(Adds details from conference call, updates shares)
By Scott Haggett
CALGARY, Alberta, Nov 12 (Reuters) - Penn West Energy Trust PWT_u.TO will cut its capital spending by 20 percent next year as it looks to weather weak oil prices it believes will continue for a year or more, but it said the downturn may lead to acquisition opportunities.
Canada's biggest conventional energy trust said late on Tuesday its third-quarter profit rose nearly eightfold to C$1.06 billion ($860 million), or C$2.78 a unit, from a year-earlier C$138 million, or 57 Canadian cents, because of hedging gains and high oil prices.
It also said it plans to spend about C$800 million next year on capital projects, 20 percent less than its forecast of a $1 billion outlay in 2008.
Penn West said it could further cut next year's budget by another $200 million if conditions worsen or bump it back up to $1 billion if high prices return.
The trust is the latest among Canada's big oil producers to rein in spending next year to weather tough markets. Nearly all the country's big oil firms have said they will try to live within their means next year and avoid debt.
Canadian Natural Resources Ltd (CNQ.TO) said last week it would slash its capital spending next year by nearly half as the country's No. 2 independent oil producer made the most severe cut yet for the sector.
Penn West said it expects the shaky fundamentals for the oil industry will firm in the next one to two years. But that may lead to acquisition opportunities for the trust.
Murray Nunns, Penn West's chief financial officer, said on a conference call that "structural damage to the junior market" in Canada as well as U.S. companies selling off assets to cut debt would let the trust add output and properties to its portfolio.
However, because of problems in the field and oil prices that have fallen by more than half after rising above $147 a barrel in July, Penn West said it will not meet its production and cash flow targets for the year,
The company said its output in 2008 will be slightly below the average 195,000 barrels of oil equivalent a day it had forecast, but it did not say how big the miss would be.
Funds flow, or cash flow, will also be light because of falling oil and gas prices. Penn West expects to have funds flow of $2.6 billion, or C$6.86 per unit, this year, down from the range of C$2.8 billion to C$3 billion it had forecast.
The trust said its third-quarter funds flow, the cash used to pay distributions to investors, rose 91 percent from the year-earlier period to C$662 million, or C$1.73 a unit, from C$346 million, or $1.44 a unit.
The company's outstanding units rose 59 percent from the third quarter of 2007 because of acquisitions.
Production in the quarter was also boosted by acquisitions, rising by more than half to 190,177 barrels of oil equivalent a day from 125,345 boe/d a year earlier.
Penn West units fell 91 Canadian cents, or 4.7 percent, to C$18.62 on the Toronto Stock Exchange on Wednesday. The units have dropped 32 percent over the past 12 months.
$1=$1.23 Canadian Editing by Rob Wilson