On a sequential quarter basis, consolidated revenues grew five percent influenced by continued expansion in the global offshore markets. Offshore business volumes accounted for approximately 90 percent of the Oilfield segment revenue increase over the December quarter, impacted by demand for drilling and completion fluids, environmental solutions and borehole enlargement technologies. On a geographic basis, increased activity in the U.S. deepwater market and rising offshore investment in the Eastern Hemisphere region, including the North Sea, Former Soviet Union ("FSU") and Middle East/Asia, accounted for the majority of the sequential improvement.
Commenting on the results, Chairman and CEO, Doug Rock stated, "Our revenues and earnings continue to benefit from acceleration of Eastern Hemisphere and offshore markets. These markets have demonstrated better long-term revenue and margin stability compared to the more volatile North American land-based natural gas drilling market. Based on our prospects for the rest of 2007, we believe earnings of $3.10 to $3.20 per share is a reasonable expectation for Smith."
M-I SWACO's first quarter revenues totaled $1.04 billion, six percent above the fourth quarter of 2006 and 29 percent higher on a year-over-year basis. The improvement over the December 2006 quarter was driven by a 13 percent increase in global offshore revenues, which, based on the phase of the drilling operations, primarily consisted of higher base fluid products. On a geographic basis, Eastern Hemisphere operations generated the majority of the sequential revenue growth driven by increased sales for offshore programs in Asia and the FSU and, to a lesser extent, continuing demand for environmental solution technologies by operators in the North Sea region. Western Hemisphere revenues increased four percent over the December 2006 quarter, benefiting from new contract awards to support deepwater projects in the U.S. offshore market.
Smith Technologies, which in the first quarter of 2007 began reporting sales of the RHINO Reamer and other borehole enlargement tools that had previously been included in the Smith Services unit, reported revenues of $244.1 million. On a comparative basis, Smith Technologies' revenues were modestly above the fourth quarter of 2006 and 22 percent higher on a year-over-year basis. The sequential revenue comparison was influenced by the inclusion of several Eastern Hemisphere export orders in the fourth quarter of 2006. After excluding export sales, revenues were four percent above the prior quarter level - in-line with the change in corresponding activity levels. The sequential revenue improvement was influenced by continuing demand for borehole enlargement tools in the Eastern Hemisphere offshore region.
Smith Services' revenues, which have also been adjusted to reflect the formation of the Smith Borehole Enlargement group, totaled $282.5 million. On a comparative basis, sales grew six percent over the December 2006 quarter and were 35 percent higher on a year-over-year basis. The sequential revenue growth was influenced by increased tubular sales volumes in the United States, including the HEVI-WATE product line. After excluding the impact of tubular sales, revenues increased three percent sequentially and 19 percent above the March 2006 quarter. The majority of the core business growth over the December 2006 period was attributable to increased Eastern Hemisphere business volumes related to drilling product and service lines.
Wilson reported revenues of $546.0 million, six percent higher on a sequential quarter basis and 16 percent above the prior year period. Higher sales in the upstream energy segment, which grew 11 percent period-to-period, accounted for the majority of the sequential revenue growth. Increased drilling and completion activity in North America and, to a lesser extent, higher project business volumes in the Europe/Africa region contributed to the revenue improvement for the upstream segment. Expanded downstream sector business volumes, which benefited from increased customer spending in the engineering and construction market, also contributed to the sequential revenue growth.
Margaret Dorman, Chief Financial Officer, commented, "We're pleased with the first quarter's results, reporting a seven percent increase in sequential profitability levels despite a fairly flat rig count period-to-period. Continued expansion in the Oilfield segment operating margins, which improved to 19.9 percent in the first quarter of 2007, provides a significant amount of momentum, which should carryover into the rest of the year. Outside the seasonal impact of the Canadian break-up, we think we'll see strengthening demand for our products and services as the level of offshore investment continues to rise."
Smith International, Inc. is a leading supplier of premium products and services to the oil and gas exploration and production industry through its four principal business units - M-I SWACO, Smith Technologies, Smith Services and Wilson.
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