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UPDATE 1-BP hikes dividend as Q3 beats forecasts

LONDON, Oct 30 (Reuters) - International oil company BP Plc raised its dividend on Tuesday as it delivered a stronger than expected third quarter result and prepared for a court battle with U.S. authorities over its 2010 U.S. Gulf oil spill.

Third quarter underlying replacement cost profit fell to $5.2 billion from $5.5 billion a year ago as a shrinking business, lower production and lower crude prices took their toll, but the effect was masked by a co-incidence of strong refining margins and the company's highest availability of refinery capacity in years.

The result was ahead of analysts' expectations of around $4.1 billion and up from $3.7 billion in the second quarter.

BP jacked up its dividend by 12.5 percent to 9 cents a share, its second dividend increase in less than a year, as it attempts to restore investor confidence in the wake of the Macondo spill, which temporarily stopped the flow of shareholder payouts.

BP has fallen to a distant fourth in the rankings of top tier of oil and gas companies after the Macondo well disaster and amid uncertainty over the future of its Russian operations.