Halliburton Co.'s (HAL) second-quarter earnings fell 48% on weak demand and lower prices, particularly in North America, where drilling activity has declined.

But relatively strong margins in international markets such as Asia and the Middle East brought in higher earnings than most analysts expected, bumping the Houston oil services giant's share price by 0.72% to $21.53.

Oil-and-gas producers are slashing spending on oil field services as commodity prices have slumped and demand wanes. Halliburton and other companies began offering contracts tied to oil-price indexes earlier this year to keep projects afloat.

Declines in North American drilling activity weighed significantly on Halliburton's results. During a conference call, Chief Executive David Lesar said that high levels of natural gas storage would keep North American gas drilling activity suppressed in the near term.

"Any recovery in gas drilling is likely to be relatively modest for the rest of 2009," Lesar said during the call.

Natural gas storage levels have swelled despite the brisk pullback in drilling activity. Natural gas in U.S. storage for the week ending July 10 stood at 2.886 trillion cubic feet - 26% higher than a year ago and 19% higher than the five-year average.

The U.S. gas drilling rig count has plunged, falling by more than half from its peak of 1,606 rigs in September.

Although the drop in onshore drilling in North America has exerted pressure on the prices Halliburton and other oil field services firms can charge for services, Lesar said that the sector is "probably close to the bottom in terms of pricing degradation."

He also said the international market has benefited from higher oil prices than in the previous quarter.

"With the increase in oil prices and recent contract wins, I'm actually feeling better about the international markets now than I did" in the first quarter, Lesar said. Oil prices have doubled since January.

The company reported a profit of $262 million, or 29 cents a share, down from $504 million, or 55 cents a share, a year earlier. The latest period included a 1-cent job-cut charge while the prior year included a 13-cent loss from discontinued operations.

Revenue decreased 22% to $3.49 billion, weakened by a 37% decline in North America and a 17% drop in the Middle East and Asia.

Analysts polled by Thomson Reuters most recently were looking for earnings of 27 cents on revenue of $3.43 billion.

At Halliburton's completion-and-production arm, earnings declined 33% on a drop in North America primarily because of the decline in U.S. land activity, volume reductions and price declines in the U.S. At its drilling-and-evaluation division, profit fell 6.6% on lower prices and volumes in North America.

Halliburton's stock is down roughly 55% in the past year.

-By Jason Womack and Tess Stynes, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com

(Kerry Grace Benn contributed to this story.)