UPDATE 1-Baker Hughes expects modest North American growth

* CEO sees modest North American growth through 2011

* Halliburton sees weaker N.American Q3 margins than in Q2

SAN FRANCISCO, Sept 9 (Reuters) - Baker Hughes Inc (BHI.N) is anticipating "modest" growth in the number of oil and gas rigs drilling in North America through 2011, the oilfield services company's chief executive said on Wednesday.

Chad Deaton joined the ranks of drilling executives who are forecasting that the North American rig count, which is now at less than half its 23-year peak this time last year, is unlikely to recover dramatically because fewer rigs will be needed to produce natural gas in the prolific shale regions.

But Deaton, whose company announced the acquisition of rival BJ Services Co BJS.N last week, said he expected prices to recover after several quarters as equipment starts to wear out, which would help to eliminate spare capacity.

"I don't see how (the pricing slump) can last three to four years because I don't know what's going to keep Halliburton (HAL.N) or Schlumberger (SLB.N) continuing to rebuild equipment and put it in at a loss," Deaton said at the Barclays Capital CEO Energy/Power Conference in New York, which was available online.

"The smaller players are going to have to have some sort of cash flow to replace equipment," he added.

Earlier, Halliburton's chief financial officer, Mark McCollum, told the conference his company's North American margins would be lower in the third quarter than in the second quarter, and that he saw lots of bidding for offshore contracts, but at lower prices.

Ensco International Ltd (ESV.N) Chief Executive Dan Rabun said that while the international jackup rig market was "dead," in the first half, he saw some pent-up demand among clients in the North Sea and was encouraged by the Middle East market. (Reporting by Braden Reddall; Editing by Ted Kerr)