Earnings from Weatherford International (NYSE: WFT) and other oil services firms confirmed what we’ve said for some time: The industry has entered the sweet spot of its cycle, a tailwind that should persist for the next two years or so.

The company reported that fourth-quarter revenue increased 14 percent from the previous quarter and 20 percent from a year ago, reaching a record high. Operations in Latin America led the way, with sales jumping 31 percent from the third quarter.

Although some of this Latin American growth stems from a charge it took in the previous quarter, this geographic segment appears to be on solid footing in 2011. The company already has contracts in place that will substantially expand revenues in Brazil and Columbia, while the situation in Mexico appears to be stabilizing. Mexico has been a nightmare for several oil services companies over the past two years, as the government nixed planned developments while Weatherford and other firms were ramping up their operations in the country.

The North American market continued to drive revenue growth in the fourth quarter, with sales up 14 percent from the prior three months and 70 percent year over year. Much of this strength stems from drilling activity in shale fields rich in oil and natural gas liquids. Although producers will continue to favor these plays in 2011, depressed natural gas prices will finally weigh on drilling activity in the Haynesville Shale and other dry-gas plays.

The market for hydraulic fracturing, a recent driver of earnings growth within the industry, should soften because of rising capacity and declining activity. Fracturing increases the permeability of the reservoir rock, allowing natural gas to flow from the reserve rock into the well. This process involves pumping large quantities of water and a small percentage of chemicals into the rock formation at high pressure, producing a network of cracks. The inclusion of a proppant–typically sand, sand coated with ceramic material or ceramic material–ensures that these passages remain open.

But Weatherford has the least exposure to fracturing of any of its peers, limiting the potential downside. Even better, the firm has the largest position in Canada among the majors, so it should benefit disproportionately from accelerating activity in the Canadian oil sands.

After a year of shifting equipment and supplies to North Africa and the Middle East, Weatherford should finally reap the rewards of major contracts in Iraq and Algeria. Once these projects begin to generate revenue, the company’s margins and revenue will soar.

In the company’s conference call to discuss fourth-quarter results, CEO Bernard Duroc-Danner likened the next three years to the 2004-07 period, when spending on exploration and development also increased dramatically. That’s good news for investors: Over that three-year period, the stock appreciated by 281 percent. Weatherford International now rates a buy under 28.