May 23 (Bloomberg) -- Candover Partners Ltd. raised a takeover bid for U.K. oilfield-services provider Expro International Group Plc by 8 percent to about 1.71 billion pounds ($3.4 billion), topping an offer from Halliburton Co.

A venture led by Candover and Goldman Sachs Group Inc. increased its cash bid to 1,550 pence a share, the firms said today in a statement. Halliburton, the world's second-biggest oilfield contractor, offered 1,525 pence a share, exceeding Candover's previous proposal, Expro said earlier today. Expro jumped 5.5 percent to 1,626 pence in London trading.

Oil-services acquisitions are accelerating as record crude prices drive a $98.7 billion binge in exploration spending this year by Exxon Mobil Corp. and its five largest Western rivals. Services stocks are outpacing gains by oil producers as the cost of finding and developing new petroleum deposits climbs and contractors secure long-term projects ensuring revenue growth.

``During the course of the '80s and '90s, oil prices didn't justify a ton of incremental investment,'' said Jeff Spittel, an analyst at Natixis Bleichroeder in Houston. ``You can't make up for a few decades of relative underinvestment in the course of two or three years. It takes awhile.''

Exploration costs have more than quadrupled since 2000 as producers target more challenging reservoirs, according to Wood Mackenzie Consultants Ltd. At the same time, oil-rich nations are reducing access to reserves and hiring contractors such as Houston-based Halliburton to help develop fields that previously would have been tapped by international producers.

Production Testing

Reading, England-based Expro has equipment that can test oil wells in water deeper than 1,000 meters (3,281 feet), a service that's in increasing demand as producers develop more deepwater fields. The company also could further Halliburton's effort to increase sales outside North America.

``Expro is very well established in the flow-management arena, which is an area which, really, Halliburton does not participate in significantly,'' Tim Probert, executive vice president of Halliburton's strategy and corporate development, told investors on an April 21 conference call. ``That's clearly one of the attractions.''

Expro shareholders should take no action on the new Candover offer, Halliburton said in a statement. ``We're considering the situation,'' company spokesman Neil Bennett said in a telephone interview from London.

Competing Bids

Earlier today, after Halliburton made its proposal and before Candover raised its offer, Jane Coffey of Royal London Asset Management predicted that the competing suitors would ratchet up the price for Expro.

``I expect then Halliburton to top Candover's bid and become the winner, unless there's another industrial player,'' Coffey said.

The speed with which Candover increased its bid and the fact Halliburton took four weeks to make its offer suggest there won't be another proposal, said James Wicklund of Carlson Capital LLC in Dallas.

``If I'm Expro, I'm like, `No, you had four weeks doing due diligence,''' said Wicklund, who helps manage $4.3 billion in assets, including about 425,000 Halliburton shares. ```If you want to raise your bid, raise your bid. How many times do you need to go through the underwear drawer to know what you have?'''

Shares Fall

Halliburton fell 1.1 percent to $47.77 in New York Stock Exchange composite trading. Before today, the stock had climbed 27 percent this year.

Candover and Goldman said their group owns about 7.78 percent of Expro's shares. Expro's independent directors, who unanimously agreed to back the new offer, are released from their pledge should there be a rival bid at least 12.5 percent higher, according to the statement by Candover and Goldman.

Ed Cutts, head of investor relations at Expro, and Kay Drummond, an Aberdeen-based spokeswoman, weren't immediately available for comment. Peter Hewer, a Candover spokesman in London, declined to comment beyond the statement.

Buyout firms including First Reserve Corp. are acquiring oil-services companies, betting on increasing competition for commodities.

Services Takeovers

First Reserve and Schlumberger Ltd., the world's biggest oilfield-services provider, agreed to buy Canada's Saxon Energy Services Inc. on May 5 for C$592.1 million ($601.7 million). First Reserve agreed in December to buy Scottish oil driller Abbot Group Plc for 906 million pounds.

More acquisitions may be coming, said Spittel of Natixis Bleichroeder. ``The service companies are flush with cash right now, and they're redeploying that cash for the most part with smaller niche acquisitions that fit their technology platform and give them entrée into a new geographical area,'' he said.

The 15-member Philadelphia Oil Service Sector Index, a benchmark for U.S. oilfield contractors, has climbed 11 percent this year, five times the gain by major U.S. oil producers. Spittel said he expects the services index to rise another 5.8 percent, meeting the 2008 target he set in September, at which point he will re-evaluate how much further the stocks may climb.

The Eastern Hemisphere accounted for 41 percent of Halliburton's first-quarter revenue. Halliburton Chief Executive Officer David Lesar has said he wants to get half of revenue from outside the Americas.

Expro derived 75 percent of its revenue from the Eastern Hemisphere last year, according to Wachovia Securities Inc.

To contact the reporters on this story: Jim Kennett in Houston at jkennett@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net.

Last Updated: May 23, 2008 16:15 EDT