MADRID, July 29 (Reuters) - Spain's second largest oil

company Cepsa said on Monday it returned to profit in the second

quarter thanks to higher oil and gas prices, lower costs and

wider refining margins.

The company booked a net profit of 172 million euros

($186.74 million) in the quarter, up from a net loss of 31

million euros in the same period a year ago.

The company said its oil and gas extraction business

benefited from higher prices, its refining unit was lifted by

wider margins that averaged $7.7 per barrel and higher

production volumes at its petrochemical business.

During the first half of the year, Cepsa generated 735

million euros in cash up from 416 million euros, an important

indicator for a company, which is shifting its business model

from an oil company to a green energy one.

Owned by Abu Dhabi fund Mubadala and the Carlyle Group ( CG )

, Cepsa is investing up to 8 billion euros to shift to low

carbon energy, mainly into the production of green hydrogen

fuel.

($1 = 0.9211 euros)