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Rating Action:

Moody's upgrades BJ Services' ratings to A2

03 May 2010

Approximately $2.3 million of debt securities affected

New York, May 03, 2010 -- Moody's Investors Service upgraded the senior unsecured and issuer ratings for BJ Services, Inc. (BJS) to A2 from Baa1. The upgrade, which concludes the review for upgrade commenced on August 31, 2009, is in response to the closing of the acquisition of BJS by Baker Hughes Incorporated (BHI). This upgrade of the senior unsecured rating places the debt at BJS at the same rating as the BHI debt, due to the guarantee of the BJS debt by BHI. As part of this action, Moody's also affirmed the A2, P-1 ratings for BHI and will withdraw the Issuer Rating for BJS given its ownership by BHI. The outlook is stable.

As part of the acquisition, BJS under a new company name remains intact from a structural standpoint and has become a wholly-owned subsidiary of BHI, similar to the other operating subsidiaries of BHI. However, the debt at BJS will remain in place with a guarantee from the BHI parent company. Although BJS is not providing an upstream guarantee for the existing BHI debt, Moody's does not believe that the BHI debt holders are materially impacted by this structure given the relatively small amount of debt at BJS. The existing BHI debt holders will have the same access to the BHI cash flows they had prior to the merger, and even if the BJS debt holders were to make a claim on the guarantee by BHI, there is sufficient asset cover for all debt holders, given the relatively low leverage in the entire BHI organization.

Although the U.S. Department of Justice has required BHI to agree to divest a few assets before approving the acquisition, Moody's believes these divestitures do not alter the credit profile of the combined company. Pro forma leverage (debt/EBITDA) for the combined company is approximately 1.9X at December 31, 2009. While this is a bit higher than BHI has been tracking, this is mostly due to the combined company's increased reliance on the North American oilfield services markets, which was particularly weak during 2009. However, with the continued surge in drilling of the natural gas shale plays and the increased oil-related activity, general oilfield services conditions have improved, which should result in leverage improving throughout the year and returning to pre-merger levels by year-end.

The last rating action for BJ Services and Baker Hughes was on August 31, 2009 when we affirmed the Baker Hughes ratings and placed the BJ Services ratings under review for upgrade.

The principal methodology used in rating Baker Hughes and BJ Services was Moody's Global Oilfield Services Rating Methodology, published in December, 2009 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Baker Hughes Incorporated (BHI), headquartered in Houston, TX, is one of the largest oilfield services companies. Its product line spans all phases of oil and natural gas development, from exploration through production, and the company operates in over 90 countries.

BJ Services Company, headquartered in Houston, TX, is a leading provider of pressure pumping and other oilfield services for the oil and natural gas industry.

New York
Steven Wood
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Kenneth Austin
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades BJ Services' ratings to A2
No Related Data.
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