Land-based drilling activity in the Canadian market fell 74 percent on a sequential quarter basis, impacted by the seasonal drilling slowdown and weather-related project delays. The substantial reduction in Western Canadian business volumes, which contributed to a seven-cent per share earnings decline from the March 2007 quarter, was more than offset by higher fluid sales in the global offshore sector and increased customer demand for drill bit products in the U.S. market. Excluding the impact of the Canadian land-based operations, revenues rose six percent over the first quarter of 2007 while earnings increased 11 percent between the comparable periods.
Commenting on the results, Chairman and CEO, Doug Rock stated, "The second quarter of 2007 was our eighteenth consecutive quarter of revenue improvement, and we've got more to go. Second quarter revenue growth for our Oilfield segment outside of North America was eight percent on a sequential quarter basis and 32 percent year-over-year. The long term nature of our Eastern Hemisphere and Latin American service contracts give us good visibility for the next two to five years, and what we see is impressive. Based on our prospects for the remainder of this year, we believe 2007 annual earnings per share of $3.15 to $3.25 is a reasonable expectation for Smith."
M-I SWACO's second quarter revenues totaled $1.09 billion, five percent above the March 2007 quarter and 28 percent higher on a year-over-year basis. The majority of the sequential revenue improvement was reported in Latin America, Europe and Asia, driven by improved business volumes in the offshore market. Offshore revenues increased 16 percent on a sequential quarter basis, more than offsetting the decline experienced in the Western Canada region. From a product perspective, increased premium drilling fluid sales volumes and higher demand for completion fluids and tools accounted for the majority of the sequential revenue improvement.
Smith Technologies reported revenues of $248.3 million, two percent above the first quarter of 2007 and 16 percent higher on a year-over-year basis. The sequential revenue growth was primarily influenced by the U.S. operations, which reported higher drill bit volumes and improved pricing. A favorable customer mix in the Middle East/Asia region and continuing demand for borehole enlargement product offerings helped offset the seasonal decline in Canada. To a lesser extent, increased export orders for the Eastern Hemisphere market contributed to the sequential revenue improvement.
Smith Services' revenues totaled $280.1 million in the second quarter of 2007, comparable with the March 2007 period and 31 percent above the year-ago level. Lower drill pipe sales volumes, which fell 17 percent due to temporary supplier delays encountered during the quarter, influenced the sequential comparison. Excluding the impact of tubular sales, sequential revenues grew four percent as increased demand for the HYDRA-JARŪ tool and other high-performance drilling products in the U.S. and Europe/Africa were partially offset by lower Canadian activity levels.
Wilson reported revenues of $499.5 million, nine percent lower on a sequential quarter basis and eight percent above the prior year period. The sequential comparison reflects the impact of the seasonal drilling slowdown in Canada - partially offset by increased project business in Europe/Africa and the Middle East. Eastern Hemisphere business volumes grew 35 percent above the prior quarter level, largely influenced by increased customer activity in the North Sea region and higher export sales related to engineering and construction projects in West Africa.
Margaret Dorman, Chief Financial Officer, commented, "Our people did an outstanding job this quarter - evidenced by improved Oilfield segment margins and significant free cash flow generation. We achieved solid results for the quarter in spite of the seasonal drilling decline in Canada, which resulted in lower sales of premium products and services. In the second quarter of 2007, Smith's Oilfield segment operating margins improved to 20.0 percent and, after excluding the impact of the Canadian land-based operations, sequential incremental margins were 32 percent."
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