* 2019 production seen unchanged from record 2018
* Oslo-listed shares fall almost 3 pct
* Raises dividend to $0.26 per share from $0.23
* Expects $14 bln in free cash flow in 2019-2021(Recasts, adds CEO, analyst, shares, details, background)
By Nerijus Adomaitis and Gwladys Fouche
OSLO/LONDON, Feb 6 (Reuters) - Equinor onWednesday reported a smaller-than-expected rise infourth-quarter earnings and said output would be stagnant in2019, sending the oil and gas company's shares down despite adividend increase and a brighter long-term outlook.
A fall in oil prices, higher exploration spending, pluslower fourth-quarter refinery and products trading marginsaffected Equinor's earnings negatively, the company said.
Equinor expects production in 2019 to remain broadlyunchanged from last year's record output, despite plans to startits Johan Sverdrup oilfield in the North Sea in November asplanned, it added.
Latest results from rivals Royal Dutch Shell, ExxonMobil, BP and Chevron have all beatforecasts, buoyed by higher production in U.S. shale basins,even though crude oil prices fell sharply at the end of theyear.
Equinor's Oslo-listed shares were 1.6 percent lower by 1130GMT, the worst performing stock in the European oil and gasindex, which was up 0.1 percent.
"Shares are down on weaker fourth-quarter figures anddisappointing production guidance for 2019, which we expected tobe higher," Teodor Sveen-Nilsen at Sparebank 1 Markets said.
"On the positive side, dividends were higher than expectedand there was also a stronger long-term (production) guidance,"he said.
Equinor's adjusted earnings before interest and tax rose to$4.39 billion for the October-December quarter from $3.96billion during the same period of 2017, lagging a forecast of$4.8 billion in a Reuters poll of analysts.
Equinor, formerly known as Statoil, said it planned to pay adividend of $0.26 per share for the fourth quarter, an increasefrom the $0.23 paid in recent quarters. Analysts had expected anunchanged dividend.
The company said it expected to generate a total of $14billion free cash flow over 2019-2021 at an oil price of $70 abarrel, indicating a potential to raise dividends going forward.
CEO Eldar Saetre told Reuters Equinor would use its cash toboost its dividends further, reinvest in capital expenditure andstrengthen its balance sheet.
"We want to grow the dividend policy," Saetre said in aninterview, adding that there were no plans for share buybacksfor now, though it remained a tool of the company's dividendpolicy.
"The priority is cash dividend," he said.
Equinor said it expected production to rise at an average 3percent per year from 2019 to 2025, with new fields coming onstream off Norway and Brazil, an increasingly importantproduction area for Equinor.
Its Carcara discovery in Brazil, which is estimated to holdsimilar resources as Johan Sverdrup, could start production in2023-2024, the company's presentation showed.
Equinor's production in the last quarter of 2018 rose to arecord high of 2.2 million barrels of oil equivalent (boe) perday from 2.1 million boe a year ago, helped by its onshore U.S.shale oil fields, the company said.
Equinor said it planned to raise its capital expenditure to$11 billion this year from $9.9 billion in 2018. It also plannedto increase its exploration budget to $1.7 billion in 2019 from$1.4 billion last year.
So far there were no signs of cost inflation that couldaffect the firm's capital expenditure guidance, Saetre said.Rising costs in an oil company's supply chain is a commonfeature of previous upturns in the oil industry activity cycle,eating into profits.
"We don't see this coming in into our numbers," Saetre toldReuters.(Editing by Terje Solsvik/Rashmi Aich/Jane Merriman)
