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UPDATE 3-Phillips 66 quarterly profit up on good margins

* Shares rise 1.4 percent, then retreat

* Margins top expectations-analyst

* Increased access to cheaper U.S., Canada crude helped

(Recasts with additional detail, quotes)

HOUSTON, Oct 31 (Reuters) - Increased access to cheaper crude oil from the United States and Canada boosted Phillips 66's quarterly profits above analyst expectations after the U.S. refining company spun off from ConocoPhillips earlier this year, the company reported on Wednesday.

More than half of the company's refining capacity is in the central corridor of the U.S. with access to those cheaper crudes in North Dakota, Texas, Kansas and other states, executives told analysts during Phillips 66's third-quarter earnings conference call.

``Our U.S. advantaged crudes increased from 52 percent last year to 61 percent to date in 2012,'' Chief Financial Officer Greg Maxwell said.

Shares rose 1.4 percent in early trading on the New York Stock Exchange, but later fell less than 1 percent to 47.14.

Those advantages stem from efforts to beef up logistics, such as pipeline and rail connections, to gain access new crude sources, said Tim Taylor, executive vice president of commercial, marketing, transportation and business development.

He said the company was delivering up to 40,000 barrels per day of cheap crude from North Dakota's Bakken shale play by rail to Phillips 66's 238,000 barrels-per-day (bpd) Bayway refinery in Linden, New Jersey, double the amount shipped in the second quarter.

Power was restored at the Bayway plant on Wednesday after it sustained damage and flooding from Hurricane Sandy, but executives had no estimate on when it would restart.

``The water is receding, we've gotten power back this morning and starting to restore that to the various units. But we're still making assessments and we really haven't determined when we can start back up,'' Taylor told Reuters in an interview.

Taylor also said Phillips 66 is ramping up pipeline and truck deliveries of Mississippi Lime crude to its 198,400 bpd Ponca City, Oklahoma, refinery, and expects to reach 50,000 bpd by the end of 2013.

That is in addition to a deal with Kinder Morgan Energy Partners L.P. to build a pipeline to carry Eagle Ford shale oil from South Texas to the refiner's 247,000 bpd plant in Sweeny, Texas.

Also, Taylor said the company is ``working hard'' on ways to bring those inland crudes to its pair of California refineries, which face higher operating costs under a state law that requires dramatic reductions in emissions by 2020.

``All in all, by mid 2014, these actions along with others that we're taking are expected to increase our access to advantage crudes by about 165,000 barrels per day across our domestic refining system. This represents about 9 percent of our U.S. refining capacity,'' Taylor said.

In addition to strong margins in the central corridor of the U.S., Phillips 66's margins also were higher than expected in Europe and the Atlantic Basin, which helped drive the earnings beat, Roger Read, analyst for Wells Fargo said in a note to clients.

The Houston company had a third-quarter profit of $1.6 billion or $2.51 per share, compared with $1 billion or $1.65 per share a year earlier.

Excluding items, Phillips had a profit of $2.97 per share. Analysts on average had expected a profit of $2.35 per share, according to Thomson Reuters I/B/E/S.

Phillips 66's consolidated margin of $16.62 per barrel exceeded Wells Fargo's forecast for $12.90 per barrel.

Phillips 66`s worldwide refining utilization rate rose to 96 percent from 92 percent, even though the company's 247,000 bpd Alliance refinery in Bell Chasse, Louisiana, was shut three weeks because of Hurricane Isaac, it said.

(Reporting By Anna Driver; Editing by Gerald E. McCormick)

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