UPDATE 2-Penn West profit falls 99 pct

* Q3 production averaged 178,124 boe/d

* Q3 earnings per unit C$0.02 vs C$2.73 a year earlier

* Says sees 2010 avg production 170,000-180,000 boe/d

* Lowers 2009 capital budget but spending more in 2010

* Units drop 0.5 pct (Recasts and adds details)

CALGARY, Alberta, Nov 5 (Reuters) - Profit at Penn West Energy Trust (PWT_u.TO) was hit by plunging oil and gas prices in the third quarter, dropping 99 percent from a year-before quarter in which earnings had been boosted by one-time gains.

The oil producer, Canada's largest conventional oil trust, said on Thursday that net income fell to C$7 million ($6.59 million), or 2 Canadian cents per trust unit, in the quarter from C$1.06 billion, or C$2.73 per trust unit, in the same quarter of 2008, when returns were inflated by gains from the company's hedging program.

Still, the result beat the average analyst forecast for a loss of 6 Canadian cents per unit.

It was Penn West's first profit of 2009, and came as the company further cut capital spending and production. The trust said it expects its capital spending this year to be between C$650 million and C$700 million, compared with its August forecast of C$600 million to C$825 million.