UPDATE 3-Husky boosts profit, dividend as oil soars

(Adds increased dividend)

CALGARY, Alberta, April 21 (Reuters) - First-quarter profit at Husky Energy Inc (HSE.TO) jumped 36 percent despite a big drop in production as crude oil prices surged to record levels, Canada's No. 3 oil explorer and refiner said on Monday.

Husky also boosted its quarterly dividend 21 percent to 40 Canadian cents a share, giving investors including major shareholder Li Ka-shing, the Hong Kong billionaire, rewards from the high commodity prices and mounting cash.

Its net income climbed to C$887 million ($882 million), or C$1.04 a share, from year-earlier C$650 million, or 77 Canadian cents a share.

The earnings beat the average forecast among analysts polled by Reuters Estimates by 2 Canadian cents .

Cash flow, an indicator of the company's ability to pay for new projects and drilling, rose 16 percent to C$1.54 billion, or C$1.82 a share, from C$1.32 billion, or C$1.56 a share.

Revenue rose 6.9 percent to C$5.09 billion.

Canadian petroleum producers are benefiting from oil prices that averaged a record $97.82 a barrel over the quarter -- more than two-thirds above the average of a year earlier -- as well as from a natural gas price rebound following a long downturn.

Husky is known for oil and gas production in Western Canada, off Newfoundland and in Southeast Asia.

It is a large producer and processor of heavy-grade crude oil, which nearly doubled in price from the first quarter of 2007 amid rising demand.

Overall, the company sold its oil for an average C$79.98 in the quarter, up 52 percent. It sold its natural gas for an average C$7.04 per thousand cubic feet, a 1 percent gain.

Husky produced 350,100 barrels of oil equivalent a day of oil and gas from its properties in Canada and Asia, down 11 percent from 390,000 barrels of oil equivalent a day.

The company said the decline was due to a 13-day maintenance turnaround at its White Rose oil field off Newfoundland and the sale of Western Canadian producing assets.

During the quarter, Husky finalized a deal with BP Plc (BP.L) that swaps a share in a BP Ohio refinery in return for a stake in a Husky oil sands project.

The transaction gives the company a share of a second refinery in the Midwestern state following its acquisition last year of a plant in Lima, Ohio, for $1.6 billion.

The U.S. refining operations generated C$8 million in earnings in the first quarter.