BP's existing Russian partners won a UK court bar on its planned Arctic oil venture with state-controlled Rosneft on Tuesday, prompting conciliatory offers from the British oil company.

The dispute reinforced concerns about BP's recovery from last year's Gulf of Mexico oil spill as it also reported weaker than expected fourth quarter results, disappointing oil production guidance and a new $1 billion oil spill charge.

Concerns about the row and its recovery overshadowed BP's much-anticipated return to paying dividends.

BP's shares recouped earlier lossess to close up 1.3 percent at 491 pence, but still lagged a 3 percent rise in the STOXX Europe 600 Oil and Gas index which was driven by oil prices exceeding $100 a barrel.

AAR, the holding vehicle of BP's oligarch partners in TNK-BP, had argued that BP's Arctic exploration deal and share swap with Rosneft breached a previous BP commitment to seek AAR approval before entering into any major new Russian venture.

Under the order handed down by a London court on Tuesday, the two parties have agreed to try to have the issue resolved by an arbitrator by February 25, BP said in a statement.

A Rosneft spokesman said the court move should not derail the deal, and both BP and oil sector analysts expressed confidence the dispute would eventually be resolved.

We did expect the injunction to be granted, but we also think that the final resolution of this dispute will be reached between the Russian partners and the state, not in the courts, said Chris Weafer, chief strategist at UralsIB in Moscow.

BP's CEO Bob Dudley, who ran TNK-BP until he was forced to flee Russia after a previous spat with the billionaires turned hostile, 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.

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 discovering oil and gas.

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.

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.

BP's results were in contrast to a better-than-expected increase in quarterly profit at Exxon Mobil Corp on

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, including the Texas City plant, where 15 workers died in an explosion in 2005 -- an accident which ruined BP's carefully nurtured green image.

The sale would halve BP's refining capacity in the U.S., 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 and Andrew Callus)

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