Jan. 26 (Bloomberg) -- Halliburton Co., the world’s second- largest oilfield-services provider, said fourth-quarter profit fell 32 percent on a plunge in crude prices and costs to end U.S. investigations of alleged bribery by a former subsidiary.

Net income dropped to $468 million, or 53 cents a share, from $690 million, or 75 cents, a year earlier, Houston-based Halliburton said today in a statement. Excluding such items as legal settlements, per-share profit was about 11 cents higher than the average of 23 analyst estimates compiled by Bloomberg.

Petroleum producers slowed exploration spending as oil futures in New York tumbled more than $100 a barrel below the all-time high set in July. Onshore natural-gas projects in North American helped cushion the impact of the price collapse on Halliburton, which had a 31 percent gain in profit from drilling and evaluation services.

“It just looks like it was -- if you look at the fourth quarter in isolation --a pretty positive performance,” said Roger Read, an analyst at Natixis Bleichroeder in Houston who rates Halliburton shares “buy” and owns about 500.

Halliburton rose 62 cents, or 3.4 percent, to $18.87 in New York Stock Exchange composite trading. The stock lost more than half of its value last year.

While keeping North American revenue from falling in the fourth quarter from third-quarter levels, Halliburton saw pricing pressure that will continue this year, Chief Executive Officer David Lesar said in the statement.

Demand Slows

“It’s clear that pricing pressures are there, activity’s going lower, margins are going lower,” Read said.

Global spending on exploration and production may fall 12 percent this year to about $400 billion, according to a December report by analysts James Crandell and James West of Barclays Capital. That includes a possible drop of 26 percent in the U.S.

The number of active rigs in North America is down about 25 percent from 2008’s highs and will slump further in the current quarter, Lesar told investors today on a conference call. Russia and the North Sea are among areas most vulnerable to the oil industry’s spending cuts, he said. Halliburton is seeing some of its projects being deferred, Lesar said.

The company also announced agreements made on behalf of its former KBR Inc. subsidiary concerning alleged violation of the U.S. Foreign Corrupt Practices Act. Proposed settlements of $559 million with the U.S. Justice Department and securities regulators exceeded the amount set aside for liabilities of KBR, reducing fourth-quarter profit by 34 cents a share.

KBR Settlements

A $382 million settlement with the Justice Department is being reviewed by the government for final approval, Halliburton said. A $177 million settlement with the Securities and Exchange Commission is contingent on the Justice Department deal. The SEC agreement requires the company to hire a consultant to review internal controls and record-keeping, Halliburton said.

Halliburton said in 2004 that a joint venture that included KBR was being investigated for possibly making improper payments to win contacts. Albert Jack Stanley, former chairman of KBR, pleaded guilty last year to taking part in a plan to bribe Nigerian officials. KBR separated from Halliburton with a public share sale in November 2006.

Brian Youngberg, an analyst at Edward Jones & Co. in Des Peres, Missouri, said resolution of the investigations removes uncertainty. “When it looks like something is going to be kind of put to bed to rest, I think investors should look at that positively,” he said.

Gas Plays

Halliburton is the biggest provider in North America of pressure pumping, a service in which materials such as water and sand are injected into a reservoir to fracture rocks and help gas to flow. Pressure pumping helps producers tap unconventional gas deposits such as those trapped in shale formations.

The average number of active horizontal rigs in the U.S., including those used in shale formations, rose 42 percent from a year earlier in the fourth quarter, according to data from Baker Hughes Inc.

“It feels as though the service companies like Halliburton that deal primarily in unconventional gas plays should have fared better than some of the smaller oil-service companies that are more exposed to conventional drilling,” said Byron Pope, an analyst at Tudor, Pickering, Holt & Co. in Houston.

Halliburton’s completion and production business, which includes pressure pumping, posted a 15 percent gain in fourth- quarter earnings. Revenue rose 20 percent in North America and 38 percent in Latin America. Companywide, revenue rose 17 percent to $4.91 billion, Halliburton said.

Job Cuts

Halliburton’s gains in drilling and evaluation earnings were led by an 88 percent increase in the Middle East and Asia and an 84 percent jump in Latin America.

Halliburton said Jan. 8 that it would cut an undisclosed number of jobs, citing the economy. Lesar said in today’s statement “it is clear 2009 will be a challenging year for both the company and the industry.” The company wants to minimize job cuts, he said on the conference call.

Schlumberger Ltd., the world’s largest oilfield-services company, also announced job cuts this month, saying it will eliminate 5,000 positions worldwide. Schlumberger, based in Houston and Paris, said Jan. 23 that its fourth-quarter net income dropped 17 percent to $1.15 billion, or 95 cents a share.

Halliburton’s stock “is reflecting a lot worse than what the fourth quarter was like,” said Joe Agular, an analyst at Johnson Rice & Co. in New Orleans who has an “equal-weight” rating on Halliburton shares and doesn’t own any. “It’s more forward-looking into 2009 and 2010.”

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net.

Last Updated: January 26, 2009 16:06 EST