Baker Hughes Investor Presentation

Transcription

1 Baker Hughes Investor Presentation November 2007 A CENTURY OF INNOVATION

2 Forward-Looking Statements Some of the things we will discuss today relative to our views on future company performance and results, and other statements not dealing with historical facts, will be forward-looking statements within the meaning of U.S. securities laws. The company cautions that actual results may differ materially from those discussed in these forward-looking statements. You should refer to the additional information contained in our filings with the SEC about the risks and uncertainties that could cause actual results to be different than those contemplated in this discussion. The company s SEC filings can be viewed at Reconciliation of non GAAP measures referenced in today s presentation can be found on our website in the Investor Relations section. 2

3 Why Baker Hughes? A World of Opportunities Committed to Our Long Term Strategy Driving Growth through our Investment in People, Infrastructure and Innovation Portfolio of Best-in-Class Technologies Market and Technology Leadership Focus on Reliability Success in Key Markets National Oil Companies Eastern Hemisphere -- Middle East, Russia / CIS, West Africa Maturing Markets (N Sea and GoM) Focused on Improving Profits Financial flexibility & discipline Strong position for 2008, 2009 and beyond

4 Revenue Growth $10 $9 $8 $7 $6 $5 Revenue (billions) $9.027B $9.027B in in Int l Int l up up 19% 19% % 21% in in 2007* 2007* 2006 Revenue 9% 7% 10% 5% 37% 9% 14% 9% $4 $3 $2 $1 $0 Canada United States Latin America Europe Africa CIS Middle East Asia Pacific Countries Countries 2 2 nd nd highest highest non-na non-na in in OFS OFS '02 '03 '04 '05 '06 '07 * Guidance as of 27 Feb Please see Earnings News Release for discussion of applicable risk factors. Baker Hughes at a Glance 4

5 Profit Growth Operating EPS EBIT Margins $4.50 $4.00 $ % 22.8% $3.50 $3.00 $2.50 Up Up 60% 60% compared compared to to $ % 15% 18.8% $2.00 $ % $1.00 5% $0.50 $0.00 0% '02 '03 '04 '05 '06 '07 '02 '03 '04 '05 '06 '07 Baker Hughes at a Glance 5

6 Investing for Growth - People Added over 5,500 employees (net) in 2006 Continued growth to support international activity Significant focus on training and career path Developing our local workforce Positioned for global leadership Employees (thousands) 5 0 '02 '03 '04 '05 '06 '07 Baker Hughes at a Glance 6

7 Investing for Growth - Infrastructure Planned capex of $1.1B Approximately $200 million for infrastructure in 2007 Continued build out of rental fleet and new technologies Ability to match spend level to market conditions $1,200 $1,000 $800 $600 CapEx & DD&A (millions) $400 $200 $0 '02 '03 '04 '05 '06 '07 * Guidance as of 26 October Please see Earnings News Release for discussion of applicable risk factors. Baker Hughes at a Glance 7

8 Investing for Growth - Infrastructure BHI infrastructure Growth Non-North America North America Square Feet (Thousands) Baker Hughes at a Glance 8

9 Investing for Growth - Technology Leading technologies and market share Strong new product pipeline Disciplined product development & commercialization methodology R&E focused on new product development / reduced sustaining engineering spend $400 $350 $300 $250 $200 $150 $100 $50 Research & Engineering (millions) $0 '01 '02 '03 '04 '05 '06 '07 Baker Hughes at a Glance 9

10 Generating Cash EBITDA Net Debt, Cash $3,000 $1,750 $2,500 $1,500 Cash $2,000 $1,250 $1,000 $1,500 $1,000 $500 $0 Adding Adding 4,500+ 4,500+ net net in in vs vs 2005* 2005* Stock Stock Repurchases Repurchases 2006: 2006: 24.3mm 24.3mm shares shares for for $1.9B $1.9B Q2 Q2 07: 07: 1.2mm 1.2mm shares shares for for $0.1B $0.1B $1.2B $1.2B authorized authorized at at end end of of Q207 Q207 '02 '03 '04 '05 '06 '07 $750 $500 $250 $0 -$250 DEC 02 DEC 03 DEC 04 DEC 05 Net Debt DEC 06 Net Cash Baker Hughes at a Glance 10

11 Best-in-Class Drilling and Evaluation Segment Drill Bits Hughes Christensen 1 4 Drilling & Evaluation INTEQ Drilling Fluids BH Drilling Fluids 3 1** 2 Wireline & Testing Baker Atlas Completion and Production Segment Completions Baker Oil Tools ESPs Centrilift Oilfield Chemicals Baker Petrolite 1 ** SII/SLB joint venture in MI Source: BHI estimates, Spears & Associates Baker Hughes at a Glance 11

12 Drilling Baker Hughes Drilling Fluids Hughes Christensen INTEQ Baker Atlas Baker Oil Tools Drilling Fluids Drilling Optimization Centrilift Baker Petrolite Drill Bits Directional Drilling Baker Hughes at a Glance 12

13 Formation Evaluation Baker Hughes Drilling Fluids Hughes Christensen Fluid Sampling INTEQ Baker Atlas Baker Oil Tools Wireline Logging Integrated Formation Evaluation Centrilift Logging While Drilling Coring Baker Petrolite Baker Hughes at a Glance 13

14 Completion Baker Hughes Drilling Fluids Hughes Christensen Pumping Services INTEQ Baker Atlas Baker Oil Tools Sand Control Completions Expandable Completions Multilateral Systems Flawless Execution Centrilift Baker Petrolite Perforating Intelligent Well Systems Baker Hughes at a Glance 14

15 Production Baker Hughes Drilling Fluids Hughes Christensen INTEQ Oilfield Chemicals Baker Atlas Progressing Cavity Pumps Baker Oil Tools Workover Services Centrilift Baker Petrolite Electric Submersible Pump Systems Baker Hughes at a Glance Fishing Services 15

16 Hughes Christensen Hughes Christensen Diamond Drill Bits Tricone Drill Bits Baker Atlas Openhole Logging Cased hole logging Geophysics Baker Hughes Drilling Fluids Water-based muds Oil-based muds Completion fluids INTEQ Conventional directional drilling Rotary steerable systems Tricone MWD PDC LWD a leading manufacturer and supplier of Tricone and PDC fixed cutter drill bits to the worldwide oil, natural gas and geothermal industries. Competitive drivers include improving rate of penetration, extending run life, improving bit reliability, matching the right bit to the right geology Competitors include Hughes Christensen Smith Grant Prideco Halliburton Drilling and Evaluation 16

17 Baker Atlas Baker Atlas Open hole Logging Cased hole logging Geophysics Baker Hughes Drilling Fluids Water-based muds Oil-based muds Completion fluids INTEQ Conventional directional drilling Rotary steerable systems MWD LWD provides wire-line conveyed well logging, data analysis and perforating services for formation evaluation, production and reservoir management. Competitive drivers include data acquisition reliability, sophistication and accuracy of measurements, ability to interpret results, ability to differentiate technology and services Competitors include Schlumberger Baker Hughes Halliburton Weatherford Drilling and Evaluation 17

18 Baker Hughes Drilling Fluids Baker Hughes Drilling Fluids Water-based muds Oil-based muds Completion fluids INTEQ Conventional directional drilling Rotary steerable systems MWD LWD offers environmentallycompliant emulsion and water based fluids, completion fluids and drilling waste management services. Competitive drivers include improving drilling efficiency minimizing cost, minimizing environmental impact and minimizing reservoir damage Competitors include MI (Smith-Schlumberger) Halliburton Baker Hughes Drilling and Evaluation 18

19 INTEQ INTEQ Conventional directional drilling Rotary steerable systems MWD LWD provides conventional directional drilling, rotary directional drilling, measurementwhile-drilling MWD, logging-whiledrilling LWD and well site information services. Competitive drivers include sophistication and accuracy of measurements, efficiency of the drilling process, equipment reliability, optimal well bore placement, optimal well bore quality Competitors include Schlumberger Baker Hughes Halliburton Drilling and Evaluation 19

20 Baker Oil Tools Baker Oil Tools Completions Systems Safety Valves Fishing Multi-lateral Intelligent Completions Sand Control Baker Petrolite Conventional directional drilling Rotary steerable systems MWD LWD Centrilift Electric Submersible Pumps Progressing Cavity Pumps Production Quest Downhole completion, workover and fishing technology to assure safe and efficient hydrocarbon production. Competitive drivers include engineering and manufacturing quality, reduced well construction costs, enhanced production and ultimate recovery, minimized risk, reliable performance over the life of the well Competitors include Baker Hughes Halliburton Schlumberger Weatherford BJ Services Smith International Completion and Production 20

21 Baker Petrolite Baker Petrolite Drilling Fluid & Stimulation Additives Oil & Gas Production Pipeline Inspection Refining Industrial Chemicalsersible Pumps Progressing Cavity Pumps Production Quest provides chemical technology solutions for hydrocarbon production, transportation and processing including corrosion inhibitors and flow assurance additives. Competitive drivers include improved production / throughput, reduced maintenance costs / frequency, lower treatment costs / intervals, resolve environmental issues Competitors include Baker Hughes Nalco Champion Servo GE Water Technology Completion and Production 21

22 Centrilift Centrilift Electric Submersible Pumps Progressing Cavity Pumps Production Quest provides electric submersible pump ESP and progressing cavity pump PCP systems, applications engineering, project management and well monitoring services. Competitive drivers include system reliability, system runlife, optimizing production, operating efficiency, service delivery ESP competitors include Baker Hughes Schlumberger Wood Group PCP competitors include Weatherford Robbins & Myers Baker Hughes Completion and Production 22

23 Best-in-Class Drilling and Evaluation Drill Bits Hughes Christensen 1 4 Drilling & Evaluation INTEQ Drilling Fluids BH Drilling Fluids 3 1** 2 Wireline & Testing Baker Atlas Completion and Production Completions Baker Oil Tools ESPs Centrilift Oilfield Chemicals Baker Petrolite 1 ** SII/SLB joint venture in MI Source: BHI estimates, Spears & Associates Baker Hughes at a Glance 23

24 Best-in-Class Organization Chad Deaton Chairman & CEO Peter Peter Ragauss Sr. Sr. VP VP & CFO CFO Martin Craighead Group President, Drilling and Evaluation David Barr Group President, Completion and Production Didier Didier Charreton VP, VP, HR HR Alan Alan Crain Crain VP, VP, General Counsel Rod Rod Clark Clark Pres Pres & COO COO Gary Rich, President Hughes Christensen Richard Williams President, Baker Hughes Drilling Fluids Paul Butero President, INTEQ Steve Ellison President, Baker Atlas Andy O Donnell President, Baker Petrolite Charlie Wolley, President Centrilift Chris Beaver President, Baker Oil Tools Joe Vandevier President, Production Quest Al Riddle Director, Technology Halina Caravello Director, HS&E Mike Davis President, Baker Hughes Russia, Inc. Wil Faubel VP, Enterprise Marketing Phil Vogel Country Director, Nigeria Baker Hughes at a Glance 24

25 Organized to Support Product Focus Drilling and Evaluation Short-cycle Rig Dependent Focus Drilling optimization Comprehensive formation evaluation Products Diamond & tricone bits Conventional & rotary directional drilling Wireline & LWD formation evaluation Drilling Fluids Completion and Production Long-cycle Rig Independent Focus Production monitoring Production optimization Brownfield Products Completion systems Workover systems Fishing ESPs and PCPs Chemical systems Baker Hughes at a Glance 25

26 Regional Organization Regional VPs report to division presidents Region VPs provide local leadership Region council exploits local opportunities Staff support mirrors regional structure Baker Hughes at a Glance 26

27 Strategic Framework - Outlook Energy markets Global hydrocarbon demand to grow through 2020 Oil and gas price volatility remain Cycles will continue Natural gas gains in importance Increased brown field development Geographic shift From mature provinces North America North Sea To Eastern Hemisphere Middle East Russia Caspian W. Africa Influence of NOC s increases Russian / Chinese service companies to enter the market Consolidations will continue Customers Service companies Demographic challenge loss of experienced service company hands Indigenization of workforce Recruit, develop & retain Customer strategy drive commoditization Service company strategy Differentiate on technology and service Increased responsibility for R&D Become more international / local content Continued cost and capital discipline Focus on execution Strategic Framework 27

28 A World of Opportunity Technology Acquisitions and Investments Geographic Focus Baker Atlas Russia Science Center Novosibirsk, Russia Drilling Fluids Research Lab w/texas A&M Doha, Qatar Baker Hughes Center for Innovation and Technology Baker Atlas Russian Science Center Strategic Framework 28

29 A World of Opportunity People Centralized BHI Recruiting Middle East Training Center Geographic Opportunities Middle East Russia National Oil Companies Super Regions Middle East KOC Russia / Caspian Strategic Framework 29

30 Goal: Best-In-Class Performance Grow revenues faster than the competition at superior margins BVA positive throughout the cycle Align the enterprise with selected growth markets. Become #1 or #2 in each selected market Oilfield Operating Margins Q % Q % Q % Q % Q % Past Future Strategic Framework 30

31 Focus 2007 High Performance Culture Core values Keys to success Leadership team development Succession planning Recruit, train and retain a high performance nationalized workforce Best-in-Class Opportunities Best-in-Class Focus Product-line divisions Super-regions Country directors Geographic Opportunities Middle East, Russia, Africa National Oil Companies Market Opportunities Drilling and Evaluation Excellence Production Optimization Financial Flexibility Maintain flexibility Invest for Growth BVA Capital Spending Research and Development Acquisitions Manage Costs Master the Market Product development and commercialization Technology Centers TRM and PDM Manufacturing Excellence Service quality Flawless execution Reliability Support Services Strategic Framework 31

32 High Performance Culture Core Values and Keys to Success People contributing at their full potential Delivering unmatched value to customers Being cost efficient in everything we do Employing our resources effectively Leadership team development Succession planning Management practices Standardization Enterprise systems Processes Procedures Continuous improvement Strategic Framework High Performance Culture 32

33 Best-in-Class Opportunities Achieve Best-in-Class positions Focus Market Leadership Pure Play Give priority to growth markets By Geography Russia and the Caspian Middle East Mature Markets (N Sea & GoM) By Customer National Oil Companies Expand into selected markets Serve polarized markets Critical wells risk reduction Standard wells cost reduction Strategic Framework Best-in-Class Opportunities 33

34 Financial Flexibility $3.0 $2.8 $2.5 $2.3 $2.0 $1.8 $1.5 $1.3 $1.0 $0.8 $0.5 $0.3 $0.0 Billions $ Total Debt Cash Net Debt Cost and Capital Discipline Efficient Cost Base Investment Allocation All investments compete across the enterprise Project BVA (Return on Capital) BVA positive throughout the cycle Consider project risks Financial Discipline Quarterly performance reviews Incentive compensation plan Individual performance contracts Financial Flexibility Retire debt Purchase stock Pay dividends Grow the business Strategic Framework Financial Flexibility 34

35 Master the Market Service Quality I N T E G R I T Y BEST L E A R N I N G IN T E A M W O R K CLASS P E R F O R M A N C E Manufacturing and Product Quality Product Development Cultivate Superior Process and Capabilities in: Product development and commercialization Manufacturing and product quality Service quality Strengthen Support Services so that the Divisions can Focus on the Customer Strategic Framework Master the Market 35

36 Product Development & Commercialization Technology Road Map Drilling Formation Evaluation Completion Production ********************** ****************** ********************** ********** ******************* ******************* ******************* ******************* ****************** ****************** ****************** ****************** ******** ********* ******** ********* ********* ************ ********* ************ ************ ********** ************ ***** ***** ******************* ***** *************************** *************************** ****************** *************************** ****************** ****************** ********* ****************** ******** ******** ************ ******** ************ ************ ***** ************ ***** ***** *************************** ***** ******************* ******** ****************** ******** ****************** ********** ******** ********** ****************** ******************* ********************** ******************* ******************* ****************** ******************* ****************** ****************** ********* ****************** ********* ********* ************ ******** ************ ************ ***** ********* ***** ********** *************************** ************ *************************** ******************* ****************** ***** ****************** ****************** ******** *************************** ******** ********* ************ ****************** ************ ************ ***** ******** ***** ***** ******************* ************ ******************* *************************** ****************** ***** ****************** ****************** ****************** ******** ****************** ******** ******************* ********** ******************* ********** ****************** ******************* ****************** ******************* ********* ****************** ********* ****************** ************ ********* ************ ********* ********** ************ ********** ************ ******************* ***** ******************* ***** ****************** *************************** ****************** *************************** ********* ****************** ********* ****************** ************ ******** ************ ******** ***** ************ ***** ************ *************************** ***** *************************** ***** ****************** ******************* ****************** ******************* ******** ****************** ******** ****************** ********************** ****************** ****************** ****************** ******************* ******************* ******************* ******************* ****************** ****************** ****************** ****************** ******** ********* ********* ********* ********* ************ ************ ************ ************ ********** ********** ********** ***** ******************* ******************* ******************* *************************** ****************** ****************** ****************** ****************** ********* ********* ********* ******** ************ ************ ************ ************ ***** ***** ***** ***** *************************** *************************** *************************** ******** ****************** ****************** ****************** ********** ******** ******** ******** ******************* ****************** ********************** ********** ****************** ******************* ******************* ******************* ********* ****************** ****************** ****************** ************ ********* ******** ********* ***** ************ ********* ************ *************************** ********** ************ ***** ****************** ******************* ***** *************************** ******** ****************** *************************** ****************** ************ ********* ****************** ******** ***** ************ ******** ************ ******************* ***** ************ ***** ****************** *************************** ***** ******************* ****************** ****************** ******** ****************** ******************* ******** ********** ****************** ****************** ********************** ******************* ******************* ********* ******************* ****************** ****************** Technology Road Map Thorough understanding of landscape Market needs compared with capabilities Market segments quantified Opportunities identified Product Development Methodology Measures progress at stages Ensures new projects meet returns targets Life cycle management Product Development Methodology Resource Planning Best-in-Class Technology 36

37 Technology Growth Drivers Hughes Christensen Genesis Diamond Bits Underreamer EZCase Casing Bits INTEQ AutoTrak G3.0 X-treme Motors LWD Suite Baker Hughes Drilling Fluids Water-based Fluids HP/HT Fluids Baker Atlas Imaging MREX Low cost logs Data Communication Reservoir Characterization Understanding the Reservoir Accessing the Formation Producing Hydrocarbons Extended Reach Drilling Deepwater Unconsolidated Formations High Pressure / High Temperature Lower Costs Wells Heavy Oil Mature Fields Production Optimization Water Management Baker Oil Tools Sand Control Intelligent Well Systems Expandables Wellbore Isolation Centrilift ESPs for gassy applications PCPs Encroachment on other forms of AL Baker Petrolite Gas markets PMG Acrolein Production Optimization Permanent Monitoring Intelligent Lifting Chemical Injection Best-in-Class Technology 37

38 Investing in Technology Research and Engineering Spending % Increase in +147% New Increase Product in New Product Spending! Spending (7-year CAGR 17.1%) Sustaining New Products $198 million +74% Increase in Engineering Spending (7-year CAGR 8.2%) $339 million Best-in-Class Technology 38

39 Key Upstream Industry Intellectual Property Patents HAL SLB BHI WFT Source: USPTO and Goldfire Researcher SII BJS Major 1 Major 2 Major 3 Other Best-in-Class Technology Geophysics (GO1V) Earth or Rock Drilling (E21B) Major 4 Major 5 39

40 Investing in Technology Best-in-Class Technology 40

41 Technological Complexity Drives Growth North Sea Starfish Well 175% Alaska Multilaterals 2 Horizontal Wells 1 Multilateral Well 50% -38% -38% Total Cost Completions Revenue HS&E Risk Production Best-in-Class Technology 41

42 Driving Innovation $2.5 $2.0 $1.5 $1.0 $0.5 New Product Revenue (Billions) 8 Global Technology Centers People Driving Technology 200+ PhDs Degreed Engineers 800+ Technical Support $ Best-in-Class Technology 42

43 Systems Approach to Technology Baker Hughes Performance Results 1200 No Total System Approach Total System Approach Average m/bha Pre Best-in-Class Technology 43

44 Understanding and Accessing the Reservoir Drilling and Evaluation Depth Enhanced drilling ROP, Casing pushed deeper Keys to Improving Economics Advanced technology that is reliable Proper implementation of the technology Information management and application Shorter NPT through informed decisions Days Drilling & Evaluation 44

45 Understanding and Accessing the Reservoir LWD Imaging Lowside Highside Highside Lowside Highside Drilling & Evaluation 45

46 Understanding and Accessing the Reservoir Thinly bedded zones 1.0 m Core photograph of a thinly bedded reservoir interval. 3D Explorer Drilling & Evaluation 46

47 Understanding and Accessing the Reservoir Baker Atlas Applies WGI Data Location: Qatar Challenge RCI Seal efficiency in horizontals 40% - high costs Good Seal Solution WGI 6-arm caliper with RCI Result Real-time borehole caliper Set probe in gauge intervals Efficiency now 90%! Saved over $75k per run Bad Seal AVOID! Drilling & Evaluation 47

48 Understanding and Accessing the Reservoir AutoTrak RCLS The first ever integrated closed-loop steering & LWD system Reduces customers OPEX and time to production Complex wells to difficult/impossible to reach targets Higher quality wells for enhanced production and reduced drilling risk Expose >44,400 ft of reservoir from a single slot Reach inaccessible, trapped reserves Impossible Before AutoTrak RCLS! Drilling & Evaluation 48

49 Understanding and Accessing the Reservoir Driving Improved Recovery 2000 Est. Recovery 1.9 Bln bbls Sub-sea Startup pilot Original Troll C recovery PDO injection wells estimate 40%PDO Troll C PDO multilaterals Additional wells Increased well dens Recovery estimate 70% 1000 Startup Troll B PDO horizontal well gas province 500 Over 1 billion barrels produced to date PDO Troll B long-term test gas province million barrels ,000 m drilled Single lateral to 7-branch well Long term collaboration Drilling & Evaluation 49

50 PERFORM AX H igh Perf orm anc ew BM Understanding and Accessing the Reservoir Deepwater Fluids Challenge: 2100 m of water 3350 m of salt 8840 m target depth 1800 bar well pressure Solution Lab analysis Hydraulic modeling Rig site expertise Logistical support Riserless drilling system 75,000 bbl of WBM Synthetic fluid system 27,000 bbl/well PERFORMAX closes the drilling performance gap between conventional WBM and emulsion systems (OBM) Balances high-performance drilling and environmental compliance Eliminates need for liquid mud plants, cuttings transport PHigh Performance WBM ERFOR M AX 100% market share for HPHT applications in Gulf of Mexico Drilling & Evaluation 50

51 Extended Reach Drilling World s Longest Extended Reach Wells Thousand Meters Competitors BHI Khurais 5,800 TVD 10,700 MD Manifa 8,500 TVD 26,600 MD Sakhalin Z TVD 37,300 MD Meeting with Success in Key Markets 51

52 Understanding and Accessing the Reservoir D&E Reliability - CoPilot Increasing Co-Pilot Deployment pre Reliability Rate of Penetration 52 Drilling & Evaluation

53 Understanding and Accessing the Reservoir Reliability Mean Time Between Failure Feet Drilled Between Failure 100% 85% 100% 97% 61% 50% 44% 50% 32% 12% 20% 0% 0% 0% YTD YTD YTD YTD AutoTrak G3 AutoTrak X-treme AutoTrak G3 AutoTrak X-treme Drilling & Evaluation 53

54 Understanding and Accessing the Reservoir AutoTrak X-Treme Location Offshore Denmark Problem / Objective Increase rate of penetration and geosteer into thin zone Solution AutoTrak X-treme system AutoTrak G3.0 X-treme Motor APLS Results Precise 3D wellbore positioning with doubled ROP and reduced drill string wear Drilling & Evaluation 54

55 Fractured Basements Location: Yemen Challenge: Reliable formation pressures in fractured basement Differentiate open from sealed fractures Open Fracture identified on the simultaneously acquired three images. Solution: New and proprietary technique identifies open fractures Pressure success rate up to 90% Unique capabilities combining RCI and STAR services with realtime interpretation Closed fractures interpretation indicated from the missing fracture trace on the acoustic travel time image Drilling & Evaluation 55

56 Producing Hydrocarbons Completion & Production Exploration & Appraisal & Production & Abandonment Discovery Development Intervention The Producer s Challenge Accelerate and Maximize Cash Flow Increase ultimate recovery 0 Lower operating & Intervention costs Time Lower finding cost Lower capital costs Accelerate & maximize production Discovery First production Completion & Production 56

57 Producing Hydrocarbons Multilateral Wells Location Saudi Arabia Problem / Objective Reduce drilling costs to produce two deep zones and increase reservoir contact. Solution Multilateral technology to produce two zones from one well. Used Hughes Christensen bits; INTEQ drilling systems & LWD; Baker Atlas logging systems; Baker Oil Tools multilateral completion. Results 8,800 of lateral hole in 2 zones; HOOK Hanger junction placed at record depth of 14,000 ; enabled selective production from both laterals; Initial production exceeded target by 25%. Baker Oil Tools Hook Hanger tm System was set at a record depth of 14,082 ft., enabling two gas zones to produce 63 mmscf/day. Completion & Production 57

58 Producing Hydrocarbons Horizontal Completions Challenge: Variable Geology Upper Stringers Main Sand Lower Stringers Completion & Production 58

59 Location Middle East Problem / Objective Producing Hydrocarbons EQUALIZER ICD Deliver uniform drawdown and delay water coning in high-rate horizontal wells in a carbonate formation Solution Equalizer CF & MPas packers Results After more than 2 years, production is two times that of offset wells, water coning has been delayed at a high production rate Completion & Production 59

60 Producing Hydrocarbons Intelligent Components Intelligent Completions Intelligent Artificial Lift Chemical Automation Completion & Production 60

61 Producing Hydrocarbons Intelligent Well Systems 1 Definition Measurement mechanism (production or injection) Control mechanism 72 systems installed through 2006 year end Accelerating growth Approximately installations in 2007 Accelerating through 2011 Customers include super majors, majors, independents and National Oil Companies Baker Oil Tools has experienced zero downhole valve failures to date Completion & Production 61

62 Producing Hydrocarbons Saudi Aramco Intelligent Well Trial 7" Tubing Hanger to facilitate through Tubing ESP Installation 7" Production Tubing 7" x 5 1/2" X-Over Baker Model 5 1/2" TSME Deep Set Tubing Retrievable Safety Valve Halliburton SSD 5 1/2" x 3 1/2" X-Over Tri-Lateral MRC well - HRDH-194 Successfully installed June 2006 Enables: Real-Time Remote Monitoring Control of each Lateral Regulated production from each lateral Integrated Multi-Phase flow measurement 7 Tubing will allow CT installation of ESP 9 5/8" Casing Shoe Baker 7" x 3 1/2" Feedthrough Premier Packer 6 1/8" Open Hole 6 1/8" Open Hole Weatherford Fibre Optic Gauge and Flowmeter Baker 3 1/2" Splice Sub Baker 3 1/2" HCM-A Hydraulic Operated Adjustable Choke 7" x 3 1/2" Feedthrough Premier Packer 7" x 3 1/2" Feedthrough Premier Packer Bull Plug 6 1/8" Open Hole 7" 26# Liner Baker Model 3 1/2" Blast Joint w/control Line Shield WTF FO Gauge Baker 3 1/2" Splice Sub 3 1/2" HCM-A WTF FO Gauge Baker 3 1/2" Splice Sub 3 1/2" HCM-A Completion & Production 62

63 Producing Hydrocarbons Intelligent Production System Completion & Production 63

64 Producing Hydrocarbons Reservoir Monitoring Permanent Sensors: Microseismic Injection Production Hydraulic Fractures Pressure, Temperature Resistivity to fluid type Processing, Interpretation Optimize drilling, decrease uncertainty & reduce risk through improved well placement Optimize field development, production & enhanced oil recovery programs Completion & Production 64

65 Producing Hydrocarbons Subsea Technology Completion & Production 65

66 Producing Hydrocarbons Middle East Refinery Capacity Additions New Refinery Capacity (5 to 7 million bpd) New Grassroots Refineries in Selected Gulf Countries Identified need 1.1 million bpd 679,000 bpd 900,000 bpd 1.75 million bpd 580,000 bpd 850,000 bpd 330,000 bpd Source: International Fuel Quality Center, October 2006 & Hart World Refining & Fuels Service Completion & Production 66

67 Tri-Lateral MRC Well Well Objectives Drill a 6-1/8 horizontal maximum reservoir coverage (MRC) tri-lateral well in a carbonate field in Saudi Arabia (April 2006) Maximise ROP Optimise wellbore placement Deliver high quality smooth wellbore Solution 4 ¾ AutoTrak X-treme System + CoPilot + Beacon, LithoTrak Services & HCC PDC Results Drilled 13Kft of 6⅛ hole in 121 drilling hours Average ROP of 109ft/hr Optimised drilling parameters - CoPilot Steered precisely in reservoir Performance Fastest ever Haradh tri-lateral drilling Well delivered 12 days ahead of schedule Completion & Production 67

68 CAPEX in Billions (2006$ RAC Crude (2006$) $280 $260 $240 $220 $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 Demand, Price & CapEx 70 s through 81 Spending Boom Capital Spending 81 through 87 Spending Bust 88 through 95 The Doldrums absorbing excess capacity Global Oil Productive Capacity 96 through Economic Growth w/o excess productive capacity Keys: Spare Capacity Supply Growth Demand Growth 2% Global Oil Demand Oil Price $ '01 '03 '05 '07 '09 Oil Demand (mboe/d 40 Sources: DOE (EIA), CitiGroup (Salomon Smith Barney), Pickering Energy Partners Business Environment 68

69 OPEC Spare Capacity Jan 05 Mar 05 May 05 Jul 05 Sep 05 Nov 05 Jan 06 Mar 06 May 06 Jul 06 Sep 06 Nov 06 Jan 07 Mar 07 May 07 Jul 07 Spare Capacity (mbd) (reached in 30 days; sustainable for 90 days) Sep 07 Nov 07 Algeria Indonesia Iran Kuwait Libya Nigeria Nigeria* Qatar Saudi Arabia UAE Venezuela Iraq Capacity that can be brought online in 30 days and sustained for 90 days Sources: IEA Monthly OMR Business Environment

70 The Demand Challenge Per Capita Consumption (MTOE) Canada United States South Korea Japan Euro 4 Mexico China Population Source: EIA, CIA World Factbook Primary Energy Consumption Hydroelectric Nuclear Coal Gas Oil India Per Capita Consumption (Bbls/day) / /1965 China / /1975 US / / / / /2000 Business Environment N. America 1905/ / /

71 The Supply Challenge 125 New Discoveries 100 Unconventional Enhanced Recovery (Brownfield) Development of Existing Reserves 25 Existing Capacity World Energy Outlook 2004, International Energy Agency Business Environment 71

72 Gas Prices and Inventory Bcf in Storage $/mmbtu Historic Range NYMEX Strip $20 $18 $16 $14 $12 $10 $8 $6 $4 72 1/3/2003 4/3/2003 7/3/ /3/2003 1/3/2004 4/3/2004 7/3/ /3/2004 1/3/2005 4/3/2005 7/3/ /3/2005 1/3/2006 4/3/2006 7/3/ /3/2006 1/3/2007 4/3/2007 7/3/ /3/2007 1/3/2008 Source: Bloomberg (NGUSHHUB, DOENUST1, MFP), EIA (DOE) Business Environment

73 Is N.A. Oversupplied? Change in Gas Production relative to January 2005 (Bcf/d 4 Gas Rigs Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 Oct 06 Jan 07 Apr 07 Jul US Gas 914 Pipeline Imports LNG Imports Gas Rig Count US Gas Supply Business Environment 73

74 A Step Change in LNG Imports 74 BCf/d Jan 2000 May Sep Jan 2001 May Sep Jan 2002 May Sep Jan 2003 May Sep Jan 2004 May Sep Jan 2005 May Sep Jan 2006 May Sep Jan 2007 May Sep 07 Business Environment

75 Gas Rigs vs Gas Production Gas Rigs Average Daily Gas Production Rigs Increases in gas rig count, drilling activity have not led to increased production Katrina and Rita Jan 97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Source: EIA, Baker Hughes Business Environment

76 U.S. Rig Activity Total Rig Count Horizontal Rig Count 1,800 1, ,700 1, Up 28% 2007 YTD 1, , ,300 1,200 1,100 Up 3% 2007 YTD , /04 7/04 1/05 7/05 1/06 7/06 1/07 7/07 1/04 7/04 1/05 7/05 1/06 7/06 1/07 7/07 Rig Count 76

77 US Offshore Jan 2002 Jan 2003 Jan 2004 Jan 2005 Jan 2006 Jan 2007 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Plan 2007 Actual Source: BHI Rig Count

78 Canadian Rig Activity % below 2006 before break-up Break-up was two weeks earlier than in Jan June Dec Rig Count 78

79 International JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Plan 2007 Actual Jan 2002 Jan 2003 Jan 2004 Jan 2005 Jan 2006 Jan 2007 Source: BHI Rig Count

80 U.S. Natural Gas Depletion Business Environment 80

81 The Access Challenge Norway Canada UK Russia United States Mexico Venezuela Algeria Nigeria Libya Egypt Caspian China Malaysia Indonesia Worldwide Oil and Gas Reserves operated by NOC s Non-NOCs Brazil Iraq Kuwait Saudi Arabia Iran Qatar UAE Australia Business Environment 81

82 Revenue Equivalent Rigs Canada Other Europe US Offshore North Sea L. America Middle East Asia Pacific Ex India India BHI revenue from the average US land rig BHI revenue from the average rig in the region W. Africa Business Environment 82

83 83

84 International Growth in 2007 Algeria Up >30% Libya Up 71% Russia Up 52% Brazil Up 77% Malaysia Up 83% Saudi Arabia Up 36% Qatar Up 69% India Up >30% * Guidance as of 27 July Please see Earnings News Release for discussion of applicable risk factors. Business Environment 84

85 170 Top Projects Source: Goldman Sachs Business Environment 85

86 International Growth in 2007 Canada Gas driven activty; high costs and high depletion rates; running 30% + below last year; impact on exports to US offset by US LNG imports? Gulf of Mexico Deep water and deep shelf plays; Hurricane disruptions? More rigs exit; deepwater activity coming US Land Steep decline rates; approaching 70% in 1 st year for unconventional plays; Rockies to be de-bottlenecked; rig count and gas production up; record storage and soft prices Venezuela PDVSA continues struggle with depletion; Changing fiscal terms; Venezuela a OPEC price-hawk. Mexico Cantarell has peak and is in rapid decline; PEMEX investment and top-end technology needed to slow decline at Cantarell. Latin America Brazil deepwater; Argentina strong; Impact of resource nationalization Business Environment 86

87 International Growth in 2007 North Sea UK in decline and Norway following; Classic Brownfield opportunities; Fallow acreage Russia and the Caspian Re-nationalization aftershocks; BHI building footprint and relationships China Strong demand offshore. Emerging market on land India Opportunity for Baker Hughes Africa Opportunities in North Africa Algeria, Libya; West Africa Nigeria, Angola, E.G.; Continuing disruption in Nigeria. Middle East Struggle to restore excess production capacity; Saudi s reach 130 rigs goal; Manifa next significant award; fields maturing; possible role for IOCs in some countries; threat of violence continues Iran, Iraq, ; Business Environment 87

88 Guidance for FY 2007 (in millions except per share data) Guidance for Revenue $9,027.4 Non-North American Revenue 20% - 21% 22% Corporate & other expenses (ex interest expense) $245 to $255 $213.8 Income from continuing operations / share $7.21 Income from continuing operations / share $4.10 (excluding gain on sale of interest in WGeco) Tax rate for Q4 32% - 33% 31.6% Tax rate for FY % % 2007 Capital spending $1.1 Bln $ Depreciation and amortization $515 to $525 $433.7 Guidance given as of 26 October 2007 News Release see News Release for discussion of risk factors Financial Performance and Guidance 88

89 $2,800 $2,600 $2,400 $2,200 $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 Revenue and EPS Performance Revenue $1.40 EPS from continuing operations excluding non-operational items $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $ MAR 01 SEP 01 MAR 02 SEP 02 MAR 03 SEP 03 MAR 04 SEP 04 MAR SEP 05 MAR 06 SEP 06 MAR 07 SEPT MAR 01 SEP 01 MAR 02 SEP 02 MAR 03 SEP 03 MAR 04 SEP 04 MAR SEP 05 MAR 06 SEP 06 MAR 07 SEPT Financial Performance and Guidance

90 $2,250 $2,000 $1,750 $1,500 $1,250 $1,000 $750 $500 $250 $0 Debt and Debt Ratios Net Debt, Cash Debt/Equity and Debt / Total Cap 70% 60% Cash 50% Net Cash 40% 30% 17.6% Net Debt 20% 10% 15.0% 0% 90 MAR 01 DEC 01 SEP 02 JUN 03 MAR 04 DEC 04 SEP 05 JUN 06 MAR 07 MAR 01 DEC 01 SEP 02 JUN 03 MAR 04 DEC 04 SEP 05 JUN 06 MAR 07 Financial Performance and Guidance

91 CapEx, D&A, Interest, Corporate & Other $350 CapEx and D&A Interest, Corporate and Other $140 $300 CapEx $250 Net Int. exp. $120 $100 $200 D&A $80 $150 $100 $50 $60 $40 $20 $0 Corporate Expense and Other $0 -$20 91 MAR 01 DEC 01 SEP 02 JUN 03 MAR 04 DEC 04 SEP 05 JUN 06 MAR 07 MAR 01 DEC 01 SEP 02 JUN 03 MAR 04 DEC 04 SEP 05 JUN 06 MAR 07 Financial Performance and Guidance

92 BHI Growth Saudi Arabia 600 Revenue BHI Rig Count $ Millions '07e '07e Meeting with Success in Key Markets 92

93 Delivering Growth - India 6x Revenue BHI Rig Count 250 5x 200 4x 3x 150 2x 100 1x 50 0x '07e '07e Meeting with Success in Key Markets 93

94 Delivering Growth - Russia / CIS 800 Revenue $ Millions '07e Meeting with Success in Key Markets 94

95 95

96 Why Baker Hughes? A World of Opportunities Committed to Our Long Term Strategy Driving Growth through our Investment in People, Infrastructure and Innovation Portfolio of Best-in-Class Technologies Market and Technology Leadership Focus on Reliability Success in Key Markets National Oil Companies Eastern Hemisphere -- Middle East, Russia / CIS, West Africa Maturing Markets (N Sea and GoM) Focused on Improving Profits Financial flexibility & discipline Strong position for 2008, 2009 and beyond

97 For more information please contact: Gary Flaharty Director, Investor Relations (fax) Gene Shiels Asst. Director, Investor Relations (fax) 97