The higher crude-oil prices climb, the deeper in the oceans it becomes worthwhile for exploration companies to drill.

So it’s no surprise a bidding battle is under way for deep-water-drilling expert Expro International Group PLC (PINK: EXPRF), of the United Kingdom.

On Friday afternoon, a private-equity consortium headed up by Candover Partners Ltd. boosted its initial bid for the U.K.-based Expro International by 8%, just narrowly beating out Halliburton Company’s (HAL) $3.4 billion (1.71 billion pounds) cash offer, which had been launched earlier that same day.

Candover Partners is a wholly owned subsidiary of Candover Investments PLC. It was joined by Goldman Sachs Group Inc. (GS).

The Candover counterbid – announced in the middle of the afternoon Friday – was made necessary after Halliburton trumped Candover’s bid earlier that same day. The Candover-led consortium’s original $3.2 billion bid had been launched on April 17.

The Halliburton bid represented a 6.2% premium over that original offer. Analysts said they expected Candover would respond with a higher bid – a correct assumption, as it turns out – but noted that they ultimately expected Halliburton to be the winner.

"I expect then Halliburton to top Candover’s bid and become the winner, unless there’s another industrial player," Jane Coffey, head of equities at Royal London Asset Management, said earlier today in a telephone interview with Bloomberg News.

What analysts such as Coffey hadn’t counted upon, however, was the speed with which Candover came back with a new bid. That quick response is now leading some analysts to predict that Expro will take the slightly higher offer without waiting for a possible counteroffer from Halliburton.

"If I’m Expro, I’m like, ‘No, you had four weeks doing due diligence,’" James Wicklund, of Carlson Capital LLC in Dallas, told Bloomberg. "’If you want to raise your bid, raise your bid. How many times do you need to go through the underwear drawer to know what you have?’"

Surging demand for oil from developing economies such as China and India have pushed oil to record levels over the past year. Just last week, West Texas intermediate crude crossed the $135-a-barrel threshold.

With oil commanding such a high price, Halliburton and its larger rival Schlumberger Ltd. (ADR: SLB), have profited as oil-rich nations have turned to the oil-services firms for help with excavation and exploration, forgoing the assistance of international oil majors, in hopes of keeping a larger chunk of revenue for state coffers.

At the same time, oil demand is skyrocketing, and some of the easy-to-reach oil deposits are starting to dry up. That’s forcing the oil majors to experiment with more-challenging and – and much-more costly – deep-sea drilling expeditions.

At $135 a barrel, the market price of oil now can cover the cost of hard-to-reach exploration sites that were previously considered financially unfeasible, making a company with Expro’s technology and experience a valuable ally – and potentially a valuable asset to own.

Such heavy-hitters as Exxon Mobil Corp. (XOM), BP PLC (BP), Total SA (TOT), Chevron Corp. (CVX), ConocoPhillips (COP), and Royal Dutch Shell PLC (RDS.A, RDS.B), will spend a record $98.7 billion this year on exploration and production, according to Lehman Bros. Holdings Inc. (LEH).

And some of that almost $100 billion in exploration and production fees is bound to end up in the pockets of Expro, given that it’s among the leaders in deep-sea oil exploration. The firm’s experience with underwater wells at levels deeper than 1,000 meters (3,281 feet) would make for a nice complement to Halliburton’s existing services.

Many analysts feel the deal makes too much sense for Halliburton to pass up.

"The consortium is private equity, with returns that need to be made – the higher their bid, the lower their returns," Phillip Lindsay, an analyst with ABN Amro Holding NV (OTC: ABNYY), told Forbes. "I would say Halliburton is in a stronger financial position. I certainly think Halliburton could bid higher."

News and Related Story Links:

• Money Morning:
  Cashing in on Commodities: What’s Driving the Oil Bull, How Much Further It Will Go, and How Investors Can Profit

• Bloomberg News:
  Candover Raises Expro Offer 8%, Topping Halliburton

• Bloomberg News:
  Halliburton Offers to Buy Expro, Tops Candover Bid

• MarketWatch:
  Halliburton proposes $3.4 billion bid for Expro

• Forbes:
  Halliburton In The Lead For Expro

• Financial Times:
  Halliburton in £1.7bn all-cash offer for Expro