* Says Q3 production averaged 178,124 boe/d

* Q3 earnings per unit C$0.02 vs C$2.73 yr ago

* Q3 gross rev down 35 pct

* Says sees 2009 avg production 175,000-180,000 boe/d

Nov 5 (Reuters) - Third-quarter profit at Penn West Energy Trust plunged 99 percent as it had unrealized risk management gains on its oil and natural gas collars a year earlier, Canada's largest conventional oil trust said on Thursday.

The trust said net income fell to C$7 million ($6.59 million), or 2 Canadian cents per trust unit, from C$1,062 million, or C$2.73 per trust unit, in the third quarter of 2008.

It was expected to post a loss of 6 Canadian cents per unit, according to Thomson Reuters I/B/E/S.

Funds flow, the cash used for distributions to shareholders and to pay for new projects and drilling, fell 47 percent to C$349 million, or 83 Canadian cents per unit.

Penn West and most other Canadian oil companies have reported lower third-quarter results on sharply lower oil and gas prices.

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.

Penn West's production fell 6 percent to 178,124 barrels of oil equivalent a day.

Gross revenue fell 35 percent to C$800 million.

Penn West said it sees 2009 average production in range of about 175,000 to 180,000 barrels of oil equivalent per day.

Penn West units closed at C$18.60 on the Toronto Stock exchange on Wednesday. The units have dropped 11 percent over the past 12 months.

($1=1.062 Canadian Dollar)

(Reporting by Koustav Samanta in Bangalore; Editing by Deepak Kannan) Keywords: PENNWEST/

(koustav.samanta@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: koustav.samanta.reuters.com@reuters.net)

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