Halliburton Co. and Baker Hughes Inc., the oilfield-services companies that agreed to merge in November, reported higher earnings for the last quarter of 2014 as they prepare for a downturn in the industry.

Even as they beat analysts’ profit estimates, the second- and third-largest services providers are reducing their workforces and seeking to cut costs after oil prices fell 46% last year. Baker Hughes expects to cut 7,000 jobs in the first quarter, CFO Kimberly Ross said on a conference call. Halliburton reported a $129 million cost during the fourth quarter “to temper the impact of anticipated activity declines.”

Halliburton announced the $34.6 billion acquisition of Baker Hughes in November, after the target’s share price dropped by almost a third. U.S. producers are expected to cut spending as much as 35% this year in response to a 42% decline in West Texas Intermediate oil prices during the last three months of 2014. A backlog of work helped Halliburton and Baker Hughes boost profits for the quarter.

“Both Halliburton and Baker Hughes put up very strong quarters,” James West, an analyst at Evercore ISI in New York who rates both companies a buy and doesn’t own the shares, said today in a phone interview. “But that was the top, at least for now. We’re about to head into a pretty rough first half of 2015.”

Halliburton’s fourth-quarter net income rose to $901 million, or $1.06 a share, from $793 million, or 93 cents, a year earlier, the Houston-based company said in a statement. Halliburton said last month it would cut 1,000 jobs to help weather the slowdown in demand.

Shares Rise

Excluding one-time items, per-share earnings were $1.19, exceeding the $1.10 average of 33 analysts’ estimates compiled by Bloomberg. Sales rose 15% to $8.77 billion, short of the $8.79 billion average of 25 estimates. Halliburton climbed 2.1% to $39.97 at 8:16 a.m. in New York, before the start of regular trading.

Halliburton is the world’s largest provider of hydraulic fracturing, a technique that blasts water, sand and chemicals underground to free trapped oil and natural gas. Pricing for fracking in North America is expected to fall 20% by the end of this year, according to PacWest, a subsidiary of IHS Inc.

Job Cuts

Earlier, Baker Hughes reported quarterly per-share earnings excluding one-time items that beat the $1.07 average of 29 analysts’ estimates. The shares rose 1.6% to $57.45 at 8:34 a.m.

“Activity was so strong to close out 2014,” Andrew Cosgrove, an analyst at Bloomberg Intelligence, said in a phone interview before the results were released. “It may take a little while for the full effect of service cost declines to be felt.”

Schlumberger Ltd., the largest oilfield-services company, said last week it was cutting 9,000 jobs and reducing costs in the “uncertain environment” of plummeting crude prices. Today it announced it will pay $1.7 billion for a stake in Eurasia Drilling Co., Russia’s largest driller.

Halliburton said its acquisition of Baker Hughes is expected to close in the second half of the year.

“It is clear that 2015 will be a challenging year for the industry,” David Lesar, chairman and CEO of Halliburton, said in the statement. “Halliburton has successfully weathered multiple industry cycles. We are confident that we have the right people, technology, and strategies in place to outperform throughout this cycle too.”