May 23 (Bloomberg) -- Halliburton Co., the world's second- biggest oilfield contractor, offered 1.71 billion pounds ($3.4 billion) for Expro International Group Plc, topping a bid by Candover Partners Ltd., as record crude prices spur exploration.

Halliburton proposed 1,525 pence a share in cash, Expro said today in a statement. That's more than the 1,435 pence per share offer by Candover and Goldman Sachs Group Inc. on April 17. The Reading, U.K.-based company, which makes equipment to test deep-sea wells, rose to 1,552 pence in London trading, indicating investors expect a higher bid.

``This is not over as I think Candover will come back with another bid,'' Jane Coffey, head of equities at Royal London Asset Management which manages $63 billion, said in a phone interview. ``I expect then Halliburton to top Candover's bid and become the winner, unless there's another industrial player.''

Surging crude prices have driven companies to explore for oil and gas in harder-to-reach fields, boosting demand for technology that allows drilling offshore and in the Arctic. Buyout firms including First Reserve Corp. are also acquiring oil services companies, betting on increased competition for commodities.

Boost Sales

Expro, whose equipment tests oil wells drilled in waters deeper than 1,000 meters (3,281 feet), would give Houston-based Halliburton a technology it lacks and further the U.S. company's efforts to boost sales outside North America. Halliburton is betting Middle East and Latin American projects will make up for a decline in U.S. income.

Expro was up 0.4 percent at 1,547 pence as of 10:30 a.m. local time. The stock has surged about 50 percent this year. Halliburton shares traded in Frankfurt rose 10 cents to $48.38.

Candover, a London private-equity firm, and Goldman Sachs Group Inc. said April 17 they agreed to buy Expro for 1.61 billion pounds.

``We are looking at the situation,'' Susanna Voyle, a spokeswoman for Candover said today. Joanna Carss, a London- based spokeswoman for Goldman, declined to comment.

First Reserve, an energy industry buyout fund, and Schlumberger Ltd., the biggest oilfield contractor, agreed to buy Canada's Saxon Energy Services Inc. on May 5 for C$592.1 million ($582 million) to expand in South America. First Reserve also agreed to buy Scottish oil drilling services company Abbot Group Plc in December.

Expro said on May 20 that full-year earnings jumped 45 percent as orders from oil companies increased. Net income in the year ended March 31 was 49.3 million pounds, compared with 34.1 million pounds a year earlier. Its revenue has more than doubled in the past five years, according to data compiled by Bloomberg.

`Well Positioned'

``The overall outlook for the upstream oil and gas services industry has never been stronger and Expro is well positioned to benefit from a prolonged industry upcycle,'' Expro said when it reported its earnings.

Exxon Mobil Corp., Royal Dutch Shell Plc, BP Plc, Chevron Corp., Total SA and ConocoPhillips will spend a record $98.7 billion this year on exploration and production, according to Lehman Brothers Holdings Inc. estimates. Costs more than quadrupled since 2000 as explorers targeted more challenging reservoirs, boosting demand for field services.

Rising energy demand by countries including China and India has pushed oil prices to all-time highs. Brent crude oil for July settlement traded at a record $135.14 a barrel on London's ICE Futures Europe exchange yesterday, almost double the price a year earlier.

Larger Share

Oil-producing countries, seeking to keep a larger share of revenue, are hiring Halliburton, its larger rival Schlumberger and other contractors to do work previously handled by companies such as Exxon, which typically seek stakes in projects.

Halliburton said April 21 that first-quarter profit rose 5.8 percent to $584 million after producers increased spending on Middle East and Latin American projects.

It's adding research and training centers from Russia to Singapore as it diversifies away from North America, which accounted for 47 percent of revenue last year. U.S. and Canadian business is dominated by regional natural-gas markets, where weather can cause prices to surge or plummet.

Chief Executive Officer David Lesar splits his time between the U.S. and Halliburton's regional corporate headquarters in Dubai. The Eastern Hemisphere accounted for 41 percent of Halliburton's first-quarter revenue. Lesar has said he'd like the region ultimately to account for half of sales.

The bid from Goldman's private-equity fund and Candover also includes AlpInvest Partners NV, a Dutch investor in Candover's private-equity funds. Candover and Goldman would own about 40 percent each, with AlpInvest holding the remainder.

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

Last Updated: May 23, 2008 06:00 EDT