BJ Services Announces Third Quarter Earnings of 70 Cents Per Share

BJ Services Company (NYSE: BJS; CBOE; PCX) announced net income of $114.2 million, or $0.70 per diluted share, for the quarter ended June 30, 2005. The Company's earnings per share improved 6% from the previous quarter and improved 56% from last year's June quarter, excluding the effect of the Halliburton patent infringement award recorded as income in last year's June quarter.

Revenues of $817.3 million generated during the quarter were up 3% compared to the previous quarter and were 24% higher than last year's June quarter.

Capital spending was $93.0 million for the quarter, resulting in year to date spending of $225.6 million.

The Company purchased 1,128,400 shares of its common stock for $56.5 million during the quarter. Year to date the Company has repurchased 1,991,000 shares for $98.3 million and has authorization remaining to purchase up to $153.1 million in stock.

On April 25, 2005 the Company redeemed all of its outstanding Convertible Senior Notes due 2022. The redemption of $422.4 million was funded with cash. Cash and cash equivalents, as of June 30, 2005 was $260.3 million, which exceeded total debt by $179.6 million.

Commenting on the results, Chairman and CEO Bill Stewart said, "BJ generated another quarter of record operating results. Continued activity increases in the U.S. market, together with improved pricing, helped offset the seasonally weak Canadian results. In addition, our international pumping service business outside North America experienced good top line growth and our operating income margins continued to show improvement.

"We expect activity to remain strong with continuing improvement in our major markets. Our earnings are forecasted to be in the range of $0.80 - 0.82 per diluted share for the quarter ending September 2005."

                   (in thousands except per share amounts)

                                                Three Months Ended
                                            June 30                 March 31
                                      2005            2004            2005
    Revenue                         $817,261        $658,662        $795,863
    Operating Expenses:
       Cost of sales and services    587,826         498,484         573,593
       Research and engineering       13,370          11,923          13,083
       Marketing                      23,497          20,788          22,170
       General and administrative     28,365          20,133          26,218
    Loss on long-lived assets            184           1,117             392
          Total operating
           expenses                  653,242         552,445         635,456
    Operating income                 164,019         106,217         160,407
    Interest expense                  (2,219)         (3,975)         (3,790)
    Interest income                    2,272           1,279           3,609
    Other income/(expense), net       (1,764)         83,604            (282)
    Income before income taxes       162,308         187,125         159,944
    Income taxes                      48,115          57,838          50,390
    Net income                      $114,193        $129,287(A)     $109,554

    Earnings Per Share:
       Basic                           $0.71           $0.80(A)        $0.68
       Diluted                         $0.70           $0.79(A)        $0.66

    Weighted Average Shares
       Basic                         161,552         160,882         162,300
       Diluted                       164,229         163,915         164,858

    Supplemental Data:
       Depreciation and
        amortization                 $34,301         $31,946         $32,865
       Capital expenditures           92,995          55,928          77,668
         Debt                         80,727         498,849         501,918

                                                    Nine Months Ended
                                                         June 30
                                                  2005              2004
    Revenue                                    $2,350,906        $1,906,521
    Operating Expenses:
       Cost of sales and services               1,711,505         1,440,320
       Research and engineering                    38,915            34,256
       Marketing                                   67,342            60,218
       General and administrative                  77,066            58,041
    Loss on long-lived assets                       1,514             2,045
          Total operating expenses              1,896,342         1,594,880
    Operating income                              454,564           311,641
    Interest expense                               (9,977)          (12,321)
    Interest income                                 8,844             2,997
    Other income/(expense), net                     7,555            83,008
    Income before income taxes                    460,986           385,325
    Income taxes                                  142,206           121,262
    Net income                                   $318,780          $264,063(A)

    Earnings Per Share:
       Basic                                        $1.97             $1.65(A)
       Diluted                                      $1.94             $1.62(A)

    Weighted Average Shares Outstanding:
       Basic                                      162,090           159,735
       Diluted                                    164,730           163,034

    Supplemental Data:
       Depreciation and amortization              $99,531           $93,908
       Capital expenditures                       225,602           139,329

     (A) Includes $56 million for the Halliburton patent infringement award.

    Segment Highlights

Following are the results of operations by segment for the three months ended June 30, 2005, June 30, 2004 and March 31, 2005 and for the nine months ended June 30, 2005 and June 30, 2004:

                                Three Months Ended         Nine Months Ended
                               June 30         March 31         June 30
                            2005     2004        2005       2005      2004

    U.S./Mexico Pressure
    Revenue                447,370  341,692     389,373  1,212,196   923,690
      Operating Income     143,706   94,582     116,808    368,238   234,995
     Pressure Pumping
    Revenue                233,288  192,469     284,678    764,111   662,444
      Operating Income      16,807    4,271      45,518     93,395    68,630
    Other Oilfield
    Revenue                136,543  124,283     121,611    374,175   319,631
      Operating Income      21,478   16,981      14,497     42,404    37,669
      Revenue                   60      218         201        424       756
      Operating Loss       (17,972)  (9,617)    (16,416)   (49,473)  (29,653)

U.S./Mexico Pressure Pumping Services revenue increased 15% sequentially and 31% year over year. The U.S. rig count averaged 1,336 during the quarter, up 4% from the previous quarter and up 15% from the prior year's quarter. All U.S. operating regions experienced revenue growth in excess of the growth in rig activity. Our Mexico revenue was down 22% sequentially and 56% year over year as result of activity reductions related to our integrated project in the Burgos area.

The Company's U.S. operations continued to realize price improvement during the quarter and operating income margins for U.S./Mexico improved to 32% from 30% reported in the previous quarter and 28% reported in last year's quarter.

International Pressure Pumping Services revenue decreased 18% sequentially and increased 21% from last year's quarter:

     Region                               Sequential          Year Over Year
     Europe/Africa                            -2%                   30%
     Middle East                              11%                   27%
     Asia Pacific                             14%                   10%
     Russia                                   18%                    9%
     Latin America                            19%                   33%
     Canada                                  -60%                   12%

The sequential revenue decline is primarily attributed to reduced activity in Canada, resulting from Spring break up. Excluding Canada, international revenue was up 11% sequentially. Revenue from the Europe/Africa region was negatively affected by lower coiled tubing activity in the North Sea compared to last quarter. Middle East revenue improved from activity increases in India and Bangladesh. Activity increases in Thailand, Malaysia and China accounted for the improvement in Asia Pacific. Russia benefited from increase in stimulation activity and increases in coiled tubing activity in Venezuela and Argentina contributed to the improvement in Latin America.

Year over year revenue, excluding Canada, was up 24%.

Operating income margins were 7% compared to 16% reported in the previous quarter and 2% reported in last year's quarter. Excluding Canada, operating income margins were 12%, increasing from 8% reported in the previous quarter and from 6% reported in last year's quarter.

    Other Oilfield Services revenue increased 12% sequentially and 10% year
over year:

     Division                              Sequential         Year Over Year
     Tubular Services                          11%                  28%
     Process & Pipeline Services               29%                   2%
     Chemical Services                          2%                  13%
     Completion Tools                          39%                  13%
     Completion Fluids                        -15%                  10%

The sequential revenue increase from Tubular Services is primarily the result of higher activity in the North Sea. Process and Pipeline Services improved due to an increase in activity from their seasonally slow March quarter. Our Completion Tools division benefited from an increase in international tool deliveries, as well as an increase in Gulf of Mexico deepwater activity. The Completion Fluids division experienced a decline in revenue resulting from unfavorable product sales mix and exceptional activity in the prior quarter.

The year over year growth from our Tubular Services division is attributable to activity improvement in the North Sea and Asia Pacific. Our Chemical Services and Completion Fluids businesses benefited from activity in the U.S. while Completion Tools revenue improved from higher activity in Brazil.

Other oilfield services operating income margins for the quarter were 16%, up from 12% reported in the previous quarter and 14% reported in last year's quarter.

Consolidated Geographic Highlights

The following table reflects the percentage change in the Company's consolidated revenue by geographic area for the June 2005 quarter compared to the March 2005 quarter (sequential) and the June 2004 quarter (year over year). The information presented is based on the Company's combined service and product line offering by geographic region.

     Geographic                       Sequential            Year Over Year

     U.S.                                14%                     32%
     Canada                             -56%                     10%
                                         -2%                     29%
     Latin America
      (includes Mexico)                  13%                      0%
     Europe/Africa                        7%                     29%
     Russia                              18%                      9%
     Middle East                         17%                     28%
     Asia Pacific                        18%                      8%
                                         13%                     15%

    Non-GAAP Financial Measures

A non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet, or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.

Any unexpected disclosures of non-GAAP financial measures discussed on the call will be posted on our website as soon as possible after the disclosure.