Total beats expectations thanks to record refining margins

* Total (Swiss: FP.SW - news) 's net adjusted profit beats forecast

* Raises full-year production target

* Sector earnings hit by prolonged low oil prices (Recasts, adds quote after analyst call, sector rivals)

By Bate Felix

PARIS, Oct (HKSE: 3366-OL.HK - news) 29 (Reuters) - French oil and gas company Total's reported better than expected third-quarter profit on Thursday after high margins in its European refining business and increased production softened the blow of prolonged low oil prices.

A lower-for-longer outlook for oil prices took its heaviest toll yet as oil companies reported a dramatic drop in income in the third quarter, with some even falling to a loss.

Total, however, appeared to fare better than its peers, even though net adjusted profit tumbled by 23 percent year on year to $2.756 billion.

Analysts had expected $2.391 billion in net adjusted profit, according to Thomson Reuters I/B/E/S (Other OTC: UBGXF - news) estimates.

The French group, Europe's biggest refiner, benefited from record-high refining margins in Europe, which helped its downstream division to post an 82 percent profit jump.

"In a context where the oil price has fallen by 50 percent in one year, Total was able to demonstrate its resilience by limiting to 23 percent the decrease in its third-quarter adjusted net income," Chief Executive Patrick Pouyanne said in a statement.

The company also made an upward revision to its production growth target to more than 9 percent this year, from 8 percent previously, after a 10 percent jump in output in a third quarter boosted by new projects.

Total said that it was on track to beat its target of $1.2 billion in cost reductions this year, while organic investments after nine months were $16.6 billion, in line with the objective of $23 billion to $24 billion for 2015.

Chief Financial Officer Patrick de La Chevardiere told analysts that the results were also aided by an effective tax rate of 27 percent for the third quarter.

"In the upstream business, there was a favourable tax adjustment in Nigeria for about $100 million in the quarter that reduced the effective rate to 34 percent," he said.

Total said it would pay an interim dividend of 0.61 euro per share in the quarter.

"Our initial view is that this is another robust set of results from Total, emphasising resilience across many of its businesses," said investment bank Jefferies, which has a "hold" rating on Total.

Rival Shell posted a third-quarter loss of $7.4 billion on Thursday, hit by a massive $8.2 billion charge after halting its controversial exploration in Alaska's Arctic sea and a costly oil sands project in Canada.

Total's shares were up 0.17 percent by 1530 GMT, slightly outperforming the European sector index.

(Editing by Andrew Callus and David Goodman)