UPDATE 2-Phillips 66 quarterly profit up on good margins

* Shares rise 1.2 percent

* Margins top expectations-analyst

* Ability to process cheaper Canada crude helped

(Updates share price, adds analyst commentary)

Oct 31 (Reuters) - Phillips 66 on Wednesday reported a higher-than-expected quarterly profit as the U.S. refining company spun off from ConocoPhillips earlier this year benefited from processing lower-cost crude oil.

Shares rose 1.4 percent in early trading on the New York Stock Exchange.

Margins at the company's refineries in the central part of the United States were particularly strong because they have access to cheaper crude oil from Canada, Phillips 66 said.

The company's margins were also 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 Alliance refinery in Louisiana was shut three weeks due to Hurricane Isaac, it said.

Shares of Phillips 66 rose 1.2 percent to $48.08.

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