Baker Hughes First Quarter Operational Earnings Per Share Increase 52% in Fifth Straight Period of Outstanding Earnings Improvement.

HOUSTON--(BUSINESS WIRE)--Jan. 22, 1997--Baker Hughes Incorporated (BHI-NYSE, PSE and EBS) operational earnings per share increased 52 percent for its fiscal first quarter ended December 31, 1996, compared to the same period last year.

"For five straight quarters, Baker Hughes earnings per share compared to prior year quarters have grown by more than 50 percent," said Max. L. Lukens, Baker Hughes President and CEO. "This continued growth is based on strong performance in all key geographic areas and the continued deployment of new technology that adds value for our oil company clients."

In a record first quarter for Baker Hughes, revenues increased 16.4 percent to $808.6 million compared to $694.7 million in the year-ago quarter as both the oilfield and process equipment groups showed strong gains for the period. Operational earnings per share were $0.35 in the quarter, compared to $0.23 in the prior year period. Income before accounting change increased 55.5 percent to $50.4 million in the quarter from $32.4 million a year ago. Reported earnings per share in the quarter were $0.27 which included an $0.08 per share charge related to the adoption of SFAS 121 - "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."

"Not only is this the seventh consecutive quarter of revenue gains in excess of 10 percent compared to prior year quarters, this is the highest percentage revenue growth quarter ever for the Company," Mr. Lukens said. "Additionally, Baker Hughes has maintained good incremental profits. On the $113.9 million increase in revenues, Baker Hughes profit before tax increased $27.4 million for an incremental margin of 24 percent."

Oilfield Highlights

Baker Hughes oilfield revenues were $710.4 million in the first quarter, up 16 percent from $612.2 million in the first quarter last year.

Two-thirds of the revenue increase was achieved in the United States, Latin America and Africa. Profit before tax rose 30 percent to $96.5 million compared to $74.5 million in last years first quarter. Oilfield margins were 13.6 percent, a 140 basis point improvement from the same period last year.

In the first quarter, Baker Hughes regional operations teams successfully implemented three advanced multilateral drilling and completion projects in Venezuela and Malaysia utilizing the Company's proprietary cemented Root System. One project involved the world's first sealed trilateral well. Interest in Baker Hughes' multilateral technology continues to grow.

Baker Hughes INTEQ pursued its focus as a leading drilling technology supplier and had strong results in measurement-while-drilling, directional drilling and re-entry systems in Venezuela, Canada, the Gulf of Mexico and the North Sea. The division also successfully introduced its Multiple Propagation Resistivity MWD system in Norway, Thailand and Italy. This technology provides high-quality wireline replacement logs and superior geosteering capability.

During the quarter, Baker Oil Tools installed an EDGE intelligent completion system in its first North Sea well, extending the system's application outside the Gulf of Mexico where 12 EDGE systems already have been successfully installed. This advanced technology has assisted Baker Oil Tools in maintaining a leading share in the deepwater completion market. Due to its commitment to technology and to its strong relationship with Norsk-Hydro, Baker Oil Tools was recently awarded a major, long-term contract with Norsk-Hydro. The contract covers completion products and services for the Njord and Visund fields. The contract includes options for new field developments within the five year time frame, includes a possible four year extension, and is estimated to be valued at $200 million.

In a record quarter, Hughes Christensen saw improved performance in all operating regions, with especially strong activity gains in North America and Africa. The division continued its introduction of new GT- Technology Tricone and Gold Series fixed-cutter bit technology. These new drill bit lines have substantially reduced drilling costs for oil company clients worldwide.

Baker Performance Chemicals Incorporated experienced increased activity in North America, primarily in oilfield production chemicals. The company also benefited from new international opportunities resulting from the BASF oilfield chemical acquisition and the start of a new five-year, sole source contract for industrial chemicals at British Petroleum's Alliance refinery in Louisiana.

The Centrilift division saw increased demand for its electric submersible pump systems during the quarter, with particular strength in Latin America, Russia and North America.

Process Equipment Group

Revenues at Baker Hughes Process Equipment Company increased 23 percent to $90.2 million for the quarter compared to $73.6 million in the first quarter a year ago. Baker Hughes Process Systems continued its focus on expansion into international markets. In the current quarter, the percent of revenue outside the United States increased to 61 percent, up from 58 percent a year ago and up from 48 percent two years ago. International expansion plus the contributions from recently acquired Vortoil and Ketema helped the process company reach record first quarter revenues.

Accounting Change

To comply with Financial Accounting Standards Board SFAS No. 121, in the first fiscal quarter of 1997, Baker Hughes changed its method of accounting for long-lived assets to be disposed of. The impact of this change is a charge to income of $12.1 million, after a tax benefit of $5.9 million.

Positive Outlook

"Recent surveys of oil company capital spending plans point to a second consecutive year of strong gains in exploration and production activity," Mr. Lukens said. "Baker Hughes is well-positioned in key markets, with competitive technology and a highly-skilled service organization. We fully expect to exploit the opportunities for growth that anticipated increased activity will bring to our industry in 1997."

Acknowledgments

After 41-1/2 years of service, James D. Woods will retire from the Company and the Board of Directors effective today and Max L. Lukens will assume the additional position of Chairman. Mr. Lukens commented, Jim Woods has guided the Company through many challenges and opportunities including the difficult period of the mid-1980s. During this period, he shaped the Company for the growth we are currently experiencing. He will best be remembered for championing the merger between Baker International and Hughes Tool Company in 1987 and executing his vision to transform that combined entity into the world-class, market leader it is today. I want to personally thank Jim for devoting the majority of his life to our shareholders, our employees and our customers. The Company wishes him the very best in his new challenges.

In accordance with the term limitation provisions in the Company's By- Laws, after serving as Director for the last ten years, Harry M. Conger will retire from the Board today at the Annual Meeting. Harry has given Baker Hughes the benefit of his broad business experience and keen viewpoint into the mining and process industries. We thank Harry for his years of service and support.

In addition, H. John Riley, Jr. was elected as a Class I Director by the remaining Baker Hughes Class I Directors to fill the vacancy created by the retirement of Mr. Conger. John Riley is Chairman, President and Chief Executive Officer of Cooper Industries, Inc. We welcome John and look forward to his input and contributions.

Dividends

Also, the Baker Hughes Board declared the regular quarterly cash dividend of $0.115 per share of common stock payable February 21, 1997 to holders of record February 3, 1997. -0-

A table of comparative results follows:
(In thousands, except per share amounts)

                                            Three Months Ended
                                                 December 31
                                          1996            1995
    REVENUES:
      Sales                            $548,948          $464,955
      Services and rentals              259,672           229,742
            Total revenues              808,620           694,697
    COSTS AND EXPENSES:
      Cost of sales                     322,143           267,336
      Cost of services and rentals      123,263           118,299
      Research and engineering           23,495            21,408
      Marketing and field service       190,164           161,239
      General and administrative         47,957            48,218
      Amortization of goodwill
        and other intangibles             7,327             7,393
             Total costs and expenses   714,349           623,893
    Operating income                     94,271            70,804
    Interest expense                    (11,553)          (15,427)
    Interest income                         531               482

    Income before income taxes
      and cumulative effect
      of accounting change               83,249            55,859
    Income taxes                        (32,883)          (23,461)
    Income before cumulative
      effect of accounting change        50,366            32,398
    Cumulative effect of accounting
      change -
        Impairment of long-lived
        assets to be disposed of
        (net of $5,965 income tax
        benefit)                        (12,079)
    Net income                        $  38,287         $  32,398

    Per Share of Common Stock:

         Income before cumulative
           effect of accounting
           change                  $        .35         $     .23
         Cumulative effect of
           accounting change               (.08)
         Net income                $        .27         $     .23

    Average Shares Outstanding
      During Period                     144,920           142,281

    Depreciation expense               $ 30,919          $ 29,362
    Capital expenditures               $ 48,292          $ 34,676

Baker Hughes is a leading supplier of technology, services and solutions for the worldwide petroleum and continuous process industries.

CONTACT: Scott B. Gill, Baker Hughes, 713/439-8666