Halliburton Co.'s (HAL) fourth-quarter net income tumbled 32% as the settlement of a bribery charge against former subsidiary KBR Inc. weighed on earnings. The company's sales and margins otherwise improved despite declining demand for oilfield services as energy prices fall.

Excluding the fine, the company fared better than Schlumberger Ltd. (SLB), its leading competitor, which reported a year-on-year decline in fourth-quarter profits on Friday. Weatherford International Ltd. (WFT) also reported a small increase in fourth-quarter net income on Monday, excluding an after-tax charge.

Halliburton reported net income of $468 million, or 53 cents a share, compared with $690 million, or 75 cents a share, a year earlier. The latest quarter included a $303 million charge, or 34 cents a share, tied to a settlement with the U.S. government related to bribery charges against KBR Inc. Revenue climbed 17% to $4.91 billion. Analysts polled by Thomson Reuters gave an average earnings estimate of 73 cents a share on $4.82 billion in revenue.

Albert J. Stanley, KBR's former CEO, pleaded guilty in September to approving bribes to Nigerian government officials in order to win a construction contract for a liquefied natural gas facility. KBR Inc. and Halliburton severed ties in April 2007.

The settlement, in which Halliburton will pay $382 million to the Justice Department over two years, as well as $177 million to the Securities and Exchange Commission, is the largest fine ever for a U.S. company alleged to be in violation of the Foreign Corrupt Practices Act, which prohibits the bribery of foreign officials.

Halliburton otherwise saw its operating margin climb to 24% from 22%, which CEO David Lesar attributed to the company's focus on holding the line on pricing even as the overall volume of business fell.

Oil and natural gas prices fell sharply in the fourth quarter and are now expected to remain at or near multi-year lows for much of 2009. Producers have announced budget cuts worldwide, with Lesar anticipating the steepest cuts in North America, the North Sea and Russia. Exploration work is likely to be postponed until oil and gas prices support starting new projects, he said.

Producers have already cut 2009 budgets by 25% in Russia, Lesar said.

"In the international market, (we expect) a slowdown but not a cancellation of existing projects and a deferral of new projects," Lesar said in a conference call.

Halliburton sees the steep, and quick, cut in producer spending as potentially boosting prices. The largest cuts are occurring in older oil and gas fields, and the resulting loss in production has in the past sparked a quick rebound in prices and spending. North American drilling activity, which is mainly tied to natural gas prices, recovered after three quarters in 2001, the last time spending fell so sharply, said Tim Probert, executive vice president for strategy and corporate development.

"Anytime that you see a short and sharp reduction in activity ... will provoke some supply response relatively quickly, and obviously that impacts pricing directly," Probert said.

Halliburton, along with Schlumberger and other oil-services providers, has laid off workers and is keeping spending close to 2008 levels. Further cuts to the workforce are coming, Lesar said.

Halliburton's shares recently traded 6% higher at $19.35. It closed Friday's session at $18.25 and weren't active pre-market. The stock has fallen 65% since July, around when oil prices peaked.

-By Brian Baskin, Dow Jones Newswires; 201-938-2062; brian.baskin@dowjones.com

(Shirleen Dorman in New York contributed to this article)

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