* CEO insists operation makes money as oil falls
* Q3 adjusted EPS C$1.04 vs estimates C$1.07
* Cuts production forecast for third time in 2008
* Shares up 8.5 percent (Adds CEO comments, details)
By Jeffrey Jones
CALGARY, Alberta, Oct 29 (Reuters) - Suncor Energy Inc's (SU.TO) chief executive insisted on Wednesday his company's Alberta oil sands business, which has been hit with mechanical problems this year, remains profitable as the world economic crisis pressures oil prices.
After reporting a 30 percent jump in third-quarter profit -- but another cut in forecast production -- Suncor CEO Rick George said the world's No. 2 oil sands producer can still generate a rich return from its base operations if U.S. crude falls to $60 a barrel.
In addition, Suncor's C$20.6 billion ($16.6 billion) expansion is designed to produce a 15 percent return on capital with crude at $80, George said. Suncor announced a delay in the expansion, called Voyageur, last week.
Suncor shares jumped C$2.17, or about 8.5 percent, to C$27.57, on a day when oil prices rebounded by 7 percent to $66.93 a barrel.
The company has already spent C$7 billion on Voyageur and the remaining outlay will be spread over the next four years.
"And we don't really run future economics based upon today's crude oil price, so we think it's still a very strong, very viable project," George told analysts.
"You get people who say, 'Oh well, Suncor can't make money at $80.' I would say those people really haven't done their homework around what the economics are here."
Suncor shares had been down this week by 62 percent from July, when oil prices hit a record above $147 a barrel.
Last week, it delayed the planned upgrading plant for Voyageur by 12 months to weather economic turmoil. It was one of a handful of postponements announced by oil sands developers struggling with the drop in crude prices and the market meltdown.
George said the base operations, with which Suncor has struggled this year as output lagged expectations, can generate a healthy profit margin with oil prices at $60, subtracting operating costs, royalties, the discount from benchmark light oil and such noncash items as depletion.
In the third quarter, the company earned C$815 million, or 87 Canadian cents a share, up from year-earlier C$627 million, or 68 Canadian cents a share.
Excluding one-time items, income was C$971 million, or C$1.04 a share, up 65 percent from C$538 million, or 58 Canadian cents a share.
That was 3 Canadian cents shy of the average of analysts' forecasts, according to Reuters Estimates.
Cash flow rose 41 percent to C$1.35 billion from C$957 million.
Oil sands production averaged 245,600 barrels a day, up 2.7 percent from the third quarter of 2007. Output was held back by unplanned maintenance in upgrading and oil sands extraction facilities at the site near Fort McMurray, Alberta.
The problems forced Suncor to cut its annual production forecast for the third time this year to 235,000 barrels a day from 240,000-250,000. It also upped its operating cost outlook to C$36.50 a barrel from C$35-C$36.
The company aims to fill its plant capacity of 350,000 barrels a day through 2009, George said.
$1=$1.24 Canadian Additional reporting by Ajay Kamalakaran; editing by Rob Wilson