< INVENTING SMARTER WAYS> 2017 Annual Report We invent smarter ways to bring energy to the world We are BHGE Only BHGE has a fullstream capability: the portfolio, the technology and the people to radically transform the industry and deliver unparalleled improvement in industrial yield for our customers. 120+ COUNTRIES 64K+ EMPLOYEES $22B* COMBINED 2017 REVENUE $600M+* COMBINED 2017 R&D SPEND * Combined business basis is a non-GAAP measure. Please refer to the GAAP to non-GAAP measures table at the end of this document for a reconciliation. On the cover: BHGE employee Rob Klenner, Senior Geoscientist CHAIRMAN’S LETTER TO SHAREHOLDERS “ We provide a new way of serving the oil and gas industry … With our talented people and unique set of products and services, BHGE can, and will, deliver.” Lorenzo Simonelli Chairman, President and Chief Executive Officer e formally launched Baker Hughes, a GE company (BHGE), on July 3, 2017. BHGE combines the strengths of the legacy Baker Hughes and GE Oil & Gas businesses, integrating products, Wservices and digital solutions for upstream, midstream and downstream applications. Together, we provide a new way of serving the industry through our fullstream offering that stretches across the oil and gas value chain. During our first six months as BHGE, we focused on building The average global rig count in 2017 was 2,030, an increase core operations, delivering results for customers and share- of 27% as compared to 2016. The increase was driven by holders, and executing on the integration. We also made North American activity, where the rig count rose 69%. important progress on our three financial priorities of growing Internationally, the rig count decreased 1% in 2017. market share, increasing margin rates and generating better cash conversion, with a focus on maximizing total shareholder While the natural gas and liquefied natural gas (LNG) return. I am extremely proud of what our team has achieved as markets remained over supplied, global demand for gas a combined company and would like to share some of our 2017 was strong. Incremental supply for LNG will be required accomplishments and our view on BHGE’s promising future. to come online by 2025. 2017 IN REVIEW Financial Performance* Throughout the year, oil and gas markets remained challenging. We made progress toward our three financial priorities Oil supply continued to exceed demand, maintaining the despite the difficult macro environment. We booked industry’s lower-for-longer dynamic. Crude oil prices hit lows $22 billion in orders, an increase of 4% year-over-year. in June 2017, and while the outlook improved toward the end Revenues decreased 5% year-over-year to $22 billion. of the year, there was no material change in our customers’ Margins improved and total year 2017 adjusted operating spending behavior. income was $1 billion, up 69% year-over-year. * Discussion throughout this letter is on a combined business basis, which is a non-GAAP measure. Please refer to the GAAP to non-GAAP measures table at the end of this document for a reconciliation. BHGE 2017 Annual Report 1 CHAIRMAN’S LETTER TO SHAREHOLDERS continued We also made progress toward our goal of improving free cash We are also focused on building a new, shared culture that flow generation by implementing more robust working capital embraces the strengths of both legacy organizations. Together, processes for inventory and receivables. While there is more we created culture pillars to guide decision-making and the work to do, we have laid the foundation to transform BHGE way we work. into a strong cash-generating company. Winning in the Marketplace In our first 180 days as a combined company, we focused on In 2017, we secured several major commercial wins and optimizing our capital structure. We announced a $3 billion delivered record performance for our customers. Highlights share buyback authorization, and we increased our quarterly included winning our first fullstream deal with Twinza Oil dividend by 6% to $0.18 per share. We also announced a Limited for an offshore project in Papua New Guinea. We $3.95 billion debt offering at attractive pricing that allowed also signed an agreement with Siccar Point Energy for an us to refinance a portion of our higher interest debt. These integrated project in the North Sea, where we will provide actions reflect our confidence in our ability to generate strong a suite of well services for the appraisal well in addition to free cash flow and shareholder returns. providing the construction and installation of subsea equipment. Additionally, we were awarded two major contracts by Eni East Integration Africa to provide subsea production systems, ancillary Prior to the close of the transaction, we had detailed integration equipment and services, and rotating equipment, including plans in place that were focused on customers, process aeroderivative gas turbines for power and gas refrigeration harmonization and a smooth transition for our employees. We process at the Coral South FLNG project offshore Mozambique. have made tremendous progress since July 3. Our employees We also won our largest turbomachinery order to date with are energized and our customers are excited about what they PetroChina for turbine generators in the Halfaya oil field in Iraq. have seen so far, and by the valuable opportunities ahead. Our Oilfield Services business grew in several critical Our integration efforts, as well as our synergy targets of markets, including North America and the Middle East, $1.6 billion by 2020, remain firmly on track. driven by our well construction and artificial lift businesses. Our AutoTrak™ Curve rotary steerable system coupled with our industry-leading drill bits continued to help operators improve their drilling economics. We also strengthened our position in the artificial lift segment, securing several new contracts and delivering solid performance for customers. For example, our TransCoil™ rigless artificial lift system extended the economic life of a mature deepwater field in Malaysia. In 2017, we had strong demand for our digital products and services as our customers are eager to explore the opportunity to unlock value and drive productivity through better connectivity. We signed our largest-ever digital order with a significant international customer. We further expanded our digital partnerships with some of our major customers, including Shell, who co-develops our JewelSuiteTM modeling platform. The platform delivers speed, accuracy and complex Lead research engineer Dustin Sharber uses a mixed reality application at technical modeling capabilities to reduce risk and improve well BHGE’s Technology and Innovation Center in Oklahoma City, where we are developing virtual, mixed and augmented reality applications to connect productivity. Shell is currently deploying the software across remote operations to the office through simulated environments. its enterprise. 2 BHGE Inventing Smarter Ways FINANCIAL HIGHLIGHTS $ in millions Combined Business Basis (1) 2017 2016 Orders $ 22,038 $ 21,106 Revenue $ 21,921 $ 23,102 Operating Income $ (233) $ (1,266) Adjusted Operating Income (2) $ 1,033 $ 611 “ We made important progress on our three financial priorities of growing market share, increasing margin rates and generating better cash conversion, with a focus on maximizing total shareholder return.” $22B1 COMBINED ORDERS UP 4% YEAR-OVER-YEAR $1B 2 COMBINED ADJUSTED OPERATING INCOME UP 69% YEAR-OVER-YEAR $22B1 COMBINED REVENUE DOWN 5% YEAR-OVER-YEAR 1. All year-over-year comparisons are on a combined business basis which is a non-GAAP measure. Please refer to the GAAP to non-GAAP measures table at the end of this document for a reconciliation. 2. Adjusted operating income is a non-GAAP measure. Please refer to the GAAP to non-GAAP measures table at the end of this document for a reconciliation. BHGE 2017 Annual Report 3 CHAIRMAN’S LETTER TO SHAREHOLDERS continued LM9000 is our latest, high-efficiency aeroderivative gas turbine for large-scale projects, designed to provide a 20% reduction in the total cost of ownership for LNG operators. Technology and New Product Launches industry-leading policies to ensure we always meet the highest Technology continues to differentiate us as a company. In 2017, Health, Safety and Environment (HSE), Quality and Integrity, and we remained focused on this core strength, investing more than Compliance standards. Since becoming BHGE, we harmonized $600 million combined in research and development. Results the legacy Baker Hughes “Perfect HSE Day” concept, which included launching more than 240 new products and receiving highlights a 24-hour period without a serious injury, motor more than 2,800 patents. vehicle accident or environmental impact, across the company. Notable product launches included the LM9000 aeroderivative Since the combined “Perfect HSE Day” concept was gas turbine, which provides a 20% reduction in the total cost of implemented in July 2017, we achieved 72 Perfect HSE ownership for LNG operators and can also be used for simple Days by year-end. While this is a good start, nothing short cycle, cogeneration and combined cycle power generation. of 365 Perfect HSE Days will satisfy us. We introduced the TerrAdapt™ bit, the industry’s first adaptive drill bit that adjusts to downhole conditions autonomously to We also adhere to the highest ethical standards through sound enable smoother, faster drilling and extended tool life. Finally, governance, effective policies and guidelines, and open channels we introduced IntelliStream™, our upstream production of reporting, fostering a culture of complete compliance. optimization software solution that provides analytical insights and continuous learning to improve production and reduce LOOKING AHEAD TO 2018 non-productive time. Toward the end of 2017, oil and gas markets recovered, underpinned by strong demand growth and OPEC’s We are also leveraging emerging digital technologies such as commitment to extend production cuts through 2018. The robotics and virtual reality to enhance reliability and accuracy markets are expected to be in equilibrium through 2018 for our own operations and our customers’.