Oilfield services leader Schlumberger Ltd posted a quarterly profit tarnished by weak margins, but talked of more spending by oil companies this year, including those in Iraq.

Schlumberger shares fell 4.5 percent on Friday, as U.S. crude oil prices hit one-month lows and analysts worried about how robust the better-than-expected fourth-quarter profit was.

Chief Executive Andrew Gould expected international margins to bottom out in the middle of 2010, and warned that natural gas production presented few growth opportunities outside the United States in the next few years.

Yet the cautious executive offered a much better view of the potential for oilfield activity in Iraq based on the plans set out in the latest round of bidding for contracts.

If that timetable is adhered to, then it implies a huge amount of service activity over the next two or three years, he said in a conference call, adding that this outlook assumed an election took place there and that Iraq passed an oil law.

I don't think it will have a material effect on results in 2010, but we may well start to see the ramp-up in second half of the year.

Fourth-quarter net profit fell to $817 million, or 67 cents per share, from $1.15 billion, or 95 cents per share, a year earlier. Revenue fell 16 percent to $5.74 billion. That topped analysts' average forecast of 64 cents per share on revenue of $5.44 billion, according to Thomson Reuters I/B/E/S.

Analysts said an unexpected improvement in the tax rate explained much of the bottom-line outperformance.

North American oilfield services demand grew in the fourth quarter from the third, but analysts pointed out that revenue in the region did not rise as much as overall activity levels and margins suffered from the mix of business.

You would have expected them to recover given the improvement in revenue, said Pierre Conner, analyst at Capital One Southcoast, who sensed that many investors had hoped for an even better earnings beat, and sold the stock as a result.

Schlumberger also explained its weak margins by pointing to price concessions made in response to the downturn last year.

Oil prices steadily improved in 2009 and have steadied at $70 to $80 per barrel in recent months, lending some confidence to oil companies who will begin spending on new wells in 2010.

Global oil and gas exploration and production spending may grow 11 percent in 2010, after a 15 percent drop in 2009, based on a Barclays Capital survey out last month.

POSSIBLE DIVIDEND RISE

As Schlumberger looked at deploying its $4.6 billion in cash, which is up by nearly $1 billion from a year before, Gould said it would review its dividend later this year.

Expectations were for oil demand to grow in 2010 for the first time in three years, particularly in developing nations, but Gould was less optimistic on natural gas -- one of the fastest-growing parts of the industry -- with markets generally oversupplied with it despite better demand and cold weather.

Revenue fell 8 percent to $549 million at Schlumberger's WesternGeco seismic surveying arm, which struggled in 2009 as energy companies clamped down on spending on new exploration, but its operating profit rose 30 percent to $115 million.

Its competitor in seismic, Petroleum Geo-Services

, told Reuters this month the seismic data market was clawing its way back along with the rise in oil prices.

Schlumberger shares closed 4.5 percent lower at $65.21, mirroring the drops on Friday for oilfield service rivals Halliburton Co , Weatherford International Ltd and Baker Hughes Inc , which all report results early next week.

(Reporting by Matt Daily in New York and Braden Reddall in San Francisco; Editing by Lisa Von Ahn, Dave Zimmerman and Steve Orlofsky)

Iraq Energy