Baker Hughes Announces Second Quarter Results

                Baker Hughes Announces Second Quarter Results

- Record revenue of $5.9 billion for the quarter, up 8% year over year

- Adjusted profit before tax from operations of $778 million, up 15%
sequentially

- Repurchase of $200 million of shares during the quarter

PR Newswire

HOUSTON, July 17, 2014

HOUSTON, July17, 2014 /PRNewswire/ --Baker Hughes Incorporated (NYSE: BHI)
announced today results for the second quarter of 2014 are as follows:

                                                 Q2 2014   Q2 2013   Q1 2014
Revenue (millions)                               $ 5,935   $ 5,487   $ 5,731
Adjusted net income (non-GAAP, millions)         404       240       369
Net income (GAAP, millions)                      353       240       328
Adjusted net income per diluted share (non-GAAP) 0.92      0.54      0.84
Net income per diluted share (GAAP)              0.80      0.54      0.74

Adjusted net income for the second quarter of 2014 excludes $62 million in
before-tax charges ($39 million after-tax) relating to litigation settlements
for labor claims ($0.09 per diluted share) and $12 million before and
after-tax costs ($0.03 per diluted share) associated with a foreign exchange
loss related to the Venezuela currency devaluation. Please see Table 1 for a
reconciliation of GAAP to non-GAAP financial measures for this quarter, as
well as for the first quarter of 2014. There were no identified items
requiring adjustment for the second quarter of 2013.

"This quarter we delivered record revenue and a 15% sequential increase in
adjusted profit from operations," said Martin Craighead, Baker Hughes Chairman
and Chief Executive Officer. "Our results reflect improved execution and the
rapid deployment of innovative new products and services around the world.

"In North America, newly introduced well construction and production
technologies, such as the Kymera™ hybrid drill bit and ProductionWave™
production solution, are seeing unprecedented demand resulting in record
revenue in our drilling services, drill bits, upstream chemicals, and
artificial lift product lines. The rising sales of these products, along with
an increase in onshore and offshore activity in the United States, more than
offset the seasonal decline in our Canadian business.

"Internationally, we are leveraging new logging-while-drilling and wireline
technologies to gain share within several critical offshore markets, including
the United Kingdom, West Africa, and Australia. In the onshore markets, we are
entering the early stages of global shale development. Products and services
we recently introduced to improve the economics of North America shale
production, are now finding new homes in the Middle East, Argentina, North
Africa, Russia, and China.

"Around the world, the fundamentals of our business continue to strengthen. We
anticipate increased activity for the remainder of the year in the form of
higher international rig counts, and increased North American well counts. As
a result, we project strong earnings growth as we fulfill the industry's
growing need for innovative new technologies."

Share repurchases amounted to $200 million or 2.9 million shares for the
second quarter of 2014, which results in a remaining amount of $1.25 billion
under the current authorization.

Total dividend payments were $65 million in the second quarter of 2014. In May
2014, the Board of Directors approved a 13% increase in the quarterly cash
dividend for the third quarter of 2014.

The effective tax rate on net income for the second quarter of 2014 increased
to 37.2%, primarily attributed to the geographic mix of earnings.

Capital expenditures were $424 million in the second quarter of 2014, compared
to the depreciation and amortization expense of $454 million.

Adjusted EBITDA (a non-GAAP measure) in the second quarter of 2014 was $1,159
million, an increase of $112 million compared to the first quarter of 2014 and
an increase of $299 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.

Consolidated Condensed Statements of Income

                                                 Three Months Ended
                                                 June 30,            March 31,
(Inmillions, except per share amounts)          2014      2013      2014
Revenue                                          $ 5,935   $ 5,487   $  5,731
Costs and expenses:
Cost of revenue                                  4,745     4,591     4,720
Research and engineering                         159       131       143
Marketing, general and administrative            338       329       316
Litigation settlements                           62        —         —
Total costs and expenses                         5,304     5,051     5,179
Operating income                                 631       436       552
Interest expense, net                            (59)      (60)      (57)
Income before income taxes                       572       376       495
Income taxes                                     (213)     (131)     (159)
Net income                                       359       245       336
Net income attributable to noncontrolling        (6)       (5)       (8)
interests
Net income attributable to Baker Hughes          $ 353     $ 240     $  328
Basic earnings per share attributable to Baker   $ 0.81    $ 0.54    $  0.75
Hughes
Diluted earnings per share attributable to Baker $ 0.80    $ 0.54    $  0.74
Hughes
Weighted average shares outstanding, basic       437       443       439
Weighted average shares outstanding, diluted     440       444       441
Depreciation and amortization expense            $ 454     $ 424     $  437
Capital expenditures                             $ 424     $ 551     $  439



Consolidated Condensed Statements of Income

                                                     Six Months Ended June 30,
(Inmillions, except per share amounts)              2014           2013
Revenue                                              $  11,666      $  10,717
Costs and expenses:
Cost of revenue                                      9,465          8,917
Research and engineering                             302            258
Marketing, general and administrative                654            651
Litigation settlements                               62             —
Total costs and expenses                             10,483         9,826
Operating income                                     1,183          891
Interest expense, net                                (116)          (115)
Income before income taxes                           1,067          776
Income taxes                                         (372)          (263)
Net income                                           695            513
Net income attributable to noncontrolling interests  (14)           (6)
Net income attributable to Baker Hughes              $  681         $  507
Basic earnings per share attributable to Baker       $  1.56        $  1.14
Hughes
Diluted earnings per share attributable to Baker     $  1.55        $  1.14
Hughes
Weighted average shares outstanding, basic           438            443
Weighted average shares outstanding, diluted         440            444
Depreciation and amortization expense                $  891         $  839
Capital expenditures                                 $  863         $  1,041



Consolidated Condensed Balance Sheets

                                                       June 30,   December 31,
(In millions)                                          2014       2013
ASSETS
Current Assets:
Cash and cash equivalents                              $ 1,163    $  1,399
Accounts receivable - less allowance for doubtful      5,361      5,138
accounts (2014 - $215, 2013 - $238)
Inventories, net                                       4,075      3,884
Other current assets                                   948        874
Total current assets                                   11,547     11,295
Property, plant and equipment, net                     9,087      9,076
Goodwill                                               5,999      5,966
Intangible assets, net                                 836        883
Other assets                                           808        714
Total assets                                           $ 28,277   $  27,934
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable                                       $ 2,536    $  2,574
Short-term debt and current portion of long-term debt  657        499
Accrued employee compensation                          569        778
Other accrued liabilities                              833        727
Total current liabilities                              4,595      4,578
Long-term debt                                         3,900      3,882
Deferred income taxes and other tax liabilities        773        821
Long-term liabilities                                  758        741
Equity                                                 18,251     17,912
Total liabilities and equity                           $ 28,277   $  27,934



Consolidated Condensed Statements of Cash Flows

                                                     Six Months Ended June 30,
(In millions)                                        2014          2013
Cash flows from operating activities:
Net income                                           $  695        $  513
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization                        891           839
Other, primarily working capital                     (890)         (274)
Net cash flows provided by operating activities      696           1,078
Cash flows from investing activities:
Expenditures for capital assets                      (863)         (1,041)
Proceeds from disposal of assets                     203           183
Other                                                (26)          (4)
Net cash flows used in investing activities          (686)         (862)
Cash flows from financing activities:
Net proceeds from issuance of debt                   178           —
Repurchase of common stock                           (400)         —
Dividends                                            (131)         (132)
Other                                                108           29
Net cash flows used in financing activities          (245)         (103)
Effect of foreign exchange rate changes on cash and  (1)           (5)
cash equivalents
(Decrease) increase in cash and cash equivalents     (236)         108
Cash and cash equivalents, beginning of period       1,399         1,015
Cash and cash equivalents, end of period             $  1,163      $  1,123



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 income^1 (a
non-GAAP financial measure). This excludes identified items with respect to
the second quarter of 2014 and the first quarter of 2014. There were no
identified items requiring adjustment for the second quarter of 2013.

                                 Three Months Ended
                                 June 30,           March 31,
                                 2014               2014
                                         Diluted
(Inmillions, except per share   Net                Net     Diluted
amounts)                                 Earnings   Income  Earnings PerShare
                                 Income
                                         PerShare
Net income attributable to Baker $ 353   $  0.80    $ 328   $     0.74
Hughes (GAAP)
Identified item:
Severance charges^2              —       —          21      0.05
 Technology royalty        —       —          20      0.05
agreement^3
 Litigation settlements^4  39      0.09       —       —
 Venezuela currency        12      0.03       —       —
devaluation^5
Adjusted net income (non-GAAP)^1 $ 404   $  0.92    $ 369   $     0.84



   Adjusted net income is a non-GAAP measure comprised of net income
   attributable to Baker Hughes excluding the impact of certain identified
1  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 charges of $29 million before-tax ($21 million after-tax) were
   incurred in North America during the first quarter of 2014.
3  Costs related to a technology royalty agreement of $29 million before-tax
   ($20 million after-tax) were incurred during the first quarter of 2014.
   Costs related to litigation settlements for labor claims of $62 million
4  before-tax ($39 million after-tax) were recorded during the second quarter
   of 2014.
   Foreign exchange loss of $12 million before and after-tax in Venezuela was
   recorded in the second quarter of 2014 as a result of changing from the
5  official exchange rate of 6.3 Bolivars Fuertes per U.S. Dollar to the SICAD
   2 rate of approximately 50 Bolivars Fuertes per U.S. Dollar. The SICAD 2
   rate is most representative of the economics in which we operate.



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

                                                   Three Months Ended
                                                   June 30,          March 31,
(In millions)                                      2014      2013    2014
Net income attributable to Baker Hughes            $ 353     $ 240   $  328
Net income attributable to noncontrolling          6         5       8
interests
Income taxes                                       213       131     159
Income before income taxes                         572       376     495
Interest expense, net                              59        60      57
Earnings before interest and taxes (EBIT)          631       436     552
Depreciation and amortization expense              454       424     437
Earnings before interest, taxes, depreciation and  1,085     860     989
amortization (EBITDA)
Adjustments to EBITDA:
Severance charges^2                                —         —       29
Technology royalty agreement^3                     —         —       29
Venezuela currency devaluation^4                   12        —       —
Litigation settlements^5                           62        —       —
Adjusted EBITDA                                    $ 1,159   $ 860   $  1,047



                                                     Six Months Ended June 30,
(In millions)                                        2014          2013
Net income attributable to Baker Hughes              $  681        $  507
Net income attributable to noncontrolling interests  14            6
Income taxes                                         372           263
Income before income taxes                           1,067         776
Interest expense, net                                116           115
Earnings before interest and taxes (EBIT)            1,183         891
Depreciation and amortization expense                891           839
Earnings before interest, taxes, depreciation and    2,074         1,730
amortization (EBITDA)
Adjustments to EBITDA:
Severance charges^2                                  29            —
Technology royalty agreement^3                       29            —
Venezuela currency devaluation^4                   12            23
Litigation settlements^5                             62            —
Adjusted EBITDA                                      $  2,206      $  1,753



   EBIT, EBITDA, and Adjusted EBITDA (as defined in the calculations above)
   are non-GAAP measures. Management is providing these measures because it
1  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 charges of $29 million before-tax ($21 million after-tax) were
   incurred in North America during the first quarter of 2014.
3  Costs related to a technology royalty agreement of $29 million before-tax
   ($20 million after-tax) were incurred during the first quarter of 2014.
   Foreign exchange loss of $12 million before and after-tax in Venezuela was
   recorded in the second quarter of 2014 as a result of changing from the
   official exchange rate of 6.3 Bolivars Fuertes per U.S. Dollar to the SICAD
   2 rate of approximately 50 Bolivars Fuertes per U.S. Dollar. The SICAD 2
4  rate is most representative of the economics in which we operate. Also,
   reflected is a loss of $23 million before and after-tax 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.
   Costs related to litigation settlements for labor claims of $62 million
5  before-tax ($39 million after-tax) were recorded during the second quarter
   of 2014.



Table 3a: Segment Revenue, Profit Before Tax, and Profit Before Tax Margin^1

                                      Three Months Ended
                                      June 30,              March 31,
(In millions)                         2014       2013       2014
Segment Revenue
North America                         $ 2,843    $ 2,677    $ 2,776
Latin America                         544        557        530
Europe/Africa/Russia Caspian          1,066      966        996
Middle East/Asia Pacific              1,149      971        1,108
Industrial Services                   333        316        321
Total Operations                      $ 5,935    $ 5,487    $ 5,731
Profit Before Tax
North America                         $ 340      $ 211      $ 258
Latin America                         46         (18)       55
Europe/Africa/Russia Caspian          178        151        142
Middle East/Asia Pacific              168        115        135
Industrial Services                   34         39         27
Total Operations                      $ 766      $ 498      $ 617
Corporate and Other Profit Before Tax
Corporate and other                   (73)       (62)       (65)
Interest expense, net                 (59)       (60)       (57)
Litigation settlements                (62)       —          —
Corporate, net interest and other     (194)      (122)      (122)
Profit Before Tax                     $ 572      $ 376      $ 495
Profit Before Tax Margin^1
North America                         12      %  8       %  9       %
Latin America                         8       %  (3)     %  10      %
Europe/Africa/Russia Caspian          17      %  16      %  14      %
Middle East/Asia Pacific              15      %  12      %  12      %
Industrial Services                   10      %  12      %  8       %
Total Operations                      13      %  9       %  11      %



   Profit before tax margin is a non-GAAP measure defined as profit before tax
   ("income before income taxes") divided by revenue. Management uses the
1  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 Margin^1

                                      Six Months Ended June 30,
(In millions)                         2014           2013
Segment Revenue
North America                         $  5,619       $ 5,280
Latin America                         1,074          1,147
Europe/Africa/Russia Caspian          2,062          1,820
Middle East/Asia Pacific              2,257          1,865
Industrial Services                   654            605
Total Operations                      $  11,666      $ 10,717
Profit Before Tax
North America                         $  598         $ 446
Latin America                         101            31
Europe/Africa/Russia Caspian          320            244
Middle East/Asia Pacific              303            231
Industrial Services                   61             63
Total Operations                      $  1,383       $ 1,015
Corporate and Other Profit Before Tax
Corporate and other                   (138)          (124)
Interest expense, net                 (116)          (115)
Litigation settlements                (62)           —
Corporate, net interest and other     (316)          (239)
Profit Before Tax                     $  1,067       $ 776
Profit Before Tax Margin^1
North America                         11         %   8        %
Latin America                         9          %   3        %
Europe/Africa/Russia Caspian          16         %   13       %
Middle East/Asia Pacific              13         %   12       %
Industrial Services                   9          %   10       %
Total Operations                      12         %   9        %



   Profit before tax margin is a non-GAAP measure defined as profit before tax
   ("income before income taxes") divided by revenue. Management uses the
1  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 Tax^1

                                           Three Months Ended
                                           June 30,  March 31,
(In millions)                              2014^3    2014^2
Adjustments to Operating Profit Before Tax
North America                              $  —      $   42
Latin America                              12        3
Europe/Africa/Russia Caspian               —         6
Middle East/Asia Pacific                   —         6
Industrial Services                        —         1
Total Operations                           $  12     $   58



                                           Six Months Ended June 30,
(In millions)                              2014^2,3       2013^3
Adjustments to Operating Profit Before Tax
North America                              $    42        $   —
Latin America                              15             23
Europe/Africa/Russia Caspian               6              —
Middle East/Asia Pacific                   6              —
Industrial Services                        1              —
Total Operations                           $    70        $   23



1  There were no identified adjustments in the second quarter of 2013.
   Severance charges of $29 million before-tax in North America and costs
   related to a technology royalty agreement of $29 million before-tax were
2  incurred during the first quarter of 2014. The costs associated with the
   technology royalty agreement pertain to our global operations and have
   therefore been allocated to all segments.
   Foreign exchange loss of $12 million before and after-tax in Venezuela was
   recorded in the second quarter of 2014 as a result of changing from the
   official exchange rate of 6.3 Bolivars Fuertes per U.S. Dollar to the SICAD
   2 rate of approximately 50 Bolivars Fuertes per U.S. Dollar. The SICAD 2
3  rate is most representative of the economics in which we operate. Also,
   reflected is a loss of $23 million before and after-tax 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.



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 a foreign exchange loss in
Venezuela recorded in the second quarter of 2014, as well as, severance
charges in North America and costs related to a technology royalty agreement
recorded in the first quarter of 2014 (see Table 4).

                                     Three Months Ended
                                     June 30,              March 31,
(In millions)                        2014       2013       2014
Segment Revenue
North America                        $ 2,843    $ 2,677    $ 2,776
Latin America                        544        557        530
Europe/Africa/Russia Caspian         1,066      966        996
Middle East/Asia Pacific             1,149      971        1,108
Industrial Services                  333        316        321
Total Operations                     $ 5,935    $ 5,487    $ 5,731
Operating Profit Before Tax^1
North America                        $ 340      $ 211      $ 300
Latin America                        58         (18)       58
Europe/Africa/Russia Caspian         178        151        148
Middle East/Asia Pacific             168        115        141
Industrial Services                  34         39         28
Total Operations                     $ 778      $ 498      $ 675
Operating Profit Before Tax Margin^1
North America                        12      %  8       %  11      %
Latin America                        11      %  (3)     %  11      %
Europe/Africa/Russia Caspian         17      %  16      %  15      %
Middle East/Asia Pacific             15      %  12      %  13      %
Industrial Services                  10      %  12      %  9       %
Total Operations                     13      %  9       %  12      %



   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
1  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.



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 a foreign exchange loss in
Venezuela, severance charges in North America and costs related to a
technology royalty agreement recorded in the first six months of 2014, and the
charge for the devaluation of the Venezuelan currency recorded in the first
six months of 2013 (see Table 4).

                                     Six Months Ended June 30,
(In millions)                        2014           2013
Segment Revenue
North America                        $  5,619       $ 5,280
Latin America                        1,074          1,147
Europe/Africa/Russia Caspian         2,062          1,820
Middle East/Asia Pacific             2,257          1,865
Industrial Services                  654            605
Total Operations                     $  11,666      $ 10,717
Operating Profit Before Tax^1
North America                        $  640         $ 446
Latin America                        116            54
Europe/Africa/Russia Caspian         326            244
Middle East/Asia Pacific             309            231
Industrial Services                  62             63
Total Operations                     $  1,453       $ 1,038
Operating Profit Before Tax Margin^1
North America                        11         %   8        %
Latin America                        11         %   5        %
Europe/Africa/Russia Caspian         16         %   13       %
Middle East/Asia Pacific             14         %   12       %
Industrial Services                  9          %   10       %
Total Operations                     12         %   10       %



   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
1  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.

Innovations to Earnings

The following section provides operational and technical highlights outlining
the successes aligned to our strategy.

Efficient Well Construction

Baker Hughes continues to see a strong demand for FASTrak™
logging-while-drilling (LWD) fluid analysis and testing service, the
industry's first commercial service capable of retrieving fluid samples during
the drilling process. Since its introduction to the market, the FASTrak LWD
service has been deployed in more than 50 critical deepwater projects. During
the second quarter, the FASTrak service was used in one project in Nigeria to
take more than 100 pressure tests and 10 fluid samples in a single run for an
independent operator. The service was also successfully deployed in the
United Arab Emirates, Trinidad, North Sea, and the Gulf of Mexico.

The AutoTrak Curve™ rotary steerable system drills more than one mile on a
well in a single day. A service value combination of the AutoTrak Curve
system with the NEXT-DRILL™ drilling fluid system and HCC AT505 drill bit
technology safely drilled more than 5,870 ft (1789 m) in one day while
maintaining 100% reservoir contact. During the quarter, the AutoTrak Curve
system also surpassed 12.5 million cumulative feet drilled in the United
States, and is now being deployed in Canada, Egypt, Kuwait, Saudi Arabia, and
China.

Baker Hughes increases deepwater market share in West Africa. In Angola and
Nigeria, Baker Hughes was awarded several, multiyear contracts to provide
directional drilling, measurement-while-drilling, LWD, drill bits, and under
reamers to deepwater operators.

Baker Hughes stimulation service grows in deepwater Brazil. During the
quarter, Baker Hughes was awarded a two-year contract to provide gravel pack
and acidizing services using a new, modular stimulation unit installed on a
platform supply vessel. Also in Brazil during the quarter, Baker Hughes
delivered its first 2⅛-in. TeleCoil™ intelligent coiled tubing services in the
world. The technology is designed to efficiently service wells with
small-diameter completions and was used to deliver zonal isolation, well
stimulation, and production logging services simultaneously.

Optimizing Well Production

Baker Hughes takes the next step in redefining production potential from
shale. During the quarter, FLEXPump™ Curve was successfully field tested.
This product is the world's first artificial lift system engineered to be
deployed below the tight bend angles that are common in shale wells, and set
in the horizontal section at the maximum depth possible. By placing the pump
deeper in the well, maximum drawdown rates are achieved, resulting in higher
production rates. FLEXPump Curve is scheduled for launch in the third quarter.

Baker Hughes reshapes the possibilities of well construction with
SHADOW™series frac plugs. On one project last quarter, a customer used the
SHADOW plug technology to completely redesign their wellbore. Several SHADOW
plugs were deployed, with the deepest plug set at more than 25,000 ft (7620 m)
measured depth, on a horizontal well stepping out nearly 15,000 ft (4572 m).
This trajectory surpasses the range of coil tubing. The SHADOW plug
technology enables our customers to construct wellbores and access reserves
that would not have been possible with conventional completions technology.
Based on growing sales across every United States geomarket, we have expanded
the commercialization of the SHADOW plug internationally, with our first
deliveries scheduled for Russia and China.

In China, Baker Hughes successfully installs an advanced downhole, oil/water
separation solution in an offshore, high water-cut oilfield scenario.
Following a study by our Reservoir Development Services (RDS) group to
identify an injection zone, a multidiscipline engineering team designed an
integrated system that combines completions tools, electrical submersible
pumping systems, and upstream chemicals. Within five days of installation,
the well was producing 4,000 barrels of oil per day on the surface and
injecting 14,000 barrels of water per day downhole.

Rapid adoption of the ProductionWave™ production solution is exceeding
expectations and continues to drive North America results. The ProductionWave
solution sales have surpassed 1,000 installations since its commercial launch
late last year including working systems now producing in virtually every
North American oil basin. During the quarter, several significant
enhancements have been added to the ProductionWaveplatform. The
FLEXPump-ER™was launched during the quarter and is capable of handling
production rates from 3,000 barrels per day down to a level as low as 50
barrels per day with a single pump. This innovation prevents the need to
install different pump types over the life of a typical shale well.

Baker Hughes secures a pilot project in the legendary Bazhenov basin in
Russia. Baker Hughes has extended its unconventional reach internationally
with an integrated work award in the Bazhenov shale basin in Western Siberia.
On this project, Baker Hughes will deliver completions, wireline logging, plug
and perf operations, geoscience, petrophysics, and RDS as the operator
evaluates the potential of this play.

Increasing Ultimate Recovery

In Saudi Arabia, Baker Hughes delivers a game changing, all-electric
intelligent well system, enabling controlled production of eight different
zones simultaneously. The completions design includes three cased-hole
laterals isolated by feed-through packers, and an open-hole main-bore,
segregated into five zones by swelling-elastomer feed-through packers.
Numerous downhole sensors were deployed throughout the tubing and the annulus
to allow real-time monitoring of production performance. Active flow control
devices installed in each zone are actuated remotely to restrict production in
high-water cut zones, increasing production from hydrocarbon rich zones and
enabling greater recovery over the life of the well. The entire network of
flow control devices is deployed and operated using one single electric
control line, as opposed to traditional systems requiring multiple hydraulic
control lines. This significantly simplifies the installation process,
improves system reliability, and enables highly accurate remote control, not
possible before.

Leading in Sustainability

Baker Hughes recognized for efforts in corporate social responsibility.
During the quarter,Baker Hughes achieved the highest rating for any public
company in the energy sector in Newsweek's 2014 Green Rankings, placing #11
among the 500 largest United States companies.

Baker Hughes announces BrineCare™, its newest environmentally friendly
fracturing fluid system. The BrineCaresystem is transforming waste streams
into cost-saving alternatives to fresh water systems by enabling operators to
use untreated, produced, or brackish water-based fluids in frac applications.
The fluids are compatible with total dissolved solids, to create effective
fracturing fluids and reduce the consumption of potable water without
sacrificing performance. Recent deployments of the BrineCare system in New
Mexico's Delaware Basin have proven successful with production rates
comparable to using fresh water fracturing fluids.

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 8:30a.m. Eastern time, 7:30a.m.
Central time on Thursday, July17, 2014, 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 Thursday, July 31, 2014. 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: 37166275. 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 Section27A of the Securities
Act of 1933, as amended, and Section21E 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 December31, 2013; Baker Hughes' subsequent quarterly report on Form
10-Q for the quarterly period ended March 31, 2014; 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/investoror through the SEC's Electronic Data Gathering
and Analysis Retrieval ("EDGAR") system 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; 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. In addition, market conditions, such as the trading prices for our
stock, as well as the terms of any stock purchase plans may impact stock
repurchases. At our discretion, we may engage in or discontinue stock
repurchases at any time.

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
59,000-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, visit: www.bakerhughes.com.

Investor Contacts:
Trey Clark, +1.713.439.8039, trey.clark@bakerhughes.com
Alondra Oteyza, +1.713.439.8822, alondra.oteyza@bakerhughes.com

Media Contact:
Melanie Kania, +1.713.439.8303, melanie.kania@bakerhughes.com 

SOURCE Baker Hughes Incorporated

Website: http://www.bakerhughes.com
 
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