On a sequential basis, first quarter revenue of $135 million was up 4%, while operating income of $35.2 million was down slightly, and net income of $23.3 million was down 3%. Net income, excluding after-tax merger related expenses of $1.4 million, was $24.7 million and up 3% from the fourth quarter 2006. Compared to the first quarter of 2006, revenue and operating income increased 18% and 7%, respectively, and net income increased 3%.
Chris Seaver, Chairman, President and CEO, commented, "The outlook remains strong for both of our segments, with international premium connection demand continuing to grow and increasing demand for deepwater pressure control equipment which we expect to mature into purchase orders over the coming months. We remain focused on our commitment to meeting the increasing demands of our customers."
On February 12, 2007, Hydril announced an agreement and plan of merger with Tenaris S.A. On March 8, the United States Department of Justice granted early termination of the antitrust notification waiting period. The stockholder meeting to vote on the merger is scheduled for May 2, 2007.
Premium Connection Segment
Sequentially, first quarter revenue for Hydril's premium connection segment was down slightly, while operating income increased 3% to $25.9 million due to a favorable product mix. As a result, operating margin improved to 37% from 36% in the prior quarter.
Pressure Control Segment
Sequentially, first quarter revenue for the pressure control segment increased 10% to $65 million and operating income increased 7% to $17.2 million. Capital equipment revenue increased 23% to $43.4 million due to progress made on offshore blowout prevention system projects and aftermarket revenue decreased 9% to $21.9 million. Operating margin for the first quarter was 26%, down from 27% for the fourth quarter 2006 due to product mix.
The capital equipment backlog was $489 million at March 31, 2007, down slightly from $508 million at December 31, 2006, and up from $233 million at March 31, 2006. Deliveries for this backlog are scheduled into the second half of 2009.
Share Repurchase Program
During the first quarter the company repurchased approximately 512,000 shares of stock for $42 million and, since the beginning of the share repurchase program in June 2006, the company has repurchased 3.1 million shares of stock for $215 million.
Hydril's principal market indicators are: (1) the U.S. rig count for rigs drilling at targets deeper than 15,000 feet, (2) Gulf of Mexico rigs under contract, (3) the international rig count, (4) worldwide offshore rigs under contract, and (5) the total U.S. land rig count.
Hydril, headquartered in Houston, Texas, is engaged worldwide in designing, manufacturing and marketing premium connection and pressure control products used for oil and gas drilling and production.
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