Swiss-based oil field services company Weatherford International Ltd. (WFT) reported first quarter earnings this morning. The company reported diluted EPS of $0.06, excluding a loss of -$0.11 attributed to devaluation of the Venezuelan Bolivar, a charge to the company’s suplemental executive retirement plan, and what it calls severance and investigation costs.

Weatherford’s revenues for the quarter grew by 4%, to $2.34 billion year-over-year, and the company’s rig count increased by 6%. Diluted EPS was $0.04 higher sequentially. Thomson/Reuters had consensus estimates of $0.09 EPS and revenue estimates of $2.54 billion.

Since January, Weatherford shares are down about 9%, compared with competitors Schlumberger Ltd. (SLB), which is up about 1%, Halliburton Co. (HAL), up about 5%, and Baker Hughes Inc. (BHI), up nearly 18%.

Part of the reason for the decline is Weatherford’s decision to reduce its presence in North America. The company has lowered its rig count in North America by 25% from its peak in the third quarter of 2008, and revenues have fallen the same amount. North American operating income fell by $11 million year-over-year, but improved by $71 million sequentially. North America still contributes the lion’s share of the company’s revenues however, $891 million in the first quarter.

Overall, the company’s operating income for the quarter totaled $116.9 million, compared with $311 million a year ago. The largest drop was in Latin American, where projects in Mexico and Venezuela did not materialize.

Weatherford appears to have put its eggs in the wrong baskets. North American drilling is surging again, mostly on the strength of activity in the various natural gas shale plays. That activity will only grow as the gas E&P companies begin to tap their liquids deposits while natural gas prices remain firmly in the $4/thousand cubic feet range.

The other difficulty Weatherford faces is the consolidation of the oil field services business as its competitors merge. Baker Hughes has all but completed its acquisition of BJ Services, Inc. (BJS), Halliburton recently announced that it would acquire Boots & Coots (WEL), and Schlumberger gets ready to tie the knot with Smith International, Inc. (SII).

All these recent deals are aimed at growing the acquiring company’s size and capabilities to compete for contracts in the re-opened Iraqi oil fields. The opportunity is gigantic: Iraq wants to grow production from the current 2.5 million b/d to 12 million b/d by 2017.  Weatherford, with a market cap of about $12.5 billion, will be competing for contracts with companies twice its size and a wider range of services. That’s a tough place to be.

Schlumberger has already begun hiring staff for its Iraqi operations and expects to have 300 employees in the country by late summer. Baker Hughes also has employees already in Iraq, and Halliburton has begun hiring as well. Weatherford did win a contract with BP plc (BP) for work in Iraq’s Rumaila field, but the company has not been very aggressive so far.

Investors must have been expecting worse because Weatherford shares are up about 3.5% in early trading, most likely on the rise in crude prices and the overall rise in equities this morning.