July 26 (Bloomberg) -- Petro-Canada, the third-largest oil company in Canada, said second-quarter profit rose 79 percent as the start of the Buzzard field in the U.K's North Sea helped boost production.

Net income rose to C$845 million ($811 million), or C$1.70 a share, from C$472 million, or 92 cents, a year earlier, Calgary- based Petro-Canada said in a statement today. Excluding one-time items, profit was C$1.63 a share. On that basis, the company was expected to earn C$1.43, the average of 11 analyst estimates compiled by Bloomberg.

The company benefited from the output from the Buzzard field and a widening in the spread of North Sea oil prices against West Texas Intermediate oil, the grade on which New York futures are based, said Chris Feltin, an analyst at Tristone Capital Inc. in Calgary, who expected profit of C$1.48.

``It was a solid quarter,'' said Feltin, who rates Petro- Canada shares at ``outperform'' and owns none.

Sales rose 16 percent to C$5.48 billion. Second-quarter oil production soared 48 percent to 304,300 barrels a day partly on the start of Buzzard in January. Petro-Canada owns about 30 percent of the field, located in the North Sea about 100 kilometers (62 miles) northeast of Aberdeen.

Production Outlook

``We will continue to focus on execution, increasing our production by 15 percent compared with last year,'' Chief Executive Officer Ron Brenneman said in the statement.

Shares of Petro-Canada fell C$1.68, or 2.8 percent, to C$58.32 on the Toronto Stock Exchange, joining a worldwide drop in equities on concern higher borrowing costs will slow takeovers. The 76-member Energy GICS Sector, part of the S&P- Toronto Stock Exchange Composite Index, fell 2.2 percent.

The company also benefited in the quarter from the resumption of production at Terra Nova, an oil field off the coast of Newfoundland that was shuttered for much of last year for equipment repairs, and increased output at Syncrude Canada Ltd. Petro-Canada owns 12 percent of the oil-sands joint venture, which is led by Canadian Oil Sands Trust of Calgary.

Petro-Canada said its oil sold for an average of C$70.14 a barrel in the second quarter, down 4.2 percent from a year earlier.

Natural-gas production fell 0.7 percent to 721 million cubic feet a day. The power-plant and heating fuel sold for an average of C$6.79 per thousand cubic feet, a gain of 7.6 percent.

Refining, Marketing

Earnings from refining and marketing soared 86 percent to C$259 million as margins widened in North America, the company said.

Production of oil and gas for the full year is expected to rise to an average of 400,000 to 420,000 barrels of oil equivalent a day, Petro-Canada said. That compares with a January outlook of 390,000 to 420,000.

Capital and exploration spending will rise to an estimated C$4.12 billion this year, up from the previous target of C$4.06 billion, Petro-Canada said. The increase mostly reflects higher offshore drilling in Trinidad and Tobago, the company said.

Changes in provincial and federal taxes in Canada increased profit in the second quarter of 2006 by C$127 million.

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.

Imperial Oil Ltd., 70 percent owned by Irving, Texas-based Exxon Mobil Corp., is Canada's largest oil company by 2006 sales, followed by EnCana Corp.

(Petro-Canada conducted a conference call for analysts and investors at 9 a.m. New York time. A replay will be available on the company's Web site at http://www.petro-canada.ca/eng/investor/845.aspx.)

To contact the reporter of this story: Ian McKinnon in Calgary at imckinnon1@bloomberg.net; Bill Murray in London at wmurray1@bloomberg.net.

Last Updated: July 26, 2007 16:24 EDT