CALGARY - Penn West Energy Trust (TSX:PWT.UN) said Thursday it will continue to pump money into its oil projects even though its profits have declined from year-ago levels.

The Calgary-based oil and gas company reported net income of $7 million or two cents per unit in the quarter ended Sept. 30. This was a drop from year-ago net profit of $1.2 billion or $2.78 per unit.

Quarterly revenues totalled $800 million, falling from $1.2 billion last year.

Analysts had predicted a net loss of six cents per share and revenue of $708 million for the quarter, according to estimates compiled by Thomson Reuters.

Penn West said its significantly higher income last year was due to unrealized risk management gains.

The company said more than 80 per cent of its spending was going into oil projects which were showing consistent strong returns despite a soft commodity-price environment.

"Our outlook for Penn West remains highly optimistic," said William Andrew, the company's chief executive officer, in a letter to shareholders.

Andrew said the company had maintained a strong production base and strengthened its balance sheet in the third quarter.

Total production at the company was reported at 178 million barrels per day, down six per cent from last year.

Andrew added that production remained at the high end of the company's full-year guidance.

"We are encouraged by the results on many of our development projects and we are eagerly planning our next steps in these plays," Andrew said. "We expect increases to our development capital budgets in future years."

Penn West said it was maintaining its focus on moving from a trust to a corporate model before the end of 2011. The company said it will continue to focus on the advancement of large scale resource plays it already has interests in.

In response to declining commodity prices, Penn West had reduced its 2009 development programs and focused on less capital intensive projects. Given the results of the quarter, Penn West said it will allocate a larger portion of its 2010 capital budget to drilling within its oil resource plays.

The company's units closed at $18.60 Wednesday on the Toronto Stock Exchange.