UPDATE 2-Hunting cautious on shrinking gas extraction market

* Pretax profit jumps 55 percent in 2012

* Hunting sees slow start to 2013, improving in H2

* Expects more competition stemming from weak gas price

* Plans final 2012 dividend of 14.0 pence

By Alice Baghdjian

LONDON, March 7 (Reuters) - British oil services firm Hunting reported a jump in 2012 profits but gave a cautious outlook for 2013, saying low prices were discouraging drilling for gas in the United States, shrinking the market for extraction services.

"There is a smaller market - instead of rigs chasing for (both) oil and gas, all they can chase for is the oil market...We'll continue to achieve our market share but will no doubt meet increased competition," Hunting's finance director Peter Rose told Reuters.

Hunting posted a 55 percent jump in pretax profit for 2012 to 123.6 million pounds ($186 million), compared with the 79.8 million it made a year earlier.

Profits were bolstered by activity in the Gulf of Mexico returning to levels seen before BP's 2010 oil spill, stable U.S. crude oil prices, as well as a full year's contribution from acquisitions completed in 2011, the company said.

Shares in the firm were down 1.88 percent by 1130 GMT to 914 pence, having risen some 18 percent so far this year, outperforming the broader sector.

The company, which manufactures products used by oil firms to construct and maintain wells, has benefited from huge growth in demand for its products from operators in the booming U.S. shale oil and gas market in recent years.

Oil and gas firms are increasingly reliant on services companies to help extract the shale hydrocarbons, which can be more difficult and costly to remove than conventional oil and gas.

Hunting said an increase in active offshore drilling units in the Gulf of Mexico and elsewhere helped to offset the shift from gas to liquids in North America, with a 13 percent decline in the number of active onshore rig units there in 2012.

The company said that the first six months of 2013 would be flat, but added business should pick up later in the year, alongside a modest increase in onshore drilling throughout 2013.

"While the Board is mindful of the current geopolitical and economic issues which prevail, it is confident of delivering a further satisfactory year," Hunting's chief executive Dennis Proctor said in a statement.

A surprise profit warning in January from Saipem, Europe's biggest company in the industry, sent shockwaves through what was seen as a buoyant sector.

A vague outlook forecast from peer Petrofac last week also weighed on the sector.