* Q3 adj shr C$1.21 vs yr-ago C$1.78

* Q3 cash flow C$2.78/shr

Nov 5 (Reuters) - Third-quarter profit at Canadian Natural Resources Ltd fell 77 percent as oil and gas prices plunged, Canada's No. 2 independent oil explorer said on Thursday.

Canadian Natural's net income fell to C$658 million ($619.6 million), or C$1.21 per share, from C$2.84 billion, or C$5.25, a year ago.

Excluding items, profit fell 32 percent to C$658 million, or C$1.21 a share, from C$963 million, or C$1.78.

Analysts on average were looking a profit of C$1.25 per share, according to Thomson Reuters I/B/E/S.

Most Canadian oil companies have posted lower third-quarter earnings as the recession cut prices and demand for oil and natural gas.

During the quarter, benchmark oil prices averaged $68.24 a barrel, down 42 percent from a year earlier. Natural gas averaged $3.44 per million British thermal units on the New York Mercantile Exchange, down 62 percent.

Cash flow, a measure of the company's ability to pay for new projects and drilling, fell 17 percent to C$1.51 billion, or C$2.78 per share.

The company, which is ramping up output at the C$9.7 billion Horizon oil sands project in northern Alberta, said its crude oil and natural gas liquids production rose 17 percent to 359,269 barrels per day.

Canadian Natural's share closed at C$68.60 on the Toronto Stock Exchange on Wednesday. The stock has risen 8.7 percent over the past 12 months.

($1=1.062 Canadian Dollar)

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Himani Sarkar) Keywords: CANADIANNATURAL/

(ajay.kamalakaran@reuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800 +1 646 897 1898; Reuters Messaging: ajay.kamalakaran.reuters.com@reuters.net)

COPYRIGHT

Copyright Thomson Reuters 2009. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.