Halliburton Co posted a higher-than-expected profit on Monday, lifting its shares, but the world's second-largest oil services company warned that North American natural gas markets would stay weak throughout 2009.

Natural gas prices in the United States have tumbled to less than half of year-ago levels, and the industry expects high inventories to curb spending by producers on new wells.

It seems that in North America, there's no place to hide, said Bernard Duroc-Danner, chief executive of rival Weatherford International Ltd , which posted a steeper-than-expected second-quarter profit drop on Monday. Pricing was under severe pressure just about everywhere I could think of.

The sharp decline in oil and gas prices over the past year has forced exploration and production companies to reel in spending across the board, putting a tight squeeze on pricing power among companies selling them services.

Halliburton said margins in the international market, which tends to react more slowly to hydrocarbon pricing trends, would shrink by 3 to 5 percentage points by the end of 2010.

Halliburton's second-quarter net profit fell to $262 million, or 29 cents per share, from $504 million, or 55 cents per share, a year earlier.

Excluding a $12 million charge to cut jobs, Halliburton posted earnings per share of 30 cents, topping the analysts' average forecast of 26 cents, according to Reuters Estimates.

Revenue dropped to $3.49 billion from $4.49 billion, while analysts had expected $3.41 billion.

We believe it is unlikely that there will be a meaningful recovery in natural gas prices and, consequently, drilling activity for the remainder of the year, Halliburton Chief Executive Dave Lesar said in a statement.

Weatherford, which was similarly hard-hit in North America, reported a 77 percent drop in profit, and its stock fell 8 percent.

Duroc-Danner, who is in the process of cutting Weatherford's North American costs, told analysts on a conference call that he believed the downward pressure on its pricing internationally was behind it.

Last month, Goldman Sachs cut its ratings on Halliburton and other stocks exposed to natural gas because of persistent weakness in the huge North American market.

On Friday, Baker Hughes Inc said the number of U.S. rigs drilling for gas had hit a seven-year low of 665.

Analysts at Tudor Pickering Holt said Weatherford has been an international revenue growth story -- but derailed in Q2 on painful North American profitability.

Halliburton shares were up 2.7 percent at $21.95. At Friday's close, the stock was up 18 percent in 2009, or half the gain of Philadelphia oilfield service index <.OSX>.

Weatherford shares, despite their drop on Monday, are up by 68 percent so far in 2009.

(Reporting by Braden Reddall in San Francisco and Matt Daily; Editing by Maureen Bavdek, Lisa Von Ahn and Matthew Lewis)

Energy