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Smith International, Inc.

1998 ANNUAL REPORT

Smith International, Inc., is a leading worldwide suppiler of products and services to the oil and gas exploration and production industry, the petrochemical industry, and other industrial markets.   Headquartered in Houston, the Company employs approximately 7,600 full-time personnel and operates through five business units - M-I Fluids, M-I SWACO, Smith Bits, Smith Drilling & Completions and Wilson Supply.  The common stock is traded on the New York and Pacific Stock Exchanges under the symbol SII.

  The Company provides a comprehensive line of technologically advanced products and engineering servcices, including drilling and completion fluid systems, waste-management services, three-cone and diamond drill bits, fishing services, drilling tools, underreamers, sidetracking systems, packers, and line hangers.  The Company also operates an extensive network of supply branches through which it markets pipe, valves, fittings, and other capital and expendable maintenance products.

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