Oct. 16--Oil field services giant Halliburton Co. said third quarter earnings fell 61 percent amid weaker oil and gas activity compared with a year ago, particularly in North America, but was encouraged by improving conditions in international markets.

"While there is a risk of further decline in international activity in coming quarters, I am more optimistic than I was previously that this downturn will not match previous cycles in terms of duration and deptch," Halliburton CEO Dave Lesar said today in a conference call with financial analysts.

But, "without compelling evidence of a recovery in hydrocarbon demand," oil companies are not likely to increase capital spending again, he said, signaling business could remain slow in some areas into next year.

Halliburton's third-quarter net income dropped to $262 million, or 29 cents a share, from $672 million, or 74 cents a share in the year-ago period. The results included employee separation costs of $19 million, or $0.02 per share.

Revenue fell 26 percent to $3.59 billion, from $4.85 billion in the July-to-September period a year ago.

While down versus the same quarter a year ago, the results came in higher than Wall Street expectations.

Analysts chiefly focused an uptick in international business, which helped Halliburton post its first quarter-to-quarter growth in revenue since the fourth quarter of 2008.

"We believe the strong international revenues and margins are the key takeaway and have positive implications for Halliburton and diversified peers," Mark Brown, analyst with Pritchard Equity Research, said in a report today.

Halliburton, with dual headquarters in Houston and Dubai, is the world's second-largest oil field services firm. Other major oil field service providers, including industry leader Schlumberger, Baker Hughes and Weatherford International, will report third quarter earnings in coming weeks. Oil field services firms work on a contract basis with oil companies, assisting in drilling wells and bringing them into production.

The sector has been pummeled in recent months as falling commodity prices and a recessionary drop in global energy demand forced oil companies to slash spending, halt projects and demand cuts in pricing for services.

During the downturn, Halliburton has moved aggressively to increase market share across its product lines and regions where it operates, Lesar said.

That has put the company in a good position to capitalize on the rebound in international markets, which accounted for 64 percent of Halliburton's revenue in the third quarter, he said. But he said that while the company's international business will keep growiing in coming months, profit margins will likely slip from peaks seen last year, he said.

In North America, pricing for services has stabilized in most basins, and margins may have bottomed in the third quarter, Lesar said. But competition remains fierce and fourth quarter margins will likely be affected by seasonal weather and cautious spending by oil companies waiting to see commodity prices improve, he said.

Tim Probert, president of Halliburton's drilling and evaluation division and corporate development, said the current cycle appears to be following the same path to recovery the industry took in 2002, suggesting activity will remain restrained in first half of 2010 before fully rebounding.

Halliburton shares were up 92 cents to $30.77 in morning trading on the New York Stock Exchange.

brett.clanton@chron.com

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