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Oil majors Royal Dutch Shell and BP will kick off the City's annual results season next week, with the latter due to end its current suspension of dividend payments following the Gulf of Mexico disaster.

Embattled oil giant BP will take another step in its rehabilitation on Tuesday if it delivers on current City expectations and reinstates dividend payments alongside the publication of its full-year results.

The return of BP's dividend following its suspension in the summer due to the Deepwater Horizon disaster would be a key development for pension holders as well as investors given the stock previously accounted for an estimated one in every six pension pounds invested.

Analysts at Collins Stewart anticipate the quarterly dividend will be around seven cents a share, half the level announced in April.

BP upped its estimate of the bill to cover the cost of the oil spill to 40 billion US dollars (£25 billion) in November, but analysts do not expect this to increase and have latched on to recent signs that only half of the 20 billion US dollar (£12.6 billion) compensation fund will be required.

The financial hit from the oil spill will offset underlying replacement cost profits of 21 billion US dollars (£13.2 billion) for the full year. Fourth quarter profits of around 5 billion US dollars (£3.1 billion) would represent a 15% improvement on a year ago but come in 9% lower than the previous quarter.

The company has been able to benefit from a gradual increase in oil prices over 2010, which hit 90 US dollars a barrel at around the year end. Refining margins have also shown improvement.

But production is likely to be 10% lower than a year earlier due to the impact of the US drilling moratorium and asset disposals following the disaster, while extended maintenance periods will also impact output.

FTSE 100 rival Royal Dutch Shell has had a more sedate year and analysts have forecast pre-tax profits of around 30 billion US dollars (£18 billion), including a year-on-year rise in fourth quarter earnings of 69% to 4.68 billion dollars (£2.9 billion).

The company, which reports on Thursday, has benefited from higher oil prices and a hike in production levels, as well as a 3.5 billion US dollar (£2.2 billion) cost-saving plan, which saw 7,000 jobs go.


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