The consolidated results compare favorably to both the third quarter of 2005 and the prior year period. Earnings for the third quarter of 2005, excluding a $2.5 million after-tax gain related to the sale of Smith's ownership interest in a mining bit joint venture, were $77.0 million, or 38 cents per share. After eliminating the impact of non-recurring items, quarterly earnings grew 60 percent year-over-year and 20 percent on a sequential quarter basis.
Consolidated revenues increased 26 percent over the prior year quarter and were nine percent above the September 2005 period, the strongest sequential-quarter revenue and earnings growth rates achieved in 2005. The majority of the revenue and earnings improvement over the third quarter was reported in North America, benefiting from the higher level of land-based drilling activity, a favorable mix of business in the U.S. offshore market and the impact of price increases implemented during the last half of 2005. Revenue growth in markets outside of North America also contributed to the sequential comparison, largely associated with increased offshore exploration and production spending in West Africa.
For the year ended December 31, 2005, earnings were $302.3 million, or $1.48 per share, on revenues of $5.58 billion. For the 2004 fiscal year, the Company reported net income of $182.5 million, or 89 cents per share, on revenues of $4.42 billion. The 2004 results included a $20.4 million after-tax charge related to the drill bit patent litigation matter which was resolved in December 2005. Excluding the impact of the litigation charge, 2004 earnings were $202.9 million, or 99 cents per share.
M-I SWACO's fourth quarter revenues totaled $726.4 million, seven percent above the third quarter of 2005 and 22 percent higher on a year-over-year basis. The majority of the sequential revenue improvement was generated in North America, influenced by higher U.S. offshore revenue volumes and the impact of price increases implemented in the last half of 2005. U.S. offshore revenues increased despite a decline in associated drilling activity, as operators transitioned from workover and completion projects to more revenue-intensive drilling and exploration activities. Compared to the prior year period, the majority of the revenue growth was reported in the Eastern Hemisphere reflecting new contract awards and increased customer investment in offshore markets, primarily the North Sea and West Africa. In addition, North American revenue growth significantly outpaced the 19 percent change in underlying activity levels - driven by improved pricing and higher offshore business volumes in the U.S. Gulf of Mexico.
Smith Technologies reported fourth quarter revenues of $167.5 million, eight percent above the September 2005 quarter and 21 percent higher than the prior year period. Over half of the sequential revenue increase was associated with the seasonal activity pick-up in Canada, with the remainder concentrated in markets outside of North America, including Latin America and the Middle East. Strong demand for recent product introductions, including the new Sharc(TM) series of diamond drill bits, increased market activity and the impact of recent price increases contributed to the sequential revenue growth. On a year-over-year basis, the revenue improvement reflects increased demand for diamond bit products in markets outside of North America and higher Eastern Hemisphere export orders. To a lesser extent, improved pricing and significant expansion of the Neyrfor operations contributed to the year-over-year revenue growth.
Smith Services' revenues totaled $195.5 million, 10 percent higher on a sequential quarter basis and 39 percent above the December 2004 period. The improvement over the third quarter of 2005 was reported in North America and West Africa, as higher activity levels resulted in increased demand for high-margin drilling and remedial products. Increased sales of tubular products and the impact of acquired operations also contributed to the sequential revenue comparison. On a year-over-year basis, the revenue growth was driven by higher tubular sales volumes in the United States, including the HEVI-WATE(TM) product line. Excluding tubular sales, revenues grew 29 percent - with the favorable comparison to the rig count associated with increased remedial business volumes in markets outside of North America, including the North Sea and Middle East regions.
Wilson reported revenues of $441.0 million, 10 percent higher on a sequential basis and 29 percent above the prior year period. The majority of the revenue growth over the September quarter was reported by the upstream energy operations benefiting from higher North American drilling and completion activity levels. Increased industrial sector project spending in the United States, primarily in the engineering and construction and petrochemical customer base, contributed approximately one-third of the sequential quarter revenue improvement. On a year-over-year basis, energy sector revenues increased 37 percent - driven by improved North American drilling activity, new contracts in the upstream operations and increased line pipe project spending. Industrial and downstream revenues grew 13 percent above the prior year quarter, as higher customer spending levels more than offset the impact of the completion of a large engineering and construction export order in the prior year period.
Commenting on the results, Chairman and CEO Doug Rock stated, "Smith had a great year in 2005, but that's old news. I'm excited about the momentum we have going into 2006. With fourth quarter 2005 operating earnings up 20 percent sequentially and 60 percent year-over-year, Smith's financial performance is accelerating. Due to improved pricing and product volumes, sequential incremental operating margins for the oilfield segment have topped 30 percent for the past two quarters. As a result, we now expect Smith's 2006 earnings to range between $2.00 and $2.10 per share."
Loren Carroll, Executive Vice President, also noted that, "We had a strong finish to 2005 and our prospects for this year are even better. Considering the higher level of planned investment by exploration and production companies and our exposure to some of the fastest-growing segments in the oilfield service market - drilling waste management, brownfield development and production chemicals - I'm confident that Smith can continue to deliver exceptional growth."
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