HOUSTON, Nov. 4 /PRNewswire/ -- Baker Hughes Incorporated
(NYSE:BHI) today announced that net income for the third quarter
2009 was $55 million or $0.18 per diluted share compared to $429
million or $1.39 per diluted share for the third quarter 2008 and
$87 million or $0.28 per diluted share for the second quarter 2009.
Net income for the third quarter 2009 includes expenses of $38
million before tax ($0.08 per share) associated with
reorganization, severance and acquisition costs, and an increase to
our allowance for doubtful accounts. As previously reported, net
income for the second quarter 2009 included expenses of $54 million
before tax ($0.13 per share) comprised of $16 million ($0.04 per
share) associated with employee severance and reorganization costs
and $38 million ($0.09 per share) associated with increasing our
allowance for doubtful accounts. Revenue for the third quarter 2009
was $2.23 billion, down 26% compared to $3.01 billion for the third
quarter 2008 and down 4% compared to $2.34 billion for the second
quarter 2009. Chad C. Deaton, Baker Hughes chairman, president and
chief executive officer, said, "Third quarter North America
operating margins rebounded from the low set in the second quarter
of 2009. Aggressive cost cutting in the first half of 2009 enabled
us to absorb additional price decreases and improve profitability
on modest activity increases. "International results were
disappointing with revenue less than expected and price discounting
greater than expected. Our operating profit margin was also
impacted by the extra costs we are carrying to assure a smooth
organizational transition we announced in May 2009. Given the
progress we are making on this company transformation these
additional costs should largely be behind us as we enter 2010.
"Looking forward, gas-directed drilling in North America is
gradually increasing and we believe this trend will likely continue
through 2010. Internationally, we believe that customer spending
reached its low point this quarter and that forecasts for
increasing economic growth, particularly in China, India and the
Middle East, combined with modest spare production capacity are
supporting higher oil prices and laying the foundation for
increased spending in 2010. "We are continuing to make good
progress on the pending BJ Services transaction. Regulatory filings
have been made in the US and in some international jurisdictions,
and our preliminary proxy statement has been filed and is being
reviewed by the SEC. We have received a 'second request' from the
Department of Justice which is limited in product and geographical
scope. As a result of the second request, we now project that the
transaction will close in the first quarter of 2010. "With the
pending addition of BJ Services, we expect to significantly advance
our competitiveness as we improve our customer intimacy,
operational effectiveness, and product portfolio." During the third
quarter 2009, debt decreased $23 million to $1.81 billion and cash
and short-term investments increased $125 million to $1.49 billion
as compared to the second quarter 2009. Capital expenditures were
$222 million, depreciation and amortization expense was $177
million and dividend payments were $47 million in the third quarter
2009. Financial Information Consolidated Statements of Operations
Three Months Ended UNAUDITED --------------------------------- (In
millions, except per share amounts) September 30, June 30,
----------------- ---------- 2009 2008 2009 ------ ------ ------
Revenues: Sales $1,091 $1,446 $1,156 Services and rentals 1,141
1,564 1,180 -------------------- ----- ----- ----- Total revenues
2,232 3,010 2,336 -------------- ----- ----- ----- Costs and
Expenses: Cost of sales 937 1,032 926 Cost of services and rentals
824 996 871 Research and engineering 88 103 102 Marketing, general
and administrative 272 278 284
------------------------------------- --- --- --- Total costs and
expenses 2,121 2,409 2,183 ------------------------ ----- -----
----- Operating income 111 601 153 Equity in income of affiliates -
- - Interest expense (29) (21) (34) Interest and dividend income 1
10 3 ---------------------------- --- --- --- Income before income
taxes 83 590 122 Income taxes (28) (161) (35) ------------ --- ----
--- Net income $55 $429 $87 ========== === ==== === Basic earnings
per share $0.18 $1.40 $0.28 Diluted earnings per share $0.18 $1.39
$0.28 Weighted average shares outstanding, basic 310 307 310
Weighted average shares outstanding, diluted 311 308 310
Depreciation and amortization expense $177 $158 $182 Capital
expenditures $222 $301 $291 Financial Information Consolidated
Statements of Operations Nine Months Ended UNAUDITED September 30,
--------------- (In millions, except per share amounts) 2009 2008
---- ---- Revenues: Sales $3,558 $4,165 Services and rentals 3,678
4,513 -------------------- ----- ----- Total revenues 7,236 8,678
-------------- ----- ----- Costs and Expenses: Cost of sales 2,890
2,952 Cost of services and rentals 2,628 2,842 Research and
engineering 299 312 Marketing, general and administrative 837 798
Litigation settlement - 62 --------------------- -- -- Total costs
and expenses 6,654 6,966 ------------------------ ----- -----
Operating income 582 1,712 Equity in income of affiliates - 1 Gain
on sale of product line - 28 Interest expense (98) (53) Interest
and dividend income 5 22 ---------------------------- -- -- Income
before income taxes 489 1,710 Income taxes (152) (507) ------------
---- ---- Net income $337 $1,203 ========== ==== ====== Basic
earnings per share $1.09 $3.91 Diluted earnings per share $1.09
$3.89 Weighted average shares outstanding, basic 310 308 Weighted
average shares outstanding, diluted 310 309 Depreciation and
amortization expense $532 $460 Capital expenditures $794 $840
Calculation of EBIT and EBITDA (non-GAAP measures)(1) UNAUDITED
Three Months Ended ----------------------------- September 30, June
30, ------------------ -------- 2009 2008 2009 ------ ------
------- $83 $590 $122 Income before income taxes Interest expense
29 21 34 ---------------- -- -- -- Earnings before interest expense
and taxes (EBIT) 112 611 156 Depreciation and amortization expense
177 158 182 ------------------------------------- --- --- ---
Earnings before interest expense, taxes, depreciation and
amortization (EBITDA) $289 $769 $338
======================================= ==== ==== ==== (1) EBIT and
EBITDA (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.
Consolidated Balance Sheets (UNAUDITED September 30, December 31,
In millions) 2009 2008 =========== ==== ==== ASSETS Current Assets:
Cash and cash equivalents $1,487 $1,955 Accounts receivable, net
2,220 2,759 Inventories, net 1,967 2,021 Deferred income taxes 244
231 Other current assets 174 179 -------------------- --- --- Total
current assets 6,092 7,145 -------------------- ----- -----
Property, plant and equipment, net 3,059 2,833 Goodwill 1,410 1,389
Intangible assets, net 199 198 Other assets 423 296 ------------
--- --- Total assets $11,183 $11,861 ============ ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts
payable $661 $888 Short-term borrowings and current portion of
long-term debt 23 558 Accrued employee compensation 459 530 Income
taxes payable 58 272 Other accrued liabilities 252 263
------------------------- --- --- Total current liabilities 1,453
2,511 ------------------------- ----- ----- Long-term debt 1,783
1,775 Deferred income taxes and other tax liabilities 322 384
Liabilities for pensions and other postretirement benefits 376 317
Other liabilities 64 67 Stockholders' Equity: Common stock 310 309
Capital in excess of par value 811 745 Retained earnings 6,474
6,276 Accumulated other comprehensive loss (410) (523)
------------------------------------ ---- ---- Total stockholders'
equity 7,185 6,807 -------------------------- ----- ----- Total
liabilities and stockholders' equity $11,183 $11,861
=================================== ======= ======= Revenue, Profit
Before Tax, and Profit Before Tax Operating Margin(1) (in millions)
Three Months Ended -----------------------------------------
9/30/2009 9/30/2008 6/30/2009 ------------- ------------
----------- Segment Revenue Drilling and Evaluation $1,051 $1,558
$1,116 Completion and Production 1,181 1,452 1,220
------------------------- ----- ----- ----- Oilfield Operations
$2,232 $3,010 $2,336 =================== ====== ====== ======
Geographic Revenue North America $817 $1,312 $794 Latin America 265
285 276 Europe Africa Russia Caspian 666 874 743 Middle East Asia
Pacific 484 539 523 ------------------------ --- --- --- Oilfield
Operations $2,232 $3,010 $2,336 =================== ====== ======
====== Segment Profit Before Tax(1) Drilling and Evaluation $41
$347 $73 Completion and Production 146 323 166
------------------------- --- --- --- Oilfield Operations $187 $670
$239 =================== ==== ==== ==== Geographic Profit Before
Tax(1) North America $39 $316 $3 Latin America 10 51 34 Europe
Africa Russia Caspian 87 202 130 Middle East Asia Pacific 51 101 72
------------------------ -- --- -- Oilfield Operations 187 670 239
------------------- --- --- --- Corporate and Other Profit Before
Tax(1) Interest expense (29) (21) (34) Interest and dividend income
1 10 3 Corporate and other (76) (69) (86) ------------------- ---
--- --- Corporate, net interest and other (104) (80) (117)
--------------------------- ---- --- ---- Total Profit Before Tax
$83 $590 $122 ======================= === ==== ==== Profit Before
Tax Operating Margin(1) Drilling and Evaluation 4% 22% 7%
Completion and Production 12% 22% 14% Oilfield Operations 8% 22%
10% Profit Before Tax Operating Margin(1) North America 5% 24% 0%
Latin America 4% 18% 12% Europe Africa Russia Caspian 13% 23% 17%
Middle East Asia Pacific 11% 19% 14% Oilfield Operations 8% 22% 10%
(1) Profit before tax operating margin is a non-GAAP measure
defined as profit before tax ("income before income taxes") divided
by revenue. Management uses the profit before tax operating 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. Expenses
for Reorganization, Severance and Acquisition Costs, and Increases
to Allowance for Doubtful Accounts Included in the Following(1)
This table reconciles "Revenue, Profit Before Tax, and Profit
Before Tax Operating Margin" (table above) with "Revenue, Profit
Before Tax, and Profit Before Tax Operating Margin Excluding
Reorganization, Severance and Acquisition Costs, and Increases to
Allowance for Doubtful Accounts" (table below) (In millions) Three
Months Ended ----------------------------------------- 9/30/2009
9/30/2008 6/30/2009 ============== ============= ============
Segment Expense Drilling and Evaluation $12 - $26 Completion and
Production 17 - 25 ------------------------- --- --- --- Oilfield
Operations $29 - $51 =================== === === === $ Geographic
Expense North America $15 - $13 Latin America 3 - 23 Europe Africa
Russia Caspian 3 - 10 Middle East Asia Pacific 8 - 5
------------------------ --- --- --- Oilfield Operations $29 - $51
------------------- --- --- --- Corporate Expense Corporate and
other 9 - 3 ------------------- --- --- --- Total $38 - $54 =====
=== === === (1) Charges associated with reorganization, severance
and acquisition (associated with the pending merger with BJ
Services) costs were approximately $33 million in the third quarter
2009 and approximately $16 million in the second quarter 2009.
Charges associated with allowances for doubtful accounts were
approximately $ 5 million in the third quarter 2009 and
approximately $38 million in the second quarter 2009. Revenue,
Profit Before Tax, and Profit Before Tax Operating Margin(1)
Excluding Reorganization, Severance and Acquisition Costs, and
Increases to Allowance for Doubtful Accounts The following table
contains non-GAAP measures of segment profit before tax, geographic
profit before tax, corporate and other profit before tax, and
operating margins excluding expenses for, reorganization, severance
and acquisition costs, and increases to allowance for doubtful
accounts (see table above). Management uses this measure to isolate
the results of certain operations and believes that this
information may be useful to investors. Three Months Ended
----------------------------------------- 9/30/2009 9/30/2008
6/30/2009 ------------- ------------- ----------- Segment Revenue
Drilling and Evaluation $1,051 $1,558 $1,116 Completion and
Production 1,181 1,452 1,220 ------------------------- ----- -----
----- Oilfield Operations $2,232 $3,010 $2,336 ===================
====== ====== ====== Geographic Revenue North America $817 $1,312
$794 Latin America 265 285 276 Europe Africa Russia Caspian 666 874
743 Middle East Asia Pacific 484 539 523 ------------------------
--- --- --- Oilfield Operations $2,232 $3,010 $2,336
=================== ====== ====== ====== Segment Profit Before Tax
Drilling and Evaluation $53 $347 $99 Completion and Production 163
323 191 ------------------------- --- --- --- Oilfield Operations
$216 $670 $290 =================== ==== ==== ==== Geographic Profit
Before Tax North America $54 $316 $16 Latin America 13 51 57 Europe
Africa Russia Caspian 90 202 140 Middle East Asia Pacific 59 101 77
------------------------ -- --- -- Oilfield Operations 216 670 290
------------------- --- --- --- Corporate and Other Profit Before
Tax Interest expense (29) (21) (34) Interest and dividend income 1
10 3 Corporate and other (67) (69) (83) ------------------- --- ---
--- Corporate, net interest and other (95) (80) (114)
--------------------------- --- --- ---- Total Profit Before Tax
$121 $590 $176 ======================= ==== ==== ==== Profit Before
Tax Operating Margin(1) Drilling and Evaluation 5% 22% 9%
Completion and Production 14% 22% 16% Oilfield Operations 10% 22%
12% Profit Before Tax Operating Margin(1) North America 7% 24% 2%
Latin America 5% 18% 21% Europe Africa Russia Caspian 14% 23% 19%
Middle East Asia Pacific 12% 19% 15% Oilfield Operations 10% 22%
12% (1) Profit before tax operating margin is a non-GAAP measure
defined as profit before tax ("income before income taxes") divided
by revenue. Management uses the profit before tax operating 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. Comparison
of Revenue to Prior Periods Percent Increase (Decrease) for the
Three Months Ended September 30, 2009 Compared to the
----------------------------------------------------- Three Months
Ended Three Months Ended September 30, 2008 June 30, 2009
------------------ ------------------ Segment Drilling and
Evaluation (33%) (6%) Completion and Production (19%) (3%) Oilfield
Operations (26%) (4%) Geographic North America (38%) 3% Latin
America (7%) (4%) Europe Africa Russia Caspian (24%) (10%) Middle
East Asia Pacific (10%) (7%) Oilfield Operations (26%) (4%)
Operational Highlights North America Revenue in North America
reflected changes in the North America rig count which was down 52%
year-over-year. The sequential quarterly improvement was primarily
driven by a 13% increase in the North America rig count, where a
strong seasonal rebound in Canada was partially offset by a 32%
decrease in offshore drilling as offshore activity slowed during
the Gulf of Mexico hurricane season. The sequential improvement in
profit before tax and profit before tax margins demonstrated the
advantages of our early and aggressive cost cutting in the first
half of 2009 which overcame incremental price discounting in the
third quarter 2009. During the quarter, and in collaboration with a
major U.S. independent operator, our US Land geomarket team
successfully installed the first 24-stage FracPoint(TM) EX open
hole isolation completion system in the Williston Basin. In
addition, we launched our IntelliFrac(TM) service, an integration
of our advanced micro-seismic services with state-of-the-art
fracturing and production enhancement services from BJ Services.
This combined offering of services enables operators to monitor
fracture dimensions during stimulation treatments and allows
real-time control of fracture operations. Latin America Revenue
declined year-over-year as increased revenue from the Mexico /
Central America geomarket was offset by reduced revenue from the
Venezuela and Argentina / Bolivia / Chile geomarkets. Revenue
declined sequentially primarily due to lower activity in the
Venezuela geomarket. Operating profit margin in the third quarter
was adversely impacted by incremental costs in the Mexico / Central
America and Brazil geomarkets associated with start-up activity,
and higher labor costs in the Argentina / Bolivia / Chile
geomarket. During the quarter we were awarded a contract for
intelligent completions for the pre-salt Tupi field in Brazil
valued in excess of $50 million. In the Mexico/Central America
geomarket, we operated on a record six rigs in the Alma marine
integrated services project for PEMEX, and we completed the
drilling phase of the first Alma well and started completion
operations. In addition, we introduced FracPoint(TM) into the
Mexico/Central America geomarket, and commenced operations on three
ATG integrated contracts awarded by PEMEX to local integrated
operations suppliers last quarter. Under these three contracts,
Baker Hughes is providing individual product line well construction
technologies and services as a subcontractor. Also during the third
quarter, our newly-deployed BEACON center for Mexico became fully
operational, providing permanent real-time monitoring visibility of
ongoing operations allowing Baker Hughes experts from around the
world to provide support on operational and technical challenges as
they arise. Europe Africa Russia Caspian Revenue declined
year-over-year in all geomarkets with the exception of Angola, with
the largest declines in the Russia, UK and Norway geomarkets.
Sequentially, revenues declined as the increases in the Norway, Sub
Sahara Africa, and Caspian geomarkets were more than offset by
declines in the UK, Russia, Continental Europe, Angola and Libya
geomarkets. Baker Hughes drilled and completed the first well using
our 9-5/8" steerable liner drilling system for a client in Norway.
The system features INTEQ directional drilling systems, Hughes
Christensen drill bits and Baker Oil Tools completion systems. In
Azerbaijan we were awarded a $300 million contract in the third
quarter 2009 for directional drilling, formation evaluation and
completion systems. Work is expected to commence in January 2010.
Middle East Asia Pacific The year-over-year revenue decline in the
region was in line with the decline in the rig count, with higher
revenue from the Australasia and India/Southwest Asia geomarkets
being offset by lower revenue from all other Middle East Asia
Pacific geomarkets. Compared to the second quarter 2009, revenue
increases in the India / Southwest Asia, Indonesia, and Australasia
geomarkets were more than offset by reduced revenue in the North
Asia, Egypt, Gulf and Southeast Asia geomarkets. During the quarter
we were awarded drilling, evaluation and completion contracts for a
twelve well deepwater exploration program for a consortium of six
major integrated oil companies operating in Indonesia. In the Gulf
geomarket, we achieved a new milestone in reservoir
characterization, performing one of the largest ever onshore 3D
Vertical Seismic Profiling jobs for a major National Oil Company.
Conference Call The company has scheduled a conference call to
discuss the results of today's earnings announcement. The call will
begin at 8:30 a.m. Eastern time, 7:30 a.m. Central time, on
Wednesday, November 4, 2009. 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 Wednesday,
November 18, 2009. The number for the replay is (800) 642-1687, or
(706) 645-9291 for international callers, and the access code is
33298674. The call and replay will also be web cast on
http://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," "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, 2008; and those
set forth from time to time in our 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; 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 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 pending merger - the ability to obtain
regulatory approvals for the transaction and the approval of the
merger agreement by the stockholders of both parties; the risk that
the cost savings and any other synergies from the transaction may
not be realized or take longer to realize than expected; disruption
from the transaction making it more difficult to maintain
relationships with customers, employees or suppliers; the ability
to successfully integrate the businesses; unexpected costs or
unexpected liabilities that may arise from the transaction, whether
or not consummated; the inability to retain key personnel;
continuation or deterioration of current market conditions; the
outcome of pending litigation; future regulatory or legislative
actions that could adversely affect the companies and the business
plans of the customers of the respective parties. Economic
conditions - the impact of deteriorating 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; 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 period 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 integration of
newly-acquired businesses; 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 compliancerelated costs; our ability to recruit,
train and retain the skilled and diverse workforce necessary to
meet our business needs and manage the associated costs;
manufacturing capacity and subcontracting capacity at 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; the development of
technology by us or our competitors that lowers overall finding and
development costs; 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;
costs and changes in processes and operations related to or
resulting from the activities of the compliance monitor appointed
to assess our Foreign Corrupt Practices Act policies and procedures
in connection with previously reported settlements with the SEC and
Department of Justice ("DOJ") as well as compliance with the terms
of the settlements as well as any future agreements with the SEC,
DOJ or other authority; 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; 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. Additional Information and Where to Find It
On October 14, 2009, Baker Hughes filed with the SEC a Registration
Statement on Form S-4, which includes a joint proxy statement of
Baker Hughes and BJ Services that also constitutes a prospectus of
Baker Hughes regarding the proposed transaction. INVESTORS AND
SECURITY HOLDERS OF BAKER HUGHES AND BJ SERVICES ARE URGED TO
CAREFULLY READ THE REGISTRATION STATEMENT FILED WITH THE SEC AND
THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER
MATERIALS FILED OR TO BE FILED WITH THE SEC REGARDING THE PROPOSED
TRANSACTION WHEN THEY BECOME AVAILABLE, BECAUSE THEY CONTAIN, OR
WILL CONTAIN, IMPORTANT INFORMATION REGARDING BAKER HUGHES, BJ
SERVICES AND THE PROPOSED TRANSACTION. A definitive joint proxy
statement/prospectus will be sent to security holders of Baker
Hughes and BJ Services seeking their approval of the proposed
transaction. Investors and security holders may obtain a free copy
of the proxy statement/prospectus and other documents filed by
Baker Hughes and BJ Services with the SEC at the SEC's web site at
http://www.sec.gov/. The joint proxy statement/prospectus and such
other documents (relating to Baker Hughes) may also be obtained
from Baker Hughes for free from Baker Hughes' web site at
http://www.bakerhughes.com/investor or by directing a request to:
Baker Hughes Incorporated, 2929 Allen Parkway, Suite 2100, Houston,
TX 77019, Attention: Corporate Secretary, or by phone at (713)
439-8600. The joint proxy statement/prospectus and such other
documents (relating to BJ Services) may also be obtained from BJ
Services for free from BJ Services' web site at
http://www.bjservices.com/ or by directing a request to: BJ
Services Company, P.O. Box 4442, Houston, Texas 77210-4442,
Attention: Investor Relations, or by phone at (713) 462-4239.
Participants in the Solicitation Baker Hughes, its directors,
executive officers and certain members of management and employees
may be considered "participants in the solicitation" of proxies
from Baker Hughes' stockholders in connection with the proposed
transaction. Information regarding such persons and a description
of their interests in the proposed transaction are contained in the
preliminary joint proxy statement/prospectus filed. BJ Services,
its directors, executive officers and certain members of management
and employees may be considered "participants in the solicitation"
of proxies from BJ Services' stockholders in connection with the
proposed transaction. Information regarding such persons and a
description of their interests in the proposed transaction are
contained in the preliminary joint proxy statement/prospectus
filed. Baker Hughes provides reservoir consulting, drilling,
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 H. Gene
Shiels, +1.713.439.8822, gene.shiels @ bakerhughes.com DATASOURCE:
Baker Hughes Incorporated CONTACT: Gary R. Flaharty,
+1-713-439-8039, gflaharty @ bakerhughes.com, or H. Gene Shiels,
+1-713-439-8822, gene.shiels @ bakerhughes.com, both of Baker
Hughes Incorporated Web Site: http://www.bakerhughes.com/
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