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UPDATE 2-BP profits fall 40% on weaker oil prices, hurricane

Ron Bousso

* Underlying profits reach $2.3 bln in the third quarter

* BP takes $2.6 bln charge on large divestments

* Shares down around 0.7% (Recasts, updates throughout)

LONDON, Oct 29 (Reuters) - BP's profits fell sharply in the third quarter, hurt by lower oil prices, but strong refining operations helped the company beat expectations even after taking a one-off charge of $2.6 billion linked to large asset sales.

The British oil company made its first net loss in more than three years due to the charge, but its underlying performance remained strong.

Cash flow from operations was unchanged in the quarter from a year earlier at $6.1 billion despite a 17% drop in oil prices.

"BP delivered strong operating cash flow and underlying earnings in a quarter that saw lower oil and gas prices and significant hurricane impacts," Chief Executive Officer Bob Dudley said in a statement.

The $2.6 billion charge will not come as a surprise to investors after BP flagged earlier this month it would take a non-cash charge of $2 billion to $3 billion in the quarter as it gets closer to disposing of assets worth $10 billion by the end of 2019, a year ahead of schedule.

As a result, the company reported a net loss of $700 million, its first since the second quarter of 2016.

So far this year, BP's proceeds from divestments reached $1.4 billion.

BP last year acquired BHP's U.S. shale assets for $10.25 billion that turned BP into one of the largest shale oil drillers. It announced the sale of its Alaskan business to Hilcorp Energy Co for $5.6 billion.

"Today's Q3 numbers weren't expected to come in close to the levels seen in Q2 given the decline in oil prices seen since then, however they still show a company that is nimbler and more efficient than it was a decade ago," Michael Hewson, chief market analyst at CMC Markets said in a note.

BP shares were down 0.7% shortly after trading opened in London

Third-quarter underlying replacement cost profit, the company's definition of net income, fell 40% from the year earlier period to $2.3 billion. That exceeded a forecast of $1.73 billion in a company-provided survey of analysts and compared to $2.81 billion in the second quarter of 2019.

HURRICANE

Oil and gas production, excluding BP's share from its 19.75% stake in Russia's Rosneft, was down 2.5% from a year earlier at 2.568 million barrels of oil equivalent per day as a result of maintenance at several high-margin fields and a two-week disruption to production in the U.S. Gulf of Mexico from Hurricane Barry.

BP said production in the fourth quarter would be higher than in the previous quarter as maintenance winds down.

The weakness in oil and gas production was offset by a strong performance in its refining and chemicals businesses, higher than expected earnings from Rosneft, which helped lower BP's tax rate.

Weaker oil prices in the third quarter from a year earlier also weighed heavily on profits of other energy companies including Italy's Eni and Norway's Equinor.

BP earlier this month said CEO Dudley would retire next year following a tumultuous decade at the helm of the company. He will be succeeded by 49-year-old Bernard Looney, BP's head of upstream.

(Reporting by Ron Bousso, editing by Louise Heavens/Kirsten Donovan/Jane Merriman)