Revenues for the three months ended March 31, 2004 were $1.0 billion, three percent above the fourth quarter of 2003 and 26 percent higher than the prior year period. Over 80 percent of the sequential revenue growth was reported in the Western Hemisphere, as higher North American land-based drilling activity was partially offset by continued weakness in the offshore markets. Eastern Hemisphere revenues grew two percent over the fourth quarter despite relatively flat activity levels influenced, in part, by the inclusion of several, large export orders. The revenue growth over the first quarter of 2003 benefited from a 20 percent increase in North American land-based drilling activity and improved business volumes in the Europe/Africa region, including the Norwegian sector of the North Sea and the Former Soviet Union ("FSU").
M-I SWACO's first quarter revenues totaled $519.1 million, two percent above the fourth quarter of 2003 and 25 percent higher than the prior year period. On a sequential quarter basis, increased revenues associated with improved worldwide drilling activity were partially offset by reduced demand for higher-margin fluid products in the Western Hemisphere offshore markets due, in part, to the continued weakness in the U.S. Gulf. Compared to the prior year quarter, over 70 percent of the revenue growth was generated in areas outside of North America, reflecting new contract awards and increased exploration and production spending in Latin America, the North Sea and the FSU. To a lesser extent, increased North American land-based drilling activity also contributed to the year-over-year revenue variance.
Smith Technologies reported revenues of $125.3 million, 14 percent higher on a sequential quarter basis and 36 percent above the March 2003 period. The significant revenue increase over the fourth quarter reflects a combination of improved activity levels, increased market penetration and, to a lesser extent, the inclusion of several, large international export orders. Non-export petroleum drill bit revenues increased 10 percent over the fourth quarter, more than twice the rate of improvement in the corresponding rig count, largely influenced by increased demand for new product introductions. The year-over-year revenue variance reflects the increase in global activity levels and, again, the delivery of several Eastern Hemisphere export orders. Excluding export business volumes, revenues grew approximately 27 percent driven by the continued strong performance of the North American operations.
Smith Services' first quarter revenues totaled $111.1 million, a two percent improvement from the fourth quarter of 2003 and an increase of 17 percent over the prior year period. The sequential revenue improvement was reported in North America, reflecting increased demand for HEVI-WATE(TM) pipe and other drilling-related products and services. Lower customer spending in the North Sea, which impacted remedial product and service lines, served to mask the growth experienced throughout the North American market. Year-over-year, more than three-quarters of the revenue growth was reported in the Western Hemisphere benefiting from strong demand for remedial and drilling product and service lines. Excluding U.S. drill pipe orders, which declined by more than 50 percent from the prior year quarter, revenues grew 21 percent, significantly outpacing the change in corresponding activity levels.
Distribution revenues were $262.3 million, a three percent increase from the December 2003 quarter and a 28 percent improvement over the prior year period. The sequential revenue growth was reported by CE Franklin Ltd., reflecting strong seasonal demand for maintenance, repair and operating supplies in Canada. Wilson's revenues declined approximately two percent from the fourth quarter, resulting from the completion of a large international engineering and construction ("E&C") project late last year. Compared to the prior year quarter, the Distribution energy sector operations grew in excess of the North American activity improvement and accounted for the majority of the revenue change. Industrial and downstream revenues increased 25 percent year-over-year benefiting from new contract awards in the refining and petrochemical markets and increased project spending by E&C customers.
Commenting on the results, Chairman and CEO Doug Rock stated, "Our operating people performed exceptionally in the first quarter, enabling Smith to report record revenues and earnings. Based on the first quarter results, we believe 2004 annual earnings of $1.80 to $1.90 per share should be a reasonable expectation for Smith -- with most, if not all, of the increase over the current Thomson Financial consensus estimate expected to occur in the second half of the year."
Loren Carroll, Executive Vice President, also noted that, "The first quarter's results provide us with a significant amount of momentum which should carryover into the rest of the year. Outside the seasonal impact of the Canadian break-up, we believe we'll continue to see a strengthening global business environment for our products and services. Although it's not a near-term event, we're encouraged by some of the spending plans of our larger customers scheduled to occur later this year."
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