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PART฀I
ITEM฀1.฀BUSINESS
Baker฀Hughes฀Incorporated฀(“Baker฀Hughes,”฀“Company,”฀
“we,”฀“our”฀or฀“us”)฀is฀a฀Delaware฀corporation฀engaged฀in฀
the฀oilfield฀services฀industry.฀Baker฀Hughes฀is฀a฀major฀supplier฀
of฀wellbore-related฀products฀and฀technology฀services฀and฀sys-
tems฀to฀the฀worldwide฀oil฀and฀natural฀gas฀industry,฀including฀
products฀and฀services฀for฀drilling,฀formation฀evaluation,฀com-
pletion฀and฀production฀of฀oil฀and฀natural฀gas฀wells.฀We฀con-
duct฀part฀or฀all฀of฀our฀operations฀through฀subsidiaries,฀
affiliates,฀ventures฀or฀alliances.
Baker฀Hughes฀was฀formed฀in฀April฀1987฀in฀connection฀
with฀the฀combination฀of฀Baker฀International฀Corporation฀and฀
Hughes฀Tool฀Company.฀We฀acquired฀Western฀Atlas฀Inc.฀in฀a฀
merger฀completed฀on฀August฀10,฀1998.
As฀used฀herein,฀“Baker฀Hughes,”฀“Company,”฀“we,”฀
“our”฀and฀“us”฀may฀refer฀to฀Baker฀Hughes฀Incorporated฀or฀its฀
subsidiaries.฀The฀use฀of฀these฀terms฀is฀not฀intended฀to฀connote฀
any฀particular฀corporate฀status฀or฀relationships.
Our฀annual฀reports฀on฀Form฀10-K,฀quarterly฀reports฀on฀
Form฀10-Q,฀current฀reports฀on฀Form฀8-K฀and฀amendments฀to฀
those฀reports฀filed฀or฀furnished฀pursuant฀to฀Section฀13(a)฀or฀
15(d)฀of฀the฀Securities฀Exchange฀Act฀of฀1934,฀as฀amended฀(the฀
“Exchange฀Act”),฀are฀made฀available฀free฀of฀charge฀on฀our฀
Internet฀website฀at฀www.bakerhughes.com฀as฀soon฀as฀reason-
ably฀practicable฀after฀these฀reports฀have฀been฀electronically฀
filed฀with,฀or฀furnished฀to,฀the฀Securities฀and฀Exchange฀Com-
mission฀(the฀“SEC”).
We฀have฀adopted฀a฀Business฀Code฀of฀Conduct฀to฀provide฀
guidance฀to฀our฀directors,฀officers฀and฀employees฀on฀matters฀
of฀business฀conduct฀and฀ethics,฀including฀compliance฀standards฀
and฀procedures.฀We฀have฀also฀required฀our฀principal฀executive฀
officer,฀principal฀financial฀officer฀and฀principal฀accounting฀
officer฀to฀sign฀a฀Code฀of฀Ethical฀Conduct฀Certification.฀Our฀
Business฀Code฀of฀Conduct฀and฀Code฀of฀Ethical฀Conduct฀Certi-
fications฀are฀available฀on฀the฀Investor฀Relations฀section฀of฀our฀
website฀at฀www.bakerhughes.com.฀We฀intend฀to฀promptly฀dis-
close฀on฀our฀website฀information฀about฀any฀waiver฀of฀these฀
codes฀with฀respect฀to฀our฀executive฀officers฀and฀directors.฀Our฀
Corporate฀Governance฀Guidelines฀and฀the฀charters฀of฀our฀
Audit/Ethics฀Committee,฀Compensation฀Committee,฀Executive฀
Committee,฀Finance฀Committee฀and฀Governance฀Committee฀
are฀also฀available฀on฀the฀Investor฀Relations฀section฀of฀our฀web-
site฀at฀www.bakerhughes.com.฀In฀addition,฀a฀copy฀of฀our฀Busi-
ness฀Code฀of฀Conduct,฀Code฀of฀Ethical฀Conduct฀Certification,฀
Corporate฀Governance฀Guidelines฀and฀the฀charters฀of฀the฀
Committees฀referenced฀above฀are฀available฀in฀print฀at฀no฀cost฀
to฀any฀stockholder฀who฀requests฀them฀by฀writing฀or฀telephon-
ing฀us฀at฀the฀following฀address฀or฀telephone฀number:
Baker฀Hughes฀Incorporated
3900฀Essex฀Lane,฀Suite฀1200
Houston,฀TX฀฀77027
Attention:฀Investor฀Relations
Telephone:฀(713)฀439-8039
Information฀contained฀on฀or฀connected฀to฀our฀website฀is฀
not฀incorporated฀by฀reference฀into฀this฀annual฀report฀on฀Form฀
10-K฀and฀should฀not฀be฀considered฀part฀of฀this฀report฀or฀any฀
other฀filing฀that฀we฀make฀with฀the฀SEC.
We฀have฀seven฀operating฀divisions฀–฀Baker฀Atlas,฀Baker฀
Hughes฀Drilling฀Fluids,฀Baker฀Oil฀Tools,฀Baker฀Petrolite,฀Centri-
lift,฀Hughes฀Christensen฀and฀INTEQ฀–฀that฀we฀have฀aggregated฀
into฀the฀Oilfield฀segment฀because฀they฀have฀similar฀economic฀
characteristics฀and฀because฀the฀long-term฀financial฀perfor-
mance฀of฀these฀divisions฀is฀affected฀by฀similar฀economic฀condi-
tions.฀These฀operating฀divisions฀manufacture฀and฀sell฀products฀
and฀provide฀services฀used฀in฀the฀oil฀and฀natural฀gas฀industry,฀
including฀drilling,฀formation฀evaluation,฀completion฀and฀pro-
duction฀of฀oil฀and฀natural฀gas฀wells.฀They฀operate฀in฀the฀same฀
markets,฀which฀include฀all฀of฀the฀major฀oil฀and฀natural฀gas฀
producing฀regions฀of฀the฀world:฀North฀America,฀South฀Amer-
ica,฀Europe,฀Africa,฀the฀Middle฀East฀and฀the฀Far฀East.฀The฀Oil-
field฀segment฀also฀includes฀our฀30%฀interest฀in฀WesternGeco,฀
a฀seismic฀venture฀we฀entered฀into฀with฀Schlumberger฀Limited฀
(“Schlumberger”),฀as฀well฀as฀other฀investments฀in฀affiliates.
For฀additional฀industry฀segment฀information฀for฀the฀three฀
years฀ended฀December฀31,฀2004,฀see฀Note฀13฀of฀the฀Notes฀to฀
Consolidated฀Financial฀Statements฀in฀Item฀8฀herein.
Baker฀Atlas
Baker฀Atlas฀is฀a฀leading฀provider฀of฀formation฀evaluation฀
and฀wireline฀completion฀and฀production฀services฀for฀oil฀and฀
natural฀gas฀wells.
Formation฀Evaluation.฀Formation฀evaluation฀involves฀
measuring฀and฀analyzing฀specific฀physical฀properties฀of฀the฀
rock฀(petrophysical฀properties)฀in฀the฀immediate฀vicinity฀of฀a฀
wellbore฀to฀determine฀an฀oil฀or฀natural฀gas฀reservoir’s฀bound-
aries,฀volume฀of฀hydrocarbons฀and฀ability฀to฀produce฀fluids฀to฀
the฀surface.฀Electronic฀sensor฀instrumentation฀is฀run฀through฀
the฀wellbore฀to฀measure฀porosity฀and฀density฀(how฀much฀open฀
space฀there฀is฀in฀the฀rock),฀permeability฀(how฀well฀connected฀
the฀spaces฀in฀the฀rock฀are)฀and฀resistivity฀(is฀there฀oil,฀natural฀
gas฀or฀water฀in฀the฀spaces).฀At฀the฀surface,฀measurements฀are฀
recorded฀digitally฀and฀can฀be฀displayed฀on฀a฀continuous฀graph,฀
or฀“well฀log,”฀which฀shows฀how฀each฀parameter฀varies฀along฀
the฀length฀of฀the฀wellbore.฀Formation฀evaluation฀tools฀can฀also฀
be฀used฀to฀record฀formation฀pressures฀and฀take฀samples฀of฀
formation฀fluids฀to฀be฀further฀evaluated฀on฀the฀surface.
Formation฀evaluation฀instrumentation฀can฀be฀run฀in฀the฀
well฀in฀several฀ways฀and฀at฀different฀times฀over฀the฀life฀of฀the฀
well.฀The฀two฀most฀common฀methods฀of฀data฀collection฀are฀
wireline฀logging฀(performed฀by฀Baker฀Atlas)฀and฀logging-while-
drilling฀(“LWD”)฀(performed฀by฀INTEQ).฀Wireline฀logging฀is฀con-
ducted฀by฀pulling฀or฀pushing฀instruments฀through฀the฀wellbore฀
after฀it฀is฀drilled,฀while฀LWD฀instruments฀are฀attached฀to฀the฀
drill฀string฀and฀take฀measurements฀while฀the฀well฀is฀being฀
drilled.฀Wireline฀logging฀measurements฀can฀be฀made฀before฀the฀
well’s฀protective฀steel฀casing฀is฀set฀(open฀hole฀logging)฀or฀after฀
casing฀has฀been฀set฀(cased฀hole฀logging).฀Baker฀Atlas฀also฀offers฀
geophysical฀data฀interpretation฀services฀which฀help฀the฀opera-
tor฀interpret฀the฀petrophysical฀properties฀measured฀by฀the฀log-
ging฀instruments฀and฀make฀inferences฀about฀the฀formation,฀
2004฀Form฀10-K฀฀฀฀฀3