April 29 (Bloomberg) -- Petro-Canada, the worst performer among Canada's largest oil companies, said first-quarter profit rose 82 percent on higher oil prices and production.

Net income climbed to C$1.08 billion ($1.07 billion), or C$2.20 a share, from C$590 million, or C$1.18, a year earlier, the Calgary-based company said today in a statement. Revenue rose 36 percent to C$6.62 billion.

Higher-than-expected production, led by the Buzzard field offshore the U.K., and increased prices enabled the company to beat earnings estimates, said Lanny Pendill, an analyst with Edwards Jones & Co. in St. Louis. Buzzard helped boost output from the U.K. North Sea 68 percent to the equivalent of 84,300 barrels of oil a day.

``Buzzard continued to ramp up and that certainly helped overall production growth,'' Pendill said in a telephone interview. ``Historically Petro-Canada has over-promised and under-delivered so we are now beginning to see a couple of quarters where the company has met or beat expectations, which is a nice reversal of the historical trend.''

Petro-Canada beat his estimate of C$1.53, said Pendill, who rates the company's shares as ``buy'' and owns none. Excluding one-time items such as stock-based compensation, Petro-Canada said it earned C$1.86. On that basis, the company exceeded by 24 cents the average of 14 analyst estimates compiled by Bloomberg.

Petro-Canada fell 29 cents to C$49.84 in trading on the Toronto Stock Exchange. The stock has declined 6.4 percent this year, the worst stock performance among the 9 Canadian oil companies with a market value exceeding C$19 billion.

Buzzard Field

The company owns about 30 percent of Buzzard, a field about 100 kilometers (62 miles) northeast of Aberdeen that started production a year ago.

Petro-Canada said last December it agreed to pay about C$1.11 billion to settle hedges that covered about half of Buzzard's output. That allowed the company to capitalize on rising prices as Petro-Canada's oil sold for C$93.38 a barrel in the first quarter, up 48 percent.

Chief Executive Officer Ron Brenneman, 61, is boosting Petro-Canada's oil output from Alberta's tar-like deposits, estimated to contain the most reserves outside of the Middle East.

Petro-Canada and its partners forecast spending C$14.1 billion on the first stage of the Fort Hills oil-sands project. The development, owned 60 percent by Petro-Canada, is scheduled to produce 140,000 barrels of refinery-ready crude by the second quarter of 2012.

Decision Delayed

Brenneman said on a conference call today that the investment decision on Fort Hills has been delayed until the fourth quarter because Petro-Canada and its partners are waiting for regulatory approval of the project's processing plant. The decision had been planned for the third quarter.

The delay isn't significant for a project that will produce for decades, said Pendill, the Edwards Jones analyst. ``I'd rather the company get the decision right than try to rush a decision and not have the full information just to meet some kind of guideline,'' he said.

Petro-Canada owns 60 percent of Fort Hills while Calgary- based UTS Energy Corp. and Teck Cominco Ltd. of Vancouver each hold 20 percent.

Quarterly production of oil rose 9.8 percent to 307,900 barrels a day, Petro-Canada said.

Gas output fell 4.8 percent in the quarter to 712 million cubic feet a day. The home-heating fuel sold for C$7.59 per thousand cubic feet, a gain of 3.7 percent.

Refining, Marketing

Profit from refining and marketing was unchanged at C$184 million, the company said.

Petro-Canada plans to shutter its Edmonton, Alberta, refinery for two months starting in August. The shutdown is part of a C$2.2 billion project to modify the plant to run on heavy oil extracted from Alberta's tar sands.

Purchase and supply swaps with other refiners will help Petro-Canada blunt the impact of the refinery closure on customers, Brenneman said.

``We would expect that the margin on what we're pulling through the refinery would be about 30 percent of what it might be normally, but the volume would essentially be maintained through these supply arrangements and purchases,'' he told analysts and investors.

The modifications will boost heavy-oil processing capacity at the refinery by 85,000 barrels a day. The plant will have a daily processing capacity of 135,000 barrels of fuels including gasoline and diesel, the company has said.

Montreal Strike

A six-month strike at Petro-Canada's Montreal plant has delayed the start of a coking unit until at least 2010 instead of late 2009, Brenneman said on the call.

The company hasn't given final approval to the estimated C$1 billion coking project, Brenneman said. The unit is forecast to boost margins by allowing the plant to process more heavy oil, which sells for less than other grades such as West Texas Intermediate, the benchmark crude use for futures in New York.

Petro-Canada produces oil and natural gas in North America, Africa and the U.K. It also owns refineries and a national chain of fuel stations in Canada.

To contact the reporters on this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net; Sabine Pirone in London at spirone@bloomberg.net.

Last Updated: April 29, 2008 16:11 EDT