HOUSTON–(EMWNews)–Smith International, Inc. (NYSE:SII) today announced record earnings of

$183.3 million, or 91 cents per diluted share, for the second quarter of

2008. Profitability levels increased 20 percent when compared to the

year-earlier period and were five percent higher on a sequential quarter

basis.

Consolidated revenues for the second quarter of 2008 totaled $2.49

billion, as 10 percent sequential business growth in markets outside

Canada was partially masked by the impact of the seasonal weakness in

Canadian drilling. The sequential revenue improvement was concentrated

in the United States and Europe/Africa, reflecting increased investment

in exploration and production programs due to strong commodity prices. A

significant portion of the sequential quarter profitability growth was

provided by the Distribution operations, as higher Oilfield segment

earnings associated with improved business levels in the United States

and Europe/Africa was largely offset by reduced Canadian earnings.

Excluding the impact of lower Canadian drilling activity, which resulted

in the loss of high-margin product sales, Oilfield earnings grew nine

percent on a sequential quarter basis.

Compared to the prior year quarter, Smith’s

consolidated revenues grew 18 percent. Increased customer spending

outside North America, influenced by continued expansion in key drilling

markets including the Former Soviet Union (“FSU”),

the North Sea and Mexico, accounted for more than half of the

year-on-year revenue growth. Non-North American business volumes were

primarily driven by the performance of the Oilfield segment operations –

which reported 23 percent year-on-year growth due to improved activity

levels, new Latin American contract awards, and increased operator

investment in the Europe/Africa offshore market. The consolidated

revenue improvement was also impacted by higher U.S. land-based business

activity, which increased 18 percent over the June 2007 period.

Commenting on the results, Chairman and CEO, Doug Rock stated, “We

at Smith are encouraged by the improving market conditions for the

second half of 2008. We’re also pleased to see

crude oil prices begin to moderate as the most immediate threat to

drilling activity is demand destruction caused by high oil prices.

Additionally, we look forward to the merger of W-H Energy Services and

Smith International, Inc. during the current quarter. Our customers,

employees and shareholders will all benefit from this combination.”

Margaret Dorman, Chief Financial Officer, commented, “We’re

pleased with the second quarter results. Our Oilfield and Distribution

segments reported strong year-over-year earnings growth and, even with

the seasonal downturn in Canadian drilling activity, both segments

posted improved profitability levels over the March 2008 quarter.

Moreover, Smith’s balance sheet position

remains solid – evidenced, in part, by our

debt-to-total capitalization improving to 18 percent at June 30, 2008.

Although funding the W-H transaction will lead to modestly higher

leverage, we expect our debt-to-total capitalization will remain at very

manageable levels post-closing.”

M-I SWACO’s second quarter revenues totaled

$1.29 billion, five percent above the March 2008 quarter and 18 percent

higher on a year-on-year basis. The sequential revenue growth was

influenced by a significant increase in completion activity in the U.S.

Gulf, the Norwegian sector of the North Sea and West Africa – which

resulted in increased demand for completion fluid products. To a lesser

extent, increased environmental equipment sales for the Europe/Africa

region contributed to the sequential growth –

reflecting demand for produced water treatment equipment in the North

Sea market and fluid processing units for the FSU region. North American

revenues were in-line with March 2008 levels as increased U.S. onshore

fluid volumes were largely offset by reduced activity levels in Western

Canada.

Smith Technologies reported revenues of $281.3 million, two percent

higher on a sequential quarter basis and 13 percent above the June 2007

period. The unit’s sequential results were

impacted by the seasonal weakness in Canada, which resulted in reduced

demand for three-cone and diamond product offerings. Higher sales of

drill bits specifically developed for unconventional land-based drilling

programs in the United States and increased market penetration in key

Latin American markets more than offset the reduction in Canadian

business volumes. To a lesser extent, increased Eastern Hemisphere

export orders, improved drill bit pricing and heightened demand for

turbine drilling motors contributed to the sequential revenue

improvement.

Smith Services’ revenues increased to $311.5

million in the second quarter of 2008, four percent above the March 2008

period and 11 percent above the year-ago level. The revenue increase

over the first quarter of 2008 was primarily related to new contract

awards for completion, fishing and remedial products and services

outside North America – enabling Non-North

American business volumes to expand eight percent on a sequential

quarter basis. To a lesser extent, higher U.S. drilling activity has had

a favorable impact on demand for the unit’s

premium product and service offerings, including tubular drill collars

and casing exit technologies.

Wilson reported record revenues of $615.6 million, evidencing eight

percent sequential and 23 percent year-on-year top-line growth. The

improvement over the March 2008 quarter primarily reflects increased

demand for line pipe and other operating supplies associated with

unconventional drilling projects in the U.S. market. To a lesser extent,

higher business volumes related to engineering and construction projects

in the energy and downstream sector operations also contributed to the

sequential revenue improvement. These factors were partially offset by

the impact of the seasonal drilling slowdown in Canada – which impacted

the level of drilling and completion activity and associated revenues.

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. The Company will

host a conference call today beginning at 10:00 a.m. Central to review

the quarterly results. Participants may join the conference call by

dialing (800) 233-1182 and requesting the Smith International call

hosted by Doug Rock. A replay of the conference call will also be

available through Thursday, July 31, 2008, by dialing (888) 843-8996 and

entering conference call identification number 22001431.

Certain comments contained in this news release and today’s

scheduled conference call concerning the anticipated financial results

of the Company constitute “forward-looking

statements” within the meaning of Section 21E

of the Securities Exchange Act of 1934, as amended. Whenever possible,

the Company has identified these “forward-looking”

statements by words such as “believe,”

“encouraged,” “expect,”

“expected,” “should”

and similar phrases. The forward-looking statements are based upon

management’s expectations and beliefs and,

although these statements are based upon reasonable assumptions, actual

results might differ materially from expected results due to a variety

of factors including, but not limited to, overall demand for and pricing

of the Company’s products, changes in the

level of oil and natural gas exploration and development, and variations

in global business and economic conditions. The Company assumes no

obligation to update publicly any forward-looking statements whether as

a result of new information, future events or otherwise. For a

discussion of additional risks and uncertainties that could impact the

Company’s results, review the Smith

International, Inc. Annual Report on Form 10-K for the year ended

December 31, 2007 and other filings of the Company with the Securities

and Exchange Commission.

Financial highlights follow: