By Tom Bergin
LONDON (Reuters) - BP said it was preparing "vigorously" for lawsuits related to its Gulf of Mexico oil spill, which are due to start later this month, as it unveiled a rise in fourth-quarter earnings boosted by higher oil prices and one-off gains.
Chief Executive Bob Dudley said on Tuesday BP was ready to settle the approximate 600 civil lawsuits it faces from people in states as far away as South Carolina and Kentucky, as well as litigation from the government, on "fair and reasonable terms."
However, as the clock ticks to the February 27 start of hearings in New Orleans, he added BP was also ready to fight.
Alastair Syme, oil analyst at Citigroup, said he expected the case to go to trial.
BP, Europe's second-largest oil company by market value, lifted its estimate of the total cost of the United States' worst-ever offshore oil spill by $1.8 billion to $43 billion due to higher costs for shoreline clean up, which BP said was now largely complete, and a new $500 million charge for legal fees.
Some analysts think the final figure could be much higher. By contrast, BP's statement showed the company has valued the doomed Macondo prospect at just $400 million.
However, the company added that over $5 billion of contributions from its partners in the blown-out well, Anadarko Petroleum and Japan's Mitsui, meant it would be able to end its own payments into a $20 billion compensation fund in 2012, a year earlier than expected.
Underscoring its confidence, BP also increased its quarterly dividend to 8 cents a share from 7 cents, backed by strong cashflows due to higher oil price.
"It is a good sign of confidence in the improving operational performance," said Tony Shepard, oil analyst at Charles Stanley.
BP's 14 cents a share quarterly payout was cut at the height of the spill, and reintroduced at half that level in 2011.
The company's total bill for litigation costs related to the spill is now over $2 billion. Including plaintiffs' legal fees, the disaster is likely to represent one of the biggest pay days for attorneys.
OUTPUT FLAT, MORE CAPEX
BP said its replacement cost (RC) net profit rose 65 percent compared to the same period last year, to $7.61 billion in the quarter, boosted by a $4 billion contribution from Anadarko.
Stripping out one-offs, the result rose 14 percent to $4.99 billion, in line with an I/B/E/S consensus forecast of $4.89 billion. Rival Royal Dutch Shell Plc reported an 18 percent rise in underlying profits in the quarter while industry leader Exxon Mobil only managed a 2 percent rise.
Replacement cost profit excludes gains or losses related to changes in the value of fuel inventories and so is comparable with net income under U.S. accounting rules.
BP's muted increase was despite an unusually low tax rate, and a 26 percent rise in the Brent crude price in the quarter compared to the same period of 2010.
Lower production weighed on the result, with assets sales, in part to help pay for the oil spill, pushing output down to 3.49 million barrels of oil equivalent per day in the quarter.
Dudley said he expected output, excluding BP's Russian field, to be flat in 2012, despite investor hopes that BP's smaller asset base would facilitate higher growth.
Echoing a trend across the sector, BP said it was lifting its capital expenditure budget for 2012, as it invests more in exploration and production.
Some analysts have questioned whether the additional spending will generate the same returns oil giants like BP, Shell and Exxon have enjoyed in the past.
BP shares traded down 1.3 percent at 483 pence at 1040 GMT, lagging a 0.6 percent drop in the STOXX Europe 600 Oil and Gas index.
(Editing by Mark Potter)