Baker Hughes 2009 Annual Report Download - page 88

14 Baker Hughes Incorporated
Upon consummation of the merger, a portion of the com-
bined company’s revenues will be derived from its North Amer-
ican operations. Because of the economic environment and
related decrease in demand for energy, natural gas exploration
and production in North America have decreased significantly
from their peak levels in the summer of 2008. Many factors
may adversely impact demand for natural gas and, therefore,
demand for oilfield services. Further decline in natural gas
exploration and production could cause a decline in the demand
for the services and products of the combined company. Such
decline could result in a significant adverse effect on our oper-
ating results and the expected benefits of the merger.
In addition to disclosures in this annual report regarding
the Company’s settlements, as further described in its SEC fil-
ings, BJ Services has voluntarily disclosed information found in
its internal investigations to the DOJ and SEC and has engaged
in discussions with these authorities in connection with their
review of possible illegal payments. Neither BJ Services nor
the Company can currently predict the outcome of its investi-
gations, when any of these matters will be resolved, or what,
if any, actions may be taken by the DOJ, SEC, Baker Hughes’
independent monitor or other authorities or the effect the
actions may have on the business or consolidated financial state-
ments of the combined company. If the DOJ or SEC were to
take action for failure to comply with the U.S. Foreign Corrupt
Practices Act or terms of agreements with such agencies, it
could significantly affect our results of operations.
While a settlement has been proposed in connection with
the pending stockholder class action litigation against BJ Ser-
vices, its directors and certain officers and Baker Hughes in con-
nection with the merger, the litigation could adversely affect our
business, financial condition or results of operations following
the merger if the proposed settlement has not been completed.
Demand for the combined company’s products and
services, including pressure pumping services, could
be reduced or eliminated by governmental regulation
or a change in the law.
Upon completion of the merger, pressure pumping services
will account for approximately 20% of the combined compa-
ny’s revenue. Recently, legislation has been introduced in the
United States Congress that would authorize the Environmental
Protection Agency to regulate hydraulic fracturing under the
Clean Water Act. Such regulations could greatly reduce or
eliminate demand for the combined company’s pressure
pumping services. If such regulation were enacted, the com-
bined company could suffer a significant decrease in revenue.
We are unable to predict whether the proposed legislation or
any other proposals will ultimately be enacted, and if so, the
impact on the combined company’s business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We are headquartered in Houston, Texas and operate
46 principal manufacturing plants (including significant equip-
ment repair facilities), ranging in size from approximately
10,000 to 300,000 square feet of manufacturing space. The
total aggregate area of the plants is approximately 3.6 million
square feet, of which approximately 2.4 million square feet
(65%) are located in North America, 0.3 million square feet
(8%) are located in Latin America, 0.8 million square feet
(23%) are located in Europe, and a minimal amount of space
is located in the Middle East, Asia Pacific region. Our principal
manufacturing plants are located in: (i) North America –
Houston, Texas; Broken Arrow, Claremore and Tulsa, Oklahoma;
Lafayette, Louisiana; Calgary, Canada; (ii) Latin America –
Maracaibo, Venezuela; Mendoza, Argentina; (iii) Europe, Africa,
Russia, Caspian – Aberdeen and East Kilbride, Scotland; Celle,
Germany; Belfast, Northern Ireland; and (vi) Middle East,
Asia Pacific – Dubai, United Arab Emirates.
We own or lease numerous service centers, shops and
sales and administrative offices throughout the geographic
regions in which we operate. We also have a significant invest-
ment in service vehicles, rental tools and manufacturing and
other equipment. We believe that our manufacturing facilities
are well maintained and suitable for their intended purposes.
The table below shows our principal manufacturing plants by
segment and geographic region:
Europe, Middle
Africa, East,
North Latin Russia, Asia
Segment America America Caspian Pacific Total
Completion
and Production 20 3 4 2 29
Drilling
and Evaluation 10 1 4 2 17
ITEM 3. LEGAL PROCEEDINGS
The information with respect to Item 3. Legal Proceedings
is contained in Note 15 of the Notes to Consolidated Financial
Statements in Item 8 herein. We previously disclosed copies of
the orders, agreements, settlements and deferred prosecution
agreement, referenced in Note 15, and the same are incorpo-
rated by reference in this annual report as Exhibits 10.61 and
10.62 and 99.1 through 99.7.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
None.