* Profit beats Street across the board on refining margin
* Suncor operating profit C$0.85 versus est. C$0.78
* Imperial profit C$1.22 versus est. C$1.08
* Husky profit excl. items C$0.52 versus est. C$0.40
* Shares of all three up 3 percent in Toronto
By Jeffrey Jones
CALGARY, Alberta, Nov 1 (Reuters) - Canada's large integrated oil companies pocketed hefty returns at their refineries in the third quarter, lifting profit well beyond expectations and prompting investors to bid their shares sharply higher on Thursday.
Suncor Energy Inc, Imperial Oil Ltd and Husky Energy Inc all took advantage of a wide gulf between the discounted price of oil in the glutted North American interior and expensive imported barrels, a benefit that showed up in an important measure known as the refining margin.
That spread has been building for the past year as booming production in both Canada and the United States has flooded the market in the U.S. Midwest and Midcontinent regions.
Meanwhile, U.S. petroleum product inventories were low through the summer and into autumn following the closure of refineries on the East Coast in recent years, said Lanny Pendill, analyst at Edward Jones.
"Refiners with that advantage have really been making out like bandits and reaping record profits in refining, whereas the less advantaged ones haven't done that well and have actually closed plants or are looking to divest plants, and we've seen a lot of that occur in the last 12 to 18 months," Pendill said.
Discounted Canadian crude prices are squeezing returns in the oil-producing parts of the business. Suncor on Thursday delayed a multibillion-dollar oil sands processing plant in Alberta due to the surge in light crude output in regions like the North Dakota Bakken, permitting refineries to be fed with cheaper feedstock.
Following the round of Street-beating profit, shares of the Canadian refiners all jumped about 3 percent on the Toronto Stock Exchange. Suncor rose C$1.16 to C$34.68, Imperial gained C$1.34 to C$45.53, and Husky climbed 90 Canadian cents to C$27.95.
Pendill pointed out that the effects were not just showing up among the Canadian integrateds, but also in results of the global majors, including Exxon Mobil Corp, BP Plc and Royal Dutch Shell.
One factor expected to eventually lift discounted Canadian and U.S. crude prices is the coming expansion of pipeline capacity to U.S. Gulf Coast refineries from the Cushing, Oklahoma, storage hub.
In the third quarter, Suncor, the country's biggest oil company, earned C$1.6 billion ($1.6 billion), or C$1.01 a share, up 21 percent from year-earlier C$1.3 billion, or 82 Canadian cents a year, for the third quarter of 2011.
Operating profit fell 27 percent or 85 Canadian cents a share, but it handily beat the average forecast of analysts for 78 Canadian cents, according to Thomson Reuters I/B/E/S.
The company, one of the largest oil sands developers, chopped its capital budget for the year by 11 percent to C$6.65 billion, citing deferred spending at the Syncrude Canada joint venture and offshore developments in Newfoundland and the North Sea, as well as its strategy to increase returns.
However, refining and marketing, or the downstream segment of the business, generated company-record earnings, with the inland refineries, located in Ontario and Colorado, running at full capacity.
"As long as we have these (oil-price) differentials we are seeing, then we will see these types of refinery margins," Suncor Chief Executive Steve Williams told analysts. "One of the comments I would like to make is, it is a very good position for companies like Suncor to be in, (to) have an integrated business model."
Profit at Imperial Oil Ltd, the Canadian affiliate of Exxon Mobil, jumped 21 percent to C$1.04 billion, or C$1.22 a share, from C$859 million, or C$1.01 a share. The result bested the analysts' average of C$1.08 a share.
Imperial, known for its dominant position in the Alberta oil sands, will expand that with its new Kearl project in northern Alberta, due to start up before the end of the year. It also runs the Esso service station chain across the country.
Analysts said earnings from oil and gas production, which fell 7 percent to C$498 million were largely in line with estimates due to lower prices at Syncrude and for natural gas.
However, refining and marketing profit more than doubled to C$536 million, thanks to wide margins at the company's three inland refineries - Nanticoke and Sarnia in Ontario and Strathcona in Alberta. Weak returns at its Dartmouth, Nova Scotia, refinery, which runs imported oil, has prompted Imperial to seek a buyer for the facility.
At Husky, the Canadian oil company, controlled by Hong Kong billionaire Li Ka-shing, third-quarter profit rose slightly to C$526 million, or 53 Canadian cents a share, from C$521 million, or 53 cents a share in the third quarter of 2011.
Adjusted earnings were 52 Canadian cents a share, beating the average forecast by 12 Canadian cents a share.
The company, known for its Husky and Mohawk-branded gas stations, is developing major projects, including the C$2.5 billion Sunrise oil sands venture and Liwan gas field in the south China Sea, both of which it said is on time and on budget.
Overall production fell 8 percent to 285,000 barrels of oil equivalent a day, due to planned maintenance at the Terra Nova and White Rose oil fields off the Newfoundland coast.
Like its peers, however, refining ruled the day, with Canadian downstream operations earning C$103 million, up 14 percent, and U.S. refining, including its two plants in Ohio, earning C$195 million, up 140 percent.
CEO Asim Ghosh declined to speculate how long the strong refining environment will last.
"I don't have a crystal ball any better than anybody else's, but I'm just positioning myself as a company to be in a place where in choppy markets I can move up and down the value chain and provide some overall stability," he said.