updated 10/24/2006 11:59:35 AM ET 2006-10-24T15:59:35

BP PLC reported a 3.6 percent drop in third-quarter profit on Tuesday because of lost production in Alaska, higher taxes in Britain and a slump in refining margins.

BP, which has experienced a run of difficulties in the United States, said net income for the three months ended Sept. 30 came to $6.23 billion, compared with $6.46 billion in the third quarter of 2005. Revenue in the third quarter climbed 4 percent to $70.7 billion.

Production for the period averaged 3.8 million barrels of oil equivalent per day, down 0.2 percent from the year-ago period and down 5 percent from the second quarter this year.

The results reflected London-based BP’s woes in the United States, where several of its fields experienced outages and delays.

The company halved production at its Prudhoe Bay field in Alaska after severe pipeline corrosion and a small leak were uncovered. Production has now reached 400,000 barrels per day, double the low point but still below the previous average of 450,000 barrels per day.

It has also delayed the opening of its Thunder Horse platform in the Gulf of Mexico — damaged by Hurricane Dennis last year — from 2007 to the middle of 2008 because of equipment failures.

The platform is the largest in the Gulf and is expected to produce about 240,000 barrels of oil and 200 million cubic feet of natural gas per day.

As well as its U.S. production troubles, BP was faced with higher taxes in Britain’s North Sea and lower refining margins.

“The trading environment reflected higher oil realizations and retail margins but lower refining margins and gas realizations compared to a year ago,” said Chief Executive John Browne.

A 10-percentage-point rise in U.K. North Sea oil taxes was enforced for the first time in the third quarter. As a result, the company’s effective tax rate was about 40 percent in the third quarter, compared to 36 percent in the second quarter.

The average price of a barrel of Brent oil, a key U.K. North Sea crude benchmark, rose 13 percent in the third quarter compared to the year-earlier period.

But average quarterly global refining margins were down 32 percent year-on-year after being boosted in the year-earlier period by the impact of hurricanes on prices.

Falling oil prices have further depressed BP’s earnings, with light sweet crude trading below $59 a barrel Tuesday on the New York Mercantile Exchange — down from the record $78.40 a barrel reached in July.

BP’s adjusted net profit — earnings before extraordinary items and excluding changes in the value of inventories — was $4.5 billion. That was slightly worse than the $4.74 billion expected by analysts.

Shares in the company rose 1 percent to 607 pence ($11.34) on the London Stock Exchange.

BP’s value has fallen 20 percent since April as the company struggles to restore its profile in the United States following the Prudhoe Bay oil spill, the Thunder Horse platform delays, investigations into a March 2005 refinery explosion in Texas that killed 15 workers and allegations that it manipulated crude-oil and gasoline markets in the United States.

BP has already settled several lawsuits relating to the Texas City blast and has put aside $1.2 billion to resolve legal disputes. It also began a complete review of its global operations following the blast.

Browne has been ordered to appear in court to give a sworn deposition in one lawsuit brought by a woman whose parents were among those killed.

The company has declined to comment on a report by the British Broadcasting Corp. that a probe by the U.S. Chemical Safety Board into the explosion has attacked the company’s safety standards. The BBC said that the report by the CSB, which is due for release early next year, alleges that the eight previous safety incidents at the facility were not property investigated, and that the right corrective actions were not taken.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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