The news comes on the back of mixed results for the oil and gas company during the three months ending in June.

The results were basically in line and the most important element was the dividend increase

Ignace De Coene Fortis

Profits during the second quarter were in line with analyst expectations, but slipped 36% from the same period last year.

BP reported a net profit of $2.2bn for the second quarter, compared with $3.4bn recorded in the second quarter of 2001.

This was, however, an increase on $1.6bn reported for the first three months of the year.

"Although the upstream and downstream business environment showed some improvement over the first quarter, the half-year's trading conditions were significantly less favourable than a year ago," said chief executive Lord Brown.

The dividend will be increased to six cents a share from 5.76 cents.

Oil bounce

The relative recovery in the second quarter was put down to a rebound in crude oil prices.

However, compared with last year, natural gas prices are lower in the US and the UK.

BP also said "first half results reflect a less favourable environment than a year ago for exploration and production and refining and marketing".

Profits for the first six months of the year came in at $3.8bn, compared with $7.1bn last year - a sharp decrease of nearly 50%.

"The results were basically in line and the most important element was the dividend increase," said Ignace De Coene, equity manager at Fortis Investment.

Possible share buyback

The company also said it would consider re-starting its share buyback programme - more good news for shareholders.

For the half year, the dividend showed an increase of 9%.

"Our continued performance delivery has underpinned our capability to increase the dividend," added Lord Browne.

In sterling terms, however, the dividend increase will still mean a slight drop to 3.875p from 3.911p a year ago, because of weaknesses in the dollar.

BP sets its dividend payment in US dollars because it receives most of its revenues in the US currency.

At lunchtime in London, the company's shares were up 3p at 482.5p.