---------------------------------------------------------------------------



                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                          -----------------------------

               X  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
              ---      OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 1997

                                       OR

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


                          -----------------------------

                          Commission file number 1-9397

                          -----------------------------

                            BAKER HUGHES INCORPORATED
             (Exact name of registrant as specified in its charter)


             Delaware                                        76-0207995
(State or other jurisdiction                               (IRS Employer
 of incorporation or organization)                      Identification No.)
 3900 Essex Lane, Houston, Texas                               77027
(Address of principal executive offices)                     (Zip code)

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

                          -----------------------------

    Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange Act 
of 1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.  Yes  X   No
                                                    ---     ---

    Indicate the number of shares outstanding of each of the issuer's 
classes of common stock, as of the latest practicable date.


              Class                           Outstanding at August 2, 1997
              -----                           -----------------------------

Common Stock, $1.00 par value per share               168,735,000 shares



---------------------------------------------------------------------------

                            BAKER HUGHES INCORPORATED




                                      INDEX


                                                                       Page
                                                                        No.
                                                                       ----
Part I - Financial Information:


    Consolidated Condensed Statements of Operations - Three Months
         and Nine Months Ended June 30, 1997 and 1996                    2

    Consolidated Condensed Statements of Financial Position
         - June 30, 1997 and September 30, 1996                          3

    Consolidated Condensed Statements of Cash Flows - Nine Months
         Ended June 30, 1997 and 1996                                    5

    Notes to Consolidated Condensed Financial Statements                 6

    Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                           9


Part II - Other Information                                             19





























                                     -1-
                       PART I.  FINANCIAL INFORMATION
                         BAKER HUGHES INCORPORATED
              CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                  (In thousands, except per share amounts)

                                 Three Months Ended     Nine Months Ended
                                       June 30,              June 30,
                                   1997       1996       1997       1996
REVENUES:                       --------------------  --------------------
   Sales                       $  596,462 $  522,025 $1,694,979 $1,487,256
   Services and rentals           300,809    243,827    844,102    718,115
                                ---------  ---------  ---------  ---------
       Total revenues             897,271    765,852  2,539,081  2,205,371
                                ---------  ---------  ---------  ---------
COSTS AND EXPENSES:
   Cost of sales                  346,775    298,352    990,371    858,616
   Cost of services and rentals   139,180    120,304    395,948    364,914
   Research and engineering        29,148     21,858     78,829     64,472
   Marketing and field service    209,153    178,922    596,704    504,299
   General and administrative      51,653     48,472    142,472    145,415
   Amortization of goodwill
     and other intangibles          6,767      7,371     21,520     22,218
   Unusual charge                             39,611                39,611
                                ---------  ---------  ---------  ---------
       Total costs and expenses   782,676    714,890  2,225,844  1,999,545
                                ---------  ---------  ---------  ---------
Operating income                  114,595     50,962    313,237    205,826
Gain on sale of Varco stock                   44,295                44,295
Interest expense                  (11,650)   (13,077)   (34,991)   (43,305)
Interest income                       532        880      1,405      2,665
                                ---------  ---------  ---------  ---------
Income before income taxes        103,477     83,060    279,651    209,481
Income taxes                      (21,454)   (36,187)   (89,287)   (88,651)
                                ---------  ---------  ---------  ---------
Income before cumulative
  effect of accounting change      82,023     46,873    190,364    120,830

Cumulative effect of accounting
  change - Impairment of long-lived
  assets to be disposed of (net of
  $5,965 income tax benefit)                            (12,079)
                                ---------  ---------  ---------  ---------
Net income                     $   82,023 $   46,873 $  178,285 $  120,830
                                =========  =========  =========  =========
Per share of common stock:
   Income before cumulative
     effect of accounting
     change                    $      .56 $      .33 $     1.31 $      .85
   Cumulative effect of
     accounting change                                     (.08)
                                ---------  ---------  ---------  ---------
   Net income                  $      .56 $      .33 $     1.23 $      .85
                                =========  =========  =========  =========
Cash dividends per share of
  common stock                 $     .115 $     .115 $     .345 $     .345
                                =========  =========  =========  =========

   See accompanying notes to consolidated condensed financial statements.

                                    -2-
                         BAKER HUGHES INCORPORATED
          CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
                              (In thousands)


                                  ASSETS

                                                   June 30,   September 30,
                                                     1997          1996
                                                  ----------    ----------
CURRENT ASSETS:
    Cash and cash equivalents                    $    12,520   $     7,714
                                                  ----------    ----------
    Receivables - net                                864,065       793,801
                                                  ----------    ----------
    Inventories:
         Finished goods                              738,211       665,715
         Work in process                              94,080        70,609
         Raw materials                                72,698        65,870
                                                  ----------    ----------
              Total inventories                      904,989       802,194
                                                  ----------    ----------
    Deferred income taxes                             82,403        78,680
                                                  ----------    ----------
    Other current assets                              48,368        34,004
                                                  ----------    ----------
              Total current assets                 1,912,345     1,716,393
                                                  ----------    ----------
PROPERTY - NET                                       687,015       598,950
                                                  ----------    ----------
OTHER ASSETS:
    Investments                                       81,768        68,992
    Property held for disposal                        43,084        57,666
    Other assets                                      75,223        98,104
    Excess costs arising from acquisitions - net     740,744       757,285
                                                  ----------    ----------
              Total other assets                     940,819       982,047
                                                  ----------    ----------
                   Total                         $ 3,540,179   $ 3,297,390
                                                  ==========    ==========

   See accompanying notes to consolidated condensed financial statements.

















                                    -3-
                         BAKER HUGHES INCORPORATED
          CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL POSITION
                              (In thousands)


                   LIABILITIES AND STOCKHOLDERS' EQUITY

                                                  June 30,    September 30,
                                                    1997          1996
                                                 ----------    ----------
CURRENT LIABILITIES:
    Accounts payable                            $   360,473   $   330,138
    Short-term borrowings and current portion
         of long-term debt                               62         1,859
    Accrued employee compensation and benefits      163,477       155,310
    Income taxes                                     62,052        32,925
    Taxes other than income                          23,415        26,600
    Accrued insurance                                26,599        28,052
    Accrued interest                                 24,307        10,324
    Other accrued liabilities                        44,545        50,112
                                                 ----------    ----------
              Total current liabilities             704,930       635,320
                                                 ----------    ----------
LONG-TERM DEBT                                      687,832       673,588
                                                 ----------    ----------
DEFERRED INCOME TAXES                               173,911       150,460
                                                 ----------    ----------
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS          96,292        97,635
                                                 ----------    ----------
OTHER LONG-TERM LIABILITIES                          47,055        51,178
                                                 ----------    ----------
STOCKHOLDERS' EQUITY:
    Common stock                                    145,807       144,553
    Capital in excess of par value                1,420,598     1,393,580
    Retained earnings                               378,711       250,567
    Cumulative foreign currency translation
         adjustment                                (143,845)     (118,766)
    Unrealized gain on securities available
         for sale                                    28,888        19,275
                                                 ----------    ----------
              Total stockholders' equity          1,830,159     1,689,209
                                                 ----------    ----------
                   Total                        $ 3,540,179   $ 3,297,390
                                                 ==========    ==========

   See accompanying notes to consolidated condensed financial statements.













                                    -4-
                         BAKER HUGHES INCORPORATED
              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                              (In thousands)
                                                      Nine Months Ended
                                                          June 30,
                                                     1997           1996
CASH FLOWS FROM OPERATING ACTIVITIES:              --------       --------
Net income                                        $ 178,285      $ 120,830
Adjustments to reconcile net income to net cash
    flows from operating activities:
    Depreciation and amortization of:
        Property                                     98,775         87,436
        Other assets and debt discount               28,873         30,184
    Deferred tax provision                           20,514         22,441
    Noncash portion of unusual charge                               25,269
    Gain on sale of Varco stock                                    (44,295)
    Gain on disposal of assets                      (18,544)          (856)
    Foreign currency translation (gain)/loss - net   (4,589)         7,801
    Cumulative effect of accounting change           12,079
    Change in receivables                           (68,453)       (85,242)
    Change in inventories                          (100,017)       (75,743)
    Change in accounts payable                       26,037        (20,354)
    Changes in other assets and liabilities             476         47,679
                                                   --------       --------
Net cash flows from operating activities            173,436        115,150
                                                   --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Property additions                             (191,630)      (131,596)
    Proceeds from sale of Varco stock                               95,476
    Proceeds from disposal of assets                 39,906         33,634
    Acquisition of businesses, net of cash acquired                (32,681)
                                                   --------       --------
Net cash flows from investing activities           (151,724)       (35,167)
                                                   --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Net borrowings from commercial paper and
        revolving credit facilities                   5,545         43,394
    Repayment of indebtedness                                     (108,401)
    Proceeds from exercise of stock options
        and stock purchase grants                    28,272         33,239
    Dividends                                       (50,141)       (49,265)
                                                   --------       --------
Net cash flows from financing activities            (16,324)       (81,033)
                                                   --------       --------
Effect of exchange rate changes on cash                (582)           895
                                                   --------       --------
Increase (decrease) in cash and cash equivalents      4,806           (155)
Cash and cash equivalents, beginning of period        7,714          6,817
                                                   --------       --------
Cash and cash equivalents, end of period          $  12,520      $   6,662
                                                   ========       ========
Income taxes paid                                 $  40,396      $  29,859
Interest paid                                     $  15,305      $  36,255

    See accompanying notes to consolidated condensed financial statements.




                                    -5-
                         BAKER HUGHES INCORPORATED

            NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


Note 1. General
---------------

    In the opinion of Baker Hughes Incorporated (the "Company" or "Baker 
Hughes" or "BHI"), the unaudited consolidated condensed financial 
statements include all adjustments consisting of normal recurring accruals 
necessary for a fair presentation of the Company's consolidated financial 
position as of June 30, 1997 and its consolidated results of operations and 
cash flows for each of the three and nine month periods ended June 30, 1997 
and 1996.  Although the Company believes that the disclosures in these 
financial statements are adequate to make the information presented not 
misleading, certain information and footnote disclosures normally included 
in annual financial statements prepared in accordance with generally 
accepted accounting principles have been condensed or omitted pursuant to 
the rules and regulations of the Securities and Exchange Commission (see 
the Company's Annual Report on Form 10-K for the year ended September 30, 
1996 for the most recent annual financial statements prepared in accordance 
with generally accepted accounting principles).  The results of operations 
for the three and nine months ended June 30, 1997 are not necessarily 
indicative of the results to be expected for the full year.


Note 2. Income Per Common Share
-------------------------------

    Net income per common share is based on the weighted average number of 
shares outstanding during the respective periods (three months ended    
June 30, 1997 and 1996, 145,707,000 and 143,704,000, respectively; nine 
months ended June 30, 1997 and 1996, 145,348,000 and 142,880,000, 
respectively) and excludes the negligible dilutive effect of shares 
issuable in connection with employee stock, stock option and similar plans.


Note 3. Impairment of Long-Lived Assets To Be Disposed Of
---------------------------------------------------------

    The Company adopted Statement of Financial Accounting Standards 
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and 
for Long-Lived Assets to be Disposed Of", effective October 1, 1996.  The 
statement sets forth guidance as to when to recognize an impairment of 
long-lived assets, including goodwill, and how to measure such an 
impairment.  The methodology set forth in SFAS No. 121 is not significantly 
different from the Company's prior policy and, therefore, the adoption of 
SFAS No. 121 does not have a significant impact on the consolidated 
financial statements as it relates to impairment of long-lived assets used 
in operations.  However, SFAS No. 121 also addresses the accounting for 
long-lived assets to be disposed of and requires these assets to be carried 
at the lower of cost or fair market value, rather than the lower of cost or 
net realizable value, the method that was previously used by the Company.  
The Company recognized a charge to income of $12.1 million ($.08 per 
share), net of a tax benefit of $6.0 million, as the cumulative effect of a 
change in accounting in the first quarter of 1997.


                                    -6-

                         BAKER HUGHES INCORPORATED

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS CONTINUED


Note 4. Acquisitions
----------------------------

Petrolite
---------

    On July 2, 1997, the Company completed the acquisition of Petrolite 
Corporation ("Petrolite") and Wm. S. Barnickel & Company ("Barnickel"), the 
holder of 47.1% of Petrolite's common stock, pursuant to the Agreement and 
Plan of Merger (the "Merger Agreement") dated as of February 25, 1997.  
Pursuant to the Merger Agreement, the three-way business combination was 
completed as follows:

        1) The 8,800 shares of Barnickel common stock were converted at an
           exchange rate of 1,075.5367 shares of BHI common stock for each
           share of Barnickel common stock.  This exchange rate was
           determined by dividing (i) the Barnickel share value (determined
           as described below) by (ii) $37.80625, which is the average
           closing price of BHI common stock as reported on the New York
           Stock Exchange for the ten trading days ended June 27, 1997.
           The Barnickel share value was determined by multiplying $61.00,
           the value per share of Petrolite common stock as set forth in
           the Merger Agreement, and the number of shares of Petrolite
           common stock owned by Barnickel (5,337,360 shares) and then
           adding the net after tax value of Barnickel's assets, other than
           Petrolite common stock.

        2) The 6.1 million shares of Petrolite common stock, not held by
           Barnickel, were converted at an exchange rate of 1.6135
           shares of BHI common stock for each share of Petrolite common
           stock.  This exchange rate was determined by dividing (i) $61.00
           by (ii) $37.80625 (determined as described above).

    In the aggregate, BHI will issue 19.277 million shares of its common 
stock to Petrolite and Barnickel shareholders having an aggregate value of 
approximately $729 million.  Additionally, BHI assumed Petrolite's 
outstanding vested and unvested employee stock options to purchase an 
aggregate of 591,000 shares of Petrolite common stock, which have been 
converted into the right to acquire approximately 954,000 shares of BHI 
common stock.  Such assumption of Petrolite options by BHI has a fair 
market value of approximately $21 million resulting in total consideration 
in the acquisition of approximately $750 million.

    Petrolite, previously a publicly held company, is a manufacturer and 
marketer of specialty chemicals used in the petroleum and process 
industries.  For its most recent fiscal year ended October 31, 1996, 
Petrolite had revenues of $360.7 million.  Barnickel was a privately held 
company which owned certain marketable securities in addition to its 
investment in Petrolite.

    The mergers will be accounted for using the purchase method of 
accounting with BHI acquiring Petrolite and Barnickel.


                                    -7-
                         BAKER HUGHES INCORPORATED

       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS CONTINUED


Environmental Technology Division of Deutz AG
---------------------------------------------

    On July 7, 1997, the Company completed its cash acquisition of the 
Environmental Technology Division, a decanter centrifuge and dryer 
business, of Deutz AG ("ETD") for approximately DM 92 million (subject to 
adjustment), equivalent to approximately $53 million.  BHI will add ETD to 
its Baker Hughes Process Equipment Company operations as part of its Bird 
Machine Company division, headquartered in South Walpole, Massachusetts.  
The acquisition will be accounted for using the purchase method of 
accounting.  For its most recent fiscal year ended December 31, 1996, ETD 
had revenues of approximately $103.0 million.

Drilex
------

    On July 14, 1997, the Company completed the acquisition of Drilex 
International Inc. ("Drilex") a provider of products and services used in 
the directional and horizontal drilling and workover of oil and gas wells.  
The exchange ratio for the acquisition was .4013 shares of BHI common stock 
for each share of Drilex common stock.  As a result, the 6.8 million shares 
of Drilex common stock were exchanged for 2.7 million shares of BHI common 
stock, for a total consideration of approximately $108 million.  The 
acquisition will be accounted for using the pooling of interests method of 
accounting.  For its most recent fiscal year ended December 31, 1996, 
Drilex had revenues of $76.1 million.

Oil Dynamics, Inc.
------------------

    On June 24, 1997, the Company entered into a definitive agreement to 
acquire Oil Dynamics, Inc. ("ODI") from Franklin Electric Co. Inc.  ODI is 
a manufacturer of electric submersible pumps used to lift crude oil in 
producing wells.  The purchase price is $31.5 million in cash subject to 
certain post-closing adjustments.  The agreement is subject to the 
satisfaction of customary conditions, including the expiration or 
termination of the waiting period prescribed by the Hart-Scott-Rodino Act 
of 1976, as amended.  Assuming that all conditions to closing are satisfied 
or waived, the acquisition is expected to close by September 30, 1997.















                                    -8-
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                         AND RESULTS OF OPERATIONS


    Management's Discussion and Analysis of Financial Condition and Results 
of Operations ("MD&A") should be read in conjunction with the Company's 
Consolidated Condensed Financial Statements and the related notes thereto.

Forward-Looking Statements
--------------------------

    MD&A includes forward-looking statements within the meaning of Section 
27A of the Securities Act of 1933, as amended and Section 21E of the 
Securities Exchange Act of 1934, as amended.  The words "anticipate," 
"believe," "expect," "plan," "intend," "estimate," "project," "forecasts," 
"will," "could," "may" and similar expressions are intended to identify 
forward-looking statements.  No assurance can be given that actual results 
may not differ materially from those in the forward-looking statements 
herein for reasons including the effect of competition, the level of 
petroleum industry exploration and production expenditures, world economic 
conditions, prices of and the demand for crude oil and natural gas, 
drilling activity, weather, the legislative environment in the United 
States and other countries, OPEC policy, conflict in the Middle East and 
other major petroleum producing regions and the condition of the capital 
and equity markets.

BUSINESS ENVIRONMENT
--------------------

    Baker Hughes provides products and services to the worldwide oilfield 
services and continuous process industries.  Oilfield services generate 
approximately 90% of the Company's consolidated revenues.

    Baker Hughes Oilfield Operations consist of six divisions that provide 
products, services and solutions used in the drilling, completion, 
production and maintenance of oil and gas wells.  The business environment 
for oilfield operations and its corresponding operating results are 
affected significantly by petroleum industry exploration and production 
expenditures.  These expenditures are influenced strongly by oil company 
expectations about energy prices and the supply and demand for crude oil 
and natural gas.  Petroleum supply and pricing, in turn, are influenced by 
numerous factors including, but not limited to, those described above in 
"Forward-Looking Statements".

    Baker Hughes Process Equipment Company ("BHPEC") has three divisions 
that serve a broad range of process industries around the world.  BHPEC's 
technologies separate solids from liquids and liquids from liquids through 
filtration, sedimentation, centrifugation and flotation processes.  The 
business environment for BHPEC is affected significantly by worldwide 
economic conditions and the economic health of the specific business 
sectors where it participates.  The results for BHPEC also includes the 
results of Tracor Europa, a computer peripherals operation.






                                    -9-
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS CONTINUED


ACQUISITIONS
------------

Petrolite
---------

    On July 2, 1997, the Company completed the acquisition of Petrolite 
Corporation ("Petrolite") and Wm. S. Barnickel & Company ("Barnickel"), the 
holder of 47.1% of Petrolite's common stock.

    In the aggregate, BHI will issue 19.277 million shares of its common 
stock to Petrolite and Barnickel shareholders having an aggregate value of 
approximately $729 million.  Additionally, BHI assumed Petrolite's 
outstanding vested and unvested employee stock options.  Such assumption of 
Petrolite options by BHI has a fair market value of approximately $21 
million resulting in total consideration of approximately $750 million.

    Petrolite is a manufacturer and marketer of specialty chemicals used in 
the petroleum and process industries.  For its most recent fiscal year 
ended October 31, 1996, Petrolite had revenues of $360.7 million.  
Barnickel was a privately held company which owned certain marketable 
securities in addition to its investment in Petrolite.  The mergers will be 
accounted for using the purchase method of accounting with BHI acquiring 
Petrolite and Barnickel.

Environmental Technology Division of Deutz AG
---------------------------------------------

    On July 7, 1997, the Company completed its cash acquisition of the 
Environmental Technology Division, a decanter centrifuge and dryer 
business, of Deutz AG ("ETD") for approximately DM 92 million (subject to 
adjustment), equivalent to approximately $53 million.  BHI will add ETD to 
its BHPEC operations.  The acquisition will be accounted for using the 
purchase method of accounting.  For its most recent fiscal year ended 
December 31, 1996, ETD had revenues of approximately $103.0 million.

Drilex
------

    On July 14, 1997, the Company completed the acquisition of Drilex 
International Inc. ("Drilex") a provider of products and services used in 
the directional and horizontal drilling and workover of oil and gas wells.  
The 6.8 million shares of Drilex common stock were exchanged for 2.7 
million shares of BHI common stock, for a total consideratin of $108 
million.  The acquisition will be accounted for using the pooling of 
interests method of accounting.  For its most recent fiscal year ended 
December 31, 1996, Drilex had revenues of $76.1 million.







                                    -10-
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS CONTINUED


    The table below presents certain proforma information as of June 30, 
1997 taking into account the acquisitions completed in July.

                                        Reported           Proforma
(In millions)                            Balance            Balance
                                        --------           --------
Stockholders' equity                    $1,830.2           $2,636.4
Shares of common stock outstanding         145.8              167.8

    In connection with these three acquisitions, the Company expects to 
record an unusual charge in its fourth quarter of 1997 of between $12.0 
million and $19.0 million related to the integration of the acquired 
businesses into the respective divisions of the Company.  Additionally, BHI 
expects to record a non-recurring charge to cost of sales of between $19.0 
million and $23.0 million in the fourth quarter of 1997 related to the fair 
market value adjustment of Petrolite's inventories as of the acquisition 
date, July 2, 1997.

Oil Dynamics, Inc.
------------------

    On June 24, 1997, the Company entered into a definitive agreement to 
acquire Oil Dynamics, Inc. ("ODI") from Franklin Electric Co. Inc..  ODI is 
a manufacturer of electric submersible pumps used to lift crude oil in 
producing regions worldwide.  The purchase price is $31.5 million in cash 
subject to certain post-closing adjustments.  The agreement is subject to 
the satisfaction of customary conditions, including the expiration or 
termination of the waiting period prescribed by the Hart-Scott-Rodino Act 
of 1976, as amended.  Assuming that all conditions to closing are satisfied 
or waived, the acquisition is expected to close by September 30, 1997.

OPERATING ENVIRONMENT FOR OILFIELD OPERATIONS
---------------------------------------------

    Two key trends are continuing to alter the oilfield service market 
place:  the impact of technology and the growth in outsourcing and 
partnering.  Advances in the design and application of the Company's 
products and services allow oil and gas operators to drill and complete 
wells at a lower overall cost.  At the same time, this technology helps 
accelerate hydrocarbon production and enhance reserve recovery.

    Similarly, oil companies have increased their levels of outsourcing to, 
and partnering with, service companies because this approach has proven to 
be effective in lowering finding and development costs.  Baker Hughes works 
closely with client companies in project planning and management, and in 
the engineering and integration of several products and services into 
solutions that meet client objectives.

    Crude oil and natural gas prices and the Baker Hughes rotary rig count 
are summarized in the tables below as quarterly averages followed by the 
Company's outlook.  While reading the Company's outlook set forth below, 
caution is advised that the factors described above in "Forward-Looking 
Statements" could negatively impact the Company's expectations for oil 
demand, oil and gas prices and drilling activity.
                                    -11-
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS CONTINUED


Oil and Gas Prices                 Three Months Ended    Nine Months Ended
                                          June 30,             June 30,
                                      1997      1996       1997      1996
    ----------------------------------------------------------------------
    WTI ($/Bbl)                      19.93     21.76      22.53     19.90
    U.S. Spot Natural Gas ($/mcf)     2.04      2.17       2.50      2.28

    The Company expects crude oil to trade between $18 and $22 per barrel 
in 1997 and early 1998 while remaining susceptible to short-term price 
fluctuations as the incremental worldwide demand is met by incremental 
production from both non-OPEC and OPEC countries. According to the 
International Energy Agency, the demand for crude oil is expected to grow 
1.4 million to 2.0 million barrels per day per year through the end of the 
century.  Three-quarters of the incremental demand is expected to be driven 
by relatively low energy prices, low but increasing energy consumption per 
capita, population growth and economic growth in non-OECD countries, 
particularly in Asia and Latin America.  U.S. natural gas prices are 
expected to trade between $1.80/mcf and $2.50/mcf through late 1997 and 
early 1998.

Rotary Rig Count                   Three Months Ended    Nine Months Ended
                                          June 30,             June 30,
                                      1997      1996       1997      1996
    ----------------------------------------------------------------------
    U.S. - Land                        811       646        762       637
    U.S. - Offshore                    122       113        115       107
    Canada                             253       157        322       241
                                     -----     -----      -----     -----
      North American                 1,186       916      1,199       985
                                     -----     -----      -----     -----
    Latin America                      277       286        279       280
    North Sea                           60        56         59        53
    Other Europe                        52        68         57        69
    Africa                              82        76         82        74
    Middle East                        158       138        146       136
    Asia Pacific                       183       172        181       171
                                     -----     -----      -----     -----
      International                    812       796        804       783
                                     -----     -----      -----     -----
    Worldwide                        1,998     1,712      2,003     1,768
                                     -----     -----      -----     -----
    U.S. Workover                    1,422     1,332      1,416     1,290
    ----------------------------------------------------------------------

The Company anticipates continued growth in the worldwide demand for 
hydrocarbons that will result in increased spending by oil and gas 
companies for the development of the hydrocarbon supply.  The increase is 
dependent on continued worldwide economic growth and, in particular, 
economic growth in the developing countries.  The increased spending is 
expected to result in increased drilling activity in most regions.




                                    -12-
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS CONTINUED


North America

    The Company anticipates strong growth in both the U.S. and Canadian 
markets.  Growth in the rig count will be limited by the availability of 
drilling rigs in certain sectors - in particular offshore U.S. and in 
Canada.

International

    The Company is optimistic that most international areas will continue 
to post an increasing rig count for the remainder of 1997 and into 1998.  
The Company is forecasting increases in Latin America, the North Sea and 
the Middle East.  Activity in Africa and Asia is expected to remain at 
current levels.

RESULTS OF OPERATIONS
---------------------

Industry Segment Results            Three Months Ended    Nine Months Ended
                                          June 30,              June 30,
Revenues (In millions)                1997       1996       1997      1996
----------------------                ----       ----       ----      ----
  Oilfield Operations             $  805.3   $  665.2   $2,258.5  $1,933.0
  BHPEC                               92.0      100.7      280.6     272.4
                                   -------    -------    -------   -------
    Consolidated Revenues         $  897.3   $  765.9   $2,539.1  $2,205.4
                                   =======    =======    =======   =======

Revenues

    Consolidated revenues were up 17.2% and 15.1% for the three months and 
nine months ended June 30, 1997, respectively, as compared to the same 
periods in 1996.  Sales revenue was up 14.3% for the quarter and 14.0% for 
the nine months as compared to the same periods in 1996.  Service and 
rentals revenue was up 23.4% for the quarter and 17.5% for the nine months 
as compared to the same periods in 1996.  Approximately 66% of the 
Company's 1997 revenues were derived from international activities for the 
quarter and nine months.  The revenue improvement was lead by Oilfield 
Operations where revenue growth outpaced rig count increases in most areas 
of the world.  In particular, revenues in the United States increased 24% 
for the quarter and 17% for the nine months as compared to the same periods 
in 1996.  Revenues in Venezuela were up 62% for the quarter and 44% for the 
nine months as compared to the same periods in 1996 and, Nigerian revenues 
were up 38% for the quarter and 51% for the nine months as compared to the 
same periods in 1996.  The continued deployment of new technology aimed at 
reducing the cost to drill and complete a well coupled with increased 
drilling activity around the globe contributed to revenue gains.

    BHPEC's revenue declined 8.6% in the third quarter of 1997 compared to 
the prior year quarter due to weakness in the pulp and paper industry 
combined with delays in customers' capital spending.  Year to date revenues 
were up 3% due to two acquisitions in the third quarter of 1996 offset by 
the current quarter decline.

                                    -13-
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS CONTINUED


Operating Income

    During the June 1996 quarter, the Company recorded an unusual charge of 
$39.6 million; $30.9 million was recorded by Oilfield Operations, $3.7 
million was recorded by BHPEC and $5.0 million was recorded at the 
Corporate level.  The operating income information presented below includes 
these unusual charges.

                                    Three Months Ended    Nine Months Ended
                                          June 30,              June 30,
Operating Income (In millions)        1997       1996       1997      1996
------------------------------        ----       ----       ----      ----
  Oilfield Operations             $  116.3   $   59.9   $  317.3  $  220.2
  BHPEC                                7.4        4.7       23.5      17.9
  Corporate and Other                 (9.1)     (13.6)     (27.6)    (32.3)
                                   -------    -------    -------   -------
    Consolidated Operating Income $  114.6   $   51.0   $  313.2  $  205.8
                                   =======    =======    =======   =======

    Consolidated operating income, excluding the 1996 unusual charges, 
increased 26.5% and 27.6% for the three and nine months ended June 30, 
1997, respectively.

    Oilfield Operations margins for the three months ended June 30, 1997 
and 1996, excluding the 1996 unusual charge, were 14.4% and 13.7%, 
respectively.  Oilfield Operations margins for the nine months ended June 
30, 1997 and 1996, excluding the 1996 unusual charge, were 14.0% and 13.0%, 
respectively.  The increases result primarily from increased revenues and 
continued emphasis on productivity and cost improvements.

    BHPEC margins, excluding the 1996 unusual charge, were 8.0% in the 
third quarter of 1997 compared to 8.3% in the prior year quarter and 8.4% 
for the first nine months of 1997 compared to 7.9% in the prior year.

Costs and Expenses

    The increase in cost of sales, cost of services and rentals, research 
and engineering and marketing and field service expenses is in line with 
the increase in the related revenue.  In total, as a percent of 
consolidated revenues, costs and expenses applicable to revenues decreased 
slightly from 80.9% in the third quarter of 1996 to 80.7% in the third 
quarter of 1997.

    General and administrative expense ("G&A") was $51.7 million and $48.5 
million for the quarter ended June 30, 1997 and 1996, respectively.  The 
increase is due, in part, to an increase in employment and employee 
training.  G&A was $142.5 million and $145.4 million for the nine months 
ended June 30, 1997 and 1996, respectively.  The dollar decline is due to 
higher foreign exchange losses in 1996 due to the Venezuelan Bolivar 
devaluation.




                                    -14-
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS CONTINUED


    The three year cumulative rate of inflation in Mexico exceeded 100% for 
the year ended December 31, 1996, therefore Mexico is considered to be a 
highly inflationary economy.  Effective December 31, 1996, the functional 
currency for the Company's investments in Mexico has changed from the 
Mexican peso to the U.S. dollar.

Unusual Charge

    During the quarter ended June 30, 1996, the Company recorded an unusual 
charge of $39.6 million.  The charge consisted primarily of the write-off 
of $8.5 million of Oilfield Operations patents that no longer protected 
commercially significant technology, a $5.0 million impairment of a Latin 
America joint venture due to changing market conditions in the region in 
which it operates and restructuring charges totaling $24.1 million.  The 
restructuring charges include the downsizing of Baker Hughes INTEQ's 
Singapore and Paris operations, a reorganization of Baker Hughes Process 
Equipment Company's Italian operations and the consolidation of certain 
Baker Oil Tools manufacturing operations.  Noncash provisions of the charge 
totaled $25.3 million and consist primarily of the write-down of assets to 
net realizable value.  The remaining $14.3 million of the charge represents 
future cash expenditures related to severance under existing benefit 
arrangements, the relocation of  people and equipment and abandoned leases.  
The Company spent $4.2 million of the cash during 1996.  For the nine 
months ended June 30, 1997, the Company spent $4.0 million and expects to 
spend substantially all of the remaining $6.1 million by the end of 
calendar 1997.  Such expenditures relate to specific plans and clearly 
defined actions and will be funded from operations and available credit 
facilities.

Interest Expense

    Interest expense for the three and nine months ended June 30, 1997 
decreased compared to the prior year periods due to the repayment of the 
4.125% Swiss Franc Bonds which matured in June 1996.

Income Taxes

    The Company reached an agreement with the Internal Revenue Service 
("IRS") to close the audit of its fiscal 1992 and 1993 U.S. consolidated 
income tax returns.  The principal issue in the examination related to 
inter-company pricing on the transfer of goods and services between U.S. 
and non-U.S. subsidiary companies.  As a result of the agreement, the 
Company recognized a tax benefit through the reversal of deferred income 
taxes previously provided of $11.4 million (approximately $0.08 per share) 
in the quarter ended June 30, 1997.

    The effective income tax rates for the three and nine months ended 
June 30, 1997, are down from the prior year periods due to the IRS 
settlement as explained above, a favorable change in the mix of foreign 
earnings, the fixed nature of the nondeductible goodwill amortization, an 
increase in export sales incentives utilized through the Company's foreign 
sales corporation and additional tax credits for increasing U.S. research 
activities.

                                    -15-
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS CONTINUED


    The Company expects the effective tax rate to be 38% in 1998.

CAPITAL RESOURCES AND LIQUIDITY

Financing Activities

    Net cash outflows from financing activities during the first nine 
months of 1997 were $16.3 million compared to $81.0 million for the first 
nine months in 1996.

    Total debt outstanding at June 30, 1997 was $687.9 million, compared to 
$675.4 million at September 30, 1996.  The debt to equity ratio was .376 at 
June 30, 1997, compared to .400 at September 30, 1996.

    At June 30, 1997 the Company had $634.7  million of credit facilities 
with commercial banks, of which $300.0 million is committed.  These 
facilities are subject to normal banking terms and conditions and do not 
materially restrict the Company's activities.

Investing Activities

    Net cash outflows from investing activities were $151.7 million in the 
first nine months of 1997 compared to cash outflows of $35.2 million in the 
first nine months of 1996.

    Proceeds from the disposal of assets and noncore businesses generated 
$39.9 million in the first nine months of 1997 compared to $33.6 million in 
the first nine months of 1996.  Property additions increased to $191.6 
million in 1997 from $131.6 million in 1996.  The increase in additions is 
in line with the Company's objective of replacing and adding capital to 
increase productivity and ensure that the necessary capacity is available 
to meet the increased market demand.

    The majority of the capital expenditures have been in Oilfield 
Operations where the largest single item is the expenditure for rental 
tools and equipment to supplement the rental fleet.  Funds provided from 
operations and outstanding lines of credit are expected to be more than 
adequate to meet future capital expenditure requirements.  The Company 
expects 1997 capital expenditures to be in excess of $250 million.

Operating Activities

    Net cash inflows from operating activities for the first nine months of 
1997 were $173.4 million compared to $115.2 million in the first nine 
months of 1996.

    The increase of $58.2 million in 1997 was due to an increase in net 
income adjusted for noncash items and a decrease in the growth of working 
capital from the prior year due primarily to the decrease in days sales 
outstanding from increased accounts receivable collections and an increase 
in trade debt offset by growth in inventory levels resulting from the 
increase in activity.


                                    -16-
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS CONTINUED


    During the June 1997 quarter, the Company began a multi-year initiative 
designed to completely overhaul and reengineer the Company's business 
processes.  The initiative, named "Project Renaissance", will identify best 
practices and standardize these processes across the whole of BHI.  As a 
technology enabler, the Company will move to an enterprise wide software 
solution and has chosen SAP R/3 as its platform for the future.  This 
project is expected to cost in excess of $200 million over a four year 
period.

ACCOUNTING STANDARDS

Impairment of Long-Lived Assets

    The Company adopted Statement of Financial Accounting Standards 
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and 
for Long-Lived Assets to be Disposed Of," effective October 1, 1996.  The 
statement sets forth guidance as to when to recognize an impairment of 
long-lived assets, including goodwill, and how to measure such an 
impairment.  The methodology set forth in SFAS No. 121 is not significantly 
different from the Company's prior policy and, therefore, the adoption of 
SFAS No. 121 does not have a significant impact on the consolidated 
financial statements as it relates to impairment of long-lived assets used 
in operations.  However, SFAS No. 121 also addresses the accounting for 
long-lived assets to be disposed of and requires these assets to be carried 
at the lower of cost or fair market value, rather than the lower of cost or 
net realizable value, the method that was previously used by the Company.  
The Company recognized a charge to income of $12.1 million ($.08 per 
share), net of a tax benefit of $6.0 million, as the cumulative effect of a 
change in accounting in the first quarter of 1997.

Stock Based Compensation

    In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-
Based Compensation".  SFAS No. 123 permits, but does not require, a fair 
value based method of accounting for employee stock option plans which 
results in compensation expense being recognized in the results of 
operations when stock options are granted.  The Company will continue the 
use of its current intrinsic value based method of accounting for such 
plans where no compensation expense is recognized.  However, as required by 
SFAS No. 123, the Company will provide pro forma disclosure of net income 
and earnings per share in the notes to the consolidated financial 
statements for the year ending September 30, 1997, as if the fair value 
based method of accounting had been applied.

Earnings Per Share

    In February 1997, the FASB issued SFAS No. 128, "Earnings per Share," 
which establishes new standards for computing and presenting earnings per 
share ("EPS").  SFAS No. 128 will require the presentation of "basic" and 
"diluted" EPS on the face of the income statement, including all prior 
periods presented, and is effective for financial statements issued for 
periods ending after December 15, 1997.  The calculation of basic EPS will 
result in a per share amount equal to that currently presented for income 

                                    -17-
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS CONTINUED


per share of common stock.  The calculation of diluted EPS is expected to 
be lower than the basic EPS calculation by approximately 2-3%.

Segment Information

    In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments 
of an Enterprise and Related Information", which establishes new standards 
for reporting information about operating segments and for related 
disclosures about products and services, geographic areas and major 
customers.  The statement is effective for financial statements for fiscal 
years beginning after December 15, 1997.  Restatement of prior years is 
required.  The Company is currently analyzing the impact of this statement 
and has not made a decision as to when to adopt.









































                                    -18-
                         PART II. OTHER INFORMATION


Item 1.  Legal Proceedings

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

         None.

Item 6.  Exhibits and Reports on Form 8-K

    (a)  Exhibits:

         None.

    (b)  Reports on Form 8-K:

         A report on Form 8-K was filed with the Commission on July 17, 
1997, as amended on Form 8-K/A dated August 11, 1997, reporting that the 
Company had consummated the transactions contemplated by the Agreement and 
Plan of Merger dated February 25, 1997, providing for the acquisition of 
Petrolite Corporation and Wm. S. Barnickel & Company by the Company.



































                                    -19-
                                SIGNATURES



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




                                       BAKER HUGHES INCORPORATED
                                             (Registrant)




Date:  August 14, 1997                 By  /s/LAWRENCE O'DONNELL, III
                                       ------------------------------------
                                           Vice President & General Counsel




Date:  August 14, 1996                 By  /s/JAMES E. BRAUN
                                       ------------------------------------
                                           Controller
































                                    -20-