Baker Hughes Incorporated
`
`2929 Allen Parkway, Suite 2100
`Houston, Texas 77019-2118
`
`P.O. Box 4740
`Houston, TX 77210-4740
`
`(713) 439-8600
`
`www.bakerhughes.com
`
`2008 Annual Report To Stockholders
`
`Advancing Reservoir Performance. All the easy oil has been found.
`
`Our customers need the right technology, properly applied, to
`
`produce hydrocarbons from difficult reservoirs, including unconven-
`
`tional gas plays, sub-salt formations, and deep, high pressure/
`
`high temperature wells. Baker Hughes has that technology.
`
`Baker Hughes has long been a leading provider of high-performance technology that creates
`value from the reservoir. Virtually every product and service we provide is designed to lower
`costs, reduce risk or improve productivity during activities directly related to hydrocarbon
`extraction, advancing reservoir performance.
`
`Our Drilling and Evaluation segment provides advanced evaluation technologies and geosci-
`ence services to identify and quantify hydrocarbons so customers can make better decisions
`about field development and create more value. Our full range of drilling technologies helps
`our customers drill their wells more efficiently and more precisely to the most productive
`zones in the reservoir.
`
`Our Completion and Production segment is focused on advancing reservoir performance
`over the 10- to 20-year life of the field. Our completion systems anticipate reservoir prob-
`lems and enable operators to optimize production from all types of wells, even in hostile
`environments. Our artificial lift systems and chemical treatment services provide unique solu-
`tions that enhance long-term productivity.
`
`Even our downstream services to pipeline and refining customers are designed to create
`value from hydrocarbons extracted from the reservoir by moving crude oil and products
`more efficiently and by improving the performance of plant processes.
`
`While Baker Hughes possesses a full range of technologies directed at the reservoir, we are
`improving our ability to understand hydrocarbon reservoirs. In 2008, Baker Hughes formed
`the Reservoir Technology and Consulting Group to build capabilities in reservoir engineering,
`geomechanics and consulting that will enhance our ability to advance reservoir performance.
`
`Additional information about the company is available on our website at
`http://investor.bakerhughes.com/annuals.cfm
`
`Advancing
` Reservoir
` Performance
`
`1 of 160
`
`Ex. 2026
`IPR 2016-00596
`
`

`
`Baker Hughes Incorporated
`
`2929 Allen Parkway, Suite 2100
`Houston, Texas 77019-2118
`
`P.O. Box 4740
`Houston, TX 77210-4740
`
`(713) 439-8600
`
`www.bakerhughes.com
`
`2008 Annual Report To Stockholders
`
`Advancing
` Reservoir
` Performance
`
`Advancing Reservoir Performance. All the easy oil has been found.
`
`Our customers need the right technology, properly applied, to
`
`produce hydrocarbons from difficult reservoirs, including unconven-
`
`tional gas plays, sub-salt formations, and deep, high pressure/
`
`high temperature wells. Baker Hughes has that technology.
`
`Baker Hughes has long been a leading provider of high-performance technology that creates
`value from the reservoir. Virtually every product and service we provide is designed to lower
`costs, reduce risk or improve productivity during activities directly related to hydrocarbon
`extraction, advancing reservoir performance.
`
`Our Drilling and Evaluation segment provides advanced evaluation technologies and geosci-
`ence services to identify and quantify hydrocarbons so customers can make better decisions
`about field development and create more value. Our full range of drilling technologies helps
`our customers drill their wells more efficiently and more precisely to the most productive
`zones in the reservoir.
`
`Our Completion and Production segment is focused on advancing reservoir performance
`over the 10- to 20-year life of the field. Our completion systems anticipate reservoir prob-
`lems and enable operators to optimize production from all types of wells, even in hostile
`environments. Our artificial lift systems and chemical treatment services provide unique solu-
`tions that enhance long-term productivity.
`
`Even our downstream services to pipeline and refining customers are designed to create
`value from hydrocarbons extracted from the reservoir by moving crude oil and products
`more efficiently and by improving the performance of plant processes.
`
`While Baker Hughes possesses a full range of technologies directed at the reservoir, we are
`improving our ability to understand hydrocarbon reservoirs. In 2008, Baker Hughes formed
`the Reservoir Technology and Consulting Group to build capabilities in reservoir engineering,
`geomechanics and consulting that will enhance our ability to advance reservoir performance.
`
`Additional information about the company is available on our website at
`http://investor.bakerhughes.com/annuals.cfm
`
`2 of 160
`
`Ex. 2026
`IPR 2016-00596
`
`

`
`Corporate Officers
`
`Board of Directors
`
`Larry D. Brady
`Former Chairman and
`Chief Executive Officer,
`Intermec, Inc.
`
`Clarence P. Cazalot, Jr.
`President and Chief
`Executive Officer,
`Marathon Oil Corporation
`
`Chad C. Deaton
`Chairman, President and
`Chief Executive Officer,
`Baker Hughes Incorporated
`
`Edward P. Djerejian
`Director, James A. Baker III
`Institute for Public Policy,
`Rice University
`
`Anthony G. Fernandes
`Former Chairman, President
`and Chief Executive Officer,
`Phillip Services Corporation
`
`Claire W. Gargalli
`Former Vice Chairman,
`Diversified Search and
`Diversified Health
`Search Companies
`
`Pierre H. Jungels, CBE
`Former President of the
`Institute of Petroleum
`
`James A. Lash
`Chairman, Manchester
`Principal LLC
`
`James F. McCall*
`Lt. General, U.S. Army
`(Retired) and Former
`Executive Director of the
`American Society of
`Military Comptrollers
`
`J. Larry Nichols
`Chairman and Chief
`Executive Officer,
`Devon Energy Corporation
`
`H. John Riley, Jr.
`Former Chairman,
`Cooper Industries, Ltd.
`
`Charles L. Watson
`Senior Advisor, Eagle Energy
`Partners and Electricite de
`France and Chairman,
`Wincrest Ventures L.P.
`
`Stockholder Information
`Transfer Agent and Registrar
`BNY Mellon Shareowner
`Services LLC
`480 Washington Boulevard
`Jersey City, NJ 07310
`(888) 216-8057
`
`Form 10-K
`Additional copies of the
`company’s Annual Report to
`the Securities and Exchange
`Commission (Form 10-K) are
`available by writing to Baker
`Hughes Investor Relations.
`
`Stock Exchange Listings
`Ticker Symbol “BHI”
`New York Stock Exchange, Inc.
`SWX Swiss Exchange
`
`Investor Relations Office
`Gary R. Flaharty
`Director, Investor Relations
`Baker Hughes Incorporated
`P.O. Box 4740
`Houston, Texas 77210-4740
`ir@bakerhughes.com
`
`Annual Meeting
`The company’s Annual Meeting
`of Stockholders will be held
`at 9:00 a.m. Central Time on
`April 23, 2009 at the
`Plaza Banquet Room
`2777 Allen Parkway
`Houston, Texas 77019-2118
`
`Corporate Office
`Location and
`Mailing Address
`2929 Allen Parkway, Suite 2100
`Houston, Texas 77019-2118
`Telephone: (713) 439-8600
`P.O. Box 4740
`Houston, Texas 77210-4740
`
`Website
`www.bakerhughes.com
`Baker Hughes
`Information Systems
`(888) 408-4244
`
`As a Baker Hughes stockholder, you are invited to take advantage of our convenient stockholder services or request
`more information about Baker Hughes.
`
`BNY Mellon Shareowner Services, our transfer agent, maintains the records for our registered stockholders and can
`help you with a variety of stockholder related services at no charge including:
`
`• Change of name or address
`• Duplicate mailings
`• Lost stock certificates
`
`• Additional administrative services
`• Consolidation of accounts
`
`• Dividend reinvestment enrollment
`• Transfer of stock to another person
`
`Access your investor statements online 24 hours a day, 7 days a week with MLinkSM.
`For more information, go to www.melloninvestor.com/ISD.
`
`*Will retire at the Annual Meeting of Stockholders to be held April 23, 2009.
`
`Chad C. Deaton
`Chairman, President and Chief Executive Officer
`
`Martin S. Craighead
`Vice President and Group President,
`Drilling and Evaluation
`
` Paul S. Butero
` Vice President and President, INTEQ
`
` Stephen K. Ellison
` Vice President and President, Baker Atlas
`
` Gary G. Rich
` Vice President and President,
` Hughes Christensen
`
` Richard L. Williams
` Vice President and President,
` Baker Hughes Drilling Fluids
`
` Clifton Triplett
` Vice President, Chief Information Officer
`
`David H. Barr
`Vice President and Group President,
`Completion and Production
`
` Christopher P. Beaver
` Vice President and President,
` Baker Oil Tools
`
` Nelson Ney
` Vice President and President, Centrilift
`
`John A. O’Donnell
`
` Vice President and President,
` Baker Petrolite
`
` David E. Emerson
` Vice President, Corporate Development
`
`Peter A. Ragauss
`Senior Vice President and
`Chief Financial Officer
`
` Alan J. Keifer
` Vice President and Controller
`
`John H. Lohman, Jr.
`
` Vice President, Tax
`
`Jan Kees van Gaalen
`
` Vice President and Treasurer
`
`Alan R. Crain
`Senior Vice President and General Counsel
`
` Sandra E. Alford
` Corporate Secretary
`
`Jay G. Martin
`
` Vice President, Chief Compliance Officer
` and Senior Deputy General Counsel
`
`Didier Charreton
`Vice President, Human Resources
`
`Derek Mathieson
`Vice President and Chief Technology
`and Marketing Officer
`
`Russell J. Cancilla
`Vice President, Health, Safety and
`Environment and Security
`
`Design: SAVAGE, Branding + Corporate Design, Houston, Texas
`
`Review
`
`During a year with record financial results, Baker Hughes contin-
`ued to invest in people, technology and infrastructure to help oil
`and gas companies advance reservoir performance. We delivered
`advanced technology and services to support unconventional gas
`and deepwater projects in North America, geared up for growing
`activity in Latin America, and expanded our capabilities to meet
`client needs in the Eastern Hemisphere. Below are highlights from
`Baker Hughes operations around the world.
`
`Keys to Success
`• People contributing to their full potential.
`• Delivering unmatched value to our customers.
`• Being cost-efficient in everything we do.
`• Employing our resources effectively.
`
`Our Core Values
`Integrity – We believe integrity is the foundation of our individual and corporate actions.
`We are accountable for our actions, successes and failures.
`Teamwork – We believe teamwork leverages our individual strengths. We willingly share our resources as we
`work toward common goals.
`Performance – We believe performance excellence will differentiate us from our competitors. We work hard,
`celebrate our successes and learn from our failures.
`Learning – We believe a learning environment is the way to achieve the full potential of each
`individual and the company.
`
`Canada
`In Canada, total rig count was up 11% from 2007,
`as oil-directed drilling increased 33%. Our horizontal
`well technology helped operators exploit the Willi-
`ston basin oil plays in Saskatchewan. We introduced
`our casing drilling technology in the arctic Mckenzie
`delta and in the Canadian Rockies. We also provided
`drill bits, chemical services, completion tools and
`high temperature ESP systems for oil sand and Steam
`Assisted Gravity Drainage projects.
`U.S. Land
`In the U.S. land market, Baker Hughes was well posi-
`tioned to support operators in unconventional gas
`basins with horizontal drilling, evaluation and com-
`pletion technology. Our artificial lift, specialty chemi-
`cal and permanent monitoring product lines helped
`optimize production from mature fields. We inaugu-
`rated our new Center for Technology Innovation in
`Houston, and opened a number of new operations
`facilities across the country.
`U.S. Offshore
`Offshore U.S., deepwater operators benefited from
`Baker Hughes technology and experience. Our drill-
`ing fluids experts demonstrated their leadership in
`deep water with new synthetic fluids and advanced
`hydraulics engineering. Our directional drilling and
`LWD experts continued their record of reliability in
`drilling through and beneath salt formations. Our
`completions, intelligent well technology, and flow
`assurance services helped optimize deepwater pro-
`duction. And we installed ESP systems in innovative
`booster systems for subsea wells.
`Latin America
`In Latin America, Baker Hughes opened a new facility
`in Macaé, Brazil and expanded operations there to
`support deepwater and pre-salt directional drilling
`and LWD services, while adding capabilities to pro-
`vide drilling fluids throughout the country. Our artifi-
`cial lift systems helped clients throughout Latin
`America maximize oil recovery, and we introduced
`new pumping systems for water injection. Baker
`Hughes also managed two integrated operations
`projects in Colombia during the year and prepared
`for a major integrated project offshore Mexico to
`commence in 2009.
`
`3 of 160
`
`Ex. 2026
`IPR 2016-00596
`
`Europe
`In Europe, Baker Hughes reinforced its leading posi-
`tion in Norway, obtaining an important contract for
`drilling, evaluation, fluids and completion technology.
`We continued to set records, drilling complex, multi-
`lateral wells for StatoilHydro. We also helped U.K.
`operators optimize production from mature fields
`using reentry systems, directional drilling, specialty
`chemical services and artificial lift technology.
`Russia
`In the first half of the year, Baker Hughes set
`extended reach drilling records from Sakhalin Island,
`and expanded its fluids, specialty chemicals and elec-
`tric submersible pump businesses in Western Siberia.
`Wireline logging and re-entry drilling activity also
`increased before the market weakened. Despite the
`impact of the economic downturn, the company
`continues to invest in growth in Russia, adding facili-
`ties and developing our employee base.
`Middle East
`Baker Hughes opened a major new regional head-
`quarters and education center in Dubai. Horizontal
`drilling and completions activity remained strong in
`Saudi Arabia with the introduction of new PDC bits
`and LWD technology. Baker Hughes also gained
`directional drilling and completions business in the
`U.A.E., built its fluids and artificial lift businesses in
`Kuwait, delivered advanced completions in Qatar,
`and won a long-term artificial lift contract in Oman.
`Asia Pacific
`In the Asia Pacific area, Baker Hughes completion
`systems enhanced results from horizontal and HPHT
`wells in India. Our wireline and artificial lift busi-
`nesses showed strong gains in Indonesia. We pro-
`vided innovative completions and gravel packing
`services in Thailand and advanced logging services
`offshore Vietnam. In Malaysia, we drilled complex
`horizontal wells and helped restore production from
`under-performing wells. In China, our technologies
`and services contributed to successful projects in
`Bohai Bay and the South China Sea.
`Africa
`Strong activity in northern Africa included a multi-rig
`integrated operations project and steady ongoing
`business in Algeria, as well as increased participation
`in the emerging Libyan market. Baker Hughes
`focused on opportunities in the deepwater fields
`off West Africa. In Angola, we delivered high-end
`drilling and evaluation systems for complex wells,
`and in Nigeria, we prepared a new facility to serve
`offshore customers.
`
`

`
`Corporate Officers
`
`Board of Directors
`
`Larry D. Brady
`Former Chairman and
`Chief Executive Officer,
`Intermec, Inc.
`
`Clarence P. Cazalot, Jr.
`President and Chief
`Executive Officer,
`Marathon Oil Corporation
`
`Chad C. Deaton
`Chairman, President and
`Chief Executive Officer,
`Baker Hughes Incorporated
`
`Edward P. Djerejian
`Director, James A. Baker III
`Institute for Public Policy,
`Rice University
`
`Anthony G. Fernandes
`Former Chairman, President
`and Chief Executive Officer,
`Phillip Services Corporation
`
`Claire W. Gargalli
`Former Vice Chairman,
`Diversified Search and
`Diversified Health
`Search Companies
`
`Pierre H. Jungels, CBE
`Former President of the
`Institute of Petroleum
`
`James A. Lash
`Chairman, Manchester
`Principal LLC
`
`James F. McCall*
`Lt. General, U.S. Army
`(Retired) and Former
`Executive Director of the
`American Society of
`Military Comptrollers
`
`J. Larry Nichols
`Chairman and Chief
`Executive Officer,
`Devon Energy Corporation
`
`H. John Riley, Jr.
`Former Chairman,
`Cooper Industries, Ltd.
`
`Charles L. Watson
`Senior Advisor, Eagle Energy
`Partners and Electricite de
`France and Chairman,
`Wincrest Ventures L.P.
`
`Stockholder Information
`Transfer Agent and Registrar
`BNY Mellon Shareowner
`Services LLC
`480 Washington Boulevard
`Jersey City, NJ 07310
`(888) 216-8057
`
`Form 10-K
`Additional copies of the
`company’s Annual Report to
`the Securities and Exchange
`Commission (Form 10-K) are
`available by writing to Baker
`Hughes Investor Relations.
`
`Stock Exchange Listings
`Ticker Symbol “BHI”
`New York Stock Exchange, Inc.
`SWX Swiss Exchange
`
`Investor Relations Office
`Gary R. Flaharty
`Director, Investor Relations
`Baker Hughes Incorporated
`P.O. Box 4740
`Houston, Texas 77210-4740
`ir@bakerhughes.com
`
`Annual Meeting
`The company’s Annual Meeting
`of Stockholders will be held
`at 9:00 a.m. Central Time on
`April 23, 2009 at the
`Plaza Banquet Room
`2777 Allen Parkway
`Houston, Texas 77019-2118
`
`Corporate Office
`Location and
`Mailing Address
`2929 Allen Parkway, Suite 2100
`Houston, Texas 77019-2118
`Telephone: (713) 439-8600
`P.O. Box 4740
`Houston, Texas 77210-4740
`
`Website
`www.bakerhughes.com
`Baker Hughes
`Information Systems
`(888) 408-4244
`
`As a Baker Hughes stockholder, you are invited to take advantage of our convenient stockholder services or request
`more information about Baker Hughes.
`
`BNY Mellon Shareowner Services, our transfer agent, maintains the records for our registered stockholders and can
`help you with a variety of stockholder related services at no charge including:
`
`• Change of name or address
`• Duplicate mailings
`• Lost stock certificates
`
`• Additional administrative services
`• Consolidation of accounts
`
`• Dividend reinvestment enrollment
`• Transfer of stock to another person
`
`Access your investor statements online 24 hours a day, 7 days a week with MLinkSM.
`For more information, go to www.melloninvestor.com/ISD.
`
`*Will retire at the Annual Meeting of Stockholders to be held April 23, 2009.
`
`Chad C. Deaton
`Chairman, President and Chief Executive Officer
`
`Martin S. Craighead
`Vice President and Group President,
`Drilling and Evaluation
`
` Paul S. Butero
` Vice President and President, INTEQ
`
` Stephen K. Ellison
` Vice President and President, Baker Atlas
`
` Gary G. Rich
` Vice President and President,
` Hughes Christensen
`
` Richard L. Williams
` Vice President and President,
` Baker Hughes Drilling Fluids
`
` Clifton Triplett
` Vice President, Chief Information Officer
`
`David H. Barr
`Vice President and Group President,
`Completion and Production
`
` Christopher P. Beaver
` Vice President and President,
` Baker Oil Tools
`
` Nelson Ney
` Vice President and President, Centrilift
`
`John A. O’Donnell
`
` Vice President and President,
` Baker Petrolite
`
` David E. Emerson
` Vice President, Corporate Development
`
`Peter A. Ragauss
`Senior Vice President and
`Chief Financial Officer
`
` Alan J. Keifer
` Vice President and Controller
`
`John H. Lohman, Jr.
`
` Vice President, Tax
`
`Jan Kees van Gaalen
`
` Vice President and Treasurer
`
`Alan R. Crain
`Senior Vice President and General Counsel
`
` Sandra E. Alford
` Corporate Secretary
`
`Jay G. Martin
`
` Vice President, Chief Compliance Officer
` and Senior Deputy General Counsel
`
`Didier Charreton
`Vice President, Human Resources
`
`Derek Mathieson
`Vice President and Chief Technology
`and Marketing Officer
`
`Russell J. Cancilla
`Vice President, Health, Safety and
`Environment and Security
`
`Design: SAVAGE, Branding + Corporate Design, Houston, Texas
`
`Review
`
`During a year with record financial results, Baker Hughes contin-
`ued to invest in people, technology and infrastructure to help oil
`and gas companies advance reservoir performance. We delivered
`advanced technology and services to support unconventional gas
`and deepwater projects in North America, geared up for growing
`activity in Latin America, and expanded our capabilities to meet
`client needs in the Eastern Hemisphere. Below are highlights from
`Baker Hughes operations around the world.
`
`Keys to Success
`• People contributing to their full potential.
`• Delivering unmatched value to our customers.
`• Being cost-efficient in everything we do.
`• Employing our resources effectively.
`
`Our Core Values
`Integrity – We believe integrity is the foundation of our individual and corporate actions.
`We are accountable for our actions, successes and failures.
`Teamwork – We believe teamwork leverages our individual strengths. We willingly share our resources as we
`work toward common goals.
`Performance – We believe performance excellence will differentiate us from our competitors. We work hard,
`celebrate our successes and learn from our failures.
`Learning – We believe a learning environment is the way to achieve the full potential of each
`individual and the company.
`
`Canada
`In Canada, total rig count was up 11% from 2007,
`as oil-directed drilling increased 33%. Our horizontal
`well technology helped operators exploit the Willi-
`ston basin oil plays in Saskatchewan. We introduced
`our casing drilling technology in the arctic Mckenzie
`delta and in the Canadian Rockies. We also provided
`drill bits, chemical services, completion tools and
`high temperature ESP systems for oil sand and Steam
`Assisted Gravity Drainage projects.
`U.S. Land
`In the U.S. land market, Baker Hughes was well posi-
`tioned to support operators in unconventional gas
`basins with horizontal drilling, evaluation and com-
`pletion technology. Our artificial lift, specialty chemi-
`cal and permanent monitoring product lines helped
`optimize production from mature fields. We inaugu-
`rated our new Center for Technology Innovation in
`Houston, and opened a number of new operations
`facilities across the country.
`U.S. Offshore
`Offshore U.S., deepwater operators benefited from
`Baker Hughes technology and experience. Our drill-
`ing fluids experts demonstrated their leadership in
`deep water with new synthetic fluids and advanced
`hydraulics engineering. Our directional drilling and
`LWD experts continued their record of reliability in
`drilling through and beneath salt formations. Our
`completions, intelligent well technology, and flow
`assurance services helped optimize deepwater pro-
`duction. And we installed ESP systems in innovative
`booster systems for subsea wells.
`Latin America
`In Latin America, Baker Hughes opened a new facility
`in Macaé, Brazil and expanded operations there to
`support deepwater and pre-salt directional drilling
`and LWD services, while adding capabilities to pro-
`vide drilling fluids throughout the country. Our artifi-
`cial lift systems helped clients throughout Latin
`America maximize oil recovery, and we introduced
`new pumping systems for water injection. Baker
`Hughes also managed two integrated operations
`projects in Colombia during the year and prepared
`for a major integrated project offshore Mexico to
`commence in 2009.
`
`Europe
`In Europe, Baker Hughes reinforced its leading posi-
`tion in Norway, obtaining an important contract for
`drilling, evaluation, fluids and completion technology.
`We continued to set records, drilling complex, multi-
`lateral wells for StatoilHydro. We also helped U.K.
`operators optimize production from mature fields
`using reentry systems, directional drilling, specialty
`chemical services and artificial lift technology.
`Russia
`In the first half of the year, Baker Hughes set
`extended reach drilling records from Sakhalin Island,
`and expanded its fluids, specialty chemicals and elec-
`tric submersible pump businesses in Western Siberia.
`Wireline logging and re-entry drilling activity also
`increased before the market weakened. Despite the
`impact of the economic downturn, the company
`continues to invest in growth in Russia, adding facili-
`ties and developing our employee base.
`Middle East
`Baker Hughes opened a major new regional head-
`quarters and education center in Dubai. Horizontal
`drilling and completions activity remained strong in
`Saudi Arabia with the introduction of new PDC bits
`and LWD technology. Baker Hughes also gained
`directional drilling and completions business in the
`U.A.E., built its fluids and artificial lift businesses in
`Kuwait, delivered advanced completions in Qatar,
`and won a long-term artificial lift contract in Oman.
`Asia Pacific
`In the Asia Pacific area, Baker Hughes completion
`systems enhanced results from horizontal and HPHT
`wells in India. Our wireline and artificial lift busi-
`nesses showed strong gains in Indonesia. We pro-
`vided innovative completions and gravel packing
`services in Thailand and advanced logging services
`offshore Vietnam. In Malaysia, we drilled complex
`horizontal wells and helped restore production from
`under-performing wells. In China, our technologies
`and services contributed to successful projects in
`Bohai Bay and the South China Sea.
`Africa
`Strong activity in northern Africa included a multi-rig
`integrated operations project and steady ongoing
`business in Algeria, as well as increased participation
`in the emerging Libyan market. Baker Hughes
`focused on opportunities in the deepwater fields
`off West Africa. In Angola, we delivered high-end
`drilling and evaluation systems for complex wells,
`and in Nigeria, we prepared a new facility to serve
`offshore customers.
`
`4 of 160
`
`Ex. 2026
`IPR 2016-00596
`
`

`
`Selected Financial Highlights
`
`
`
`(In millions, except per share amounts)
`As Reported:
` Revenues
` Operating income
` Income from continuing operations
` Income before cumulative effect
` of accounting change
` Net income
`
`Per share of common stock:
` Income from continuing operations:
` Basic
` Diluted
`
` Net income:
` Basic
` Diluted
`Dividends
`Number of shares:
` Outstanding at year end
` Average during year
`
`Reconciliation from As Reported to
` operating profit:
` Income from continuing operations
` Non-operational items, net of tax (1)
` Operating profit after tax (2)
`
`2008 Annual Report 1
`
`2008
`
`2007
`
`2006
`
`2005
`
`2004
`
`Year Ended December 31,
`
`$ 11,864
`2,376
`
`1,635
`
`
`$ 10,428
`
`2,278
`
`1,514
`
`1,635
`1,635
`
`
`
`
`1,514
`1,514
`
`5.32
`5.30
`
`5.32
`5.30
`0.56
`
`309
`307
`
`$
`
`
`$
`
`$
`
`
`
`
`4.76
`4.73
`
`4.76
`4.73
`0.52
`
`315
`318
`
`
`
`
`$
`
`
`$
`
`$
`
`
`
`
`$
`
`$
`
`1,635
`–
`1,635
`
`$ 1,514
`
`–
`$ 1,514
`
`$ 2,399
` (1,035)
`$ 1,364
`
`$ 9,027
` 1,934
` 2,399
`
` 2,419
` 2,419
`
`$ 7,185
` 1,233
`
`874
`
`
`
`
`879
`878
`
`$ 6,080
`
`817
`
`526
`
`
`
`
`529
`529
`
`$ 7.26
`
`7.21
`
`$ 2.58
`
`2.56
`
`$ 1.57
`
`1.57
`
`$ 7.32
`
`7.27
`$ 0.52
`
`
`
`
`320
`331
`
`$ 2.59
`
`2.57
`$ 0.48
`
`$ 1.58
`
`1.58
`$ 0.46
`
`
`
`
`$
`
`$
`
`342
`339
`
`874
`–
`874
`
`
`
`
`$
`
`$
`
`337
`334
`
`526
`–
`526
`
`$ 1.57
`
`1.57
`
`Per share of common stock:
` Operating profit after tax:
` Basic
` Diluted
`
` Cash, cash equivalents and
` short-term investments
` Working capital
` Total assets
` Total debt
` Stockholders’ equity
` Total debt/equity ratio
`
` Number of Employees (thousands)
`
`$
`
`
`$
`
`
`
`
`
`
`
`
`5.32
`5.30
`
`$
`
`
`4.76
`4.73
`
`$ 4.12
`
`4.10
`
`$ 2.58
`
`2.56
`
`1,955
`4,634
`11,861
`2,333
`6,807
`34%
`
`$ 1,054
`
`3,837
`
`9,857
`
`1,084
`
`6,306
`
`17%
`
`$ 1,104
` 3,346
` 8,706
` 1,075
` 5,243
`
`21%
`
`774
`$
` 2,479
` 7,807
` 1,088
` 4,698
`
`23%
`
`319
`$
` 1,738
` 6,821
` 1,162
` 3,895
`
`30%
`
`39.8
`
`
`
`35.8
`
`
`
`34.6
`
`
`
`29.1
`
`
`
`26.9
`
`Note: The above excludes the results of Baker SPD, Baker Hughes Mining Tools, BIRD Machine, EIMCO Process Equipment, and our oil producing operations in West Africa,
`all discontinued businesses.
`(1) Includes gain on sale of our interest in affiliate, restructuring charges and reversals and impairment of investment in affiliate. Additional information of each item can
`be found on our website at www.bakerhughes.com/investor.
`(2) Operating profit after tax is a non-GAAP measure comprised of income from continuing operations excluding the impact of certain non-operational items. We believe
`that operating profit after tax is useful to investors because it is a consistent measure of the underlying results of our business. Furthermore, management uses operat-
`ing profit internally as a measure of the performance of our operations.
`
`2008 Revenues by Region
`
`Total Revenues
`2006–2008, by Quarter
`(In millions)
`
`Total Operating Profit
`After Tax Per Share (Diluted)
`2006–2008, by Quarter
`
`Net Debt(3)
`2006–2008, by Quarter
`(In millions)
`
`Canada, 5%
`Asia Pacific, 9%
`Middle East, 9%
`Russia, Caspian, 6%
`USA, 38%
`Africa, 9%
`Europe, 14%
`Latin America, 10%
`
`$3,500
`
`$3,000
`
`$2,500
`
`$2,000
`
`$1,500
`
`$1,000
`
`$500
`
`$0
`
`$1.60
`$1.40
`$1.20
`$1.00
`$0.80
`$0.60
`$0.40
`$0.20
`$0
`
`$600
`
`$400
`
`$200
`
`$0
`
`$(200)
`
`$(400)
`
`$(600)
`
`2006
`
`2007
`
`2008
`
`2006
`
`2007
`
`2008
`
`2006
`
`2007
`
`2008
`
`(3) Net debt is a non-GAAP measure comprised of
`total debt less cash, and cash equivalents. We
`believe that net debt is useful to investors because
`it is a consistent measure of the underlying results
`of our business.
`
`5 of 160
`
`Ex. 2026
`IPR 2016-00596
`
`

`
`2 Baker Hughes Incorporated
`
`To Our Stockholders
`
`Chad C. Deaton
`
`2008 was a successful year for Baker
`Hughes, at the high point of the current
`business cycle.
`Baker Hughes achieved record reve-
`nues and profits as we invested in global
`growth and added new capabilities to
`serve our customers. As 2008 began,
`energy demand was strong, commodity
`prices were escalating, and our customers’
`exploration and production activity was
`increasing. This positive trend continued
`until mid-year, when oil prices peaked at
`$145 per barrel, then began to fall rap-
`idly. During the second half of the year,
`the financial crisis and a slowing world
`economy led to a precipitous drop in
`energy prices and the most rapid and
`most dramatic downturn in upstream
`activity since the mid-1980s.
`North American activity was stronger
`than expected in 2008. Natural gas-
`directed drilling was up slightly for the
`year, driven by relatively low gas storage
`levels, higher natural gas prices, and
`increased horizontal drilling in the uncon-
`ventional shale gas basins. Oil-directed
`drilling was up 38% compared to 2007 in
`response to rising crude prices in the first
`half of the year. The U.S. rig count peaked
`in September at 2,031 active rigs, the
`highest level since 1985, then dropped
`17% by end of the year. Baker Hughes
`benefited from our strength in technology
`and services for horizontal well projects,
`which have declined less rapidly than proj-
`ects involving vertical or directional wells.
`Outside North America, most areas saw
`steady increases in exploration and produc-
`tion activity through the first half of the
`year, contributing to our strong results.
`By the third quarter, oil companies of
`all sizes and types were impacted by the
`short supply of credit, slowing economy,
`
`and drastically lower oil and natural gas
`prices. Even the economic engines of
`China and India slowed. In response,
`OPEC announced production cuts in an
`effort to prop up oil prices. By the end of
`the year, the fundamentals of the market
`had eroded, making the outlook for
`2009 uncertain.
`Despite these shifts in the market,
`Baker Hughes continued to build for
`future growth with ongoing investment in
`technology, people and infrastructure. We
`also took a critical step toward improving
`our ability to create value from our cus-
`tomers’ hydrocarbon reservoirs through
`the acquisition of two leading consulting
`firms and the formation of our new Res-
`ervoir Technology and Consulting Group.
`During the year, our regional organiza-
`tion structure grew stronger and our local
`management teams worked more closely
`together to provide multi-product solu-
`tions for our clients and drive efficiencies
`throughout the organization. Through this
`effort, we have strengthened our position
`in most key markets around the world.
`
`Record Financial Results
`In 2008, Baker Hughes revenues
`increased 14% to $11.86 billion, from
`$10.43 billion in 2007. The company’s
`2008 net income rose 9%, reaching
`$1.64 billion or $5.30 per diluted share,
`from $1.51 billion or $4.73 per diluted
`share in 2007.
`Net income for 2008 included a pre-
`tax gain of $28 million (approximately
`$18 million after-tax or $0.06 per diluted
`share) from the sale in the first quarter of
`the Completion and Production segment’s
`Surface Safety Systems product line. Net
`income also included a net charge of
`$62 million ($40 million after-tax or
`
`This Annual Report to Stockholders, including the letter to stockholders from Chairman Chad C. Deaton, contains
`forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended