BP reignited doubts about its ability to return to growth on Tuesday as below-forecast profit, disappointing production guidance and new oil spill charges overshadowed the oil major's return to dividend payouts.

But Chief Executive Bob Dudley offered an apparent olive branch in a dispute with his Russian partners in joint venture TNK-BP who are trying to block a recent deal between BP and Russian state-owned oil and gas group Rosneft.

Dudley said BP could reach a financial deal with its partners, who are trying to stop the Rosneft Arctic exploration agreement, even suggesting TNK-BP could also get involved.

BP shares showed investor disappointment with the 2010 results, which followed a better-than-expected increase in quarterly profit at Exxon Mobil Corp on Monday.

BP's shares were up 0.4 percent at 487 pence at 1450 GMT, underperforming peers and a 2.3 percent rise in the STOXX Europe 600 Oil and Gas sector index.

BP has sought to put last year's Gulf of Mexico oil spill disaster firmly behind it and on Tuesday held out the prospect of long-term growth via new exploration partnerships and a fresh focus on getting oil and gas out of the ground.

Yet guidance for another 11 percent drop in output in 2011, after a 9.4 percent drop in 2010, left some analysts questioning BP's shrink to grow strategy.

BP's future pace of development in the Gulf of Mexico now looks highly uncertain in the wake of Macondo. We also would highlight the uncertainty in the U.S. unconventional gas business, Alastair Syme at Citigroup said in a research note.

The growth promises were also overshadowed by a court hearing due later on Tuesday at which BP's partners in TNK-BP will seek an injunction to block its joint venture with Rosneft.

Dudley, who ran TNK-BP until he was forced to flee Russia after a previous spat with the billionaires turned hostile, said the injunction might well be granted, but insisted that BP expected to settle the dispute with its Russian partners.

The CEO said the oligarchs could be placated via a financial settlement, by BP including TNK-BP in the exploration venture, or by BP offering TNK-BP some other strategic help.

Analysts said it was important BP did settle the spat.

The company has clearly pinned its hopes on Russia, but the new JV has already gone wrong, antagonizing the TNK-BP partners ... There remains substantial uncertainty surrounding the company, said Dougie Youngson, analyst at Arbuthnot Securities.

BP said it would pay a fourth-quarter dividend of 7 cents per share and 42 cents per American depositary share -- in line with analysts' expectations, but only half of what it was paying before the spill disaster.

The re-introduction of the dividend is good news for investors (even at its much lower level), but it is likely to prove inflammatory to U.S. Gulf Coast senators whose communities are still being impacted by the spill, Youngson said.

TAXING TIMES

BP said fourth-quarter replacement cost net income was $4.61 billion, up from $3.45 billion a year ago, as a big rise in oil prices outweighed a 9 percent drop in oil and gas production.

Brent oil stayed above $100 a barrel on Tuesday, a level hit this week for the first time since October 2008. U.S. prices were above $90 and were boosted, like Brent, by concerns that deadly civil unrest in Egypt could spread to Middle East crude producers or disrupt Suez canal flows.

Dudley said BP was watching the situation carefully.

BP had deliberately declined to issue production goals as the oil group was targeting value not volumes, he added.

Excluding one-off items of $250 million, BP's replacement cost net income came in at $4.36 billion, behind the $5.09 billion average forecast from nine analysts polled by Reuters.

The net income measure excludes gains or losses related to changes in the value of oil inventories and is comparable with U.S. net income.

BP said the weaker-than-expected results were partly due to a higher-than-expected tax rate. Exxon, on the other hand, saw its results helped by a lower tax rate.

BP is still feeling pain from the oil spill, adding another $1 billion to its earlier $40 billion estimate of the total bill. Analysts had recently started to cut their estimates for the cost of the oil spill.

Offering a pointer to future growth, BP said it would sell two refineries in the United States, halving its capacity there, and invest more in oil and gas exploration.

The group said it would increase significantly its investment in exploration and would seek new partnership opportunities. It also said it was on track to meet its target of up to $30 billion of divestments by the end of 2011.

(Writing by Sophie Walker; Editing by Alexander Smith)

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