Oil spill? What Oil Spill? BP Stronger than Ever

BP (NYSE: BP) reported that it would be raising its quarterly dividend after reporting a 38 percent increase in profits to $7.69 billion, nearly doubling analyst expectations of $4.9 billion profits. For 2011, the company's profit climbed to $39.8 billion, even after the company paid $14.5 billion to the Gulf Trust fund in response to the Deepwater Horizon oil spill in the Gulf of Mexico in 2010. The company's annual EPS reached $26 for 2011, slightly behind analyst expectations.

Revenues grew 15 percent to $96.3 billion, but analysts and the market are disappointed with the company's net income discounting exceptional charges and gains, which was just $5 billion, largely in line with analyst expectations. The company delivered around $7.2 billion at the level of operations, whereas analysts had hoped for slightly more, while end-year debt of $29 billion exceeded analysts' hopes. This is a high figure when compared to the company's working capital of $6 billion, although with cash flow reaching $22 billion for the year, the company is in no danger of going bankrupt anytime soon.

Despite some disappointment, most analysts are maintaing a hold or buy recommendation on the stock with most price targets in the lower 50's (mean target is 52.93 amongst analysts, according to Thomson/First Call data).

CEO Bob Dudley said he expects 2012 to be a year of "increasing investment and milestones" in an optimistic report on the company's financial shape. Dudley also said that the company was prepared to fight "vigorously" on lawsuits related to the Deepwater disaster, as it faces 600 civil lawsuits in southern states who were affected by the disaster.

Analysts expect legal costs to exceed the $500 million that BP said it was facing. However, with profits returning to lofty heights, even a greater legal expense would not damage the company's overall profitability thanks to improved operational performance and expansion of its international operations, in addition to settlements with contractors over the Deepwater event.

One of the developments pushing BP forward is greater exploration and production revenue, as the company ramps up its investment in deep water operations. Since oil prices are staying at the $100 price point, Dudley expects operating cash flow to grow in coming years beyond the $22 billion mark reached in 2011. That milestone marks a 60 percent jump on 2010 figures, as the company's upstream operations continue to be productive in a high-price oil environment. The company's upstream CAGR for 2012 is expected to increase by 6.2 percent, according to analysts at Deutsche Bank.

Many analysts are maintaining an outperform or buy rating on the stock with a price target beyond its current price of around $46, after the company lost nearly 2% of value in after-hours trading in New York. The stock is still down in pre-market trading.