INDEPTH

BAKER HUGHES
INDEPTH
Volume 13, No. 2, 2007
Special Edition
July 2007
BAKER HUGHES
INDEPTH
Volume 13, No. 2, 2007
Special Centennial Issue
July 2007
Editor
Ron Bitto
Managing Editor
Pramod Kulkarni
Contributors
Michael Beyeler
Soraya Brombacher
Noel Atzmiller
Isaac Kerridge
Brenda Sharp
Sheila Luebbert
Howard Batt
Craig Fleming
Susan Bourgain
Tom Haynes
Kathy Shirley
Published by
Baker Hughes Incorporated
P.O. Box 4740
Houston, TX 77210-4740
www.bakerhughes.com
© 2007 Baker Hughes Incorporated. No part of this
publication may be reproduced, stored in a retrieval system, or
transmitted in any form or by any means (electronic, mechanical,
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Baker Hughes Incorporated.
Requests should be addressed to:
Editor
InDepth magazine
Baker Hughes Incorporated
P.O. Box 4740
Houston, TX 77210-4740
Contact us by e-mail at [email protected]
Art Director
Eric Olson
Design Team Leader
Shirley Leong
Artists
Jody Cockrell
Summer Garner
Victoria Quijano
Beth Prete
Oscar Sajche
April 15, 1922. The Mexia Field was discovered in Texas. Hobson, Blackstock
and their crew drilled the well with a 133/4” Hughes Simplex bit.
ACKNOWLEDGMENTS
Acknowledgments
Houston Public Library, Joel Draut; R.C. Baker Memorial Library,
Stephanie McHaney; Peter Bogniez, Oil & Gas Journal, World Oil,
Hart Publications.
Bibliography
Material in this brief history of Baker Hughes came from numerous
sources, including:
 Baker Story, Baker International, 1978.
 100 Most Influential People of the Petroleum Century,
supplement to Oil & Gas Investor, Hart Publications, 2001.
 50 Years of Offshore Oil & Gas Development, Hart
Publications, 1997.
 A Century of Houston Energy, Houston Business Journal, 2001.
 Baker Hughes annual reports, 1987-2006.
 Baker Oil Tools and Baker International annual reports,
1975-1986.
 Brantley, J.E.: The History of Oil Well Drilling, Gulf Publishing
Book Division, 1971.
 Carestio, Michael; Cipriana Mecchi, Andrea: R.C. Baker
of Coalinga: A California Story, R.C. Baker Memorial Museum,
Inc., 2005.
 Clark, J. Stanley, The Oil Century, University of Oklahoma
Press, 1958.
 Directions, Eastman Christensen newsletter, 1987.
 Eastman Survey, Eastman Oil Survey Company, 1956.
 Flowline, Milchem newsletter, 1982.
 From an Idea to an Industry: 50 Years with Dresser Atlas,
Dresser Atlas, 1982.
 GEMS, Christensen Diamond Products newsletter, 1953-1975.
 Hughes Rigway magazine, Hughes Tool Company, 1976.
 Hughes Tool Company annual reports, 1973-1986.
 Hughes Tool Company catalog, 1965-66.
 Knowles, Ruth Sheldon: The First Pictorial History of the
American Oil and Gas Industry, Ohio University Press, 1983.
 Petrolite…Legacy of a Pioneer, 75th anniversary newsletter,
Petrolite, 1991.
 Solutions, Baker Hughes INTEQ magazine, 1993.
Drillers on the rig floor after a successful run
with a Hughes drill bit in the 1920s.
Additional sources include numerous brochures, catalogs and
publications produced by companies that have been incorporated
into today’s Baker Hughes.
CONTENTS
1907-1917
A Century of Innovation Begins
6
1918-1927
Oil Boom during the 1920s
14
1928-1937
Oilfield Services Emerge
20
1938-1947
Modern Manufacturing, Supporting the War Effort
28
1948-1957
Post-War Growth
34
1958-1967
International and Offshore Markets
42
1968-1977
Broadening the Product Lines, Diversification
50
1978-1987
Boom, Bust and Consolidation
60
1988-1997
A Decade of Acquisitions
70
1998-2007
A New Century and a New Millennium
80
A CENTURY OF INNOVATION
I
n 2007, Baker Hughes is proudly celebrating 100 years in
the oilfield service industry. This special issue of InDepth
magazine tells the story of the individual pioneers and the
companies that shaped today’s Baker Hughes.
We trace our beginnings to the technological innovation and
entrepreneurial spirit of Reuben Carl Baker who patented an
innovative casing shoe in 1907, and Howard Hughes, Sr.
whose roller cone bit revolutionized rotary drilling in 1909.
Other innovators who contributed to the Baker Hughes
legacy include:
 William S. Barnickel, who founded the oilfield
chemical industry and whose company would become
Baker Petrolite.
 Melvin DeGroote, Chief Scientist for Petrolite, who
held 969 U.S. Patents, second only to Thomas Edison.
 Bill Lane and Walt Wells, who invented well perforating
and built a wireline service company that would become
Baker Atlas.
companies were driven
by entrepreneurs with
vision, dedication and
great personal energy.
They focused on their
customers’ needs and
they weren’t satisfied
until they exceeded their
customers’ expectations.
And their companies
continued to innovate
year after year, even after
their founders retired
or passed away.
Baker Hughes has
recognized recent innovators with Lifetime Technology
Achievement Awards for their careers of innovation and for
mentoring generations of younger technology professionals.
 H. John Eastman, the inventor of controlled directional
drilling, which is now offered through INTEQ.
 John L. (Lindley) Baugh served for more than 40 years
at Baker Oil Tools and received more than 60 U.S.
patents for completions and liner hanger technology.
 Frank and George Christensen, who pioneered diamond
bit technology, and whose vision established the first
Celle Technology Center fifty years ago. Their legacy
continues in both Hughes Christensen and INTEQ.
 During his 38-year career at Hughes Christensen, Rolf
Pessier has advanced the company’s drill bit product lines
and was awarded more than 55 U.S. patents.
 Cicero C. Brown, founded Brown Oil Tools and
invented the liner hanger, now a major product line
from Baker Oil Tools.
 Max B. Miller and George Miller, two drilling fluids
pioneers who founded Milwhite Drilling Mud and
Oil Base Inc., respectively. Their innovations are now
incorporated into Baker Hughes Drilling Fluids.
 Vern Jones and the co-founders of Exploration
Logging Company (EXLOG), providing surface
logging, which is now an INTEQ service.
 Ralph Spinnler and the Teleco engineering team, who
designed and built the first commercial measurementwhile-drilling system. Their vision is now realized in
INTEQ’s Answers-While-Drilling service.
All of the predecessor companies that are part of the
Baker Hughes heritage were born from innovative ideas that
could be broadly applied in the oil and gas industry. These
 In a career that has spanned three decades, Volker Krueger
has been instrumental in developing all of INTEQ’s drilling systems including drilling motors and rotary steerable
systems, accumulating 37 U.S. patents along the way.
In the 21st century, Baker Hughes people continue the
company’s tradition of technological innovation and service,
helping our customers achieve the reliable performance they
need to efficiently find and produce hydrocarbons. I believe
the brief history in this issue of InDepth magazine is just a
preamble to even greater achievements for Baker Hughes as
we strive to deliver what matters most to our customers,
shareholders and the communities where we live and work.
Chad C. Deaton, Chairman and CEO
Baker Hughes Incorporated
1907-1917
6
BAKER HUGHES:
A Century of Innovation Begins
R.C. Baker
Howard Hughes, Sr.
1872-1957
1869-1924
T
he Baker Hughes story began in the early 20th century, when two young men
set out to make their fortunes in the booming new oil fields of California and
Texas. Initially both men worked as wildcatters, but they achieved lasting success
through technical innovations that would improve operations for the entire industry.
In 1907, R.C. Baker received a patent on a casing shoe that advanced well cementing
so much that it launched Baker Oil Tools. In 1909, H.R. Hughes, Sr. patented a roller
cone bit that made it possible to drill through deeper, harder rock. This invention
gave birth to the Hughes Tool Company. A century later, Baker Hughes carries on
the tradition of technical innovation not only by its two founders, but also by the
many other industry pioneers whose inventions and business lines became part of a
global oilfield service leader.
7
1907-1917
R.C. Baker’s Inventions Launch
Oilfield Equipment Business
I
n 1895, 22-year-old Reuben Carlton “Carl” Baker left his
family’s marginal farm in Northern California, planning to
prospect for gold in Alaska. When he reached the nearest train
station, in Redding, California, he had no money to buy a ticket.
To earn the fare to Alaska, he went to work in a stone quarry and
slept in a nearby barn. After two weeks in the quarry, he had earned
$24, but when he returned to the barn after work, he found that
his clothes had been stolen. That night, an acquaintance cheered
him up by telling him that oil had been discovered in Southern
California. He wouldn’t have to wait to earn more money to travel
to the Klondike. His $24 would be just enough to buy new clothes
and a train ticket to Los Angeles.
An early casing shoe advertisement
Carl Baker arrived in Los Angeles on April 4, 1895 with a new
suit, 95 cents in his pocket, and dreams of making his fortune in
the town’s oil boom. First he hauled oil for drillers with a team of
horses, and then he worked as an oilwell pumper, and as a tool
dresser for a contract driller. When his employer, Irving Carl,
couldn’t pay R.C. Baker’s wages, he made Baker his partner. By
1897, they had two rigs and a profitable business. In 1898, they
divided their assets, and R.C. Baker started his own contract
drilling business.
R.C. Baker contracted to drill a well in Coalinga, California in
1899, the year that the “Blue Goose” gusher discovered a major
field and sparked a boom in the area. Mr. Baker settled in the dusty
boom town, and his contract drilling business prospered with
steady work in the newly discovered Kern River oil fields. As a town
leader in Coalinga, he helped organize several small oil companies,
a bank and a local power and gas company.
R.C. Baker on the rig floor, 1940s
The original Baker casing shoe, 1907
8
While drilling around Coalinga, Baker encountered hard
rock layers that made it difficult to get casing down a
freshly drilled hole. To solve the problem, he developed an
offset bit for cable tool drilling that enabled him to drill a
hole larger than the casing. In 1903, he received his first
U.S. patent for this invention.
On July 16, 1907, Carl Baker patented his second
invention, the Baker Casing Shoe, which improved the
driving of cable tool casing, and led to the founding of a
small royalty-collecting company that would eventually
become Baker Oil Tools and Baker Hughes Incorporated.
Because R.C. Baker had no facilities to manufacture his
invention in 1907, he licensed independent machine
shops to fabricate it on a royalty basis, and the Baker
Casing Shoe was marketed nationwide.
In 1912, R.C. Baker patented the first Baker Cement
Retainer, which was designed to pack off between the
casing and tubing when pumping cement through
tubing. This invention made cementing more efficient
and effective.
During his time in Coalinga, Carl Baker also grew as a
businessman. Although he continued as a contract oilwell
driller until 1917, drilling oil wells occupied only a part
of his time. His business interests included farming and
oil production companies (which he sold in 1920).
A California oil field
near Coalinga
The Baker Cement Retainer,
invented by R.C. Baker in
1912, allowed operators to
cement wells under pressure.
In 1913, R.C. Baker organized his own corporation –
the Baker Casing Shoe Company – in response to the new
U.S. income tax law, to protect his patents, and to collect
royalties. For the next five years, royalties, mostly from
the Baker Casing Shoe, ranged from $600 to $1,500
per month.
Southern Pacific Railroad Depot, Coalinga in 1907
9
1907-1917
Howard R. Hughes, Sr. Solves
the Problem of Rotary Drilling
H
oward R. Hughes, Sr. was born in Missouri in 1869 and
attended Harvard College and the State University of
Iowa law school. By 1899, he was practicing law with his father in
Keokuk, Iowa. Howard soon lost interest in the legal profession,
and he moved to Joplin, Missouri to pursue a career in the lead
and zinc mining industry.
In 1901, Mr. Hughes heard news about the Lucas gusher at
Spindletop near Beaumont, Texas. Oil seemed to hold better
prospects than lead for making his fortune, so he hurried to Texas
to enter the drilling business.
Sharp-Hughes Tool Co. plant in Houston.
Walter Sharp (inset) was Howard Hughes’
partner until his death in 1912.
Mr. Hughes formed a partnership with Walter Sharp in a contract
drilling business operating in Texas and Louisiana. Although cable
tool (impact) drilling was still prevalent, many drillers along the
Gulf Coast used the rotary drilling method with fishtail bits
that scraped through clay and soft shale. Penetration slowed or
stopped, however, when the bit reached harder formations. By
1906, Mr. Hughes began working on ways to use the rotary
method to efficiently drill through harder rock.
The original twocone rotary drill bit
that launched the
Hughes Tool Co.
Prior to the
invention of the
Hughes rotary bit,
wells were drilled
with fishtail bits.
10
Employees operate
belt-driven lathes at the original
Hughes Tool Company plant, 1909.
Walter Sharp died in 1912, and Howard Hughes purchased
Sharp’s half of the business. The company was re-named
Hughes Tool Company in 1915.
By 1914, roller cone bits had been successfully run in 11 states
in the U.S. and 13 other countries. One customer of the period
wrote, “I feel sure that you have reached the solution of a
problem, which has long been the chief drawback in the rotary
system of drilling.”
Goose Creek oil field, adjacent to the Houston Ship Channel,
where Howard Hughes, Sr. first tested the two-cone steel bit
Then one day in 1907, Hughes visited a machine shop in
Sour Lake, Texas where his drilling tools were being repaired.
There he noticed an emery wheel with two outer wheels
moving in one direction and an inner wheel moving in the
opposite direction. He realized that the same concept could
be applied to a multi-cone rock cutting tool. He conducted
experiments and built a wooden model of a drill bit with
two cone-shaped, rolling cutters.
During World War I, Howard Hughes, Sr. invented and
developed a horizontal boring machine for undermining enemy
strongholds and artillery positions. He was assisted by officers
of the Russian and British armies prior to the entry of the
United States into the war and by U.S. Army engineers after
America joined the fight. The war ended before the machine
was used. (The original device is kept in the drilling simulator
lab at the Hughes Christensen facility in The Woodlands.)
Then in 1908, Hughes and Sharp built the first two-cone bit
made of steel. Rather than scraping against the formation as
fishtail bits did, the new roller cone bit was designed to crush
and grind the rock.
The partners conducted two secret tests on a drilling rig in
Goose Creek (now Baytown), Texas. Each time, Hughes asked
the drilling crew to leave the floor. Then he pulled the bit
from a locked wooden box, and his associates ran the bit into
the hole. The drill pipe twisted off on the first test, but the
second was extremely successful.
Hughes Tools’ first research lab. Note the blocks of rock drilled
in this derrick laboratory. Bits were tested on the steam-driven
rotary drilling machine, purchased in 1911.
In 1909, the Sharp-Hughes bit was granted a U.S. patent. In
the same year, the partners formed the Sharp-Hughes Tool
Company in Houston. The first plant occupied a rented space
of 20 by 40 feet in the corner of the old Houston Car Wheel
and Machine Company on Washington Avenue.
In 1910, the Sharp-Hughes company established the first
drill bit research lab where bits were tested on a steam-driven
hydraulic rotary machine. Numerous advances followed,
making drilling more efficient and reducing the cost per foot.
The Sharp-Hughes bit was so successful that by 1911 the
plant was moved to a larger shop equipped with modern
tools, where the company operated until a new, larger plant
was needed in 1918.
Hughes with his horizontal boring machine
11
1907-1917
William S. Barnickel’s Demulsifier
Recovers Oil from “Basic Sediment”
I
n 1907, a 29-year-old chemist named William Sidney Barnickel
traveled from St. Louis to visit the Glenn Pool oil field in
Oklahoma where large quantities of oil were wasted because they
were mixed with water that had been produced along with it.
Such “cut” oil, known as “basic sediment,” was either burned or
dumped into creeks near many of America’s oil fields. Seeing this
waste and contamination, Barnickel began working on the problem
of separating oil from water.
In December 1911, he discovered that a chemical agent, a sulfate of
iron (copperas), could efficiently do the job, and in 1913 he applied
it to recover 56,000 barrels of oil from basic sediment at the Caddo
field in Oklahoma. After several tries, he was finally granted a U.S.
patent for the chemical treatment on April 14, 1914.
William S. Barnickel received a U.S.
patent for the process to chemically recover
oil from basic sediment and launched the
company that is now Baker Petrolite.
Determined to manufacture large quantities of his chemical that
could be readily shipped throughout the country, Mr. Barnickel
returned to St. Louis to outfit a factory. He sold the first two barrels
of Tret-O-Lite on November 17, 1917. On that day, the company
that would become Baker Petrolite had begun commercial operations.
A Ford Model T car used by Tret-O-Lite
representatives to service the early
oil fields
William S. Barnickel (left) with one of the first
barrels of Tret-O-Lite demulsifier
12
Year
The World
Energy
Industry
Technology
Baker Hughes
Milestones
World’s first oil wells are
drilled on the Aspheron
Peninsula northeast of Baku.
1848
1859
Charles Darwin publishes
“Origin of Species.”
Col. Drake drills America’s
first well to discover oil
in Pennsylvania.
Drake well was drilled with a
40-ft wooden derrick to a
depth of 69 ft. The well produced
20 barrels of oil per day.
1866
First underwater telegraph cable
between North America and
Europe, 1,686 miles long.
Digboi field discovered in
northeast state of Assam in India.
Diamonds discovered in
South Africa.
1901
Commonwealth of Australia
formed.
Spindletop discovery at
1,020-ft depth creates Texas
oil boom.
Fishtail bits used to drill
wells.
1903
Marie Curie announces her
discovery of radium.
First transcontinental auto
trip completed.
Marconi broadcasts the first
transatlantic radio message
from Cape Cod to England.
R.C. Baker introduces offset
bit for cable tool drilling.
1907
• First electric washing
machine invented.
• Picasso introduces Cubism.
First tubular steel
derrick built.
• R.C. Baker receives a patent
on a casing shoe that launched
Baker Oil Tools.
• William Barnickel begins work
on the problem of saving
waste oil (water/oil emulsion).
1908
Henry Ford builds the first
Model T.
Hydraulic rotary rig introduced
in California fields.
Howard Hughes secretly tests
first roller cone bit at Goose
Creek, Texas.
1909
• 200,000 Americans own cars.
• Plastic is invented.
• Robert Peary becomes the
first to reach the North Pole.
J.B. Speed and F.G. Cottrell
introduce an electrostatic
oil/water separator in
Coalinga, California.
H.R. Hughes, Sr. patents a
roller cone bit that made it
possible to drill through deeper,
harder rock.
1910
• Boy Scouts established in
the U.S.
• Halley’s comet makes an
appearance.
Lakeview Gusher blows in
near Taft, California, and
becomes America's greatest
oil gusher.
1911
• Charles F. Kettering
develops an electric automobile
starter so gasoline powered
cars no longer need a crank.
• Greenwich Mean Time adopted.
• Standard Oil Trust
broken up.
• Beldridge field discovered
in California.
1912
S.S. Titanic sinks.
Cushing field discovered in
Oklahoma.
1913
• U.S. has 1.26 million
automobiles.
• Henry Ford creates the
assembly line.
• Charles Gould presents
theory of petroleum
geology based on
anticlines.
• Standard Oil of Indiana
adopts cracking process
to refine gasoline.
William Meriam Burton
receives a patent for his
cracking process, which
converts oil to gasoline.
• R.C. Baker organizes his own
corporation – Baker Casing
Shoe Company.
• Barnickel reclaims 56,000
barrels of oil from Caddo field
waste, but is cheated out of his
share of the profits.
• A. Wright dies, leaving B.D.
Adamson as PETRECO president.
1914
World War I commences.
Venezuela’s first gusher
drilled near Lake Maracaibo.
W.S. Barnickel patents an
oil/water demulsifier.
Barnickel receives a patent for his
demulsifying agent.
1915
British steamship Lusitania is sunk
by a German submarine, leading to
U.S. entry into World War I.
Ventura field discovered in
California.
• Rotary table with square kelly and
bushings comes into use.
• All-steel sprocket chain introduced.
The Sharp-Hughes company
is re-named Hughes Tool
Company.
1916
Henry L. Dougherty installs
nighttime lighting for the
Statue of Liberty in New York
Harbor.
Name "Pennzoil"
trademarked by Pennsylvania
Refining Company.
Two-speed drawworks
hoist with brake becomes
standard.
Barnickel builds his first factory
in St. Louis.
1917
Russian revolution leads to
Communist state.
The first long-distance
high-voltage transmission
line is built by American
Gas & Electric.
Standard tool joint and
Acme tool thread developed.
• First two barrels of Tret-O-Lite
chemical treatment are sold.
• Hughes introduces reaming
cone bit.
Oil is discovered in Persia.
Sharp-Hughes Company establishes
the first drill bit research lab where
bits are tested on a steam-driven
hydraulic rotary machine.
Schlumberger brothers
invent electric well logging.
William Barnickel discovers that
a sulfate of iron (copperas) can
demulsify oil and water.
• R.C. Baker patents the first
Baker Cement Retainer.
• Walter Sharp dies.
• Howard Hughes purchases
Sharp’s half of the business.
13
1918-1927
14
Oil Boom
during the 1920s
T
he 1920s were an exciting time for the oil industry. In 1921, oil was discovered
in the Los Angeles Basin at Signal Hill, Huntington Beach and Santa Fe Springs.
To meet the increasing demand for drilling equipment, the Baker Casing Shoe
Company started manufacturing operations and Hughes Tool Company launched
new products to improve drilling and reaming in deeper and harder formations. By
the end of the decade, both companies had expanded their operations in California, the
Mid-continent and Texas. Meanwhile, Tret-O-Lite and Petreco were competing
with each other to separate water from produced oil in the California oil fields.
15
1918-1927
Baker: Entrepreneur
to Manufacturer
I
n 1918, Mr. Baker became a manufacturer, when Baker Casing Shoe
Co. bought a machine shop in Coalinga, California, for $52,000.
The early manufacturing facilities were meager, with 3,400 square feet
of floor space, two lathes, a drill press, a power saw, a shaper and one
pipe-threading machine. The new plant manufactured Baker casing
shoes, dump bailers, clean-out bailers and cement retainers, as well as
other equipment that the company had been licensed to manufacture.
The oil boom in the Los Angeles area in the early ‘20s was a period
of rapid growth for the Baker Casing Shoe Co. In 1922, Baker built
a new plant and headquarters in Huntington Park, California. In
addition to other Baker products, this plant produced tool joints,
which were in great demand in the new oil fields.
Baker Casing Shoe Co. started
manufacturing in this building in 1918.
By 1924, much of the company’s sales came from the Mid-Continent
area, and a branch office was opened in Tulsa to handle the increasing
business. Branches were also established in Bakersfield and Taft,
California in 1924, and an export representative was established in
New York. By 1927, Texas provided a significant sales volume, and
a warehouse and office were established in Houston.
In 1927 Baker gained industry leadership in cementing-related tools
with the introduction of a complete line of guiding, floating and
cementing equipment, including a drillable cement float shoe and
collar and a cement guide shoe.
During the 1920s, Baker added variations to the
casing shoe and new products for cementing.
Office and factory in
Huntington Park, Los Angeles
16
Howard Hughes, Sr.:
Advancing Rotary Drilling
As wells were drilled deeper through harder formations, the
Hughes Tool Company added reamers to the two-cone bits
to help maintain full gauge hole and to stabilize the bit. In
1917, Hughes introduced a reaming cone bit equipped with
two regular cones in addition to a reamer built into the body
of the bit.
In 1921, the Simplex bit was introduced. The design had
a replaceable wash pipe down the center of the bit that
allowed for the use of more powerful mud pumps. The
new bit achieved dramatic improvements in the rate of
penetration. The concept of footage drilled per bit was
introduced at this time.
In 1924, Howard R. Hughes, Sr. died at the age of 54, and
left his fortune and the Hughes Tool Company to his only
son. Howard. R. Hughes, Jr., then an 18-year-old student at Rice
Institute, would use the profits from Hughes Tool Company to
pursue his interests in aviation, motion pictures and real estate.
Hughes Tool Company plant in 1917.
Hughes bit with self-cleaning cones was
used to drill through Austin Chalk
in the Luling Field.
In 1925, the company opened a branch in Los Angeles and
introduced self-cleaning cones that more than doubled the
penetration rates of rock bits.
Hughes 133/4” bit used for a Burmah
Oil Company well, 1927
Howard Hughes, Jr.
during one of his few
visits to the Hughes
Tool Company plant
17
1918-1927
Tret-O-Lite and PETRECO Grow
through Competing Technologies
B
y 1921, William Barnickel’s Tret-O-Lite business had outgrown
his initial manufacturing plant, so he built a new one in
Webster Groves, Missouri. The new facility had six times the
capacity of the old plant and was built on a hillside so that raw
materials were unloaded from a railroad line on the top of the hill,
and the fluids flowed through the plant using the force of gravity.
Finished product was loaded on rail cars at the bottom of the hill.
In 1922, the company sold 10,815 drums of Tret-O-Lite demulsifier,
representing a recovery of 50 million barrels of oil from produced
oil/water emulsion. In 1923, Mr. Barnickel died at the age of 45,
and John S. Lehmann succeeded him as Tret-O-Lite president.
Tret-O-Lite demulifier barrels ready for
shipment to oil fields
Meanwhile, Frederick Cottrell and James Speed were developing electrostatic methods for separating oil from water. In 1910, Allen C. Wright
formed the Petroleum Rectifying Company of California (PETRECO),
which built electric dehydrating plants – based on Cottrell’s and Speed’s
inventions – to serve California oil fields. By 1922, PETRECO had 417
treaters in operation.
Melvin DeGroote:
The Inventor
In 1924, Melvin DeGroote (1895-1963) joined Tret-O-Lite as chief
research chemist. During his career, the company’s laboratory
conducted more than a half-million experiments on more than
93,000 compounds. By the time he retired from Petrolite in 1960,
DeGroote had earned 963 U.S. patents, making him the most
prolific inventor of his era (second only to Thomas Edison in the
number of patents). Under his leadership, the company became
an industry giant.
A worker makes a
barrel test with Tret-O-Lite
demulsifier in the Cushing Field in 1918.
18
DeGroote invented and patented many of the demulsifying agents
that separate crude oil from salt, sulfur and water (a process necessary
before raw petroleum can be refined into gasoline and other products).
Without demulsification, most of the oil pumped in the United States
for the last century would have been too corrosive for pipelines or
tankers and would have been discarded. DeGroote’s inventions of
chemical demulsifiers contributed to the development of the modern
oil industry by making more types of crude suitable for refining.
Year
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
The World
Energy
Industry
Technology
Baker Hughes
Milestones
• Tsar Nicholas II, his wife, and
children, are murdered by
the Bolsheviks.
• World War I ends.
• First curbstone gas pump
introduced in 1918.
• First U.S. gasoline pipeline
carries gasoline 40 miles, from
Salt Creek to Casper, Wyoming.
Howard Hughes, Sr. invents
a horizontal boring machine
to place explosives under
WW I trenches, but war ends
before it is used.
Baker Casing Shoe Company
starts manufacturing shoes
and other products.
Prohibition starts in U.S.,
banning sale of alcohol.
• Earle Halliburton establishes a
cementing service in Oklahoma.
• The first state gasoline tax of
one-cent per gallon levied by
Oregon for road construction.
Rotary rigs begin replacing
cable-tool rigs.
Hughes Tool Company
establishes a new manufacturing
plant and general offices
in Houston.
• Women gain the right to vote
in the U.S.A.
• League of Nations established.
• Jack Dempsey knocks out
Jess Willard for the
heavyweight crown.
• Mexia field discovered in Texas
based on W.E. Pratt’s theory
that faults trap oil.
• Elk Hills field discovered
in California.
• Giant field found in
Burbank, OK.
• Mud-laden drilling fluid used.
• First core barrel sampling tools
used in California and West Texas.
• Steel derricks begin replacing
wooden derricks.
Tret-O-Lite establishes
a new manufacturing plant
in Webster Groves, Missouri.
First stretch of the Autobahn
completed in Germany.
Oil discovered at Signal Hill,
Huntington Beach, Santa Fe
Springs, California, expanding
Los Angeles oil boom.
Thomas Midgley Jr. discovers that
tetraethyl lead prevents "knock"
in gasoline engines.
Hughes introduces the
Simplex drill bit.
British Egyptologists unearth
King Tutankhamen's tomb in
the Valley of the Kings.
• Oil discovered in Venezuela.
• U.S. Geological Survey predicts
that the U.S. only has enough oil
supply to last 20 years.
Talking movies invented.
• Teapot Dome scandal
• Ford introduces the “Roadster.”
• Garrett Morgan invents
the traffic signal.
• V. I. Lenin dies.
• First Olympic Winter Games
• Oil found in West Texas’
Permian Basin.
Tret-O-Lite Co. sells 10,815 drums
of demulsifier. PETRECO has
417 treaters in operation.
Seismic method is used
in Mexico for the first time
to search for petroleum.
• Baker float shoe introduced
to improve cementing.
• W.S. Barnickel dies at age of 45,
of a perforated ulcer.
John S. Lehmann takes over
as Tret-O-Lite president.
• Howard Hughes, Sr. dies,
at age 54, leaving Howard, Jr.,
age 18, in charge of
Hughes Tool Company.
• Melvin DeGroote joins
William S. Barnickel & Co.
Eventually he would hold
963 patents, making him the
world’s greatest living inventor.
Hughes introduces Acme Selfcleaning cones, for improved
drilling in soft formations.
• Hitler publishes Mein Kampf.
• The Scopes (Monkey) trial
• Airmail service begins
in the U.S.
• Robert Goddard successfully
tests first liquid-fueled rocket.
Borger field discovered
in Texas Panhandle.
• Lindbergh flies solo
across Atlantic.
• First demonstration of
long-distance television.
• Oil discovered in Kirkuk, Iraq.
• Seminole field discovered
in Oklahoma.
Spindletop production reaches
its all-time annual high of
21,000,000 barrels.
Baker introduces complete line
of cementing equipment. Also
manufactures tongs, core barrels,
bailers and other tools.
19
1928-1937
20
Oilfield Services Emerge
Baker Oil Tools started offering “coreing” services during the 1930s.
T
he oil industry has ridden the “boom-to-bust” cycle many times during its
history, but the stock market crash of 1929 and its impact on world economy
increased the impact of these energy demand cycles. The Depression affected the
growth of Baker Hughes fledgling companies as survival became the watchword of
many industry entrepreneurs who had invested heavily in start-up operations and
manufacturing capabilities.
21
1928-1937
Baker’s Growth and Downturn
H. John Eastman
In 1928, Baker Casing Shoe Company was renamed Baker Oil Tools,
Inc. to reflect its broad range of products and services. By 1929,
Baker Oil Tools had grown to 96 employees with its best year ever of
$868,000 in revenues. The future looked bright. But Baker did not
escape the crash unscathed. Only three years later, BOT reached a
low point when income dropped to $299,000 and Carl Baker was
forced to lay off employees who had been with him from the start of
the company.
But there were also bright spots within the industry during the
Depression years. One of the brightest was early recognition that
“services” could be offered profitably to the oil field in addition
to building equipment and selling it directly to individual oil
companies. This concept of professional expertise in the field to
support manufactured products would create a whole new sector of
the industry...oilfield services. Services became even more important
as oil companies expanded operations throughout North America
and to growing overseas markets. With far-flung operations, oil
companies grew to depend upon service companies to provide local
expertise and technically sophisticated products demanding special
knowledge and skills. Effectively providing this service would differentiate Baker Hughes throughout the company’s history.
An Eastman automobile at a California oil field
with directional survey instrument mounted on the
passenger side
Service Becomes a Science
with Eastman
A prime example of oilfield services was the evolution of “controlled
directional drilling.” In the late ‘20s, H. John Eastman went into
business for himself with a truck, a winch, a built-on darkroom and
7000 ft of cable. He used an acid bottle as the primary drift indicator
and went up and down the California coast soliciting survey business.
Alexander Anderson, a local inventor and watch maker, helped him
build the first multi-shot survey instrument, and then they invented
a single-shot survey instrument. These instruments were the basis of a
science that made controlled directional drilling possible.
The 1934 Conroe
fire and its crater
In 1929 Mr. Eastman introduced the concept in Huntington Beach,
California, of using whipstocks and magnetic survey instruments
to deflect the drill pipe from shore-based rigs to reach oil deposits
offshore. For the first time, the oil industry could drill angled wells on
a controlled trajectory instead of drilling only “straight” wells, which
were often deflected by subsurface geology.
In 1934, Mr. Eastman gained further acclaim and industry-wide
credibility for directional drilling techniques when he drilled the
world’s first relief well to control a blowout in Conroe, Texas that
22
had been on fire for more than a year. Mr. Eastman was soon called
upon to use controlled directional drilling to kill blowouts around
the world. Today, INTEQ carries on this leadership in directional
drilling established by the original Eastman Oilwell Survey Company
that H. John Eastman founded in Long Beach, California.
Lane and Wells Invent
Bullet Perforating
In 1932, Bill Lane and Walt Wells developed the first gun perforating
system and started an oilfield service business in Vernon, California.
That year Lane’s oilfield experience and Wells’ engineering expertise
were tested with Union Oil’s backing on La Merced #17, a 2500-foot
well that had gone dry in the Montebello oil field near Los Angeles.
The new enterprise depended upon an ungainly looking contraption
Eastman drilled a
dangling above the wellhead, representing more than two years of
directional well in 1935 to help
engineering work for Lane and Wells. It was described as a “string
kill a well blowout in Romania.
of coconuts.” Beneath the coconuts was the first crude bullet gun
perforating system. Eight days later, after 87 shots were fired in 11
Bill Lane (left) and Harry Quintrell with
runs, the well flowed 40 barrels a day of California crude. With this
their first perforating gun, 1932
first successful job on March 19, 1932, the Lane-Wells Company
(which would become Baker Atlas) was in the perforating business.
With the successful test, Lane-Wells faced a new challenge, laboring
over ways to improve the cable and how to design a truck to carry
the service into the field. At the end of 1933, Perforating Truck #1,
a ‘32 Ford chassis and engine, rolled out of the Santa Fe Avenue
office/shop in Los Angeles with a new insulated conductor wire
as a core for the cable. In spite of the Depression, demand was
brisk for the innovative perforating services and oil tools offered
by Lane-Wells.
Continuing improvements in engineering design led to the
replacement of the “string of coconuts” with a 10-shot perforating
cylinder, making jobs easier from a mechanical standpoint. The
Lane-Wells reputation spread quicker than its ability to respond
and its famous slogan “Tomorrow’s Tools Today” painted on the
driver’s side of cabs furthered the company’s visibility in the oil field
while performing work.
The company learned quickly that providing quality service to the
nomadic oil field would be a continuing challenge and in the mid
‘30s more perforating trucks were added to the fleet as crews
worked 100-hr weeks to catch up with increasing business. In
1935, truck #4 spent two days and nights firing 300 shots
working in snow and high winds in New Mexico then continued
on to Arkansas and after another 24 hours of shooting headed for
Oklahoma. An office was soon established in Houston to improve
logistics and in 1937 Lane-Wells expanded into the Mid-Continent
with an Oklahoma City shop.
Lane-Wells’ first truck was
custom built in 1933.
23
1928-1937
Miller Finds the Right Mix
for Drilling Fluids
I
n the early years, the drilling fluid used in cable-tool rigs was
mostly water to soften the earth and make it more pliable for
drill-bit penetration. As rotary rigs supplanted cable drilling and
roller-cone bits proved themselves, more elaborate drilling fluids
called “muds,” were developed and introduced into the borehole
to cool and lubricate the bit, circulate the rock cuttings from the
bottom of the hole to the surface, and hydrostatically balance the
drilling-fluid column. With the expansion of the industry in the
‘20s and ‘30s, opportunities unfolded to introduce even better
drilling fluids to enhance drilling efficiency.
A Milwhite representative tests
fluid samples from his
mobile laboratory.
Soon drilling muds were “weighted up” using barite or similar
products to counter the higher pressures that were experienced as
formation depths increased. This helped prevent the dreaded blowouts. Initially, mud materials were low-cost waste products from
other industries, but as oil companies drilled deeper, hotter holes,
higher fluid densities were needed and the industry began developing
specialty chemical products designed for specific purposes.
The Max B. Miller company originally began in New York to design,
sell and construct patented oil-manufacturing processes. During the
‘20s, the company developed and held several patents in the field of
refinery construction and in 1925 the company devised a process of
contact filtration control using California clay as a filter medium.
With limited applications for the process in the mining industry, the
company began to look for a larger market. They found it in the oildrilling business, and in 1931 moved to Texas to form the Milwhite
Company. The “Mil” in Miller and the “White” from the color of the
California clay were combined to name the Milwhite enterprise that
continued its contact filtration clay operations. The company
also started mining and grinding drilling mud clays, and explored
for barite, which was used as a drilling mud weighting agent.
Sourcing was key to the company’s growth so Milwhite first mined
barite in the now famous Magnet Cove Area of Arkansas until the
late ‘30s. Then, Milwhite and Magnet Cover Barium Corporation
(later to become Magcobar) signed a contract to process Magnet
Cove materials jointly.
Baker Model “K”
cement retainer
24
The Rebound Begins
After retrenching during the worst of the Depression,
oilfield companies began to introduce new technologies
and expansion plans. As the general economy began to
recover, demand for oil also increased, especially as more
cars were manufactured and train systems converted to
diesel fuel.
The Baker cement retainer product line achieved a
competitive advantage during this period with the
Baker Model “K” tool. It would have a major impact
on the company’s growth as high-pressure squeeze
cementing became common practice.
By 1936, Baker Oil Tools’ business had increased so
much, especially in the Mid-Continent, that the company
built a new manufacturing plant in Houston. By the end of
the year, the company passed the $1 million mark in sales
and the number of employees had grown to 160.
Baker Oil Tools manufacturing plant in Houston, 1936
First Tricone® Bit
During the 1930s, Hughes Tool Company kept
improving on its technologies. In 1933, the
company introduced the first Tricone® bit, which
featured interfitting teeth and could be customized
for specific formations. Hughes began hardfacing bit
cutting surfaces and introduced anti-friction bearings,
staggered teeth and cantilevered bearing shafts to
make hole faster and cheaper. The combination of
roller cone bits and better drilling fluids had
significantly improved drilling performance.
Hughes Tool Company employees in front of the
manufacturing plant, in Los Angeles
Invented in 1933, the Tricone bit has seen
many improvements, but remains a workhorse
of the drilling industry.
25
1928-1937
Petrolite is Formed
Throughout the 1920s, Tret-O-Lite, Inc. (which used
chemical demulsifiers) and PETRECO (which used
electric dehydrating towers) competed to provide oil/
water separation services to recover oil from produced
“basic sediment.” In 1929, Tret-O-Lite, Inc. merged with
another chemical supplier Vez Company, to form Tuxedo
Corp. In 1930, Tuxedo and PETRECO merged to form
Petrolite Corporation, which brought together their
radically different technologies to treat oilfield and refinery
hydrocarbons. One early outgrowth of the union was the
first electrical desalter, which was installed at the Ashland
Oil Co. refinery in Cattlesburg, Kentucky in 1936.
Business in the California boom
fields, like Signal Hill seen
below, fueled Petreco
expansion elsewhere.
Petreco’s D.C. Norcross
would become Petrolite’s
first president.
C.C. Brown invents
the Liner Hanger
In 1929, Cicero C. Brown founded Brown Oil Tools in
Houston to provide oil tools and services. In 1937, he
patented the first liner hanger. Liner hangers enabled drillers
to lengthen their casing strings without having the liner
pipe extend all the way to the surface, saving capital cost
and reducing the weight borne by rigs. Brown Oil Tools
continued to advance liner hanger technology and also
manufactured casing centralizers and other completion
equipment. In 1978, Hughes Tool Company acquired
Brown Oil Tools. In 1987, the Brown liner hanger line
became part of Baker Oil Tools, which by that time had
also developed liner hanger systems. Today, liner hangers
are the largest product line in BOT.
C.C. Brown patented the
liner hanger in 1937.
From Bits to Beer
Once the prohibition ended in 1933, Howard Hughes, Jr.
decided to take advantage of the repeal by getting into the
brewery business. Hughes turned to Frantz H. Brogniez, a
master brewer, who had created the Southern Select beer
prior to Prohibition. Southern Select had won the 1913
Grand Prix in Belgium in a contest against 4,600 other beers.
Hughes’ Gulf Brewing Co. held a contest to select “Grand
Prize” as the name for the new beer to commemorate the
Grand Prix. Grand Prize was a popular beer in Texas until
1963, when it was purchased by the Theodore Hamm
Company of Minnesota.
26
Grand Prize beer truck and can
Year
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
The World
• Kellogg-Briand treaty
outlaws war.
• Penicillin discovered.
Energy
Industry
Technology
Baker Casing Shoe Company
changes its name to Baker Oil
Tools, Inc.
Texas oilman Louis Giliasso
launches offshore drilling by
mounting a derrick and drilling
rig onto a submersible barge.
• H. John Eastman obtains
patents on multi-shot instrument
and whipstock, introduces
controlled directional drilling.
• Hughes first applies tungsten
carbide hardfacing to
cutting structures.
• Stock market crashes, leading
to the Great Depression.
• U.S. has 27 million
cars and trucks.
Baker Hughes
Milestones
• Eastman Oilwell Survey formed
in Long Beach, California.
• W.S. Barnickel Co. is renamed
Tret-O-Lite, Inc., then merges
with Vez Company to form
Tuxedo Corp.
• C.C. Brown founds
Brown Oil Tools, a pioneer
in liner hangers.
• Sliced bread is available.
• Stalin collectivizes agriculture
in USSR.
• Dad Joiner finds East Texas
oil field, makes H.L. Hunt
wealthy.
• E.L. DeGolyer proves
the reflection seismograph
technique.
Empire State building completed.
World’s oil markets flooded by
the over production of East Texas
oil fields.
• Max B. Miller develops
drilling mud based on white clay.
• Hughes Tool Co. introduces
first drill bits with antifriction
bearings.
• Milwhite Company formed,
moves from California to Texas.
• Gulf Brewing Company
brews Grand Prize beer at
the Hughes Houston rock
bit location.
• FDR elected.
• Scientists split the atom.
• Schlumberger brothers
commercialized electric
well logging.
• Oil discovered in Bahrain.
Lane-Wells Company introduces
bullet gun perforating.
Lane-Wells Company formed in
Vernon, California by Bill Lane
and Walt Wells.
• Prohibition ends.
• Adolph Hitler elected
Chancellor of Germany.
• FDR launches the New Deal.
Gas lift valves developed.
Hughes introduces the first
Tricone bit.
• Drought creates Dust Bowl
in Oklahoma.
• Parker Brothers launch
“Monopoly” board game.
Tuxedo Corp. merges
with PETRECO to form
Petrolite Corporation.
H. John Eastman drills the world’s
first relief well to kill a blowout
in Conroe, Texas.
Baker Oil Tools opens
Oklahoma City branch.
Frank and George Christensen meet
while playing professional football
for the Detroit Lions. Their
friendship leads to the formation
of Christensen Diamond Products.
• Amelia Earhart flies solo
across the Pacific Ocean.
• Social Security established
in the U.S.
Humble Oil Co. discovers
Anuhuac field in Texas.
First flight of airship Hindenburg
Standard Oil of California
strikes oil in Saudi Arabia’s
Damman field.
Petrolite installs a desalter at
a refinery in Kentucky.
• Texas Co. joins Standard Oil
in Saudi Arabia, leading to
the formation of Aramco.
• C.C. Brown patents the
liner hanger.
• Horizontal drilling takes place
in Yarega, USSR.
Baker Oil Tools opens Houston
manufacturing plant.
27
1938-1947
28
Modern Manufacturing,
Supporting the War Effort
I
n 1938, Adolf Hitler occupied Austria, and Europe seemed headed toward
another world war. Meanwhile, the fledgling Baker Hughes companies were
transitioning from small-scale shops to modern manufacturing facilities equipped
with machine tools and other processes. As Baker Oil Tools expanded from its
California base into the Mid-Continent and southwest U.S., Hughes Tool Company
was also expanding nationwide.
29
1938-1947
Hughes Expands its Horizons
Over the decade, the Hughes product line was extended to core
bits, tool joints and drill collars. Simultaneously, Hughes Tool’s
geographic coverage was expanded virtually nationwide through
regional offices in California, Wyoming, Oklahoma and Midland.
An export office was established at the Rockefeller Plaza in New York
and international representatives were based in London, Buenos
Aires and Caracas. As Hughes Tool Company expanded, so did the
interests of its young president. Howard Hughes, Jr. financed his
endeavors in aviation and motion pictures in Hollywood with profits
from the company he had inherited.
Howard Hughes, Jr. (center) waves to the crowds during
a 1938 parade in downtown Houston to commemorate
his flight around the world in record time.
Christensen Diamond Products
In 1944, Frank and George Christensen founded the Christensen
Diamond Products Company in Salt Lake City, Utah, and in 1946
introduced diamond core bits to the mining industry. Within a few
years their business had expanded to helping oil and gas companies
take samples from exploratory wells in the Rocky Mountains. By
1952, they were manufacturing and selling natural diamond drill bits
for use in hard formations. The two men were unrelated, and had
met in 1935 when they were teammates on the Detroit Lions football
team. Before they joined forces, Frank’s family owned a machine shop
and George had a business making diamond cutting tools.
Early Christensen
diamond core bit
Frank and George Christensen (left to right)
were football teammates who combined their
resources to launch the diamond bit company.
30
Baker Broadens its Base
By 1938, Baker Oil Tools’ product range had extended to cement
guiding and floating equipment, cement retainers, rotary wall
scrapers, a portable hydraulic Kelly and a pipe straightener. These
“practical and dependable” tools were on display at the International
Petroleum Exposition in May. Baker had a “rolling exhibit” that
covered some 40,000 miles and 24 states, providing “oil tool
education on wheels.”
In 1942, Baker Oil Tools introduced the Model D Packer, which
enabled multiple completions in the same well. The design was
driven, in part, by the shortage of steel during World War II. The
Model D Packer is still sold today.
Growth at Lane-Wells
By 1938, the Lane-Wells Company had outgrown its original
workshop and moved into a 10-acre site at 5610 South Soto Street
in Los Angeles. The company now offered three services: gun
perforating, electrologging, and oilwell surveys. Products included
packers, liner hangers, survey instruments, knuckle joints,
whipstocks and mills. Perforating services were extended during
this decade into the Mid-Continent region through a shop in
Oklahoma City. While Walt Wells was in charge of marketing,
Bill Lane was supervising field operations and engineering. In
1938, Lane announced his retirement. He passed away in 1949.
A Baker Oil Tools rig technician lowers the
Model D packer into a well.
In 1939, Lane-Wells secured an exclusive license from Well Services
Inc. (WSI) to build a gamma ray log that could identify the exact
zone that should be perforated. The next major innovation came in
1944 with the deployment of the reverse concentric armored cable,
which improved the accuracy of downhole measurements. A product
of war ordnance – the bazooka – enabled Lane-Wells to introduce
the precise shaped-perforating charge. The magnetic collar locater
came in 1947. By this time, the company had expanded operations
internationally to Lake Maracaibo in Venezuela and to Trinidad.
Baker Oil Tools employees on the rig
floor with the Kelly straightener
Lane-Wells building at the Tulsa Oil Show, complete
with the mockup of a perforator on top with sequentially
flashing lights to simulate the firing of shots
31
1938-1947
Eastman Extends
Directional Drilling
During the 1930s and ‘40s, H. John Eastman directed most of the
shoreline drilling under the ocean in the Huntington and Long Beach
Harbor areas. In 1941, the company headquarters were moved from
Long Beach to Denver. In the Rocky Mountain region, slanted wells
were drilled to reach sweet spots underneath mountain ranges.
Oil Base Drilling Fluid
In May 1942, Oil Base Drilling Company, headed by its founder
George Miller, made the first commercial application of its Black
Magic® oil-based mud.
An Eastman orienting tool is unhitched from a car at a
California oil field.
Contributing to the War Effort
During World War II, Baker Oil Tools began dual operations to
help the war effort, dividing its plant between oilfield and defense
manufacturing. Baker’s war production included recoil mechanisms
for cannons, and parts for M-5 tanks. In 1943, the company earned
the Army-Navy “E” Flag for its wartime contributions.
The Hughes Tool Company established a Gun Plant in Dickson,
Texas to manufacture howitzers and struts for military aircraft
landing gear. Lane-Wells Company also joined the war effort,
producing electrical components for munitions. Part of its South
Soto Street factory in Los Angeles was switched to the production
of projectiles, launching mechanisms, fuses for submarine rockets,
and airspeed indicators.
Oil Base Drilling Company introduced the first
oil-based drilling fluid in 1942.
Baker Oil Tools received the
Army-Navy E award for contributing toward the
war effort. Similar awards were presented to the Hughes
Tool, Lane-Wells and Christensen Machine companies.
32
Meanwhile, Christensen Machine Company, a precursor to today’s
Hughes Christensen, manufactured precision tools and gauges for
Army and Navy ordnance and radar at its machine shop in Salt Lake
City, Utah.
Women join Hughes Tools Co. employees in
making ordnance for the war effort.
Year
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
The World
Energy
Industry
Technology
Baker Hughes
Milestones
• Broadcast of the “War of
the Worlds” creates a panic.
• Hitler occupies Austria.
• Glenn Miller forms
his jazz orchestra.
• Oil is discovered in Saudi Arabia
and Kuwait.
• Drilling depth passes
15,000 feet.
• Catalysts used in refining to
produce high-octane gasoline.
• World War II begins.
• First commercial flight
over the Atlantic
U.S. provides two-thirds of oil
used by the Allied Forces.
• Lane-Wells Co. commercializes
the Gamma Ray log developed
by Well Survey, Inc.
• Petrolite develops a water clarifier.
• Battle of Britain
• Leon Trotsky assassinated,
• 40-hour work week goes into
effect in the U.S.
Russia develops multisection
turbodrills.
Petrolite installs first chemical
desalter in a Texas refinery.
Japan bombs Pearl Harbor,
leading to the U.S. entry into
World War II.
First Texas offshore well
• Lane-Wells Co. introduces
the Neutron log.
• Petrolite begins production
of monocrystalline waxes
in Kilgore, Texas.
Baker Oil Tools revenues
reach $2 million.
Baker introduces the Model D
packer, which enables multiple
completions – technology driven by
steel shortage during the war.
• Baker Oil Tools begins dual
operations, helping the war effort.
• Hughes Tool Company
manufactures howitzers and
aircraft landing gear struts.
• Lane-Wells Co. makes electronic
components for the military.
• Oil Base Inc. formed, first
oil-based mud company.
• Enrico Fermi’s team at the
University of Chicago produces
the first, self-sustaining nuclear
chain reaction, leading to
the development of the
Atomic bomb.
• T-shirt invented.
• Bill Lane, co-founder of
Lane-Wells Co., retires.
• Howard Hughes, Jr. flies around
the world in record time –
3 days, 19 hours, 8 minutes
and 10 seconds.
Warsaw ghetto uprising
Cities Service completes
construction of the biggest,
longest pipeline to help supply
petroleum for the war effort.
John Eastman and John Zublin
develop short-radius horizontal
drilling tools.
Petrolite builds castor oil plant
in Rhode Island to address wartime
supply shortages; begins operations
in Canada.
Allies invade Normandy
on D-Day.
U.S. refineries supply
35 million gallons of gasoline
to fuel the war effort.
Lane-Wells Co. incorporates
armored cable in wireline units.
Christensen Diamond
Products Co. founded in
Salt Lake City, Utah.
• Atomic bombs dropped
on Japan.
• World War II ends.
• United Nations founded.
• Levelland field discovered
in West Texas.
• Louisiana holds first offshore
lease sale.
Petrolite patents first organic
corrosion inhibitor, KONTOL.
• Winston Churchill makes
“Iron Curtain” speech.
• ENIAC computer is built.
• Bikini introduced.
First marine seismic survey
conducted in the Gulf of Mexico.
• Petrolite applies first corrosion
inhibitor at a gasoline plant
in Illinois.
• Christensen introduces
diamond bits in Rangely,
Colorado oil field.
Lane-Wells Co. expands
to Venezuela, completes
75,000th job.
• Dead Sea scrolls discovered.
• India gains independence
from colonial rule.
• Leduc field discovery fuels
Canadian oil boom.
• First offshore well drilled out of
sight of land off Louisiana.
Lane-Wells introduces the
collar locator.
• Baker Oil Tools expands
throughout North America.
• Christensen begins to import
diamonds directly from London.
33
1948-1957
34
Post-war Growth
A
fter World War II, the industry re-focused on technology and geographic
expansion, especially in North America. Discoveries in Nebraska’s Gurley field
opened the Denver-Julesburg Basin and shortly afterwards North Dakota’s Williston
Basin came into play. In California, the first commercial gas well went into production
near Oakland, and a well was drilled over water from an island structure off Seal Beach.
In Louisiana, the first offshore well was drilled out of sight of land in 1947. By the mid1950s there were 2700 active rigs in the U.S., drilling more than 57,000 wells through
233 million feet of bedrock.
In Canada, the Leduc discovery set off an oil boom in Alberta, and soon after, gas was
discovered in Nova Scotia. Oilfield service companies debated which market to chase
in a time of opportunity. Even with similar discoveries on other continents, including
the world’s largest oil field in Ghawar, Saudi Arabia and oil finds in Nigeria and Algeria,
most chose to stay focused on North America where it was easier to operate.
35
1948-1957
Baker Builds New Plant, Expands
In the U.S., Baker Oil Tools matched the industry’s growth with
an aggressive expansion of its operations. During 1948-59 a total of
50 new branches were established in sixteen states and a Baker export
office was opened and staffed in New York. Baker Oil Tools also
outgrew its Huntington Park facility and in 1952 the Los Angeles
headquarters moved into a new plant and building on a 13-acre site
on Slauson Avenue. The facility was built at a cost of $1,250,000,
and Reuben C. Baker was proud to note that none of the money for
the expansion was borrowed. In 1950, Baker introduced the Model
E, the first retrievable casing packer.
Baker Oil Tools Slauson Avenue plant was built in 1952.
Hughes Builds R&E Facility,
Opens First International Plant
Returning its attention from war production back to the oil patch,
Hughes Tool Company expanded its operations to the newly
discovered oil fields throughout North America and made major
advancements in drill bit and tool joint technologies. During 194850, Hughes applied jet drilling research to develop integrated jets
for rock bits, yielding improved removal of cuttings and higher rates
of penetration. In 1951, the company introduced the first Tungsten
Carbide Insert (TCI) bits, which increased penetration rates and bit
life in the hard and abrasive West Texas chert.
In 1954, Hughes Tool Company established its first manufacturing
plant outside the United States, in Belfast, Northern Ireland.
A full-size drilling rig in the Hughes laboratory
simulated field conditions.
4500
U.S. Rotary Rig Count
4000
3500
3000
2500
2000
1500
1000
500
19
49
19
51
19
53
19
55
19
57
19
59
19
61
19
63
19
65
19
67
19
69
19
71
19
73
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
0
36
The Baker Hughes rotary rig count began at Hughes Tool
Company in the 1930s as an in-house production forecasting and marketing tool. Noting that the information
would be beneficial to the industry, Hughes began providing monthly counts of U.S. drilling activity to the public in
1944. Since 1949, the U.S. rig count has been published on
a weekly basis. Coverage was expanded to include Canadian
rig activity in 1964, and in 1975 a monthly International
Rig Count was added. Today, Baker Hughes publishes
three distinct rig counts: U.S. and Canadian Rotary Rigs
(weekly); International Rotary Rigs (monthly), and U.S.
and Canadian workover rigs (compiled by Baker Oil Tools,
monthly since 1992). The highest recorded U.S. rig count
was 4530 rigs, during the last week of 1981. The lowest
U.S. rig count was 488, in April 1999. Extremes of
Canadian rig counts are a high of 715 rigs in February
2006, and a low of just 32 in April 1992. The highest
international rig count on record was 1497 in May
1987, and the low point was 560 rigs in January 2000.
The highest North America workover count was 2407 in
June 2006, and the lowest was 925 in May 1999.
Lane-Wells Advances
Logging Technology
The Baker Atlas predecessor company LaneWells also grew steadily after the war with
growth in all parts of the U.S. The boom areas
of East Texas, the Permian Basin and New
Mexico stretched resources, and by 1950 there
were a total of 249 Lane-Wells wireline units
serving North America and Venezuela. LaneWells established its Canadian offices in the
early 1950s to end the long drives from the
Wyoming service base, and to establish a
presence as a major contributor to future
Canadian oil and gas development.
Christensen Diamond Products employees in front of the headquarters building in
Salt Lake City, 1954. During this decade, Christensen Diamond Products expanded
its manufacturing capacity in Salt Lake City, opened manufacturing plants in
Hobbs, New Mexico, and expanded internationally with a plant near Paris, France.
Lane-Wells also improved its technology with the
introduction of the first shaped-perforating charge in 1948 and
later the development of the density log. Because of strong growth
prospects, Dresser Industries acquired Lane-Wells in 1954. Just
six months after the acquisition, the industry took a downturn.
To survive, Lane-Wells focused on improved services and
instrumentation to provide a complete range of logging services.
Success depended upon the development of resistivity systems
and ultimately the induction log. A merger with the Elgen
Company, which had built a logging business in North Texas,
facilitated commercialization. Field testing took place at a deserted
intersection on Westheimer Road in Houston, which years later
would become the company’s headquarters.
Eastman Expands Services
In the 1950s, Eastman Oilwell Survey Company expanded its
product line, which it marketed through principal offices in
Houston, Denver, Long Beach and Calgary. Eastman improved
magnetic survey methods with the introduction of nonmagnetic
drill collars, new single-shot and multiple-shot instruments, and
better survey calculation algorithms. Improved whipstocks and
orienting devices enhanced directional drilling operations and
EASTCO reamers and stabilizers were designed for use in
directional drilling assemblies. Eastman also introduced the Star
Drilling Recorder as a service to provide permanent records of
land rig operations and the EASTCO Drift Indicator, which
measured inclination in vertical wells. Eastman directional
drillers, surveyors and technicians held a leading share of the
North American directional service business.
Introduced in 1948,
Lane-Wells shaped-perforating
charges were manufactured under “bakery-like” clean
conditions (left). A Permeability Lab (right) was built
in Houston in the early 1950s.
An Eastman
directional
driller lowers a
whipstock into
a well.
37
1948-1957
Milwhite Evolves
After a hiatus that began during World War II, Milwhite
restarted its drilling mud business in 1952. To meet demand
during the 1950s, Milwhite mining operations and grinding
plants were greatly expanded to keep up with increased demand.
The company bought a Continental Oil clay plant in Riverside,
Texas and also began to grind barites imported from mines in
Nova Scotia. Milwhite products were sold on consignment in
Canada and West Texas to companies that maintained their own
warehouses and staff of field engineers. In coastal Texas and eastern Louisiana, products were serviced by Milwhite field engineers,
but warehouses were generally operated by appointed dealers.
In 1956, St. Louis-based Mississippi River Fuel Company,
purchased Milwhite.
Milwhite mud technician at work in Houston
Start-up Companies Add Depth
An important oilfield chemical market first surfaced in 1951 when
four chemists and engineers left Chevron Research Corp to form
Magna Corporation. Magna’s founders had obtained the marketing rights to a patented oilfield corrosion inhibitor developed by
Chevron. Magna’s early operations were in Brea, California with
trucks delivering inhibitors to the field and injecting directly into
the annulus of corrosive wells. As business grew, Magna added
new products and services including scale inhibitors, demulsifiers,
biocides and surfactants. Magna eventually established a full-line
manufacturing facility in Odessa, Texas and operations quickly
spread through Texas, the Mid-Continent and Rocky Mountain
regions in parallel with industry expansion. Baker International
acquired Magna in 1976. The company eventually evolved into
Baker Performance Chemicals and finally Baker Petrolite.
In 1952, a group of Stanford University engineering and geology
graduates formed Exploration Logging Company (EXLOG) to
provide geologic mud logging services from wheeled logging units
using technical innovations in hot-wire gas detection. EXLOG
would become a world leader in surface logging, rig-site instrumentation, and data acquisition services.
Centrilift Begins
Lane-Wells logging
truck and interior monitoring equipment
38
As the industry expanded in the early 1950s and then contracted
by mid-decade, oilfield operators faced difficulty raising capital
for new wells. They searched for ways to increase their return
on investment in existing wells, opening the door for fledgling
companies to provide the technology that would increase recovery.
In 1949 Oil Base Inc. (OBI) introduced BLACK-MAGIC®
SFT (Sacked Fishing Tool), a drilling fluid additive designed
to free stuck pipe. The product was an immediate success and
is still in use today.
The original Christensen manufacturing
plant in Celle, Germany, 1957
In the 1900s in Russia, Aramis Arutunoff invented the first
electrical submersible pump (ESP). The technology lay
somewhat dormant for years until the 1940s when the advent
of water flooding as a secondary recovery measure gave the
ESP industry an additional market.
Building on the need to enhance production, a group of
engineers set up shop in Vernon, California in 1957. Here
they developed the Centrilift oilfield electrical submersible
pump. More than 20 prototypes would be built before the
first installation took place in 1959 at Signal Hill in Long
Beach, California, for Shell Oil Company. Centrilift would
become a product line of Byron Jackson Pump, a division of
the Borg-Warner Corporation.
Technology Center Opens
in Germany
In 1957 Christensen Diamond Products opened a manufacturing plant in Celle, West Germany to serve international
markets. A friendship between co-founder Frank Christensen,
Bob Lawe and local national Addi Baumann led to the
business undertaking. Initially, the facility built diamond
core heads and drilling bits. Later, it began producing
stabilizers, drilling jars and other equipment, utilizing the
talents of German engineers in all disciplines. Today, the Celle
Technology Center is the leading research and engineering
facility for Baker Hughes in the Eastern Hemisphere.
New Products
Improve Efficiency
Also, in 1949, Whipstock, Inc. was founded in Louisiana
after Eastman directional drilling patents expired. Whipstock
Inc. pursued international markets and would establish
operations in Nigeria and the Middle East. The company
would later merge with Eastman Oilwell Survey Company
to become Eastman Whipstock, and eventually part of Baker
Hughes INTEQ.
In 1952, Christensen introduced the first non-coring surfaceset diamond bit for oilfield applications after developing a
proprietary erosion-resistant matrix and powder metallurgy
process for mounting diamonds in the bit crowns. The
company was also the first to manufacture diamond washover
shoes, and diamond reamers and under-reamers. For coring
operations, Christensen developed the 250P and Rubber Sleeve
core barrel systems, which soon became industry standards.
In 1954, Baker Oil Tools licensed Fagro, a German manufacturing concern, to manufacture Baker products in Germany
and shortly afterwards Baker Transworld added divisions in
Canada and Venezuela. Baker also developed an impressive
list of new tools including Differential and Flexiflow Fill-Up
Equipment, Snap-Set Dual Packers, the Model “A” Tension
Packer, the Model “L” Triple Packer, Tubing Anchors and the
Three-Blade Wall Scraper.
McMurry Oil Tools also started business in Houston in 1954
with a line of gas-lift equipment. In the late 1970s, the company would become part of Hughes Tool to supplement its
growing offerings of oil and gas production equipment.
Baker’s Model “A”
Tension Packer was
designed to support
water flooding projects.
During this decade Baker Hughes predecessor companies
expanded their product lines through internal advances in
technology, manufacturing, and materials and through
acquisitions and new business relationships.
39
1948-1957
Neutron Log Pioneer
Arthur Youmans was an Iowa farm boy who managed to
educate himself during the Great Depression and had a penchant
for physics. He began his oilfield career in 1948 as a Staff
Chemist at Well Surveys, Inc., a small oilfield services company
in Tulsa, Oklahoma. His key project soon became the development
of a pulsed-neutron logging tool capable of locating and assessing
oil through cased boreholes. Over the next decade, his persistent
work and the help of a team of co-workers led to the Neutron
Lifetime Log® in 1963 – the first commercially available pulsedneutron tool. In the years that followed, the Neutron Lifetime
Log discovered millions of barrels of oil that otherwise might
never have been found.
In 1960, Well Surveys merged with Lane-Wells and Youmans
quickly advanced to senior research positions. He was acknowledged
as an international expert on well logging and by the end
of his career had received over 75 U.S. patents.
Arthur Youmans (right) with Richard Conner
(left) and Erik Hopkinson during the testing of the
Neutron Lifetime log
A Founder Dies
In early 1957, during one of the most successful
periods in the company’s history, Reuben C.
Baker retired as President of Baker Oil Tools.
A few weeks later, Mr. Baker died after a brief
illness. He was 85 years old. Mr. Baker left a
legacy of creative genius, integrity, and dedication to providing quality products and services
to the oil and gas industry. Although he only
had three years of formal education, Mr. Baker’s
inventions earned him 150 U.S. patents. He was
succeeded as Baker Oil Tools president by his
long-time associate Ted Sutter.
“I think I have lived in the most wonderful period of all time. Science and invention found
their stride during my lifetime. I can remember the first gasoline engine, the first automobile,
the first electric light, telephone, wireless telegraph, submarine, airplane, radio, and now
atomic development.” – R.C. Baker
40
Year
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
The World
Energy
Industry
Technology
Baker Hughes
Milestones
• Berlin airlift delivers
food supplies.
• Gandhi assassinated.
• State of Israel founded.
U.S. briefly becomes a net oil
importer.
• Hughes introduces jet bits.
• Lane-Wells introduces shapedperforating charge.
Lane-Wells completes 100,000th
job on La Merced #17 well, same
well perforated on job #1.
• China becomes Communist.
• NATO established.
Denver-Julesburg Basin discovered.
• Petrolite applies first corrosion
inhibitor at Illinois refinery.
• Petrolite patents ethylene oxide
demulsifier, chemistry that
is still in use.
• Oil Base, Inc. introduces
BLACK-MAGIC® spotting
fluid.
• Lane-Wells co-founder
Bill Lane dies.
• Whipstock Inc. founded
in Louisiana as Eastman
patent expires.
• Baker Transworld formed
for Venezuela operations.
• Modern credit card issued.
• Korean War begins.
Spraberry Trend discovered
in West Texas.
Libya becomes a country
established by the UN.
Discovery of Williston Basin
in North Dakota.
Hughes introduces tungsten
carbide insert (TCI) bits.
Magna Corporation founded,
based on first oilfield corrosion
inhibitor.
• Polio vaccine created.
• Princess Elizabeth becomes
Queen at the age of 25.
Six drain holes drilled from
one well.
Petrolite applies first rust inhibitor
to a Pennsylvania pipeline.
• Exploration Logging (EXLOG)
founded by Stanford University
graduates.
• Milwhite Mud Company
organized.
• New Baker Oil Tools headquarters
established on Slauson Street
in Los Angeles.
• DNA discovered.
• Hillary and Norgay climb
Mt. Everest.
Multilateral well drilled in Russia.
Christensen introduces industry
standard 250P core barrel system.
• U.S. has 58.5 million vehicles.
• First atomic submarine
launched.
• Roger Bannister breaks the
four-minute mile.
• First commercial acoustic
seismic log
• First offshore jack-up drilling rig
Lane-Wells introduces density log.
• Lane-Wells is acquired
by Dresser Industries.
• E.D. McMurry founds
McMurry Oil Tools to provide
gas lift equipment.
• Hughes Tool Co. opens
manufacturing plant in
Belfast, Northern Ireland.
• Warsaw pact signed.
• Disneyland opens.
• Soviets begin exporting oil.
• First oil discoveries in Gabon,
Cameroon and Angola.
Petrolite applies dispersant fouling
inhibitor at an Illinois refinery.
Petrolite opens manufacturing
plant in Kirkby, England.
• Arab-Isreali crisis closes
Suez canal.
• USSR suppresses
Hungarian uprising.
• Oil found in Nigeria and Algeria.
• 58,000 wells drilled in the U.S.
• First drillship and jackup rig
go into service.
Elgen Company develops
the induction logging tool.
Lane-Wells establishes
Westheimer location, acquires
Elgen Company.
• European Community
established.
• Soviet satellite Sputnik
launches Space Age.
Subsea BOP stack and control
system developed.
Centrilift pump developed
in Vernon, California.
• R.C. Baker retires. Ted Sutter
becomes President and
G.M. of Baker Oil Tools.
Mr. Baker dies at 85.
• Centrilift becomes a product line
of Byron Jackson pumps.
• Christensen opens a diamond
bit plant in Celle, Germany.
41
1958-1967
42
International and
Offshore Markets
A
fter a brief recession during 1956-58, the oil and gas service sector resumed
sustained growth and expansion through the 1960s. In the continental United
States, significant discoveries were made in the Denver, Williston and Permian basins.
Offshore, oil fields were discovered on the continental shelf of the Gulf of Mexico,
bringing the oil patch to south Louisiana. Internationally, giant fields were discovered
in the Middle East, leading to the formation of OPEC in 1960. The energy industry in
Russia expanded with the discovery of major gas fields, and the giant Daqing field was
discovered in China. But these two Communist nations remained closed to Western
operating and service companies.
The 1960s boom cycle turned Baker Oil Tools, Hughes Tool Company, Lane-Wells
and Eastman into industry leaders and the period also fostered technological innovation
that led to the formation of new oilfield service companies.
43
1958-1967
Sutter, Clark Lead
Baker Growth
B
aker Oil Tools experienced one of its greatest periods of growth
in this decade, first under the direction of Ted Sutter, who
became president in 1956, and then E.H. “Hubie” Clark, who
was elected president in 1961. This period also saw a gradual shift
of research and manufacturing operations from Los Angeles to
Houston. The company installed its first computer, a Univac, in
1962 to improve inventory control, pricing and accounting.
Ted Sutter (center) and Hubie Clark (far right) shake
hands with R.F. Ingold (far left) and C.J. Coberly after
the acquisition of Kobe pump company.
To meet growing international demand for oilfield services, Baker
Oil Tools opened a manufacturing plant in Edmonton, Canada, and
established sales and distribution centers in West Germany, South
America and Nigeria. A complete reservoir fluid analysis lab was
established in Port Harcourt, Nigeria. Baker Oil Tools (Nederland)
N.V. was formed to service North Sea operations off the Dutch coast,
while Baker Oil Tools (U.K.) Ltd. was established at Great Yarmouth
to service the British sector of the North Sea.
Baker introduced a number of completion products, including dual
and triple packers, tubing anchors, and cement retainers. The first
retrievable packer, Model E, was introduced during this decade and
improved upon through the Model G and R retrievable packers. In
1962, Baker introduced the first external casing packer.
Baker Oil Tools
introduced a number of packer
innovations during the 1960s.
Baker Oil Tools’ Houston test lab
facility was completed in 1961.
44
E.H. “Hubie” Clark held 30 oil
tool patents and led Baker Oil Tools
through the growth and expansion
period of the 1960s and 1970s.
Innovation and Expansion
at Hughes
Hughes Tool Company remained a private enterprise through
the decade, owned by Howard Hughes, Jr. While Mr. Hughes was
engaged in his Hollywood and aviation enterprises, managers in
Houston, such as Fred Ayers and Maynard Montrose, kept the tool
company growing through technical innovation and international
expansion. In 1958, the Engineering and Research Laboratory was
enlarged to accommodate six laboratory sections that housed
specialized instruments such as a direct reading spectrometer and
X-ray diffractometer. In 1959, Hughes introduced self-lubricating,
sealed-bearing rock bits. After collecting data from thousands
of bit runs, Hughes introduced the first comprehensive guides
to efficient drilling practices in 1960. The year 1964 saw the
introduction of the X-Line rock bits, combining new cutting
structure designs and hydraulic jets.
To support drilling activity in the North Sea and the Middle East,
the company expanded manufacturing operations in Belfast,
Northern Ireland. A new bit plant was set up in Buenos Aires,
Argentina. Through licensees, bits and tool joints were manufactured in Canada, Mexico, Brazil and Germany. Product sales were
made in oil fields throughout the Western and Eastern hemispheres
with the help of manufacturer’s representatives.
Hughes Tool Company introduced the
X-Line rock bits in 1964.
Hughes Tool
Company’s Research
& Engineering
laboratory was the
most extensive in
the industry, 1958.
45
1958-1967
Lane-Wells’ Survival and Successes
As Lane-Wells technology became increasingly complex, a
Quality Control Department was established to maintain
high manufacturing standards, 1959.
Lane-Wells celebrated its 25-year anniversary in 1957, a period of
severe belt-tightening and consolidation. In 1958, the company
vacated most of its Los Angeles offices and moved the core group of
employees to Houston. Convinced that the best way to turn around
the company was through improved logging services, Lane-Wells merged
with Elgen, an openhole logging company based in Wichita Falls, Texas.
Manufacturing capabilities were enhanced through S.I.E., a Dresser
company, which supplied geophysical and analog instruments. As a
result of this reorganization, the company launched new formation
evaluation services – Electrolog® electric logging, Acoustilog® and
Neutron Lifetime Log. With Lane-Wells Research at work in the
new Westheimer location, the company introduced the Induction log
and conducted development research for the Minilog and Laterolog
resistivity instruments.
Activity picked up first in the international markets with South America
being the busiest sector. The company negotiated a contract with YPF,
the Argentinian oil company in 1959 and serviced more than 4,000
wells over the next four years. Operations in Venezuela also contributed
to the company’s continued stability. Lane-Wells entered the Canadian
acidizing and fracturing market by purchasing a small company known
as “Eskimo.” Within a few years, the company became a separate entity
within the Dresser Goup and was renamed “Titan.”
Eastman Extends Services
Eastman Oilwell Survey Company continued to expand its businesses
through the 1960s with headquarters in Denver, Colorado. The
company had field offices located in Houston, Lafayette, Odessa and
both Edmonton and Calgary in Canada to handle controlled
directional drilling and well survey jobs through local field engineers.
An Export Sales department was established in the Denver office to
support international orders.
The Lane-Wells Company’s Houston headquarters on Westheimer Road.
46
Christensen Goes International
Christensen Diamond Products businesses grew in international
markets with manufacturing plants operating in Canada, France
and Celle, Germany. Frank Christensen set up a Nippon
Christensen plant in Japan. In South America, Christensen bits
were used to drill wells at Lake Maracaibo in Venezuela and
Brazil’s Amazon jungle. The company invented a rubber sleeve
core barrel to allow recovery of unconsolidated cores. Patents
were obtained for drilling and coring bits with spiral waterways.
Fluids and Chemicals Businesses
During the 1960s, Milwhite took advantage of drilling activity in
the Permian and D-J Basins to expand the distribution network in
the West Texas and Rocky Mountain region. Newly discovered
offshore fields in the Gulf of Mexico led to the establishment of
supply depots and blend plants in Louisiana. Milwhite’s business
growth potential attracted the attention outside the oil industry,
leading to its 1962 acquisition by the Olin Group, a chemicals and
metals company based in Missouri. In 1964, Milchem was formed
to supply drilling fluids and oilfield chemicals. The new company
launched THERMEX, an oil-based drilling mud system in 1965.
In addition to its directional services, Eastman
supplied the Star Recorder, a mechanical logging
unit that could record drilling rig performance
parameters, 1958.
Production and refining chemicals business saw increased activity
by established companies such as Petrolite and the formation of
new enterprises. In 1963, Milwhite acquired Aquaness, a provider
of production and refining chemicals. In 1965, Amoco founded
Wellchem, an oilfield production chemicals business.
Christensen engineers run
the rubber sleeve core barrel in Venezuela, 1958.
47
1958-1967
Centrilift: Tulsa to Tripoli
In 1966, the Centrilift ESP business moved to a new plant
in Tulsa, which was jointly occupied with Byron Jackson
Pump standard products division. Centrilift’s sales and
service activities were expanded as units were added in
Canada and other parts of the United States. To better serve
these customers, a network of service centers was developed,
which located service personnel and equipment close to the
installations through North America.
Centrilift’s first foreign installations were made in
Germany, Austria and Brunei in the early 1960s. Work
was also going on at this time in South America. The first
major export was to the Oasis Oil Company in Tripoli,
Libya in 1965, a contract for 43 units.
Milwhite used a seaplane
to support drilling operations along
Louisiana’s inland waters during the 1960s.
In 1966, Centrilift moved its ESP manufacturing operations
to the Byron Jackson pump facility in Tulsa.
48
Year
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
The World
Energy
Industry
Technology
Baker Hughes
Milestones
• NASA founded.
• Hula hoop becomes popular.
U.S. drillers pass 25,000-ft barrier.
• Baker Oil Tools introduces new
packers, anchors, scrapers and
workover tools.
• Christensen introduces rubber
sleeve core barrel for the
Mohole project.
Lane-Wells Co. moves
headquarters to Houston.
Cuban Revolution brings
Castro to power.
China discovers supergiant
Daqing field.
• Centrilift installs first
ESP system in California.
• Milwhite introduces UNI-CAL
chrome lignosulfate drilling fluid.
• Hughes introduces selflubricating sealed-bearing bit.
• Centrilift moves operations
to Tulsa.
• Petrolite opens blend plant
in Estevan, Saskachewan and
Frankfurt, Germany.
• U2 spy plane shot down
over Russia.
• John F. Kennedy wins U.S.
presidential election.
• Oil discovered in Qatar, UAE.
• OPEC formed.
• Petrolite patents anti-oxidant
fuel stability additive for
#2 fuel and diesel.
• Baker Oil Tools revenue tops
$25 million.
• BOT Research Department
moves to Houston.
Ted Sutter is named Chairman
and E.H. Clark President
of Baker Oil Tools.
• Berlin Wall built.
• Soviets launch first man in space.
• U.S. Peace Corps founded.
• Cuban missile crisis increases
tensions between U.S. and
Soviet Union.
• Algeria gains independence
after France withdraws.
Major oilfield discoveries
in the Gulf of Mexico.
Baker introduces external
casing packer.
• Olin Group purchases Milwhite.
• Baker Oil Tools acquires
Pressure Services Incorporated,
a manufacturer of subsurface
flow control equipment.
• Petrolite France commences
operations.
• John Kennedy assassinated.
• Martin Luther King makes his
“I have a dream” speech.
Major discoveries in West Texas
and Saudi Arabia.
• Lane-Wells introduces
Neutron Lifetime Log.
• Petrolite applies first inhibitor
dispersant in a naptha HDS
heat exchanger.
• Milwhite purchases Aquaness,
provider of production and
refining chemicals.
• Baker Oil Tools acquires
Kobe Inc., a major pump supplier.
• Lane-Wells founder
Walt Wells dies.
• Beatles become popular
in the U.S.
• Civil rights act passes in the U.S.
Three giant fields discovered
in Iran.
Hughes Tool Company introduces
X-Line drill bits with improved
cutting structure, fully sealed
bearings and jets.
• Milchem formed to market
drilling fluids and oilfield
chemicals.
• BOT International expands with
locations in Canada, Germany,
Bolivia, Libya, Iran and Nigeria.
U.S. Marines land in DaNang,
Vietnam, escalating the war.
• Discoveries in Alaska’s
McArthur River, West Texas
and Oklahoma.
• Production begins in Egypt’s
Gulf of Suez.
Milchem introduces THERMEX
oil-based mud.
• BOT’s Houston facilities
match size of Los Angeles plant.
• BOT opens facilities in U.K.
and Holland.
• Amoco founds Wellchem Inc.,
an oilfield production chemicals
business.
Mao Zedong launches the
“Cultural Revolution.”
• Major oil discoveries in Libya
and gas discoveries in Russia
• Civil War in Nigeria disrupts
oil operations.
Russia develops multilobe positive
displacement motor (PDM).
• Centrilift moves to new
facility in Tulsa.
• Baker Oil Tools expands
Latin American operations
to Peru and Brazil.
• First heart transplant
• Six day war in the Middle East
• Arab-Israeli War causes oil crisis.
• First oil production in Oman
First 3D seismic survey shot over
Exxon’s Friendswood field.
49
1968-1977
50
Broadening Product Lines,
Diversification
I
n the late 1960s and 1970s, new markets, new products, new applications, and
corporate mergers drove industry growth and diversification. The 1973 Arab oil
embargo ignited exploration activity as oil discoveries on Alaska’s North Slope and
the North Sea basin spurred development of large new reserves.
51
1968-1977
Hughes Goes Public, Grows
through Acquisitions
Hughes Tool Company’s 84-acre Polk Street facility near
downtown Houston
In 1972, a corporation was formed to acquire the oil tool assets of
Howard R. Hughes, Jr.’s Summa Corporation. The new, publicly
held Hughes Tool Company achieved extraordinary growth through
the decade as revenues grew from $150 million in 1973 to $450
million in 1977. To support international sales of its principal
products, drill bits and tool joints, Hughes built manufacturing
plants in Canada, Mexico, Venezuela and Brazil. The company also
pursued an aggressive strategy of mergers and acquisitions under
the direction of Chairman Raymond Holliday and President James
Lesch. Two of the major acquisitions during this decade were
Byron Jackson Inc. (BJ) in 1974 and Regan Offshore International
in 1976. The BJ acquisition diversified Hughes’ operations into
pressure pumping for cementing and well stimulation. Through
Regan Offshore, Hughes extended its offshore services to risers
and diverters for subsea production. Drilling expertise also enabled
Hughes to diversify outside the oil industry. The company sold drill
bits and boring equipment for mining, water-well, construction and
demolition industries.
Integration of Wireline Services
In 1968, Dresser Industries brought together Lane-Wells and the
Pan Geo Atlas Corporation (PGAC) to form Dresser Atlas. PGAC’s
expertise in openhole logging and its international
operations made it an ideal merger
partner to form an integrated
wireline services company.
During the 1970s, Hughes manufactured over 400 types of drill bits (left)
and was the largest manufacturer of
tool joints.
52
A BJ-Hughes cementing operation (left). A Regan subsea
production system under test (right)
Since its inception, Lane-Wells had generated most of its income
from perforating services, but log interpretation had narrowed
down producing zones, resulting in fewer perforations and less
revenue. Greatly expanded wireline logging capabilities helped
the combined company continue to grow.
The company’s increased service capabilities in both logging
and perforating and the advent of modern computer technology
allowed research engineers to make major advancements in
instrumentation during the ‘70s. Microprocessors and minicomputers improved the design and reliability of downhole
tools and gave field engineers improved abilities to analyze data.
Innovations included the Compensated Neutron, Spectralog,
HC Acoustilog instruments and continued improvements in the
carbon/oxygen log. There were also vast improvements in cased
hole offerings with the development of VertilogSM services, which
Dresser Atlas purchased from AMF Tuboscope.
The perforating side of the business also was buoyed with
increased technical expertise. In 1975, Dresser Atlas constructed
the Pine Island facility for the manufacturing and testing of
shaped-perforating charges.
Dresser Atlas facility in far west Houston
on Westheimer Road was a center for
the company’s research, engineering and
manufacturing operations.
53
1968-1977
Christensen Develops PDC Bit
Christensen applied
innovative synthetic
diamond manufacturing
technology to introduce
the first PDC bit
in 1976.
Since its founding, Christensen Diamond Products had expanded
its designs and applications for diamond drilling and coring bits
using natural diamonds as the principal cutting elements. These
“industrial” diamonds were primarily sourced from South Africa
and were sorted, sized and graded for mounting in diamond bits
that would drill certain formation types in specific applications.
In the early 1970s, diamond technology reached a major milestone
when General Electric developed a process to make synthetic
diamonds by alternating carbon graphite and cobalt under high
pressures and temperatures. Recognizing the potential opportunity
to adapt this technology to oilfield drilling, in 1972 Christensen
built a Diamond Technology Center in Salt Lake staffed with
scientists and outfitted with state-of-the-art equipment to pursue
research and development. Ultimately the investment led to the
development of a polycrystalline diamond compact (PDC) cutting
elements. Christensen quickly adapted the technology to oilfield
drilling in the form of a “fixed cutter” bit with the introduction
of the industry’s first PDC bit in 1976. With cutters made of
synthetic diamonds, the PDC bit had no moving parts and cut rock
with a shearing action that increased rates of penetration compared
to roller cone and natural diamond bits drilling in the same formation. PDCs subsequently opened a whole new application range
for diamond bits, principally in softer formations. Materials, design
and manufacturing processes continue to be improved and perfected
and today, PDC bits account for more than 60% of the footage
drilled worldwide.
In 1976, Christensen developed the Navi-Drill® downhole motor at
its facility in Celle, West Germany. In January 1977, the first run of a
Navi-Drill Motor – a 3¾” Mach 3 operated out of Celle – was
invoiced to customer, Preussag AG in Germany. Product offerings
were continuously expanded to meet market demands, and the
Navi-Drill motor line would become the industry leader in reliability,
performance and worldwide use.
Dresser Atlas built a flow loop at its Westheimer center to
test production logging instruments under simulated
downhole conditions.
54
Teleco Conceives Real-time
Drilling Measurements
To verify the direction of drilling, historically the drilling operation
was stopped to take directional surveys that verified positioning. In
1972, Raymond Engineering of Connecticut and French oil company
Elf Aquitaine formed a joint venture to develop new technology
that would measure directional drilling information in a downhole
assembly and transmit it to the surface in near real time without
using a wireline or photographic methods. Soon, Ralph Spinnler
and a group of aerospace engineers began the development of the
first directional measurement-while-drilling (MWD) system far
from the oil field, in Connecticut. Their efforts resulted in a tool
that could acquire directional readings while drilling, eliminating
downtime and saving operators substantial money. The technique
was based on the use of advanced downhole sensor and telemetry
technology, whereby data would be transmitted from the bottom
of a borehole to the surface via mud pulses.
In 1978, Teleco conducted its first commercial job in the U.K. sector
of the North Sea, saving substantial time by eliminating single-shot
surveys and wireline steering tool services. The technology was soon
deployed throughout the North Sea and in Lafayette to serve the
Gulf of Mexico.
Baker Achieves Rapid Growth
through Diversification
With continued solid growth as a base, Baker Oil Tools aggressively
acquired companies to complement existing businesses, enter new
markets and extend product lines. Baker expanded operations
geographically and explored new industry segments. A small corporate group headed by E.H. “Hubie” Clark was formed to provide
overall guidance and strategic planning as the company diversified.
Teleco Oilfield Services developed the first
MWD system and conducted the first
commercial job in the North Sea
in 1978.
Technical Oil Tool Corporation (TOTCO) was acquired in 1968
to add drilling instrumentation. Rotary Oil Tool Co. was purchased
to add drilling equipment manufacturing. Associated Engineering
and Equipment Co. provided production service outlets for Baker
flow control products.
In 1969, Baker’s first foray outside the oil and gas industry
came with the purchase of The Galigher Company, a mining
equipment manufacturer. Lynes, Inc., a supplier of liner hangers
and completion tools, was purchased in 1970.
In 1971, Baker’s production, remedial and stimulation businesses
also were expanded as the company sought new avenues in
oilfield services. In the same year, Milchem, now a major supplier
of drilling fluids, oilfield chemicals and related services, was
acquired. Mud Separators, Inc. was added to provide Milchem with
a solids control product line. Other Baker acquisitions in this year
included Dixieco, a Louisiana-based corporation specializing in
hydraulic workover systems, and Hallikainen Instruments, Inc.,
a process instruments manufacturer.
Baker Oil Tools acquired the Milchem drilling fluids
and oilfield chemical company in 1971.
Baker’s product base further diversified into specialty chemicals
used in petroleum production and refining with the acquisition
55
1968-1977
of Magna Corporation in 1977. Magna would become part of Baker
Performance Chemicals in 1985.
Baker pursued product line expansions in retrievable packers, safety
valves and well-washing equipment. Baker gravel packing services
began to steadily increase in importance. In 1976, the company
established a separate division called Baker Sand Control to specialize
in this sand control technology and service.
This pattern of diversification continued into mid decade, when
Baker acquired Harold Brown Co., a gas lift systems and surface
valve actuator manufacturer, as well as EXLOG, a leader in mud
logging and geological engineering services. In 1973 Tri-State Oil
Tool Industries brought additional drilling and fishing tools to
Baker’s service package. Many market niches were pursued including
the formation of Baker Offshore, which provided well testing equipment packages for offshore drilling rigs.
To support dramatic growth Baker added or expanded manufacturing
facilities in all or its divisions to increase capacity and install new
processes. The old Navigation site in Houston was demolished and
Houston personnel moved into new facilities at the same location.
In Aberdeen, construction of a new manufacturing plant was begun.
Baker’s most notable acquisition during this era was Reed Tool
Company in 1975, a major supplier of drill bits, tool joints and other
petroleum equipment as well as products in the mining industry.
With this acquisition, the company joined the Fortune 500 list of
leading American corporations for the first time.
In 1976, Baker Oil Tools changed its name to Baker International
Corporation to reflect its new position as a major player in
oilfield services.
To better align operations five new company Groups were formed
to include Reed Tool Company, Drilling Services, Baker Oil Tools,
Production Services and Mining. They would split further into
autonomous divisions to redirect engineering, production and
management efforts in response to the increased need for specialized
products and services. With the Reed Tool acquisition, Baker
International pursued three strategies to help customers discover,
develop, and improve the recovery of oil and gas reserves.
Notable Baker acquisitions during the 1970s
included the Milchem fluids company, Reed Tool
Company, which manufactured drill bits and tool
joints, and Exlog, the mud logging company.
56
Other Developments
Other companies that would become part of Baker Hughes also
were positioning for industry growth during this decade. In the
late ‘60s, Centrilift expanded its network of service centers with
growing international sales in Europe and the Middle East.
In 1972, the company received a contract for 110 units from the
U.S.S.R. Subsequent contracts throughout the ‘70s allowed the
pump manufacturer to gain a strong foothold in the Russian
market. In 1974, the first ESP sales also were made to the People’s
Republic of China.
Magna purchased the Aquaness Company of Houston in 1972
along with a large, versatile manufacturing plant. Aquaness sold
oilfield specialty chemicals, but also offered chemicals and products
that could be used in oilwell stimulation and drilling fluid
formulations. With broader product lines, the new combination
grew steadily during the decade and revenues expanded ten-fold.
New, larger manufacturing facilities in England and Canada helped
meet growing demand.
In 1977, predecessor company Newpark Drilling Fluids introduced
NEW-DRILL fluid, the first polymer mud system. The product was
the first step in developing environmentally acceptable water-based
fluids that would also deliver drilling efficiency.
Baker Oil Tools was renamed
Baker International in 1976.
Petrolite was also busy moving into new markets and products
during this decade. To service the Asian market, a Toyo-Petrolite joint
Diversification during the 1970s led Baker Oil Tools to form seven companies to support all of its oilfield services.
57
1968-1977
venture was formed in Japan during 1975. A blend plant
opened in Saudi Arabia in 1978 and in Canada, Norchem
Services was formed to distribute oilfield chemicals developed
at Petrolite’s Tulsa Research Center. In the U.S., Petrolite
became the sole distributor of Wemco air flotation water
clarifier vessels. The first unit was installed for Gulf Oil Co. in
California. Welchem, a future Petrolite acquisition, patented the
A-Sol product line for downhole stimulations and remediation
treatments. A new manufacturing plant in Bayport, Texas came on
stream to enhance distribution.
In 1972 Petrolane, a California conglomerate, purchased Whipstock,
Inc. Two years later, Petrolane also acquired Eastman Oilwell Survey
Company to create Eastman Whipstock Incorporated, the world’s
largest directional drilling company. Eastman Whipstock performed
directional drilling and surveying services on some of the first North
Sea platforms, including the Forties field in the U.K. sector, and all
four of the Ekofisk platforms in Norway.
Howard Hughes, Jr. Dies
Eastman Whipstock was active
in oil fields throughout the world, including
Nigeria and the Middle East.
Howard Hughes, Jr. sold his interest in the Hughes Tool Company
in 1972, but his diversified business interests, including the Hughes
Aircraft Company, Hughes Airwest Airline and Las Vegas casinos,
continued to thrive. Hughes died at the age of 70 on April 5, 1976
of kidney failure while en route from Acapulco to Houston. He left
behind an estate worth $2 billion. One of his charitable legacies is
the Howard Hughes Medical Institute, a leader in molecular biology
and medical science education.
Howard Hughes, Jr.
58
Energy
Industry
Technology
Baker Hughes
Milestones
Year
The World
1968
• Tet offensive takes place
in Vietnam.
• Martin Luther King assassinated.
• Robert F. Kennedy assassinated.
• Richard M. Nixon elected
U.S. President
• Prudhoe Bay and Barracouta
fields discovered in Alaska.
• Six more gas fields discovered
in Western Siberia.
• U.S. well completions down
to 30,939.
Baker Oil Tools introduces
innovative packer systems.
• Baker Oil Tools acquires
Technical Oil Tool Corporation
(TOTCO), provider of
oilfield instrumentation.
• Dresser acquires Pan Geo Atlas
Corp. and combines it with LaneWells Co. to form Dresser Atlas.
1969
• Neil Armstrong becomes the first
man to walk on the moon.
• Arapnet, the precursor of
the internet, is created.
• Oil discovered in the Norwegian
North Sea.
• Oil found offshore Dubai.
Hughes Tool Co. introduces
the first steel tooth bit with
journal bearings.
Baker Oil Tools forms
Baker Automation System
after acquiring Galigher Co.,
Rotary Oil Tool Co. and
Associated Engineering and
Equipment Co.
1970
• Corning Glass creates optical
fiber for data transmission.
• Computer floppy disk
introduced.
• Aswan dam completed in Egypt.
• Ekofisk field discovered in Norway.
• Wattenberg field discovered
in Colorado.
• U.S. electric utilities switch
from coal to oil.
Hughes Tool Co. introduces
first journal-bearing tungsten
carbide bits.
Baker Oil Tools acquires
Lynes, Inc.
1971
• VCRs introduced.
• Mao Zedong invites U.S.
ping pong team to China.
• Brent field discovered
in U.K. North Sea.
• North Rankin gas field discovered
in Australia.
Baker Oil Tools introduces
products for remedial stimulation,
“E” series gate valves and expands
gravel packing services.
• Baker Oil Tools acquires Milchem,
the drilling fluids and chemical
company and Dixieco, a provider
of hydraulic workover services.
• Baker Oil Tools revenues exceed
$100 million, 40% from
international business.
1972
• Terrorists attack Olympic
games in Munich.
• First mass-produced
video game introduced.
• Edda and Frigg fields discovered
off Norway.
• Attake field found in Indonesia.
• Christensen makes prototype of
the first PDC drill bit.
• Teleco begins development of
mud pulse telemetry to convey
drill bit location.
• Hughes Tool Co. becomes
a public company.
• Petrolane acquires Whipstock, Inc.
• Baker acquires EXLOG mud
logging company and
Harold Brown, a gas lift company.
• Baker’s old Navigation plant is
demolished and replaced by a
new building.
1973
• Arab oil embargo causes first
“oil shock.”
• U.S. withdraws from
Vietnam.
Christensen expands downhole
product range to stabilizers, jars
and motors.
• BOT acquires Tri-State Oil Tool
Industries, a fishing tool company,
and Compressors Automation
Controls, a manufacturer of
instrumentation and safety systems.
• Magna acquires Aquaness
Chemicals.
1974
• Bar-coded products first sold
in American stores.
• President Nixon resigns.
• International Energy Agency
established.
• Alaska pipeline approved.
• Double acting hydraulic jar
developed.
• Horizontal well techniques
deployed in the U.S.
• Hughes acquires Byron Jackson Inc.
(BJ), provider of rig tools and
oilwell cementing and stimulation.
• Hughes opens new plants in
Argentina and Northern Ireland.
• Baker acquisitions include
Hydraulic Workover, Inc.
and Ramsey Engineering.
1975
• Civil war plagues Lebanon.
• Microsoft founded.
• First U.S. fuel efficiency
standards
• First oil produced from
U.K. North Sea.
• Oil discovered in U.S.
Rocky Mountain overthrust belt.
• Baker introduces subsurface
safety valve and corrosive
environment packer.
• EXLOG introduces GEMDAS
computerized mud logging unit.
• Baker completes merger with
Reed Tool Company and becomes
a Fortune 500 company.
• Toyo-Petrolite joint venture
is formed in Japan.
1976
• South Vietnam falls
to Communists.
• Jimmy Carter becomes
U.S. president
Discovery of oil fields in Mexico’s
Bay of Campeche.
• Dresser Atlas introduces
carbon/oxygen log.
• Baker launches surface-controlled
subsurface safety valves
and tubing hanger systems.
• Baker Oil Tools changes name
to Baker International
Corporation.
• Hughes Tool Co. acquires
Regan Offshore.
• Howard Hughes, Jr. dies.
1977
• Elvis Presley found dead.
• First test tube baby born.
Alaska pipeline begins operation.
Newpark introduces New-Drill
PHPA drilling fluids system.
Modernization of Hughes Tool
plant in Houston progresses after
delays caused by a 5-week strike.
59
1978-1987
60
Boom, Bust
and Consolidation
T
he years 1978-1987 would turn out to be, by turns, the most exhilarating and
the most traumatic decade in Baker Hughes’ history. The oil embargo of 1973,
the rise of OPEC, and the Iranian revolution drove crude oil prices to record levels.
Heightened prospects for oil, natural gas and coal as well as new tax incentives
attracted investment from both established companies and speculators. In this
booming environment, most oilfield service companies pursued a strategy of expansion
by increasing their presence in North America and international markets, and by
purchasing other companies. By December 1981, the U.S. rig count reached 4530
active rigs, and demand for oilfield products and services seemed unquenchable.
61
1978-1987
T
he exuberant boom faded quickly in 1982 as the U.S. economy
entered a recession, demand for energy declined sharply, and
upstream investment dried up. By October, the U.S. rig count had
fallen 47%, and the oilfield service sector found itself with a huge
overcapacity of facilities, equipment and people.
For the rest of the decade, oilfield companies downsized, contracted,
combined, and looked to international markets to assure their
survival. In 1986, when actions by OPEC drove oil prices as low as
$8 per barrel, even the strongest oilfield companies reported record
financial losses. In 1987, in response to the weak market and
continued industry overcapacity, Baker International and Hughes
Tool Company merged to form Baker Hughes Incorporated.
Chinese Vice Premier Deng Xiaoping during his visit to the
Hughes Tool Plant in Houston, 1979
Hughes Tool Company President & CEO
James R. Lesch (left) with Chairman
Raymond M. Holliday
Boom Years:
Hughes Tool Company
After it became a public company in 1972, Hughes Tool pursued
a strategy of adding product lines and increasing geographic
coverage. In 1978, it acquired Brown Oil Tools, a leader in liner
hanger technology and a provider of equipment for cementing,
completion and workover. The company also acquired McMurry
Oil Tools, whose products included gas lift valves, side-pocket
mandrels, and coupons for monitoring corrosion in pipelines.
Hughes also added a plant in Singapore to manufacture tool
joints and a facility in Brazil to produce drill bits, rig equipment
and drill collars.
In 1979, Deng Xiaoping, the Vice Premier of the People’s Republic of
China visited the Hughes Tool plant in Houston during his historic
and highly publicized trip to the United States. Hughes had been
selling drill bits to China since it opened to Western companies in
1973. In 1980, Hughes signed a 10-year agreement to supply bits to
the Chinese.
In 1980, Hughes Tool Company’s revenue exceeded $1 billion for the
first time, with sales of $1.2 billion, a 50% increase from 1979.
During 1980, Hughes acquired Centrilift from Borg Warner, and
the Claremore, Oklahoma, electrical submersible pump (ESP) plant
was added in the same year. Hughes also acquired Submergible Oil
Services (SOS) in 1980 and combined it with Centrilift. SOS had
developed variable speed drive technology, which optimized pump
system performance and efficiency.
In 1981, Hughes Tool Company’s revenues increased 46%, reaching
$1.8 billion. During the year, the company built a manufacturing
Centrilift-Hughes plant in Claremore, 1980
62
plant in Huntsville, Texas for Brown Oil Tools. As the drilling
fluids business grew, the company re-named its mud division as
Hughes Drilling Fluids and invested in a new barite grinding plant
in Sheldon, Texas. BJ-Hughes Services expanded its pumping operations during the year.
In 1981, James R. Lesch was named Chairman, President and
Chief Executive Officer of Hughes Tool Company at Raymond
Holliday’s retirement.
Hughes started manufacturing
natural diamond bits in 1982.
Despite signs of a downturn in early 1982, Hughes made investments
for further growth. Centrilift-Hughes opened a new multi-conductor
cable plant in Claremore, Oklahoma, making it the only ESP manufacturer capable of supplying every component of the ESP system.
Centrilift also built a new test facility for high-temperature pumps,
and introduced its new horizontal injection pump and a smalldiameter pump for use in smaller casing sizes.
Hughes also purchased two Metallurgical Products Division (MPD)
plants from General Electric, which made tungsten carbide inserts for
drill bits, mills and mining tools.
Hughes Tool Company added diamond drill bits to its product line
in 1982, with PDC and natural diamond bits. With this addition,
Hughes Tool Company became the only supplier at the time that was
capable of providing every type of drill bit. The company also introduced robotics on its assembly line.
Also in 1982, Hughes Drilling Fluids introduced two low-toxicity
fluids systems, and BJ-Hughes Services offered new, low-temperature
cement for operations on the North Slope of Alaska.
Brown Oil Tools introduced new retrievable packers, and new liner
hangers, set both hydraulically and mechanically, which enabled
the division to set several weight and depth records for liner string
installation. During 1982, the Hughes Sand Control product line
was commercialized on the Gulf Coast.
Hughes Drilling Fluids
introduced low-toxicity fluids
in 1982.
Financial results for Hughes Tool Company were disappointing
in 1982, with sales down 9.3% from the prior year, and net
income down by 42.4%. With industry over capacity, margins
were impacted by deep discounts in most product lines. By the end
of the year, the company had laid off 4700 employees and several of
its manufacturing plants were closed, with production consolidated
into other facilities.
Despite its difficulties, Hughes Tool Company looked back on its first
10 years as a public company with considerable pride. Its revenues
had increased at an average growth rate of 29.9% per year since going
public, from $151 million in 1973 to $1.6 billion in 1982.
Brown Oil Tools’ SMC
liner hanger, 1982
63
1978-1987
Rapid Growth for Baker
International
In 1979 Baker International’s revenues were up 27%, exceeding
$1 billion for the first time. It was organized into three operating
units, Baker Drilling Equipment, Baker Oil Tools, and Baker
Mining Equipment, each with several divisions. In 1980, revenues
increased another 32% to $1.5 billion, based largely on the growth
of its drilling-related product lines, which had been added in the late
1960s. In 1981, Baker International revenues grew another 38%,
topping $2.1 billion.
In 1981, Baker opened the safety systems plant in Broken Arrow,
Oklahoma, and introduced a new line of subsurface safety valves.
The company enlarged its manufacturing plant in Singapore and
expanded operations in Saudi Arabia and West Africa. The company
formed Baker Supply Products Division (Baker SPD) to compete in
the oilfield supply store segment.
Baker International revenues topped
$2.1 billion in 1981.
The Baker Sand Control division added seven bases in the U.S.,
Latin America and West Africa and developed a single-trip,
multi-zone gravel pack system that cut rig time in half compared
to conventional methods. The division also built a sand control
manufacturing plant in Singapore.
EXLOG introduced a probe-based measurement-while-drilling
system in 1980, and Baker Service Tools developed a downhole
motor that went commercial in 1981.
In 1980, Milchem formed domestic and international divisions
for its drilling fluid business and in 1981 opened 12 new locations
in nine countries. In 1980, Milchem introduced the first hightemperature polymer drilling mud. In 1982, Milchem opened a
barite mine in Arkansas and installed a grinding mill in Venezuela.
Also in 1982, the division began construction on its 12-story
Milchem Place building on Essex Lane in Houston; the facility
would eventually become the Baker Hughes corporate headquarters.
Magna, the oilfield chemical division, grew rapidly by taking
advantage of increased drilling, workover and enhanced oil
recovery operations.
Milchem introduced high-temperature
polymer mud in 1980.
64
Baker International also invested in its mining equipment businesses, believing that coal mining would become a growth market
during the energy crisis, and that metals would be needed as raw
materials for the growing economy.
In 1982, the company also established “Goals and Controls” budgeting, which was the basis of the quarterly planning process that the
company still uses today.
Baker International’s financial results in 1982 reflected the downturn
that began in the second quarter of that year. The company’s revenue
growth rate slowed to 18% for the full year. Not only had the drilling
market collapsed, but the metals mining industry had its worst year
since 1929, and the growth in coal mining had not materialized.
Built in 1982, the Milchem Place building at
3900 Essex Lane served as the Baker Hughes
corporate headquarters from 1987 until 2006.
Other Growth Companies
During the boom years after 1977, Dresser Atlas expanded international operations into the North Sea and to Venezuela, Argentina
and Saudi Arabia. By 1982, the company had 75 units working
outside the United States. Dresser Atlas used computer technology
to design its tools and acquire data in the field. Several new services
were introduced, including compensated neutron, Acoustilog®
and improved carbon/oxygen logging services. The company had
a growing staff of sales engineers and log analysts to promote the
company and assure clients gained value from its services.
Eastman Whipstock reinforced its reputation as a leader in directional
drilling when it drilled relief wells to kill major blowouts in the Arun
field of Sumatra (1979) and in Mexico’s Bay of Campeche (1980).
Eastman directional experts used mini-computers for well planning
and wireline steering tools for well guidance to enable the relief wells
to intersect very small targets.
During 1980-81, Eastman Whipstock carried out a broad expansion
program establishing over 20 new facilities in 15 countries. The company opened an instrument assembly plant and an oilfield machine
shop in Abilene, Texas, and invested in development of measurementwhile-drilling, downhole motor, and gyroscopic survey technology.
In 1979, Christensen Diamond Products was purchased by Norton
Company, an abrasives manufacturer from Massachusetts that wanted
to profit from the energy boom. The company reorganized into
four groups. The Diamond Products group advanced PDC bit
technology and introduced sintered diamond bits for harder formations. The Drilling Products group, driven by engineering in Celle,
Germany, introduced new drilling motors and turbines. Christensen
MWD developed the Accu-Trak measurement-while drilling system,
which went commercial in 1982.
In 1982, the Baker Training Center was opened
on W.W. Thorne Road in Houston, to help the
many new employees gain necessary skills.
In 1982 Sonat (formerly Southern Natural Gas) acquired Teleco
Oilfield Services. The company continued to advance measurementwhile-drilling technology by adding formation evaluation sensors to
its service suite. In 1984 Teleco introduced its directional-gamma
MWD system, which could provide readings of formation changes.
In 1986, the company introduced its Resistivity Gamma Directional
system to identify formation tops while drilling.
65
1978-1987
Hughes Responds to
the Downturn
Hughes Tool Company recorded an operating loss of $91 million
in 1983 and a loss of 134 million in 1984, then broke even in
1985 as it took major steps to respond to the industry downturn.
With an estimated overcapacity of 50% in most product lines,
oilfield service firms had to offer steep discounts to price-conscious
customers. Only technologically superior products could be sold at
adequate margins.
Hughes consolidated its eleven operating divisions into five
business units and closed a plant in California. The company sold
excess inventory and disposed of six different product lines.
To reduce overcapacity in the pressure pumping business in the U.S.
and Canada, BJ-Hughes Services and Dresser Titan Services, Inc.
formed a general partnership called BJ-Titan Services Company.
Hughes reduced overcapacity in the pressure
pumping business by combining BJ-Hughes
Services and Dresser Titan to form BJ-Titan
Services Company.
The company continued to invest in new technology. Development
efforts resulted in new J22C Tricone® drill bits from Hughes Tool;
cement foamed with nitrogen for deeper wells, and a new stimulation vessel from BJ-Hughes Services; cable for hostile well environments and surge protection systems from Centrilift-Hughes; stronger
liner hangers from Brown Oil Tools; and new drilling motors from
the Oncor group (whose plant was located on what is now the 2001
Rankin Road campus).
Hughes Tool companies reorganized geographically to pursue international markets. With a presence in 50 countries, the company had
16 international manufacturing plants, including JV facilities, and
licensee plants in Saudi Arabia, Canada and Japan. In 1985, a drill
bit plant in Jiang Han, China, started making bits based on Hughes
technology, reducing direct sales to China and lowering the volume
through the Houston drill bit plant.
As the rig count fell 18.5% in 1985, prospects for 1986 looked
particularly bleak.
Baker Faces an Oilfield Recession
Baker International
acquired Newpark Drilling Fluids and combined it
with Milchem to form Milpark Drilling Fluids.
66
In 1983, Baker International’s revenues declined by 27.5% from the
previous year, and the company reported a loss of $63.5 million, after
a $205 million write-off. Revenues were flat in 1984. During the year,
Baker combined operating divisions and laid off 12,500 people.
Baker management warned that OPEC would drive prices down
further, and the surplus of natural gas in the U.S. (“the gas bubble”)
drove down drilling and completion business in the United States.
Oil company customers also were restructuring instead of exploring
for new reserves, and the mining sector was hurt by a slow
U.S. economy.
Baker sold its Kobe hydraulic pump business in 1984 and further
consolidated its division structure. To gain business from producing
wells, the company entered the artificial lift business by starting
the Baker Lift Systems ESP division in Oklahoma City and by
purchasing a beam pump company. The Magna chemical division
focused on a “Thin Film Spreading Agent,” which was expected to
dramatically improve rates of oil recovery from older wells.
In 1985, Baker International acquired the Newpark Drilling
Fluids division from Newpark Resources and combined it with
the drilling mud business of Milchem to form Milpark Drilling
Fluids. The Milchem chemical group was combined with Magna
to form Baker Performance Chemicals.
An Eastman Whipstock directional driller
reads a single-shot survey.
In 1985, revenues increased 3.8%, and James D. Woods was
named President and COO, with a mandate to enhance gross
margins and control costs as the industry faced the prospects of
a dismal year in 1986.
Other Companies Respond
After 1982, other future Baker Hughes companies also had
to respond to the industry downturn by consolidating and
downsizing. However, the tight market did not stop ongoing
technical innovation.
In 1983, Norton Christensen launched the slow-speed, multilobed Mach 1C drilling motor and a new hydraulic drilling jar.
In 1984, the company introduced the industry’s first steerable
motor system using a Shell patent, and combined it with PDC
bits and its MWD system to form the NorTrak system, which
enhanced accuracy of directional wells. In 1985, Norton
Christensen drilled the world’s first medium-radius horizontal
well in Texas for Arco, using specialized motor technology.
In 1984, Eastman Whipstock was acquired by Texas Eastern
Corporation, and gained the short radius horizontal drilling system
that Texas Eastern had developed for re-entry drilling. Eastman
marketed the “lateral drilling” concept, and built industry
awareness for the potential benefits of horizontal well technology.
In 1986, Eastman Whipstock and Norton Christensen were
combined to form Eastman Christensen. The new company
joined the Eastman directional drilling service network with
technology developed by Christensen. This combination enabled
the company to become the industry’s leading proponent of steerable
motor and horizontal drilling services.
An Eastman
Christensen directional supervisor
begins a steerable motor operation using the
NorTrak system.
67
1978-1987
In 1987, Litton Industries and Dresser Industries formed a joint
venture combining their respective divisions Western Geophysical
and Dresser Atlas. The combined company was called Western
Atlas. Dresser Atlas was renamed Atlas Wireline Services.
Baker International and
Hughes Tool Company Merge
In 1986, OPEC actions forced oil prices downward so they
reached a low point of $8 per barrel in August. Baker
International’s revenues declined 18% during the year and
Hughes Tool Company’s revenues were down 40%. Taken
together, the companies had combined losses of $804 million
for the year.
Both companies believed the industry would weather the storm,
but they understood that the key to survival in the interim was
to reduce surplus capacity to deliver both products and services.
On April 3, 1987, Baker International Corporation and Hughes
Tool Company merged to form Baker Hughes Incorporated. E.H.
“Hubie” Clark was named Chairman of the Board and James D.
Woods was named President and Chief Executive Officer.
The combined company was organized in three groups with
a total of 21 divisions:
Drilling Equipment: Hughes Tool Company,
Baker Hughes Tubular Services, Tri-State Oil Tools,
Exlog/TOTCO, Milpark Drilling Fluids.
Production Tools: Baker Oil Tools, Baker Service
Tools, Baker Sand Control, Baker CAC, Baker
Performance Chemicals, Centrilift, Hughes Services
International, Develco, BJ-Titan
Mining Equipment: BGA International, Ramsey
Technology Inc., Baker Hughes Mining Tools,
Chas A. Lewis; WEMCO, EIMCO process equipment,
EIMCO mining equipment
The company had to divest Reed Tool Company to satisfy
antitrust concerns in the drill bit segment.
The new company combined the long traditions of two oilfield
service leaders and was able to offer customers a wide range of
technologies for drilling, completion and production. Revenues
for BHI’s first year of operation were $1.4 billion dollars, and the
company reported a net loss of $254 million.
James D.Woods became president and CEO
when Baker Hughes was formed in 1987.
68
Year
The World
Energy
Industry
1978
• John Paul II becomes Pope.
• First test tube baby born.
• Khomeini leads Islamic
revolution in Iran.
Cognac platform installed
in 1025 ft of water in the
Gulf of Mexico.
1979
• Iranian revolution topples Shah of
Iran, causing a second “oil shock.”
• U.S. Embassy in Teheran is seized.
• Margaret Thatcher becomes
first female prime minister of
Great Britain.
• Western energy companies
expelled from Iran.
• Three Mile Island nuclear
accident reduces demand for
nuclear power.
1980
• Ronald Reagan is elected
U.S. President.
• Beatle John Lennon
is assassinated.
• Iraq launches war against Iran.
Drill-in fluids, synthetic oil-based
drilling fluids introduced.
1981
• NASA launches and lands
a reusable spacecraft called
the Space Shuttle.
• New plague identified as AIDS.
• IBM introduces the PC.
U.S. rig count reaches 4,530
active rigs.
1982
• OPEC introduces production
quotas.
• Argentina invades Falkland Islands.
• First implant of the artificial heart
• Oilfield market begins to decline.
• Unocal drills the first horizontal
well in the North Sea.
1983
• U.S. embassy in Lebanon
is bombed.
• Soviets shoot down Korean airliner.
Harriet field discovered in Western
Australia’s Carnavaron Basin.
1984
• Huge poison gas leak in
Bhopal, India.
• Indian Prime Minister Indira
Gandhi killed by her bodyguards.
Chevron purchases Gulf Oil.
1985
• Genetic engineering begins
in the rapidly growing biotech
industry.
• Hole in the ozone layers
discovered.
• Mikhail Gorbachev becomes
the leader of Soviet Union.
1986
• Challenger space shuttle explodes.
• Chernobyl nuclear accident
• Soviet Union launches the MIR
space station.
1987
• Black Monday on New York
Stock Exchange
• DNA first used to convict
criminals.
Technology
• Teleco Services introduces first
MWD system.
• Centrilift introduces
Centriline ESP cable.
• Milchem introduces
CARBO-FAST oil-based mud.
• Bakerline casing liner hanger
introduced.
Baker Hughes
Milestones
• Hughes Tool acquires McMurry
Oil Tools and Brown Oil Tools.
• Hughes Tool opens plants
in Brazil and Singapore.
• Baker Sand Control formed.
• China vice Premier Deng
Xiaoping visits Hughes Tool
headquarters in Houston.
• Centrilift breaks ground on a new
manufacturing and office facility
in Claremore, Oklahoma.
Baker Sand Control introduces
Beta system for gravel pack
completions.
• Centrilift is sold to Hughes Tool
Co., becomes Hughes-Centrilift.
• Hughes-Centrilift purchases
SOS, manufacturer of variable
speed ESP drives.
• Hughes Tool Company revenues
reached $1.2 billion.
• Atlas Wireline Services runs
the first tubing conveyed
perforating run.
• Centrilift develops horizontal
injection pump.
• Baker International acquires Arjay,
Inc. and merges it with Magna.
• Hughes Tool acquires Mining
Products Division of General
Electric, a supplier of tungsten
carbide products.
Centrilift opens cable plant in
Claremore.
Norton Christensen introduces
steerable drilling motor system.
• Texas Eastern acquires Petrolane, Inc.
• Arco Performance Chemicals
merges with Oilfield Chemicals
to form Chemlink.
• Baker International renames Magna
as Baker Performance Chemicals.
• Norton Christensen introduces
the first medium radius
horizontal drilling system.
• Baker introduces Metal Muncher
milling technology.
• Baker introduces the FlexLock
liner hanger.
Milchem forms joint venture with
drilling fluids division of Newpark
Resources to form Milpark.
Oil price collapse causes industry
consolidation.
• Petrolite introduces the first iron
control additive for use in
acidizing asphaltic crudes.
• Centrilift enters ESP water
well market.
• Baker International moves its
headquarters from Orange,
California to Houston.
• Eastman Christensen formed
as joint venture owned by Texas
Eastern and Norton companies.
Shell establishes a drilling depth
record at its Coulomb prospect
in 7,520 ft of water in the
Gulf of Mexico.
Atlas Wireline Services introduces
formation density tool.
• Baker Hughes formed by merger
of Baker International and
Hughes Tool Co.
• Western Atlas formed through
the combination of Western
Geophysical and Dresser Atlas.
• EXLOG moves headquarters
from Sacramento to Houston.
• Milpark and Milchem combined
with Hughes Drilling Fluids to
form Milpark Drilling Fluids.
• Baker Performance Chemicals
formed to serve oilfield and
petrochemical sectors.
69
1988-1997
70
A Decade of Acquisitions
D
uring its first decade as Baker Hughes Incorporated, the company made a
series of more than 30 acquisitions and divestitures to reinforce its core
technical competencies in drilling, formation evaluation, completion and production.
Understanding the importance of technology as a differentiator, Baker Hughes made
an ongoing commitment to research and development to assure a steady stream
of innovations. Horizontal drilling and completion technology, for both new and
re-entry sidetrack wells, was a particular focus for the company’s technology programs.
During the decade, Baker Hughes also pursued non-oilfield businesses, with the
formation of its Baker Process unit.
71
1988-1997
Acquisitions and Divestitures
I
n 1988, despite the flat U.S. drilling activity, the new corporation
returned to profitability with a net income of $103 million on
revenues of $2.32 billion.
During the decade, Baker Hughes set the objective of being either
the #1 or #2 provider in each of its market segments. This approach,
first espoused by General Electric, was the driving force behind
Baker Hughes’ strategy for acquisition and divestiture of business
lines. In 1988, Baker Hughes divested its interests in Vetco Gray
(subsea equipment), BJ Machinery (drilling rig surface equipment)
and Econolift (progressive cavity pump systems). In 1989, the
company sold its mining equipment group, but acquired EDECO
Petroleum Services, which sold electrical submersible pumps and
completion systems.
Baker Hughes management did not see long-term potential in specialty
tubular products, and considered the pressure pumping business too
capital intensive. In response, the company sold the tool joint business
of Hughes Tool Company, and completed an initial public offering
(IPO) to spin off BJ Services as a separate company in 1990.
Eastman Teleco was a leader in directional drilling
and coring services.
Baker Hughes management recognized the importance of directional
drilling in offshore field development and saw the potential for growth
in horizontal drilling for increasing hydrocarbon recovery. To gain a
leading position in these technologies, as well as in diamond drill bits,
Baker Hughes acquired Eastman Christensen in 1990. Then in 1992,
Baker Hughes purchased Teleco Oilfield Services, the industry leader
in measurement-while-drilling, and combined it with the Eastman
Christensen division to create Eastman Teleco. These acquisitions
coincided with high levels of horizontal drilling activity in the Austin
Chalk trend in Texas.
Also in 1990, Baker Hughes acquired ChemLink and combined it
with Baker Performance Chemicals to form the largest U.S. oilfield
chemical treatment company. During the same year, Baker Hughes
acquired the fishing tool business of Wilson Industries and combined
it with Tri-State Oil Tools and purchased Elder Oil Tools to add to
Baker Oil Tools’ product line and increase its manufacturing capacity.
With the expectation of growth in environmental protection
activities, Baker Hughes acquired in 1989 Bird Machine Co., a
supplier of solid/liquid separation equipment, to add to EIMCO
Process Equipment Co.
72
Realignment of Product Line
Divisions, INTEQ Created
During a decade of acquisitions and divestitures, Baker Hughes
continually realigned its product line divisions to achieve
synergies, enhance focus, and promote efficiency. In 1992, with
the formation of Eastman Teleco, Baker Hughes combined the
Christensen diamond bit product line with the Hughes Tool
Company to create Hughes Christensen, which became the
industry’s leading supplier of both Tricone® and PDC bits.
During the early 1990s, many oil and gas companies merged to
form larger companies, and they sought ways to achieve efficiencies
and maximize profitability. In the process, the number of oil and
gas operators decreased and the consolidated companies shed staff
and sought to shift project management and research activities to
the service companies. Sensing a change in customer needs,
Baker Hughes formed a task force to chart the company’s response
to it. Executives on the task force interviewed a cross-section of oil
company managers to understand industry trends and producer
priorities. At the time, a majority of operators expressed the desire
to deal with fewer service companies that could provide broad,
integrated solutions.
The merger of Hughes Tool Company and
Christensen launched Hughes Christensen as a
leader in both Tricone and PDC bits.
In response, Baker Hughes formed a new division in March 1993, Baker
Hughes INTEQ, with a broad product line and the mandate to integrate
and deliver comprehensive solutions. INTEQ combined Eastman Teleco,
EXLOG, Develco, Baker Sand Control and Milpark Drilling Fluids.
At the same time, the Tri-State fishing tool division and the Baker Service
Tool workover and remediation division became product lines within
Baker Oil Tools. The divisional product line organization was fine-tuned
in 1996 when the Sand Control product line was transferred from
INTEQ to Baker Oil Tools and the Baker Hughes Solutions division
was formed to handle integrated project management.
The 1993 combination
of Baker Oil Tools and
Baker Service Tools
created the industry’s
leading well completion
company.
Baker Hughes Chairman, J.D. Woods
announcing the formation of Baker Hughes
INTEQ in 1993
73
1988-1997
Technology Innovations
Baker Oil Tools
introduced
multilateral
completions
in 1994.
I
n 1988, Baker Sand Control performed the first horizontal gravel
pack completion. In 1990, Baker Sand Control also developed the
gravel pack simulator to test its new products under simulated highangle downhole conditions.
In 1994, Baker Oil Tools introduced multilateral completion
systems, that enabled operators to install completion tools and
perform selective intervention work in multiple horizontal sections
from a common main wellbore. The division established itself as the
leader in high-end multilateral solutions.
Simultaneously, Baker Hughes sought to strengthen its directional
drilling capabilities. Soon after the creation of INTEQ, the company
introduced the NaviGatorTM reservoir navigation system, combining
the Navi-Drill® steerable drilling motor and the quantitative resistivity MWD measurements near the bit. The system was specifically
designed to use geosteering techniques for precise well placement
within the reservoir.
In 1995, innovations across the Baker Hughes companies were
combined to offer cost-effective horizontal re-entry systems that
enabled operators to boost production from old wells and extend
the economic life of existing fields.
INTEQ introduced the NaviGator
reservoir navigation system in 1994.
A gravel pack
simulator helped
Baker Sand Control
engineers design
gravel pack
completions for
horizontal wells.
74
In 1997, Baker Hughes introduced more than 20 new products and
services. The innovations included the AutoTrak® Rotary ClosedLoop system developed with Agip S.p.A. to allow the driller to
automatically steer the drilling assembly along a pre-programmed
path and the EDGE™ Intelligent Completion System that enabled
packers to be set by remote control from the surface.
Introduced in 1997
with Agip S.p.A, the
AutoTrak Rotary
Closed-Loop system
was a step change in
directional drilling
performance.
New Bit Plant in The Woodlands
In the early 1990s, Hughes Tool Company, under the direction
of division president Andy Szescila, initiated a plan to revolutionize its drill bit manufacturing processes. The existing plant on Polk
Street was spread out over 14 separate buildings, and manufacturing
of a single bit could take several weeks. To reduce manufacturing
cycle time, the company built a state-of-the-art bit facility in The
Woodlands, Texas, which took over Tricone® manufacturing in
1993. As a result, a new roller cone bit could be built in a few days.
In the summer of 1995, the Christensen PDC plant was brought
into The Woodlands facility from Salt Lake City.
Baker Hughes redeveloped the Polk Street site as a modern, urban
industrial park, whose buildings were leased to smaller companies.
Innovations in Drilling Fluids
From 1988 to 1993, Baker Hughes offered drilling fluids through
its Milpark division. In March 1993, Milpark drilling fluids business was integrated into INTEQ. Under the INTEQ banner, the
company was an innovator in water-based fluid systems, with its
AQUA-DRILL® system that utilized cloud-point glycol chemistry.
The division also introduced unique synthetic-based fluid systems,
such as the ISO-TEQ™ and SYN-TEQ™ systems, for use in
environmentally sensitive areas. In 1994, INTEQ introduced
PERFFLOW™ drill-in fluids, which minimized formation damage
and helped operators increase initial production.
Milpark Drilling
Fluids division
was integrated into
INTEQ in 1993.
Hughes Christensen plant in The Woodlands was opened
in 1993.
PERFFLOW drill-in and
completion fluids from INTEQ
reduced formation damage.
75
1988-1997
Centrilift Expands ESP Market
During the 1990s, Centrilift continued to strengthen its manufacturing capabilities in Claremore, Oklahoma, introduced new
products and expanded its markets to the Eastern Hemisphere,
including Russia, China, and to Venezuela in South America. In
1993, Centrilift began to export ESP systems to the Former Soviet
Union, establishing Baker Hughes as a supplier in this slowly
emerging market.
During the decade, Centrilift introduced the Electrospeed® ICS
Variable Speed Controller, and the Horizontal Injection Pump. In
1997, Centrilift strengthened its capabilities with the acquisition
of Oil Dynamics, Inc, an ESP competitor with unique technology.
The same year, Centrilift joined Baker Process Systems and Baker Oil
Tools in developing the HydroSep™ downhole oil/water separator.
In the 1990s, Centrilift introduced the Electrospeed
variable speed controller and expanded its markets in
the Eastern Hemisphere.
Process Equipment
During the 1990s, Baker Hughes also served the process equipment
market segment. Process companies included EIMCO Process
Equipment, a supplier of liquid separation and filtration equipment
for wastewater treatment; Bird Machine Company, manufacturer
of centrifuges for separation of solids from effluents, and EPEC, a
supplier of municipal sewage treatment equipment. In 1992, the
process division’s name was changed to EnviroTech.
In 1994, as the process industries business declined, Baker Hughes
divested the Measurement and Controls Group of EnviroTech and
organized the remaining companies into the Process Equipment
Operations group. In 1996, Baker
Hughes acquired Vortoil Separation
Systems, a leader in hydrocyclones
for separating oil from water.
Baker Performance
Chemicals had extensive
business in Venezuela.
76
Western Atlas Logging
Services
During the 1990s, Western Atlas Logging Services
expanded its capabilities to 100 different logging
services, covering a full complement of resistivity,
acoustic and radioactivity measurements. The company
had 80 locations worldwide. Acquisition of NL
McCullough in 1988 enabled the company to provide
pipe recovery services. In 1997, Western Atlas acquired
WEDGE DIALOG, Inc. to strengthen its cased hole
logging services.
Western Atlas Logging Services’ technology advancements during the decade included the ECLIPS™
logging unit, Predator™ deep penetrating and Jumbo
Jet™ big hole perforating charges, Multipole Array
Acoustilog, and Digital Circumferential Borehole
Imaging Log.
Western Atlas well logging unit
on an offshore rig in the Gulf of Mexico
Baker Petrolite Formed
In 1997, Baker Hughes acquired St. Louis-based Petrolite and
combined it with Baker Performance Chemicals to form Baker
Petrolite. Tracing its roots to William S. Barnickel’s original oilfield
demulsifier, the new company could provide products and services
for the upstream oil and gas industry, refining and petrochemical
customers, as well as the pipeline and agricultural industries. In
addition, its specialty polymers business provided products to
cosmetics, candle and computer printer manufacturers.
With a worldwide distribution infrastructure, Baker Petrolite had
major manufacturing locations in Texas, Oklahoma and the
United Kingdom. By the
end of the year, a new
Baker Petrolite company
headquarters was under
construction in
Sugar Land, Texas.
St. Louis-based Petrolite
corporation was combined
with Baker Performance
Chemicals to form
Baker Petrolite
in 1997.
77
1988-1997
Project Renaissance
In the fall of 1997, Baker Hughes Chairman Max Lukens convened
400 of the company’s top managers to introduce the concept of
“re-engineering the corporation” and to announce the kick-off of
Project Renaissance. This multi-year project would develop common
processes across the Baker Hughes enterprise, introduce shared
services for essential business functions, and implement SAP as a
single financial and resource management system for Baker Hughes.
(At the time, the company was using over 30 incompatible
financial software systems). David Barr was the first head of Project
Renaissance. He was succeeded in 1999 by Andy O’Donnell.
In 1997, to close out the company’s ninth decade, Baker Hughes
revenues were $3.7 billion.
E.H. “Hubie” Clark retired in 1988.
Under Mr. Clark’s leadership, Baker
delivered the highest return on stockholder equity of any U.S. industrial
company during 1971-81, according
to Fortune magazine.
During Chairman Max E.
Lukens’ tenure, the company
launched Project Renaissance
and acquired Western Atlas.
James D. Woods retired in 1997. Mr. Woods
championed the merger between Hughes Tool
Company and Baker Oil Tools, and led the
company through a series of acquisitions and
divestments to establish Baker Hughes as a
leading oilfield technology company.
78
Year
The World
Energy
Industry
Technology
Baker Hughes
Milestones
1988
• Pan Am flight 103 is bombed
over Lockerbie.
• Apple loses lawsuit against
Microsoft.
1989
• Berlin wall comes down.
• Mars-Ursa field discovered
in the Gulf of Mexico.
• Oil tanker Exxon Valdez
flounders off the coast of
Alaska, causing a 10-million
gallon oil spill.
• Western Atlas Logging Services
introduces pulsed neutron tool
for measuring water behind pipe.
• Eastman Christensen introduces
“anti-whirl” PDC bits.
BJ-Titan becomes BJ Services
division of Baker Hughes
1990
• Iraq invades Kuwait.
• Hubbel telescope launched.
First horizontal well in the North
Sea signals a decade of horizontal
well development.
Eastman Christensen develops
coiled tubing drilling.
• Baker Hughes acquires
Eastman Christensen.
• Baker Hughes acquires Chemlink.
• BJ Services goes public.
1991
• Soviet Union breaks up.
• Gulf War: U.S.-led coalition
drives Iraqis from Kuwait.
Western companies see
opportunities in Russian oil
industry.
Coiled tubing programs
in France and South Texas.
1992
• Official end of the Cold War
• Riots in Los Angeles
1993
• Use of the internet grows
exponentially.
• Record U.S. oil imports
1994
• Eastman Christensen
introduces the “egg beater” bit.
• Baker performs the first horizontal
gravel pack completion.
• Atlas Wireline Services logs
the farthest extended reach well
to date in the Gulf of Mexico.
Petrolite patents a line
of H2S scavengers.
• Baker Hughes acquires Teleco
Oilfield Services. Combines
Christensen’s diamond bit line
with Hughes Tool to form
Hughes Christensen.
• Petrolite acquires Wellchem, Inc.
• Atlas Wireline Services
introduces ECLIPS™
logging unit.
First installation of commercial
subsea multiphase integrated
helicoaxial pump and turbine
boosting system
• Western Atlas introduces
annular flow log.
• Baker introduces WindowMaster
casing exit system.
• Centrilift develops first
ESPCP system.
Houston Tricone bit
manufacturing operation
moved from Polk Street to
The Woodlands.
• English Channel tunnel opens.
• Nelson Mandela elected
President of South Africa.
First ESP in subsea well off Brazil.
• Baker Oil Tools introduces
multilateral completion system.
• Western Atlas introduces pulsed
neutron holdup imager.
1995
• Oklahoma City bombing
• Gas attacks in Tokyo subway
U.S. lawmakers pass a royalty relief
bill to spur production in the Gulf
of Mexico after oil costs average
$18.43 per barrel.
• INTEQ introduces the
NaviGatorTM reservoir
navigation system and
NaviDrill® Ultra series motors.
• BOT introduces the
WindowMaster casing
whipstock system.
PDC plant in Salt Lake City
moved to The Woodlands.
1996
• Mad cow disease in
Great Britain
• Two British Royal divorces
• First well drilled in over
7,000 ft of water.
• Former Standard Oil divisions
reunited to form ExxonMobil.
• BP/Amoco/Arco merge
in a $635 billion deal.
• INTEQ introduces Multiple
Propagation Resistivity™
LWD system
• EXCLUDER™ extended life
well screen introduced.
• Western Atlas Logging Services
introduces the Pulsed Neutron
Holdup Imager.
• Max Lukens named Chairman,
President and CEO.
• Sand Control product line
moved to Baker Oil Tools.
• Baker Performance Chemicals
acquires BASF Oilfield Chemicals.
1997
• Hong Kong returned to China.
• Scientists clone sheep.
• INTEQ introduces the AutoTrak
rotary steerable system, a step
change in directional drilling.
• Baker Oil Tools installs the first
trilateral completion.
Baker Hughes acquires Petrolite
and combines it with Baker
Performance Chemicals to form
Baker Petrolite.
79
1998-2007
80
A New Century
and a New Millennium
T
he tenth and most recent decade of the Baker Hughes story was shaped
by business cycles characteristic of the oil and gas industry. After a poorly
timed acquisition and changes at the top, the company’s management defined a
strategy that focused on Baker Hughes strengths in the oil field and its specialized
technology for oil and gas wells. By 2007, Baker Hughes has achieved rapid growth,
and has continued to invest in new technology, global infrastructure and a diverse
workforce. The company also has begun to extend its capabilities beyond the
wellbore to provide customers with broader solutions to help them understand their
reservoirs and maximize recovery.
81
1998-2007
A Major Acquisition
O
n August 10, 1998, Baker Hughes merged with Western Atlas
to complete its largest acquisition since Baker International and
Hughes Tool Company combined. Western Atlas was comprised of:
Western Geophysical, the world’s largest seismic company; Western
Atlas Logging Services, the industry’s second largest wireline logging
and perforating supplier; and Western Atlas E&P, which owned oil
producing assets in Nigeria.
CEO Max Lukens said that the merger had “transformed Baker
Hughes from a provider of discrete oilwell products and services into
an integrated life-of-the-field company focused on the reservoir.”
Unfortunately, by the time the Western Atlas deal was closed, the
Asian financial crisis had caused the collapse of stock markets in
Thailand, South Korea and Indonesia and had driven the world
economy into a recession. The price of crude oil dropped below
$15/barrel and oil and gas companies curtailed their exploration and
development investments substantially.
Western Atlas wireline logging unit in Venezuela.
The merger with Western Atlas added wireline
logging and formation evaluation technologies to
the Baker Hughes portfolio.
Responding to a Downturn
The downturn continued in 1999, as oil prices dropped to $11/barrel
and the worldwide rig count declined by 21%. This drilling activity
drop off and overcapacity in the seismic industry resulted in poor
financial results for service companies. In 1999, Baker Hughes reduced
variable and fixed costs by $1 billion, laid off 10,000 people and took
a write-off for its seismic operations, as Western Geophysical removed
16 vessels from service.
To instill financial discipline, Baker Hughes adopted its Baker
Value Added (BVA) metric in 1999. BVA is a measure of financial
performance that integrates operating results with the balance sheet
and measures performance in relation to the cost of invested capital.
Baker Hughes Business Support Services was established in the first
quarter of 1999, with BHBSS employees providing shared services
in Accounting, Payroll and Information Technology for corporate
functions and five divisions.
BHBSS provides shared services in
accounting, payroll and IT.
82
Project Renaissance continued, and SAP had been installed for all
U.S. locations of Baker Oil Tools, INTEQ, Baker Atlas and Baker
Petrolite by the end of 2000. In December 2001, Project Renaissance
was officially closed.
New Facilities
In 1998, Baker Petrolite moved into its new
Sugar Land, Texas headquarters, combining
laboratories and administrative offices.
Baker Petrolite’s headquarters building in the Sugar
Land suburb of Houston includes state-of-the-art
chemical research laboratories.
INTEQ and Baker Atlas combined their
Houston engineering and manufacturing operation
and opened the Houston Technology Center at
2001 Rankin Road in 2000, serving as headquarters
for both divisions. The Westheimer campus previously occupied by Western Atlas, was sold.
Two New Chairmen
In early 2000, Max Lukens resigned his position
as chairman and CEO. The board of directors
appointed Joe B. Foster as interim Chairman,
President and CEO. A Baker Hughes board member
for 10 years, Mr. Foster directed the company
through the management transition as market
conditions improved.
In August 2000, Michael E. Wiley, was named
Chairman, President and CEO. Mr. Wiley had
made a long career at Arco and was that company’s
president when it was acquired by BP. Mr. Wiley set
out to establish a high performance culture to guide
decision making and a strategic framework to set a steady
long-term course for Baker Hughes. To develop the
company’s culture he met individually with the company’s
80 top executives, and the Core Values and Keys to Success
were crafted and adopted in 2000.
Interim Chairman Joe B.
Foster guided the company
through the transition
period in 2000.
Houston Technology Center at the
Rankin Road complex provides engineering research and
manufacturing facilities for both INTEQ and Baker Atlas.
As Chairman, Michael Wiley
instituted Core Values, Keys to
Success and the Strategic
Framework at Baker Hughes.
83
1998-2007
WesternGeco venture
In 2000 to reduce the impact of the severe downturn in seismic
services, Baker Hughes formed a venture with Schlumberger to
combine the assets of Western Geophysical with those of GecoPrakla. Baker Hughes received $500 million and retained a 30%
ownership in the new WesternGeco. Also in 2000, Baker Hughes
sold the Nigerian oil-producing assets of its E&P Solutions group.
Strategic Focus
In the early 2000s, Baker Hughes reaffirmed its commitment to an
organization based on strong product-line divisions and strengthened
the “corporate center” with enterprise departments for legal, finance,
human resources, marketing and business development functions.
INTEQ has introduced a full suite of
logging-while-drilling measurements as part
of its integrated bottomhole assemblies.
Financial flexibility also became a priority as Baker Hughes
executives stated that they were “determined to manage our business
for profitability and to generate adequate returns no matter where
we are in the business cycle.” This focus achieved results in 2001,
as operating profits doubled for the second year in a row. The
Strategic Framework, first introduced in 2003, reaffirmed the
company’s oilfield focus, its divisional structure, and its commitment
to financial discipline.
Building Technology Leadership
From 1998 until the present, Baker Hughes divisions have worked to
develop pre-eminent technology positions in key market segments.
For INTEQ, the AutoTrak® rotary closed-loop drilling system has
been the breakthrough technology of the decade, transforming the
practice of directional drilling. Since the AutoTrak system’s introduction in 1997, the system has been continually improved, with its
third-generation system introduced in 2002, small-diameter tools
launched in 2004, and the AutoTrak X-Treme® system commerialized
in 2005. As of mid-2007, AutoTrak systems had been used to drill
more than 20 million feet of hole.
The AutoTrak system’s “closed-loop” pad steering technology
also has been a key feature of other automated drilling devices,
including the VertiTrakTM vertical drilling system, CoilTrak® coiled
tubing drilling assembly, and the TruTrakTM system for land-based
directional drilling.
Technicians prepare the drilling
simulator to test a Genesis XT PDC
bit under downhole conditions.
84
INTEQ has built on the AutoTrak system’s success to develop and
introduce integrated bottomhole assemblies that include a full range
of logging-while-drilling and drilling dynamics measurements.
These are key components in the division’s leading capability to
provide customers with “Answers While Drilling.”
In the 1990s, the drilling industry increased its use of PDC drill
bits, and Hughes Christensen faced growing competition as more
suppliers entered the diamond bit market. To regain its lead, Hughes
Christensen launched the Genesis® program. The intensive, threeyear research program was based on the premise that drilling
performance could be optimized when the PDC bit was specifically
designed to match each drilling application. Launched in 2001,
the Genesis product line was a great success, and by 2002 had
re-established Hughes Christensen’s lead in the diamond drill bit
market. Enhancements to the Genesis program have included
Genesis XT bits (2004) and Genesis ZX technology (2006).
The Reservoir Characterization Instrument
service has enabled Baker Atlas to establish itself
as a leader in deepwater logging.
For the past decade, Baker Atlas has upgraded its technology offering
to compete effectively in the high-end wireline logging market. The
Reservoir Characterization Instrument® (RCI)® service, first introduced
in 1997, has unique capabilities for analyzing formation fluids downhole. The RCI service’s capabilities have enabled Baker Atlas to gain a
substantial share of deepwater logging activity. Baker Atlas logged eight
of the first 13 exploration wells in deepwater blocks off Angola.
Other important technologies introduced by Baker Atlas include the
3D ExplorerSM resistivity logging service for evaluating thinly laminated
zones; the XMACSM Elite acoustic logging service for measuring rock
properties and correlating with surface seismic measurements; the
Earth ImagerSM service for obtaining wellbore images in oil-based
mud; and the Magnetic Resonance ExplorerSM service for characterizing
and quantifying reservoir fluids.
Baker Oil Tools has maintained its historical leadership in completion, intervention and workover technology. Notable innovations in
completion technology have included High-Pressure/High-Temperature
equipment including packers, flow control equipment and safety valves.
Baker Oil Tools also leads the industry in liner hanger technology,
including the Flex LockTM liner hanger system. Intervention systems
include conventional fishing tools and innovative through-tubing
inflatable systems.
Baker Oil Tools also introduced a number of key innovations in
sand control technology. In 1997, the division first combined its
EXCLUDER™ sand control screens with the EQUALIZER™ flow
control devices (licensed from Norsk Hydro) to provide completions
that would efficiently drain oil reservoirs from long horizontal wells,
while delaying water coning. This technology has since been installed
in a total of more than 20 miles of horizontal wellbore, with most
applications in Norway and Saudi Arabia.
Throughout the decade, Baker Oil Tools also has continued to develop
gravel packing tools and procedures. In 1999, Baker Oil Tools introduced its first two technology vessels, the Republic Tide and the R.C.
Baker, for gravel packing and fracturing service in the Gulf of Mexico.
EXCLUDER sand control screens with
EQUALIZER flow control system from
Baker Oil Tools represent the leading edge in
completion technology for horizontal wells.
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1998-2007
In 2001, Baker Hughes launched the H.R. Hughes technology
vessel. The StimForceTM modular stimulation vessel template was first
deployed on the deck of a supply vessel in Equatorial Guinea in 2006.
Other significant Baker Oil Tools innovations over the past decade
include a variety of multilateral completion systems, the InForce™
and InCharge™ Intelligent Well Systems, and expandable solutions
for well screens and solid tubulars.
The Baker Oil Tools H.R. Hughes technology vessel
is the industry’s largest proppant-capacity fracturing
vessel in the Gulf of Mexico.
Baker Petrolite is leveraging
its chemical technology expertise to
provide engineered solutions for deepwater
flow assurance.
Since 1998, Baker Petrolite has held its place as the largest oilfield
chemical supplier based on proprietary chemistries and outstanding
service. The division’s production chemicals inhibit corrosion,
deposition and the build up of waxes and paraffin in producing
wells. Baker Petrolite established a leading position in the deepwater
market with HI-M-PACTTM hydrate inhibitors and its FATHOM™
deepwater treatment programs. The F.O.A.M.TM program helps
operators remove water from gas wells and has been widely applied in
North America. In 2006, Baker Petrolite revived its original Tretolite®
brand to help market its complete line of demulsifiers for separating
oil from produced water. Baker Petrolite also has introduced products and services to help refiners and petrochemical plant operators
improve operational efficiency.
In 2002, Baker Petrolite formed the Pipeline Management Group
(PMG) to provide pipeline integrity services for the world’s aging
pipeline systems. Initially, PMG included tethered pipeline inspection
services (transferred from Baker Atlas) and pipeline cleaning and flow
enhancement services already resident in Baker Petrolite. In 2003,
Baker Hughes acquired the Cornerstone Pipeline Integrity Group
(CPIG), which had unique “smart pig” technology for in-line pipeline inspection. With CPIG technology, PMG has become a leader
in the pipeline integrity market.
Centrilift has continued to advance electrical submersible pumping
system technology by introducing enhancements to extend run life,
even while operating in hostile conditions. New Centurion™ pump
features addressed high gas content, high temperatures and high
solids content. The Electrospeed® II variable speed controller and
downhole performance monitors were introduced to further improve
system efficiency.
Centrilift also has made strides in extending ESP applications into
new applications. The division has installed dual ESP systems for
offshore applications, both in subsea and platform wells, often to
replace gas lift systems. ESP systems also have been applied as subsea
boosters to help move produced oil along subsea tie backs, and to lift
oil to Floating Production Storage and Offloading vessels. Centrilift
also has applied ESP systems to dewater gas and coalbed methane
86
wells, and to pump high-temperature oil from Steam Assisted
Gravity Drainage (SAGD) wells.
Centrilift designs and manufactures the complete
ESP system, including the pump, motor, seal,
power cable and surface controllers.
In the drilling fluids market, Baker Hughes has continued its
focus on providing systems that promote drilling efficiency,
minimize formation damage and achieve environmental
compliance. In 1998, INTEQ Drilling Fluids worked with
Hughes Christensen to introduce PENETREXTM rate of
penetration enhancer for water-based mud. In 2000, the
Dynamic Kill Drilling system was introduced for riserless
drilling of deepwater wells. In 2001, the INTEQ Fluids group
managed the first zero-discharge project in the deepwater
Gulf of Mexico. In 2002, the company acquired Apollo
Services, a drilling waste management and cuttings re-injection
company, to form its Fluids Environmental Services group.
In 2004, the company introduced the PERFORMAXTM high
performance water-based mud system. The Drilling Fluids
group also established a record of success on deepwater wells
using its SYN-TEQTM drilling fluids, advanced laboratory
analysis and its Advantage fluids hydraulic modeling software.
In 2004, Baker Hughes Drilling Fluids was separated from
INTEQ to become a new division focused on drilling and
completion fluids and related services.
Oilfield Focus Sharpened
In 2002, Baker Hughes sold the Baker Process group, consisting of EIMCO Process Equipment, Bird Machine Group and
Petreco International, to focus almost exclusively on the oilfield services industry. In 2004, the company sold Baker Hughes
Mining Tools, a unit of Hughes Christensen.
Chad Deaton Named CEO
Baker Hughes Drilling Fluids introduced the
XHP/HT viscometer in 2005 to support drilling
fluid applications in ultra deep waters.
Baker Hughes strategic focus and financial discipline showed
results in 2004, as revenues reached $6.1 billion for the year, up
16% despite lower than expected investment by customers and
a 10% decline in the worldwide rig count.
On October 25, 2004, Chad C. Deaton succeeded Michael E.
Wiley as Chairman and CEO of Baker Hughes Incorporated.
As he assumed his position, Mr. Deaton expressed his belief that
Baker Hughes’ greatest opportunity for growth “is expansion in
geographic markets where we are underrepresented.” He called
for increased Baker Hughes presence in Russia and the Middle
East and improved relationships with National Oil Company
customers. He emphasized the importance of the company’s
product line divisions, new technology, and a diverse, global
work force.
Chad Deaton, who became Chairman and CEO
in 2004, expects Baker Hughes to become the global
leader in oilfield services.
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1998-2007
Two Segments/Four Regions
In 2005, Baker Hughes had another outstanding year, as
revenues reached $7.2 billion. During the year, the company
was organized into two business segments and aligned into four
consistent geographic regions. The Drilling and Evaluation
segment includes four divisions: Hughes Christensen, Baker
Hughes Drilling Fluids, INTEQ and Baker Atlas. The
Completion and Production segment includes Baker Oil
Tools, Centrilift and Baker Petrolite. At the same time, Baker
Hughes aligned its global operations into four geographic
regions: North America, Latin America, Europe Africa Russia
Caspian, and Middle East Asia Pacific.
Exiting WesternGeco
In 2006, Baker Hughes sold its 30% interest in the WesternGeco
venture to Schlumberger for $2.4 billion, ending the company’s
involvement in the surface seismic acquisition business.
ProductionQuest Pursues
Production Optimization
In 2005, Baker Hughes formed a production optimization
business unit to help oil and gas company customers maximize
recovery from both new and existing wells. The company
purchased full ownership of QuantX Wellbore Monitoring,
which had been formed as a joint venture between Baker
Hughes and Expro International, and the Luna Energy
company, which had developed fiber optic sensing technology.
In addition, Baker Hughes acquired Nova Technologies
Corporation, a supplier of downhole gauges and subsea
umbilical installation services. In 2006, these product lines
were combined with the SentryNet chemical automation
business from Baker Petrolite to form the ProductionQuest
business unit. This group also will provide intelligent production
systems that incorporate completion, pumping and chemical
technology from other Baker Hughes divisions.
Investing in the Future
By 2006, energy demand was slightly below the world’s
productive capacity, largely because of rapidly growing
economies in China and India. Oil prices above $60/barrel
spurred investment and increased demand for oilfield products
and services. Baker Hughes revenues in 2006 topped $9 billion,
and operating profits reached record levels. At the end of a year
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of rapid growth, the company had nearly 35,000 employees.
Capital investment of $922 million in 2006 was nearly double
the spending in 2005, and Baker Hughes invested $339 million
in research and engineering during the year.
As Baker Hughes completes its first century, the company
continues to invest in its global infrastructure, with new facilities
planned in every region. A new regional headquarters campus is
under construction in Dubai, and a new Center for Technology
Innovation is being built in Houston.
Baker Hughes continues to invest in recruiting, developing and
retaining a diverse global workforce. Baker Hughes also has
made a commitment to extensive technical, HS&E, supervisory
and management training programs, which are conducted in
classrooms and via online learning. The company’s succession
planning, personal development and performance management
processes enable qualified and motivated employees to make
their careers at Baker Hughes.
In its first hundred years, Baker Hughes became an industry
leader in technology and customer service because of the
creativity, dedication and hard work of its people. In the years
ahead, Baker Hughes people, working in a High Performance
Culture, will continue to make the difference.
Architectural rendering of the Center for Technology Innovation
being built on a 14-acre site in northwest Houston
New Dubai
regional headquarters, including
training, manufacturing and office
facility is scheduled
to open in 2008.
Year
1998
The World
Energy
Industry
Technology
Baker Hughes
Milestones
• India and Pakistan test
nuclear weapons.
• Asian financial market crisis
causes recession.
BP drills extended reach well
beyond 10 km on Wytch Farm.
INTEQ Drilling Fluids launches
PENETREX rate of penetration
enhancer.
• Baker Hughes acquires
Western Atlas.
• Centrilift acquires
Oil Dynamics Inc.
• Baker Petrolite headquarters
opens in Sugar Land.
• Euro becomes the new
European currency.
• Fear of the Y2K bug
• Panama Canal returned
to Panama.
• Mergers create Super Majors.
• Thunder Horse field discovered
in the Gulf of Mexico.
• Oil drops to $11/barrel.
Baker Oil Tools completes the first
Level 6 multilateral well.
Baker Oil Tools launches
Republic Tide and R.C. Baker
vessels for gravel packing and
fracturing services.
• Concorde supersonic plane
crashes near Paris.
• Clashes in Northern Ireland
with IRA
Houston Technology Center
opens as headquarters for INTEQ
and Baker Atlas.
• Joe B. Foster named interim
Chairman and CEO.
• Michael E. Wiley named
Chairman and CEO.
• Core Values and Keys to Success
are adopted.
• World Trade Center and Pentagon
attacked on 9/11.
• U.S. invades Afghanistan.
• Hughes Christensen introduces
the Genesis PDC bit line.
• INTEQ fluids group manages
the first zero discharge project
in the Gulf of Mexico.
Baker Oil Tools launches
H.R. Hughes technology vessel.
2002
• U.S. and Russia reach landmark
agreement on nuclear weapons.
• Terrorist bomb in Bali
kills hundreds.
Centrilift installs first subsea ESP
system in the North Sea.
• Baker Hughes sells Process Group.
• Baker Hughes acquires
Apollo Services to create
Fluids Environmental Services
within INTEQ.
• Baker Hughes forms
Pipeline Management Group.
2003
U.S. deposes Iraq’s
Saddam Hussein.
2004
• Enormous tsunami
devastates Asia.
• George W. Bush reelected
U.S. President.
Walker Ridge trend discovered
in the Gulf of Mexico.
• INTEQ introduces new
LWD suite.
• Centrilift introduces Centurion
pump line; Electrospeed II drive;
Centinel downhole sensor.
• Chad C. Deaton named
Chairman and CEO.
• Baker Hughes sells
Mining Tools group.
• Baker Hughes Drilling Fluids
formed as a separate division.
2005
• Pope John Paul II dies, succeeded
by Pope Benedict XVI.
• London subway terrorist bomb
blasts kill 52 commuters.
• Hurricanes Katrina and Rita
devastate Gulf Coast,
damage energy infrastructure.
• Giant gas fields discovered
in KG Basin, Bay of Bengal.
• INTEQ introduces AutoTrak
X-treme drilling system.
• Centrilift introduces MVP pump.
• Baker Hughes organized into
Drilling & Evaluation and
Production & Completion
segments.
• Four geographic regions
established.
U.S. and India agree to
a nuclear pact.
• Oil hits a record high
of $78.40/bbl on New York
Mercantile Exchange.
• Statoil and Norsk Hydro merge.
• Jack field discovered in
the Gulf of Mexico.
• INTEQ introduces TruTrak landbased directional drilling system.
• Baker Petrolite revives Tretolite
demulsifier brand.
• Centrilift introduces WellLIFT
downhole sensor.
• Baker Hughes sells its 30% share
of WesternGeco to Schlumberger.
• ProductionQuest unit formed
to provide production
optimization services.
Climate change becomes a
leading public policy issue.
Venezuela initiates plans to
nationalize its oil fields.
INTEQ drills world record
37,000-ft extended reach well on
Sakhalin Island.
Baker Hughes marks its
100th anniversary.
1999
2000
2001
2006
2007
Andy Szescila retires, Rod Clark
named BHI President and COO.
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CORE VALUES
INTEGRITY
We believe integrity is the foundation of our individual and corporate actions that drives
an organization of which we are proud.
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We are a responsible corporate citizen committed to the health and safety of people, protection
of the environment, and compliance with laws, regulations, and company policies.
We are honest, trustworthy, respectful and ethical in our actions.
We honor our commitments.
We are accountable for our actions, successes and failures.
TEAMWORK
We believe teamwork leverages our individual strengths.
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We are committed to common goals.
We expect everyone to actively participate on the BHI team.
We openly communicate up, down, and across the organization.
We value the diversity of our workforce.
We willingly share our resources.
PERFORMANCE
We believe performance excellence will drive the results that differentiate us
from our competitors.
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We focus on what is important.
We establish and communicate clear expectations.
We relentlessly pursue success.
We strive for flawless execution.
We work hard, celebrate our successes and learn from our failures.
We continuously look for new ways to improve our products, services and processes.
LEARNING
We believe a learning environment is the way to achieve the full potential of each
individual and the company.
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We expect development throughout each individual’s career by a combination of individual
and company commitment.
We learn from sharing past decisions and actions, both good and bad, to continuously
improve performance.
We improve by benchmarking and adopting best practices.
KEYS TO SUCCESS
People contributing at their full potential. Everyone can make a difference.
 We understand our priorities and performance goals.
 We drive to do our part every day.
 We support new ideas and take appropriate risks.
 We take action to find and correct problems.
 We commend each other on a job well done.
Delivering unmatched value to our customers.
 We make it easy for customers to do business with us.
 We listen to our customers and understand their needs.
 We plan ahead to deliver innovative, cost-effective solutions.
 We are dedicated to safe, flawless execution and top quality results.
Being cost efficient in everything we do.
 We maintain a competitive cost structure for the long term.
 We utilize shared services to control cost for the enterprise.
 We seek the best value for Baker Hughes in our relationships with suppliers.
 We ruthlessly eliminate waste without compromising safety or quality.
Employing our resources effectively.
 We assign our people where they can make the biggest contribution.
 We allocate our investments to leverage the best opportunities for Baker Hughes.
 We handle company assets as if they were our own.
 We manage our balance sheet to enhance return on investment.
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Baker Hughes Incorporated
P.O. Box 4740
Houston, Texas 77210-4740
Tel 713.439.8600
Fax 713.439.8280
Baker Atlas
INTEQ
Hughes Christensen
Baker Hughes Drilling Fluids
Baker Oil Tools
Baker Petrolite
Centrilift
ProductionQuest
© 2007 Baker Hughes Incorporated. All rights reserved. Printed in U.S.A. COR-07-13127