* BP reports Q1 profits of $2.6 billion
* Doubling of refining profits offsets 86 drop in upstream
* Dividends maintained (Recasts, adds details, share price)
By Ron Bousso and Dmitry Zhdannikov
LONDON, April 28 (Reuters) - BP reported higher thanexpected profit on Tuesday thanks to a jump in earnings fromrefining while the oil company's cash flow slumped after crudeoil prices halved.
The British oil giant responded to the sharp drop in oilprices in recent months with a 13 percent cut in 2015 capitalspending and a large restructuring programme.
Chief Executive Bob Dudley vowed to maintain BP's dividendat 10 cents per share by "successfully resetting" its cost base,following the first quarter to feel the full impact of thehalving of oil prices since June.
BP shares traded 1.7 percent higher at 485 pence at 0743GMT, higher than the European oil and gas sector's 0.9percent rise.
BP reported first-quarter underlying replacement costprofit, the company's definition of net income, of $2.58billion. That was down nearly 20 percent from the same periodlast year but up 15 percent from the fourth quarter of 2014 andwell above analyst expectations of $1.28 billion.
Pretax profit at BP's refining division jumped to $2.2billion from $1 billion a year earlier, though profits fromupstream oil production crashed to $604 million from $4.4billion.
Production profits were hit in part by the cancellation oftwo deep water oil projects in the Gulf of Mexico which led to a$545 million loss for BP's U.S. upstream business.
"Earnings look very strong thanks to the downstream butunderlying earnings in upstream and the overall cash flow wereextremely weak," said Anish Kapadia, analyst at Tudor, PickeringHolt and Co.
BP's first-quarter cash flow plunged to $1.86 billion from$8.23 billion a year earlier due to lower oil prices and as aresult of a large build-up in the company's oil stocks.
The company's first-quarter profits were also boosted by aone-off benefit from the British government, which announced aseries of tax cuts for Britain's battered North Sea oil and gasproducers.
BP said its effective tax rate on first-quarter profit wasminus 42 percent, while it would have been plus 21 percentwithout the North Sea tax benefit.
Benchmark Brent prices averaged $55 a barrel in thefirst quarter of 2015, almost half the level of a year ago.
Estimated underlying net income from Russia's Rosneft, in which BP owns a 20 percent stake, was $183million, down from $270 million a year earlier.
BP's first-quarter results included a $215 millionnon-operating charge as part of a $1 billion restructuringprogramme that will include thousands of job cuts. (Editing by David Goodman and David Clarke)