UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~Form~~FORM 10-Q



þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2016~~2017



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number ~~1-9397~~1-09397

BAKER HUGHES, A GE COMPANY, LLC

(Formerly known as Baker Hughes ~~Incorporated~~Incorporated)

(Exact name of registrant as specified in its charter)



Delaware	76-0207995
(State or other jurisdiction	(I.R.S. Employer Identification No.)
of incorporation or organization)

17021 Aldine Westfield Road, Houston, Texas	77073-5101
(Address of principal executive offices)	(Zip Code)

~~Registrant’s~~Registrant's telephone number, including area code: (713) 439-8600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ~~“large~~"large accelerated filer,~~” “accelerated filer”~~" "accelerated filer" and ~~“smaller~~"smaller reporting ~~company”~~company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o	Emerging growth company o
		(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO þ

~~As of October 19, 2016, the registrant has outstanding~~ ~~422,794,027~~ ~~shares of Common Stock, $1 par value per share.~~

BAKER HUGHES, A GE COMPANY, LLC

~~Baker Hughes Incorporated~~

~~Table of Contents~~TABLE OF CONTENTS



		Page No.
PART I -	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements ~~(Unaudited)~~

	Condensed Consolidated ~~Condensed~~ Statements of Income (Loss) (Unaudited)- Three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	2

	Condensed Consolidated ~~Condensed~~ Statements of Comprehensive Income (Loss) (Unaudited) - Three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	3

	Condensed Consolidated ~~Condensed~~ Balance Sheets (Unaudited) - ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016	4

	Condensed Consolidated ~~Condensed~~ Statements of Changes in Equity (Unaudited) - ~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	5

	Condensed Consolidated ~~Condensed~~ Statements of Cash Flows (Unaudited) - ~~Nine~~Six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016	6

	Notes to Unaudited Condensed Consolidated ~~Condensed~~ Financial Statements	7

Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations	2221

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3433

Item 4.	Controls and Procedures	3433

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings	3534

Item 1A.	Risk Factors	3534

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3534

Item 3.	Defaults Upon Senior Securities	3534

Item 4.	Mine Safety Disclosures	3534

Item 5.	Other Information	3634

Item 6.	Exhibits	3635

	Signatures	37

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED)~~

~~Baker Hughes Incorporated~~BAKER HUGHES, A GE COMPANY, LLC

~~Consolidated Condensed Statements of Income (Loss)~~CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In millions, except per share amounts)	2016			2015			2016			2015			2017			2016			2017			2016
Revenue:
Sales	$	933		$	1,363		$	2,900		$	4,322		$	1,002		$	954		$	1,957		$	1,967
Services	1,420			2,423			4,531			8,026			1,402			1,454			2,709			3,111
Total revenue	2,353			3,786			7,431			12,348			2,404			2,408			4,666			5,078
Costs and expenses:
Cost of sales	794			1,138			2,920			3,703			893			1,182			1,668			2,126
Cost of services	1,265			2,237			4,909			7,598			1,191			1,930			2,304			3,644
Research and engineering	91			110			292			366			102			99			201			201
Marketing, general and administrative	203			211			632			749			225			222			409			429
Impairment and restructuring charges	304			98			1,590			747			—			1,126			90			1,286
Goodwill impairment	17			—			1,858			—			—			1,841			—			1,841
Merger and related costs	—			93			180			204
Merger and related costs, net													49			78			80			180
Merger termination fee	—			—			(3,500		)	—			—			(3,500		)	—			(3,500		)
Total costs and expenses	2,674			3,887			8,881			13,367			2,460			2,978			4,752			6,207
Operating loss	(321		)	(101		)	(1,450		)	(1,019		)	(56		)	(570		)	(86		)	(1,129		)
Loss on early extinguishment of debt	—			—			(142		)	—			—			(142		)	—			(142		)
Interest expense, net	(39		)	(55		)	(142		)	(162		)	(30		)	(48		)	(65		)	(103		)
Loss before income taxes	(360		)	(156		)	(1,734		)	(1,181		)
Income taxes	(70		)	—			(589		)	242
Loss before income tax and equity in loss of affiliate													(86		)	(760		)	(151		)	(1,374		)
Equity in loss of affiliate													(21		)	—			(39		)	—
Income tax provision													(72		)	(152		)	(119		)	(519		)
Net loss	(430		)	(156		)	(2,323		)	(939		)	(179		)	(912		)	(309		)	(1,893		)
Net (income) loss attributable to noncontrolling interests	1			(3		)	2			3
Net loss attributable to Baker Hughes	$	(429	)	$	(159	)	$	(2,321	)	$	(936	)
Net loss attributable to noncontrolling interests													—			1			1			1
Net loss attributable to Baker Hughes, a GE company, LLC													$	(179	)	$	(911	)	$	(308	)	$	(1,892	)

Basic and diluted loss per share attributable to Baker Hughes	$	(1.00	)	$	(0.36	)	$	(5.31	)	$	(2.13	)
Basic and diluted loss per share attributable to Baker Hughes, a GE company, LLC													$	(0.42	)	$	(2.08	)	$	(0.72	)	$	(4.30	)

Cash dividends per share	$	0.17		$	0.17		$	0.51		$	0.51		$	0.17		$	0.17		$	0.34		$	0.34

See accompanying Notes to Unaudited CondensedConsolidated Financial Statements.

BAKER HUGHES, A GE COMPANY, LLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2017			2016			2017			2016
Net loss	$	(179	)	$	(912	)	$	(309	)	$	(1,893	)
Other comprehensive income (loss):
Foreign currency translation adjustments	36			(25		)	59			40
Pension and other postretirement benefits	(7		)	12			(8		)	14
Other comprehensive income (loss)	29			(13		)	51			54
Comprehensive loss	(150		)	(925		)	(258		)	(1,839		)
Comprehensive loss attributable to noncontrolling interests	—			1			1			1
Comprehensive loss attributable to Baker Hughes, a GE company, LLC	$	(150	)	$	(924	)	$	(257	)	$	(1,838	)

See accompanying Notes to Unaudited CondensedConsolidated Financial Statements.

BAKER HUGHES, A GE COMPANY, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



(In millions)	June 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	4,133		$	4,572
Accounts receivable - less allowance for doubtful accounts (2017 - $367; 2016 - $509)	2,307			2,251
Inventories, net	1,976			1,809
Other current assets	675			535
Total current assets	9,091			9,167
Property, plant and equipment - less accumulated depreciation (2017 - $6,576; 2016 - $6,567)	4,047			4,271
Goodwill	4,088			4,084
Intangible assets, net	282			318
Other assets	1,167			1,194
Total assets	$	18,675		$	19,034
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,094		$	1,027
Short-term debt and current portion of long-term debt	331			132
Accrued employee compensation	456			566
Other accrued liabilities	585			579
Total current liabilities	2,466			2,304
Long-term debt	2,678			2,886
Deferred income taxes and other tax liabilities	344			328
Liabilities for pensions and other postretirement benefits	647			626
Other liabilities	153			153
Commitments and contingencies
Equity:
Common stock, one dollar par value (shares authorized - 750; issued and outstanding: 2017 - 426; 2016 - 424)	427			425
Capital in excess of par value	6,793			6,708
Retained earnings	6,129			6,583
Accumulated other comprehensive loss	(982		)	(1,033		)
Treasury stock	(60		)	(27		)
Baker Hughes, a GE company, LLC stockholders' equity	12,307			12,656
Noncontrolling interests	80			81
Total equity	12,387			12,737
Total liabilities and equity	$	18,675		$	19,034

See accompanying Notes to Unaudited Condensed Consolidated ~~Condensed~~ Financial Statements.

~~Baker Hughes Incorporated~~BAKER HUGHES, A GE COMPANY, LLC

~~Consolidated Condensed Statements of Comprehensive Income (Loss)~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2016 2015 2016 2015
Net loss $ (430 ) $ (156 ) $ (2,323 ) $ (939 )
Other comprehensive income (loss):
Foreign currency translation adjustments during the period 7
(91 ) 47
(182 )
Pension and other postretirement benefits, net of tax 5
5
19
6
Other comprehensive income (loss) 12
(86 ) 66
(176 )
Comprehensive loss (418 ) (242 ) (2,257 ) (1,115 )
Comprehensive (income) loss attributable to noncontrolling interests 1
(3 ) 2
3
Comprehensive loss attributable to Baker Hughes $ (417 ) $ (245 ) $ (2,255 ) $ (1,112 )



	Baker Hughes, a GE company, LLC Stockholders' Equity
(In millions, except per share amounts)	Common Stock		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Non-controlling Interests			Total Equity
Balance at December 31, 2016	$	425	$	6,708		$	6,583		$	(1,033	)	$	(27	)	$	81		$	12,737
Comprehensive loss:
Net loss						(308		)							(1		)	(309		)
Other comprehensive income									51									51
Stock plan activity	2		32									(33		)				1
Stock-based compensation			59															59
Cash dividends ($0.34 per share)						(146		)										(146		)
Net activity related to noncontrolling interests			(6		)													(6		)
Balance at June 30, 2017	$	427	$	6,793		$	6,129		$	(982	)	$	(60	)	$	80		$	12,387



	Baker Hughes, a GE company, LLC Stockholders' Equity
(In millions, except per share amounts)	Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Non-controlling Interests			Total Equity
Balance at December 31, 2015	$	437		$	7,261		$	9,614		$	(1,005	)	$	(9	)	$	84		$	16,382
Comprehensive loss:
Net loss							(1,892		)							(1		)	(1,893		)
Other comprehensive income										54									54
Stock plan activity	2			13									(12		)				3
Repurchase and retirement of common stock	(11		)	(489		)													(500		)
Stock-based compensation				68															68
Cash dividends ($0.34 per share)							(148		)										(148		)
Balance at June 30, 2016	$	428		$	6,853		$	7,574		$	(951	)	$	(21	)	$	83		$	13,966

See accompanying Notes to Unaudited Condensed Consolidated ~~Condensed~~ Financial Statements.

~~Baker Hughes Incorporated~~BAKER HUGHES, A GE COMPANY, LLC

~~Consolidated Condensed Balance Sheets~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions) September 30,
2016 December 31,
2015
ASSETS
Current assets:
Cash and cash equivalents $ 3,736
$ 2,324
Accounts receivable - less allowance for doubtful accounts
(2016 - $558; 2015 - $383)
2,207
3,217
Inventories, net 1,966
2,917
Deferred income taxes 159
301
Other current assets 934
509
Total current assets 9,002
9,268
Property, plant and equipment - less accumulated depreciation
(2016 - $6,759; 2015 - $7,378)
4,874
6,693
Goodwill 4,216
6,070
Intangible assets, net 407
583
Other assets 992
1,466
Total assets $ 19,491
$ 24,080
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 951
$ 1,409
Short-term debt and current portion of long-term debt 127
151
Accrued employee compensation 466
690
Income taxes payable 131
55
Other accrued liabilities 549
470
Total current liabilities 2,224
2,775
Long-term debt 2,895
3,890
Deferred income taxes and other tax liabilities 382
252
Liabilities for pensions and other postretirement benefits 631
646
Other liabilities 122
135
Commitments and contingencies

Equity:
Common stock, one dollar par value
(shares authorized - 750; issued and outstanding: 2016 - 423; 2015 - 437)
423
437
Capital in excess of par value 6,625
7,261
Retained earnings 7,072
9,614
Accumulated other comprehensive loss (939 ) (1,005 )
Treasury stock (22 ) (9 )
Baker Hughes stockholders’ equity 13,159
16,298
Noncontrolling interests 78
84
Total equity 13,237
16,382
Total liabilities and equity $ 19,491
$ 24,080



	Six Months Ended June 30,
(In millions)	2017			2016
Cash flows from operating activities:
Net loss	$	(309	)	$	(1,893	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization	434			659
Impairment of assets	19			1,055
Goodwill impairment	—			1,841
Inventory write-down	—			587
Loss on early extinguishment of debt	—			142
Provision for deferred income taxes	20			238
Provision for doubtful accounts	(111		)	215
Other noncash items	15			(23		)
Changes in operating assets and liabilities:
Accounts receivable	(3		)	742
Inventories	(139		)	347
Accounts payable	57			(385		)
Other operating items, net	(210		)	(47		)
Net cash flows (used in) provided by operating activities	(227		)	3,478
Cash flows from investing activities:
Expenditures for capital assets	(216		)	(156		)
Proceeds from disposal of assets	134			139
Proceeds from sale of investment securities	103			204
Purchases of investment securities	(72		)	(276		)
Net cash flows used in investing activities	(51		)	(89		)
Cash flows from financing activities:
Net repayments of short-term debt and other borrowings	(10		)	(36		)
Repayment of long-term debt	—			(1,135		)
Repurchase of common stock	—			(500		)
Dividends paid	(146		)	(148		)
Other financing items, net	(4		)	14
Net cash flows used in financing activities	(160		)	(1,805		)
Effect of foreign exchange rate changes on cash and cash equivalents	(1		)	2
(Decrease) increase in cash and cash equivalents	(439		)	1,586
Cash and cash equivalents, beginning of period	4,572			2,324
Cash and cash equivalents, end of period	$	4,133		$	3,910
Supplemental cash flows disclosures:
Income taxes paid, net of refunds	$	120		$	213
Interest paid	$	92		$	129
Supplemental disclosure of noncash investing activities:
Capital expenditures included in accounts payable	$	28		$	22

See accompanying Notes to Unaudited Condensed Consolidated ~~Condensed~~ Financial ~~Statements.~~

~~Baker Hughes Incorporated~~

~~Consolidated Condensed~~ Statements ~~of Changes in Equity~~

~~(Unaudited)~~

Baker Hughes Stockholders' Equity
(In millions, except per share amounts) Common Stock
Capital
in Excess
of
Par Value

Retained
Earnings

Accumulated
Other
Comprehensive
Loss
Treasury Stock
Non-controlling
Interests
Total Equity
Balance at December 31, 2015 $ 437
$ 7,261
$ 9,614
$ (1,005 ) $ (9 ) $ 84
$ 16,382
Comprehensive loss:
Net loss (2,321 ) (2 ) (2,323 )
Other comprehensive income 66
66
Activity related to stock plans 2
18
(13 ) 7
Repurchase and retirement of common stock (16 ) (747 ) (763 )
Stock-based compensation 93
93
Cash dividends ($0.51 per share) (221 ) (221 )
Net activity related to noncontrolling interests

(4 ) (4 )
Balance at September 30, 2016 $ 423
$ 6,625
$ 7,072
$ (939 ) $ (22 ) $ 78
$ 13,237

Baker Hughes Stockholders' Equity
(In millions, except per share amounts) Common Stock
Capital
in Excess
of
Par Value

Retained
Earnings

Accumulated
Other
Comprehensive
Loss
Treasury Stock
Non-controlling
Interests
Total Equity
Balance at December 31, 2014 $ 434
$ 7,062
$ 11,878
$ (749 ) $ —
$ 105
$ 18,730
Comprehensive loss:
Net loss (936 ) (3 ) (939 )
Other comprehensive loss (176 ) (176 )
Activity related to stock plans 2
62
(9 ) 55
Stock-based compensation 92
92
Cash dividends ($0.51 per share) (222 ) (222 )
Net activity related to noncontrolling interests (24 ) (11 ) (35 )
Balance at September 30, 2015 $ 436
$ 7,192
$ 10,720
$ (925 ) $ (9 ) $ 91
$ 17,505

~~See accompanying Notes to Unaudited Consolidated Condensed Financial Statements.~~

~~Baker Hughes Incorporated~~

~~Consolidated Condensed Statements of Cash Flows~~

~~(Unaudited)~~

Nine Months Ended September 30,
(In millions) 2016 2015
Cash flows from operating activities:
Net loss $ (2,323 ) $ (939 )
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization 921
1,326
Impairment of assets 1,241
265
Goodwill impairment 1,858
—
Inventory write-down 556
194
Loss on early extinguishment of debt 142
—
Provision (benefit) for deferred income taxes 292
(359 )
Provision for doubtful accounts 209
160
Other noncash items (15 ) (3 )
Changes in operating assets and liabilities:
Accounts receivable 802
1,692
Inventories 408
570
Accounts payable (457 ) (1,289 )
Other operating items, net (37 ) (352 )
Net cash flows provided by operating activities 3,597
1,265
Cash flows from investing activities:
Expenditures for capital assets (226 ) (751 )
Proceeds from disposal of assets 199
269
Proceeds from maturities of investment securities 307
—
Purchases of investment securities (308 ) (217 )
Other investing items, net —
(14 )
Net cash flows used in investing activities (28 ) (713 )
Cash flows from financing activities:
Net repayments of short-term debt and other borrowings (57 ) (38 )
Repayment of long-term debt (1,135 ) —
Repurchase of common stock (763 ) —
Dividends paid (221 ) (222 )
Other financing items, net 17
21
Net cash flows used in financing activities (2,159 ) (239 )
Effect of foreign exchange rate changes on cash and cash equivalents 2
(10 )
Increase in cash and cash equivalents 1,412
303
Cash and cash equivalents, beginning of period 2,324
1,740
Cash and cash equivalents, end of period $ 3,736
$ 2,043
Supplemental cash flows disclosures:
Income taxes paid, net of refunds $ 239
$ 395
Interest paid $ 183
$ 192
Supplemental disclosure of noncash investing activities:
Capital expenditures included in accounts payable $ 25
$ 52

~~See accompanying Notes to Unaudited Consolidated Condensed Financial Statements.~~.

~~Baker Hughes Incorporated~~BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated ~~Condensed~~ Financial Statements

NOTE 1. ORGANIZATION, NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

Baker Hughes, ~~Incorporated~~a GE company, LLC, a Delaware limited liability company ("~~Baker Hughes,~~BHGE LLC," "Company," "we," "our," or ~~"us,"~~"us") and the successor to Baker Hughes Incorporated, a Delaware corporation ("Baker Hughes"), is a leading supplier of oilfield services, products, technology and systems used for drilling, formation evaluation, completion and production, pressure pumping, and reservoir development in the worldwide oil and natural gas industry. We also provide products and services for other businesses including downstream chemicals, and process and pipeline services. On July 3, 2017, subsequent to the period ended June 30, 2017 as reported herein, Baker Hughes converted into a limited liability company, named Baker Hughes, a GE company, LLC, for the purpose of facilitating the combination of Baker Hughes and the oil and gas business ("GE O&G") of General Electric Company ("GE"). See "Note 2. General Electric Transaction Agreement" for further information.

Basis of Presentation

~~Our~~The accompanying unaudited condensed consolidated ~~condensed~~ financial statements of the Company included herein have been prepared in accordance with ~~generally accepted~~ accounting principles ~~("GAAP")~~generally accepted in the United States of America ("U.S." and such principles, "U.S. GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, certain information and disclosures normally included in our annual financial statements have been condensed or omitted. These unaudited condensed consolidated ~~condensed~~ financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2015.~~2016. We believe the unaudited condensed consolidated ~~condensed~~ financial statements included herein reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the interim periods. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. In the Notes to Unaudited Condensed Consolidated ~~Condensed~~ Financial Statements, all dollar and share amounts in tabulations are in millions of dollars and shares, respectively, unless otherwise indicated.

Beginning in 2016, all merger and related costs are presented as a separate line item in the consolidated condensed statements of income (loss). Prior year merger and related costs were reclassified to conform to the current year presentation.

New Accounting Standards Adopted

In ~~July~~November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. ~~2015-11,~~2015-17, ~~Simplifying the Measurement~~Balance Sheet Classification of ~~Inventory~~Deferred Taxes~~, which~~. The new standard requires ~~inventory measured using average cost methods, which we utilize,~~all deferred tax assets and liabilities to be ~~subsequently measured at the lower~~classified as noncurrent in a classified statement of ~~cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.~~financial position. We adopted this ~~guidance as of~~pronouncement prospectively on January 1, 2017, thus prior periods were not adjusted. The impact of adoption was not material to our condensed consolidated balance sheets.

In March 2016, ~~because we believe this approach will reduce~~ the ~~complexity in the subsequent measurement of our inventory. The guidance stipulates that the amendments in~~FASB issued ASU No. ~~2015-11 shall be~~2016-09, Improvements to Employee Share-Based Payment Accounting. The simplifications in this standard affect several aspects of the accounting for share-based payment transactions, including the requirement to record all of the tax effects related to share-based payments at settlement (or expiration) through the income statement. We adopted this pronouncement on ~~a prospective basis, therefore,~~January 1, 2017. The impact of adoption was not material to our ~~adoption had no impact on prior reporting periods.~~condensed consolidated financial statements and related disclosures.

New Accounting Standards To Be Adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. The ASU will supersede most of the existing revenue recognition requirements in U.S. GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity's nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The pronouncement is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.

The standard permits either a full retrospective method of adoption, in which the standard is applied to all the periods presented, or a modified retrospective method of adoption, in which the standard is applied only to the

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

current period with a cumulative-effect adjustment reflected in retained earnings. We will adopt the new standard on January 1, 2018, and iswill make a final decision on the adoption method following the close of the Transactions on July 3, 2017 as discussed in "Note 2. General Electric Transaction Agreement" and the completion of the assessment that the adoption will have on the combined businesses.

We are currently evaluating the provisions of ASU No. 2014-09 and assessing the impact, if any, that it may have on our financial position and results of operations. In the fourth quarter of 2016, we formed an implementation work team, completed training of the new ASU's revenue recognition model and began policy and contract review. Our approach includes performing a detailed review of contracts representative of our different product lines and comparing historical accounting policies and practices to ~~be applied retrospectively. Early adoption is permitted.~~the new requirements that are in the standard. We ~~have~~engaged external resources to help the Company complete the analysis of potential changes to current accounting practices related to material revenue streams and are substantially complete with the initial assessment. During the remainder of 2017, we will quantify the potential impacts as well as design and implement required process, system and control changes to address the impacts identified in the assessment. We are not ~~completed an evaluation of~~currently able to reasonably estimate the impact the ~~pronouncement~~new revenue recognition standard will have on our consolidated financial statements and related disclosures.

~~In November 2015, the FASB issued ASU No. 2015-17,~~ ~~Balance Sheet Classification of Deferred Taxes~~, which amends existing guidance on income taxes to require the classification of all deferred tax assets and liabilities as noncurrent on the balance sheet. The pronouncement is effective for annual reporting periods beginning after December 15, 2016, and may be applied either prospectively or retrospectively. Based on our current evaluation,

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

~~the reclassification of deferred tax assets from current to noncurrent could be significant. We do not expect a significant reclassification for deferred tax liabilities.~~

In February 2016, the FASB issued ASU No. 2016-02, Leases, a new standard on accounting for leases. The ASU introduces a lessee model that brings most leases on the balance sheet. The new standard also aligns many of the underlying principles of the new lessor model with those in the current accounting guidance as well as the FASB's new revenue recognition standard. However, the ASU eliminates the use of bright-line tests in determining lease classification as required in the current guidance. The ASU also requires additional qualitative disclosures along with specific quantitative disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The pronouncement is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, using a modified retrospective approach. Early adoption is permitted.

We ~~have not completed an evaluation~~are currently evaluating the provisions of ASU No. 2016-02 and assessing the impact ~~the pronouncement~~it will have on our consolidated financial statements and related disclosures. In the fourth quarter of 2016, we formed an implementation work team and completed training of the new ASU's lease model with the implementation team. We engaged external resources to complete an initial review of lease agreements representative of the different aspects of our business and to assess the potential changes to current accounting practices as a result of the new requirements that are in the standard. We are substantially complete with the initial assessment. While we continue to evaluate the effect of the standard on our ongoing financial reporting, we anticipate that the adoption of the ASU may significantly affect our balance sheet.

In ~~March~~June 2016, the FASB issued ASU No. ~~2016-09,~~2016-13, ~~Improvements~~Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. The new standard amends the impairment model for trade receivables, net investments in leases, debt securities, loans and certain other instruments to ~~Employee Share-Based Payment Accounting. The standard provides a new requirement to record all~~utilize an expected loss methodology in place of the ~~tax effects related to share-based payments at settlement (or expiration) through the income statement.~~currently used incurred loss methodology. This pronouncement is effective for annual ~~reporting~~ periods beginning after December 15, ~~2016.~~2019, including interim periods within those annual periods. Early adoption will be permitted for annual periods beginning after December 15, 2018. We ~~have completed an evaluation~~are currently evaluating the provisions of the pronouncement and ~~determined that its~~assessing the impact, ~~upon adoption will not be material to~~if any, on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. The standard addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practices. This pronouncement is effective for annual reporting periods beginning after December 15, 2017. The amendments in this ASU should be applied using a retrospective approach. We have not completed an evaluation of the impact the pronouncement will have on our consolidated financial statements and related disclosures, but the impact is not expected to be material.

In October 2016, the FASB issued ASU No. 2016-16, Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory. The standard removes the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. This pronouncement is effective for annual reporting periods beginning after December 15, 2017. The amendments in this ASU should be applied using a retrospective approach. We have not completed an evaluation of the impact

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

the pronouncement will have on our consolidated financial statements and related disclosures, but the impact is not expected to be material.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test. As a result, under this ASU, an entity would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This pronouncement is effective for impairment tests in fiscal years beginning after December 15, 2019, on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changes the income statement presentation of net periodic benefit cost by requiring separation between the service cost component and all other components. The service cost component is required to be presented as an operating expense with other similar compensation costs arising for services rendered by the pertinent employees during the period. The non-operating components must be presented outside of income from operations. This pronouncement is effective for annual reporting periods beginning after December 15, 2017, and the presentation disclosure should be applied using a retrospective approach. Early adoption is permitted. Our evaluation of the impact the pronouncement will have on our consolidated financial statements and related disclosures is still in progress, but the impact is not expected to be material.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation, Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The pronouncement is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017, and should be applied prospectively. Early adoption is permitted, including adoption in any interim period. We have not completed an evaluation of the impact the pronouncement will have on our consolidated financial statements and related disclosures, but the impact is not expected to be material.

NOTE 2. ~~HALLIBURTON MERGER~~GENERAL ELECTRIC TRANSACTION AGREEMENT

On ~~November 16, 2014,~~July 3, 2017, subsequent to the period ended June 30, 2017 as reported herein, and pursuant to the terms of the Transaction Agreement and Plan of Merger, dated as of October 30, 2016, among GE, Baker Hughes, ~~Halliburton Company~~Bear Newco, Inc. (which was renamed "Baker Hughes, a GE company") ("~~Halliburton"~~BHGE") and Bear MergerSub, Inc. ("Merger Sub"), as amended by the Amendment to Transaction Agreement and Plan of Merger, dated as of March 27, 2017, among GE, Baker Hughes, BHGE, Merger Sub, Baker Hughes Newco, Inc., a wholly owned subsidiary of ~~Halliburton~~Baker Hughes ("Newco 2"), and Bear MergerSub 2, Inc., a wholly owned subsidiary of Newco 2 ("Merger ~~Sub"~~Sub 2")~~, entered into an Agreement and Plan of Merger~~ (the ~~"Merger~~"Transaction Agreement"), the following transactions (the "Transactions") were consummated: Baker Hughes merged with Merger Sub 2, with Baker Hughes surviving the merger as a direct wholly owned subsidiary of Newco 2 (the "First Merger"), immediately followed by the conversion of the surviving corporation of the First Merger into a Delaware limited liability company (originally named Newco LLC and then renamed Baker Hughes, a GE company, LLC) ("the Conversion"). Immediately following the Conversion, Newco 2 merged with BHGE, with BHGE surviving the merger (the "Second Merger"). Following the Second Merger, GE transferred to BHGE LLC (1) all of the equity interests of the GE O&G holding companies that held directly or indirectly all of the assets and liabilities of GE O&G, including any GE O&G operating subsidiaries, and (2) $7.4 billion in cash in exchange for approximately 62.5% of the membership interests in BHGE LLC (the "Contribution").

As a result of the Transactions, BHGE became the holding company of the combined businesses of Baker Hughes and GE O&G. Also on July 3, 2017, shares of BHGE's Class A Common Stock were issued to former Baker Hughes shareholders in exchange for their existing shares in Baker Hughes on a 1:1 basis. Shares of BHGE's Class A Common Stock are listed for trading on the New York Stock Exchange as a standard listing under ~~which Halliburton would acquire all~~the ticker symbol "BHGE". Holders of Baker Hughes common stock immediately prior to the Transactions owned

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

approximately 37.5% of the indirect economic interest in BHGE LLC through their ownership of 100% of BHGE's Class A Common Stock immediately following the completion of the Transactions. All of the outstanding shares of ~~Baker Hughes through a merger~~Class B Common Stock of ~~Baker Hughes with and into Merger Sub (the "Merger").~~

~~In accordance with the provisions of Section 9.1 of the Merger Agreement, Baker Hughes and Halliburton agreed to terminate the Merger Agreement on April 30, 2016,~~BHGE issued as a result of the ~~failure~~Transactions are held by GE. Former Baker Hughes shareholders immediately after the completion of the ~~Merger~~Transactions also were entitled to ~~occur~~receive a special one-time cash dividend of $17.50 per share (the "Special Dividend") paid by BHGE to holders of record of the Class A Common Stock. Events subsequent to June 30, 2017, including the completion of the Transactions, are not reflected in the condensed consolidated financial statements included in this Quarterly Report on ~~or before April~~Form 10-Q.

We incurred net costs of $49 million and $80 million during the three and six months ended June 30, 2016 due to the inability to obtain certain specified antitrust related approvals. Halliburton paid 3.5 billion to Baker Hughes on May 4, 2016, representing the termination fee required to be paid pursuant to the Merger Agreement.

~~Baker Hughes incurred costs~~2017, respectively, related to the ~~Merger of $180 million and $204 million~~Transactions. See "Note 14. Subsequent Events" for the nine months ended September 30, 2016 and 2015, respectively, including costs under our retention programs and obligations for minimum incentive compensation costs which, based on meeting eligibility criteria, have been treated as merger and related expenses. No costsadditional information related to the ~~Merger were incurred during the three months ended September 30, 2016, compared to $93 million for the three months ended September 30, 2015.~~

Transactions.

NOTE 3. IMPAIRMENT AND RESTRUCTURING CHARGES

IMPAIRMENT CHARGES

We conduct impairment tests on long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable based on estimated future cash flows. ~~Although oil prices have risen since~~During the ~~lows reached~~first six months of 2017, based on current facts and circumstances, we did not identify any indicators of potential impairment for assets still in ~~February~~use that would require further examination. Impairments related to assets removed from service are included in restructuring charges below.

In the second quarter of 2016, ~~and rig counts have begun to stabilize, customer spending and activity continue to remain at low levels, thus continuing lower demand for our products and services. We consider our~~

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

customers' constrained capital spending budgets for 2016 and the current outlook for low activity levels to be impairment indicators and accordingly continue to evaluate our long-lived assets for impairment.

Asas a result of our long-lived asset impairment testing, ~~during the first three quarters of 2016, we have recorded impairment charges of $578 million, of which $462 million pertains to~~ certain machinery and equipment and ~~$116 million pertains to certain~~ intangible assets ~~that~~ were written down to their estimated fair value. These assets remain in use. Specific to the third quarter of 2016, certain machinery and equipment, with an initial total carrying value of $380 million, was written down to its estimated fair value, resulting in an impairment charge of $116 million. Additionally, certain intangible assets, with an initial total carrying value of $40 million, were written down to their estimated fair values, resulting in an impairment charge of $15 million. Total impairment charges for the three months ended September 30, 2016 were $131 million. The majority of the impaired machinery and equipment and intangible assets ~~impaired in the third quarter of 2016 were~~ related to our pressure pumping business in North America, Middle East and ~~Latin America.~~Asia Pacific. The estimated fair values for these assets were determined using discounted future cash flows. The significant Level 3 unobservable inputs used in the determination of the fair value of these assets were the estimated future cash flows and the weighted average cost of capital of 10.0% for North America, 14.0% for Middle East and ~~16.0%~~13.5% for ~~Latin America.~~Asia Pacific. Long-lived asset impairment charges are summarized in the table below:



	Three Months Ended				Six Months Ended
Long-lived asset impairment charges	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
Machinery and equipment	$	—	$	240	$	—	$	346
Intangible assets	—		89		—		101
Total long-lived asset impairment charges	$	—	$	329	$	—	$	447

RESTRUCTURING CHARGES

We recognize restructuring charges for costs associated with workforce reductions, contract terminations, facility closures and impairments related to the permanent removal from service and disposal of excess machinery and equipment. As a result of the downturn in the oil and natural gas industry, beginning in the first quarter of 2015 ~~and its impact on our business outlook,~~through the first quarter of 2017, we took actions to restructure and adjust our operations and cost structure to reflect current and expected activity levels to the extent allowable under the Merger Agreement with Halliburton. Following the termination of the Merger Agreement in the second quarter of 2016, to address ongoing industry challenges, we took additionalbroad actions to reduce costs, simplify our organization, refine and rationalize our operating strategy and adjust our capacity to meet expected levels of ~~future demand.~~activity. We refer to this initiative as the "Global Cost Reduction and Restructuring."

During the first quarter of 2017, we also initiated a separate restructuring plan to address specific market challenges in key areas, including offshore North America, North Sea, Africa and Southeast Asia. These actions ~~necessitated~~were primarily related to workforce reductions. We refer to this initiative as the "2017 Oilfield Restructuring."

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

The table below summarizes the impact of the two restructuring plans described above for the three and six months ended June 30, 2017 and 2016. There were no new impairment or restructuring charges during the three months ended June 30, 2017 associated with either plan.



	Three Months Ended				Six Months Ended
Restructuring charges	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
Global Cost Reduction and Restructuring	$	—	$	797	$	21	$	839
2017 Oilfield Restructuring	—		—		69		—
Total restructuring charges	$	—	$	797	$	90	$	839

Global Cost Reduction and Restructuring

As part of our Global Cost Reduction and Restructuring plan, we took actions that included workforce reductions, contract terminations, facility closures and the permanent removal from service and disposal of excess machinery and equipment. ~~Depending on future market conditions and activity levels, further actions may be necessary to adjust our operations, which may result~~The composition of total restructuring charges we incurred under this plan is shown in ~~additional charges.~~the following table:



	Three Months Ended				Six Months Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
Workforce reductions	$	—	$	98	$	3	$	145
Contract terminations	—		91		7		91
Impairment of fixed assets	—		608		11		603
Total restructuring charges	$	—	$	797	$	21	$	839

During the ~~three~~second quarter of 2016, the following actions occurred related to the Global Cost Reduction and ~~nine months ended September 30, 2016 and 2015, we recorded restructuring charges as summarized below:~~Restructuring Plan:

Three Months Ended Nine Months Ended
Restructuring Charges September 30, 2016 September 30, 2015 September 30, 2016 September 30, 2015
  Workforce reductions $ 58
$ 108
$ 203
$ 416
  Contract terminations 55
—
146
83
  Impairment of buildings and improvements 91
—
196
82
  Impairment of machinery and equipment (31 ) (10 ) 467
166
Total restructuring charges $ 173
$ 98
$ 1,012
$ 747

~~Workforce reduction costs: During the first nine months of 2016~~, ~~we initiated~~Initiated workforce reductions that ~~will result~~resulted in the elimination of approximately ~~6,400 additional~~3,000 positions worldwide ~~of which 1,400 workforce reductions were initiated during the third quarter of 2016. As a result, we~~and recorded a charge for severance expense of ~~$203 million for the nine months ended September 30, 2016,~~$98 million.

Canceled a supply contract and made payments totaling $236 million during the same period. As of September 30, 2016, we had $42 million of accrued severance. We expect that substantially all of the accrued severance will be paid by the end of 2016.

~~Contract termination costs:~~ ~~During the first nine months of 2016~~, ~~we canceled supply contracts and~~ certain ~~facility and~~ equipment leases and recorded a charge of ~~$146 million. During the same period, we made payments totaling $97~~$91 million ~~relating to~~for contract termination costs. As of September 30, 2016, we had accrued contract termination costs of $75 million. We expect that substantially all of the accrued contract termination costs will be paid within the next twelve months.

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

~~Impairment of buildings and improvements:~~ ~~During the first nine months of 2016~~, we consolidated and closed certain facilities and recorded related impairment charges of $196 million. The total impairment of buildings and improvements for the first nine months of 2016 reduced our segment assets as follows: North America - $130 million; Latin America - $18 million; Europe/Africa/Russia Caspian - $41 million; and Middle East/Asia Pacific - $7 million. These facilities have been taken out of service and will be disposed.

~~Impairment of machinery and equipment:~~ ~~Following the termination of the Merger Agreement with Halliburton in the second quarter of 2016, we evaluated our capacity and~~Adjustments were made ~~adjustments~~ to align our capacity to expected future operational levels and ~~strategy. These actions impacted all product lines~~strategy and as a result, we recognized an impairment ~~loss~~related to excess machinery and equipment. In addition, we consolidated and closed certain facilities, primarily in North America. These actions resulted in an impairment charges of ~~$467~~$608 million.

During the first quarter of 2017,we recorded a charge of $21 million ~~for~~primarily due to impairment charges resulting from the ~~nine months ended September 30, 2016 relating to~~closing of certain owned facilities as well as the cost to ~~impair excess machinery~~terminate facility and equipment lease contracts. We made payments totaling $55 million during the first six months of 2017 for severance and costs related to its net realizable value. The total machinery and equipment impairments reduced our segment assets as follows: North America - $200 million; Latin America - $82 million; Europe/Africa/Russia Caspian - $81 million; Middle East/Asia Pacific - $71 million; and Industrial Services - $33 million.contract terminations. We ~~have been disposing~~expect that substantially all of ~~all excess machinery and equipment and expect~~the remaining cash payments related to this plan will be ~~substantially complete~~paid by the end of ~~2016.~~2017. We do not expect further restructuring activities under this plan.

2017 Oilfield Restructuring

During the first quarter of 2017, as part of the 2017 Oilfield Restructuring plan, we took actions to reorganize our operating structure in certain countries based on recent changes in market conditions. Accordingly, we recorded a charge of $69 million, primarily related to workforce reductions. The composition of total restructuring charges is shown in the following table:

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements



	Three Months Ended		Six Months Ended
	June 30, 2017		June 30, 2017
Workforce reductions	$	—	$	58
Other	—		11
Total restructuring charges	$	—	$	69

The workforce reductions initiated in the first quarter of 2017 resulted in the elimination of approximately 850 positions worldwide. We made payments totaling $30 million during the first six months of 2017, and we expect that substantially all of the remaining cash payments related to this plan will be paid by the end of 2017. We do not expect significant restructuring activities under this plan for the remainder of 2017.

OTHER CHARGES

During the ~~nine months ended September 30,~~second quarter of 2016, in connection with the evaluation of our current inventory levels and expected future demand and to align with our future strategy, we recorded charges of ~~$587~~$621 million, including ~~$31~~$34 million of disposal costs, of which ~~$194~~$205 million is reported in cost of sales and ~~$393~~$416 million is reported in cost of services, to write off the carrying value of inventory deemed excess. These actions impacted all product lines. The amount of the inventory write-off recorded by segment is as follows: North America - ~~$200~~$209 million; Latin America - ~~$84~~$88 million; Europe/Africa/Russia Caspian - ~~$143~~$152 million; Middle East/Asia Pacific - ~~$117~~$125 million; and Industrial Services - ~~$43~~$47 million. We have ~~been disposing~~disposed of substantially all of the excess ~~inventory, and were substantially completed by the end of the third quarter of 2016. During the first nine months of 2015, we recorded charges of $194 million, of which $37 millionis reported in cost of sales and $157 million is reported in cost of services, to write down the carrying value of certain~~ inventory. The product lines impacted were primarily pressure pumping and drilling and completion fluids.

~~The second quarter~~

NOTE 4. EQUITY METHOD INVESTMENT

We use the equity method to account for investments in companies in which we do not have a controlling financial interest, but over which we exercise significant influence over the operating and financial policies. Our consolidated net income (loss) includes our proportionate share of the net income (loss) of the investee.

In December 2016, we closed the transaction contemplated by the contribution agreement among our subsidiaries, CSL Capital Management ("CSL") and West Street Energy Partners ("WSEP"), a fund managed by the Merchant Banking Division of Goldman Sachs, to create a North American onshore pressure pumping company, called BJ Services, LLC ("BJ Services"). Under the terms of the agreement, we contributed our wholly-owned North American onshore pressure pumping business, which consists primarily of cementing and hydraulic fracturing services in the U.S. and Canada. This also includes personnel, technology and infrastructure. We received a 46.7% interest in BJ Services, which we recorded as an equity method investment and include in Other Assets in our condensed consolidated balance sheet. We retained no other services within the onshore North American pressure pumping business that was ~~benefited by~~contributed to BJ Services.

We will continue to provide customary support services during the transition period. BJ Services has access to certain of our pressure pumping technology through a ~~reversal~~licensing agreement. We have representation on the BJ Services board of ~~a loss~~directors based on our ownership interest. While there is no formal agreement for strategic collaboration between us and BJ Services, the mixed board representation allows the BHGE LLC representatives and the BJ Services executives to identify possible opportunities for the two parties to collaborate. Through this collaboration, we may access BJ Services' product and service portfolio to provide solutions to customers in the North American onshore market if and when opportunities arise.

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

Financial information for BJ Services is reported on a ~~firm purchase commitment~~one-month lag. The impact of ~~$51 million that was recorded in cost of service in~~ the ~~first quarter of 2016~~lag on our consolidated net income (loss) is not expected to be material. BJ Services is taxed as a partnership, therefore, the ~~contract was settled in~~net loss reflected below does not include U.S. income taxes. Summarized unaudited financial information for BJ Services for the ~~second quarter of 2016.~~three and five months ended May 31, 2017 is as follows:



	Three Months Ended			Five Months Ended
	May 31, 2017			May 31, 2017
Revenue	$	265		$	365
Gross profit (loss)	(30		)	(58		)
Net loss	(45		)	(84		)
Net loss attributable to BHGE LLC	(21		)	(39		)

NOTE 4.5. SEGMENT INFORMATION

We are a supplier of oilfield services, products, technology and systems used in the worldwide oil and natural gas business, referred to as oilfield operations, which are managed through operating segments that are aligned with our geographic regions. We also provide services and products to the downstream chemicals, and process and pipeline services, referred to as Industrial Services.

The performance of our operating segments is evaluated based on operating profit (loss) before tax, which is defined as income (loss) before income taxes and equity in loss of affiliate and before the following: net interest expense, corporate expenses and certain gains and losses, including impairment and restructuring charges, goodwill impairment charges and the merger termination fee, ~~and certain gains and losses~~ not allocated to the operating segments.

Beginning in 2016, we excluded merger and related costs from our operating segments. These costs are now presented as a separate line item in the consolidated condensed statement of income (loss). Prior year merger and related costs have been reclassified to conform to the current year presentation.

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

Summarized financial information is shown in the following tables:


	Three Months Ended					Three Months Ended					Three Months Ended					Three Months Ended
	September 30, 2016					September 30, 2015					June 30, 2017					June 30, 2016
Segments	Revenue		Operating Profit (Loss) Before Tax			Revenue		Operating Profit (Loss) Before Tax			Revenue		Operating Profit (Loss) Before Tax			Revenue		Operating Profit (Loss) Before Tax
North America	$	674	$	(65	)	$	1,368	$	(153	)	$	778	$	14		$	668	$	(311	)
Latin America	243		20			439		51			208		12			235		(243		)
Europe/Africa/Russia Caspian	519		22			791		98			504		15			581		(257		)
Middle East/Asia Pacific	649		71			849		76			661		63			651		(142		)
Industrial Services	268		30			339		44			253		(8		)	273		(43		)
Total Operations	2,353		78			3,786		116			2,404		96			2,408		(996		)
Corporate(1)	—		(78		)	—		(26		)	—		(103		)	—		(29		)
Loss on early extinguishment of debt											—		—			—		(142		)
Interest expense, net	—		(39		)	—		(55		)	—		(30		)	—		(48		)
Impairment and restructuring charges	—		(304		)	—		(98		)	—		—			—		(1,126		)
Goodwill impairment	—		(17		)	—		—			—		—			—		(1,841		)
Merger and related costs	—		—			—		(93		)
Merger and related costs, net											—		(49		)	—		(78		)
Merger termination fee											—		—			—		3,500
Total	$	2,353	$	(360	)	$	3,786	$	(156	)	$	2,404	$	(86	)	$	2,408	$	(760	)


⁽¹⁾	For the three months ended June 30, 2017, corporate expenses include charges for litigation and other related matters of $67 million.

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements


	Nine Months Ended					Nine Months Ended					Six Months Ended					Six Months Ended
	September 30, 2016					September 30, 2015					June 30, 2017					June 30, 2016
Segments	Revenue		Operating Profit (Loss) Before Tax			Revenue		Operating Profit (Loss) Before Tax			Revenue		Operating Profit (Loss) Before Tax			Revenue		Operating Profit (Loss) Before Tax
North America	$	2,161	$	(601	)	$	4,872	$	(512	)	$	1,490	$	(9	)	$	1,487	$	(536	)
Latin America	755		(289		)	1,371		129			409		96			512		(309		)
Europe/Africa/Russia Caspian	1,711		(254		)	2,555		135			965		16			1,192		(276		)
Middle East/Asia Pacific	2,018		(22		)	2,621		198			1,322		135			1,369		(93		)
Industrial Services	786		(17		)	929		86			480		(14		)	518		(47		)
Total Operations	7,431		(1,183		)	12,348		36			4,666		224			5,078		(1,261		)
Corporate(1)	—		(139		)	—		(104		)	—		(140		)	—		(61		)
Loss on early extinguishment of debt	—		(142		)	—		—			—		—			—		(142		)
Interest expense, net	—		(142		)	—		(162		)	—		(65		)	—		(103		)
Impairment and restructuring charges	—		(1,590		)	—		(747		)	—		(90		)	—		(1,286		)
Goodwill impairment	—		(1,858		)	—		—			—		—			—		(1,841		)
Merger and related costs	—		(180		)	—		(204		)
Merger and related costs, net											—		(80		)	—		(180		)
Merger termination fee	—		3,500			—		—			—		—			—		3,500
Total	$	7,431	$	(1,734	)	$	12,348	$	(1,181	)	$	4,666	$	(151	)	$	5,078	$	(1,374	)

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

~~The following table presents total assets by segment at September 30, 2016 and December 31, 2015:~~

September 30, 2016 December 31, 2015
Segments Assets Assets
North America $ 3,541
$ 6,599
Latin America 1,595
2,323
Europe/Africa/Russia Caspian 2,488
3,077
Middle East/Asia Pacific 2,867
3,441
Industrial Services 678
1,106
Shared assets 5,314
5,613
Total Operations 16,483
22,159
Corporate 3,008
1,921
Total $ 19,491

$ 24,080

Shared assets consist primarily of the assets carried at the enterprise level and include assets related to our supply chain, product line technology and information technology organizations. These assets are used to support our operating segments and consist primarily of manufacturing inventory, property, plant and equipment used in manufacturing and information technology, intangible assets related to technology, and certain deferred tax assets. All costs and expenses from these organizations, including depreciation and amortization, are allocated to our operating segments as these enterprise organizations support our global operations. Corporate assets include cash, certain facilities, and certain other noncurrent assets related to certain employee retirement plans.


⁽¹⁾	For the six months ended June 30, 2017, corporate expenses include charges for litigation and other related matters of $67 million.

NOTE 5.6. INCOME TAXES

For the three months ended ~~September~~June 30, ~~2016,~~2017, the total income tax ~~expense~~provision was ~~$70~~$72 million on a loss before income taxes, including equity in loss of ~~$360~~affiliate, of $107 million, resulting in a negative effective tax rate of ~~19.4%~~67.3%. The negative effective tax rate is due primarily to the geographical mix of earnings and losses, ~~such that~~which resulted in taxes in certain jurisdictions, including withholding and deemed profit taxes, ~~exceed~~exceeding the tax benefit from the losses in other jurisdictions due to valuation allowances provided in most loss jurisdictions.

In the third quarter of 2016, we filed a carryback claim for the 2015 U.S. Net Operating Loss ("NOL") to prior tax years. As a result, a $370 million current income tax receivable is reflected in other current assets in the balance sheet as of September 30, 2016.

NOTE 6.7. EARNINGS PER SHARE

A reconciliation of the number of shares used for the basic and diluted loss per share computations is as follows:

Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Weighted average common shares outstanding for basic and diluted loss per share 430
439
437
438

Anti-dilutive shares excluded from diluted loss per share ⁽¹⁾
1
1
1
2
Future potentially dilutive shares excluded from diluted loss per share ⁽²⁾
3
3
5
3

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~



	Three Months Ended June 30,		Six Months Ended June 30,
	2017	2016	2017	2016
Weighted average common shares outstanding for basic and diluted loss per share	429	438	429	440

Anti-dilutive shares excluded from diluted loss per share ⁽¹⁾	1	1	1	1
Future potentially dilutive shares excluded from diluted loss per share ⁽²⁾	2	6	2	7


⁽¹⁾	The calculation of diluted loss per share for ~~both~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 excludes shares potentially issuable under stock-based incentive compensation plans and the employee stock purchase plan, as their effect, if included, would have been anti-dilutive.


⁽²⁾	Options where the exercise price exceeds the average market price are excluded from the calculation of diluted net loss or earnings per share because their effect would be anti-dilutive.

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

NOTE 7.8. INVENTORIES

Inventories, net of reserves of ~~$128~~$151 million at ~~September~~June 30, ~~2016~~2017 and ~~$278~~$188 million at December 31, ~~2015~~2016, are comprised of the following:

September 30,
2016 December 31,
2015
Finished goods $ 1,744
$ 2,649
Work in process 117
132
Raw materials 105
136
Total inventories $ 1,966
$ 2,917

In the first nine months of 2016, we wrote off the carrying value of certain excess inventory resulting in a charge of $556 million, net of existing reserves of $260 million. In addition, we accrued $31 million of related disposal costs. See Note 3. "Impairment and Restructuring Charges" for further discussion. We have been disposing of the excess inventory, and were substantially completed by the end of the third quarter of 2016.



	June 30, 2017		December 31, 2016
Finished goods	$	1,735	$	1,607
Work in process	134		105
Raw materials	107		97
Total inventories	$	1,976	$	1,809

~~NOTE 8. PROPERTY, PLANT AND EQUIPMENT~~

~~Property, plant and equipment are comprised of the following at September 30, 2016 and December 31, 2015:~~

Useful Life September 30, 2016 December 31, 2015
Land $ 241
$ 263
Buildings and improvements 5 - 30 years 2,440
2,624
Machinery, equipment and other 1 - 20 years 8,952
11,184
Subtotal 11,633
14,071
Less: Accumulated depreciation 6,759
7,378
Total property, plant and equipment $ 4,874
$ 6,693

During the first nine months of 2016, we recorded impairment charges relating to property, plant and equipment totaling approximately $1,125 million. See Note 3. "Impairment and Restructuring Charges" for further discussion.

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

NOTE 9. GOODWILL AND INTANGIBLE ASSETS

~~The changes in the carrying amount of goodwill are detailed below by segment.~~

North
America

Latin
America

Europe/
Africa/
Russia
Caspian

Middle
East/
Asia
Pacific

Industrial
Services
Total Goodwill
Balance at December 31, 2015 $ 3,097
$ 584
$ 1,068
$ 819
$ 502
$ 6,070
Impairments (1,549 ) —
—
—
(309 ) (1,858 )
Currency translation adjustments 3
3
(1 ) —
(1 ) 4
Balance at September 30, 2016 $ 1,551
$ 587
$ 1,067
$ 819
$ 192
$ 4,216

~~We perform an annual~~Goodwill is tested annually for impairment ~~test of goodwill on a qualitative or quantitative basis for each of our reporting units~~ as of October 1 of each year or ~~more frequently~~sooner when circumstances indicate an impairment may exist at the reporting unit level. During the second quarter of 2016, as a result of the termination of the Merger Agreement with Halliburton, we concluded it was necessary to conduct a ~~quantitative~~ goodwill impairment review.

Our reporting units are the same as our five reportable segments. Goodwill is tested for impairment using a two-step approach. In the first step, the fair value of each reporting unit is determined and compared to the reporting unit's carrying value, including goodwill. If the fair value of a reporting unit is less than its carrying value, the second step of the goodwill impairment test is performed to measure the amount of impairment, if any. In the second step, the fair value of the reporting unit is allocated to the assets and liabilities of the reporting unit as if it had been acquired in a business combination and the purchase price was equivalent to the fair value of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is referred to as the implied fair value of goodwill. The implied fair value of the reporting unit's goodwill is then compared to the actual carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized for the difference.

We determined the fair value of our reporting units using a combination of techniques including discounted cash flows derived from our long-term plans and a market approach that provides value indications through a comparison with guideline public companies. The inputs used to determine the fair values were classified as Level 3 in the fair value hierarchy. Based on the results of our impairment test, ~~during the second quarter of 2016,~~ we determined that goodwill of two of our reporting units was impaired and ~~we commenced the second step~~recorded an estimate of the goodwill impairment ~~test. We~~loss of $1.84 billion, which consisted of $1.53 billion for the North America segment and $311 million for the Industrial Services segment. While we had substantially completed all actions necessary in the determination of the implied fair value of goodwill in the second quarter of ~~2016; however,~~2016, some of the estimated fair values and allocations were subject to adjustment once the valuations and other computations were completed. ~~Accordingly,~~The analysis was completed in the second quarter of 2016, we recorded an estimate of the goodwill impairment loss of $1,841 million, which consisted of $1,530 million for the North America segment and $311 million for the Industrial Services segment. During the third quarter of 2016 ~~we finalized all valuations~~ and ~~computations, which resulted~~did not result in ~~an immaterial~~a material adjustment. The total impairment is reflected in the table above. The volatility that currently exists in the oil and natural gas industry and further declines in future commodity prices and customer spending could negatively impact our forecasted profitability and operating cash flows, necessitating a future goodwill impairment review. Depending on the changes in our business outlook and other assumptions underlying the fair value measurements of our reporting units, we may be required to recognize additional goodwill impairments.

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

Intangible assets are comprised of the following:

September 30, 2016 December 31, 2015

Gross
Carrying
Amount

Less:
Accumulated
Amortization
Net
Gross
Carrying
Amount

Less:
Accumulated
Amortization
Net
Technology $ 792
$ 439
$ 353
$ 866
$ 452
$ 414
Customer relationships 67
28
39
251
106
145
Trade names 90
78
12
108
89
19
Other 16
13
3
18
13
5
Total intangible assets $ 965
$ 558
$ 407
$ 1,243
$ 660
$ 583

~~During the first nine months of 2016, we recorded impairments relating to various intangible assets totaling $116 million. See Note 3. "Impairment and Restructuring Charges" for further discussion.~~



	June 30, 2017						December 31, 2016
	Gross Carrying Amount		Less: Accumulated Amortization		Net		Gross Carrying Amount		Less: Accumulated Amortization		Net
Technology	$	526	$	286	$	240	$	527	$	267	$	260
Customer relationships	68		36		32		74		31		43
Trade names	19		12		7		90		79		11
Other	17		14		3		17		13		4
Total intangible assets	$	630	$	348	$	282	$	708	$	390	$	318

Intangible assets are generally amortized on a straight-line basis with estimated useful lives ranging from 3 to 30 years. Amortization expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was $1713 million and ~~$59~~$27 million, respectively, as compared to ~~$26~~$20 million and ~~$77~~$42 million reported in ~~2015~~2016 for the same periods.

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

Amortization expense of these intangibles over the remainder of ~~2016~~2017 and for each of the subsequent five fiscal years is expected to be as follows:

Year Estimated Amortization Expense
Remainder of 2016 $ 17
2017 65
2018 60
2019 57
2020 48
2021 43

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

~~NOTE 10. INDEBTEDNESS~~

~~Total debt consisted of the following at September 30, 2016, net of unamortized discount and debt issuance cost:~~

September 30, 2016 December 31, 2015
6.0% Notes due June 2018 $ 200
$ 255
7.5% Senior Notes due November 2018 524
747
3.2% Senior Notes due August 2021 511
746
8.55% Debentures due June 2024 112
149
6.875% Notes due January 2029 301
394
5.125% Notes due September 2040 1,132
1,482
Other debt 242
268
Total debt 3,022
4,041
Less: short-term debt and current portion of long-term debt 127
151
Total long-term debt $ 2,895
$ 3,890

The estimated fair value of total debt at September 30, 2016 and December 31, 2015 was $3,404 million and $4,321 million, respectively, which differs from the carrying amounts of $3,022 million and $4,041 million, respectively, included in our unaudited consolidated condensed balance sheets. The fair value was determined using quoted period end market prices.

In June 2016, we purchased $1.0 billion of the aggregate outstanding principal amount associated with our long-term outstanding notes and debentures, which included portions of each tranche of notes and debentures. Pursuant to a cash tender offer, the purchases resulted in the payment of an early-tender premium, including various fees, of $135 million and a pre-tax loss on the early extinguishment of debt of $142 million, which includes the premium and the write-off of a portion of the remaining original debt issue costs and debt discounts or premiums.

On July 13, 2016, we entered into a new five-year $2.5 billion committed revolving credit facility (the "2016 Credit Agreement") with commercial banks maturing in July 2021, which replaced our existing credit facility of $2.5 billion, but maintained the existing commercial paper program. The previous credit facility had a maturity date in September of 2016. The maximum combined borrowing at any time under both the 2016 Credit Agreement and the commercial paper program is $2.5 billion. The 2016 Credit Agreement contains certain covenants, which, among other things, require the maintenance of a total debt-to-total capitalization ratio, restrict certain merger transactions or the sale of all or substantially all of our assets or a significant subsidiary and limit the amount of subsidiary indebtedness. Upon the occurrence of certain events of default, our obligations under the 2016 Credit Agreement may be accelerated. Such events of default include payment defaults to lenders under the 2016 Credit Agreement, covenant defaults and other customary defaults. To the extent we have outstanding commercial paper, the aggregate ability to borrow under the 2016 Credit Agreement is reduced.

During the first nine months of 2016, there were no direct borrowings under either the previous credit facility or the 2016 Credit Agreement, and we were in compliance with all of the covenants under both credit facilities. Under the commercial paper program, we may issue from time to time up to $2.5 billion in commercial paper with maturities of no more than 270 days. The amount available to borrow under the credit facility would be reduced by the amount of any commercial paper outstanding. At September 30, 2016, we had no borrowings outstanding under the commercial paper program.



Year	Estimated Amortization Expense
Remainder of 2017	$	26
2018	48
2019	46
2020	38
2021	32
2022	29

NOTE ~~11.~~10. FINANCIAL INSTRUMENTS

Our financial instruments include cash and cash equivalents, accounts receivable, investments, accounts payable, short and long-term debt and derivative financial instruments. Except for long-term debt, the estimated fair

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

value of our financial instruments at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 approximates their carrying value as reflected in our ~~unaudited~~condensed consolidated balance sheets.

The estimated fair value of total debt at June 30, 2017 and December 31, 2016 was $3.39 billion and $3.36 billion, respectively, which differs from the carrying amount of $3.01 billion and $3.02 billion, respectively, in our condensed consolidated balance sheets. ~~For further information on~~The fair value was determined using quoted period-end market prices.

During the first quarter of 2017, we executed an agreement with our primary customer in Ecuador, resulting in an exchange of certain fully reserved outstanding receivables for government-backed bonds. We recorded the bonds at their estimated fair value of $84 million at the date of exchange, which approximated their fair value as of March 31, 2017. The estimated fair value for these bonds was determined using discounted cash flows. The significant Level 3 unobservable input used in the determination of the fair value was the discount rate of 11.6%, which was based on the Ecuador government bond yield. This investment was classified as available-for-sale. During the second quarter of 2017, we sold the government-backed bonds for $92 million, resulting in a gain of $8 million, which was included in "Marketing, general and administrative expense" in our ~~debt, see Note 10. "Indebtedness."~~

condensed consolidated statement of income (loss).

NOTE ~~12.~~11. EMPLOYEE BENEFIT PLANS

We have both funded and unfunded noncontributory defined benefit pension plans ("Pension Benefits") covering certain employees primarily in the U.S., the United Kingdom, Germany and Canada. We also provide certain postretirement health care benefits ("Other Postretirement Benefits"), through an unfunded plan, to a closed group of U.S. employees who, when they retire, have met certain age and service requirements.

The components of net periodic cost ~~(benefit)~~ are as follows for the three months ended ~~September~~June 30:


	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits						U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
	2016			2015			2016			2015			2016			2015			2017			2016			2017			2016			2017			2016
Service cost	$	13		$	15		$	4		$	4		$	1		$	1		$	10		$	13		$	3		$	3		$	1		$	1
Interest cost	7			6			7			7			1			1			7			7			5			7			1			1
Expected return on plan assets	(10		)	(12		)	(9		)	(12		)	—			—			(10		)	(10		)	(8		)	(9		)	—			—
Amortization of prior service credit	—			—			—			—			(2		)	(2		)	—			—			—			—			(2		)	(2		)
Amortization of net actuarial loss	3			3			1			2			—			—			2			2			2			2			—			—
Curtailment gain	—			—			—			—			—			(2		)
Other	3			8			—			—			—			—
Net periodic cost (benefit)	$	16		$	20		$	3		$	1		$	—		$	(2	)
Net periodic cost																			$	9		$	12		$	2		$	3		$	—		$	—

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

The components of net periodic cost ~~(benefit)~~ are as follows for the ~~nine~~six months ended ~~September~~June 30:


	U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits						U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
	2016			2015			2016			2015			2016			2015			2017			2016			2017			2016			2017			2016
Service cost	$	39		$	49		$	11		$	12		$	3		$	3		$	20		$	26		$	6		$	7		$	2		$	2
Interest cost	21			20			21			23			3			3			14			14			11			14			2			2
Expected return on plan assets	(30		)	(37		)	(27		)	(36		)	—			—			(20		)	(20		)	(17		)	(18		)	—			—
Amortization of prior service credit	—			—			—			—			(6		)	(8		)	—			—			—			—			(4		)	(4		)
Amortization of net actuarial loss	8			7			4			4			—			2			4			5			4			3			—			—
Curtailment gain	—			—			—			—			—			(11		)
Other	3			8			—			—			—			—
Net periodic cost (benefit)	$	41		$	47		$	9		$	3		$	—		$	(11	)
Net periodic cost																			$	18		$	25		$	4		$	6		$	—		$	—

For all pension plans, we make annual contributions to the plans in amounts equal to or greater than amounts necessary to meet minimum governmental funding requirements. During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we contributed approximately ~~$77~~$18 million to our defined benefit and other postretirement benefit plans. We expect to contribute between $4$47 million and $5$50 million to our ~~funded and unfunded pension~~defined benefit plans and to make payments of between $3$6 million and $4$7 million related to other postretirement ~~benefits in~~benefit plans for the ~~fourth quarter~~remainder of ~~2016.~~2017.

We contributed approximately ~~$76~~$74 million to our defined contribution plans during the ~~nine~~six months ended ~~September~~June 30, ~~2016. Effective April 2016, employer contributions to certain plans were suspended indefinitely. We~~2017, and we estimate we will contribute between ~~$11~~$68 million and ~~$12~~$74 million to ~~other defined contribution~~these plans induring the ~~fourth quarter~~remainder of ~~2016.~~2017.

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

NOTE ~~13.~~12. COMMITMENTS AND CONTINGENCIES

LITIGATION

We are subject to a number of lawsuits and claims arising out of the conduct of our business. The ability to predict the ultimate outcome of such matters involves judgments, estimates and inherent uncertainties. We record a liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, including accruals for self-insured losses which are calculated based on historical claim data, specific loss development factors and other information.

A range of total possible losses for all litigation matters, other than those discussed below, cannot be reasonably estimated. Based on a consideration of all relevant facts and circumstances, we do not expect the ultimate outcome of ~~any~~ currently pending lawsuits or claims against us, other than those discussed below, will have a material adverse effect on our financial position, results of operations or cash flows; however, there can be no assurance as to the ultimate outcome of these matters.

~~We insure against risks arising from our business~~Our current and best estimate of a reasonable range of total possible losses collectively for the four litigation matters denoted below is between $80 million and $290 million. With respect to the ~~extent deemed prudent by our management and to the extent insurance is available, but no assurance can~~litigation matters below, if there was an adverse outcome individually or collectively, there could be given that the nature and amount of that insurance will be sufficient to fully indemnify us against liabilities arising out of pending or future legal proceedings or other claims. Most of our insurance policies contain deductibles or self-insured retentions in amounts we deem prudent and for which we are responsible for payment. In determining the amount of self-insurance, it is our policy to self-insure those losses that are predictable, measurable and recurring in nature, such as claims for automobile liability, general liability and workers compensation.

The following lawsuits were filed in Delaware in connection with our Merger with Halliburton. Subsequent to the filing of the lawsuits, on April 30, 2016, the Merger Agreement with Halliburton was terminated as described in Note 2. "Halliburton Merger Agreement."

On November 24, 2014, Gary Molenda, a purported shareholder of the Company, filed a class action lawsuit in the Court of Chancery of the State of Delaware ("Delaware Chancery Court") against Baker Hughes, the Company’s Board of Directors, Halliburton, and Red Tiger LLC, a wholly owned subsidiary of Halliburton ("Red Tiger" and together with all defendants, "Defendants") styled ~~Gary R. Molenda v. Baker Hughes, Inc., et al., Case No. 10390-CB.~~

~~On November 26, 2014, a second purported shareholder of the Company, Booth Family Trust, filed a substantially similar class action lawsuit in Delaware Chancery Court.~~

On December 1, 2014, New Jersey Building Laborers Annuity Fund and James Rice, two additional purported shareholders of the Company, filed substantially similar class action lawsuits in Delaware Chancery Court.

~~On December 10, 2014, a fifth purported shareholder of the Company, Iron Workers Mid-South Pension Fund, filed another substantially similar class action lawsuit in the Delaware Chancery Court.~~

~~On December 24, 2014, a sixth purported shareholder of the Company, Annette Shipp, filed another substantially similar class action lawsuit in the Delaware Chancery Court.~~

All of the lawsuits make substantially similar claims. The plaintiffs generally allege that the members of the Company’s Board of Directors breached their fiduciary duties to our shareholders in connection with the Merger negotiations by entering into the Merger Agreement and by approving the Merger, and that the Company, Halliburton, and Red Tiger aided and abetted the purported breaches of fiduciary duties. More specifically, the lawsuits allege that the Merger Agreement provides inadequate consideration to our shareholders, that the process resulting in the Merger Agreement was flawed, that the Company’s directors engaged in self-dealing, and that certain provisions of the Merger Agreement improperly favor Halliburton and Red Tiger, precluding or impeding third parties from submitting potentially superior proposals, among other things. The lawsuit filed by Annette Shipp also alleges that our Board of Directors failed to disclose material information concerning the proposed Merger in the preliminary registration statement on Form S-4. On January 7, 2015, James Rice amended his complaint, adding similar allegations regarding the disclosures in the preliminary registration statement on Form S-4. The lawsuits seek unspecified damages, injunctive relief enjoining the Merger, and rescission of the Merger Agreement, among other relief. On January 23, 2015, the Delaware lawsuits were consolidated under the caption ~~In re Baker Hughes Inc. Stockholders Litigation, Consolidated C.A.~~ ~~No. 10390-CB (the "Consolidated Case"). Pursuant to the Court’s consolidation order, plaintiffs filed a consolidated complaint on February 4, 2015, which alleges substantially similar~~

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

~~claims and seeks substantially similar relief to that raised in the six individual complaints, except that while Baker Hughes is named as a defendant, no claims are asserted against the Company.~~

On March 18, 2015, the parties reached an agreement in principle to settle the Consolidated Case in exchange for the Company making certain additional disclosures. Those disclosures were contained in a Form 8-K filed with the SEC on March 18, 2015. The settlement was made subject to certain conditions, including consummation of the Merger, final documentation, and court approval. With the termination of the Merger Agreement with Halliburton, the March 18, 2015 settlement agreement is rendered null and void. On May 31, 2016, the Consolidated Case and the claims asserted therein were dismissed, save and except for plaintiffs counsel's Fee and Expense Application to the Delaware Chancery Court. On October 13, 2016, the Delaware Chancery Court ruled on plaintiffs counsel's Fee and Expense Application. The amount awarded does not have a material impact on our business, financial ~~position,~~condition and results of operations ~~or cash flows.~~

~~On October 9, 2014, one of our subsidiaries filed a Request for Arbitration against a customer before the London Court of International Arbitration, pursuing claims~~expected for the ~~non-payment~~year. These litigation matters are subject to inherent uncertainties and management's view of ~~invoices for goods and services provided~~these matters may change in ~~an amount provisionally quantified to exceed $67.9 million. In our Request for Arbitration, we also noted that invoices in an amount exceeding $57 million had been issued~~the future. Therefore, there can be no assurance as to the customer, and would be added to the claim in the event that they became overdue. On November 6, 2014, the customer filed its Response and Counterclaim, denying liability and counterclaiming damages for breachultimate outcome of contract of approximately $182 million. On March 31, 2016, the parties agreed to a settlement principally involving the purchase by the customer of certain inventory held by our subsidiary, with all other claims and counterclaims being released and discharged by each party, and the arbitral proceedings being discontinued. On April 18, 2016, all claims and counterclaims filed in the London Court of International Arbitration were released and discontinued. The settlement did not have a material impact on our financial position, results of operations or cash flows.these matters.

During 2014, we received customer notifications related to a possible equipment failure in a natural gas storage system in Northern Germany, which includes certain of our products. We are currently investigating the cause of the possible failure and, if necessary, possible repair and replacement options for our products. Similar products were utilized in other natural gas storage systems for this and other customers. The customer initiated arbitral proceedings against us on June 19, 2015, under the rules of the German Institute of Arbitration e.V. (DIS). On August 3, 2016, the customer amended its claims and now alleges damages of approximately $224 million plus interest at an annual rate of prime + 5%. ~~The hearing~~Hearings before the arbitration panel ~~is scheduled~~were held January 16, 2017 through

BAKER HUGHES, A GE COMPANY, LLC

Notes to ~~commence on~~ Unaudited Condensed Consolidated Financial Statements

January ~~16,~~23, 2017, and March 20, 2017 through March 21, 2017. In addition, on September 21, 2015, TRIUVA Kapitalverwaltungsgesellschaft mbH filed a lawsuit in the United States District Court for the Southern District of Texas, Houston Division against the Company and Baker Hughes Oilfield Operations, Inc. alleging that the plaintiff is the owner of gas storage caverns in Etzel, Germany in which the Company provided certain equipment in connection with the development of the gas storage caverns. The plaintiff further alleges that the Company supplied equipment that was either defectively designed or failed to warn of risks that the equipment posed, and that these alleged defects caused damage to the ~~plaintiff’s~~plaintiff's property. The plaintiff seeks recovery of alleged compensatory and punitive damages of an unspecified amount, in addition to reasonable ~~attorneys’~~attorneys' fees, court costs and pre-judgment and post-judgment interest. The allegations in this lawsuit are related to the claims made in the June 19, 2015 German arbitration referenced above. At this time, we are not able to predict the outcome of these ~~claims or whether either will have any material impact on our financial position, results of operations or cash flows.~~

On August 31, 2015, a customer of one of the Company’s subsidiaries issued a Letter of Claim pursuant to a Construction and Engineering Contract. The customer had claimed $369 million plus loss of production resulting from a breach of contract related to five electric submersible pumps installed by the subsidiary in Europe. On January 29, 2016, the Customer served its Statement of Claim, Case No. CL-2015-00584, in the Commercial Court Queen's Bench Division of the High Court of Justice. On September 20, 2016, the parties entered a settlement agreement by which all claims were released and discharged by each party. On October 6, 2016, the Commercial Court entered a Consent Order dismissing all claims in the litigation. The settlement did not have a material impact on our financial position, results of operations or cash flows.

On October 30, 2015, Chieftain Sand and Proppant Barron, LLC initiated arbitration against our subsidiary, Baker Hughes Oilfield Operations, Inc., in the American Arbitration Association. The Claimant alleged that the Company failed to purchase the required sand tonnage for the contract year 2014-2015 and further alleged that the

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

Company repudiated its yearly purchase obligations over the remaining contract term. The Claimant alleged damages of approximately $110 million plus interest, attorneys’ fees and costs. On June 2, 2016, the parties agreed to a settlement of all claims and counterclaims asserted in the Arbitration. The settlement did not have a material impact on our financial position, results of operations or cash flows.claims.

On April 30, 2015, a class and collective action lawsuit alleging that we failed to pay a nationwide class of workers overtime in compliance with the Fair Labor Standards Act and North Dakota law was filed titled Williams et al. v. Baker Hughes Oilfield Operations, Inc. in the U.S. District Court for the District of North Dakota. On February 8, 2016, the Court conditionally certified certain subclasses of employees for collective action treatment. We are evaluating the background facts and at this time cannot predict the outcome of this ~~lawsuit and are not able to reasonably estimate the potential impact, if any, such outcome would have on our financial position, results of operations or cash flows.~~lawsuit.

On July 31, 2015, Rapid Completions LLC filed a lawsuit in federal court in the Eastern District of Texas against Baker Hughes Incorporated, Baker Hughes Oilfield Operations, Inc., and others claiming infringement of U.S. Patent Nos. 6,907,936; 7,134,505; 7,543,634; 7,861,774; and 8,657,009. On August 6, 2015, Rapid Completions amended its complaint to allege infringement of U.S. Patent No. 9,074,451. On September 17, 2015, Rapid Completions and Packers Plus Energy Services Inc., sued Baker Hughes Canada Company in the Canada Federal Court on related Canadian patent 2,412,072. On April 1, 2016, Rapid Completions removed U.S. Patent No. 6,907,936 from its claims in the lawsuit. On April 5, 2016, Rapid Completions filed a second lawsuit in federal court in the Eastern District of Texas against Baker Hughes Incorporated, Baker Hughes Oilfield Operations, Inc. and others claiming infringement of U.S. Patent No. 9,303,501. These patents relate primarily to certain specific downhole completions equipment. The plaintiff has requested a permanent injunction against further alleged infringement, damages in an unspecified amount, supplemental and enhanced damages, and additional relief such as ~~attorney’s~~attorney's fees and costs. During August and September 2016, the United States Patent and Trademark office agreed to institute an inter-partes review of U.S. Patent Nos 7,861,774; 7,134,505; 7,534,634; 6,907,936; 8,657,009; and 9,074,451. Trial on the validity of asserted claims from Canada patent 2,412,072, was completed March 9, 2017, with no decision from the Court at this time. At this time, we are not able to predict the outcome of these ~~claims or whether they will have a material impact on our financial position, results of operations or cash flows.~~claims.

On ~~April 6, 2016,~~May 10, 2017, a ~~civil Complaint against~~putative class action complaint was filed on behalf of purported Baker Hughes Incorporated and Halliburton Company was filed by the United States of America seeking a permanent injunction restraining Baker Hughes and Halliburton from carrying out the planned acquisition of Baker Hughes by Halliburton or any other transaction that would combine the two companies. The lawsuit is styled ~~United States of America v. Halliburton Co. and Baker Hughes Inc.~~,stockholders in the U.S. District Court for the Southern District of ~~Delaware, Case~~Texas challenging the Transaction Agreement and Plan of Merger combining Baker Hughes with GE O&G. The complaint is captioned Booth Family Trust v. Baker Hughes Inc., et al., Civil Action No. ~~1:16-cv-00233-UNA.~~4:17-cv-01457 (S.D. Tex. 2017). The ~~Complaint alleges~~complaint asserts, among other things, claims under Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") against Baker Hughes and the members of its board of directors and challenges the adequacy of the disclosures made in the combined proxy statement/prospectus dated as of May 9, 2017. In addition to certain unspecified damages and reimbursement of costs, the plaintiff seeks to enjoin the consummation of the Transactions, or in the event the Transactions are consummated, to rescind the Transactions or to obtain rescissory damages. On June 21, 2017, the parties reached an agreement in principle to settle the Booth Family Trust litigation in exchange for the Company making certain additional disclosures. Those disclosures were contained in an 8-K filed with the SEC on June 22, 2017. On July 5, 2017, Booth Family Trust filed a stipulation to dismiss the lawsuit as moot, which remains pending before the Court. Pursuant to the stipulation, the Court will retain jurisdiction to resolve any attorneys' fees dispute between the parties.

We insure against risks arising from our business to the extent deemed prudent by our management and to the extent insurance is available, but no assurance can be given that the ~~proposed transaction between Halliburton~~nature and ~~Baker Hughes would violate Section 7~~amount of that insurance will be sufficient to fully indemnify us against liabilities arising out of pending or future legal proceedings or other claims. Most of our insurance policies contain deductibles or self-insured retentions in amounts we deem prudent and for which we are responsible for payment. In determining the ~~Clayton Act. Subsequent~~amount of self-insurance, it is our policy to ~~the filing of the Complaint, on April 30, 2016, the Merger Agreement with Halliburton was terminated~~self-insure

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

those losses that are predictable, measurable and recurring in nature, such as ~~described in Note 2. "Halliburton Merger Agreement." On May 4, 2016, the United States filed a Notice of Voluntary Dismissal of the Complaint.~~

~~On May 30, 2013, we received a Civil Investigative Demand ("CID") from the U.S. Department of Justice ("DOJ") pursuant to the Antitrust Civil Process Act. The CID sought documents~~claims for automobile liability, general liability and information from us for the period from May 29, 2011 through the date of the CID in connection with a DOJ investigation related to pressure pumping services in the U.S. On May 18, 2016, we received notice from the DOJ that they have closed the investigation with no further action requested of the Company.workers compensation.

OTHER

In the normal course of business with customers, vendors and others, we have entered into off-balance sheet arrangements, such as surety bonds for performance, letters of credit and other bank issued guarantees, which totaled approximately ~~$1.0~~$1.1 billion at ~~September~~June 30, ~~2016.~~2017. It is not practicable to estimate the fair value of these financial instruments. None of the off-balance sheet arrangements either has, or is likely to have, a material effect on our financial position, results of operations or cash flows.

~~Baker Hughes Incorporated~~

~~Notes to Unaudited Consolidated Condensed Financial Statements~~

NOTE ~~14.~~13. ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables present the changes in accumulated other comprehensive loss, net of tax:

Pensions and Other Postretirement Benefits Foreign Currency Translation Adjustments Accumulated Other Comprehensive Loss
Balance at December 31, 2015 $ (261 ) $ (744 ) $ (1,005 )
Other comprehensive income before reclassifications 14
47
61

Amounts reclassified from accumulated other comprehensive loss 6
—
6

Deferred taxes (1 ) —
(1 )
Balance at September 30, 2016 $ (242 ) $ (697 ) $ (939 )



	Pensions and Other Postretirement Benefits				Foreign Currency Translation Adjustments				Accumulated Other Comprehensive Loss
Balance at December 31, 2016		$	(284	)		$	(749	)		$	(1,033	)
Other comprehensive income (loss) before reclassifications		(11		)		59				48
Amounts reclassified from accumulated other comprehensive loss		4				—				4
Deferred taxes		(1		)		—				(1		)
Balance at June 30, 2017		$	(292	)		$	(690	)		$	(982	)

Pensions and Other Postretirement Benefits Foreign Currency Translation Adjustments Accumulated Other Comprehensive Loss
Balance at December 31, 2014 $ (246 ) $ (503 ) $ (749 )
Other comprehensive income (loss) before reclassifications 9
(182 ) (173 )
Amounts reclassified from accumulated other comprehensive loss (6 ) —
(6 )
Deferred taxes 3
—
3

Balance at September 30, 2015 $ (240 ) $ (685 ) $ (925 )



	Pensions and Other Postretirement Benefits				Foreign Currency Translation Adjustments				Accumulated Other Comprehensive Loss
Balance at December 31, 2015		$	(261	)		$	(744	)		$	(1,005	)
Other comprehensive income before reclassifications		11				40				51
Amounts reclassified from accumulated other comprehensive loss		4				—				4
Deferred taxes		(1		)		—				(1		)
Balance at June 30, 2016		$	(247	)		$	(704	)		$	(951	)

The amounts reclassified from accumulated other comprehensive loss during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 represent the amortization of prior service credit and net actuarial loss, ~~curtailment gain and certain other items~~ which are included in the computation of net periodic ~~cost (benefit).~~cost. See ~~Note 12. "Employee~~"Note 11. Employee Benefit Plans" for additional details. Net periodic cost ~~(benefit)~~ is recorded in cost of sales and services, research and engineering, and marketing, general and administrative expenses.

NOTE 14. SUBSEQUENT EVENTS

GE TRANSACTION

As discussed in "Note 2. General Electric Transaction Agreement," on July 3, 2017, we closed the Transactions to combine GE O&G and Baker Hughes. The Transactions were executed using a partnership structure, pursuant to which GE O&G and Baker Hughes each contributed their operating assets to a newly formed partnership, BHGE LLC. As a partnership, BHGE LLC will be treated as a flow-through entity for U.S. federal income tax purposes and, accordingly, will not incur any material current or deferred U.S. federal income taxes. BHGE LLC’s foreign subsidiaries, however, are expected to incur current and deferred foreign income taxes. GE holds an approximate 62.5% controlling interest in this partnership and former Baker Hughes shareholders hold an approximate 37.5% interest through the ownership of 100% of BHGE's Class A Common Stock, which was listed under the ticker symbol "BHGE" on the New York Stock Exchange. GE’s approximate 62.5% interest is held through a voting

BAKER HUGHES, A GE COMPANY, LLC

Notes to Unaudited Condensed Consolidated Financial Statements

interest of Class B Common Stock in BHGE and its economic interest through a corresponding number of common units of BHGE LLC. Former Baker Hughes shareholders immediately after the completion of the Transactions, were entitled to receive a Special Dividend of $17.50 per share paid by BHGE to holders of record of the Class A Common Stock. GE contributed $7.4 billion to BHGE LLC to fund substantially all of the Special Dividend.

BHGE LLC is governed by an amended and restated operating agreement to which the business and operations of BHGE LLC are managed by EHHC Newco, LLC, a Delaware limited liability company and direct wholly owned subsidiary of the BHGE, as the managing member.

Prior to the Transactions, shares of Baker Hughes common stock were registered pursuant to Section 12(b) of the Exchange Act and listed on the New York Stock Exchange and the SIX Swiss Exchange. Shares of Baker Hughes common stock were suspended from trading on the New York Stock Exchange and the SIX Swiss Exchange prior to the open of trading on July 5, 2017. The New York Stock Exchange filed a Form 25 on Baker Hughes' behalf to provide notice to the SEC regarding the withdrawal of shares of Baker Hughes common stock from listing and to terminate the registration of such shares under Section 12(b) of the Exchange Act. The issuance of BHGE's Class A Common Stock in connection with the Transactions was registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to the Registration Statement on Form S-4 (File No. 333-216991), as amended, filed with the SEC by BHGE and declared effective on May 30, 2017. As a result of the Transactions, on July 3, 2017, BHGE issued 428 million shares of Class A Common Stock and 717 million shares of Class B Common Stock.

Based on the relative voting rights of former Baker Hughes shareholders and GE immediately following completion of the Transactions, and after taking into consideration all relevant facts, GE O&G is treated as the "acquirer" and Baker Hughes is treated as the "acquired" company using the acquisition method of accounting. As such, the historical financial statements of the accounting acquirer, GE O&G, will become the historical financial statements of BHGE and BHGE LLC for periods ending after the closing of the Transactions.

CREDIT FACILITY

On July 3, 2017, in connection with the combination with GE O&G, we entered into a new five-year $3 billion committed unsecured revolving credit facility (the "2017 Credit Agreement") with commercial banks maturing in July 2022, which replaced our existing credit facility of $2.5 billion, but maintained the existing commercial paper program. The 2017 Credit Agreement contains certain customary representations and warranties, certain affirmative covenants and no negative covenants. Upon the occurrence of certain events of default, our obligations under the 2017 Credit Agreement may be accelerated. Such events of default include payment defaults to lenders under the 2017 Credit Agreement, and other customary defaults. To the extent we have outstanding commercial paper, the aggregate ability to borrow under the 2017 Credit Agreement is reduced.

ITEM 2. ~~MANAGEMENT’S~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the ~~unaudited~~condensed consolidated ~~condensed~~ financial statements and the related notes included in Item 1 thereto, as well as our Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2015~~2016 ("~~2015~~2016 Annual Report").

EXECUTIVE SUMMARY

On July 3, 2017, we closed the Transactions to combine GE O&G and Baker Hughes, creating a world-leading, fullstream oilfield technology provider that has a unique mix of equipment and service capabilities. The Transactions were executed using a partnership structure, pursuant to which GE O&G and Baker Hughes each contributed their operating assets to a newly formed partnership, BHGE LLC. Immediately following the completion of the Transactions, GE held an approximately 62.5% controlling interest in this partnership and former Baker Hughes shareholders held an approximately 37.5% interest through the ownership of 100% of BHGE Class A Common Stock. Former Baker Hughes shareholders immediately after the completion of the Transactions also were entitled to receive a Special Dividend of $17.50 per share, for which GE contributed $7.4 billion to BHGE LLC to fund substantially all of the Special Dividend. Events subsequent to June 30, 2017, including the completion of the Transactions, are not reflected in the condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations included in this Quarterly Report on Form 10-Q.

BHGE LLC, and the successor to Baker Hughes Incorporated, is a leading supplier of oilfield services, products, technology and systems used in the worldwide oil and natural gas industry, referred to as our oilfield operations. We manage our oilfield operations through four geographic segments consisting of North America, Latin America, Europe/Africa/Russia Caspian ("EARC"), and Middle East/Asia Pacific ("MEAP"). Our Industrial Services businesses are reported in a fifth segment. As of ~~September~~June 30, ~~2016, Baker Hughes~~2017, BHGE LLC had approximately ~~34,000~~32,000 employees compared to approximately ~~43,000~~33,000 employees as of December 31, ~~2015.~~2016.

Within our oilfield operations, the primary driver of our businesses is our ~~customers’~~customers' capital and operating expenditures dedicated to oil and natural gas exploration, field development and production. The main products and services provided by oilfield operations fall into one of two categories, Drilling and Evaluation or Completion and Production. This classification is based on the two major phases of constructing an oil and/or natural gas well, the drilling phase and the completion phase, and how our products and services are utilized in each phase. We also provide products and services to the downstream chemicals, and process and pipeline services, referred to as Industrial Services.

During the second quarter ~~following the termination~~ of ~~the merger with Halliburton, we announced a series of actions~~2017, oil prices retreated back to reduce costs and simplify our business, enhance our commercial strategy and optimize our capital structure by paying down debt and buying back shares. More specifically, we have restructured the company to remove significant costs and create a more efficient organization which aligns with our operational strategy to take our products and technology to market faster and more efficiently and through a broader set of sales channels. In an effort to improve our return on invested capital, we have conducted an analysis of our product offerings andNovember 2016 levels as a result of ~~that review,~~renewed U.S. and OPEC supply growth concerns. Despite these lower oil prices, U.S. onshore activity grew steadily throughout the quarter as many customers had hedged their oil production for the remainder of the year. Additionally, service pricing began showing signs of recovering, particularly in the U.S. onshore drilling-related product lines. Conversely, outside of the U.S. market, activity remained weak, particularly offshore.

In the second quarter of 2017, we ~~have begun~~generated revenue of $2.4 billion, which was flat compared to the ~~process~~second quarter of ~~reducing certain product offerings in specific markets based on our objectives~~2016. Both North America and MEAP revenues increased during the second quarter of ~~profitable growth. While these potential reductions will have a minimal impact on our current revenue, they are expected~~2017 as compared to ~~have a positive impact on operating profitability. We expect to have two-thirds of these product exits completed by~~ the ~~end~~second quarter of 2016 ~~with~~offsetting reductions in Latin America, EARC and Industrial Services. Despite flat revenues, we reported improved operating results year-over-year and sequentially, which is the ~~balance achieved~~direct result of our cost reduction efforts and operational restructuring activities that occurred in 2017. Additionally, we have decided to retain a selective footprint in our North America onshore pressure pumping business, and are considering a range of ownership models that will allow us to participate in this market while mitigating the resource requirements and capital intensity that are inherent in this particular business.2016.

In the first ~~nine~~six months of ~~2016, we continued to face difficult industry conditions. Activity declined across the globe as reflected by the worldwide rig count, which decreased 36%~~2017, revenue totaled $4.67 billion, a decline of $412 million or 8% compared to the same period last year, resulting in additional pricing deterioration for our products and services in many markets. The steady decline in U.S. oil production, along with the initial announcement by the Organization of Petroleum Exporting Countries ("OPEC") in late September to re-establish a production ceiling, drove oil prices higher resulting in more than a 30% increase in oil prices in the prior year. For the first ~~nine~~six months of the year. Despite this improvement in oil prices, customer spending continued to decline as most operators are looking for a sustainable rebalancing of the oil market before increasing activity. As a result, we continued to experience a significant decline in demand as well as increased pricing pressure for our products and services throughout the third quarter of 2016.

~~Financial Results~~

~~In the third quarter of 2016, we generated~~2017, North America revenue of $2.35 billion, a decrease of $1.43 billion, or 38%, compared to the third quarter of 2015, generally consistent with the 30% drop in the worldwide rig count. In the first nine months of 2016, revenue totaled $7.43 billion, a decline of $4.92 billion, or 40%,remained relatively flat compared to the same period in the prior year ~~with a 36% drop in~~while all other segments declined. In North America, increased onshore activity, where the ~~worldwide~~average rig count ~~over the same time frame. All geographic segments experienced revenue declines in the third quarter and first nine months of 2016 driven~~increased more than 75%, was offset by reduced ~~customer~~

~~spending.~~activity offshore and the divestiture of our North America was the largest contributor to the year-over-year revenue decline in both the quarter and nine months ended September 30, 2016, driven by the drop in the onshore and inland water rig count. As a result, we continued to experience reduced activity, an oversupply of equipment and an unfavorable pricing environment in this segment. Additionally, the decision to minimize our operational footprint in the onshore pressure pumping ~~business in~~business. Outside North America, ~~has resulted in share reductions in this product line. Revenue was also negatively impacted by an unfavorable change in exchange rates of several currencies relative~~revenue decreased primarily due to reduced activity, and to a lesser extent, pricing pressures experienced globally over the ~~U.S. Dollar, predominately in the EARC segment.~~past year.

Loss before income tax and equity in loss of affiliate was ~~$360~~$86 million and ~~$1.73~~$151 million for the second quarter and first six months of 2017, respectively, compared to $760 million and $1.37 billion for the ~~third~~second quarter and first ~~nine~~six months of 2016, ~~respectively,~~respectively.

The loss before income tax and equity loss of affiliate for the second quarter of 2017 included net merger and related costs of $49 million and charges for litigation and other related matters of $67 million, which were included in corporate expenses. For the first six months of 2017, net merger and related costs were $80 million, impairment and restructuring charges ~~of $304~~were $90 million and ~~$1.59 billion, respectively. These~~ charges for litigation and other related matters were ~~recorded primarily as a result~~$67 million. In the second quarter of the recent downturn in the oil and natural gas market brought about by the decline in commodity prices. Throughout this downturn, we took actions to reduce costs and adjust our operational cost structure, within the limitations of the Merger Agreement, to reflect current and expected near-term activity levels. As described above,2016, following the termination of the Merger Agreement inwith Halliburton and the ~~second quarter of 2016, we took~~subsequent additional actions to reduce costs, simplify the organization and rationalize our operating structure, we recorded charges totaling $1.13 billion, primarily related to ~~address~~impairment charges of $937 million to adjust the ~~ongoing industry challenges~~carrying amount of certain assets plus merger and ~~to support our future operational strategy.~~related costs of $78 million. For the first six months of 2016, total restructuring costs were $1.29 billion and merger and related costs were $180 million. These restructuring ~~activities included workforce reductions, contract terminations, facility closures~~impairment charges plus merger and related costs have been excluded from the ~~removal~~results of ~~excess machinery and equipment.~~our operating segments. Additionally, during the second quarter of 2016, we incurred costs of ~~$587~~$621 million, ~~in the first nine months~~including $34 million of ~~2016~~related disposal costs, to write off the carrying value of ~~certain~~ inventory deemed excess. ~~For the third~~The second quarter ~~and first nine months~~ of ~~2015,~~2016 was benefited by a reversal of a loss ~~before income tax~~on a firm purchase commitment of $51 million that was ~~$156 million and $1.18 billion, respectively, which also included impairment and restructuring charges~~recorded as a cost of ~~$98 million and $747 million, respectively. Further, we incurred $194 million~~service in the first ~~nine months~~quarter of ~~2015 to write down~~2016 as the ~~carrying value~~contract was settled in the second quarter of ~~certain inventory.~~2016. Both the inventory adjustments and the reversal of the loss on a firm purchase commitment are included in the results of our operating segments.

Also ~~during~~in the ~~first nine months~~second quarter of 2016, we recorded a loss ~~due to~~on the impairment of goodwill for the North America and Industrial Services segments totaling ~~$1.86~~$1.84 billion. This charge iswas excluded from the results of our operating ~~segments as well.~~segments.

~~Halliburton Merger~~General Electric Transaction Agreement

On ~~November 16, 2014,~~July 3, 2017, we closed the Transactions which combined the Company and GE O&G, creating a new public company, which we believe will be a world-leading, fullstream oilfield technology provider that will have a unique mix of equipment and service capabilities.

At the closing of the Transactions, GE transferred to the Company the GE O&G business and $7.4 billion in cash in exchange for approximately 62.5% of the membership interests in the Company (the "Contribution"). Also, on July 3, 2017, shares of BHGE's Class A Common Stock were issued to Baker Hughes ~~and Halliburton~~shareholders immediately prior to the closing of the Transactions in exchange for their existing shares in Baker Hughes on a 1:1 basis. Shares of BHGE's Class A Common Stock are listed for trading on the New York Stock Exchange as a standard listing under the ticker symbol "BHGE." Immediately following the closing of the Transactions, holders of Baker Hughes common stock immediately prior to the Transactions owned approximately 37.5% of the indirect economic interest in the Company ~~("Halliburton") entered into a definitive agreement and plan~~through their ownership of ~~merger (the "Merger Agreement") under which Halliburton would acquire all~~100% of BHGE's Class A Common Stock. All of the outstanding shares of ~~Baker Hughes in a stock and cash transaction (the "Merger"). In accordance with the provisions~~Class B Common Stock of ~~Section 9.1 of the Merger Agreement, Baker Hughes and Halliburton agreed to terminate the Merger Agreement on April 30, 2016,~~BHGE issued as a result of the ~~failure~~Transactions are held by GE. Former Baker Hughes shareholders immediately after the completion of the ~~Merger~~Transactions also were entitled to ~~occur on or before April 30, 2016 due~~receive a special one-time cash dividend of $17.50 per share paid by BHGE to holders of record of the inability to obtain certain specified antitrust related approvals. Halliburton paid $3.5 billion to Baker Hughes on May 4, 2016, representing the antitrust termination fee required to be paid pursuant to the Merger Agreement.

~~Outlook~~

~~While oil prices have started to rebound as~~Class A Common Stock. As a result of the Transactions, the Company became the holding company of the combined businesses of Baker Hughes and GE O&G.

Outlook

The North America rig count growth over the past 12 months, including the impending U.S. production ~~edging down~~growth, combined with increased Organization of Petroleum Exporting Countries ("OPEC") crude production from Libya and Nigeria, who are excluded from the ~~initial announcement by OPEC~~oil cuts agreed to in late ~~September~~2016, have caused oil prices to ~~re-establish~~retreat back to levels not seen since early November 2016. As a ~~production ceiling, the uncertainty from the lack~~result of ~~critical details regarding production cuts~~these supply events and ~~the various country exclusions, has limited the confidence~~a range of external factors, including geopolitical dynamics, economic growth, fiscal policy and currency fluctuations, that it could ~~lead to a more sustainable improvement in~~further impact oil prices and ~~in turn, to a more material increase in exploration and production companies' spending.~~slow down the recovery, the market outlook remains uncertain.

~~We continue to believe that~~Based on current oil prices and market conditions, customer behavior for the second half of 2017 is expected to vary by region and operating environment. In North America onshore, we expect activity growth to decelerate as we progress through the second half of the year. For the international onshore markets, we expect activity to

remain stable, with a few possible areas of modest growth. In the global offshore markets, where customer confidence in commodity prices remains one of the ~~mid-to upper-$50s are~~key elements that is required for a ~~sustainable~~sustained industry recovery, ~~in North America. As we previously projected, the North American market has been continuing to climb slowly upward, and~~ we expect activity to remain muted for the rest of the year. We believe, however, that ~~to continue. In order for a broader recovery to take place, a series of milestones need to be reached before the market can respond in a predictable way. First, supply~~with our leading products and demand surplus has to rebalance allowing commodity prices to improve. Second, commodity prices need to stabilize for confidence in the customer community to improve and investment to accelerate. Third, activity needs to increase meaningfully before service capacity can be substantially absorbed and pricing recovery takes place. Until then, we will continue to see the dislocation we have today in the relationship between commodity prices and service pricing. We expect a slow ramp up of customer spending driven by a measured increase in U.S. onshore activityinnovative technologies as well as ~~increased seasonal activity in Canada. Despite this expected gradual improvement in~~ the ~~North American environment,~~combination with GE O&G, we

~~believe pricing will continue~~ are well positioned to ~~remain challenging. As a result, we expect only modest~~capitalize on growth ~~in North America in the fourth quarter~~opportunities across all of ~~2016.~~

~~Internationally, we expect continued activity declines~~our product lines and pricing pressure in the near term due to customers continuing to restrict spending. We don’t expect year-end, seasonal product sales to significantly offset those declines. In markets where lifting costs are higher, such as deepwater, we expect that those activity declines will be even steeper. In conventional markets, such as the Middle East and North Africa, we believe there could be modest growth given the lower lifting costs. Despite these market dynamics, we continue to see opportunities for our capabilities and product innovations. Our products and services help our customers maximize production and lower overall costs allowing for improvements in our growth and profitability.

geographic regions.

BUSINESS ENVIRONMENT

We operate in more than 80 countries helping customers find, evaluate, drill, produce, transport and process hydrocarbon resources. Our revenue is predominately generated from the sale of products and services to major, national, and independent oil and natural gas companies worldwide, and is dependent on spending by our customers for oil and natural gas exploration, field development and production. This spending is driven by a number of factors, including our ~~customers’~~customers' forecasts of future energy demand and supply, their access to resources to develop and produce oil and natural gas, their ability to fund their capital programs, the impact of new government regulations and most importantly, their expectations for oil and natural gas prices as a key driver of their cash flows.

Oil and Natural Gas Prices

Oil and natural gas prices are summarized in the table below as averages of the daily closing prices during each of the periods indicated.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015		2017		2016		2017		2016
Brent oil price ($/Bbl) ⁽¹⁾	$	45.82	$	50.17	$	42.13	$	55.36	$	50.13	$	46.01	$	52.07	$	40.26
WTI oil price ($/Bbl) ⁽²⁾	44.88		46.48		41.40		50.94		48.11		45.53		49.89		39.62
Natural gas price ($/mmBtu) ⁽³⁾	2.85		2.75		2.32		2.78		3.05		2.14		3.01		2.05


⁽¹⁾	Bloomberg Dated Brent ("Brent") Oil Spot Price per Barrel


⁽²⁾	Bloomberg West Texas Intermediate ("WTI") Cushing Crude Oil Spot Price per Barrel


⁽³⁾	Bloomberg Henry Hub Natural Gas Spot Price per million British Thermal Unit

In North America, customer spending is highly driven by WTI oil prices, which began ~~the third quarter~~2017 at $52.33/Bbl, dropping to a low of ~~2016 at $48.99/Bbl, declined to $39.51/~~$42.31/Bbl in ~~early August 2016,~~late June 2017. Early in the year, the oil market showed signs that a balance between supply and ~~then rebounded to $48.24/Bbl~~demand would be achieved by the end of 2017, which supported a recovery in oil prices. On the ~~quarter due to peak summer~~ demand ~~for crude oil. According~~side, global economic activity remained healthy supporting oil consumption growth. On the supply side, voluntary oil cuts agreed in late 2016 by members of OPEC and some non-OPEC producers, achieved a substantial degree of compliance.

However, at the same time, North American drilling activity and production ramped up in response to the ~~September 2016 Oil Market Report published~~higher oil prices, causing inventories in the United States to build throughout the second quarter. U.S. crude oil and petroleum products inventories were above the five-year average during the weeks ending June 2 and June 9. Additionally, in the past few months, Libya and Nigeria have seen their combined output increase by more than 700 kb/d, and the ~~International Energy Agency, global~~OPEC cuts appear to be achieving a lower rate of compliance towards the end of the quarter. These supply events have caused the rebalancing of the oil ~~demand growth is slowing at a faster pace than initially predicted. Forecasted~~market to become less certain and oil ~~demand growth for 2016 is now only 1.3 mb/d compared~~price gains to ~~1.4 mb/d~~reverse at the end of the ~~second quarter of 2016. Further, oil demand growth for 2017 is expected to ease further to 1.2 mb/d as underlying macroeconomic conditions remain uncertain.~~quarter.

Outside North America, customer spending is most heavily influenced by Brent oil prices, which experienced a similar trend as WTI throughout the year, closing the quarter ~~exiting~~ at ~~$47.71/~~$48.23/Bbl. Brent oil price fluctuations were driven by the same factors as ~~WTI.~~WTI, although the growing U.S. supply has lowered WTI crude oil prices relative to international crude oil prices.

Overall, WTI and Brent oil prices in the first ~~nine~~six months of ~~2016~~2017 averaged ~~lower~~higher than the prior year period by ~~19%~~26% and ~~24%~~29%, respectively. Although oil prices have rebounded more than 80% from the previous twelve-year-low of $26/Bbl reached earlier this year to near $48/Bbl at the end of the quarter, there has yet to be any material change in customer behavior to suggest a significant near-term improvement in activity levels.

In North America, natural gas prices, as measured by the Henry Hub Natural Gas Spot Price, ~~remained fairly stable during~~fluctuated in the ~~third quarter~~first six months of ~~2016, exiting the quarter at $2.84/~~2017 between $2.44/mmBtu ~~relatively unchanged from where it began the quarter.~~and $3.42/mmBtu, and averaged $3.01/mmBtu. Compared to the same ~~quarter in the prior~~period last year, natural gas prices increased 4%47%, driven by ~~expectations of a colder than usual winter season. For the nine months ending September 30, 2016,~~higher drawdowns this season stemming from lower natural gas ~~prices declined by 17% as a result of~~production and higher ~~storage levels.~~exports. According to the U.S. Department of Energy ("DOE"), working natural gas in storage atin the ~~end~~last week of the ~~third~~second quarter of ~~2016~~2017 was ~~3,680~~2,888 Bcf, which is 3%7% higher than the previous five-year ~~(2011-2015)~~(2012-2016) average, ~~and 4%~~but 9%, or ~~142~~285 Bcf, ~~above~~below the corresponding week in ~~2015.~~2016.

Baker Hughes Rig Count

The Baker Hughes rig counts are an important business barometer for the drilling industry and its suppliers. When drilling rigs are active they consume products and services produced by the oil service industry. Rig count trends are driven by the exploration and development spending by oil and natural gas companies, which in turn is influenced by current and future price expectations for oil and natural gas. The counts may reflect the relative strength and stability of energy prices and overall market activity; however, these counts should not be solely relied on as other specific and pervasive conditions may exist that affect overall energy prices and market activity.

Baker Hughes has been providing rig counts to the public since 1944. We gather all relevant data through our field service personnel, who obtain the necessary data from routine visits to the various rigs, customers, contractors and other outside sources as necessary. We base the classification of a well as either oil or natural gas primarily upon filings made by operators in the relevant jurisdiction. This data is then compiled and distributed to various wire services and trade associations and is published on our website. We believe the counting process and resulting data is reliable; however, it is subject to our ability to obtain accurate and timely information. Rig counts are compiled weekly for the U.S. and Canada and monthly for all international rigs. Published international rig counts do not include rigs drilling in certain locations, such as Russia, the Caspian region, Iran and onshore China because this information is not readily available.

Rigs in the U.S. and Canada are counted as active if, on the day the count is taken, the well being drilled has been started but drilling has not been completed and the well is anticipated to be of sufficient depth to be a potential consumer of our drill bits. In international areas, rigs are counted on a weekly basis and deemed active if drilling activities occurred during the majority of the week. The weekly results are then averaged for the month and published accordingly. The rig count does not include rigs that are in transit from one location to another, rigging up, being used in non-drilling activities including production testing, completion and workover, and are not expected to be significant consumers of drill bits.

The rig counts are summarized in the table below as averages for each of the periods indicated.


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2016	2015	% Change		2016	2015	% Change		2017	2016	% Change		2017	2016	% Change
U.S. - land and inland waters	461	833	(45	%)	465	1,021	(54	%)	874	398	120	%	798	467	71	%
U.S. - offshore	18	32	(44	%)	23	38	(39	%)	21	24	(13	%)	21	25	(16	%)
Canada	121	190	(36	%)	112	200	(44	%)	117	48	144	%	206	107	93	%
North America	600	1,055	(43	%)	600	1,259	(52	%)	1,012	470	115	%	1,025	599	71	%
Latin America	187	318	(41	%)	203	331	(39	%)	188	190	(1	%)	184	211	(13	%)
North Sea	29	37	(22	%)	29	39	(26	%)	27	29	(7	%)	26	30	(13	%)
Continental Europe	65	72	(10	%)	68	80	(15	%)	65	63	3	%	70	68	3	%
Africa	80	95	(16	%)	87	111	(22	%)	86	89	(3	%)	83	90	(8	%)
Middle East	385	393	(2	%)	392	403	(3	%)	392	388	1	%	388	395	(2	%)
Asia Pacific	190	217	(12	%)	187	224	(17	%)	199	184	8	%	198	185	7	%
Outside North America	936	1,132	(17	%)	966	1,188	(19	%)	957	943	1	%	949	979	(3	%)
Worldwide	1,536	2,187	(30	%)	1,566	2,447	(36	%)	1,969	1,413	39	%	1,974	1,578	25	%

The rig count in North America ~~decreased 43%~~increased 115% in the ~~third~~second quarter of ~~2016~~2017 compared to the same period last year, as a consequence of ~~reduced~~increased spending from our customers ~~as they continue~~in response to ~~operate in a lower commodity~~the upward oil price environment. Reduced cash flows over the last two years have prompted many companies to scale back investment programs, deferring new drilling projects until a sustained price recovery occurs. Also, higher interest rates and tighter lending conditions have limited the availability of capital for many smaller producers, giving rise to distressed asset sales and consolidation of acreage holdings by firms that are more financially sound. The oil-directed drilling rig count, which represents approximately 80% of the North America rig count, movement

experienced ~~a 39% decline as the steep drop in oil prices over the last year resulted in a reduction in exploration and production spending across the region, especially~~early in the ~~U.S. onshore~~year. Following the OPEC production cut agreements and ~~Canadian~~the subsequent oil ~~sands. The natural gas-directed rig count experienced a 53% decrease compared~~price stability, many North American producers ramped up drilling programs and materially increased spending. Oil directed rigs in the United States have increased to about 115% above their levels last year. Natural gas drilling activity in the ~~same period a year ago~~United States has also grown by about 103% since the second quarter of 2016 as ~~a result of~~ lower production and higher exports reduced natural gas ~~prices. In the U.S., natural gas prices remain below levels that are considered to be economic for new investments in many natural gas fields.~~inventory levels. In Canada, ~~the reduction in the natural gas-directed rig count was primarily related to lower~~both oil and gas drilling activity ~~levels in condensate rich zones in Alberta to service oil sands.~~has meaningfully increased with the higher commodity prices.

Outside North America, the rig count in the ~~third~~second quarter of ~~2016 decreased 17%~~2017 increased 1% compared to the same period a year ago. In Latin America, the rig count declined ~~41%~~1% as a consequence of customer spending reductions ~~throughout the entire region, but most notably~~ in Argentina ~~Brazil,~~and Venezuela, which were partially offset by increased drilling activity in Colombia ~~Mexico~~ and Ecuador. In Europe, the rig count in the North Sea decreased ~~22%~~7%, primarily due to a reduction in offshore drilling activity in the ~~United Kingdom,~~Netherlands, and in Continental Europe the rig count ~~declined by 10% driven by lower~~increased 3% year over year as a result of increased onshore ~~drilling~~ activity ~~primarily~~ in ~~Romania, Serbia and Lithuania.~~Poland. In Africa, the rig count decreased ~~16%~~3% primarily due to reduced drilling activity across the region, mainly in ~~Nigeria, Gabon, Angola, Cameroon and Kenya.~~Angola. The rig count ~~decreased 2%~~increased 1% in the Middle East ~~due to lower drilling activity in Egypt and Iraq, partially offset by~~with increased drilling activity in ~~Abu Dhabi~~Kuwait, Iraq and ~~Kuwait.~~Qatar, partially offset by reduced drilling activity in Oman and Saudi Arabia. In Asia Pacific, the rig count ~~declined 12%~~increased by 8% as a result of ~~reduced~~increased drilling activity in India, Australia, and Indonesia, ~~Malaysia, and Thailand.~~which were partially offset by reduced activity in offshore China.

RESULTS OF OPERATIONS

The discussions below relating to significant line items from our unaudited condensed consolidated ~~condensed~~ statements of income (loss) are based on available information and represent our analysis of significant changes or events that impact the comparability of reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or trends and, where reasonably practicable, have quantified the impact of such items. In addition, the discussions below for revenue and cost of revenue are on a total basis as the business drivers for product sales and services are similar. All dollar amounts in tabulations in this section are in millions of dollars, unless otherwise stated.

Revenue and Operating Profit (Loss) Before Tax

Revenue and operating profit (loss) before tax for each of our five operating segments is provided below. The performance of our operating segments is evaluated based on operating profit (loss) before tax, which is defined as income (loss) before income taxes and equity in loss of affiliate and before the following: net interest expense, corporate expenses and certain gains and losses, including impairment and restructuring charges, goodwill impairment charges and the merger termination fee, ~~and certain gains and losses~~ not allocated to the operating segments. Beginning in 2016, we excluded merger and related costs from our operating segments. These costs are now presented as a separate line item in the consolidated condensed statement of income (loss). Prior year merger and related costs have been reclassified to conform to the current year presentation.



	Three Months Ended June 30,				$ Change			% Change		Six Months Ended June 30,				$ Change			% Change
	2017		2016		$ Change			% Change		2017		2016		$ Change			% Change
Revenue:
North America	$	778	$	668	$	110		16	%	$	1,490	$	1,487	$	3		—	%
Latin America	208		235		(27		)	(11	%)	409		512		(103		)	(20	%)
Europe/Africa/Russia Caspian	504		581		(77		)	(13	%)	965		1,192		(227		)	(19	%)
Middle East/Asia Pacific	661		651		10			2	%	1,322		1,369		(47		)	(3	%)
Industrial Services	253		273		(20		)	(7	%)	480		518		(38		)	(7	%)
Total	$	2,404	$	2,408	$	(4	)	—	%	$	4,666	$	5,078	$	(412	)	(8	%)


	Three Months Ended September 30,				$ Change			% Change			Nine Months Ended September 30,						$ Change			% Change		Three Months Ended June 30,						$ Change			% Change		Six Months Ended June 30,						$ Change			% Change
	2016		2015					% Change		2016			2015			2017				% Change			2016				2017				% Change		2016						$ Change			% Change
Revenue:					$ Change												$ Change
Operating Profit (Loss) Before Tax:																												$ Change
North America	$	674	$	1,368	$	(694	)	(51	%)		$	2,161		$	4,872		$	(2,711	)	(56	%)	$	14		$	(311	)	$	325		105	%	$	(9	)	$	(536	)	$	527		98	%
Latin America	243		439		(196		)	(45	%)		755			1,371			(616		)	(45	%)	12			(243		)	255			105	%	96			(309		)	405			131	%
Europe/Africa/Russia Caspian	519		791		(272		)	(34	%)		1,711			2,555			(844		)	(33	%)	15			(257		)	272			106	%	16			(276		)	292			106	%
Middle East/Asia Pacific	649		849		(200		)	(24	%)		2,018			2,621			(603		)	(23	%)	63			(142		)	205			144	%	135			(93		)	228			245	%
Industrial Services	268		339		(71		)	(21	%)		786			929			(143		)	(15	%)	(8		)	(43		)	35			81	%	(14		)	(47		)	33			70	%
Total	$	2,353	$	3,786	$	(1,433	)	(38	%)		$	7,431		$	12,348		$	(4,917	)	(40	%)
Total Operations																						96			(996		)	1,092			110	%	224			(1,261		)	1,485			118	%
Corporate ⁽¹⁾																						(103		)	(29		)	(74		)	255	%	(140		)	(61		)	(79		)	130	%
Loss on early extinguishment of debt																						—			(142		)	142			(100	%)	—			(142		)	142			(100	%)
Interest expense, net																						(30		)	(48		)	18			(38	%)	(65		)	(103		)	38			(37	%)
Impairment and restructuring charges																						—			(1,126		)	1,126			(100	%)	(90		)	(1,286		)	1,196			(93	%)
Goodwill impairment																						—			(1,841		)	1,841			(100	%)	—			(1,841		)	1,841			(100	%)
Merger and related costs, net																						(49		)	(78		)	29			(37	%)	(80		)	(180		)	100			(56	%)
Merger termination fee																						—			3,500			(3,500		)	(100	%)	—			3,500			(3,500		)	(100	%)
Loss Before Income Taxes and Equity in Loss of Affiliate																						$	(86	)	$	(760	)	$	674		89	%	$	(151	)	$	(1,374	)	$	1,223		89	%


⁽¹⁾	For the three and six months ended June 30, 2017, corporate expenses include charges for litigation and other related matters of $67 million.

Three Months Ended September 30,
$
Change

%
Change
Nine Months Ended September 30,
$
Change

%
Change
2016 2015 2016 2015
Operating Profit (Loss) Before Tax:
North America $ (65 ) $ (153 ) $ 88
58 % $ (601 ) $ (512 ) $ (89 ) (17 %)
Latin America 20
51
(31 ) (61 %) (289 ) 129
(418 ) (324 %)
Europe/Africa/Russia Caspian 22
98
(76 ) (78 %) (254 ) 135
(389 ) (288 %)
Middle East/Asia Pacific 71
76
(5 ) (7 %) (22 ) 198
(220 ) (111 %)
Industrial Services 30
44
(14 ) (32 %) (17 ) 86
(103 ) (120 %)
Total Operations 78
116
(38 ) (33 %) (1,183 ) 36
(1,219 ) N/M
Corporate (78 ) (26 ) (52 ) 200 % (139 ) (104 ) (35 ) 34 %
Loss on early extinguishment of debt —
—
—
N/M
(142 ) —
(142 ) N/M
Interest expense, net (39 ) (55 ) 16
(29 %) (142 ) (162 ) 20
(12 %)
Impairment and restructuring charges (304 ) (98 ) (206 ) 210 % (1,590 ) (747 ) (843 ) 113 %
Goodwill impairment (17 ) —
(17 ) N/M
(1,858 ) —
(1,858 ) N/M
Merger and related costs —
(93 ) 93
(100 %) (180 ) (204 ) 24
(12 %)
Merger termination fee —
—
—
N/M
3,500
—
3,500
N/M
Loss Before Income Taxes $ (360 ) $ (156 ) $ (204 ) (131 %) $ (1,734 ) $ (1,181 ) $ (553 ) (47 %)

~~"N/M" represents not meaningful.~~

~~Third~~Second Quarter of ~~2016~~2017 Compared to the ~~Third~~Second Quarter of ~~2015~~2016

North America

North America revenue ~~decreased $694~~increased $110 million, or ~~51%~~16%, in the ~~third~~second quarter of ~~2016~~2017 compared to the ~~third~~second quarter of ~~2015~~2016. The increase in revenue is primarily ~~as a~~the result of increased activity, as evidenced by the ~~steep drop~~increase of 115% in the North America rig count primarily benefiting onshore U.S. This activity improvement more than offset the reduction in activity ~~as reflected~~ in the ~~43% year-over-year~~Gulf of Mexico plus the impact from the divestiture of our North America onshore pressure pumping business. Revenue from this business was $27 million in the second quarter of 2016.

The improvement in onshore U.S. revenue benefited all product lines and in particular drilling services, completions, artificial lift and drill bits. Although the onshore U.S. rig count ~~decline,~~increased 120% during the second quarter of 2017 compared to the same period a year ago, the excess capacity that still exists in parts of the marketplace has prevented a broader pricing recovery. We are starting to see some pricing improvement in onshore U.S. and in particular in the same product lines that are experiencing the largest increases in revenue. Additionally, our upstream chemicals product line, which represents a significant portion of the sales mix of our products and services in North America, is not highly correlated to changes in rig count.

Revenue in the Gulf of Mexico declined due to the decrease in the rig count of 13% during the second quarter of 2017, compared to the same period a year ago, primarily driven by our completions, drilling and completion fluids, and our drilling services product lines. In addition, and to a lesser extent, ~~deteriorating pricing conditions as operators further reduced their spending levels~~we continue to experience price erosion particularly in our drilling services and completion product lines.

North America operating profit before tax was $14 million in the second quarter of 2017 compared to an operating loss before tax of $311 million in the second quarter of 2016. ~~All product lines have been unfavorably impacted~~In addition to the revenue increase, results from operations were benefited by the deconsolidation of the North America onshore pressure pumping business which had a net loss of $90 million in the prior year quarter. Additionally, actions taken to restructure our North American operations and the reduction of depreciation and amortization expense from asset impairments drove improvements in our operating results. In addition, our operating results for the second quarter of 2016 included

$209 million of costs related to writing down certain excess inventory, and a $51 million benefit from a reversal of a loss on a firm purchase commitment recognized in the first quarter of 2016 as the contract was settled in the second quarter of 2016.

Latin America

Latin America revenue decreased $27 million, or 11%, in the second quarter of 2017 compared to the second quarter of 2016 with Brazil and Venezuela experiencing the largest declines in revenue. The revenue decline in Brazil was primarily due to reduced activity ~~drop, most notably~~offshore in our pressure pumping and ~~completion systems. Our production chemicals, deepwater operations, and~~completions product lines. The reduction in Venezuela was primarily due to reduced artificial lift sales into the country.

Latin America operating profit before tax was $12 million in the second quarter of 2017 compared to an operating loss before tax of $243 million in the second quarter of 2016. The increase in profitability is primarily due to a reduction in bad debt expense of $134 million in the second quarter of 2017 compared to the same period in 2016, primarily driven by Ecuador. Also, reduced operating costs resulting from our efforts to structurally realign the segment to reflect current and expected near-term activity levels contributed to the improvement. These events more than offset the impact to profitability from the reduction in revenue. In the second quarter of 2016, we incurred costs of $88 million to write down certain excess inventory.

Europe/Africa/Russia Caspian

EARC revenue decreased $77 million, or 13%, in the second quarter of 2017 compared to the second quarter of 2016. The decrease in revenue can be attributed to activity reductions, and to a lesser extent price deterioration, across most of the region, particularly in our North Sea and West Africa drilling services and completions product lines. These reductions were partially offset by moderate growth in Russia, particularly in our drilling and evaluation product lines ~~showed~~and our artificial lift business.

EARC operating profit before tax was $15 million in the ~~most resilience.~~second quarter of 2017 compared to an operating loss before tax of $257 million in the second quarter of 2016. The impact from the decline in revenue was more than offset by the benefit of implemented cost reduction measures, lower depreciation and amortization expense from previous asset impairments and valuation allowances on indirect taxes recorded in Africa during the second quarter of 2016 that did not recur. During the second quarter of 2016, we incurred costs of $152 million to write down certain excess inventory.

Middle East/Asia Pacific

MEAP revenue increased $10 million or 2% in the second quarter of 2017 compared to the second quarter of 2016. The increase in revenue was largely in line with the year over year rig count increase of 3%. This increase in activity was primarily driven by Saudi Arabia, Kuwait and China offset by reductions in both Iraq and Australia. Revenue ~~has~~in Saudi Arabia increased mainly due to our completions product line. The increase in revenue in Kuwait was primarily driven by our pressure pumping and wireline product lines whereas the increase in China was due to drilling services. We experienced declines in Iraq as our integrated projects came to an end in 2016 and declines in Australia were primarily in our drilling services, completions and pressure pumping product lines. In addition, there continues to be pricing pressure throughout the region impacting all areas and product lines.

MEAP operating profit before tax was $63 million in the second quarter of 2017 compared to a loss of $142 million in the second quarter of 2016. The increase in profitability is driven primarily by the operating cost reductions and lower depreciation and amortization expense from asset impairments recorded in 2016. Margins were also ~~been~~favorably impacted by ~~onshore pressure pumping share~~bad debt recoveries of $10 million during the second quarter of 2017, compared to bad debt expense of $6 million in the second quarter of 2016. These improvements along with the increase in revenue more than offset the impact of further price deterioration. During the second quarter of 2016, we incurred costs of $125 million to write down certain excess inventory.

Industrial Services

For Industrial Services, revenue decreased $20 million or 7% in the second quarter of 2017 compared to the second quarter of 2016. This was primarily due to project completions and activity reductions ~~driven~~resulting from reduced spending and delayed projects by ~~efforts to reduce losses~~our customers, including several major pipeline construction and ~~improve cash flow~~maintenance projects partially offset by improvement in ~~a market where pricing remains unsustainable.~~our downstream chemicals business.

~~North America~~Industrial Services operating loss before tax was ~~$65~~$8 million in the ~~third~~second quarter of 2017 compared to a loss of $43 million in the second quarter of 2016. Profitability was negatively impacted by reduced activity and to a lesser extent, price deterioration. These items were partially offset by lower depreciation and amortization expense from asset impairments recorded in 2016 and bad debt expense of $7 million recorded in the second quarter of 2016 that did not repeat in 2017. During the second quarter of 2016, we incurred costs of $47 million to write down certain excess inventory.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Revenue for the six months ended June 30, 2017 decreased $412 million, or 8%, compared to ~~$153~~the six months ended June 30, 2016. Revenue decreased in all segments except North America, with the steepest drop seen in both Latin America and EARC, where the average rig count declined 13% and 5%, respectively, for the first half of 2017 compared to the same period a year ago.

Operating profit before tax for the six months ended June 30, 2017 was $224 million, incompared to a loss of $1.26 billionfor the ~~third quarter~~same period a year ago. All segments improved during the first six months of ~~2015. Although operating results were negatively impacted by~~2017 compared to the ~~sharp reduction in activity and an increasingly unfavorable pricing environment,~~first six months of 2016 due to the actions taken ~~in the past year~~ to reduce our workforce, close and consolidate facilities and improve commercial terms with ~~vendors resulted in lower operating costs. These actions to restructure our North American operations to operate in a lower activity and pricing environment, combined with~~

~~the reduction of depreciation and amortization from asset impairments, helped mitigate the impact of the ongoing decline in revenue experienced since early 2015.~~

~~Latin America~~

Latin America revenue decreased $196 million, or 45%, in the third quarter of 2016 compared to the third quarter of 2015 primarily driven by reduced activity, as evident in the 41% rig count drop, and to a lesser extent lower pricing. Activity has declined swiftly across the entire segment and all product lines, with the Andean area and Mexico experiencing the largest decline as reflected by the year-over-year decline in the rig count of 71% and 41%, respectively.

Latin America operating profit before tax was $20 million in the third quarter of 2016 compared to $51 million in the third quarter of 2015. The decrease in profitability primarily due to lower revenue was mitigated by reduced operating costs resulting from our efforts to structurally align the segment to reflect current and expected near-term activity levels. Profitability was improved due to lower provisions for doubtful accounts in Ecuador as a result of $21 million of provisions recorded in the third quarter of 2015 that did not repeat in the current quarter.

~~Europe/Africa/Russia Caspian~~

EARC revenue decreased $272 million, or 34%, in the third quarter of 2016 compared to the third quarter of 2015. The decrease in revenue can be attributed to activity reductions across all markets and all product lines, but most notably the completion systems product line in West Africa and the drilling services product line in the United Kingdom. Price deterioration throughout the region also negatively impacted revenue. The unfavorable change in exchange rates, mainly for the British Pound and Nigerian Naira, accounted for more than 10% of the decline in revenue.

EARC operating profit before tax was $22 million in the third quarter of 2016 compared to $98 million in the third quarter of 2015. The decline in operating profit driven by the decline in revenue was partially offset by the benefit of implemented cost reduction measures, lower depreciation and amortization from asset impairments, and reduced foreign exchange losses in Angola and Russia.

~~Middle East/Asia Pacific~~

MEAP revenue decreased $200 million, or 24%, in the third quarter of 2016 compared to the third quarter of 2015. The decrease in revenue was largely due to reduced activity in Asia Pacific and Iraq, and significant pricing pressure across the region, most meaningfully in Asia Pacific. While all product lines have been negatively impacted by the continued downturn, our production-related product lines have shown some resiliency in the region.

MEAP operating profit before tax was $71 million in the third quarter of 2016 compared to $76 million in the third quarter of 2015. The reduction in profitability driven primarily by the decline in revenue was partially offset by operating cost reductions and lower depreciation and amortization from asset impairments. Also, in the third quarter of 2015, we incurred charges in Iraq related to our integrated operations that did not repeat in the third quarter of 2016.

~~Industrial Services~~

For Industrial Services, revenue decreased $71 million and profitability decreased $14 million in the third quarter of 2016 compared to the third quarter of 2015 due to activity reductions as customers reduced spending and delayed projects including several major pipeline construction and maintenance projects. Revenue and profitability were also negatively impacted by pricing deterioration in the market. The impact on profitability from decreased activity and price deterioration was lessened by reduced operating costs and lower depreciation and amortization expense from asset impairments.

~~Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015~~

~~Revenue for the nine months ended September 30, 2016 decreased $4.92 billion, or 40%, compared to the nine~~

months ended September 30, 2015, in line with the 36% decline in the global rig count year-over-year. Revenue decreased in all segments, with the steepest drop seen in North America where the average rig count declined 52% for the first nine months of 2016 compared to the same period a year ago. Reduced activity, unfavorable pricing and foreign exchange rates negatively impacted our revenue from foreign operations.

~~Operating loss before tax for the nine months ended September 30, 2016 was $1.18 billion, compared to operating profit before tax of $36 millionfor the same period a year ago. In all regions, margins were negatively impacted by the continued reduction in activity and an increasingly unfavorable pricing environment.~~vendors. During the first ~~nine~~six months of 2016, we recorded ~~$587~~$621 million in charges to write off and dispose of inventory considered ~~excess, and $209~~excess. In addition to the above, North America margins were favorably impacted by the deconsolidation of our onshore pressure pumping business, which had a net loss of $179 million ~~in provisions for doubtful accounts. In comparison, operating loss before tax~~ for the six months ended June 30, 2016. Margins were also favorably impacted by bad debt recoveries of $111 million during the first ~~nine~~six months of ~~2015 included $194~~2017, primarily driven by the receipt of government-backed bonds in Ecuador in exchange for fully reserved outstanding receivables, compared to $215 million of bad debt expense in ~~charges to write down~~ the ~~carrying value~~first six months of certain inventory, and $160 million in provisions for doubtful accounts. Actions taken across all segments to reduce our workforce, close and consolidate facilities and improve commercial terms with vendors partially offset these unfavorable market conditions.2016.

Costs and Expenses

The table below details certain unaudited condensed consolidated ~~condensed~~ statement of income (loss) data and as a percentage of revenue.


	Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended June 30,								Six Months Ended June 30,
	2016				2015				2016					2015				2017				2016				2017				2016
	$		%		$		%		$			%		$		%		$		%		$		%		$		%		$		%
Revenue	$	2,353	100	%	$	3,786	100	%	$	7,431		100	%	$	12,348	100	%	$	2,404	100	%	$	2,408	100	%	$	4,666	100	%	$	5,078	100	%
Cost of revenue	2,059		88	%	3,375		89	%	7,829			105	%	11,301		92	%	2,084		87	%	3,112		129	%	3,972		85	%	5,770		114	%
Research and engineering	91		4	%	110		3	%	292			4	%	366		3	%	102		4	%	99		4	%	201		4	%	201		4	%
Marketing, general and administrative	203		9	%	211		6	%	632			9	%	749		6	%	225		9	%	222		9	%	409		9	%	429		8	%
Impairment and restructuring charges	304		13	%	98		3	%	1,590			21	%	747		6	%	—		—	%	1,126		47	%	90		2	%	1,286		25	%
Goodwill Impairment	17		1	%	—		—	%	1,858			25	%	—		—	%	—		—	%	1,841		76	%	—		—	%	1,841		36	%
Merger and related costs	—		—	%	93		2	%	180			2	%	204		2	%
Merger termination fee	—		—	%	—		—	%	(3,500		)	(47	)%	—		—	%
Merger and related costs, net																		49		2	%	78		3	%	80		2	%	180		4	%

Cost of Revenue

Cost of revenue as a percentage of revenue was ~~88%~~87% and ~~89%~~85% for the three and six months ended ~~September~~June 30, 2017, respectively, and 129% and 114% for the three and six months ended June 30, 2016, ~~and 2015, respectively, and 105% and 92% for the nine months ended September 30, 2016 and 2015,~~ respectively. Cost of revenue for the first nine months of 2016 was negatively impacted by a charge of $587 million to write off and dispose of certain excess inventory compared to a write-down of $194 million in the prior year. The ~~increase~~

decrease in cost of revenue as a percentage of revenue in the three and six months ended June 30, 2017 is due mainly to ~~deteriorating pricing conditions as operators reduce their spending, partially offset by~~ the benefit of implemented cost reduction measures and lower depreciation and amortization from asset ~~impairments. Additionally, cost~~impairments that occurred in 2016. In addition, we incurred $621 million of ~~revenue was negatively impacted by an increase~~costs in ~~provisions for doubtful accounts~~the second quarter of ~~$49 million for the nine months ended September 30,~~ 2016 ~~compared~~ to ~~the prior year.~~

~~Research~~write off and ~~Engineering~~

~~Research and engineering expenses declined by $19 million and $74 million~~dispose of certain excess inventory that did not recur in 2017. Cost of revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017 was also favorably impacted by bad debt recoveries of $17 million and $111 million, respectively, compared to bad debt expense totaling $167 million and $215 million, respectively, in the ~~prior year, primarily~~same periods in 2016. These factors also contributed to the decline in 2017 in the cost of revenue as a ~~result~~percentage of ~~cost reduction measures.~~

~~Marketing, General and Administrative~~

~~Marketing, general and administrative ("MG&A") expenses declined by $8 million and $117 million for the three and nine months ended September 30, 2016, respectively,~~revenue compared to 2016. The second quarter of 2016 was benefited by a reversal of a loss on a firm purchase commitment of $51 million that was recorded in cost of service in the ~~same period a year ago. The decline~~first quarter of 2016 as the contract was settled in ~~MG&A expenses for~~ the ~~three and nine months ended September 30, 2016 is primarily a result~~second quarter of ~~workforce reductions, lower spending and reduced foreign exchange losses, partially offset by costs related to litigation settlements of $41 million.~~2016.

Impairment and Restructuring Charges

There were no new impairment and restructuring charges during the three months ended June 30, 2017. During the six months ended June 30, 2017, we recorded restructuring charges of $90 million consisting of $61 million for workforce reduction costs, and $29 million for contract termination costs and asset impairments related to facility closures and removal of excess machinery and equipment. Total cash paid during the first six months of 2017 related to workforce reductions and contract terminations was $85 million.

During the three and ~~nine~~six months ended ~~September~~June 30, 2016, we recorded restructuring charges of ~~$304 million~~$1.13 billion and ~~$1.59~~$1.29 billion, respectively. The year-to-date restructuring charge through June 30, 2016 consisted of ~~$203~~$145 million for workforce reduction costs, ~~$146~~$91 million for contract termination costs and ~~$1.24~~$1.05 billion for asset impairments related to excess machinery and equipment, facilities and intangible assets. Total cash paid during the six months ended June 30, 2016 related to workforce reductions and contract terminations was ~~$333~~$230 million.

During the three and nine months ended September 30, 2015, we recorded restructuring charges of $98 million and $747 million, respectively. The year-to-date restructuring charge consisted of $416 million for workforce reduction costs, $83 million for contract termination costs and $248 million for asset impairments related to excess machinery and equipment and facilities. Total cash paid during the nine months ended September 30, 2015 related to these charges was $338 million. For further discussion of these charges, see ~~Note~~"Note 3. ~~"Impairment~~Impairment and Restructuring Charges" of the Notes to Unaudited Condensed Consolidated ~~Condensed~~ Financial Statements in Item 1 of Part 1 herein.

The reduction in costs from eliminated depreciation, reduced employee expenses, and reduced interest expense on long-term debt in the three months ended September 30, 2016 is approximately $150 million, and is expected to be approximately $800 million on an annualized basis, $650 million, of which is related to actions taken post merger.

Goodwill Impairment

InBased on the results of our impairment test in the second quarter of 2016, we determined that goodwill of two of our reporting units was impaired and recorded an estimate of the goodwill impairment loss of $1.84 billion, which consisted of $1.53 billion for the North America segment and $311 million for the Industrial Services segment. We determined the fair value of our reporting units using a combination of techniques including the present value of future cash flows derived from our long-term plans and historical experience, and multiples of competitors. ~~Based on the results of our impairment test,~~While we ~~determined that goodwill of two of our reporting units was impaired, and we commenced the second step of the goodwill impairment test. We~~had substantially completed all actions necessary in the determination of the implied fair value of goodwill, ~~in the second quarter of 2016; however, some~~certain of the estimated fair values and allocations were subject to adjustment once the valuations and other computations were ~~completed. Accordingly,~~completed, which occurred in the second quarter of 2016, we recorded an estimate of the goodwill impairment loss of $1.84 billion, which consisted of $1.53 billion for the North America segment and $311 million for the Industrial Services segment. During the third quarter of 2016, we finalized all valuations and computations, and adjusted our final goodwill impairment loss for the first nine months of 2016 to $1.86 billion, consisting of $1.55 billion for the North America segment and $309 million for the Industrial Services segment.2016.

Merger and Related Costs and Merger Termination Fee

We incurred net merger and related costs of $49 million and $80 million associated with the General Electric Transactions for the three and six months ended June 30, 2017, respectively. We incurred costs related to the ~~Merger~~terminated merger with Halliburton of ~~$180~~$78 million and ~~$204~~$180 million for the ~~nine~~three and six months ended ~~September~~June 30, 2016, ~~and 2015,~~ respectively, including costs under our retention ~~programs and~~programs. Costs related to the terminated merger with Halliburton also include obligations for minimum incentive compensation costs which, based on meeting eligibility criteria, ~~have been~~were treated as merger and related expenses. ~~No costs related to the Merger were incurred during the three months ended September 30, 2016, compared to $93 million for the three months ended September 30, 2015.~~ On April 30, 2016, the Merger Agreement with Halliburton was terminated and as a result, Halliburton paid us $3.5 billion on May 4, 2016, which represents the termination fee required to be paid pursuant to the Merger ~~Agreement.~~

Agreement with Halliburton.

Income Taxes

For the three months ended ~~September~~June 30, ~~2016,~~2017, total income tax ~~expense~~provision was ~~$70~~$72 million on a loss before income taxes, including equity in loss of ~~$360~~affiliate, of $107 million, resulting in a negative effective tax rate of ~~19.4%~~67.3%. The negative effective tax rate is due primarily to the geographical mix of earnings and losses, ~~such that~~which resulted in taxes in

certain jurisdictions, including withholding and deemed profit taxes, ~~exceed~~exceeding the tax benefit from the losses in other jurisdictions due to valuation allowances provided in most loss jurisdictions.

As a result of the geographic mix of earnings and losses, including the goodwill impairment, asset impairment, and restructuring charges, and other discrete tax items, our tax rate has been and will continue to be volatile until the market stabilizes.

LIQUIDITY AND CAPITAL RESOURCES

Our objective in financing our business is to maintain sufficient liquidity, adequate financial resources and financial flexibility in order to fund the requirements of our business. At ~~September~~June 30, ~~2016,~~2017, we had cash and cash equivalents of ~~$3.74~~$4.13 billion compared to ~~$2.32~~$4.57 billion of cash and cash equivalents held at December 31, 2015. As a result of the failure of the Merger, Halliburton paid us $3.5 billion on May 4, 2016, which represents the termination fee required to be paid pursuant to the Merger Agreement. Part of the proceeds received were used to purchase $1.0 billion face value of our long-term notes and debentures, which included portions of each tranche of notes and debentures, and $763 million of our common stock.2016.

At ~~September~~June 30, ~~2016,~~2017, approximately ~~$2.3~~$2.9 billion of our cash and cash equivalents was held by foreign subsidiaries which was flat when compared to ~~approximately $2.01 billion~~the balance at December 31, ~~2015.~~2016. A substantial portion of the cash held by foreign subsidiaries at ~~September~~June 30, ~~2016~~2017 was reinvested in our international operations as our intent is to use this cash to, among other things, fund the operations of our foreign subsidiaries. If we decide at a later date to repatriate those funds to the U.S., we may be required to provide taxes on certain of those funds based on applicable U.S. tax rates net of foreign tax credits. ~~We have~~At June 30, 2017, we had a committed revolving credit facility ("credit facility") with commercial banks and a related commercial paper program under which the maximum combined borrowing at any time under both the credit facility and the commercial paper program is $2.5 billion. ~~At September 30, 2016, we had no commercial paper outstanding; therefore, the amount available for borrowing under the credit facility as of September 30, 2016 was $2.5 billion.~~ During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we used cash to fund a variety of activities including ~~certain~~ working capital needs, ~~and~~ restructuring costs, capital expenditures, ~~repurchases of long-term debt and common stock,~~ and the payment of dividends. We believe that cash on hand, cash flows generated from operations and the available credit facility, including the issuance of commercial paper, will provide sufficient liquidity to manage our global cash needs.

Cash Flows

Cash flows provided by (used in) each type of activity were as follows for the ~~nine~~six months ended ~~September~~June 30:


(In millions)	2016			2015			2017			2016
Operating activities	$	3,597		$	1,265		$	(227	)	$	3,478
Investing activities	(28		)	(713		)	(51		)	(89		)
Financing activities	(2,159		)	(239		)	(160		)	(1,805		)

Operating Activities

Cash flows from operating activities used cash of $227 million in the six months ended June 30, 2017, due primarily to other operating items that used cash of $210 million due primarily to employee compensation payments related to annual bonuses and severance. In addition to these cash outflows, the changes in the components of our working capital (receivables, inventories and accounts payable) as a result of the increase in activity also used cash of $85 million. Cash flows from operating activities in the six months ended June 30, 2016 provided cash of ~~$3.6~~$3.48 billion ~~in the nine months ended September 30, 2016, due primarily to~~driven by the receipt of the $3.5 billion merger termination ~~fee. Included in our cash flows from operating activities for~~fee under the ~~nine months ended September 30, 2016, are payments of $333 million made for~~

~~employee severance and contract termination costs as a result of our restructuring activities initiated in 2015 and continuing through the first nine months of 2016.~~Merger Agreement with Halliburton.

Investing Activities

Our principal recurring investing activity is the funding of capital expenditures to ensure that we have the appropriate levels and types of machinery and equipment in place to generate revenue from operations. Expenditures for capital assets totaled ~~$226~~$216 million in the ~~nine~~six months ended ~~September~~June 30, 2017 compared to $156 million in the six months ended June 30, 2016.

Proceeds from the disposal of assets were ~~$199~~$134 million and $139 million in the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, respectively, which related primarily to equipment that was lost-in-hole, and to a lesser extent, property, machinery and equipment no longer used in operations that was sold throughout the period.

We had proceeds from ~~maturities~~sale of investment securities of ~~$307~~$103 million and ~~purchases of investment securities of $308~~$204 million in the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017 and 2016, respectively. We purchased investment securities totaling $72 million and $276 million in the six months ended June 30, 2017 and 2016, respectively.

Financing Activities

We had net repayments of short-term debt and other borrowings of ~~$57~~$10 million and $36 million in the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017 and 2016, respectively. Total debt outstanding ~~at September 30, 2016~~ was $3.01 billion and $3.02 billion ~~a decrease of $1.02 billion compared to~~at June 30, 2017 and December 31, ~~2015.~~2016, respectively. The total debt-to-capital (defined as total debt plus equity) ratio was 0.20 and 0.19 at ~~September~~June 30, 2017 and December 31, 2016, respectively. We paid dividends of $146 million in the six months ended June 30, 2017.

We had no stock repurchases in the six months ended June 30, 2017 under our previously announced purchase program. We had authorization remaining to repurchase approximately $1.24 billion in common stock at June 30, 2017. Under the Transaction Agreement with GE entered into on October 30, 2016, ~~and 0.20 at December 31, 2015.~~

~~Upon termination~~we had generally agreed not to repurchase any shares of common stock or increase the ~~Merger Agreement, on April~~quarterly dividend while the transaction was pending. In May 2016 through June 30, 2016, we repurchased 10.9 million shares of our ~~Board~~common stock at an average price of ~~Directors authorized the purchase~~$45.81 per share, for a total of ~~debt of up to $1.0 billion and approved an increase to the share repurchase program authorization from $1.05 billion to $2.0 billion.~~$500 million.

Beginning in May 2016, following the termination of the Merger, through September 30, 2016, we repurchased 16.2 million shares of our common stock at an average price of $47.09 per share, for a total of $763 million. We had authorization remaining to repurchase approximately $1.24 billion in common stock at September 30, 2016. We may continue to repurchase our common stock subject to market conditions, our liquidity and other considerations.

~~We paid dividends of $221 million in the nine months ended September 30, 2016.~~

Available Credit Facility

~~On July 13, 2016,~~At June 30, 2017, we ~~entered into~~had a ~~new five-year $2.5 billion~~ committed revolving credit facility ~~(the "2016 Credit Agreement")~~ with commercial banks ~~maturing in July 2021, which replaced our existing credit facility of $2.5 billion, but maintained the existing~~and a related commercial paper ~~program. The previous credit facility had a maturity date in September of 2016. The~~program under which the maximum combined borrowing at any time under both the ~~2016 Credit Agreement~~credit facility and the commercial paper program is $2.5 billion. The ~~2016 Credit Agreement contains~~credit facility had a maturity date in July 2021 and contained certain covenants, which, among other things, ~~require~~required the maintenance of a total debt-to-total capitalization ratio, ~~restrict~~restricted certain merger transactions or the sale of all or substantially all of our assets or a significant subsidiary and ~~limit~~limited the amount of subsidiary indebtedness. Upon the occurrence of certain events of default, our obligations under the ~~2016 Credit Agreement~~credit facility may be accelerated. Such events of default include payment defaults to lenders under the ~~2016 Credit Agreement,~~credit facility, covenant defaults and other customary defaults. ~~To the extent we have outstanding commercial paper, the aggregate ability to borrow under the 2016 Credit Agreement is reduced.~~

~~During the first nine months of 2016, there~~There were no direct borrowings under ~~either~~ the ~~previous~~ credit facility orduring the ~~2016 Credit Agreement,~~six months ended June 30, 2017, and we were in compliance with all of the ~~covenants under both~~ credit ~~facilities.~~facility's covenants. Under the commercial paper program, we may issue from time to time up to $2.5 billion in commercial paper with ~~maturities~~maturity of no more than 270 days. The amount available to borrow under the credit facility ~~would be~~is reduced by the amount of any commercial paper outstanding. At ~~September~~June 30, ~~2016,~~2017, we had no outstanding borrowings ~~outstanding~~ under the commercial paper program.

On July 3, 2017, in connection with the combination with GE O&G, we entered into a new five-year $3 billion committed unsecured revolving credit facility (the "2017 Credit Agreement") with commercial banks maturing in July 2022, which replaced our existing credit facility of $2.5 billion, but maintained the existing commercial paper program. The 2017 Credit Agreement contains certain customary representations and warranties, certain affirmative covenants and no negative covenants. Upon the occurrence of certain events of default, our obligations under the 2017 Credit Agreement may be accelerated. Such events of default include payment defaults to lenders under the 2017 Credit Agreement, and other customary default. To the extent we have outstanding commercial paper, the aggregate ability to borrow under the 2017 Credit Agreement is reduced.

If market conditions were to change and our revenue was reduced significantly or operating costs were to increase, our cash flows and liquidity could be reduced. Additionally, it could cause the rating agencies to lower our credit rating. There are no ratings triggers that would accelerate the maturity of any borrowings under our committed credit facility. However, a downgrade in our credit ratings could increase the cost of borrowings under the credit facility and could also limit or preclude our ability to issue commercial paper. Should this occur, we would seek alternative sources of funding, including borrowing under the credit facility.

We believe our current credit ratings would allow us to obtain interim financing over and above our existing credit facility for any currently unforeseen significant needs.

Cash Requirements

For ~~2016,~~2017, we believe cash on hand, cash flows from operating activities and the available credit facility will provide us with sufficient capital resources and liquidity to manage our working capital needs, meet contractual obligations, fund capital expenditures and dividends, and support the development of our short-term and long-term operating strategies. If necessary, we may issue commercial paper or other short-term debt to fund cash needs in the U.S. in excess of the cash generated in the U.S.

~~For 2016, we expect our~~Our capital expenditures can be adjusted and managed by us to match market demand and activity levels. In light of the current market conditions, capital expenditures in 2017 will be ~~between $300~~made as appropriate at a rate that we estimate would equal $450 million ~~and $400~~to $500 million ~~excluding any amount related to acquisitions.~~on an annualized basis. The expenditures are expected to be used primarily for normal, recurring items necessary to support our ~~business and operations. A significant portion of our capital expenditures can be adjusted and managed by us to match market demand and activity levels.~~

~~As a result of carrying back the 2015 NOL, we have revised our estimate for global~~business. We also anticipate making income tax payments ~~and refunds and now anticipate receiving refunds, net~~in the range of ~~income tax payments, of up~~$200 million to ~~$75~~$250 million ~~for 2016.~~in 2017.

During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we contributed approximately ~~$153~~$92 million to our defined benefit, defined contribution and other postretirement plans. ~~Effective April 2016, employer contributions to certain defined contribution plans were suspended indefinitely.~~ We expect ~~we will~~to make additional contributions ~~to other plans~~ in the range of ~~$18~~$120 million to ~~$21~~$130 million for the remainder of 2017.

During the six months ended June 30, 2017 and prior to the closing of the Transactions, we paid dividends of $146 million. On July 3, 2017, subsequent to the period covered by this report and in connection with the ~~fourth quarter~~closing of ~~2016.~~

~~We may repurchase our~~the Transactions, a special one-time cash dividend of $17.50 per share was declared, and paid by Baker Hughes, a GE company to the former holders of record of Baker Hughes' common stock, ~~depending on market conditions, applicable legal requirements, our liquidity and other considerations. We currently anticipate paying dividends in~~immediately after the ~~range~~completion of ~~$285 million to $295 million for 2016.~~the Transactions totaling approximately $7.5 billion, substantially all of which was contributed by GE.

FORWARD-LOOKING STATEMENTS

~~MD&A and certain~~This Quarterly Report on Form 10-Q contains "forward-looking" statements as that term is defined in ~~the Notes to Unaudited Consolidated Condensed Financial Statements, includes forward-looking statements within the meaning of~~ Section 27A of the Securities Act, and Section 21E of the Exchange ~~Act (each a "forward-looking statement"). The~~Act. All statements, other than historical facts, including statements regarding the presentation of the Company's operations in future reports and any assumptions underlying any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words "may," "will," "should," "potential," "intend," "expect," "endeavor," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," ~~"ensure," "expect," "if," "intend," "estimate," "probable,~~"could," "project," ~~"forecasts,"~~ "predict," ~~"outlook,~~"continue," ~~"aim," "will," "could," "should," "would," "potential," "may," "likely" and~~"target" or other similar ~~expressions, and the negative thereof, are intended to identify forward-looking statements. Our forward-looking~~words or expressions. Forward-looking statements are based ~~on assumptions~~upon current plans, estimates and expectations that we believe to be reasonable but that may not prove to be accurate. The statements do not include the potential impact of future transactions, such as an acquisition, disposition, merger, joint venture or other transactions that could occur. We undertake no obligation to publicly update or revise any forward-looking statement. Our expectations regarding our business outlook, including changes in revenue, pricing, capital spending, profitability, tax rates, strategies for our operations, the impact of any common stock or debt repurchases or exchanges, oil and natural gas market conditions, the business plans of our customers, market share and contract terms, costs and availability of resources, legal, economic and regulatory conditions, and environmental matters are ~~only our forecasts regarding these matters.~~

~~All of our forward-looking information is~~ subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from ~~the results expected. Although it is not possible to identify all factors, these risks and uncertainties~~such plans, estimates or expectations include, among others, the risk factors in the "Risk Factors" section of the combined proxy statement/prospectus filed with the SEC on Schedule 14A on May 30, 2017; and ~~the timing of any of those~~other risk factors ~~identified in "Part II, Item 1A. Risk Factors" section contained herein,~~ as ~~well as the risk factors described in our 2015 Annual Report, this filing and those set forth~~detailed from time to time in ~~our filings~~the Company's reports filed with the SEC, including the Company's annual reports on Form 10-K, periodic quarterly reports on Form 10-Q, periodic current reports on Form 8-K and other documents filed with the SEC. These documents are available through our website or through the ~~SEC’s~~SEC's Electronic Data Gathering and Analysis Retrieval ("EDGAR") system at http://~~www.sec.gov~~.www.sec.gov. The foregoing list of important factors is not exclusive.

Any forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. The Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information or developments, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information about market risks for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, does not differ materially from that discussed under Part II, Item 7(a), "Quantitative and Qualitative Disclosures About Market Risk," in our ~~2015~~2016 Annual Report on Form ~~10-K/A.~~10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

AsOur management, with the participation of ~~the end of the period covered by this Quarterly Report, we have~~our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures ~~pursuant to~~(as defined in Rule ~~13a-15~~15d-15(e) under the Exchange Act) as of the ~~Exchange Act~~end of ~~1934, as amended (the "Exchange Act"). This~~the period covered by this report. Based upon that evaluation, ~~was carried out under~~ the ~~supervision~~Chief Executive Officer and ~~with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation, these officers~~Chief Financial Officer have concluded that, as of ~~September 30, 2016,~~the end of the period covered by this quarterly report, our disclosure controls and procedures as(as defined byin Rule ~~13a-15(e)~~15d-15(e) of the Exchange ~~Act,~~Act) were ~~not effective.~~

During the quarter ended March 31, 2016, we identified a material weakness in our controls related to the determination of valuation allowances for deferred tax assets. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there iseffective at a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. Our identified weakness had no impact on any amounts reported in the financial statements for the quarter ended March 31, 2016 or for any previous period. We have evaluated the controls associated with valuation allowances for deferred tax assets and have designed a remediation plan to address identified weaknesses and to strengthen controls over this process. During the second and third quarters of 2016, we implemented certain control enhancements as part of the remediation plan. This weakness will not be considered remediated until the enhanced controls have been tested and determined to be designed and operating effectively, which we currently expect to occur as of December 31, 2016.assurance level.

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

~~Changes in Internal Controls Over Financial Reporting~~

~~Except as discussed immediately above in the Evaluation of Disclosure Controls and Procedures, there~~There has been no change in our internal controls over financial reporting during the quarter ended ~~September~~June 30, ~~2016~~2017 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Registered Public Accounting Firm's Interim Review

Deloitte & Touche LLP ("Deloitte") advised the Audit Committee of the Company's board of directors (the "Audit Committee") that it performs certain non-audit services for, and has certain other relationships with GE, including GE O&G. Deloitte also advised the Audit Committee that certain present and former Deloitte personnel or certain of their family members have employment relationships with GE, and that certain Deloitte personnel and their family members and Deloitte member firms have financial interests in GE. Services and other relationships that relate to GE O&G include management functions, financial information systems design and implementation, and business relationships. Services and relationships that do not relate to GE O&G include management functions, expert services unrelated to the audit or review of the Company's financial statements, legal services, services performed under contingent fee arrangements, and business relationships. These financial interests, employment relationships, non-audit services, and business relationships are prohibited under the SEC's auditor independence rules.

Deloitte informed the Audit Committee that because the aforementioned matters did not impact the Company for any period through June 30, 2017 and prior to the closing of the Transactions, and because of appropriate measures with respect to the audit engagement team, Deloitte maintained objectivity and impartiality on all issues encompassed within its interim review of the Company's condensed consolidated financial statements for the three and six month periods ended June 30, 2017.

After considering the facts and circumstances, the Audit Committee concurred in Deloitte's conclusion that, for the reasons described, the aforementioned matters did not impair Deloitte's objectivity and impartiality with respect to the planning and execution of the interim review of the Company's condensed consolidated financial statements for the three and six months ended June 30, 2017.

Change of Independent Registered Public Accounting Firm

Deloitte was the independent auditor that audited Baker Hughes' financial statements for the fiscal years ended December 31, 2016 and 2015. In connection with the consummation of the Transactions, on July 3, 2017, the Audit Committee approved the engagement of KPMG LLP ("KPMG") as the Company's independent registered public accountants to audit the financial statements of the Company and its consolidated subsidiaries for the period beginning July 3, 2017 and ending on December 31, 2017, such engagement to be effective immediately following the filing of this Quarterly Report on Form 10-Q. Accordingly, the Audit Committee has dismissed Deloitte as the independent registered public accountants of the Company effective immediately following the filing of this Quarterly Report on Form 10-Q.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See discussion of legal proceedings in Note 1312 of the Notes to Unaudited Condensed Consolidated ~~Condensed~~ Financial Statements in this Quarterly Report, Item 3 of Part I of our ~~2015~~2016 Annual Report and Note 1315 of the Notes to Consolidated Financial Statements included in Item 8 of our ~~2015~~2016 Annual Report.

ITEM 1A. RISK FACTORS

As of the date of this filing, the Company and its operations continue to be subject to the risk factors previously disclosed in our "Risk Factors" contained in the ~~2015 Annual Report and our Quarterly Report~~combined proxy statement/prospectus filed with the SEC on ~~Form 10-Q for the quarters ended March 31, 2016 and June~~Schedule 14A on May 30, ~~2016.~~2017.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table contains information about our purchases of equity securities during the three months ended ~~September~~June 30, ~~2016.~~2017.

Period
Total Number of Shares Purchased ⁽¹⁾

Average
Price Paid
Per Share⁽²⁾

Total Number of Shares Purchased as Part of a Publicly Announced Program ⁽³⁾

Maximum Dollar Value
of Shares that May Yet Be
Purchased Under the Program ⁽⁴⁾
July 1-31, 2016 13,153
$ 44.90
—
$ 1,500,000,083
August 1-31, 2016 4,472,579
$ 49.76
4,472,579
$ 1,277,461,564
September 1-30, 2016 812,353
$ 49.61
812,353
$ 1,237,161,230
Total 5,298,085
$ 49.72
5,284,932



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share ⁽¹⁾		Total Number of Shares Purchased as Part of a Publicly Announced Program ⁽²⁾	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program ⁽³⁾
April 1-30, 2017	1,724	$	58.90	—	$	1,237,161,230
May 1-31, 2017	87	$	58.76	—	$	1,237,161,230
June 1-30, 2017	—	$	—	—	$	1,237,161,230
Total	1,811	$	58.89	—


⁽¹⁾	Represents shares purchased from employees to satisfy the tax withholding obligations in connection with the vesting of restricted stock awards and restricted stock ~~units and shares purchased in the open market under our publicly announced purchase program.~~units.

⁽²⁾

~~Average price paid includes commissions for shares purchased in~~There were no repurchases during the ~~open market~~second quarter of 2017 under our ~~publicly~~previously announced purchase program. Under the transaction agreement with GE, as described in "Note 2. General Electric Transaction Agreement" of the Notes to the Unaudited Condensed Consolidated Financial Statements, we had agreed not to repurchase any shares of our common stock other than in connection with shares repurchased from employees to satisfy the tax withholding obligations in connection with the vesting of equity awards while the transaction was pending.

⁽³⁾

~~On April 30, 2016, our Board of Directors approved~~Following the Transactions, BHGE and the Company do not have an ~~increase to the share~~equity repurchase program authorization from $1.05 billion to $2.0 billion. Repurchases during the quarter were made under our previously announced purchase program under a Letter Agreement with an agent that complied with the requirements of Rule 10b-18 of the Exchange Act (the "Agreement"). Shares were repurchased under the Agreement by the agent at the prevailing market prices, in open market transactions.


⁽⁴⁾	During the three months ended September 30, 2016, we repurchased 5.3 million shares of our common stock at an average price of $49.73 per share (including commissions), for a total of $263 million. We had authorization remaining to repurchase up to a total of approximately $1.24 billion of our common stock as of September 30, 2016.program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Our barite mining operations, in support of our drilling fluids products and services business, are subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Quarterly Report.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Each exhibit identified below is filed as a part of this report. Exhibits designated with an "*" are filed as an exhibit to this Quarterly Report on Form 10-Q and Exhibits designated with an "**" are furnished as an exhibit to this Quarterly Report on Form 10-Q. ~~Exhibits designated with an "+" are identified as management contracts or compensatory plans or arrangements.~~



~~3.1~~2.1		~~Certificate~~Transaction Agreement and Plan of ~~Amendment~~Merger, dated ~~April 22, 2010~~as of October 30, 2016, among General Electric Company, Baker Hughes Incorporated, Bear Newco, Inc. and ~~the Restated Certificate of Incorporation~~Bear MergerSub, Inc. (filed as Exhibit ~~3.1~~2.1 to ~~the Quarterly~~Current Report of Baker Hughes, ~~Incorporated~~a GE company, LLC on Form ~~10-Q for the quarter ended March 31, 2010.)~~8-K filed November 1, 2016).
~~3.2~~2.2		~~Restated Bylaws~~Amendment dated as of March 27, 2017, to the Transaction Agreement and Plan of Merger, dated as of October 30, 2016, entered into among General Electric Company, Baker Hughes Incorporated, ~~effective as of June 5, 2014~~Bear Newco, Inc., Bear MergerSub, Inc., BHI Newco, Inc. and Bear MergerSub 2, Inc. (filed as Exhibit ~~3.1~~2.1 to the Current Report of Baker Hughes Incorporated on Form 8-K filed on ~~June 6, 2010)~~March 31, 2017).
~~4.1~~3.1		Certificate of ~~Amendment dated April 22, 2010 and the Restated Certificate of Incorporate (filed as Exhibit 3.1 to the Quarterly Report~~Conversion of Baker Hughes, ~~Incorporated on Form 10-Q for the quarter ended March 31, 2010).~~
~~4.2~~		~~Restated Bylaws of Baker Hughes Incorporated effective as of June 5, 2014~~a GE company, LLC (filed as Exhibit 3.1 to the Current Report of Baker Hughes, ~~Incorporated~~a GE company, LLC on Form 8-K filed on July 3, 2017).
3.2		Certificate of Formation of Baker Hughes, a GE company, LLC (filed as Exhibit 3.2 to the Current Report of Baker Hughes, a GE company LLC on Form 8-K filed on July 3, 2017).
3.3		Amended and Restated Operating Agreement of Baker Hughes, a GE company, LLC, dated as of July 3, 2017 (filed as Exhibit 3.3 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
4.1		Second Supplemental Indenture to the Indenture dated as of October 28, 2008, among Baker Hughes, a GE company, LLC, Baker Hughes Co-Obligor, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.1 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
4.2		First Supplemental Indenture to the Indenture dated as of May 15, 1991, among Baker Hughes, a GE company, LLC, Baker Hughes Co-Obligor, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.2 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
4.3		Sixth Supplemental Indenture to the Indenture dated as of June ~~6, 2010)~~8, 2006, among Baker Hughes, a GE company, LLC, Baker Hughes Co-Obligor, Inc., Baker Hughes Oilfield Operations, LLC, Baker Hughes International Branches, LLC and Wells Fargo Bank, National Association, as trustee (filed as Exhibit 4.3 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
4.4		First Supplemental Indenture to the Indenture dated as of May 15, 1994, among Baker Hughes, a GE company, LLC, Baker Hughes Co-Obligor, Inc., Baker Hughes Oilfield Operations, LLC, Baker Hughes International Branches, LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (filed as Exhibit 4.4 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
10.1 * +		~~Letter~~Exchange Agreement, dated as of July ~~29, 2016, between~~3, 2017, among General Electric Company, GE Oil & Gas US Holdings I, Inc., GE Oil & Gas US Holdings IV, Inc., GE Holdings (US), Inc., Baker Hughes, ~~Incorporated~~a GE company and ~~Alan R. Crain, Jr., Senior Vice President, Chief Legal and Governance Officer~~
~~10.2 +~~		~~Form of~~ Baker Hughes, ~~Incorporated Restricted Stock Unit Award Agreement and Terms and Conditions for officers with~~ a ~~three-year cliff vest pursuant to the 2002 Director & Officer Long-Term Incentive Plan~~GE company, LLC (filed as Exhibit 10.1 to the Current Report of Baker Hughes, ~~Incorporated~~a GE company, LLC on Form 8-K filed on July ~~29, 2016)~~3, 2017).
~~10.3 +~~10.2		~~Form~~Tax Matters Agreement, dated as of July 3, 2017, among General Electric Company, Baker Hughes, ~~Incorporated Restricted Stock Unit Award Agreement~~a GE company, EHHC Newco, LLC and ~~Terms and Conditions for officers with~~Baker Hughes, a ~~three-year graded vest pursuant to the 2002 Director & Officer Long-Term Incentive Plan~~GE company, LLC (filed as Exhibit 10.2 to the Current Report of Baker Hughes, ~~Incorporated~~a GE company, LLC on Form 8-K filed on July ~~29, 2016)~~3, 2017).
10.3		IP Cross License Agreement, dated as of July 3, 2017, between General Electric Company and Baker Hughes, a GE company, LLC (filed as Exhibit 10.5 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
10.4		Trademark License Agreement, dated as of July 3, 2017, between General Electric Company and Baker Hughes, a GE company, LLC (filed as Exhibit 10.6 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
10.5		GE Digital Master Products and Services Agreement, dated as of July 3, 2017, between GE Digital LLC and Baker Hughes, a GE company, LLC (filed as Exhibit 10.7 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
10.6		Intercompany Services Agreement, dated as of July 3, 2017, between General Electric Company and Baker Hughes, a GE company, LLC (filed as Exhibit 10.8 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).



10.7		Supply Agreement, dated as of July 3, 2017, between General Electric Company, as Seller, and Baker Hughes, a GE company, LLC, as Buyer (filed as Exhibit 10.9 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
10.8		Supply Agreement, dated as of July 3, 2017, between Baker Hughes, a GE company, LLC, as Seller, and General Electric Company, as Buyer (filed as Exhibit 10.10 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
10.9		Credit Agreement, dated as of July ~~13, 2016,~~3, 2017, among Baker Hughes, ~~Incorporated, as Borrower, JP Morgan~~a GE company, LLC, JPMorgan Chase Bank, ~~N.A.,~~ as Administrative Agent, and the ~~other agents and lenders identified therein~~Lenders party thereto (filed as Exhibit ~~10.1~~10.11 to the Current Report of Baker Hughes, ~~Incorporated~~a GE company, LLC on Form 8-K filed on July ~~14, 2016)~~3, 2017).
10.10		Non-Competition Agreement, dated as of July 3, 2017, between General Electric Company and Baker Hughes, a GE company (filed as Exhibit 10.3 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
10.11		Channel Agreement, dated as of July 3, 2017, between General Electric Company and Baker Hughes, a GE company (filed as Exhibit 10.4 to the Current Report of Baker Hughes, a GE company, LLC on Form 8-K filed on July 3, 2017).
31.1**		Certification of ~~Martin S. Craighead, Chairman~~Lorenzo Simonelli, President and Chief Executive Officer, furnished pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2**		Certification of ~~Kimberly A. Ross,~~Brian Worrell, Chief Financial Officer, furnished pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32**		Statement of ~~Martin S. Craighead, Chairman~~Lorenzo Simonelli, President and Chief Executive Officer, and ~~Kimberly A. Ross,~~Brian Worrell, Chief Financial Officer, furnished pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.
95*		Mine Safety Disclosure.
101.INS*		XBRL Instance Document
101.SCH*		XBRL Schema Document
101.CAL*		XBRL Calculation Linkbase Document
101.LAB*		XBRL Label Linkbase Document
101.PRE*		XBRL Presentation Linkbase Document
101.DEF*		XBRL Definition Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		BAKER HUGHES, ~~INCORPORATED~~A GE COMPANY, LLC (Registrant)

Date:	~~October 25, 2016~~July 28, 2017	By:	/s/ ~~KIMBERLY A. ROSS~~BRIAN WORRELL
		~~Kimberly A. Ross~~Brian Worrell
		~~Senior Vice President and~~ Chief Financial Officer

Date:	~~October 25, 2016~~July 28, 2017	By:	/s/ ~~KELLY C. JANZEN~~KURT CAMILLERI
		~~Kelly C. Janzen~~Kurt Camilleri
		Vice President, Controller and Chief Accounting Officer



(In millions)	September 30, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	3,736		$	2,324
Accounts receivable - less allowance for doubtful accounts (2016 - $558; 2015 - $383)	2,207			3,217
Inventories, net	1,966			2,917
Deferred income taxes	159			301
Other current assets	934			509
Total current assets	9,002			9,268
Property, plant and equipment - less accumulated depreciation (2016 - $6,759; 2015 - $7,378)	4,874			6,693
Goodwill	4,216			6,070
Intangible assets, net	407			583
Other assets	992			1,466
Total assets	$	19,491		$	24,080
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	951		$	1,409
Short-term debt and current portion of long-term debt	127			151
Accrued employee compensation	466			690
Income taxes payable	131			55
Other accrued liabilities	549			470
Total current liabilities	2,224			2,775
Long-term debt	2,895			3,890
Deferred income taxes and other tax liabilities	382			252
Liabilities for pensions and other postretirement benefits	631			646
Other liabilities	122			135
Commitments and contingencies
Equity:
Common stock, one dollar par value (shares authorized - 750; issued and outstanding: 2016 - 423; 2015 - 437)	423			437
Capital in excess of par value	6,625			7,261
Retained earnings	7,072			9,614
Accumulated other comprehensive loss	(939		)	(1,005		)
Treasury stock	(22		)	(9		)
Baker Hughes stockholders’ equity	13,159			16,298
Noncontrolling interests	78			84
Total equity	13,237			16,382
Total liabilities and equity	$	19,491		$	24,080



	Baker Hughes Stockholders' Equity
(In millions, except per share amounts)	Common Stock			Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Non-controlling Interests			Total Equity
Balance at December 31, 2015	$	437		$	7,261		$	9,614		$	(1,005	)	$	(9	)	$	84		$	16,382
Comprehensive loss:
Net loss							(2,321		)							(2		)	(2,323		)
Other comprehensive income										66									66
Activity related to stock plans	2			18									(13		)				7
Repurchase and retirement of common stock	(16		)	(747		)													(763		)
Stock-based compensation				93															93
Cash dividends ($0.51 per share)							(221		)										(221		)
Net activity related to noncontrolling interests																(4		)	(4		)
Balance at September 30, 2016	$	423		$	6,625		$	7,072		$	(939	)	$	(22	)	$	78		$	13,237



	September 30, 2016		December 31, 2015
Segments	Assets		Assets
North America	$	3,541	$	6,599
Latin America	1,595		2,323
Europe/Africa/Russia Caspian	2,488		3,077
Middle East/Asia Pacific	2,867		3,441
Industrial Services	678		1,106
Shared assets	5,314		5,613
Total Operations	16,483		22,159
Corporate	3,008		1,921
Total	$	19,491	$	24,080



	Useful Life	September 30, 2016		December 31, 2015
Land		$	241	$	263
Buildings and improvements	5 - 30 years	2,440		2,624
Machinery, equipment and other	1 - 20 years	8,952		11,184
Subtotal		11,633		14,071
Less: Accumulated depreciation		6,759		7,378
Total property, plant and equipment		$	4,874	$	6,693



	North America			Latin America		Europe/ Africa/ Russia Caspian			Middle East/ Asia Pacific		Industrial Services			Total Goodwill
Balance at December 31, 2015	$	3,097		$	584	$	1,068		$	819	$	502		$	6,070
Impairments	(1,549		)	—		—			—		(309		)	(1,858		)
Currency translation adjustments	3			3		(1		)	—		(1		)	4
Balance at September 30, 2016	$	1,551		$	587	$	1,067		$	819	$	192		$	4,216



Year	Estimated Amortization Expense
Remainder of 2016	$	17
2017	65
2018	60
2019	57
2020	48
2021	43



	September 30, 2016		December 31, 2015
6.0% Notes due June 2018	$	200	$	255
7.5% Senior Notes due November 2018	524		747
3.2% Senior Notes due August 2021	511		746
8.55% Debentures due June 2024	112		149
6.875% Notes due January 2029	301		394
5.125% Notes due September 2040	1,132		1,482
Other debt	242		268
Total debt	3,022		4,041
Less: short-term debt and current portion of long-term debt	127		151
Total long-term debt	$	2,895	$	3,890



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid Per Share⁽²⁾		Total Number of Shares Purchased as Part of a Publicly Announced Program ⁽³⁾	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program ⁽⁴⁾
July 1-31, 2016	13,153	$	44.90	—	$	1,500,000,083
August 1-31, 2016	4,472,579	$	49.76	4,472,579	$	1,277,461,564
September 1-30, 2016	812,353	$	49.61	812,353	$	1,237,161,230
Total	5,298,085	$	49.72	5,284,932