* H1 output up at 3.662 mln barrels of oil equivalent perday
* Confirms dividend rise to 10.25 cents/share
* Share price gains(Adds detail on capex and divestment outlook, peers, Deepwaterpayments, analyst comment)
By Shadia Nasralla
LONDON, July 31 (Reuters) - Higher oil prices and increasedoutput helped BP quadruple its second-quarter profit froma year earlier as the oil major finally shakes off theafter-effects of 2010's Deepwater Horizon spill and the last oilmarket slump.
Second-quarter results have been a mixed bag for the world'stop oil companies. Total beat forecasts and boostedproduction targets while Royal Dutch Shell launched a$25 billion share buyback programme despite profits fallingshort of expectations.
U.S. majors Exxon Mobil Corp and Chevron Corpdisappointed Wall Street.
BP confirmed it would increase its quarterly dividend forthe first time in nearly four years, offering 10.25 cents ashare, an increase of 2.5 percent. It bought back shares to thetune of $200 million in the first half.
In a further sign of recovery, BP last week agreed to buyU.S. shale oil and gas assets from global miner BHP Billitonfor $10.5 billion.
The deal, BP's first major acquisition in 20 years, marked awatershed for the company in the United States as it looks toleave behind the $65 billion fallout from the deadly explosionof its Deepwater Horizon rig in the U.S. Gulf of Mexico.
Benchmark Brent crude futures, currently over $74 abarrel, rose around 16 percent in the first half of 2018 and areup about 60 percent since June last year.
BP's output in the first six months of the year was 3.662million barrels of oil equivalent (boe) per day, includingproduction at Russia's Rosneft, of which it owns just under afifth, from 3.544 million boe per day a year earlier.
That helped underlying replacement cost profit, BP'sdefinition of net income, rise to $2.8 billion, exceedingforecasts of $2.7 billion, according to a company-providedsurvey of analysts.
It earned $0.7 billion a year earlier and $2.6 billion inthe first quarter. BP's shares were up around 1.2 percent,hitting a two-week high in early trading.
BP has paid around $2.4 billion of expected 2018 costs ofjust over $3 billion related to Deepwater Horizon, and plans tosplit the outstanding payments equally between the third andfourth quarters, Chief Financial Officer Brian Gilvary said.
Meanwhile, the company has tightened its investment budgetfor this year to around $15 billion from previously up to $16billion and increased its divestment guidance to over $3 billionfrom $2-3 billion.
Gearing, the ratio between debt and BP's market value,declined to 27.8 percent at the end of the quarter from 28.1percent at the end of March. Net debt was $39.3 billion at theend of June compared with $40 billion at the end of March.
"With gearing nudging down sequentially, dividends raised,and execution on track, 1Q and 2Q are the start of a newpositive trend for BP," Bernstein analyst Oswald Clint said.
(Reporting by Shadia Nasralla; editing by Jason Neely andKirsten Donovan)