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Press release from PR Newswire

Baker Hughes Announces Third Quarter Results

Friday, October 18, 2013

Baker Hughes Announces Third Quarter Results

06:00 EDT Friday, October 18, 2013

- Record revenue of $5.8 billion
- Adjusted net income of $0.81 per diluted share including $0.09 per diluted share for bad debt provisions in Latin America
- Record Eastern Hemisphere revenue and operating profit, with revenue increasing 20% compared to the third quarter of 2012

HOUSTON, Oct. 18, 2013 /PRNewswire/ -- Baker Hughes Incorporated (NYSE: BHI) announced today results for the third quarter of 2013 are as follows:

Q3 2013

Q2 2013

Q3 2012

Revenue (millions)

$

5,787

$

5,487

$

5,355

Adjusted net income (non-GAAP, millions)

358

240

322

Net income (GAAP, millions)

341

240

279

Adjusted net income per diluted share (non-GAAP)

0.81

0.54

0.73

Net income per diluted share (GAAP)

0.77

0.54

0.63

Adjusted net income for the third quarter of 2013 excludes after-tax severance charges of $17 million ($0.04 per diluted share) related to restructuring in Latin America, but includes an after-tax charge of $42 million ($0.09 per diluted share) for bad debt provisions in Latin America.  Please see Table 1 for a reconciliation of GAAP to non-GAAP Financial Measures.

"During the quarter, we achieved record revenue and strong earnings growth.  In addition, we increased margins sequentially in each of our four geographic segments," said Martin Craighead, Baker Hughes' Chairman and Chief Executive Officer.  "Specifically, in our Eastern Hemisphere operations, we increased revenue 20% compared to the same quarter last year at higher margins as a result of increased activity and improved mix.  This growth was led by strong performance in the Middle East, Asia Pacific, Africa, and Russia Caspian.

"North America also delivered higher margins with the seasonal recovery in Canada and improved performance in all of our product lines.  Across the region, growth was led by our Drilling Services, Completions Systems, Artificial Lift, and Upstream Chemicals businesses.

"The increasing complexity of oil and gas production aligns with our strength in technology and reservoir expertise.  By leveraging our heritage of innovation, we will continue to deliver new technologies and unique solutions that address tomorrow's exploration and production challenges."

Cash increased $245 million to $1.37 billion as of September 30, 2013, compared to $1.12 billion at June 30, 2013.  Debt decreased by $334 million to $4.58 billion compared to the second quarter of 2013.

Capital expenditures were $511 million, depreciation and amortization expense was $423 million and dividend payments were $68 million in the third quarter of 2013.

Adjusted EBITDA (a non-GAAP measure) in the third quarter of 2013 was $1.0 billion, an increase of $158 million compared to the second quarter of 2013.  A reconciliation of net income attributable to Baker Hughes to Adjusted EBITDA is provided in Table 2.  Supplemental financial information for revenue and adjusted operating profit before tax (a non-GAAP measure) is provided in Tables 5a and 5b.

The following financial statements and information in Tables 1 through 5 are unaudited.

 

Consolidated Condensed Statements of Income

Three Months Ended

September 30,

June 30,

(In millions, except per share amounts)

2013

2012

2013

Revenue

$

5,787

$

5,355

$

5,487

Costs and expenses:

Cost of revenue

4,750

4,396

4,591

Research and engineering

142

118

131

Marketing, general and administrative

319

355

329

    Total costs and expenses

5,211

4,869

5,051

Operating income

576

486

436

Interest expense, net

(58)

(49)

(60)

Income before income taxes

518

437

376

Income taxes

(178)

(153)

(131)

Net income

340

284

245

Net loss (income) attributable to noncontrolling interests

1

(5)

(5)

Net income attributable to Baker Hughes

$

341

$

279

$

240

Basic earnings per share attributable to Baker Hughes

$

0.77

$

0.63

$

0.54

Diluted earnings per share attributable to Baker Hughes

$

0.77

$

0.63

$

0.54

Weighted average shares outstanding, basic

444

440

443

Weighted average shares outstanding, diluted

445

441

444

Depreciation and amortization expense

$

423

$

408

$

424

Capital expenditures

$

511

$

741

$

551

 

Consolidated Condensed Statements of Income

Nine Months Ended September 30,

(In millions, except per share amounts)

2013

2012

Revenue

$

16,504

$

16,036

Costs and expenses:

Cost of revenue

13,667

12,915

Research and engineering

400

370

Marketing, general and administrative

970

999

    Total costs and expenses

15,037

14,284

Operating income

1,467

1,752

Interest expense, net

(173)

(153)

Income before income taxes

1,294

1,599

Income taxes

(441)

(497)

Net income

853

1,102

Net income attributable to noncontrolling interests

(5)

(5)

Net income attributable to Baker Hughes

$

848

$

1,097

Basic earnings per share attributable to Baker Hughes

$

1.91

$

2.49

Diluted earnings per share attributable to Baker Hughes

$

1.91

$

2.49

Weighted average shares outstanding, basic

443

440

Weighted average shares outstanding, diluted

444

441

Depreciation and amortization expense

$

1,262

$

1,151

Capital expenditures

$

1,552

$

2,183

 

Consolidated Condensed Balance Sheets

September 30,

December 31,

(In millions)

2013

2012

ASSETS

Current Assets:

Cash and cash equivalents

$

1,368

$

1,015

Accounts receivable - less allowance for doubtful accounts

(2013 - $310,  2012 - $308)

5,343

4,815

Inventories, net

3,960

3,781

Other current assets

836

806

    Total current assets

11,507

10,417

Property, plant and equipment, net

8,964

8,707

Goodwill

5,967

5,958

Intangible assets, net

915

993

Other assets

721

614

Total assets

$

28,074

$

26,689

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable

$

2,474

$

1,737

Short-term debt and current portion of long-term debt

737

1,079

Accrued employee compensation

717

646

Other accrued liabilities

771

662

    Total current liabilities

4,699

4,124

Long-term debt

3,838

3,837

Deferred income taxes and other tax liabilities

797

745

Long-term liabilities

747

715

Equity

17,993

17,268

Total liabilities and equity

$

28,074

$

26,689

 

Consolidated Condensed Statements of Cash Flows

Nine Months Ended September 30,

(In millions)

2013

2012

Cash flows from operating activities:

Net income

$

853

$

1,102

Adjustments to reconcile net income to net cash flows from operating activities:

    Depreciation and amortization

1,262

1,151

    Other, primarily working capital

43

(1,306)

Net cash flows provided by operating activities

2,158

947

Cash flows from investing activities:

    Expenditures for capital assets

(1,552)

(2,183)

    Other

248

287

Net cash flows used in investing activities

(1,304)

(1,896)

Cash flows from financing activities:

    Net (repayments) proceeds from issuance of debt

(332)

1,075

    Dividends

(200)

(197)

    Other

33

24

Net cash flows (used in) provided by financing activities

(499)

902

Effect of foreign exchange rate changes on cash and cash equivalents

(2)

4

Increase (decrease) in cash and cash equivalents

353

(43)

Cash and cash equivalents, beginning of period

1,015

1,050

Cash and cash equivalents, end of period

$

1,368

$

1,007

 

Table 1:  Reconciliation of GAAP and Non-GAAP Financial Measures

The following table reconciles net income attributable to Baker Hughes, which is the directly comparable financial result determined in accordance with Generally Accepted Accounting Principles (GAAP), to adjusted net income1 (a non-GAAP financial measure).  This excludes identified items with respect to the third quarters of 2013 and 2012.  There were no identified items requiring adjustment for the second quarter of 2013.

Three Months Ended September 30, 2013

(In millions, except per share amounts)

Net

Income

Diluted

Earnings

Per Share

Net income attributable to Baker Hughes (GAAP)

$

341

$

0.77

Identified item:

Severance charges2

17

0.04

Adjusted net income (non-GAAP)1

$

358

$

0.81

 

Three Months Ended September 30, 2012

(In millions, except per share amounts)

Net

Income

Diluted

Earnings

Per Share

Net income attributable to Baker Hughes (GAAP)

$

279

$

0.63

Identified items:

Information technology charges3

28

0.07

Facility closure4

15

0.03

Adjusted net income (non-GAAP)1

$

322

$

0.73

1

Adjusted net income is a non-GAAP measure comprised of net income attributable to Baker Hughes excluding the impact of certain identified items.  The Company believes that adjusted net income is useful to investors because it is a consistent measure of the underlying results of the Company's business.  Furthermore, management uses adjusted net income as a measure of the performance of the Company's operations.

2

Severance charge of $19 million before-tax ($17 million after-tax) related to restructuring in Latin America during the third quarter of 2013.

3

Charge of $43 million before-tax ($28 million after-tax) related to internally developed software and other information technology assets in the third quarter of 2012.

4

Charge of $20 million before-tax ($15 million after-tax) resulting from the closure of a chemical manufacturing facility in the United Kingdom in the third quarter of 2012.

 

Table 2: Calculation of EBIT, EBITDA, and Adjusted EBITDA (non-GAAP measures)1

Three Months Ended

September 30,

June 30,

(In millions)

2013

2012

2013

Net income attributable to Baker Hughes

$

341

$

279

$

240

Net (loss) income attributable to noncontrolling interests

(1)

5

5

Income taxes

178

153

131

Income before income taxes

518

437

376

Interest expense, net

58

49

60

Earnings before interest and taxes (EBIT)

576

486

436

Depreciation and amortization expense

423

408

424

Earnings before interest, taxes, depreciation and

amortization (EBITDA)

999

894

860

Adjustments to EBITDA:

Severance charges2

19

?

?

Information technology charges3

?

43

?

Facility closure4

?

20

?

Adjusted EBITDA

$

1,018

$

957

$

860

 

Nine Months Ended

(In millions)

2013

2012

Net income attributable to Baker Hughes

$

848

$

1,097

Net income attributable to noncontrolling interests

5

5

Income taxes

441

497

Income before income taxes

1,294

1,599

Interest expense, net

173

153

Earnings before interest and taxes (EBIT)

1,467

1,752

Depreciation and amortization expense

1,262

1,151

Earnings before interest, taxes, depreciation and

amortization (EBITDA)

2,729

2,903

Adjustments to EBITDA:

Severance charges2

19

?

Devaluation of Venezuelan currency5

23

?

Information technology charges3

?

43

Facility closure4

?

20

Adjusted EBITDA

$

2,771

$

2,966

1

EBIT, EBITDA, and Adjusted EBITDA (as defined in the calculations above) are non-GAAP measures.  Management is providing these measures because it believes that such measures are widely accepted financial indicators used by investors and analysts to analyze and compare companies on the basis of operating performance.

2

Severance charge of $19 million before-tax ($17 million after-tax) related to restructuring in Latin America during the third quarter of 2013.

3

Charge of $43 million before-tax ($28 million after-tax) related to internally developed software and other information technology assets in the third quarter of 2012.

4

Charge of $20 million before-tax ($15 million after-tax) resulting from the closure of a chemical manufacturing facility in the United Kingdom in the third quarter of 2012.

5

Foreign exchange loss of $23 million before and after-tax due to the devaluation of Venezuela's currency from the prior exchange rate of 4.3 Bolivars Fuertes per U.S. Dollar to 6.3 Bolivars Fuertes per U.S. Dollar, which applied to our local currency denominated balances.

 

Table 3a: Segment Revenue, Profit Before Tax, and Profit Before Tax Margin1

Three Months Ended

September 30,

June 30,

(In millions)

2013

2012

2013

Segment Revenue

  North America

$

2,854

$

2,742

$

2,677

  Latin America

557

583

557

  Europe/Africa/Russia Caspian

984

866

966

  Middle East/Asia Pacific

1,064

844

971

  Industrial Services and Other

328

320

316

Total Operations

$

5,787

$

5,355

$

5,487

Profit Before Tax

  North America

$

295

$

288

$

211

  Latin America

(23)

45

(18)

  Europe/Africa/Russia Caspian

170

104

151

  Middle East/Asia Pacific

156

70

115

  Industrial Services and Other

38

38

39

Total Operations

$

636

$

545

$

498

Corporate and Other Profit Before Tax

  Interest expense, net

(58)

(49)

(60)

  Corporate and other

(60)

(59)

(62)

  Corporate, net interest and other

(118)

(108)

(122)

Profit Before Tax

$

518

$

437

$

376

Profit Before Tax Margin1

  North America

10

%

11

%

8

%

  Latin America

(4)

%

8

%

(3)

%

  Europe/Africa/Russia Caspian

17

%

12

%

16

%

  Middle East/Asia Pacific

15

%

8

%

12

%

  Industrial Services and Other

12

%

12

%

12

%

Total Operations

11

%

10

%

9

%

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.

 

Table 3b: Segment Revenue, Profit Before Tax, and Profit Before Tax Margin1

Nine Months Ended September 30,

(In millions)

2013

2012

Segment Revenue

  North America

$

8,134

$

8,277

  Latin America

1,704

1,760

  Europe/Africa/Russia Caspian

2,804

2,684

  Middle East/Asia Pacific

2,929

2,393

  Industrial Services and Other

933

922

Total Operations

$

16,504

$

16,036

Profit Before Tax

  North America

$

741

$

1,046

  Latin America

8

189

  Europe/Africa/Russia Caspian

414

413

  Middle East/Asia Pacific

387

232

  Industrial Services and Other

101

104

Total Operations

$

1,651

$

1,984

Corporate and Other Profit Before Tax

  Interest expense, net

(173)

(153)

  Corporate and other

(184)

(232)

  Corporate, net interest and other

(357)

(385)

Profit Before Tax

$

1,294

$

1,599

Profit Before Tax Margin1

  North America

9

%

13

%

  Latin America

0

%

11

%

  Europe/Africa/Russia Caspian

15

%

15

%

  Middle East/Asia Pacific

13

%

10

%

  Industrial Services and Other

11

%

11

%

Total Operations

10

%

12

%

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.

 

Table 4: Adjustments to Operating Profit Before Tax1

(In millions)

Three Months Ended September 30, 20132

Three Months Ended September 30, 20123

Adjustments to Operating Profit Before Tax

  North America

$

?

$

33

  Latin America

19

7

  Europe/Africa/Russia Caspian

?

11

  Middle East/Asia Pacific

?

10

  Industrial Services and Other

?

2

Total Operations

$

19

$

63

 

(In millions)

Nine Months Ended September 30, 20134

Nine Months Ended September 30, 20123

Adjustments to Operating Profit Before Tax

  North America

$

?

$

33

  Latin America

42

7

  Europe/Africa/Russia Caspian

?

11

  Middle East/Asia Pacific

?

10

  Industrial Services and Other

?

2

Total Operations

$

42

$

63

1

There were no items identified requiring adjustment in the second quarter of 2013.

2

Severance charge of $19 million before-tax related to restructuring in Latin America during the third quarter of 2013.

3

Charges of $43 million before-tax related to internally developed software and other information technology assets in the third quarter of 2012.  Charges of $20 million before-tax associated with the closure of a chemical manufacturing facility in the United Kingdom in the third quarter of 2012.  The information technology assets and manufacturing facility supported our global operations.  Therefore, these costs have been allocated to all segments.

4

Includes severance charge incurred in the third quarter of 2013 (see note 2 above) and foreign exchange loss of $23 million before-tax incurred in the first quarter of 2013 due to the devaluation of Venezuela's currency from the prior exchange rate of 4.3 Bolivars Fuertes per U.S. Dollar to 6.3 Bolivars Fuertes per U.S. Dollar, which applied to our local currency denominated balances.

 

Table 5a:  Supplemental Financial Information Excluding Certain Identified Items

The following table contains non-GAAP measures of operating profit before tax and operating profit before tax margin, excluding the severance charges related to restructuring in Latin America in the third quarter of 2013, and charges related to information technology and the closure of a chemical manufacturing facility recorded in the third quarter of 2012 (see Table 4).  There were no items requiring adjustment for the second quarter of 2013.

Three Months Ended

September 30,

June 30,

(In millions)

2013

2012

2013

Segment Revenue

  North America

$

2,854

$

2,742

$

2,677

  Latin America

557

583

557

  Europe/Africa/Russia Caspian

984

866

966

  Middle East/Asia Pacific

1,064

844

971

  Industrial Services and Other

328

320

316

Total Operations

$

5,787

$

5,355

$

5,487

Operating Profit Before Tax1

  North America2

$

295

$

321

$

211

  Latin America3

(4)

52

(18)

  Europe/Africa/Russia Caspian3

170

115

151

  Middle East/Asia Pacific

156

80

115

  Industrial Services and Other

38

40

39

Total Operations

$

655

$

608

$

498

Operating Profit Before Tax Margin1

  North America2

10

%

12

%

8

%

  Latin America3

(1)

%

9

%

(3)

%

  Europe/Africa/Russia Caspian3

17

%

13

%

16

%

  Middle East/Asia Pacific

15

%

9

%

12

%

  Industrial Services and Other

12

%

13

%

12

%

Total Operations

11

%

11

%

9

%

1

Operating profit before tax is a non-GAAP measure defined as profit before tax ("income before income taxes") less certain identified costs.  Operating profit before tax margin is a non-GAAP measure defined as operating profit before tax divided by revenue.  Management uses each of these measures because it believes they are widely accepted financial indicators used by investors and analysts to analyze and compare companies on the basis of operating performance and that these measures may be used by investors to make informed investment decisions.

2

Operating profit before tax and operating profit before tax margin include an inventory charge of $11 million before-tax related to certain proppants used in pressure pumping in North America in the second quarter 2013.

3

Operating profit before tax and operating profit before tax margin include bad debt provisions of $42 million, $22 million, and $20 million before-tax in Latin America in the third quarter of 2013, third quarter of 2012, and second quarter of 2013, respectively.  The third quarter of 2012 also included bad debt provisions of $7 million before-tax in Europe.

 

Table 5b:  Supplemental Financial Information Excluding Certain Identified Items

The following table contains non-GAAP measures of operating profit before tax and operating profit before tax margin, excluding the restructuring charges in Latin America recorded in the third quarter of 2013, the charge for the devaluation of the Venezuelan currency recorded in the first quarter of 2013, and charges related to information technology and the closure of a chemical manufacturing facility recorded in the third quarter of 2012 (see Table 4).

Nine Months Ended September 30,

(In millions)

2013

2012

Segment Revenue

  North America

$

8,134

$

8,277

  Latin America

1,704

1,760

  Europe/Africa/Russia Caspian

2,804

2,684

  Middle East/Asia Pacific

2,929

2,393

  Industrial Services and Other

933

922

Total Operations

$

16,504

$

16,036

Operating Profit Before Tax1

  North America2

$

741

$

1,079

  Latin America3

50

196

  Europe/Africa/Russia Caspian3

414

424

  Middle East/Asia Pacific

387

242

  Industrial Services and Other

101

106

Total Operations

$

1,693

$

2,047

Operating Profit Before Tax Margin1

  North America2

9

%

13

%

  Latin America3

3

%

11

%

  Europe/Africa/Russia Caspian3

15

%

16

%

  Middle East/Asia Pacific

13

%

10

%

  Industrial Services and Other

11

%

11

%

Total Operations

10

%

13

%

See footnotes from Table 5a.

 

Baker Hughes Operational Highlights

This quarter, Baker Hughes officially launched ProductionWave?, a comprehensive suite of products and services specifically tailored towards production optimization in the unconventional market.  ProductionWave solutions include combinations of FLEX? pump technology, sand control products, chemical injection systems, and real-time monitoring services, providing our customers with new field development options to address the specific challenges of wide flow ranges, high gas production, and the typical paraffin, scale, and sand production associated with unconventionals.  In addition to achieving increased production rates, our customers are benefiting from lower installation and maintenance costs when compared to other artificial lift systems.  ProductionWave and FLEX pump technology are already gaining traction in the U.S. market.  In the brief time since launch, 46 FLEX pumps have been installed in low-flow wells.

Recently, Baker Hughes announced the availability of its StayCool? multidimensional cutters, which help operators drill faster and more cost effectively by extending the cutter life and footage per run, especially in difficult drilling environments.  The StayCool cutter's patent-pending contoured design reduces friction and maintains a sharper cutting edge throughout the bit run.  The StayCool cutters have already drilled more than 300,000 feet in 90 runs, in five different applications in field tests, and for more than 20 customers throughout the U.S.  In the Cana Woodford field of Oklahoma, this technology provided customers with a 10% improvement in the rate of penetration and a 37% improvement in footage when drilling through hard sands interbedded with hard limestone.

Baker Hughes launched its ClearStar? synthetic fracturing fluid system, which improves reservoir performance and delivers superior flowback for increased production and improved economic results compared to traditional guar based systems.  Used with the Baker Hughes EnZyme? and HighPerm? encapsulated breakers, ClearStar fluids minimize the risk of formation and proppant pack damage to ensure maximum flowback capacity and speed and increase both initial and long-term hydrocarbon production.  In 32 separate treatments in Colorado's Wattenberg field, this system produced an average of 11% more cumulative oil over 350 days of production compared to wells stimulated using premium, guar-based fluids.

Baker Hughes H2prO? services continue to build momentum across a number of basins including the Permian, Marcellus, and Eagle Ford.  In September, Baker Hughes reached a milestone in our Water Management business by treating five million barrels of produced water in a single month for the first time.  Our Water Management and Pressure Pumping teams also successfully performed a fracture stimulation treatment for a customer in West Texas using 100% treated produced water.  The job was the first produced water crosslink frac job performed by this customer and resulted in a successful 17-stage fracture stimulation job.

During the third quarter, Shell and Baker Hughes executed a software license and joint development agreement to produce a high-end platform for geological and reservoir modeling.  The new platform will bring enhanced evaluation and visualization capabilities to Shell, allowing geoscience and petroleum engineering experts to better plan and manage the extraction of oil and gas resources and maximize their full potential.  The system will be optimized for reservoir modeling and production in tight/shale gas and liquids rich shale reservoirs, and is based on the Baker Hughes JewelEarth? software platform, which has a strong track record of delivering integrated, data-driven workflows for optimizing these types of plays.

During the third quarter, Baker Hughes announced the strengthening of its business alliance with CGG and the realignment of the firms' joint venture to focus on surface and borehole microseismic monitoring, processing, visualization, and interpretation.  The joint venture, now called Magnitude, strengthens the capabilities of Baker Hughes and CGG in unconventional resource plays and other emerging markets. In addition to surface and borehole microseismic monitoring, Magnitude will work more closely with CGG and their microseismic team to provide a more complete reservoir monitoring solution.

Baker Hughes and Petronas Carigali have entered into a long-term Oilfield Service Agreement to enhance recoverable reserves and production of hydrocarbons in the Greater D18 field, offshore Malaysia.  This 23-year agreement is a result of a successful field development study and production enhancement campaign by our Reservoir Development Services and Integrated Operations groups.  Commencing in the fourth quarter, this award will support continued growth in the region, and complements our growing position in field management projects around the world.

During the third quarter, Baker Hughes achieved a significant milestone by drilling the deepest well in the history of the Gulf of Mexico to a depth of 36,552 feet.  Achieving this record required operating in extreme pressures over 30,000 pounds per square inch.

Supplemental Financial Information

Supplemental financial information can be found on the Company's website at:  www.bakerhughes.com/investor in the Financial Information section under Quarterly Results.

Conference Call and Webcast

The Company has scheduled a conference call and webcast to discuss management's outlook and the results reported in today's earnings announcement.  The call will begin at 8 a.m. Eastern time, 7 a.m. Central time on Friday, October 18, 2013, the content of which is not part of this earnings release.  A slide presentation providing summary financial and statistical information that will be discussed on the conference call will also be posted to the Company's website and available for real-time viewing at www.bakerhughes.com/investor.  To access the conference call, please call the conference call operator at: 800-446-1671 in the U.S., or 847-413-3362 for international calls.  Please call in 20 minutes prior to the scheduled start time and ask for the "Baker Hughes Conference Call."  A replay of the call will be available through Friday, November 1, 2013.  The number for the replay is: 888-843-7419 in the U.S., or 630-652-3042 for international calls, and the access code is:  35542417.  To access the webcast, go to our Events and Presentations page on the Company's website at: 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," "foresee," "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, 2012, Baker Hughes' subsequent quarterly report on Form 10-Q for the quarterly periods ended March 31, and June 30, 2013; 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:  www.bakerhughes.com/investor or through the SEC's Electronic Data Gathering and Analysis Retrieval System ("EDGAR") at:  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 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 these risk factors:

Economic and political conditions ? the impact of worldwide economic conditions and sovereign debt crises in Europe; 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; and the impact of government disruptions such as a U.S. government shutdown.

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; drilling permits for and regulation of the shelf and the deepwater drilling; excess productive capacity; crude and product inventories; LNG supply and demand; seasonal and other adverse weather conditions that affect the demand for energy; severe weather conditions, such as tornadoes and 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 petroleum-producing or consuming regions; labor disruptions, civil unrest or security conditions where we operate; expropriation of assets by governmental action; cybersecurity risks and cyber incidents or attacks.

Price, market share, contract terms, and customer payments ? our ability to obtain market prices for our products and services; 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, to 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, availability, distribution and delivery of sufficient raw materials and components (especially steel alloys, chromium, copper, carbide, lead, nickel, titanium, beryllium, barite, synthetic and natural diamonds, sand, gel, 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; 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; 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; our ability to maintain information security.

Litigation and changes in laws or regulatory conditions ? the potential for unexpected litigation or proceedings and our ability to obtain adequate insurance on commercially reasonable terms; the legislative, regulatory and business environment in the U.S. 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; laws, regulations or restrictions on hydraulic fracturing; any restrictions on new or ongoing offshore drilling or permit and operational delays or program reductions as a result of the regulations in the Gulf of Mexico and other areas of the world; changes in export control laws or exchange control laws; the discovery of new environmental remediation sites; changes in environmental regulations; the discharge of hazardous materials or hydrocarbons into the environment; restrictions on doing business in countries subject to sanctions; customs clearance procedures; 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.

Baker Hughes is a leading supplier of oilfield services, products, technology and systems to the worldwide oil and natural gas industry.  The Company's 60,000-plus employees today work in more than 80 countries helping customers find, evaluate, drill, produce, transport and process hydrocarbon resources.  For more information on Baker Hughes' century-long history, visit: www.bakerhughes.com.

Investor Contacts:Trey Clark, +1.713.439.8039, trey.clark@bakerhughes.comEric Holcomb, +1.713.439.8822, eric.s.holcomb@bakerhughes.com

Media Contact:Christine Mathers, +1.713.439.8738, christine.mathers@bakerhughes.com

SOURCE Baker Hughes Incorporated

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