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UPDATE 1-Phillips 66 quarterly profit rises as it ships more crude

(Adds details on pipeline business, utilization, industry background)

July 26 (Reuters) - U.S. refiner Phillips 66 reported a 4.3% rise in quarterly adjusted profit on Friday as it earned more by shipping crude through its pipelines, which more than offset a fall in refining margins.

A surge in output has led oil producers to scramble for takeaway capacities, which has benefited pipeline operators, including Phillips 66, which has both wholly owned and joint venture operations.

Earnings from midstream segment rose 77.7% to $423 million in the second quarter ended June 30 even though refining margins per barrel fell to $11.37 per barrel from $12.28 a year earlier.

Refiners in the United States have been struggling to find cheap sources of heavy crude due to factors including Alberta's output cuts, sanctions on Venezuela and Iran as well as the OPEC's pull back on production.

Adjusted earnings rose to $1.38 billion, or $3.02 per share, in the quarter ended June 30, from $1.32 billion, or $2.80 per share, a year earlier.

During the quarter, the company's refineries had an average utilization rate of 97% compared with a 100% in the year-ago period. (Reporting by Debroop Roy in Bengaluru; Editing by Arun Koyyur)