Baker Hughes Incorporated

Company Profile

Publication Date: 14 Oct 2011

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Baker Hughes Incorporated

TABLE OF CONTENTS

Company Overview..............................................................................................4

Key Facts...............................................................................................................4

Business Description...........................................................................................5

History...................................................................................................................8

Key Employees...................................................................................................12

Key Employee Biographies................................................................................13

Major Products and Services............................................................................20

Revenue Analysis...............................................................................................22

SWOT Analysis...................................................................................................23

Top Competitors.................................................................................................28

Company View.....................................................................................................29

Locations and Subsidiaries...............................................................................35

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Baker Hughes IncorporatedTABLE OF CONTENTS

COMPANY OVERVIEW

Baker Hughes is a supplier of wellbore related products and technology services and systems tothe oil and natural gas industry. The company operates in North America, Latin America, Europe,Africa, Russia, Middle East, Asia Pacific, and the Caspian region. It is headquartered in Houston,Texas and employs about 53,100 people.

The company recorded revenues of $14,414 million in the financial year ended December 2010(FY2010), an increase of 49.2% over FY2009. The operating profit of the company was $1,551million in FY2010, compared with an operating profit of $750 million in FY2009. The net profit was$812 million in FY2010, an increase of 92.9% over FY2009.

KEY FACTS

Baker Hughes IncorporatedHead Office2929 Allen ParkwaySuite 2100HoustonTexas 77019 2118USA

1 713 439 8600Phone

1 713 439 8699Fax

http://www.bakerhughes.comWeb Address

14,414.0Revenue / turnover(USD Mn)

DecemberFinancial Year End

53,100Employees

BHINew York Ticker

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Baker Hughes IncorporatedCompany Overview

BUSINESS DESCRIPTION

Baker Hughes is engaged in the oilfield services industry. The company is a supplier of wellborerelated products and technology services and systems to the oil and natural gas industry, includingproducts and technology services, including drilling, formation evaluation, completion, and productionand reservoir technology and consulting to the worldwide oil and natural gas industry. The companyoperates in more than 90 countries including the US, Germany, and the United Arab Emirates.

Baker Hughes operates through two businesses: oilfield operations (drilling and evaluation; andcompletion and production) and industrial services and other. The company reports revenues fromfive segments. Besides industrial services and others, four of these segments represent oilfieldoperations and their geographic organization.They include North America (combined results for theUS including Gulf of Mexico, Canada, and Trinidad); Latin America (combined results for Centraland South America including Mexico and excluding Trinidad); Europe/Africa/Russia Caspian (EARC)(combined results for Europe, Africa excluding Egypt, and Russia Caspian); and Middle East/AsiaPacific (MEAP) (combined results for Middle East including Egypt, and Asia Pacific).

In the oilfield services, the drilling and evaluation segment of Baker Hughes provides products andservices used to drill and evaluate oil and natural gas wells. The segment consists of drilling fluids,drill bits, directional drilling and drilling evaluation services, wireline formation evaluation andcompletion and production services, and reservoir technology and consulting services.The segmentincludes the following business units: Baker Hughes Drilling Fluids; Hughes Christensen; INTEQ;Baker Atlas; and reservoir technology and consulting group.

Baker Hughes Drilling Fluids is a provider of drilling fluids (mud), completion fluids (brines), andfluids environmental services (waste management).

Hughes Christensen primarily supplies Tricone drill bits and fixed-cutter polycrystalline diamondcompact (PDC) bits. It supplies them to the oil and natural gas industry worldwide to drill a highquality wellbore efficiently.

INTEQ is a supplier of drilling and evaluation services. These include directional drilling,measurement-while-drilling (MWD), and logging-while-drilling (LWD) services. Baker Hughes alsoprovides mud logging services, to monitor the interaction between the drilling fluid and the formationand perform laboratory analysis of drilling fluids and examinations of the drill cuttings to detect thepresence of hydrocarbons and identify the different geological layers penetrated by the drill bit.

Baker Atlas is a provider of wireline formation evaluation and wireline completion and productionservices for oil and natural gas wells. These services include using wireline instruments to evaluatewell integrity, perform mechanical intervention and perform cement evaluations.Wireline instrumentscan also be run in producing wells to perform production logging. Baker Hughes also providesperforating services, which involve puncturing a well’s steel casing and cement sheath with explosivecharges.

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Baker Hughes IncorporatedBusiness Description

Baker Hughes’ reservoir technology and consulting group business unit provides a range of servicesthat assist its customers in the evaluation, drilling, completion, and production of oil and gas reservoirs.Services include well planning, drilling optimization, formation evaluation and imaging, well placement,sand control completions and stimulation, and fracturing operations. The company, under thisbusiness unit, also provides consulting services to assist customers with operations management,exploration and field development, and reservoir management.

Baker Hughes’ completion and production segment provides products and services used in thecompletion and production phase of oil and natural gas wells. This includes several product lineswhich support wellbore construction and completion.This segment also provides specialty chemicalsfor the oilfield and refining markets, pipeline inspection and treatment services, and the design,manufacture, and repair of artificial lift systems. It also provides permanent monitoring and chemicalinjection systems, and integrated operations and project management services.

Baker Hughes is engaged in wellbore construction, cased-hole completions, sand control, andproviding wellbore intervention solutions. Wellbore construction products and services include linerhangers, multilateral completion systems, and expandable metal technology. Cased-hole completionsproducts and services include packers, flow control equipment, subsurface safety valves, andintelligent completions. Sand control equipment includes gravel pack tools, sand screens, andfracturing fluids. Wellbore intervention products and services protect producing assets. Wellboreintervention solutions offerings range from service tools and inflatable products to conventional andthrough-tubing fishing systems, casing exits, wellbore cleaning, and temporary abandonment.

Baker Hughes also provides specialty chemicals to the oil and gas industry. It also supplies specialtychemicals to several industries including refining, pipeline transportation, petrochemical, agricultural,and iron and steel manufacturing; and provide polymer-based products to a broad range of industrialand consumer markets.Through its pipeline management group, Baker Petrolite also offers productsand services for the pipeline transportation industry. It also provides oilfield chemical programs fordrilling, well stimulation, production, pipeline transportation and maintenance programs. The oilfieldchemical programs include emulsion breakers, corrosion inhibitors, and chemicals which inhibit theformation of paraffin, scale, and natural gas hydrates.

For the refining industry, Baker Hughes offers various process and water treatment programs, aswell as finished fuel additives. These programs include removal of salt from crude oil and to controlcorrosion in processing equipment. The company also provides chemical technology solutions toother industrial markets worldwide; including petrochemicals, fuel additives, plastics, imaging,adhesives, steel, and crop protection.

Baker Hughes offers various products and services for the pipeline transportation industry. It offerscustom turnkey cleaning programs that combine chemical treatments with brush and scraper toolsthat are pumped through the pipeline. Additional services allow pipelines to operate more safely.These include inspection and internal corrosion assessment technologies, which physically confirmthe structural integrity of the pipeline. In addition, PMG also identifies high risk segments of a pipelineto ensure proper mitigation programs are in place.

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Baker Hughes IncorporatedBusiness Description

Baker Hughes also manufacturers and supplies artificial lift systems including electrical submersiblepump systems (ESPs) and progressing cavity pump systems (PCPs). ESPs lift large quantities ofoil or oil and water from wells that do not flow under their own pressure. PCPs are a form of artificiallift comprised of a downhole progressing cavity pump powered by either a downhole electric motoror a rod turned by a motor on the surface.

The industrial services and others consist of Baker Hughes downstream chemicals; process andpipeline services; and stimulation chemicals. It also includes the reservoir technology and consultinggroup that provides consulting services and software products, including the Gaffney, Cline &Associates reservoir consulting services.

The company provides permanent monitoring systems and chemical automation systems. It alsoprovides electronic gauges including the engineering, application, and field services necessary tocomplete an installation of a permanent monitoring system. In addition, it also provides chemicalautomation systems for well treatment or production stimulation Chemical automation systemsremotely monitor chemical tank levels that are resident in producing field locations. This helps inensuring proper chemical injection through real-time monitoring.

The company offers integrated operations and manages projects on behalf of certain customersaround the world. Under project management contract, the company also assumes responsibilityfor certain risks related to a project.These assumed risks may include the performance of its productsand services, performance of products and services of third-party providers, or completion of theproject in accordance with specified technical parameters or in a specified timeframe.

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Baker Hughes IncorporatedBusiness Description

HISTORY

Baker Hughes in its present form was created as a result of a merger between two oil extractionequipment companies, Baker International and Hughes Tool. Baker International began in 1903 withthe introduction of an offset bit for cable tool drilling to enable casing wells in hard rock. Around thesame time, Hughes Tool was working on the roller cone bit, introduced in 1909.

During the 1930s, Baker International and Hughes Tool introduced anti-friction bearings, bullet gunperforating, and the Tricone drill bit. In the 1940s, the companies introduced the 24 channel seismicrecording system, the Model D permanent packer, and the neutron log. The two companies weremerged in 1987, to form Baker Hughes. The company merged its performance chemicals divisionwith Petrolite to form Baker Petrolite, in 1997. The company acquired Western Atlas, in 1998.

Baker Hughes signed a Memorandum of Understanding (MOU) with Schlumberger for the purposeof creating a seismic venture to be called Western GECO, in 2000. Baker Hughes entered into anagreement with OAO Sibneft in 2002 to provide well drilling and production products and servicesfor the Noyabrsk area of Western Siberia. In the same year, the company sold Eimco processequipment, a division of its process segment, to Groupe Laperriere and Verreault of Montreal,Canada.

In 2003, the company entered into a joint venture with Expro International Group to form a jointventure QuantX Wellbore Instrumentation, to serve the rapidly growing permanent in-well monitoringmarket. Further in that year, the company acquired Cornerstone Pipeline Inspection Group andmerged it with its pipeline management group.

In 2004, the company sold Bird machine to Andritz and Petreco International to Cooper CameronCorporation. In the same year, the company created Baker Hughes drilling fluids division, and soldmining tools division to Atlas Copco North America.

Baker Hughes acquired Zeroth Technology (Zertech), a privately-owned company based in Aberdeen,Scotland, in 2005. Zertech was the company which had developed and patented nonelastomer,expandable metal sealing element, used in well intervention applications.

In 2006, Baker Hughes acquired Nova Technology Corporation, a supplier of permanent monitoring,chemical injection systems, and multi-line services for deepwater and subsea oil and gas wellapplications. In the same year, the company sold 30% interest in WesternGeco for $2.4 billion toSchlumberger. Further in 2006, Baker Atlas, a division of Baker Hughes, acquiredOrenburgneftegeofizika (ONFG), a provider of wireline services in Russia, from TNK-BP.

In 2007, Centrilift, a division of the company, secured contracts with Talisman Energy (UK) andTalisman Energy Norge to provide electrical submersible pumping (ESP) systems required byTalisman in the North Sea. In the same year, Baker Hughes Drilling Fluids, a division of the company,

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Baker Hughes IncorporatedHistory

introduced the TERRA-MAX system, a water-based mud designed to address specific drillingobjectives with improved performance compared to conventional water base mud systems.

In 2008, Baker Oil Tools, a division of the company, completed the 100th worldwide installation ofits intelligent well system (IWS) at the Okume Complex, offshore Equatorial Guinea. In the sameyear, Baker Oil Tools installed a new rotating, self-aligning multilateral (RAM) system on Alaska'sNorth Slope. Subsequently, Baker Hughes acquired two reservoir consulting firms, namely, Gaffney,Cline & Associates (GCA) and GeoMechanics International (GMI).

Further in 2008, Baker entered into a reciprocal license agreement with ReedHycalog, a division ofNational Oilwell Varco (NOV), regarding outstanding patent infringement claims and counter-claims.As part of the agreement, the companies agreed to a cross license of the disputed technologies.NOV was a provider of equipment and components used in oil and gas drilling and productionoperations, oilfield services, and supply chain integration services to the upstream oil and gasindustry. In mid 2008, Baker Oil Tools installed more than two million feet of inflow control completionsystems to achieve successful production rates in horizontal wells in more than twenty oil and gasfields around the world.

Later in 2008, Baker Hughes INTEQ (a business unit of drilling and evaluation segment of BakerHughes) introduced its new aXcelerate High-Speed Telemetry service.This service offers high-speedmud-pulse and wired-pipe data transmission for logging while drilling (LWD) and measurement whiledrilling (MWD) applications. Towards the end of 2008, Baker Hughes Drilling Fluids expanded itsgeographic position into the northeast US market by purchasing the assets of North East MudServices Company (NEMSco, a supplier of drilling fluids and solids control equipment in the northeastUS) of Clarksburg, West Virginia.

In 2009, Baker Hughes announced a major expansion of its clear brine fluids infrastructure with thecompletion of full-service completion fluids plants in Fourchon, Louisiana and Galveston, Texas.Subsequently in 2009, Baker Hughes and BJ Services (a provider of pressure pumping and otheroilfield services for the petroleum industry) announced that their Boards of Directors had approveda definitive merger agreement, under which Baker Hughes would acquire BJ Services for $5.5 billion.

In 2009, Baker Hughes announced that it would open two facilities in Canada to serve operators inthe oil sands and other northern Canadian oil fields. The infrastructure expansion would include apurpose-built oilfield chemicals plant in Leduc and a multi-discipline operations center in FortMcMurray.

Further in 2009, Baker Hughes introduced Hughes Christensen Quantec Force line of polycrystallinediamond compact (PDC) bits, featuring newly engineered stabilization technology and next-generationcutters, to deliver higher penetration rates, increased footage, and reduced costs in a wide rangeof drilling environments.

In January 2010, Baker Hughes was awarded two-year extensions on two contracts in Norway forthe provision of drill bits, directional drilling, formation evaluation, and related services on 10 to 12rigs operating in multiple fields offshore Norway by Statoil. In February 2010, Baker Hughes signed

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Baker Hughes IncorporatedHistory

a two-year contract with Saudi Aramco for two fit-for-purpose underbalanced coiled tubing drillingpackages designed to re enter existing wells in the gas fields of southern Saudi Arabia.

In March 2010, Baker Hughes developed a multiphase flowmeter that combined downhole sensortechnology with neural network capabilities to provide real-time, affordable flow rate estimates fromwells produced with electrical submersible pumping (ESP) systems. In the same month, BakerHughes introduced WellLink Desktop, a secure system for automatic delivery of well data from thewellsite to the desktop. In April 2010, Baker Hughes completed the acquisition of BJ ServicesCompany.

In June 2010, Baker Hughes opened an eco-centre waste management facility in Peterhead, Scotland,providing the North Sea oil and gas industry with environmentally compliant waste processing servicesfrom the rigsite to final disposal. In the same month, Baker Hughes signed a two year strategicframework agreement with PetroChina Tarim Oilfield to supply multiple services in the Tarim oil fieldin northwest China. Further in June 2010, Baker Hughes acquired Siberia-based Oilpump Services(OPS), the second largest electrical submersible pumping (ESP) system service company in WesternSiberia.

In August 2010, Baker Hughes installed the world's first ultra-temperature electrical submersiblepumping (ESP) systems in steam assisted gravity drainage (SAGD) wells in the Canadian oil sands.In the same month, Baker Hughes acquired oilfield equipment and service supplier Tanroc.

Further in August 2010, Baker Hughes signed a three-year strategic alliance with Iraq’s South OilCompany (SOC) to provide technical services to SOC’s wireline logging department in Burj Esya,Basra south Iraq. Later in August 2010, Baker Hughes developed Baker Petrolite SULFIX 9610 andSULFIX 9614 asphalt additives to remove hydrogen sulfide from asphalt or bitumen products.

In October 2010, BJ Services, a Baker Hughes subsidiary, was awarded a contract by Woodside toprovide casing and tubing running services in Australia. Subsequently Baker Hughes was awardeda $137 million, eight-year contract extension from Repsol for the exclusive supply and maintenanceof electrical submersible pumping (ESP) systems in Ecuador’s Block 16 and Tivacuna productionareas. The project covers 200 wells in which Repsol required ESP systems to maximize production.

Further in October 2010, Baker Hughes was awarded a multimillion dollar integrated project for theBorgland Dolphin Consortium (BDC) in Norway. The contract covered an initial three-year periodfor a full exploration program on the Norwegian continental shelf encompassing 15 wells.

In April 2011, Oil and Natural Gas Corporation (ONGC) of India awarded Baker Hughes a five-yearcontract to provide drilling and evaluation services and to manage third-party services for the PlatinumExplorer drillship.

Baker Hughes completed its first unconventional hydrocarbon shale hydraulic fracturing andstimulation project in Argentina for YPF in the Neuquen basin in July 2011.

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Baker Hughes IncorporatedHistory

In September 2011, Baker Hughes entered into an agreement to acquire a minority equity stake inVerdande Energy, a subsidiary of Verdande Technology, and will become a user of VerdandeTechnology's case-based reasoning (CBR) software platform for oil and gas applications.

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Baker Hughes IncorporatedHistory

KEY EMPLOYEES

CompensationBoardJob TitleName

9443963 USDExecutive BoardChairman and Chief ExecutiveOfficer

Chad C Deaton

4133385 USDExecutive BoardPresident and Chief OperatingOfficer

Martin S Craighead

257263 USDNon Executive BoardDirectorLarry D Brady

262867 USDNon Executive BoardDirectorClarence P Cazalot, Jr.

269763 USDNon Executive BoardDirectorAnthony G Fernandes

252909 USDNon Executive BoardDirectorClaire W Gargalli

254763 USDNon Executive BoardDirectorPierre H Jungels

266659 USDNon Executive BoardDirectorJames A Lash

249763 USDNon Executive BoardDirectorJ Larry Nichols

272867 USDNon Executive BoardDirectorH John Riley, Jr

254763 USDNon Executive BoardDirectorCharles L Watson

90130 USDNon Executive BoardDirectorJames W Stewart

Senior ManagementPresident, US LandPaul S Butero

Senior ManagementVice President, Global SalesGary Rich

Senior ManagementPresident, Gulf of MexicoRichard L Williams

Senior ManagementVice President, CorporateDevelopment

David Emerson

3680420 USDSenior ManagementSenior Vice President and ChiefFinancial Officer

Peter A Ragauss

2526795 USDSenior ManagementSenior Vice President and GeneralCounsel

Alan R Crain

Senior ManagementVice President and ControllerAlan J Keifer

Senior ManagementVice President and TreasurerJan Kees Van Gaalen

Senior ManagementVice President, Supply ChainArthur Soucy

Senior ManagementVice President and Chief InformationOfficer

Clifton Triplett

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Baker Hughes IncorporatedKey Employees

KEY EMPLOYEE BIOGRAPHIES

Chad C Deaton

Board: Executive BoardJob Title: Chairman and Chief Executive OfficerSince: 2004Age: 58

Mr. Deaton has been the Chairman and Chief Executive Officer at Baker Hughes since he joinedthe company in 2004. He also served as the President at Baker Hughes from 2004 to 2010. Priorto this, he served as the President, Director, and Chief Executive Officer at Hanover CompressorCompany from 2002 until 2004. Before that, he was with Schlumberger Oilfield Services for mostof his career from 1976 until 2001.

He is also a Director at Air Products and Chemicals and Ariel Corporation.; and a member of theSociety of Petroleum Engineers' Industrial Advisory Council. He also sits on the Boards at HoustonAchievement Place, Junior Achievement of Southeast Texas, and the Greater Houston Partnership.

Martin S Craighead

Board: Executive BoardJob Title: President and Chief Operating OfficerSince: 2010Age: 51

Mr. Craighead has been the President and the Chief Operating Officer at Baker Hughes since 2010.Prior to this role, he was the President of Drilling and Evaluation Group at Baker Hughes, a positionheld by him from 2007 to 2009. He previously served as the President at INTEQ since 2005. Hejoined the company in 1986 and has served Western Atlas and Baker Atlas in a number of operationalpositions, including assignments in Canada, Latin America, and Asia. He has also served as VicePresident of Worldwide Operations from 2003 to 2005; and as President at Baker Atlas since 2005.Before he joined the company, he was employed as a Research Engineer at BJ Services.

Larry D Brady

Board: Non Executive BoardJob Title: DirectorSince: 2004Age: 68

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Baker Hughes IncorporatedKey Employee Biographies

Mr. Brady has been a Non Executive Director at Baker Hughes since 2004. Before that, he was theChairman and Chief Executive Officer at Intermec (industrial technologies) from 2001 to 2007; andas its Chief Executive Officer from 2000 to 2007. He served as Intermec’s President from 1999 to2001; and as its Chief Operating Officer from 1999 to 2000. Before that, he served as the Presidentat FMC Corporation from 1993 to 1999; Vice President from 1984 to 1989; Executive Vice Presidentfrom 1989 to 1999; and was its Director from 1989 to 1999.

He is also a Director at Pactiv Corporation and a member of the Advisory Board at NorthwesternUniversity's Kellogg School of Management.

Clarence P Cazalot, Jr.

Board: Non Executive BoardJob Title: DirectorSince: 2002Age: 60

Mr. Cazalot has been a Non Executive Director at Baker Hughes since 2002. He is also the President,Chief Executive Officer, and Director at Marathon Oil Corporation (formerly known as USXCorporation). He served as the Vice Chairman at USX Corporation and President at Marathon OilCompany from 2000 to 2001. He is also a Director at and Executive Committee Member of both theUS Saudi Arabian Business Council and the American Petroleum Institute.

Anthony G Fernandes

Board: Non Executive BoardJob Title: DirectorSince: 2001Age: 65

Mr. Fernandes has been a Non Executive Director at Baker Hughes since 2001. He served as theChairman, President, and Chief Executive Officer at Phillip Services Corporation from 1999 to 2002.Prior to that, he was the Executive Vice President at ARCO's downstream operations from 1994 to1999; President at ARCO Coal, a subsidiary of ARCO, from 1990 to 1994; and Corporate Controllerat ARCO from 1987 to 1990. He also serves on the boards at ABM Industries, Black & Veatch, CytecIndustries and Tower Automotive.

Claire W Gargalli

Board: Non Executive BoardJob Title: DirectorSince: 1998Age: 68

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Baker Hughes IncorporatedKey Employee Biographies

Ms. Gargalli has been a Non Executive Director at Baker Hughes since 1998. She was the ViceChairman at Diversified Search and Diversified Health Search Companies from 1990 to 1998. Beforethat, she served as the President and Chief Operating Officer at Equimark from 1984 to 1990. Duringthat period, she also served as the Chairman and Chief Executive Officer at Equimark's two principalsubsidiaries, Equibank and Liberty Bank.

She is also a Director at Praxair, Intermec, and Virginia National Bank. She is also a Trustee Emeritusat Carnegie Mellon University and Middlebury College.

Pierre H Jungels

Board: Non Executive BoardJob Title: DirectorSince: 2006Age: 67

Dr. Jungels has been a Non Executive Director at Baker Hughes since 2006. He served as thePresident at the Institute of Petroleum until 2003. From 1997 through 2001, he served as a Directorand Chief Executive Officer at Enterprise Oil. In 1996, he served as the Managing Director ofExploration and Production at British Gas. He is also a Director at Woodside Petroleum and ImperialTobacco Group.

James A Lash

Board: Non Executive BoardJob Title: DirectorSince: 2002Age: 66

Mr. Lash has been a Non Executive Director at Baker Hughes since 2002. He is also the Chairmanat Manchester Principal, a high technology venture capital firm, since 1982. He is a former FirstSelectman, Greenwich, Connecticut from 2003 to 2007. He also served as the Chairman and ChiefExecutive Officer at Reading Tube Corporation from 1982 to 1996. He is also a Director at Ivy AnimalHealth and East West Institute. He is also a Trustee at the Massachusetts Institute of Technology.

J Larry Nichols

Board: Non Executive BoardJob Title: DirectorSince: 2001Age: 68

Mr. Nichols has been a Non Executive Director at Baker Hughes since 2001. He is also the Chairmanand Chief Executive Officer at Devon Energy Corporation. He has served as Chairman at Devon

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Baker Hughes IncorporatedKey Employee Biographies

Energy Corporation since 2000; as the Chief Executive Officer since 1980; and was its Presidentfrom 1976 until 2003. He is also a Director at SONIC Corp as well as several trade associationsrelevant to the oil and gas exploration and production business.

H John Riley, Jr

Board: Non Executive BoardJob Title: DirectorSince: 1997Age: 70

Mr. Riley has been a Non Executive Director at Baker Hughes since 1997. Previously, he was theChairman at Cooper Industries from 1996 to 2006. Before that he was Cooper Industries’ Presidentfrom 1992 to 2004; and its Chief Executive Officer from 1995 to 2005. He was Executive VicePresident of Operations at Cooper Industries from 1982 to 1992; and its Chief Operating Officerfrom 1992 to 1995.

He is also a Director at the Allstate Corporation, Westlake Chemical Corporation, and Post OakBank. He also serves as a Director at the National Association of Corporate Directors and a Trusteeat the Museum of Fine Arts, Junior Achievement of Southeast Texas and Syracuse University.

Charles L Watson

Board: Non Executive BoardJob Title: DirectorSince: 1998Age: 61

Mr. Watson has been a Non Executive Director at Baker Hughes since 1998. He is the Chairmanat Eagle Energy Partners since 2003, the Chairman at Wincrest Ventures since 1994, and theChairman at Collegiate Zone since 2004. He was a Managing Partner at Lehman Brothers from2007 to 2008. He served as the Chairman and Chief Executive Officer at Dynegy from 1989 to 2002.He was elected as the Chairman and Chief Executive Officer at NGC Corporation, the predecessorof Dynegy, in 1989.

He is also a board member at Mainstream Renewable Power, Shona Energy Partners, AngelenoInvestors and the Baylor College of Medicine.

James W Stewart

Board: Non Executive BoardJob Title: DirectorSince: 2010Age: 67

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Baker Hughes IncorporatedKey Employee Biographies

Mr. Stewart has been a Non Executive Director at Baker Hughes since 2010. He served as theChairman of the Board of Directors, President, and Chief Executive Officer at BJ Services Companyfrom 1990 to 2010. Prior to this, he held various management and staff positions at BJ ServicesCompany and its predecessor company.

Paul S Butero

Board: Senior ManagementJob Title: President, US LandSince: 2009

Mr. Butero has been the President of the US Land operations at Baker Hughes since 2009. Previously,he served as the President at INTEQ, Baker Atlas, and Hughes Christensen product lines. He joinedthe company in 1981 and has served 25 years in a number of operations roles in the US and theEastern Hemisphere before becoming the Vice President of Marketing at Hughes Christensen in2000.

Gary Rich

Board: Senior ManagementJob Title: Vice President, Global SalesSince: 2011

Mr. Rich has been the Vice President of Global Sales at Baker Hughes since July 2011. Prior tothat, he was the President of Europe from 2009 to June 2011. Previously, he served as the Presidentat Hughes Christensen Company since 2006. He has worked for the company for nineteen yearsin both INTEQ and Hughes Christensen, serving in several operations, marketing, and strategicroles.

Richard L Williams

Board: Senior ManagementJob Title: President, Gulf of MexicoSince: 2009

Mr. Williams has been the President of the Gulf of Mexico operations at Baker Hughes since 2009.Previously, he served as the President at Baker Hughes Drilling Fluids since 2005. During his nearly35 years with the company, he has been the Vice President of Operations at Baker Oil Tools andINTEQ.

David Emerson

Board: Senior Management

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Baker Hughes IncorporatedKey Employee Biographies

Job Title: Vice President, Corporate DevelopmentSince: 2001

Mr. Emerson has been the Vice President of Corporate Development at Baker Hughes since 2001.Prior to that, he was the Director of Business Development at Baker Hughes Oilfield Operationssince 1998. He joined Western Atlas in 1997 as Director of Corporate Development. Prior to joiningWestern Atlas, he held various positions at Halliburton Company from 1982 to 1997.

Peter A Ragauss

Board: Senior ManagementJob Title: Senior Vice President and Chief Financial OfficerSince: 2006Age: 53

Mr. Ragauss has been a Senior Vice President and the Chief Financial Officer at Baker Hughessince he joined the company in 2006. Before that, he served as Segment Controller of Refining andMarketing at BP in London. Earlier to that, he was the Chief Executive Officer at Air BP, and Assistantto the Group Chief Executive at BP. Prior to joining BP, he served as the Vice President of Financeand Portfolio Management at Amoco Energy International, Vice President of Finance at El PasoEnergy International, and Vice President of Corporate Development at Tenneco Energy.

Alan R Crain

Board: Senior ManagementJob Title: Senior Vice President and General CounselSince: 2007Age: 59

Mr. Crain has been a Senior Vice President and the General Counsel at Baker Hughes since 2007.He joined the company as the Vice President and General Counsel in 2000. He has served asExecutive Vice President, General Counsel, and Secretary at Crown Cork & Seal Company; and asVice President and General Counsel at Union Texas Petroleum. He has also held legal positions atPennzoil and El Paso Energy.

Alan J Keifer

Board: Senior ManagementJob Title: Vice President and ControllerSince: 1999Age: 56

Mr. Keifer has been a Vice President and the Controller at Baker Hughes since 1999. He joined thecompany in 1990 as the Director of Corporate Audit after working for several years at Ernst & Young.

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Baker Hughes IncorporatedKey Employee Biographies

Jan Kees Van Gaalen

Board: Senior ManagementJob Title: Vice President and TreasurerSince: 2008

Mr. Van Gaalen has been a Vice President and the Treasurer at Baker Hughes since 2008. Prior tothis he was the Chief Financial Officer and Vice President of Finance at PT Inco Tbk in Jakarta,Indonesia from 2004 to 2008. Before this he held various finance positions at Anglo American,Carlton Communications, and Schlumberger in France, the UK, Brazil, and South Africa.

Arthur Soucy

Board: Senior ManagementJob Title: Vice President, Supply ChainSince: 2009Age: 48

Mr. Soucy has been the Vice President of Supply Chain at Baker Hughes since 2009. Most recentlyhe served as the Vice President, Global Supply Chain at Pratt and Whitney, a company in the design,manufacture and service of aircraft engines, industrial gas turbines and space propulsion systems.Mr. Soucy held a variety of management positions across different business units since beginningwith Pratt and Whitney in 1995. From 1982 to 1995, he worked for Hamilton Standard, serving invarious manufacturing engineering and product development management roles.

Clifton Triplett

Board: Senior ManagementJob Title: Vice President and Chief Information OfficerSince: 2008Age: 52

Mr.Triplett has been a Vice President and the Chief Information Officer at Baker Hughes since 2008.He joined Baker Hughes from Motorola where he served as Vice President and Chief InformationOfficer for Network and Enterprise Group and most recently as Vice President, Global Services.Prior to that, he held a variety of IT leadership roles with General Motors, Allied Signal and EntergyServices.

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Baker Hughes IncorporatedKey Employee Biographies

MAJOR PRODUCTS AND SERVICES

Baker Hughes is a supplier of wellbore related products and technology services and systems to the oil and natural gas industry. The company's key products and services include the following:

Drilling and formation evaluation:

Integrated formation evaluation Directional drilling Drill bits Measurement while drilling Surface logging systems Drilling fluids systems Fluids environmental services Coring services Wireline logging Reservoir and petrophysical analysis

Completion services:

Flow control systemsPacker systems Completion fluids and services Fishing solutions Service tools Remedial systemsCompletion systems Perforating services Sand control Inflatable systems Safety systems Liner hangers Multilaterals/expandables

Baker Hughes solutions:

Baker Hughes integrated operationsDeepwater Geothermal Integrated formation evaluation Pipeline optimization and management Water management

Production management:

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Baker Hughes IncorporatedMajor Products and Services

Well MonitoringLow dosage hydrate inhibitors Thru-tubing intervention Workover services Electric submersible pumping (ESP) systems Production services Specialty chemical programs Oil/water separation and treatment systems Reservoir management Re-entry Pipeline services

Seismic acquisition and processing:

VSFusionDownhole seismic solutions (DSS)

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Baker Hughes IncorporatedMajor Products and Services

REVENUE ANALYSIS

Overview

Baker Hughes recorded revenues of $14,414 million during FY2010, an increase of 49.2% overFY2009. For FY2010, North America, the company's largest geographic market, accounted for 45.9%of the total revenues.

Baker Hughes generates revenues through five segments: North America, Europe/Africa/RussiaCaspian, Middle East/Asia Pacific, Latin America, and industrial services and others.

Revenue by geography

North America, Baker Hughes's largest geographical market, accounted for 45.9% of the totalrevenues in FY2010. Revenues from North America reached $6,621 million in FY2010, comparedwith revenues of $3,165 million in FY2009.

Europe/Africa/Russia Caspian accounted for 20.9% of the total revenues in FY2010. Revenues fromEurope/Africa/Russia Caspian reached $3,006 million in FY2010, an increase of 8.4% over FY2009.

Middle East/Asia Pacific accounted for 15.6% of the total revenues in FY2010. Revenues from MiddleEast/Asia Pacific reached $2,247 million in FY2010, an increase of 16% over FY2009. Latin Americaaccounted for 10.9% of the total revenues in FY2010. Revenues from Latin America reached $1,569million in FY2010, an increase of 43.4% over FY2009.

Industrial services and others accounted for 6.7% of the total revenues in FY2010. Revenues fromindustrial services and others reached $971 million in FY2010, an increase of 39.9% over FY2009.

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Baker Hughes IncorporatedRevenue Analysis

SWOT ANALYSIS

Baker Hughes is engaged in the oilfield services industry. The company is a supplier of wellborerelated products and technology services and systems to the oil and natural gas industry, includingproducts and services for drilling, formation evaluation, completion, and production of oil and naturalgas wells. The company has a wide product portfolio, which is its core strength and a keydifferentiating factor in the competitive oilfield services industry. Intense competition, however,threatens to erode the market share of the company.

WeaknessesStrengths

Settlement with DOJ and SECWide product portfolioStrong focus on research and developmentDiverse geographical presence

ThreatsOpportunities

Intense competitionAcquisition to expand operations in theRussian ESP market Risks associated with conducting business

outside the USMerger with BJ ServicesWeather conditionsPositive outlook for the global energy

equipment and services industry

Strengths

Wide product portfolio

Baker Hughes has a wide product portfolio catering to the worldwide oil and natural gas industry.The company manufactures and supplies drill bits and fixed-cutter polycrystalline diamond compact(PDC) bits. It supplies them to the oil and natural gas industry worldwide. Baker Hughes also suppliesdrilling and evaluation services which include directional drilling, measurement-while-drilling (MWD),and logging-while-drilling (LWD) services. The company provides wireline formation evaluation andwireline completion and production services for oil and natural gas wells.

Baker Hughes provides its services in wellbore construction, cased-hole completions, sand control,and wellbore intervention. Wellbore construction products and services include liner hangers,multilateral completion systems, and expandable metal technology. Cased-hole completions productsand services include packers, flow control equipment, subsurface safety valves, and intelligentcompletions. Sand control equipment includes gravel pack tools, sand screens, and fracturing fluids.Intervention solutions offerings range from service tools and inflatable products to conventional andthrough-tubing fishing systems, casing exits, wellbore cleaning, and temporary abandonment.

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Baker Hughes IncorporatedSWOT Analysis

The company provides specialty chemicals to the oil and gas industry. It also supplies specialtychemicals to several industries and provides polymer-based products to a range of industrial andconsumer markets. The company provides oilfield chemical programs for drilling, well stimulation,production, pipeline transportation, and maintenance programs. Baker Hughes also manufacturesand supplies electrical submersible pump systems (ESPs) and progressing cavity pump systems(PCPs). The company also provides permanent monitoring systems and chemical automationsystems.

The company's wide product portfolio is its core strength and a key differentiating factor in thecompetitive oilfield services industry.

Strong focus on research and development

The company has strong research and development (R&D) capability to promote market drivensolutions. Baker Hughes maintains a consistent and a strong focus on research to develop newproducts, processes, and services; and improve existing products and services, to design specializedproducts to meet specific customer needs and to enhance manufacturing and production methodsand improve service. It spent $429 million on R&D in FY2010. R&D costs increased 23% in FY2010compared to FY2009.

The company’s strong R&D capabilities have enabled Baker Hughes to develop new products. In2009, Baker Hughes introduced Hughes Christensen Quantec Force line of polycrystalline diamondcompact (PDC) bits, featuring newly engineered stabilization technology and next-generation cutters,to deliver higher penetration rates, increased footage, and reduced costs in a wide range of drillingenvironments. In March 2010, the company developed a multiphase flowmeter that combinesdownhole sensor technology with neural network capabilities to provide real-time, affordable flowrate estimates from wells produced with electrical submersible pumping (ESP) systems.

Further, in March 2010, it introduced WellLink Desktop, a secure system for automatic delivery ofwell data from the wellsite to the desktop. In addition, in August 2010, Baker Hughes developedBaker Petrolite SULFIX 9610 and SULFIX 9614 asphalt additives to remove hydrogen sulfide fromasphalt or bitumen products.

The company's strong R&D capability provides it with a competitive advantage and helps the companyto develop market leading technologies to meet the future needs of its customers.

Diverse geographical presence

Baker Hughes has wide geographical presence. The company’s global operations are organizedinto a number of geomarket organizations spread across various locations including Canada, theUS, Latin America, Brazil, the UK, Mainland Europe, Russia, United Arab Emirates, and Asia Pacificregions. Further, the company has manufacturing operations in various countries, including, the US(Texas, Oklahoma, and Louisiana), the UK (Scotland and Northern Ireland), Germany (Celle), SouthAmerica (Venezuela and Argentina), and the UAE (Dubai).

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Baker Hughes IncorporatedSWOT Analysis

In addition, Baker Hughes generates its revenue from well spread locations. For FY2010, the NorthAmerica accounted 45.9% of the total revenues, Europe, Africa, Russia, and the Caspian regionaccounted for 20.9%, Middle East and Asia Pacific 15.6%, and Latin America 10.9%.

The company's wide geographical presence reduces its business risks.

Weaknesses

Settlement with DOJ and SEC

In FY2007, Baker Hughes reached parallel settlements with the US Department of Justice (DOJ)and the Securities and Exchange Commission (SEC) to resolve the investigations into Baker Hughes’operations in Angola, Kazakhstan, and Nigeria. The total payments to settle these investigationswere $44.1 million.

Under the settlements in connection with the previous investigations by the DOJ and SEC, thecompany is subject to ongoing review and regulation of its business operations, including the reviewof its operations and compliance program by an independent monitor appointed to assess BakerHughes’s Foreign Corrupt Practices Act (FCPA) policies and procedures. The activities of theindependent monitor may result in a cost to the company and may cause a change in its processesand operations. In addition, the settlements may impact the company’s operations or result in legalactions against it in the countries that are the subject of the settlements. These settlements couldalso result in third-party claims against the company, which may include claims for special, indirect,derivative, or consequential damages.

Opportunities

Acquisition to expand operations in the Russian ESP market

Russia has the largest concentration of electrical submersible pumping (ESP) systems globally withover 70,000 installations, representing 60% of the world's ESP installations. Against this background,Baker Hughes, a leading equipment provider in the Russia ESP market for high volume and technicallychallenging artificial lift applications, has acquired Siberia-based Oilpump Services (OPS), the secondlargest ESP system service company, in June 2010.

Prior to the acquisition, Baker Hughes operated its ESP service business from a single base inNoyabrsk. The acquisition adds three full-cycle bases in Nyagen, Nizhnevartovsk, and Megion andfour remote field service bases, with the capacity to service more than 10,000 ESP systems. Withthe addition of OPS' service bases, Baker Hughes has complete geographic service coverage inthe fast growing ESP market in the world. The acquisition will enable the company to expand itsoperations to cover the Russian ESP market from low-volume, benign applications to high-volume,technically challenging applications.

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Baker Hughes IncorporatedSWOT Analysis

In addition, the ESP technology and manufacturing capabilities of the company combined with OPSservice infrastructure positions Baker Hughes to capitalize the rapidly expanding ESP leasing marketin Western Siberia and further strengthen its market share in Russia.

Merger with BJ Services

In April 2010, Baker Hughes completed the acquisition of BJ Services Company (BJ Services). BJServices is a leading provider of pressure pumping and oilfield services for the petroleum industry.The company’s pressure pumping services consist of cementing and stimulation services used inthe completion of new oil and natural gas wells and in remedial work on existing wells, both onshoreand offshore. BJ Services’ oilfield services include casing and tubular services, pre commissioning,maintenance, and turnaround services in the pipeline and process business, including pipelineinspection, chemical services, completion tools, and completion fluids.

Pressure pumping used in unconventional gas plays such as shale formations to break up rock,accounted for less than 1% of Baker Hughes' revenue but with this acquisition it will grow toapproximately 20% close to what Baker Hughes’s competitors like Halliburton and Schlumbergerbring in with the business. The deal will create a large entity with more than $17 billion in annualrevenue and more than 50,000 employees across the world.

In addition, the merger will enable Baker Hughes to compete for the growing large integrated projectsby incorporating pressure pumping into its product offering. BJ Services strengthens the combinedcompany's integrated services offering and significantly advances Baker Hughes’ capabilities.

Positive outlook for the global energy equipment and services industry

The global energy equipment and services industry had total revenues of $370.5 billion in 2010,representing a compound annual growth rate (CAGR) of 12.6% for the period spanning 2006–10.The oil and gas drilling segment contributed revenues of $81.9 billion in 2010, equating to 22.1% ofthe industry's aggregate value. For the period 2010–15, the industry is forecast to grow at a CAGRof 6.4%, which is expected to drive the industry to a value of $506 billion by the end of 2015.

Baker Hughes, being a supplier of wellbore related products and technology services and systems,is well positioned to benefit from the positive outlook for the global energy equipment and servicesindustry.

Threats

Intense competition

Baker Hughes faces intense competition in the markets it operates in. In the drilling and evaluationsegment, its unit Baker Hughes Drilling Fluids competes with M-I SWACO, Halliburton Company(Halliburton), and Newpark Resources. Its unit Hughes Christensen competes in the oil and natural

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Baker Hughes IncorporatedSWOT Analysis

gas drill bit market with National Oilwell Varco and Halliburton. INTEQ’s competitors in drilling andevaluation services include Halliburton, Schlumberger, and Weatherford International (Weatherford).Baker Atlas competes in wireline formation evaluation and wireline completion and perforating marketwith Schlumberger, Halliburton, and Weatherford.

In the completion and production segment, Baker Oil Tools competes in wellbore construction,cased-hole completions, and sand control market with Halliburton, Schlumberger, and Weatherford.Its competitors in wellbore intervention include Weatherford. Baker Petrolite’s primary competitorsinclude Champion Technologies, and Nalco Holding Company. Centrilift competes in the ESP marketwith Schlumberger and John Wood Group. In the PCP market, the primary competitors includeWeatherford, Robbins & Myers, and Kudu Industries. ProductionQuest competes with Schlumberger,Halliburton, and Weatherford.

Baker Hughes ability to defend, maintain or increase prices for its products and services is dependenton the industry’s capacity relative to customer demand, and the availability of competitors’ productsand services. Such intense competition threatens to erode the market share of Baker Hughes.

Risks associated with conducting business outside the US

The company has its operations in more than 90 countries. More than 53% of its business is carriesoutside the US. In these foreign locations, the company might experience fluctuations in exchangerates, complex regulatory requirements, and restrictions on its ability to repatriate investments andearnings from its foreign operations.The company might also face changes in the political or economicconditions in the foreign countries it operates in. Such instabilities could negatively impact the revenuegrowth of the company.

Weather conditions

The operations of Baker Hughes are affected by weather conditions. Weather can have a significantimpact on demand as consumption of energy is seasonal. Any variation from normal weather patterns,cooler or warmer summers and winters, can have a significant impact on demand. Adverse weatherconditions, such as hurricanes in the Gulf of Mexico, may interrupt or curtail Baker Hughes’ operations,or Baker Hughes customers’ operations, cause supply disruptions and result in a loss of revenueand damage to Baker Hughes’ equipment and facilities, which may or may not be insured. Thus,adverse weather conditions can have a negative impact on the operations of the company.

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Baker Hughes IncorporatedSWOT Analysis

TOP COMPETITORS

The following companies are the major competitors of Baker Hughes Incorporated

Halliburton CompanySchlumberger LimitedWeatherford International Ltd.Newpark Resources, Inc.Champion TechnologiesJohn Wood GroupKudu IndustriesM-I SWACONalco Holding CompanyRobbins & Myers, Inc.National Oilwell Varco

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Baker Hughes IncorporatedTop Competitors

COMPANY VIEW

A statement by Chad C. Deaton, Chairman and Chief Executive Officer at Baker Hughes, is givenbelow. The statement has been taken from the company’s annual report for FY2010:

In 2010, after a year-long effort to obtain full government approval, we completed the acquisition ofBJ Services and integrated pressure pumping, coiled tubing and cementing capabilities into ourglobal service offering. We also further reinforced our reservoir capabilities through acquisition andrealignment of our consulting services; our geographic and business segment organization becamefully functional; and, our enterprise-level supply chain effort began to deliver significant cost savings.In North America, the “unconventional” gas and oil plays became the foundation of our land business,driving demand for directional drilling, advanced completion systems and pressure pumping.

In April 2010, the industry mourned the loss of 11 men working on the Deepwater Horizon. Althoughwe were not involved in the accident, we did provide products and services to help with the capping,relief well and clean-up efforts following the blowout. The accident and associated spill negativelyimpacted our business in the Gulf of Mexico, as the drilling moratorium, the creation of newregulations, and the pace of permit approval impeded all new drilling activity from late April throughthe end of the year. Given the difficulty of permitting new wells both in deep water and on the shelf,we saw increased demand for our work over and stimulation services to battle production declines,but not enough to offset the revenue we would have generated from the 33 deepwater rigs that wereidled.The international market entered what we believe to be a multi-year trend of increasing spendingas the global industry battles decline curves and invests to satisfy expanding global demand for oiland natural gas.

Financial Results

In 2010, Baker Hughes recorded its highest annual revenue to date, with top-line growth driven byour acquisition of BJ Services. Baker Hughes results for the year include results of BJ Servicesstarting from May 2010.

Revenue for 2010 was $14.41 billion, up 49% compared to $9.66 billion in 2009. Net incomeattributable to Baker Hughes for 2010 was $812 million or $2.06 per diluted share, compared to$421 million or $1.36 per diluted share for 2009.

Earnings before interest, taxes, depreciation and amortization, or “EBITDA,” for 2010 were $6.63per diluted share, up 41% from $4.70 for 2009. Capital expenditures were $1.49 billion, depreciationand amortization expense was $1.07 billion and dividend payments were $241 million in the year2010.

At the end of 2010, Baker Hughes had $3.88 billion in debt, and cash and short-term investmentsof $1.71 billion. We also had $1.7 billion undrawn and available under committed credit facilities.

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Baker Hughes IncorporatedCompany View

Our debt to capital ratio was 21%. Our net debt was $2.2 billion and our net debt to capital ratio was13%.

Transformation Complete

For the past several years, Baker Hughes has invested in building a diverse global workforce,expanding our infrastructure to support growing markets in North America and internationally, todevelop new technology and expand our capabilities to do so, and to deliver products and equipmentto serve our clients.This investment set the stage for further changes to make us stronger and morecompetitive.

In May 2009, we announced a fundamental change in Baker Hughes’ organizational structure,moving from a product line organization managed through divisions to a geographic organizationmanaged through geomarkets.The geographic organization has met our objectives of building closerrelationships with our customers and developing a more holistic view of the market while maintainingexcellence in rig site execution and safety.

In 2010, we also improved our reservoir consulting and engineering capabilities by forming theReservoir Development Services group that combines several consulting and software firms acquiredsince 2008 and other Baker Hughes geotechnical professionals.

On April 28, we received approval from the U.S. Department of Justice to complete our acquisitionof BJ Services. And on August 28, following the divestiture of certain Gulf of Mexico businesses andassets, the Department of Justice agreed to the lifting of a Hold Separate Order, allowing the fullcombination of the U.S. businesses of Baker Hughes and BJ Services. International integration waswell under way when the divestiture was completed in August, and we were finally able to leveragethe full synergies across all product lines globally.

Geographic Highlights

North America North America revenues were $6.62 billion in 2010, up 109% from $3.17 billion in2009. Success in our North America land business centers on the unconventional reservoirs andthe use of horizontal drilling, advanced completions and pressure pumping to access the reserves.Baker Hughes is a leader in these products and services.

Beginning in September 2010, when BJ Services’ U.S. operations were formally merged into BakerHughes, we moved with agility to leverage the strengths of the legacy Baker Hughes product lineswith the newly acquired capabilities of BJ Services. We continue to expand our service capabilities.We opened a new service facility in Westmoreland County, Pennsylvania, and we plan to invest inenough facilities, equipment and personnel to add one additional pumping spread in North Americaevery six weeks.

Service intensity continues to increase as customers are planning longer horizontal wells and tighterspacing between frac stages, resulting in more stages and higher demand for hydraulic fracturing.Depending on the basin, pressure pumping capacity remains tight with backlogs stable at 90–180

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Baker Hughes IncorporatedCompany View

days. The supply chain for new equipment is stretched, and we believe that it is unlikely that theindustry can increase pressure pumping capacity faster than demand in 2011.

In Canada, in addition to delivering drilling and hydraulic fracturing services for unconventional oil,Baker Hughes is active in the oil sands where we provide drilling services, completion chemicalsand artificial lift. Our experience in heavy oil treatment, our advanced drilling systems, and our hightemperature electric submersible pump (ESP) technology have enabled us to be an important supplierfor steam assisted gravity drainage (SAGD) wells.

Latin America

Revenue in Latin America was up 43% in 2010, reaching $1.57 billion compared to $1.09 billion in2009, led by strong performance in our Brazil and Andean geomarkets.

In Brazil, in a little more than four years, Baker Hughes has grown from supporting two simultaneousoffshore directional drilling jobs to servicing 22 simultaneous jobs today. Baker Hughes also providescomplete drill cuttings handling and drying systems on 34 rigs. With the combination of drilling,evaluation and completion technology and the three pumping vessels from BJ Services currentlyoperating in Brazil, Baker Hughes is positioned to be a leading supplier to Petrobras.

Europe/Africa/Russia Caspian Revenue in the Europe/Africa/Russia Caspian segment was $3.01billion in 2010, up 8% from $2.77 billion in 2009.

In Europe, Baker Hughes maintained strong positions in the UK and Norway. We opened ourEcoCentre in Peterhead, Scotland, which provides comprehensive, environmentally compliant drillingwaste management services. A Baker Hughes conducted reservoir study helped the Norwaygeomarket win the drilling and formation evaluation contract for the Trym and Olsevar fields. Thegeomarket also won a large integrated contract for the Borgland Dolphin Consortium. Coiled tubingservices from BJ Services have been successfully introduced to traditional Baker Hughes customersin Norway. In Continental Europe, Baker Hughes has become a major supplier in the growinggeothermal and natural gas storage well markets.

Baker Hughes built a stronger presence in the Russia Caspian region with the introduction of newtechnology; the acquisition of the second largest ESP service company in Western Siberia, OilpumpServices; and through collaboration with local drilling contractors.

Our Africa business suffered from project delays in Algeria and Libya and contract losses in Angola.Bright spots included startup of operations in Ghana and Uganda, strong activity in Nigeria, a 22-welldirectional drilling contract in Libya, and a 10-year chemical services agreement in Angola.

Middle East/Asia Pacific

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Baker Hughes IncorporatedCompany View

Revenue in the Middle East/Asia Pacific segment of $2.25 billion was up 16% compared to $1.94billion in 2009, paced by activity in Saudi Arabia, start up of operations in Iraq, and modest but steadygrowth in the Asia Pacific region.

In Saudi Arabia, operations are under way on a two-rig, coiled tubing drilling integrated operationsproject that is setting new records for horizontal drilling on coil. In addition, we introduced an ultra-slimEQUALIZER™ system to complete a 10,000-foot horizontal well drilled on coiled tubing. The BakerHughes 4¾-inch MagTrak magnetic resonance system is being used for precise well placementwhile drilling water injection wells in the Manifa field where we drilled the longest extended reachwell in Saudi Arabia. In 2010, Baker Hughes installed the FracPoint system on our first multi-stagecompletion in the kingdom.

Our operations in Iraq began during the year with workover projects and ESP installations. Weopened our new base in Ramallah in June 2010. Early business development successes include acontract for 162 ESP systems for the Rumailah field, and a three-year technical agreement withSouth Oil Company to provide wireline data acquisition and logging services.

Our Asia Pacific operations leveraged leading technology to make gains throughout the region. Forexample, in China our North Asia geomarket won a 77-well FracPoint contract to perform multi-stage,open hole completions in China’s emerging shale gas basins. Baker Hughes also won a critical wellcontract for PetroChina’s Tarim Oilfield Company for formation evaluation, completion, and artificiallift in deep, high pressure/high temperature wells.

Focus on Profitability

One of the challenges of the global reorganization was optimizing the new operating structure tocontrol cost and deliver acceptable margins, especially in regions outside North America. During2010, we consolidated geomarkets to match market activity in the Africa, Latin America and RussiaCaspian areas, reducing expatriate staff and taking a variety of cost-cutting measures. By the fourthquarter, our Eastern Hemisphere operations had achieved substantial margin improvement.International profit improvement and cost control will be primary areas of focus over the next severalquarters.

Our supply chain strategy is paying off, as we achieve efficiencies in manufacturing downhole toolsand chemicals while leveraging our combined buying power to control procurement costs. We alsoare investing in manufacturing capacity in the Eastern Hemisphere to produce products in Asia andthe Middle East, closer to our customers. Taken together, supply chain improvements are deliveringrecurring savings of $100 million per year.

In addition, we are on target to achieve the expected cost efficiencies of $150 million per year fromthe combination with BJ Services.

Leveraging Opportunities

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Baker Hughes IncorporatedCompany View

The interest in unconventional gas development has spread from North America, and operators inEurope, China, Australia and Latin America have asked us to present our reservoir engineering,horizontal drilling and fracturing technology as they consider accessing shale gas resources.

Offshore drilling, including deepwater activity, continues to increase, and Baker Hughes remains aleader in this market segment. Despite a slowdown in the Gulf of Mexico, demand for stimulationvessels has been strong. Our new Blue Dolphin and Blue Tarpon vessels bring state-of-the-arttechnology and the industry’s highest capacity to the market. As a result of the merger we nowprovide cementing services on 25% of the world’s offshore rigs.

New Technology

Baker Hughes continues to invest more than $430 million per year in research and engineering,producing an array of new and improved technologies that make the company more competitive.

For example, our new Kymera hybrid drill bit combines diamond and roller cone bit technologies todrill difficult, variable formations. We have extended our AutoTrak line of automated drilling systemswith versions for vertical wells and land-based applications with AutoTrak Curve. We continue toextend the range of coiled tubing drilling. Our Nautilus Ultra logging suite can acquire petrophysicaldata in wells with temperatures as high as 500°F. Our completion systems innovations include theslimhole EQUALIZER system, GeoForm – a newly commercialized well screen that conforms to thewellbore to improve sand control efficiency, and the FracPoint Premium multi-stage frac completionsystem. Our ESP systems are installed on the seabed in 8,000 feet of water in the Gulf of Mexico,boosting oil production in the Perdido field.

Baker Hughes also has focused on green technology. Using our BJ SmartCare program, our expertsdesign and implement frac-fluid programs that minimize environmental impact during hydraulicfracturing.

Outlook

Looking ahead, we expect the economic recovery to create increased oil demand, which shouldsupport high oil prices and a sustained multi-year expansion of international spending.

We expect North America land activity to remain strong as horizontal drilling and hydraulic fracturingactivity continues to grow.While operators are shifting to liquid and oil reserves, we expect continuedsignificant shale gas drilling, but we are carefully watching natural gas prices and their effect on rigactivity.

To help drive growth in 2011, we are planning annual capital expenditures of $2.3 to $2.7 billion,compared to $1.5 billion in 2010. Much of the increase reflects the capital requirements of expandingour pressure pumping business.

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Baker Hughes IncorporatedCompany View

In closing, I want to recognize the contributions of our 53,100 employees who so professionally serveour customers. Through their dedication we continue to lead our industry segment in safety andhave been recognized as leaders in innovation. With the reorganization now in place, the additionof BJ Services, and the slow but steady improvement in global economic conditions, 2011 is off toa good start.

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Baker Hughes IncorporatedCompany View

LOCATIONS AND SUBSIDIARIESHead Office

Baker Hughes Incorporated2929 Allen ParkwaySuite 2100HoustonTexas 77019 2118USAP:1 713 439 8600F:1 713 439 8699http://www.bakerhughes.com

Other Locations and Subsidiaries

Baker Oil ToolsBaker Atlas9100 Emmott Road2001 Rankin RoadHoustonHoustonTexas 77040 3596Texas 77073 5100USAUSA

CentriliftBaker Petrolite200 W. Stuart Roosa Drive12645 West Airport BoulevardClaremoreSugar LandOklahoma 74017 3095Texas 77478USAUSA

Baker Hughes INTEQHughes Christensen2001 Rankin Road9110 Grogan's Mill RoadHoustonThe WoodlandsTexas 77073 5100Texas 77380 3615USAUSA

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Baker Hughes IncorporatedLocations and Subsidiaries