(Corrects subhead and paragraph 13 to show Husky's adjusted profit missed analysts' estimates, not beat)
* 4th-qtr earnings C$0.48/share vs C$0.42 last year
* Adjusted earnings unchanged at C$0.50/share
* Production rises to 319,300 boe/d vs 318,900 boe/d
Feb 6 (Reuters) - Husky Energy Inc, Canada's No.3 oil producer and refiner, reported a 16 percent rise in fourth-quarter net profit as cheaper crude oil fattened refining margins.
Husky, along with compatriots Suncor Energy Inc and Imperial Oil Ltd, has taken advantage of a wide gulf between the price of oil in the glutted North American interior and expensive imported crude.
That spread has been building as booming production in both Canada and the United States floods the market in the U.S. Midwest and Midcontinent regions, the major market for Canadian crude.
Realized refining margins for the quarter averaged $16.24 per barrel, compared with $14.80 a year earlier.
Husky, controlled by Hong Kong billionaire Li Ka-shing, in December forecast higher production for the current year, as it increased oil production and cut back on natural gas.
The company said it expected to produce 310,000 to 330,000 barrels of oil equivalent per day (boe/d) in 2013.
Husky, a dominant producer of heavy crude in Western Canada, is also known for its Husky and Mohawk-branded gas stations.
Production at its 60,000 barrel per day Sunrise oil sands project, a joint venture with BP Plc, in northern Alberta is expected to begin in 2014.
Field facilities for the first phase of the project are about three-quarters complete, the company said in a statement.
Husky said in December that the Sunrise project would cost C$2.7 billion, 8 percent above its previous estimate.
With regulatory approvals in place for a total of 200,000 bbls/day, development of the next phase of Sunrise is underway with early engineering work scheduled for completion in 2013, Husky said on Wednesday.
Husky said its net income rose to C$474 million ($474.9 million), or 48 Canadian cents per share, in the quarter from C$408 million, or 42 Canadian cents per share, a year earlier.
Adjusted earnings, which exclude most one-time items, was unchanged at 50 Canadian cents per share, but missed analysts' average expectation of 56 Canadian cents per share, according to Thomson Reuters I/B/E/S.
Cash flow, a key measure of the company's ability to pay for new projects and drilling, rose 18 percent to C$1.41 billion, or C$1.44 per share.
Production averaged 319,300 barrels of oil equivalent per day (boe/d), almost flat from a year earlier.
Shares of Husky, which has a market value of C$30.55 billion, closed at C$31.37 on Tuesday the Toronto Stock Exchange. ($1 = 0.9982 Canadian dollars) (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Don Sebastian, Ted Kerr and Roshni Menon)