UPDATE 3-Tetra Technologies gives positive outlook, shares surge

* Q3 Adj EPS of $0.34 beats $0.22

* Q3 revenue of $254 million tops est of $225.9 mln

* Sees lower activity in offshore segment in Q4

* Shares jump as much as 19 pct (Recasts; Adds conference call comments, share movement)

By Antonita Madonna Devotta

BANGALORE, Nov 9 (Reuters) - Tetra Technologies Inc (TTI.N) posted strong third-quarter results on increased repair work from damages caused by Hurricane Ike, and said it was beginning to see signs of deepwater activity increasing in the Gulf of Mexico, sending its shares to a new year-high.

The oil and gas services company also expects to benefit as markets appear to have bottomed in its fluids segment, which manufactures and markets clear brine fluids to the oil and gas industry for use in well drilling and workover operations.

Tetra said it will continue supplying fluids to Brazil under its Petrobras contract, begun during the third quarter, and expects the main benefit of the contract to begin in early 2010.

"We are seeing evidence of growth in our long-term deepwater Gulf of Mexico strategy in the beginning of our contract with Petrobras," Chief Executive Stuart Brightman said on a conference call with analysts.

The company said it will continue to focus on reducing borrowings and expects debt levels at the end of the fourth quarter to be favorable compared to its earlier forecast of debt slightly above $400 million at year-end.

Shares of The Woodlands, Texas-based company surged about 19 percent to its year-high of $11.50 in mid-day trade, Monday on the New York Stock Exchange.

Third-quarter revenue from the offshore division, that helped Tetra nearly double its quarterly profit, rose about 28 percent from services provided on a combination of projects secured on an individual service basis and an integrated service basis, where the company is like a general contractor to its clients.

"We expected an improvement in that segment in their business, but we did not expect it to be quite as robust as it was," analyst Thaddeus Vayda of Stifel Nicolaus & Co said.

"They executed very well, delivering about 34 percent operating margins... You could not have had better performance from this segment of their business that has historically been problematic," he added.

The analyst said the company's sales of local integrated or bundled services in the offshore business was notable -- as a similar strategy had misfired years ago -- and is keen on whether more contribnutions from this service is likely to be seen in future.

However, Brightman said he expects a lower level of activity in the division in the fourth quarter due to weather disruptions, although results are expected to be higher than the segment's typical quarterly operating performance, given the current backlog.

In the latest quarter, the company, which also owns oil producing properties, posted a net income of $22.7 million, or 30 cents a share, compared with $11.7 million, or 15 cents a share, a year ago.

The latest quarter's results include a charge of 4 cents due to the repair related expenses incurred during the quarter.

Revenue rose 2 percent to $254 million.

Analysts, on average, were looking for earnings of 22 cents a share, before items, on revenue of $225.9 million, according to Thomson Reuters I/B/E/S.

"I think it (uptick) will persist a bit longer, though it is not clear how long..., because operators are disinclined to take the risk of hiring assets because they will have to pay for them whether they're working or not," analyst Vayda said.

It is not clear if the company will benefit from Hurricane Ida, which weakened to a tropical storm as it churned toward oil and gas facilities in the Gulf of Mexico and was forecast to hit the U.S. Gulf Coast early on Tuesday. [ID:nN09245045]

Vayda does not expect the company to benefit a lot from the hurricane and instead expects to see near-term headwinds because the level of activity will go down as the storm approaches.

"If the hurricane doesn't do any damage, I do not think it has much of an impact at all... it could benefit them at the margins (in the longer-term) but I do not think I will factor in the influence of one weak storm," he said. (Editing by Aradhana Aravindan, Jarshad Kakkrakandy)