Baker Hughes Announces Second Quarter Results

Supplemental Financial Information

HOUSTON, Aug 03, 2010 /PRNewswire via COMTEX News Network/ -- Baker Hughes Incorporated (NYSE: BHI) today announced net income for the second quarter 2010 of $93 million or $0.23 per diluted share compared to net income of $87 million or $0.28 per diluted share for the second quarter 2009 and net income of $129 million or $0.41 per diluted share for the first quarter 2010.

Baker Hughes completed its acquisition of BJ Services on April 28, 2010. Financial results for the second quarter 2010 include results for BJ Services for the months of May and June 2010. Second quarter 2010 results also include a charge for acquisition-related costs of $56 million before-tax ($51 million after-tax) or $0.13 per diluted share. In addition, as part of the purchase price allocation process, $196 million of transaction and change in control expenses incurred by BJ Services have been included as part of goodwill.

Second quarter 2010 results also include a $26 million before-tax ($18 million after-tax) or $0.05 per diluted share charge for increased depreciation and amortization of tangible and intangible assets associated with the BJ Services acquisition for May and June 2010 (Estimated to be $39 million before-tax for a full 3 months).

The effective tax rate, excluding the impact of acquisition-related costs, in the second quarter was 44% and the expected effective tax rate for the rest of the year is now between 37% and 38%. The impact on earnings per share of the 44% effective tax rate in the second quarter 2010, compared with the midpoint of the 33% to 34% guidance given in our first quarter 2010 conference call, was approximately $0.07. The increase in the tax rate is primarily due to profits that are below expectations in certain African countries, which resulted in tax losses in some foreign jurisdictions for which we obtain no tax benefit or tax losses in countries that impose taxes on revenue.

Revenue for the second quarter 2010, which includes revenue for BJ Services for May and June 2010, was $3.37 billion, up 44% compared to $2.34 billion for the second quarter 2009 and up 33% compared to $2.54 billion for the first quarter 2010.

Chad C. Deaton, Baker Hughes chairman and chief executive officer, said, "Results in the second quarter were mixed. Operationally, our performance improved in North America, Russia and Asia Pacific, each making significant improvement sequentially. However, in Africa and Latin America, where we have invested heavily, revenue has lagged and our profit was below our expectations. With our organization now well established, our focus is on improving efficiency and operating margins.

"In the quarter, we completed our first year in our new geographic organization, and on April 28th we closed on our acquisition of BJ Services and began integrating its international operations into those of Baker Hughes. BJ Services has had a positive impact on our results, and excluding acquisition-related costs, was already accretive to earnings per share in its first two months. The international integration is proceeding smoothly, and we look forward to integrating US operations once the agreed sale of our Gulf of Mexico stimulation vessels and related assets has Department of Justice approval.

"In response to the Gulf of Mexico drilling moratorium, we have deployed people and equipment to US land operations and to international offshore markets where deepwater drilling continues. The drilling moratorium negatively impacted our business on the shelf and in deepwater by $0.03 per share during the quarter and has a potential negative impact per share of $0.08 to $0.11 per quarter in the second half of the year.

"Looking forward, we expect our North America land business to remain strong compared to last year as unconventional gas and oil-directed drilling in the US continues to grow and as the Canada market, where we are a significant participant, rebounds seasonally. We believe international markets will continue to improve and expect our emphasis on operational efficiency to help us improve our international margins significantly by year end."

During the second quarter 2010, we issued 118 million shares of common stock to stockholders of BJ Services representing 27.6% of the combined company. Debt increased $892 million to $2.91 billion and cash decreased $695 million to $919 million as compared to the first quarter 2010. The change in debt reflected the assumption of $500 million in debt from BJ Services and the issuance of $320 million of short-term debt to fund the $793 million cash purchase portion of the BJ Services acquisition. The change in cash reflected the use of $480 million cash for the acquisition of BJ Services. Capital expenditures were $338 million, depreciation and amortization expense was $261 million and dividend payments were $64 million in the second quarter 2010.

Earnings before interest, taxes, depreciation and amortization or "EBITDA" per diluted share for second quarter 2010 was $1.38, up $0.29 or 27% compared to $1.09 for the second quarter 2009 and up $0.04 or 3% compared to $1.34 for the first quarter 2010. EBITDA is a non-GAAP measure and is calculated in Table 1 (Calculation of EBIT and EBITDA (non-GAAP measures).

Before April 2010 we reported results for two segments - Drilling and Evaluation and Completion and Production. In May 2009, we announced a new organization for Baker Hughes and began a transition period in which both product line and geographic information were used to allocate resources and assess performance. That transition was completed at the beginning of the second quarter 2010 and we are now disclosing results for five new segments: North America (Canada, US and Trinidad), Latin America (including Mexico), Europe/Africa/Russia/Caspian (excluding Egypt), Middle East/Asia Pacific (including Egypt), and Industrial and Other (downstream chemicals, process and pipeline equipment, and reservoir technology and consulting).

In addition to reported results, we also are providing "Supplemental Financial Information" in Table 3 for revenue and operating profit before tax (a non-GAAP measure). This information presents pro forma combined revenue and operating profit before tax for Baker Hughes and BJ Services for all periods referenced.

 

    Financial Information
    Consolidated Statements of Operations
                                            Three Months Ended
    UNAUDITED                               ------------------
    (In millions, except per share
     amounts)
                                        June 30,               March 31,
                                        --------               ---------
                                     2010           2009           2010
                                     ----           ----           ----
    Revenues:
      Sales                        $1,357         $1,156         $1,253
      Services and rentals          2,017          1,180          1,286
      --------------------          -----          -----          -----
       Total revenues               3,374          2,336          2,539
       --------------               -----          -----          -----
    Costs and Expenses:
      Cost of sales                 1,013            926            943
      Cost of services and rentals  1,649            871            969
      Research and engineering        112            102             94
      Marketing, general and
       administrative                 312            284            305
       Acquisition-related costs       56              -             10
       -------------------------      ---            ---            ---
       Total costs and expenses     3,142          2,183          2,321
       ------------------------     -----          -----          -----
    Operating income                  232            153            218
    Interest expense                  (30)           (34)           (25)
    Interest income                     -              3              1
    ---------------                   ---            ---            ---
    Income before income taxes        202            122            194
    Income taxes                     (109)           (35)           (65)
    ------------                     ----            ---            ---
    Net income                        $93            $87           $129
    ==========                        ===            ===           ====
    Basic earnings per share        $0.23          $0.28          $0.41
    Diluted earnings per share      $0.23          $0.28          $0.41
    Weighted average shares
     outstanding, basic               398            310            313
    Weighted average shares
     outstanding, diluted             399            310            313
    Depreciation and amortization
     expense                         $261           $182           $189
    Capital expenditures             $338           $291           $190

    Financial Information
    Consolidated Statements of Operations
                                                     Six Months Ended
    UNAUDITED                                        ----------------
    (In millions, except per share amounts)
                                               June 30,           June 30,
                                               --------           --------
                                                     2010               2009
                                                                        ----
    Revenues:
      Sales                                        $2,610             $2,467
      Services and rentals                          3,303              2,537
      --------------------                          -----              -----
       Total revenues                               5,913              5,004
       --------------                               -----              -----
    Costs and Expenses:
      Cost of sales                                 1,956              1,953
      Cost of services and rentals                  2,618              1,804
      Research and engineering                        206                211
      Marketing, general and administrative           617                565
       Acquisition-related costs                       66                  -
       -------------------------                      ---                ---
       Total costs and expenses                     5,463              4,533
       ------------------------                     -----              -----
    Operating income                                  450                471
    Interest expense                                  (55)               (69)
    Interest income                                     1                  4
    ---------------                                   ---                ---
    Income before income taxes                        396                406
    Income taxes                                     (174)              (124)
    ------------                                     ----               ----
    Net income                                       $222               $282
    ==========                                       ====               ====
    Basic earnings per share                        $0.63              $0.91
    Diluted earnings per share                      $0.62              $0.91
    Weighted average shares outstanding, basic        355                310
    Weighted average shares outstanding,
     diluted                                          356                310
    Depreciation and amortization expense            $450               $355
    Capital expenditures                             $528               $572

    Table 1:  Calculation of EBIT and EBITDA (non-GAAP measures)(1)
    UNAUDITED                   Three Months Ended
    ---------                   ------------------
                                      June 30, 2010(2)
                                      ----------------
                                     millions       per share
                                     --------       ---------
    Net income                                 $93      $0.23
    Income taxes                               109       0.28
    ------------                               ---       ----
    Income before income
     taxes                                     202       0.51
    Interest expense                            30       0.07
    Acquisition-related
     costs(3)                                   56       0.14
    Earnings before interest
     expense                                  $288      $0.72
       and taxes (EBIT)
    Depreciation and
     amortization                              261       0.66
       expense                                 ---       ----
       -------
    Earnings before interest
     expense,                                 $549      $1.38
       taxes, depreciation and                ====      =====
       amortization (EBITDA)
       =====================

    UNAUDITED                   Three Months Ended
    ---------                   ------------------
                                        June 30, 2009
                                        -------------
                                     millions       per share
                                     --------       ---------
    Net income                                 $87      $0.28
    Income taxes                                35       0.11
    ------------                               ---       ----
    Income before income
     taxes                                     122       0.39
    Interest expense                            34       0.11
    Acquisition-related
     costs(3)                                    -          -
    Earnings before interest
     expense                                  $156       0.50
       and taxes (EBIT)
    Depreciation and
     amortization                              182       0.59
       expense                                 ---       ----
       -------
    Earnings before interest
     expense,                                 $338      $1.09
       taxes, depreciation and                ====      =====
       amortization (EBITDA)
       =====================

    UNAUDITED                   Three Months Ended
    ---------                   ------------------
                                       March 31, 2010
                                       --------------
                                     millions       per share
                                     --------       ---------
    Net income                                $129      $0.41
    Income taxes                                65       0.21
    ------------                               ---       ----
    Income before income
     taxes                                     194       0.62
    Interest expense                            25       0.08
    Acquisition-related
     costs(3)                                   10       0.04
    Earnings before interest
     expense                                  $229
       and taxes (EBIT)                                 $0.74
    Depreciation and
     amortization                              189
       expense                                 ---       0.60
       -------                                              -
    Earnings before interest
     expense,                                 $418
       taxes, depreciation and                ====
       amortization (EBITDA)                            $1.34
       =====================                            =====

                                            Six Months Ended
                                            ----------------
    UNAUDITED
    ---------
                                 June 30, 2010(2)          June 30, 2009
                                 ----------------          -------------
                              millions   per share  millions   per share
                              --------   ---------  --------   ---------
    Net income                     $222      $0.62       $282      $0.91
    Income taxes                    174       0.49        124       0.40
    ------------                    ---       ----        ---       ----
    Income before income
     taxes                          396       1.11        406       1.31
    Interest expense                 55       0.15         69       0.22
    Acquisition-related
     costs(3)                        66       0.19          -          -
    Earnings before
     interest expense and
     taxes (EBIT)                   517       1.45        475       1.53
    Depreciation and
     amortization expense           450       1.27        355       1.15
    ---------------------           ---       ----        ---       ----
    Earnings before
     interest expense,
     taxes,                        $967      $2.72       $830
       depreciation and
        amortization (EBITDA)      ====      =====       ====      $2.68
       ======================                                      =====

    (1) EBIT, EBITDA, EBIT per diluted share and EBITDA per diluted share
    (as defined in
    the calculations above) are non-GAAP measurements.  Management uses
    EBIT and
    EBITDA because it believes that such measurements are widely accepted
    financial
    indicators used by investors and analysts to analyze and compare
    companies on the
    basis of operating performance and that these measurements may be
    used by investors
    to make informed investment decisions.
    (2) Includes results for BJ Services for May and June 2010.
    (3) Costs related to the acquisition of BJ Services.
    Consolidated Balance Sheets
    (In millions)                             (UNAUDITED)         (AUDITED)
    =============                               June 30,        December 31,
                                                      2010               2009
                                                      ====               ====
    ASSETS
    Current Assets:
       Cash and cash equivalents                      $919             $1,595
       Accounts receivable, net                      3,505              2,331
       Inventories, net                              2,469              1,836
       Deferred income taxes                           382                268
       Other current assets                            322                195
     Total current assets                            7,597              6,225
     --------------------                            -----              -----
    Property, plant and equipment, net               5,925              3,161
    Goodwill                                         5,230              1,418
    Intangible assets, net                           1,985                195
    Other assets                                       408                440
    Total assets                                   $21,145            $11,439
    ============                                   =======            =======
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
       Accounts payable                             $1,301               $821
       Short-term borrowings and current
        portion of                                     843                 15
             long-term debt
       Accrued employee compensation                   712                448
       Income taxes payable                             44                 95
       Other accrued liabilities                       455                234
     Total current liabilities                       3,355              1,613
     -------------------------                       -----              -----
    Long-term debt                                   2,068              1,785
     Deferred income taxes and other tax
      liabilities                                    1,623                309
    Liabilities for pensions and other
     postretirement                                    492                379
         benefits
    Other liabilities                                  143                 69
    Stockholders' Equity:
       Common stock                                    431                312
       Capital in excess of par value                6,923                874
       Retained earnings                             6,623              6,512
       Accumulated other comprehensive loss           (513)              (414)
    Total stockholders' equity                      13,464              7,284
    --------------------------                      ------              -----
    Total liabilities and stockholders'
     equity                                        $21,145            $11,439
    ===================================            =======            =======

Table 2: Segment Revenue, Profit Before Tax, and Profit Before Tax Margin(1)

Before April 2010 we reported results for two segments - Drilling and Evaluation and Completion and Production. In May 2009, we announced a new organization for Baker Hughes and began a transition period in which both product line and geographic information were used to allocate resources and assess performance. That transition was completed at the beginning of the second quarter 2010 and we are now disclosing results for five new segments: North America (Canada, US and Trinidad), Latin America (including Mexico), Europe / Africa / Russia Caspian (excluding Egypt), Middle East / Asia Pacific (including Egypt), and Industrial and Other (downstream chemicals, process and pipeline equipment, and reservoir technology and consulting). The second quarter 2010 includes results for BJ Services for the months of May and June 2010. Information on Baker Hughes results by these new segments can be found on the web at www.bakerhughes.com/investor in the Financial Information section.

    (in millions)                         Three Months Ended
                                          ------------------
                               June 30,
                                 2010     June 30, 2009   March 31, 2010
                              ---------   -------------   --------------
    Segment Revenue
       North America              $1,486            $692            $919
       Latin America                 384             264             272
       Europe /Africa /Russia
        Caspian                      736             710             720
       Middle East /Asia
        Pacific                      545             503             439
       Industrial and Other          223             167             189
       --------------------          ---             ---             ---
    Oilfield Operations            3,374          $2,336          $2,539
    ===================            =====          ======          ======

    Profit Before Tax
       North America                $204            $(14)           $141
       Latin America                  13              32               9
       Europe /Africa /Russia
        Caspian                       69             133              80
       Middle East /Asia
        Pacific                       40              74              30
       Industrial and Other           18              14              17
       --------------------          ---             ---             ---
    Oilfield Operations              344             239             277
    -------------------              ---             ---             ---
    Corporate and Other
     Profit Before Tax
       Acquisition-related
        costs(2)                     (56)              -             (10)
       Interest expense              (30)            (34)            (25)
       Interest income                 -               3               1
       Corporate and other           (56)            (86)            (49)
       -------------------           ---             ---             ---
    Corporate, net interest
     and other                      (142)           (117)            (83)
    -----------------------         ----            ----             ---
    Total Profit Before Tax         $202            $122            $194
    =======================         ====            ====            ====
    Profit Before Tax
     Margin(1)
       North America                  14%            (2%)             15%
       Latin America                   3%             12%              3%
       Europe /Africa /Russia
        Caspian                        9%             19%             11%
       Middle East /Asia
        Pacific                        7%             15%              7%
       Industrial and Other            8%              8%              9%
       --------------------          ---             ---             ---
    Oilfield Operations               10%             10%             11%
    ===================              ===             ===             ===

    (1) Profit before tax margin is a non-GAAP measure defined as profit
    before tax ("income before
    income taxes") divided by revenue. Management uses the profit before
    tax margin because it
    believes it is a widely accepted financial indicator used by
    investors and analysts to analyze
    and compare companies on the basis of operating performance and that
    this measurement
    may be used by investors to make informed investment decisions.
    (2) Costs related to the acquisition of BJ Services.

Table 3: Supplemental Financial Information (Pro Forma Combined Basis)(1)

The following table contains non-GAAP measures of segment revenue, operating profit before tax(2), and operating profit before tax margin(3). Management uses this information to perform meaningful comparisons between quarters and believes that this information may be useful to investors. It is based on revenue and operating profit before tax: (1) previously reported by Baker Hughes in all periods; (2) previously reported by BJ Services for the quarter ended June 30, 2009; and (3) estimated by BJ Services for the quarter ended March 31, 2010 and the month of April 2010. Revenue and operating profit before tax have been reclassified into Baker Hughes' new segments. Operating profit before tax for all periods includes pro forma charges of $43 million per quarter for depreciation and amortization of tangible and intangible assets associated with the acquisition of BJ Services. The historical allocation to segments of depreciation and amortization of tangible and intangible assets associated with the acquisition of BJ Services is the same as the actual allocation of these charges in May and June 2010. No adjustments have been made for cost or revenue synergies or any other integration related items that may have affected these quarters. Operating profit before tax for Baker Hughes and BJ Services also excludes expenses for reorganization, severance, impairment, and increases to allowance for doubtful accounts identified by each of the companies in their respective earnings news releases for the quarter ended June 30, 2009. Supplemental financial information for the first quarter 2008 through the second quarter 2010 can be found on the web at www.bakerhughes.com/investor in the Financial Information section.

     (in millions)                        Three Months Ended
                                          ------------------
                               June 30,       June 30,
                                 2010         2009(4)     March 31, 2010
                              ---------      ---------    --------------
    Segment Revenue
       North America              $1,728          $1,070          $1,641
       Latin America                 424             386             399
       Europe /Africa /Russia
        Caspian                      767             804             815
       Middle East /Asia
        Pacific                      579             617             554
       Industrial and Other          247             239             248
       --------------------          ---             ---             ---
    Oilfield Operations            3,745           3,116           3,657
    ===================            =====           =====           =====

    Operating Profit Before
     Tax(2)
       North America(2)             $223            $(79)           $170
       Latin America(2)                9              66               5
       Europe /Africa /Russia
        Caspian(2)                    69             146              81
       Middle East /Asia
        Pacific(2)                    41              96              42
       Industrial and Other           20              23              18
       --------------------          ---             ---             ---
    Oilfield Operations              362             252             316
    ===================              ===             ===             ===
    Operating Profit Before
     Tax Margin(3)
       North America                  13%            (7)%             10%
       Latin America                   2%             17%              1%
       Europe /Africa /Russia
        Caspian                        9%             18%             10%
       Middle East /Asia
        Pacific                        7%             16%              8%
       Industrial and Other            8%             10%              7%
       --------------------          ---             ---             ---
    Oilfield Operations               10%              8%              9%
    ===================              ===             ===             ===

    (1) This supplemental financial information is provided for
    illustrative purposes and is not
    intended to represent or be indicative of the consolidated results of
    operations or financial
    position of Baker Hughes had the acquisition been completed as of the
    dates presented and
    should not be taken as representative of future results of operations
    or financial position of
    the combined company.
    (2) Operating profit before tax is a non-GAAP measure defined as
    profit before tax
    ("income before income taxes") less certain identified costs.
    Management uses operating
    profit before tax because it believes it is a widely accepted
    financial indicator used by investors
    and analysts to analyze and compare companies on the basis of
    operating performance and that
    this measurement may be used by investors to make informed investment
    decisions.
    (3) Operating profit before tax margin is a non-GAAP measure defined
    as operating profit before
    tax divided by revenue. Management uses the operating profit before
    tax margin because it
    believes it is a widely accepted financial indicator used by
    investors and analysts to analyze
    and compare companies on the basis of operating performance and that
    this measurement
    may be used by investors to make informed investment decisions.
    (4) Operating profit before tax in the second quarter 2009 excludes
    these identified
    costs: (1)charges Baker Hughes disclosed associated with
    reorganization and severance
    costs were $16 million and charges associated with allowances for
    doubtful accounts
    were $38 million in the second quarter 2009 totaling $54 million and
    recognized in the
    following segments: North America -$13 million; Latin America -$23
    million; EARC -$10 million;
    and MEAP -$5 million and $3 million at Corporate; (2) charges BJ
    Services disclosed associated
    with severance costs were $5 million and charges associated with
    impairments were $18 million
    in the second quarter 2009 totaling $23 million and recognized in the
    following segments:
    North America -$14 million; Latin America -$1 million; MEAP -$3
    million and $5 million at Corporate.

Operational Highlights

North America

Hess Corporation has awarded Baker Hughes a five-year contract for directional drilling services, drill bits, drilling fluids, pressure pumping, cased hole wireline and packers and completion systems in North Dakota's Bakken formation.

Also in the Bakken, Baker Hughes installed the first FracPoint multi-stage frac system to be instrumented with downhole fiber optic and electronic monitoring sensors in a 20,000 foot horizontal well. The system will enable the customer to acquire real-time downhole data during fracturing operations.

Baker Hughes has installed electrical submersible pumping (ESP) systems in two vertical subsea boosting stations located on the seabed at Shell's Perdido Field in the Gulf of Mexico in 8,000 feet of water. The pumping systems at Perdido are designed to boost up to 125,000 barrels of fluid per day.

Baker Hughes won a contract with one of the largest SAGD producers in Canada to complete all of its approximately 50 SAGD wells in 2010.

Latin America

OGX, the second most active operator in Brazil, awarded Baker Hughes a multi-product line contract including directional drilling, logging while drilling, wireline and surface logging and real-time monitoring services. The contract follows a recent award for electrical submersible pumps from the same customer.

EZ-Case liner drilling technology and a TORX liner hanger were used to successfully drill a casing string through a difficult shale/dolomite section in Mexico's Marine Region. An EZ-Case system also was used to perform the first casing-drilling job in Chevron's Boscan field in Venezuela.

Europe / Africa / Russia Caspian

In Norway Baker Hughes performed a reservoir study that helped win a 1 1/2 year drilling and formation evaluation contract with a new customer for the Trym and Oslevar fields. Baker Hughes will provide drill bits, rotary steerable system and advanced logging while drilling systems.

On June 23, Baker Hughes opened its Eco-Centre waste management facility in Peterhead, Scotland, providing the North Sea oil and gas industry with environmentally compliant waste processing services from the rig site to final disposal.

Baker Hughes acquired Oilpump Services, the second-largest ESP system company in Western Siberia, doubling our ESP market share in Russia.

The Russia Geomarket was awarded 21 horizontal completions for the second half of 2010 to be installed in an Eastern Siberia green field project, following the successful pilot project well using Equalizer inflow control devices.

Middle East / Asia Pacific

In Iraq, Baker Hughes has signed a three-year technical services agreement with the South Oil Company (SOC) to develop SOC's wireline capabilities and deploy state of the art wireline data acquisition and logging services in Iraq.

In Saudi Arabia, Baker Hughes received a purchase order for 30 permanent downhole monitoring systems, including advanced pressure and temperature sensors, to be used in conjunction with intelligent well systems. Also in Saudi Arabia we achieved the milestone of completing and controlling more than 1,000,000 feet of reservoir section with Equalizer Technology.

Bahrain Petroleum Company's (BAPCO) 260,000 barrel per day petroleum refinery recently awarded several water treatment applications to Baker Petrolite Saudi Arabia, in a three-year contract which was transitioned starting in June from the incumbent supplier.

PetroChina recently awarded Baker Hughes a contract to supply 77 multistage open hole FracPoint completion systems for horizontal wells in the tight gas sands of the Changquing Field, China's second largest onshore oil and gas field.

Baker Hughes recently signed a strategic framework agreement with PetroChina Tarim Oilfield Co. to supply directional and vertical drilling systems, formation evaluation services, completion services, artificial lift technology and electrical submersible pump (ESP) systems in the Tarim field in northwest China. The two-year agreement covers ultra-deep, high-pressure high-temperature formations as well as shallow zones. The agreement also includes provisions for joint development of solutions specifically designed to address the challenges in the Tarim oilfield.

Conference Call

The company has scheduled a conference call to discuss the results reported in today's earnings announcement. The call will begin at 8:30 a.m. Eastern time, 7:30 a.m. Central time, on Tuesday, August 3, 2010. To access the call, which is open to the public, please contact the conference call operator at (800) 374-2469, or (706) 634-7270 for international callers, 20 minutes prior to the scheduled start time, and ask for the "Baker Hughes Conference Call." A replay will be available through Tuesday, August 17, 2010. The number for the replay is (800) 642-1687, or (706) 645-9291 for international callers, and the access code is 77200293. The call and replay will also be web cast on www.bakerhughes.com/investor.

Forward-Looking Statements

This news release (and oral statements made regarding the subjects of this release, including on the conference call announced herein) contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (each a "forward-looking statement"). The words "anticipate," "believe," "ensure," "expect," "if," "intend," "estimate," "project," "forecasts," "predict," "outlook," "aim," "will," "could," "should," "potential," "would," "may," "probable," "likely," and similar expressions, and the negative thereof, are intended to identify forward-looking statements. There are many risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These forward-looking statements are also affected by the risk factors described in the company's Annual Report on Form 10-K for the year ended December 31, 2009; and those set forth from time to time in other filings with the Securities and Exchange Commission ("SEC"). The documents are available through the company's website at http://www.bakerhughes.com/investor or through the SEC's Electronic Data Gathering and Analysis Retrieval System (EDGAR) at http://www.sec.gov. We undertake no obligation to publicly update or revise any forward-looking statement.

Our expectations regarding our business outlook and business plans; the business plans of our customers; the integration of BJ Services, including its financial results and operations as well as divestitures; oil and natural gas market conditions; cost and availability of resources; economic, legal and regulatory conditions and other matters are only our forecasts regarding these matters.

These forward looking statements, including forecasts, may be substantially different from actual results, which are affected by many risks including the following risk factors and the timing of any of those risk factors:

Baker Hughes - BJ Services acquisition- preliminary estimates of acquisition accounting may change; the inability to achieve the expected benefits of the acquisition, including financial and operating results; the risk that the cost savings and any other synergies from the transaction may not be realized or take longer to realize than expected; the timing and ability to successfully integrate the businesses; unexpected costs or unexpected liabilities that may arise from the transaction; the timing and ability to consummate the closing of the government-required divestiture of assets used in the sand control and stimulation services businesses in the Gulf of Mexico and any unexpected impact of such divesture on the combined company or divested assets and the impact of holding separate the BJ Services and Baker Hughes businesses in the US until those assets are divested; the inability to retain key personnel; continuation or deterioration of market conditions; the outcome of any litigation; future regulatory or legislative actions that could adversely affect the company and the business plans of our customers; and with respect to the historical financial information for BJ Services disclosed or utilized in this news release the following: the estimates, pro forma calculations and quarterly results have not been audited and actual results may differ materially, no assurance can be given that these results were realized or can be considered predictive of actual or future results, and that we do not intend to update or otherwise revise these estimates.

Economic conditions - the impact of worldwide economic conditions; the effect that declines in credit availability may have on worldwide economic growth and demand for hydrocarbons; the ability of our customers to finance their exploration and development plans; foreign currency exchange fluctuations and changes in the capital markets in locations where we operate; the condition of financial institutions and the debt, capital and equity markets in general, any impact on our ability to borrow to fund short-term cash requirements and retire long-term debt upon maturity as well as any impact on our customers' spending and ability to pay amounts owed to us; our ability to estimate the size of and changes in the worldwide oil and natural gas industry.

Oil and gas market conditions - the level of petroleum industry exploration, development and production expenditures; the price of, volatility in pricing of, and the demand for, crude oil and natural gas; drilling activity; the impact of the US Gulf of Mexico drilling moratorium and changes in the regulation of offshore drilling in the US Gulf of Mexico as well as higher operating costs; excess productive capacity; crude and product inventories; LNG imports; seasonal and other adverse weather conditions that affect the demand for energy; severe weather conditions, such as hurricanes, that affect exploration and production activities; Organization of Petroleum Exporting Countries ("OPEC") policy and the adherence by OPEC nations to their OPEC production quotas.

Terrorism and geopolitical risks - war, military action, terrorist activities or extended periods of international conflict, particularly involving any major petroleum-producing or consuming regions; labor disruptions, civil unrest or security conditions where we operate; expropriation of assets by governmental action.

Price, market share, contract terms, and customer payments - our ability to obtain market prices for our products and services; the effect of the level and sources of our profitability on our tax rate; the ability of our competitors to capture market share; our ability to retain or increase our market share; changes in our strategic direction; the effect of industry capacity relative to demand for the markets in which we participate; our ability to negotiate acceptable terms and conditions with our customers, especially national oil companies, successfully execute these contracts, and receive payment in accordance with the terms of our contracts with our customers; our ability to manage warranty claims and improve performance and quality; our ability to effectively manage our commercial agents.

Costs and availability of resources - our ability to manage the costs and availability of sufficient raw materials and components (especially steel alloys, chromium, copper, carbide, lead, nickel, titanium, beryllium, barite, synthetic and natural diamonds, chemicals, and electronic components); our ability to manage energy-related costs; our ability to manage compliance-related costs; our ability to recruit, train and retain the skilled and diverse workforce necessary to meet our business needs and manage the associated costs; the effect of manufacturing and subcontracting performance and capacity, including forecasted costs to meet our revenue goals; the availability of essential electronic components used in our products; the effect of competition, particularly our ability to introduce new technology on a forecasted schedule and at forecasted costs; potential impairment of long-lived assets; the accuracy of our estimates regarding our capital spending requirements; unanticipated changes in the levels of our capital expenditures; the need to replace any unanticipated losses in capital assets; labor-related actions, including strikes, slowdowns and facility occupations.

Litigation and changes in laws or regulatory conditions - the potential for unexpected litigation or proceedings; the legislative, regulatory and business environment in the US and other countries in which we operate; outcome of government and legal proceedings as well as costs arising from compliance and ongoing or additional investigations in any of the countries where the company does business; new laws, regulations and policies that could have a significant impact on the future operations and conduct of all businesses; restrictions on hydraulic fracturing; any restrictions on new or ongoing offshore drilling; operational delays or program reductions as a result of the drilling moratorium in the Gulf of Mexico; changes in export control laws or exchange control laws; restrictions on doing business in countries subject to sanctions; customs clearance procedures; changes in laws in countries identified by management for immediate focus; changes in accounting standards; changes in tax laws or tax rates in the jurisdictions in which we operate; resolution of tax assessments or audits by various tax authorities; and the ability to fully utilize our tax loss carry forwards and tax credits.

Environmental matters - unexpected, adverse outcomes or material increases in liability with respect to environmental remediation sites where we have been named as a potentially responsible party; the discovery of new environmental remediation sites; changes in environmental regulations; the discharge of hazardous materials or hydrocarbons into the environment.

Baker Hughes provides reservoir consulting, drilling, pressure pumping, formation evaluation, completion and production products and services to the worldwide oil and gas industry.

Contact:

Gary R. Flaharty, +1.713.439.8039, gflaharty @ bakerhughes.com

SOURCE Baker Hughes Incorporated

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