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* Says orders for new deepwater rigs to be limited in Q3
* Strong demand for land, shallow-water rigs to continue
* Profit beats estimates for fourth straight quarter
* Reports strong margins in 2nd-quarter
* Shares down 2 pct (Adds analyst, executive comments, updates shares)
July 29 (Reuters) - National Oilwell Varco Inc, the largest U.S. oilfield equipment provider, forecast falling demand for deepwater rigs, overshadowing robust demand for jack-up rigs, used in shallower waters, as well as land rigs.
The company's orders for production equipment and new deepwater rigs, or floaters, would be limited in the third quarter, Chief Financial Officer Jeremy Thigpen said.
The company's forecast echoed that of rival Diamond Offshore Drilling Inc's, which warned last week that it expected the market for deepwater and utlra-deepwater rigs to be over supplied until 2016.
National Oilwell's shares fell 2 percent in morning trading as the warning overshadowed the company's better-than-expected profit that was driven by higher margins, especially in its rigs business.
U.S. oil and gas producers are turning their attention to lucrative shale fields in North America, boosting demand for land rigs, even as they shun more-expensive deepwater projects.
Still, National Oilwell booked $3.4 billion in new orders for oilfield equipment in the second quarter ended June 30, higher than the $3.15 billion a year earlier.
The higher demand boosted revenue and margins at most of National Oilwell's businesses, helping the company report a better-than-expected profit for the fourth straight quarter.
Margins at its rig building business, which makes land and offshore rigs, rose to 21.1 percent in the quarter from 18.9 percent, a year earlier. The business accounts for nearly half of the company's revenue.
National Oilwell's overall operating margins rose to 18 percent from 16.5 percent.
The strength in the company's businesses that make hydraulic fracturing equipment, drill bits and a host of other equipment was indicative of growth in North American drilling activity, analysts said.
"Any positive momentum in North America will bode well for National Oilwell Varco and would provide upside to current estimates as long as offshore new builds do not slow down a lot from here," William Blair & Co analysts said in a note.
Net income attributable to the company rose 17 percent to $619 million in the quarter. Adjusted profit was $1.61 per share, higher than the average analyst estimate of $1.44.
Total revenue rose 12 percent to $5.26 billion, but missed the average analyst estimate of $5.49 billion, according to Thomson Reuters I/B/E/S.
This is the first quarterly result National Oilwell has reported after reshaping its 3 business units into 4. It completed the spin-off of its distribution business in the quarter.
National Oilwell shares were down 1.6 percent at $83.38 in afternoon trading and were the top loser on the Dow Jones U.S. oil equipment and services index (Reporting by Swetha Gopinath in Bangalore; Editing by Savio D'Souza)