Oct. 16 (Bloomberg) -- Halliburton Co.’s third-quarter profit dropped less than analysts estimated on projects the world’s second-largest oilfield-services provider is working on outside of North America.

Net income fell to $262 million, or 29 cents a share, from $672 million, or 74 cents, in the third quarter of 2008, Houston-based Halliburton said today in a statement. Excluding costs for job cuts, profit was 31 cents a share, 5 cents higher than the average of 24 analyst estimates compiled by Bloomberg.

Oil futures in New York averaged $68.24 a barrel in the third quarter, 42 percent lower than a year earlier. Crude climbed from $59.79 in the second quarter. Operating profit from a region that includes Africa, Europe and the former Soviet Union fell 2 percent, and income declined 16 percent in the Middle East and Asia. The drop in North America was 93 percent.

“I thought that the numbers in the Middle East and Europe came in stronger than I expected, both in terms of revenues and margins,” said Mark Brown, a senior analyst at Pritchard Capital in New York who has a “buy” rating on Halliburton shares and owns none. “I thought that was a good sign for Halliburton.”

Halliburton rose 55 cents to $30.40 in New York Stock Exchange composite trading. Before today, the shares had climbed 64 percent this year.

Job Cuts

Halliburton said today that it had cut 6,000 jobs since January, mostly in North America. The company also has implemented a salary freeze and a pay cut for executives.

A retroactive application of accounting standards related to redemption of convertible debt resulted in the reversal of $693 million in recorded costs in the third quarter of last year, the company said.

Operating income from Halliburton’s completion and production business tumbled 62 percent to $240 million. Profit from drilling and evaluation fell 43 percent to $283 million. The number of active oil and natural-gas rigs in the U.S. declined 51 percent from a year earlier to a third-quarter average of 970, up from 934 in the second quarter, according to Baker Hughes Inc.

More than 45 percent of Halliburton’s revenue in 2008 came from North America. The company is the biggest provider on the continent 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. Gas futures in New York were 62 percent lower, on average, in the third quarter compared with a year earlier.

‘Fierce’ Competition

Halliburton Chief Executive Officer David Lesar said in the statement that North American “pricing has stabilized in most basins,” although “fierce” competition remains in areas such as the Haynesville and Marcellus shale formations. The company said fourth-quarter margins likely will remain “under pressure” because of weather and deferred completions, even after there are signs that margins were bottoming in the third quarter.

Halliburton’s revenue in the third quarter declined 26 percent to $3.59 billion. That’s up from $3.49 billion in the second quarter of this year.

The North American market may recover before other areas, which would help Halliburton because of its reliance on gas projects in the U.S., said Pritchard Capital’s Brown.

“I think that it’s well-positioned, at least coming out of this quarter, to start to see some positive effects of improvements in natural-gas prices,” Brown said. Gas has traded as high as $5.12 per million British thermal units this month after trading for less than $3 at times in August and September.

International Outlook

Lesar said his outlook on international markets has improved from last quarter. He said “project deferrals together with pricing pressure, driven by our customers’ desire to reduce input costs, cause us to continue to expect a softer near-term margin outlook for international markets.”

“The shares have performed really well of late, thus people were expecting an outperformance to some extent,” said Roger Read, an analyst at Natixis Bleichroeder in Houston who has a “hold” rating on Halliburton and owns about 500 of its shares. “Management gave a more positive commentary than they’ve been giving in terms of kind of just their outlook on pricing and activity.”

Worldwide exploration and production expenditures will be an estimated $387 billion in 2009, a 15 percent drop compared with last year, according to a June report from Barclays Capital. That includes a 38 percent decline in the U.S.

Schlumberger Ltd., the largest oilfield-services provider, is scheduled to report third-quarter earnings Oct. 23.

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

Last Updated: October 16, 2009 16:23 EDT