Baker Hughes Offshore Opportunities Houston, December.01.2010 Richard Williams President, Gulf of Mexico Region Mauricio Figueiredo Vice President, Brazil
Forward-Looking Statements Today s discussion may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, the expectations, beliefs, plans and objectives of Baker Hughes. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Our actual results or actions may differ materially from those projected in these forward-looking statements. For a summary of the specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to Baker Hughes Annual Report on Form 10-K for the year ended December 31, 2009; Baker Hughes subsequent quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2010 and June 30, 2010; and those set forth from time to time in our other filings with the Securities and Exchange Commission (the SEC ), which are available at the SEC s website at www.sec.gov and our website at www.bakerhughes.com/investor. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements. Reconciliation of Operating and GAAP Results Reconciliation of non-gaap results to GAAP results for historic periods can be found on our website at www.bakerhuhges.com/investor in the Financial Information section under Financial Reports.
Agenda Baker Hughes at a Glance Reservoir Technology and Consulting Pressure Pumping and Cementing Investments for Growth Deepwater Challenges Addressing the Opportunity A Closer Look at the Gulf of Mexico A Closer Look at Brazil 3
RESERVOIR DEVELOPMENT SERVICES Gaffney, Cline & Associates, Reservoir Engineering and Simulation, Geological Modeling and Analysis DRILLING and EVALUATION Drill bits, Directional Drilling, Formation Evaluation, Wireline, Drilling Fluids COMPLETION and PRODUCTION Completion, Intervention, Intelligent Production Systems, Artificial Lift, Completion Fluids, Oilfield Chemicals PRESSURE PUMPING Cementing, Hydraulic Fracturing, Acidizing, Stimulation, Coiled Tubing About Baker Hughes Revenues: $13 billion R&D: $375 million 51,000 employees Facilities in 72 countries Operations in 90+ countries *FY 2009: Baker Hughes and BJ Services INDUSTRIAL SERVICES Refining, Water Management, Petrochemical, Process and Pipeline Services, polymers and Well Service Products 4
Full Cycle Capabilities Enhanced Recovery 5
Baker Hughes: Customer Focused Organization Canada Europe Russia Caspian US Land Gulf of Mexico Middle East Asia Pacific Africa Latin America Regions and Geomarkets US Land, GoM, Canada, Latin America Europe, Africa, Russia Caspian, Middle East, Asia Pacific Integrated Operations Business Segments Drilling and Evaluation Completions and Production Reservoir Development Services Pressure Pumping Global Support Portfolio Management Global Marketing Supply Chain Reliability and Quality 6
Investment in Infrastructure 1.8 Capital Spending 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005 2006 2007 2008 2009 2010E 8
Investment in Technology 450 6.00% 400 350 5.00% 300 4.00% 250 200 3.00% 150 2.00% 100 50 1.00% 0 0.00% Engineering Research OFS R&E Spending as a % of Revenue 9 2009 Baker Hughes Incorporated. All Rights Reserved.
Importance of Deepwater 16% of North America Revenue Comes from Offshore (7% Deepwater) 53% of International Revenue Comes from Offshore (19% Deepwater)
Deepwater Challenges Temperature differentials with 34 F at the mud line and high temperatures in the producing zone Avoiding shallow hazards: water flows, gas hydrates Rig capabilities: ability to handle large volumes of fluids and well control systems Entering the salt Wellbore stability while drilling, low fracture gradients, lost circulation Exiting the salt layer and entering the rubble zone Drilling through the salt layer Risk mitigation, non-productive time, data quality, reaching total depth
2009 Baker Hughes Incorporated. All Rights Reserved. Deepwater and HPHT Technology Challenges Product shift Services and Equipment Designed to HTHP Conditions Lower Tertiary DW Ultra Deep Gas New Design and Testing Targets to Improve Product Performance and Reliability Temp ( o F) HTHP Service Ultra-HTHP HTHP ~150 o C ~200 o C HTHP -Extreme ~250 o C Standard Product performance X System Reliability: Complex System/Component Upgrades and Modifications ~100Mpa ~175Mpa ~240Mpa Pressure (KSI)
Technology Advancement
Enhancing Reservoir Recovery & Productivity BHI is the Leading Provider of Advanced Stimulation Technology for Enhancing Recovery in Deepwater Reservoirs The Blue Dolphin and Blue Tarpon are World Class Stimulation Vessels 300 ft in Length Real Time Analysis and Collaboration Redundant Backup Systems Dynamically Positioned (DP-2) 24,000 HHP Pumps 20,000 psi Pressure Rating 2.75 Million Lbs Proppant Capacity 14
Sustainable Chemistry Global Focus on Environment Changing Regulatory Environment The Business of Less Waste 15
Advanced Measurement and Actuation Deformed 20 foot length of 7 inch 24lb K55 steel casing Real Time Reservoir Monitoring Next Generation Production Management Next Generation Drilling and Well Placement Next Generation Formation Evaluation
Center for Technology Innovation (CTI) Increase Synergy Collaboration Across the Enterprise Expand Our Capability 40,000 psi; 700 F Focus Technology Development in Strategic Growth Markets Unconventional oil and gas Reservoir understanding Extreme HP/HT environments Deepwater Remote monitoring and optimization Increase Customer Collaboration Faster to Market Reduced engineering prototype time Increase New Product Development Attract and Retain Top Talent
Celle Technology Center Capabilities Advanced Drilling Systems Development Center of Excellence for High Temperature and Geothermal Product Development Materials Development Engineering Testing and Qualification Downhole motor test bench AutoTrak test bench Flow loop Prototype mechanical laboratory Prototype testing Reliability environmental test capabilities External Research Customers Governments Universities / research institutes
Addressing the Opportunity Market Leadership through Operational and Technical Excellence, Innovative Solutions, Integrity and Reliability Long-Term Investment Infrastructure People Technology Technology Innovation Deep water and Ultra Deep water Deep Gas and Ultra Deep Gas Digital Oilfield HP/HT Strengthened Capabilities Certified Expertise Reservoir Engineering Reliability 19
A Closer Look at the Gulf of Mexico 20
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Gulf of Mexico Leases and Activity 6522 Active Leases Inclusive of OCS Shelf and Deepwater * Source MMS / BOEM October 24, 2010 Average Production Rates 1800 GoM Oil Production Deepwater Shelf 1200 KBO / day Deepwater 200 to 250 KBO / day Shelf 1600 1400 1200 Trending to 1800 KBO / day total (proven and unproven reserves) 1000 800 600 Gas 6.38 BCFD Split 50% Shelf / DW 400 200 0 21
Gulf of Mexico Deepwater 150 Active Leases 1,000 1,499 ft Water Depth 1,800 Active Leases 1,500 4,999 ft Water Depth 1,500 Active Leases 5,000 7,499 ft Water Depth 750 Active Leases > 7,500 ft Water Depth 22
Gulf of Mexico Deepwater Challenges Wellbore Stability Salt Drilling Completions Technology 23
Gulf of Mexico Moratorium Response The Moratorium Reduced Deepwater Rig Activity in Q3/Q4 by more than 50% Deepwater Floating and Deepwater Platform Rigs Slowdown in Shelf Activity due to New Permitting Requirements Personnel and Assets Temporarily Transferred to other Active Geomarkets BHI Retains Skilled Personnel Gulf of Mexico is Positioned for Recovery Geomarket Recipients Include US Land, Angola, Australia, Brazil, Equatorial Guinea, Israel, Italy, Norway, Russia, Thailand, UK 24
Gulf of Mexico Moratorium Response Lost Opportunity Rig Movement Ocean Confidence Moved to Congo Ocean Endeavor Moved to Egypt Discoverer Americas Moving to Egypt Returning 2011 Stena Forth Moved to Greenland then Egypt Returning 2011 Marianas Moving to West Africa Ascension Moving to Libya Clarion Moving to West Africa 25
Gulf of Mexico Moratorium Response 2010 Pre Moratorium Rig Activity Shelf/IB Drilling 36 to 40 Shelf/IB Completing 20 to 24 Deepwater Drilling 30 to 33 Deepwater Completing 6 to 8 Deepwater Total = 41, Shelf/IB = 64 2010 Post Moratorium Rig Activity - November November Rig Activity Drilling Completion Total Drillship 1 0 1 Semis 1 3 4 Jackup 22 5 27 Inland 16 7 23 Platform DW 2 4 6 Platform Shelf 1 2 3 Deepwater 4 7 11 Shelf 24 7 31 Inland 16 7 23 Total Gulf Coast 44 21 65 26
Gulf of Mexico Moratorium Response Shelf Activity Remains Stable Deep Gas and Ultra Deep Gas Activity Shelf and Inland Barge Activity Absorbed Some Personnel and Assets Slow Recovery to date Operators and BOEM Work through New Permitting Requirements Only 2 Subsea New Drill Permits have been Approved (BHP and CVX Water Injectors) TLP (Dry Tree) and Subsea Completion Activity Leading the Return 27
Gulf of Mexico New Regulations BOEM creating additional rules and guidelines beyond those incorporated in NTL 05, 06, and 10 Could delay recovery until the requirements are clearly understood Operators required to develop and implement Safety and Environmental Management Systems (SEMS) for OCS Operations. Overall accountability is held by the operator, Service providers will have to integrate SEMS with each respective operating company in accordance with the SEMS elements: Assurance of Quality and Mechanical Integrity of Critical Equipment Safety and Environmental Planning Emergency Response and Control Management of Change Procedures Training and Certification Hazards Analysis Safe Work Practices 28
A Closer Look at Offshore Brazil 29
Petrobras E&P Investments 16 14 12 Open Market 10 Deep Water 8 6 4 2 0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: IBP 30
Petrobras Oil Production 2500 2000 Open Market 1500 Deep Water 1000 500 0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: IBP 31
PBR Business Plan 2010-14: US $224 Billion Business Segment 2% 1% 2% 1% Brazil and Abroad 5% 8% 53% 33% 95% E&P Downstream G&E Petrochemicals Distribution Biofuels Corporate Brazil International Source: Petrobras Business Plan 2020 32
E&P-Brazil investments 2010-14 Pre-Salt US $33.0 Billion Post-Salt US $75.2 Billion Exploration Development Infrastructure Exploration Development Infrastructure Annual expenditures for exploration of more than US $4 billion annually Development capex in pre-salt approaching 50% of post-salt spending Source: Petrobras Business Plan 2020 33
The Pre-Salt Region Total Area: 149,000 km 2 Area under concession: 41,772 km 2 (28%) Area not under concession: 107,228 km 2 (72%) Area with Petrobras interest: 35,739 km 2 (24%) Drilled wells (BR non-operator) Drilled wells (BR operator) Pre-salt reservoirs Production fields Exploratory blocks 34
Pre-Salt Oil Production Source: Petrobras Business Plan 2020 Pre - Salt Capex Through 2020 2009-13 2009-20 Petrobras total Pre-Salt Capex (Production Development) 28.9 111.4 Santos Basin Pre-Salt 18.4 98.8 Espirito Santo Pre-Salt (includes Post-Salt fields) 10.3 12.6 35
Petrobras Oil Production Source: Petrobras 36
Pre-Salt Evaluation & Development Plan 2009 / 2016 TUPI First Oil: EWT at Tupi Field Pilot Production Project at Tupi & Iara Fields Development at Tupi, Iara, Guara & Carioca Fields Q2 2009 EWT: 2 wells 6 months each and back to first well for 6 months 2010 Starts drilling campaign for Tupi and Iara pilot projects 2010/2011 Iara extended well test 2013 Guará Field development; 1 FPSO 22 wells (13 production + 9 injection) 2016 Tupi Field development; 4 FPSO 88 wells (52 production + 36 injection) 2009 2010 2011 2012 2013 2014 2015 2016 2017 End of 2010 First pilot project at Tupi Field; 1 FPSO 15 wells (9 production + 6 injection) 2013 / 2014 Second pilot project at Iara Field; 1 FPSO 15 wells (9 production + 6 injection) 2016 Iara Field development; 1 FPSO 22 wells (13 production + 9 injection) 2016 Carioca Field development; 2 FPSO 44 wells (26 production + 18 injection) 37
Pre-salt Challenges Carbonate Reservoir Characterization Reservoir Surveillance Deepwater Sub-salt Drilling Environment CO 2 Well Architecture and Completions Flow Assurance 38
Overcoming Challenges Source GEOExpro Vol 6 No5 39 39
Brazil Offshore Rig Count Forecast 90 Offshore Rig Count 80 70 60 50 40 30 Non Drilling IOC Drilling IOC Non Drilling Petrobras Drilling Petrobras 20 10 0 2008 2009 2010 2011 2012 Source: BHI 40
BHI Pre-Salt Initiatives Vision Baker Hughes is the preferred partner in pre-salt reservoirs, creating, developing and implementing high performance solutions to maximize production and recovery. Mission Baker Hughes will achieve the vision by: Establishing a Baker Hughes Technology Center in Rio Collaborating with local universities Collaboration on customer joint development projects Delivering a Baker Hughes integrated solution
Technology Portfolio Baker Hughes and Petrobras Summary of Portfolio: 11 projects technically approved and 4 under evaluation 8 well construction projects 2 G&G / reservoir engineering projects 6 artificial lift and flow assurance projects 42
Technology Center (RTC)
Main Challenges Personnel Recruitment Training Development Technology Understanding technology gaps Investing in technology innovation Alliances with customers and universities Planning the Growth Infrastructure Focus on operation execution and HS&E 44