BP has raised its dividend by 14 per cent in response to soaring 2011 profits.

The oil giant, a mainstay of most income funds, reported full-year replacement cost profit, which strips out the effect of oil and other price movements, of £15.1 billion, from a £3.1 billion loss last year..

The rising profits have allowed BP to hike its dividend up to 5.1p per share for the fourth quarter of 2011.

Stripping out all one-off costs, BP’s profits for the three months to 31 December 2011 were up 14 per cent to £3.16 billion from the same period in 2010, despite a 26 per cent increase in the price of oil.

Shares in BP were trading slightly lower this morning, currently down 0.28 per cent at 488.2p, tracking a similar drop in the FTSE 100.

BP CEO Bob Dudley declared that it was back ‘on the right path’ following the 2010 Gulf of Mexico oil spill, which cost the company £26 billion.

The firm is still paying out on claims made by the individuals and businesses affected, both directly and through the Deepwater Horizon Oil Spill Trust.

It faces over 600 lawsuits from those impacted, with the proceedings expected to start in March, but Dudley declared the firm was prepared to settle on ‘fair and reasonable terms’.

Despite the legal problems, BP claimed it had gained ‘unparalleled’ access to exploration projects last year and expects to drill 12 new wells in 2012, double the number from last year.

Dudley commented, ‘We now have a robust pipeline of opportunities with exploration prospects that will generate new resources and projects well into the next decade.

‘2012 will be a year of increasing investment and milestones as we build on the foundations laid last year.

‘As we move through 2013 and 2014, we expect financial momentum will build as we complete payments into the Gulf of Mexico Trust Fund, restore high-value production and bring new projects on stream.’