Oil producer BP Plc's third-quarter replacement cost net profit rose 58 per cent to $6.975 billion thanks to asset sales but the company still undershot analysts' forecasts as production fell and costs rose.

BP added in a statement yesterday that it was setting aside another $400 million to cover compensation claims related to a fatal blast at its Texas City refinery last year, pushing the total bill, including repairs and lost profits to around $2 billion.

The world's second-largest fully-quoted oil company by market capitalisation also ditched its 2006 oil and gas production target, saying it would produce only 3.95 million barrels of oil equivalent (boepd) per day this year compared to an original target of 4.1-4.2 million boepd.

This is partly due to asset sales but also reflects problems at Prudhoe Bay in Alaska, where pipeline corrosion led to cuts in output, and delays in bringing key projects, such as the Thunder Horse platform in the Gulf of Mexico, on-stream.

BP's shares traded up 0.3 per cent at 604 pence at 0737 GMT, compared to a 0.1 per cent rise in the DJ Stoxx European oil and gas sector index.

BP's headline replacement cost result, which strips out gains or losses due to changes in the value of inventories, of $6.975 billion was flattered by $2.47 billion in one-off items such as asset sales and deferred taxes, a BP spokesman said.

Stripping out these gains, third quarter profit was $4.50 billion, compared to a Reuters poll of 10 analysts which gave an average forecast of $4.696 billion.

BP reported $1.225 billion in one-offs but this excluded an $892 million profit related to BP's share of a gain by its Russian joint venture TNK-BP on the sale of a production unit and another $354 million in tax and accounting related gains not related to BP's actual performance in the quarter.

Analysts believe that BP's replacement cost profit, excluding non-operating items, is the best measure of the London-based company's underlying performance.

BP said it would pay a quarterly dividend of 9.825 cents per share compared with 8.925 cents per share a year ago.