* H1 output up at 3,662 mln mboe/d from year ago 3,544
* Confirms divident rise to 10.25 cents/share
* Gearing at end-June 27.8 pct(Adds detail)
LONDON, July 31 (Reuters) - Higher oil prices andincreased output boosted BP's second-quarter profit to$2.8 billion, four times that of a year ago.
The company also confirmed it would increase its quarterlydividend for the first time in nearly four years, offering 10.25cents a share.
BP is turning a corner after the slump in oil prices and asit gradually shakes off a $65 billion bill for penalties andclean up costs of the deadly 2010 Deepwater Horizon spill.
Underlying replacement cost profit, the company's definitionof net income, exceeded forecasts of $2.7 billion, according toa company-provided survey of analysts.
It earned $0.7 billion a year earlier and $2.6 billion inthe first quarter.
First-half production rose to 3,662 million barrels of oilequivalent per day, including output at Rosneft, from 3,544mboe/d a year ago.
Benchmark Brent crude futures, currently over $74 abarrel, have risen around 16 percent over the first half of 2018and around 60 percent since June 30 2017.
In its biggest deal in nearly 20 years, BP last week agreedto buy U.S. shale oil and gas assets from global miner BHPBilliton, for $10.5 billion, expanding theBritish oil major's footprint in oil-rich onshore basins.
BP is also buying back shares to the tune of $200 million inthe first half of this year.
In the second quarter, it paid off $700 million for thespill on a post-tax basis.
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.
(Reporting by Shadia Nasralla; editing by Jason Neely andKirsten Donovan)