UPDATE 2-Thai PTTEP Q3 profit down 60 pct, rebound seen in Q4

* Q3 net profit at 5.26 bln baht vs 5.5 bln forecast

* Revenue down 27 pct, expenditure up 20 pct

* Earnings seen improving in Q4 as oil prices rise

* Shares pare loss, but underperform the market (Adds details)

BANGKOK, Oct 27 - Thailand's PTT Exploration and Production <PTTE.BK> reported a worse-than-forecast 60 percent fall in third-quarter earnings on Tuesday, mainly due to higher costs related to an oil spill at Australia's Montara field.

PTTEP's earnings are expected to improve in the fourth quarter as recent rises in oil prices should boost selling prices, while sales volume should rise with the start-up of new fields, although operations at Montara have been delayed until next year by the oil spill.

Despite a recent downward revision of earnings forecasts to reflect the Montara delay, many analysts are upbeat on PTTEP's earnings in 2010 due to rising prices and volume, especially from Arthit North field in the Gulf of Thailand and the Malaysian-Thai Joint Development Area gas field.

PTTEP, the exploration flagship of PTT <PTT.BK>, Thailand's biggest energy firm, was expected to post a 46 percent rise in net profit in 2010, according to 21 analysts polled by Thomson Reuters I/B/E/S.

It posted a net profit of 5.26 billion baht ($157 million) in the third quarter, down from 12.9 billion a year earlier and 6.5 billion in the previous quarter.

Eleven analysts polled by Reuters had an average forecast of a net profit of 5.5 billion baht for the July-September quarter.

PTTEP, Thailand's second-largest energy firm with a market value of $15 billion, is involved in 40 oil and gas exploration and development projects.

Third-quarter revenue fell 27 percent from a year earlier to 30.8 billion baht as its average selling prices dropped to $39.90 per barrel of oil equivalent versus $54.52 a year earlier.

Sales volume declined to 234,601 barrels of oil equivalent per day from 240,839 a year earlier, it said in a statement.

Expenses rose 20 percent to 22.4 billion baht, mainly due to the crude oil and gas leak incident at the Montara field and higher depreciation and amortisation costs from several fields, including the Arthit North and Vietnamese projects.

On Tuesday, PTTEP shares closed down 0.32 percent at 155.50 baht, after falling more than 2 percent at one stage to a low of 152.50 baht. The main Thai index ended up 0.38 percent.

In the past three months, the stock has risen 12 percent, underperforming a 16 percent gain in the overall Thai market. ($1 = 33.43 Baht)