Halliburton Co , the world's second-largest oilfield services company, posted a higher-than-expected quarterly profit on strong demand in its North American market.

Weak natural gas prices have cooled off North American drilling activity after a dramatic ramp-up in 2010, though the jump in crude oil prices has prompted a surge in oil and other liquids projects.

Halliburton's earnings were hurt by the drop in activity in the Gulf of Mexico, where companies have been struggling to win new drilling permits in the wake of the BP Plc oil spill last year.

Halliburton, which could face legal liability in the disaster that killed 11 workers last April, expects business in the region to eventually return, although prospects remain uncertain for the first half of the 2011.

However, I believe it is prudent to maintain all of our infrastructure and most of our headcount in anticipation of a rebound in the Gulf, said Chief Executive and Chairman Dave Lesar said in a statement.

Lesar also said the company will expand its deepwater operations in the Eastern Hemisphere, although it did not specify how much it would spend.

Fourth-quarter net profit rose to $605 million, or 66 cents per share, from $243 million, or 27 cents per share, a year earlier.

Excluding a 2 cent per share charge related to former subsidiary KBR's settlement with Nigeria, earnings per share were 68 cents, topping the 63 cents per share that analysts had on average forecast, according to Thomson Reuters I/B/E/S.

Revenue jumped 40 percent to $5.16 billion in the quarter. Analysts had expected revenues to be $4.88 billion.

On Friday, Schlumberger , Halliburton's larger rival, reported a higher-than-expected quarterly profit and said it expects spending from its oil and gas producing customers to increase.

Shares in Halliburton were down 1.3 percent at $38.70 in premarket trading, after moving higher earlier this morning.

(Reporting by Matt Daily, additional reporting by Braden Reddall in San Francisco; Editing by Derek Caney)