Oil giant BP Plc is expected to reinstate its dividend when it unveils fourth quarter earnings on Tuesday, after it canceled the payout at the height of the oil spill last summer.

Analysts predict BP will announce a payout of 7 cents/share for the quarter, down from the 14 cents/share dividend for the fourth quarter of 2009.

The payout for the U.S.-listed American Depositary Shares is similarly expected to be half the $0.84 per ADS a year ago.

The key announcement for BP will be whether the company restores the dividend. We expect it will be able to do so, given robust cashflows and reasonable progress on the divestment plan, Oswald Clint, oil analyst at Bernstein, said.

BP's fourth quarter earnings are expected to be solid despite the impact of the spill, Gordon Gray at Collins Stewart said.

A Reuters poll of nine analysts gave an average forecast of $5.09 billion for BP's clean Replacement Cost (RC) net income, up 16 percent on the final quarter of 2009, stripping out one-off or non-cash items.

RC net income strips out gains or losses related to changes in the value of oil inventories and as such is comparable with U.S. net income.

A $12/barrel rise in crude prices, compared to the last quarter of 2009, taking the price to an average over $86/barrel, and higher UK gas prices are seen as the main drivers of the rise in profits at Europe's second-largest oil company by market capitalization.

A big jump in refining margins, partly due to the closure of French refineries because of strikes late last year, should also drive performance in the downstream division.

This is expected to outweigh a predicted 9.4 percent drop in oil and gas production to 3.67 million barrels of oil equivalent per day. The fall is partly due to the sale of fields to raise cash for the oil spill response.

Analysts said they did not expect BP to take any additional charges for the spill after the company upped its estimate of the bill by around a quarter to $40 billion at the third quarter results in November.

Many analysts have been scaling back their estimates of how much the spill will cost the London-based oil major after the head of the body dispensing cash to those affected by the spill predicted only half the $20 billion fund will be needed to cover claims.

BP's shares have recovered from lows below 300 pence/share in June 2010 to 488 pence on Thursday on optimism that new Chief Executive Bob Dudley's plans for a turnaround are helping the company put the spill behind it.

Earlier this month, BP signed an arctic exploration deal with Russia's Rosneft that it said opened up a new province of similar scale to Britain's North Sea.

(Editing by Elaine Hardcastle)

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