1.
March 2018
PwC Case Competition

2.
2Executive Summary Situation Overview Recommendations Timeline Financial Projections
Strategic Recommendation
Executive Summary
Problem
Company
Standardize EPC
Results
Baker Hughes’ operating model and extant contract scheme leave it vulnerable to industry downturns
Shed specialized assets and
consolidate product offerings
to increase the Firm’s return
on fixed assets
Maximize Baker Hughes’ annual net profits, partially decouple cash flows from crude spot price.
Reallocate R&D
Develop natural gas
solutions in response to
increasing demand and
consumption trends
Convertible Contracts
Maximizes per-contract
profits and streamlines
production process to
benefit both parties
Rising energy demand in Asia-Pacific and unreliable OPEC production have lead to volatile oil prices

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3Executive Summary Situation Overview Recommendations Timeline Financial Projections
Shifts In Global Economic Power // Energy Price
instability
Source: U.S. Energy Information Administration (EIA), Bloomberg Professional Services
OVX/WTI Spot PriceHistory of OPEC Target Non-Adherence
Rising energy demand centered around the Asia-Pacific region has led to the rise of non-OPEC petroleum
producers such as the United States  Attempts by OPEC to reclaim market share have caused
overproduction / member non-compliance to production targets, resulting in dramatic price instability.
0
10
20
30
40
50
60
70
80
90
0
20
40
60
80
100
120
2013 2014 2015 2016 2017 2018
OVXIndex
WTISpotprice($/barrel)
WTI Spot Price OVX Index
28,000
29,000
30,000
31,000
32,000
33,000
34,000
35,000
2013 2014 2015 2016 2017 2018
CrudeOilProduced(millionbpd)
Opec Production OPEC Target

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4Executive Summary Situation Overview Recommendations Timeline Financial Projections
Oilfield Services // Industry Overview
Source: U.S. Energy Information Administration (EIA), Baker Hughes, S&P Capital IQ
Operating Rig Count vs WTI Spot Price Industry Financial Overview
 Revenue and profit in the oilfield services industry largely driven by short-term lump-sum contracts
 Since 2015, low oil prices have dried up the number of new commissions for contractors
0
500
1000
1500
2000
2500
3000
3500
4000
2013 2014 2015 2016 2017 2018
0
20
40
60
80
100
120
InternationalRigCounts
WTISpotprice($/barrel)
Rig count WTI Spot Price
21.7% 22.4%
20.1%
14.6% 14.6%
7.8% 8.3%
-2.8%
-15.4%
-11.8%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2013A 2014A 2015A 2016A 2017A
EBITDA/NetIncomeMargin(%)
Totalrevenue($mm)
EBITDA Margin (%) Net Income Margin (%) Total Revenue

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5Executive Summary Situation Overview Recommendations Timeline Financial Projections
Baker Hughes // Company Overview
Key Issue: Baker Hughes’ financial performance is linked very closely to prevailing crude spot prices. The
Company is highly vulnerable to downturns in the energy market because of the short-term nature of its contracts
with IOCs and NOCs. Large capex have driven down the fixed asset turnover ratio as crude prices have declined.
Financial Performance
16.3%
19.0%
10.4%
-1.2% -1.0%
4.9% 7.0%
-12.5%
-27.8% -27.3%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
0
5,000
10,000
15,000
20,000
25,000
30,000
2013A 2014A 2015A 2016A 2017A
EBITDA/NetIncomeMargin(%)
Totalrevenue($mm)
EBITDA Margin (%) Net Income Margin (%) Total Revenue
Source: U.S. Energy Information Administration (EIA), BH SEC filings, S&P Capital IQ
33%
22%
12% 11%
8%
6%
0%
10%
20%
30%
40%
Business Overview
Industry Market Share
Schlumberger
Halliburton
Baker Hughes
Industry leader in oilfield services, industrial services
75% of revenues come from EPC (engineering,
procurement and construction) of oil rigs and wells

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6Executive Summary Situation Overview Recommendations Timeline Financial Projections 6
Recommendations // Overview
I. Shedding niche assets
will improve FATR,
ROA ratios
Standardize EPC
Product Offerings
Employ Strategic
Convertible Contracts
with IOCs and NOCs
Reallocate R&D
Budget to Natural
Gas/LNG Technologies
Key Objectives:
Our strategies aim
to maximize Baker
Hughes’ average
annual net income
through March
2023 by hedging
against downturns
in the WTI spot
price / decoupling
cash flow from the
crude spot price.
Note: Net revenue
is not a significant
strategic focus.
II. A response to future
growth in demand for
natural gas/LNG products
III. Increases profitability
in the long run for both
parties
Strategy
Rationale

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7Executive Summary Situation Overview Recommendations Timeline Financial Projections 7
2.46
2.71
2.35
2.30
1.85
1.50
1.70
1.90
2.10
2.30
2.50
2.70
2.90
2013A 2014A 2015A 2016A 2017A
Fixed-assetTurnoverRatio
Standardize EPC Offerings and Asset Base
Baker Hughes Fixed-Asset Turnover Ratio
Source: Capital IQ
Excess
Specialized
Assets
Taking on ultra-specialized
contracts results in underused
PP&E and excess R&D
Sell Off
Specialized
Assets
Reduce underused PP&E
and boost the Fixed-asset
Turnover Ratio/ROA
Standardize
Offerings
Redeploy niche asset sale
proceeds to core strategic
initiatives/product lines

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8Executive Summary Situation Overview Recommendations Timeline Financial Projections 8
Reallocate R&D Budget to Reflect Market Trends
Source: U.S. Energy Information Administration (EIA)
Cumulative Additions To Electricity Generating Capacity By Fuel In Six Cases (Present-2040)
Key Takeaway
 Regardless of actual future economic growth or
fuel prices, consumption of natural gas as an
energy source (incl. electricity generation) is
expected to outpace any other fuel source up
until at least 2040, including renewables.
167
117
173
220
126
236
49
25
36
23
87
105
48
34
44
35
75
70
287
191
272
293
346
453
0
50
100
150
200
250
300
350
400
450
500
Reference Low
Economic
Growth
Low Oil
Price
High Oil
and Gas
Resource
High Oil
Price
High
Economic
Growth
AdditionstoEnergyCapacity(GW)
Coal Natural Gas Nuclear Wind Solar Other
Business Strategy
 Reduce current R&D budget devoted to the
development of ultra-specialized engineering
solutions for conventional petroleum clients
 Reallocate to the development of market-leading
natural gas storage (including LNG) facilities,
pipelines, underground reservoir EPC solutions

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9Executive Summary Situation Overview Recommendations Timeline Financial Projections 9
Implement Convertible Contracts // Overview
Source: Moazzami, Mohammad, et al. "A theoretical framework to enhance the conversion process in convertible
contracts." International Journal of Construction Engineering and Management 4.6 (2015): 248-262.
FEED EPC PhaseBid
Bid FEED Bid EPC Phase
Traditional Contracts (Lump Sum or Reimbursable)
Proposed Convertible Contract
 Includes clauses in the contract that allow
for flexibility in the EPC process
 Increases revenue through a 20-25% mark
up on the Lump Sum portion of the contract
 Maximizes lifetime and efficiency of the rig
Contingency
Operation
Operation
Reimbursable
Payment Plan
Lump Sum & Contingency Clause
Time Saved
During
Operation
20% Reduction in post-conversion EPC lump
sum in return for revenue stream tied to
productive operation of the well over its
operating lifetime.

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10Executive Summary Situation Overview Recommendations Timeline Financial Projections 10
Implement Convertible Contracts // Benefits
Feasibility
♦ Proposed contract model already used by
Saipem, an Italian oil and gas contractor
♦ Contract complements market trends
dictated by oil companies
♦ Appropriate risk sharing during the
construction period of the oil rig
Key Takeaway
Baker Hughes’ implementation of convertible
contracts will lead to steady future cashflows
and incentivizes the production of durable
and effective rigs.
Benefits
♦ Involvement in FEED & EPC shortens time table
and provides synergy
♦ Removes bidding process between FEED and EPC
♦ Stabilizes cash flows to offset industry downturns
Operators ♦ Faster timetable
♦ Cheaper upfront price on lump sum
♦ One stop vendor
♦ Accurate price estimations vs. lump sum contract
structure
♦ Optimizes rig efficiency
Source: Brkic, Daslav. ”Optimizing Risk by Adopting New ‘Convertible’ Contracts.” Rice University and Saipem, 2007

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11Executive Summary Situation Overview Recommendations Timeline Financial Projections
Expected Implementation Schedule
2018 2019 2020 2021 2022 2023
Begin selling off/leasing
specialized assets (15%
of depreciated PP&E)
Begin reallocating R&D budget to
natural gas solutions (30% in five yrs)
Draft new contract scheme
15% of depreciated
PP&E sold at 15% loss
15% reallocated 30% of R&D
budget reallocated
Begin implementing convertible contract
scheme on short-term contract
Begin renegotiating existing multi-project
contracts in line with convertible offerings
60% of new short-term EPC contracts
implement new contract model
30% of contracts renegotiated
Reallocate
R&D Budget
Standardize
EPC Offerings
Implement
Convertible
Contracts
Begin March 2018 By March 2020
Begin March 2018 By September 2020 By March 2023
Begin March 2018
By March 2021 By March 2023
By March 2023By January 2021

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12Executive Summary Situation Overview Recommendations Timeline Financial Projections
Financial Projections
Sources: S&P Capital IQ, BH SEC filings
Average Annual Profits From 3/1/2018 to 2/28/2023 (in $millions), w/ Changes
Average Annual Profits From 3/1/2018 to 2/28/2023 (in $millions), Reference Case
WTI price: 8/31/2020 (Dollars per barrel)
WTIprice:2/28/2023
(Dollarsperbarrel)
WTI price: 8/31/2020 (Dollars per barrel)
##### 25 45 65 85 105 125
25 (1431.6) (937.6) (443.6) 50.4 544.4 1038.4
45 (1251.2) (757.2) (263.2) 230.8 724.8 1218.8
65 (1070.8) (576.8) (82.8) 411.2 905.2 1399.2
85 (890.4) (396.4) 97.6 591.5 1085.5 1579.5
105 (710.1) (216.1) 277.9 771.9 1265.9 1759.9
125 (529.7) (35.7) 458.3 952.3 1446.3 1940.3
265.7 25 45 65 85 105 125
25 (1036.2) (445.1) 168.2 803.9 1461.8 2141.9
45 (816.1) (214.4) 409.6 1055.8 1724.3 2415.0
65 (589.7) 22.6 657.1 1313.9 1993.0 2694.4
85 (357.1) 265.7 910.9 1578.3 2268.0 2979.9
105 (118.3) 515.2 1170.9 1848.9 2549.2 3271.7
125 126.8 770.8 1437.1 2125.7 2836.6 3569.8
Key Assumptions
♦ Effective tax rate of 30.0%.
♦ 20% reduction in EPC lump sum contracts.
♦ Reimbursable contract profit rate of 10%.
♦ Projected revenue, COGS, and SG&A in
reference case are a function of rig count,
(regression r-squared of 0.986, 0.987, and
0.925, respectively).
♦ Projected rig count is a function of WTI
spot price (regression r-squared of 0.958).
♦ Linear trend between current WTI spot
price and that on 8/31/2020 and 2/28/2023.
♦ 60% of new contracts implement
convertible contract scheme over 5 years,
starting on 9/1/2018.
♦ 30% of existing contracts implement
convertible contract scheme over 5 years,
starting on 1/1/2020.
♦ R&D expense reduced to $300m from
current $384m over 5 years.
♦ Loss on sale of specialized assets: 15% loss
on 15% of current net PP&E over 5 years.
♦ Average contingency realization of 12% on
post-conversion (20% of revenues) EPC.
WTIprice:2/28/2023
(Dollarsperbarrel)

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13Executive Summary Situation Overview Recommendations Timeline Financial Projections
Financial Projections // Selected Income Statement Projection
12 Months ending
31-Dec-2013 31-Dec-2014 31-Dec-2015 31-Dec-2016 31-Dec-2017 28-Feb-2018 28-Feb-2019 29-Feb-2020 28-Feb-2021 28-Feb-2022 28-Feb-2023
Revenue 22,364.0 24,551.0 15,742.0 9,841.0 11,584.0 11,865.7 14,470.8 13,179.2 12,118.8 14,606.6 19,170.9
COGS 18,553.0 19,746.0 14,415.0 9,973.0 11,692.0 10,748.9 13,142.8 12,284.8 11,472.1 12,637.8 15,050.9
Gross Profit 3,811.0 4,805.0 1,327.0 (132.0) (108.0) 1,116.8 1,328.0 894.3 646.6 1,968.7 4,120.0
SG&A 1,306.0 1,333.0 969.0 771.0 1,045.0 948.8 971.6 884.5 803.5 816.8 879.5
R&D 556.0 613.0 466.0 384.0 384.0 384.0 367.2 350.4 333.6 316.8 300.0
Other Operating Expenses - - - - (57.0) - - - - - -
Other Operating Expenses, Total 1,862.0 1,946.0 1,435.0 1,155.0 1,372.0 1,332.8 1,338.8 1,234.9 1,137.1 1,133.6 1,179.5
Operating Income 1,949.0 2,859.0 (108.0) (1,287.0) (1,480.0) (216.0) (10.8) (340.5) (490.4) 835.1 2,940.5
Interest Exp. (234.0) (245.0) (237.0) (211.0) (212.0) (212.0) (212.0) (212.0) (212.0) (212.0) (212.0)
Int/Inv Income - 13.0 20.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0
Net Interest Exp (234.0) (232.0) (217.0) (178.0) (179.0) (179.0) (179.0) (179.0) (179.0) (179.0) (179.0)
Other Non-Operating Inc. - - - - 146.0 - - - - - -
EBT Excl. Unusual Items 1,715.0 2,627.0 (325.0) (1,465.0) (1,513.0) (395.0) (189.8) (519.5) (669.4) 656.1 2,761.5
Gain (Loss) on Sale of Assets - - - (97.0) (97.0) - (28.1) (28.1) (28.1) (28.1) (28.1)
Other Unusual Exp. - - (2,288.0) (478.0) (787.0) - - - - - -
EBT Incl. Unusual Items 1,715.0 2,627.0 (2,613.0) (2,040.0) (2,397.0) (395.0) (217.9) (547.7) (697.6) 628.0 2,733.3
Tax Expense 612.0 896.0 (639.0) 696.0 689.0 (118.5) (65.4) (164.3) (209.3) 188.4 820.0
Earnings from Cont. Operations 1,103.0 1,731.0 (1,974.0) (2,736.0) (3,086.0) (276.5) (152.5) (383.4) (488.3) 439.6 1,913.3
Extraordinary Items (7.0) (12.0) 7.0 (2.0) (75.0) - - - - - -
Net Income 1,096.0 1,719.0 (1,967.0) (2,738.0) (3,161.0) (276.5) (152.5) (383.4) (488.3) 439.6 1,913.3
Note: The above reference data includes actual historical performance and projections through
2/28/2023, assuming a WTI spot price of $45/barrel on 8/31/2020 and $85/barrel on 2/28/2023.