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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

  /X/    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999

                                       OR

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

        FOR THE TRANSITION PERIOD FROM ______________ TO ______________.

                         COMMISSION FILE NUMBER 1-10570
                            ------------------------

                              BJ SERVICES COMPANY
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                              <C>
                   DELAWARE                                        63-0084140
        (State or other jurisdiction of               (I.R.S. Employer Identification No.)
        incorporation or organization)

 5500 NORTHWEST CENTRAL DRIVE, HOUSTON, TEXAS                         77092
   (Address of principal executive offices)                        (Zip Code)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 462-4239
                            ------------------------

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
                                                   NAME OF EACH EXCHANGE
       TITLE OF EACH CLASS                          ON WHICH REGISTERED
---------------------------------                 -----------------------
<S>                                               <C>
   COMMON STOCK $.10 PAR VALUE                    NEW YORK STOCK EXCHANGE
 PREFERRED SHARE PURCHASE RIGHTS                  NEW YORK STOCK EXCHANGE
WARRANTS TO PURCHASE COMMON STOCK                 NEW YORK STOCK EXCHANGE
   7% SERIES B NOTES DUE 2006                     NEW YORK STOCK EXCHANGE
</TABLE>

        Securities Registered Pursuant to Section 12(g) of the Act: NONE

    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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K /X/.

    At December 3, 1999, the registrant had outstanding 75,820,745 shares of
Common Stock, $.10 par value per share. The aggregate market value of the Common
Stock on such date (based on the closing prices in the daily composite list for
transactions on the New York Stock Exchange) held by nonaffiliates of the
registrant was approximately $2,663,987,662.

                      DOCUMENTS INCORPORATED BY REFERENCE:

    Portions of Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held January 27, 2000 are incorporated by reference into
Part III.

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                                     PART I

ITEM 1.  BUSINESS

GENERAL

    BJ Services Company (the "Company"), whose operations trace back to the
Byron Jackson Company (which was founded in 1872), was organized in 1990 under
the corporate laws of the state of Delaware. The Company is a leading provider
of pressure pumping and other oilfield services serving the petroleum industry
worldwide. The Company's pressure pumping services consist of cementing and
stimulation services used in the completion of new oil and natural gas wells and
in remedial work on existing wells, both onshore and offshore. Other oilfield
services include product and equipment sales for pressure pumping services,
tubular services provided to the oil and natural gas exploration and production
industry, commissioning and inspection services provided to refineries,
pipelines and offshore platforms and specialty chemical services.

    In April 1995, the Company completed the acquisition of The Western Company
of North America ("Western" and the "Western Acquisition") for a total purchase
price of $511.4 million (including transaction costs of $7.2 million),
consisting of 12.0 million shares of Common Stock, cash of $247.9 million from
borrowings under the Company's then existing bank credit facility and Warrants
to purchase 4.8 million shares of Common Stock. The Western Acquisition has
provided the Company with a greater critical mass with which to compete in both
domestic and international markets and the realization of significant
consolidation benefits. The Western Acquisition increased the Company's then
existing total revenue base by approximately 75% and more than doubled the
Company's then existing domestic revenue base. In addition, in excess of $40
million in annual overhead and redundant operating costs were eliminated
annually by combining the two companies.

    In June 1996, the Company completed the acquisition of Nowsco Well Service
Ltd. ("Nowsco" and the "Nowsco Acquisition") for a total purchase price of
$582.6 million (including transaction costs of $6.2 million). Nowsco's
operations were conducted primarily in Canada, the United States, Europe,
Southeast Asia and Argentina and included pressure pumping and commissioning and
inspection services businesses. The Nowsco Acquisition added approximately 40%
to the Company's then existing revenue base.

    During the year ended September 30, 1999, the Company generated
approximately 83% of its revenue from pressure pumping services and 17% from
product and equipment sales and other oilfield services. Over the same period,
the Company generated approximately 43% of its revenue from U.S. operations and
57% from international operations.

PRESSURE PUMPING SERVICES

CEMENTING SERVICES

    The Company's cementing services, which accounted for approximately 32% of
the Company's total revenue during 1999, consist of blending high-grade cement
and water with various solid and liquid additives to create a slurry that is
pumped into a well between the casing and the wellbore. The additives and the
properties of the slurry are designed to achieve the proper cement set up time,
compressive strength and fluid loss control, and vary depending upon the well
depth, downhole temperatures and pressures, and formation characteristics.

    The Company provides regional laboratory testing services to evaluate slurry
properties, which vary with cement supplier and local water sources. Job design
recommendations are developed by the Company's field engineers to achieve
desired comprehensive strength and bonding characteristics.

    There are a number of specific applications for cementing services used in
oilfield operations. The principal application is the cementing between the
casing pipe and the wellbore during the drilling and completion phase of a well
("primary cementing"). Primary cementing is performed to (i) isolate fluids

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behind the casing between productive formations and other formations that would
damage the productivity of hydrocarbon producing zones or damage the quality of
freshwater aquifers, (ii) seal the casing from corrosive formation fluids, and
(iii) provide structural support for the casing string. Cementing services are
also utilized when recompleting wells from one producing zone to another and
when plugging and abandoning wells.

STIMULATION SERVICES

    The Company's stimulation services, which accounted for approximately 51% of
the Company's total revenue during 1999, consist of fracturing, acidizing, sand
control, nitrogen, coiled tubing and downhole tool services. These services are
designed to improve the flow of oil and natural gas from producing formations
and are summarized as follows:

    FRACTURING.  Fracturing services are performed to enhance the production of
oil and natural gas from formations having such permeability that the natural
flow is restricted. The fracturing process consists of pumping a fluid gel into
a cased well at sufficient pressure to "fracture" the formation. Sand, bauxite
or synthetic proppant which is suspended in the gel is pumped into the fracture
to prop it open. The size of a fracturing job is generally expressed in terms of
the pounds of proppant, which can exceed 200,000 lbs. The main pieces of
equipment used in the fracturing process are the blender, which blends the
proppant and chemicals into the fracturing fluid, the pumping unit, which is
capable of pumping significant volumes at high pressures, and a monitoring van
loaded with real time monitoring equipment and computers used to control the
fracturing process. The Company's fracturing pump units are capable of pumping
slurries at pressures of up to 14,000 pounds per square inch at rates of up to
four barrels per minute. In some cases, fracturing is performed by an acid
solution pumped under pressure without a proppant or with small amounts of
proppant.

    An important element of fracturing services is the design of the fracturing
treatment, which includes determining the proper fracturing fluid, proppants and
injection program to maximize results. The Company's field engineering staff
provides technical evaluation and job design recommendations as an integral
element of its fracturing service for the customer. Technological developments
in the industry over the past several years have focused on proppant
concentration control (i.e., proppant density), liquid gel concentrate
capabilities, computer design and monitoring of jobs and cleanup properties for
fracturing fluids. The Company also introduced equipment to respond to these
technological advances. During 1991, the Company introduced a patented,
borate-based fracturing fluid, Spectra Frac G-Registered Trademark-. During
1993, the Company introduced two complementary fracturing fluids, Medallion Frac
and Spartan Frac. These fracturing fluids are now used in most of the Company's
fracturing treatments. During 1994, the Company commercialized a proprietary
enzyme treatment used in conjunction with the three fracturing fluids. These
"enzyme breakers" can significantly enhance the production of oil and natural
gas in a wide range of wells. In 1998, the Company introduced a low polymer
fracturing fluid (Vistar-TM-) designed to provide greater fracture length with
minimal polymer residue. Vistar-TM- was commercialized in 1999. The Company, in
1999, developed and began field testing a product (FlexSand-TM-) designed to
address the long-standing industry problem of proppant flowback and proppant
fatigue after a fracturing treatment. FlexSand-TM-, a deformable particle
designed to improve the structural properties of the proppant, results in more
proppant being retained in the treated formation.

    ACIDIZING.  Acidizing services are performed to enhance the flow rate of oil
and natural gas from wells with reduced flow caused by formation damage due to
drilling or completion fluids, or the buildup over time of various materials
that block the formation. Acidizing entails pumping large volumes of specially
formulated acids into reservoirs to dissolve barriers and enlarge crevices in
the formation, thereby eliminating obstacles to the flow of oil and natural gas.
The Company maintains a fleet of mobile acid transport and pumping units to
provide acidizing services for the onshore market, and maintains acid storage
and pumping equipment on most of its offshore stimulation vessels.

                                       3
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    SAND CONTROL.  Sand control services involve the pumping of gravel to fill
the cavity created around the wellbore during drilling. The gravel provides a
filter for the exclusion of formation sand from the producing pathway. Oil and
natural gas are then free to move through the gravel into the wellbore to be
produced. These services are utilized primarily in unconsolidated reservoirs and
are primarily provided in the Gulf of Mexico, the North Sea, Venezuela, Trinidad
and Indonesia.

    NITROGEN.  There are a number of uses for nitrogen, an inert gas, in
pressure pumping operations. Used alone, it is effective in displacing fluids in
various oilfield applications, including underbalanced drilling. However,
nitrogen services are used principally in applications which support the
Company's coiled tubing and fracturing services.

    COILED TUBING.  Coiled tubing services involve the injection of coiled
tubing into wells to perform various applications and functions for use
principally in well-servicing operations. The application of coiled tubing to
drilling operations has increased in recent years due to improvements in coiled
tubing technology. Coiled tubing is a flexible steel pipe with a diameter of
less than five inches manufactured in continuous lengths of thousands of feet
and wound or coiled along a large reel on a truck or skid-mounted unit. Due to
the small diameter of coiled tubing, it can be inserted through existing
production tubing and used to perform workovers without using a larger, more
costly workover rig. The other principal advantages of employing coiled tubing
in a workover include (i) not having to "shut-in" the well during such
operations, thereby allowing production to continue and reducing the risk of
formation damage to the well, (ii) the ability to reel continuous coiled tubing
in and out of a well significantly faster than conventional pipe, which must be
jointed and unjointed, (iii) the ability to direct fluids into a wellbore with
more precision, allowing for localized stimulation treatments and providing a
source of energy to power a downhole motor or manipulate downhole tools and (iv)
enhanced access to remote or offshore fields due to the smaller size and
mobility of a coiled tubing unit. Recent technological improvements to coiled
tubing have increased its dependability and durability, expanding coiled
tubing's potential uses and markets.

    DOWNHOLE TOOLS.  The Company provides downhole tools and technical personnel
for gravel pack and frac pack completions, reservoir flow testing, well
stimulation and well servicing applications, operating from key service bases on
the U.S. Gulf Coast. The Company's downhole tool capabilities fall into two
categories--completion tools and service tools. Completion tools, which are used
after a well is drilled to bring the well into production, generally are sold
and remain in the well. Service tools, which are used to perform a wide range of
downhole operations to maintain or improve a well, generally are rented by
customers from nearby tool inventories of the Company. While marketed
separately, downhole tool sales and services are provided primarily during the
course of providing other pressure pumping services.

    The Company participates in the offshore stimulation market through the use
of skid-mounted pumping units and through operation of several stimula-tion
vessels including one in the North Sea, four in the Gulf of Mexico and five in
South America.

    The Company believes that as production continues to decline in key
producing fields of the U.S. and certain international regions, the demand for
fracturing and other stimulation services is likely to increase. The Company has
been increasing its pressure pumping capabilities in certain international
markets over the past several years.

OTHER SERVICES

    The Company's other services, including product and equipment sales for
cementing and stimulation services, as well as the following services, accounted
for approximately 17% of the Company's total revenue in 1999. Such products and
equipment sales to customers are generally made in areas where pressure pumping
services are primarily provided by local service companies, such as Russia and
China. Other than in its specialty chemical business, the Company generally does
not sell proprietary products to other companies involved in well servicing.

                                       4
<PAGE>
    TUBULAR SERVICES.  Tubular services principally consist of installing (or
"running") casing and production tubing into a wellbore. Casing is run to
protect the structural integrity of the wellbore and to seal various zones in
the well. These services are primarily provided during the drilling and
completion phases of a well. Production tubing is run inside the casing. Oil and
natural gas are produced through the tubing. The Company expects that workover
activity and the demand for tubular services in the North Sea should increase
during at least the next several years as operators there attempt to mitigate
the decline in production from the North Sea's mature fields. These services are
provided during the completion and workover phases.

    PROCESS AND PIPELINE SERVICES.  Process and pipeline services involve the
inspection and testing of the integrity of pipe connections in offshore drilling
and production platforms, onshore and offshore pipelines and industrial plants,
and are provided during the commissioning, decommissioning, installation or
construction stages of these infrastructures, as well as during routine
maintenance checks. Historically, hydrocarbon storage and production facilities
have been tested for leaks using either water under pressure or a "live" system
whereby oil, gas or water was introduced at operating pressure. At remote
locations such as offshore facilities, the volume of fresh water required to
test the facility made its use impractical and the use of flammable or toxic
fluids created a risk of explosion or other health hazards. Commission leak
testing, or CLT, uses a nitrogen and helium gas mixture in conjunction with
certain specialized equipment to detect very small leaks in joints, instruments
and valves that form the components of such facilities. Although the process is
safer and more practical than traditional leak detection methods, it may in some
instances be more expensive. Accordingly its use is restricted to those
instances where environmental and safety concerns are particularly acute.

    Pipeline testing and commissioning services include filling, pressure
testing, de-watering, purging and vacuum drying of pipelines. Other pipeline
services include grouting and insulating of pipeline bundles. Recent technical
innovations include the development of pipeline gels, both hydrocarbon and
aqueous, for pipeline cleaning and transport as well as plugs used for isolation
purposes. The Company has also developed high friction pig trains and freezing
techniques for the isolation of sections of pipelines.

    In conducting its pipeline inspection business, the Company uses
"intelligent pigs." Intelligent pigs are pipeline monitoring vehicles which,
together with interpretational software, offer to pipeline operators,
constructors and regulators measurement of pipeline geometry, determination of
pipeline location and orientation and examination of the pipeline's internal
condition. In addition, the customer can develop a structural analysis using the
measured pipeline geometry information. The operator's planning is improved
through the utilization of the data to determine the pipeline's status, estimate
current and future reliability and provide recommendations on remedial or
maintenance requirements which consider the severity of the problem identified.
Analysis work using intelligent pigs can be routinely performed with maintenance
monitoring programs implemented as a method for increasing safety for people,
property and the environment.

    SPECIALTY CHEMICAL SERVICES.  Specialty chemical services are provided to
customers in the upstream and downstream oil and natural gas businesses through
the Company's Unichem division. These services involve the design of treatments
and the sale of products to reduce the negative effects of corrosion, scale,
paraffin, bacteria, and other contaminants in the production and processing of
oil and natural gas. Unichem's products are used by customers engaged in crude
oil production, natural gas processing, raw and finished oil and natural gas
product transportation, refining, fuel additizing and petrochemical
manufacturing. Unichem's services address two principal priorities of such
customers: (1) the protection of the customer's capital investment in metal
goods, such as downhole casing and tubing, pipelines and process vessels, and
(2) the treatment of fluids to allow the fluid to meet the specifications of the
particular operation, such as production transferred to a pipeline, water
discharged overboard from a platform, or fuel sold at a marketing terminal.

                                       5
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OPERATIONS

    Pressure pumping services are provided to both land-based and offshore
customers on a 24-hour, on-call basis, through regional and district facilities
in over 100 locations worldwide, utilizing complex, truck-or skid-mounted
equipment designed and constructed for the particular pressure pumping service
furnished. After such equipment is moved to a well location, it is configured
with appropriate connections to perform the specific services required. The
mobility of this equipment permits the Company to provide pressure pumping
services to changing geographic areas. Management believes that the Company's
pressure pumping equipment is adequate to service both current and projected
levels of market activity in the near term.

    The Company maintains a fleet of mobile cement pumping equipment for onshore
operations. Offshore operations are performed with skid-mounted cement pumping
units primarily using the Company's patented Recirculating Averaging Mixer
("RAM"). Most cementing units are equipped with computerized systems which allow
for real-time monitoring and control of the cementing processes.

    Principal materials utilized in the pressure pumping business include
cement, fracturing proppants, acid and bulk chemical additives. Generally, these
items are available from several suppliers, and the Company utilizes more than
one supplier for each item. The Company also produces certain of its specialized
pressure pumping products through company-owned blending facilities in Germany,
Singapore and Canada. Sufficient material inventories are maintained to allow
the Company to provide on-call services to its customers to whom the materials
are resold in the course of providing pressure pumping services. Repair parts
and maintenance items for pressure pumping equipment are carried in inventory to
ensure continued operations without significant downtime caused by parts
shortages. The Company has experienced only intermittent tightness in supply or
extended lead times in obtaining necessary supplies of these materials or
replacing equipment parts and does not anticipate any chronic shortage of any of
these items in the foreseeable future.

    The Company believes that coiled tubing and other materials utilized in
performing coiled tubing services are and will continue to be widely available
from a number of manufacturers. Although there are only three principal
manufacturers of the reels around which the coiled tubing is wrapped, the
Company is not aware of any difficulty in obtaining coiled tubing reels in the
past, and the Company anticipates no such difficulty in the future.

ENGINEERING AND SUPPORT SERVICES

    The Company maintains two primary research and development centers--one in
Tomball, Texas (near Houston) and the other in Calgary, Alberta. The Company's
research and development organization is divided into five distinct
areas--Petroleum Engineering, Software Applications, Instrumentation
Engineering, Mechanical Engineering and Coiled Tubing Engineering.

    PETROLEUM ENGINEERING.  The Petroleum Engineering laboratory specializes in
designing fluids with enhanced performance characteristics in the fracturing,
acidizing and cementing operations (i.e., "frac fluids" and "cement slurries").
As fluids must perform under a wide range of downhole pressures, temperatures
and other conditions, this design process is a critical element in developing
products to meet customer needs.

    SOFTWARE APPLICATIONS.  The Company's Software Applications group develops
and supports a wide range of proprietary software utilized in the monitoring of
both cement and stimulation job parameters. This software, combined with the
Company's internally developed monitoring hardware, allows for real-time job
control as well as post-job analysis.

    INSTRUMENTATION ENGINEERING.  The pumping services industry utilizes an
array of monitoring and control instrumentation as an integral element of
providing cementing and stimulation services. The

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Company's monitoring and control instrumentation, developed by its
Instrumentation Engineering group, complements its products and equipment and
provides customers with desired real-time monitoring of critical applications.

    MECHANICAL ENGINEERING.  Though similarities exist between the major
competitors in the general design of their pumping equipment, the actual
engine/transmission configurations as well as the mixing and blending systems
differ significantly. Additionally, different approaches to the integrated
control systems result in equipment designs which are usually distinct in
performance characteristics for each competitor. The Company's Mechanical
Engineering group is responsible for the design and manufacturing of virtually
all of the Company's primary pumping and blending equipment. However, some
primary pumping equipment and certain peripheral support equipment which is
generic to the industry is purchased externally. The Company's Mechanical
Engineering group provides new product design as well as support to the
rebuilding and field maintenance functions.

    COILED TUBING ENGINEERING.  The Coiled Tubing Engineering group is located
in Calgary, Alberta. This group provides most of the support and research and
development activities for the Company's coiled tubing services. Development
work for drilling applications (DUCT-TM-) involves using coiled tubing
directional drilling technology for completions and directional underbalanced
drilling. The Company is also actively involved in the ongoing development of
downhole tools that may be run on coiled tubing, including rotary jetting
equipment and through-tubing inflatable packer systems. The Company's SandVac
system is a licensed jet pump system used with concentric coiled tubing to clean
unwanted sand from horizontal wells. The tool and coiled tubing configuration
allow sand to be drawn into the system and brought to surface through a cleaning
process analogous to a vacuum.

MANUFACTURING

    In addition to the engineering facility, the Company's research and
technology center near Houston also houses its main equipment and
instrumen-tation manufacturing facility. This operation currently occupies
approximately 105,000 square feet and includes complete fabrication, engine and
transmission rebuilding, pump manufacturing and assembly capabilities. The
Company is near completion of an expansion of these facilities by an additional
240,000 square feet to provide additional laboratories, warehousing, training,
manufacturing and engineering facilities and to consolidate certain logistical
operations. The Company also has smaller manufacturing capabilities in selected
international locations. The Company employs outside vendors for manufacturing
of its coiled tubing units and certain fabrication work, but is not dependent on
any one source.

COMPETITION

    PRESSURE PUMPING SERVICES.  There are two primary companies with which the
Company competes in pressure pumping services, Halliburton Energy Services, a
division of Halliburton Company, and Dowell, a division of Schlumberger Ltd.
These companies have operations in most areas of the U.S. in which the Company
participates and in most international regions. It is estimated that, exclusive
of "captive" service companies, these two competitors, along with the Company,
provide over 90% of pressure pumping services to the industry. Several smaller
companies compete with the Company in certain areas of the U.S. and in certain
international locations. The principal methods of competition which apply to the
Company's business are its prices, service record and reputation in the
industry. While Halliburton Energy Services and Dowell are larger in terms of
overall pressure pumping revenues, the Company has a number one or a number two
share position in several markets throughout the world.

    OTHER SERVICES.  The Company believes that it is one of the largest
suppliers of tubular services in the U.K. North Sea and has expanded such
services into other international markets in the past several years. The largest
provider of tubular services is Weatherford International, Inc. In the U.K.,
tubular services are typically provided under long-term contracts which limit
the opportunities to compete for business until

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the end of the contract term. In continental Europe, shorter-term contracts are
typically available for bid by the provider of tubular services. The Company
believes it is the largest provider of commissioning and leak detection services
and one of the largest providers of pipeline inspection services. In specialty
chemical services, there are several competitors significantly larger than the
Company's Unichem division.

MARKETS AND CUSTOMERS

    Demand for the Company's services and products depends primarily upon the
number of oil and natural gas wells being drilled, the depth and drilling
conditions of such wells, the number of well completions and the level of
workover activity worldwide.

    The Company's principal customers consist of major and independent oil and
natural gas producing companies. During 1999, the Company provided oilfield
services to several thousand customers, none of which accounted for more than 5%
of consolidated revenues. While the loss of certain of the Company's largest
customers could have a material adverse effect on Company revenues and operating
results in the near term, management believes the Company would be able to
obtain other customers for its services in the event of a loss of any of its
largest customers.

    UNITED STATES.  The United States represents the largest single oilfield
services market in the world. The Company provides its pressure pumping services
to its U.S. customers through a network of over 50 locations throughout the
U.S., a majority of which offer both cementing and stimulation services. Demand
for the Company's pressure pumping services in the U.S. is primarily driven by
oil and natural gas drilling activity, which tends to be extremely volatile
depending on the current and anticipated prices of oil and natural gas. Due to
aging oilfields and lower-cost sources of oil internationally, drilling activity
in the U.S. has declined more than 75% from its peak in 1981. Record low
drilling activity levels were experienced in 1986 and 1992 and again in 1999.
Excess capacity among pumping service companies has generally resulted in the
inability to generate adequate returns on new capital investments. To improve
returns in this environment, management believes it is important to operate with
a greater "critical mass" in the key U.S. markets. This conclusion led to the
decision to consolidate the Company's operations with those acquired from
Western, which had a larger presence in the U.S., and from Nowsco. While U.S.
drilling activity temporarily rebounded during 1997 and the beginning of 1998,
it subsequently retracted due to weak oil prices. Although drilling activity had
begun to recover somewhat toward the end of the fiscal year, the U.S. average
fiscal 1999 active rig count represented the lowest in history and was down 34%
from the average level of both fiscal 1997 and 1998.

    INTERNATIONAL.  The Company operates in over 40 countries in the major
international oil and natural gas producing areas of Latin America, Europe,
Africa, Southeast Asia, Canada and the Middle East. The Company generally
provides services to its international customers through wholly-owned foreign
subsidiaries. Additionally, the Company holds certain controlling and minority
interests in these joint venture companies, through which it conducts a portion
of its international operations. With the acquisition of Fracmaster Ltd., the
Company's Canadian operations now represent its largest international operation
with over 10% of consolidated revenue.

    Other than Canada, the international market is somewhat less volatile than
the U.S. market. Due to the significant investment and complexity in
international projects, management believes drilling decisions relating to such
projects tend to be evaluated and monitored with a longer-term perspective with
regard to oil and natural gas pricing. Additionally, the international market is
dominated by major oil companies and national oil companies which tend to have
different objectives and more operating stability than the typical independent
producer in the U.S. International activities have been increasingly important
to the Company's results of operations since 1992, when the Company implemented
a strategy to expand its international presence.

    The Company now operates in most of the major oil and natural gas producing
regions of the world. International operations are subject to special risks that
can materially affect the sales and profits of the

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Company, including currency exchange rate fluctuations, the impact of inflation,
governmental expropriation, exchange controls, political instability and other
risks. With the exception of Canada, however, the majority of the Company's
services are billed in U.S. dollars.

EMPLOYEES

    At September 30, 1999, the Company had a total of 7,610 employees.
Approximately 60% of the Company's employees were employed outside the United
States.

GOVERNMENTAL AND ENVIRONMENTAL REGULATION

    The Company's business is affected both directly and indirectly by
governmental regulations relating to the oil and natural gas industry in
general, as well as environmental and safety regulations which have specific
application to the Company's business.

    The Company, through the routine course of providing its services, handles
and stores bulk quantities of hazardous materials. In addition, leak detection
services involve the inspection and testing of facilities for leaks of hazardous
or volatile substances. If leaks or spills of hazardous materials handled,
transported or stored by the Company occur, the Company may be responsible under
applicable environmental laws for costs of remediating damage to the surface,
sub-surface or aquifers incurred in connection with such occurrence.
Accordingly, the Company has implemented and continues to implement various
procedures for the handling and disposal of hazardous materials. Such procedures
are designed to minimize the occurrence of spills or leaks of these materials.

    The Company has implemented and continues to implement various procedures to
further assure its compliance with environmental regulations. Such procedures
generally pertain to the operation of underground storage tanks, disposal of
empty chemical drums, improvement to acid and wastewater handling facilities and
cleaning of certain areas at the Company's facilities. The estimated future cost
for such procedures is $6.3 million which will be incurred over a period of
several years, and for which the Company has provided appropriate reserves. In
addition, the Company maintains insurance for certain environmental liabilities
which the Company believes is reasonable based on its knowledge of the industry.

    The Comprehensive Environmental Response, Compensation and Liability Act,
also known as "Superfund," imposes liability without regard to fault or the
legality of the original conduct, on certain classes of persons that contributed
to the release of a "hazardous substance" into the environment. Certain disposal
facilities used by the Company or its predecessors have been investigated under
state and federal Superfund statutes, and the Company is currently named as a
potentially responsible party for cleanup at five such sites. Although the
Company's level of involvement varies at each site, in general, the Company is
one of numerous parties named and will be obligated to pay an allocated share of
the cleanup costs. While it is not feasible to predict the outcome of these
matters with certainty, management is of the opinion that their ultimate
resolution should not have a material effect on the Company's operations or
financial position.

RESEARCH AND DEVELOPMENT; PATENTS

    Research and development activities for pressure pumping services are
directed primarily toward improvement of existing products and services and the
design of new products and processes to meet specific customer needs. The
Company currently holds numerous patents relating to products and equipment used
in its pumping services business. While such patents, in the aggregate, are
important to maintaining the Company's competitive position, no single patent is
considered to be of a critical or essential nature.

                                       9
<PAGE>
    To remain competitive, the Company devotes significant resources to
developing technological improvements to its pumping services products. Many of
these improvements have centered on improving products in fracturing systems
and, more recently, in deepwater cementing applications.

    In 1991, the Company introduced a borate-based fracturing fluid, Spectra
Frac G-Registered Trademark-, which is being widely used in the U.S. stimulation
market and the North Sea. In 1993, this product was complemented with two
additional fracturing fluids, Spartan Frac and Medallion Frac, which have
expanded the Company's services line offering to cover a broader range of
economic and downhole design variables. During 1994, the Company commercialized
a proprietary enzyme process used in conjunction with the three fracturing
fluids. These "enzyme breakers" significantly enhance the production of oil and
natural gas in a wide range of wells. During 1998, the Company introduced a low
polymer fracturing fluid (Vistar-TM-) designed to provide greater fracture
length with minimal polymer residue. This product has been successfully utilized
in a wide variety of applications since 1998. At the same time, the Company is
currently field testing a new type of deformable particle (FlexSand-TM-)
designed to prevent proppant flowback and extend the life of the fracturing
treatment.

    To address the trend towards more deepwater completions, the Company has
developed DeepSet, a cementing system designed to handle low sea floor
temperatures, and new automated foam cementing equipment designed to address
shallow water flows typically found in deepwater environments.

    The testing and development of new products is an integral part of the
Company's pipeline inspection and coiled tubing businesses. Developments also
include a MFL corrosion inspection tool; Rotojet-TM-, a tool for use in wellbore
scale removal; SandVac, a licensed jet pump system used to clean unwanted sand
from horizontal wells, and various downhole tools and other technologies used in
directional drilling applications using coiled tubing. Additionally, the Company
operates under various license arrangements, generally ranging from 10 to 20
years in duration, relating to certain products or techniques. None of these
license arrangements is material.

    The Company intends to continue to devote significant resources to its
research and development efforts. For information regarding the amounts of
research and development expenses for each of the three fiscal years ended
September 30, 1999, see Note 12 of the Notes to Consolidated Financial
Statements.

RISK FACTORS

    This document contains "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995. The forward-looking statements
discuss the Company's prospects, expected revenues, expenses and profits,
strategies for its operations, Year 2000 readiness and other subjects. All of
these areas are subject to risks and uncertainties. The forward-looking
statements are based on assumptions which may not prove to be accurate. Actual
results could differ significantly from the results expected, as a result of the
risk factors discussed below.

    The Company's operations are subject to hazards present in the oil and
natural gas industry, such as fire, explosion, blowouts and oil spills. These
incidents as well as accidents or problems in normal operations can cause
personal injury or death and damage to property or the environment. The
customer's operations can also be interrupted. From time to time, customers seek
to recover from the Company for damage to their equipment or property that
occurred while the Company was performing work. In the pressure pumping
business, these include customer claims for loss of oil and natural gas
production and damage to underground reservoir formations. In the specialty
chemical business, some products are sold for use in refineries. In the process
and pipeline business, work is done on petrochemical plants as well as
pipelines. Damage to the customer's property could be extensive if a major
problem occurred.

    The Company has insurance coverage that it believes is customary in the
industry against these hazards. However, such insurance has large deductibles
and certain exclusions. The Company's insurance

                                       10
<PAGE>
premiums can be increased or decreased based on the claims made by the Company
under its insurance policies. The insurance does not cover damages from breach
of contract by the Company or based on alleged fraud or deceptive trade
practices. Whenever possible, the Company obtains agreements from customers that
limit the Company's liability. Insurance and customer agreements do not provide
complete protection against the losses and risks described above.

    The Company's international operations are subject to special risks that can
significantly affect the Company's sales and profits. These risks include
changes in currency exchange rates, the impact of inflation, governmental
expropriation of assets, exchange controls, political instability and other
risks.

    Other risk factors that could cause actual results to be different from
those expected include: lower prices and decreased drilling for oil and natural
gas; higher prices for products used by the Company in its operations; lower
spending by customers in the oil and natural gas industry; changes in
environmental laws; and computer software and hardware used by government
entities, service providers, vendors, customers and the Company that are
impacted by Year 2000 date references. Most of these risks are beyond the
control of the Company.

EXECUTIVE OFFICERS OF THE REGISTRANT

    The current executive officers of the Company and their positions and ages
are as follows:

<TABLE>
<CAPTION>
                                                                                             OFFICE
NAME                         AGE                   POSITION WITH THE COMPANY               HELD SINCE
----                       --------   ---------------------------------------------------  ----------
<S>                        <C>        <C>                                                  <C>
J. W. Stewart............     55      Chairman of the Board, President and Chief
                                      Executive Officer                                       1990
Michael McShane..........     45      Senior Vice President--Finance and Chief Financial
                                      Officer                                                 1998
David Dunlap.............     38      Vice President and President--International
                                      Division                                                1995
Matthew D. Fitzgerald....     42      Vice President and Controller                           1998
Thomas H. Koops..........     53      Vice President--Technology and Logistics                1992
Margaret B. Shannon......     50      Vice President--General Counsel                         1994
T. M. Whichard...........     41      Vice President and Treasurer                            1998
Kenneth A. Williams......     49      Vice President and President--U.S. Division             1991
Stephen A. Wright........     52      Director of Human Resources                             1987
</TABLE>

    Mr. Stewart joined Hughes Tool Company in 1969 as Project Engineer. He
served as Vice President--Legal and Secretary of Hughes Tool Company and as Vice
President--Operations for a predecessor of the Company prior to being named
President of the Company in 1986. In 1990, he was also named Chairman and Chief
Executive Officer of the Company.

    Mr. McShane joined the Company from Reed Tool Company in 1987 as Vice
President--Finance and was named Senior Vice President--Finance in 1998. At Reed
Tool Company he held various financial management positions including Corporate
Controller and Regional Controller of Far East Operations.

    Mr. Dunlap joined the Company in 1984 as a District Engineer and was named
Vice President--International Operations in December 1995. He has previously
served as Vice President--Sales for the Coastal Division of North America and
U.S. Sales and Marketing Manager.

    Mr. Fitzgerald joined the Company as Controller in 1989 from Baker Hughes
Incorporated and was named Vice President in 1998. Prior thereto, he was a
Senior Manager with the certified public accounting firm of Ernst & Whinney.

    Mr. Koops joined the Company as Manager--Products and Technical Services in
1976, prior to being named Vice President--Manufacturing and Logistics of the
Company in 1988 and to his current position in 1992.

                                       11
<PAGE>
    Ms. Shannon joined the Company in 1994 as Vice President--General Counsel
from the law firm of Andrews & Kurth L.L.P. where she had been a partner since
1984.

    Mr. Whichard joined the Company as Tax and Treasury Manager in 1989 from
Weatherford International and was named Treasurer in 1992 and Vice President in
1998. Prior to being named Treasurer in 1992, he served in various positions
including Tax Director and Assistant Treasurer.

    Mr. Williams joined the Company in 1973 and has since held various positions
in the U.S. operations. Prior to being named Vice President--North American
Operations in 1991, he served as Region Manager--Western U.S. and Canada.

    Mr. Wright joined the Company as Manager of Compensation and Benefits in
1985 from Global Marine Inc., an offshore drilling company, and assumed his
current position with the Company in 1987.

ITEM 2.  PROPERTIES

    The Company's properties consist primarily of pressure pumping and blending
units and related support equipment such as bulk storage and transport units.
Although a portion of the Company's U.S. pressure pumping and blending fleet is
being utilized through a servicing agreement with an outside party, the majority
of its worldwide fleet is owned and unencumbered. The Company's tractor fleet,
most of which in the U.S. is leased, is used to transport the pumping and
blending units. The Company's domestic light duty truck fleet is also leased,
whereas a majority of vehicles used in its international operations are owned by
the Company.

    The Company both owns and leases regional and district facilities from which
pressure pumping services and other oilfield services are provided to land-based
and offshore customers. The Company's principal executive offices in Houston,
Texas are leased. The technology and research centers located near Houston,
Texas and Calgary, Alberta are owned by the Company, as are blending facilities
located in Germany, Singapore and Canada. The Company operates several
stimulation vessels, including one in the North Sea and five in South America
which are owned, and four in the Gulf of Mexico on which the hulls are leased.
The Company believes that its facilities are adequate for its current
operations. For additional information with respect to the Company's lease
commitments, see Note 11 of the Notes to Consolidated Financial Statements.

ITEM 3.  LEGAL PROCEEDINGS

    The Company, through performance of its service operations, is sometimes
named as a defendant in litigation, usually relating to claims for bodily
injuries or property damage (including claims for well or reservoir damage). The
Company maintains insurance coverage against such claims to the extent deemed
prudent by management. The Company believes that there are no existing claims
that are likely to have a materially adverse effect on the Company for which it
has not already provided.

    As a result of the Western Acquisition and the Nowsco Acquisition, the
Company assumed responsibility for certain claims and proceedings made against
Western and Nowsco in connection with their businesses. Some, but not all, of
such claims and proceedings will continue to be covered under insurance policies
of the Company's predecessors that were in place at the time of the
acquisitions. Although the outcome of the claims and proceedings against the
Company (including Western and Nowsco) cannot be predicted with certainty,
management believes that there are no existing claims or proceedings that are
likely to have a materially adverse effect on the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted for stockholders' vote during the fourth quarter
of the fiscal year ended September 30, 1999.

                                       12
<PAGE>
                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The Common Stock of the Company began trading on The New York Stock Exchange
in July 1990 under the symbol "BJS". Warrants to purchase common stock
("Warrants") were issued in April 1995 and trade under the symbol "BJSW". At
December 3, 1999 there were approximately 1,968 holders of record of the
Company's Common Stock and 1,165 holders of record of the Warrants. The Warrants
expire on April 13, 2000.

    The following table sets forth for the periods indicated the high and low
sales prices per share for the Company's Common Stock and Warrants reported on
the NYSE composite tape.

<TABLE>
<CAPTION>
                                                         COMMON STOCK          WARRANT PRICE
                                                          PRICE RANGE              RANGE
                                                      -------------------   -------------------
                                                        HIGH       LOW        HIGH       LOW
                                                      --------   --------   --------   --------
<S>                                                   <C>        <C>        <C>        <C>
Fiscal 1998
  1st Quarter.......................................   $45.38     $31.88     $64.50     $38.00
  2nd Quarter.......................................    43.81      26.94      56.50      28.75
  3rd Quarter.......................................    39.81      24.75      51.88      24.63
  4th Quarter.......................................    30.19      11.88      33.38       5.50

Fiscal 1999
  1st Quarter.......................................    22.19      13.25      18.13       6.88
  2nd Quarter.......................................    24.13      13.50      20.75       7.00
  3rd Quarter.......................................    31.75      19.75      35.00      13.50
  4th Quarter.......................................    39.00      26.81      49.06      25.88

Fiscal 2000
  1st Quarter (through December 3, 1999)............    41.50      27.56      53.38      26.50
</TABLE>

    Since its initial public offering in 1990, BJ Services has not paid any cash
dividends to its stockholders. The Company expects that, for the foreseeable
future, any earnings will be retained for the development of the Company's
business or used for the share repurchase program discussed below and,
accordingly, no cash dividends are expected to be declared on the Common Stock.
At September 30, 1999, there were 76,382,162 shares of Common Stock issued and
71,177,549 shares outstanding. On December 11, 1997, the Company's Board of
Directors approved a 2 for 1 stock split, which was distributed on February 20,
1998 in the form of a stock dividend, to holders of record as of January 30,
1998. On December 19, 1997, the Company's Board of Directors authorized a stock
repurchase program of up to $150 million (subsequently increased to $300 million
in May 1998). Repurchases are made at the discretion of the Company's management
and the program will remain in effect until terminated by the Company's Board of
Directors. During fiscal 1998, the Company purchased 5,996,400 shares at a cost
of $196.6 million. No shares were repurchased during 1999. In October 1999, the
Company reissued 4,027,972 shares of treasury stock through a private placement
with certain financial institutions. The proceeds from the private placement of
$144.0 million were used to pay down outstanding debt. The Company also entered
into privately negotiated option agreements pursuant to which it currently
intends to repurchase an equivalent number of shares in April 2000 for a total
of $149.0 million.

    The Company's Bank Credit Facility prohibits any dividend payments when the
Company's debt to capitalization ratio exceeds 35% immediately prior to and
after giving effect to the declaration of any dividend, except that the Company
may declare and make dividend payments solely in its capital stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity" and Note 6 of the Notes to
Consolidated Financial Statements.

                                       13
<PAGE>
    The Company has a Stockholder Rights Plan (the "Rights Plan") designed to
deter coercive takeover tactics and to prevent an acquirer from gaining control
of the Company without offering a fair price to all of the Company's
stockholders. Under this plan, each outstanding share of the Company's Common
Stock includes one preferred share purchase right ("Right") which becomes
exercisable under certain circumstances, including when beneficial ownership of
the Company's Common Stock by any person, or group, equals or exceeds 15% of the
Company's outstanding Common Stock. Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock at a price of $150, subject to adjustment under
certain circumstances. Upon the occurrence of certain events specified in the
Rights Plan, each holder of a Right (other than an Acquiring Person) will have
the right, upon exercise of such Right, to receive that number of shares of
common stock of the Company (or the surviving corporation) that, at the time of
such transaction, would have a market price of two times the purchase price of
the Right. No shares of Series A Junior Participating Preferred Stock have been
issued by the Company. The Rights were proportionately adjusted as of the stock
split record date to reflect the effect of the stock split.

                                       14
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA

    The following table sets forth certain selected historical financial data of
the Company. The selected operating and financial position data as of and for
each of the five years in the period ended September 30, 1999 have been derived
from the audited consolidated financial statements of the Company, some of which
appear elsewhere in this Annual Report. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto which are included elsewhere herein.

<TABLE>
<CAPTION>
                                               AS OF AND FOR THE YEAR ENDED SEPTEMBER 30,
                                      ------------------------------------------------------------
                                       1999(1)        1998         1997       1996(1)     1995(1)
                                      ----------   ----------   ----------   ----------   --------
                                                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                   <C>          <C>          <C>          <C>          <C>
OPERATING DATA:
  Revenue...........................  $1,131,334   $1,527,468   $1,466,573   $  965,261   $633,660
  Operating expenses, excluding
    unusual charges and goodwill
    amortization....................   1,092,879    1,289,295    1,269,731      875,022    592,905
  Goodwill amortization.............      13,525       13,824       14,435        7,910      3,266
  Unusual charges(2)................      39,695       26,586                     7,425     17,200
  Operating income (loss)...........     (14,765)     197,763      182,407       74,904     20,289
  Interest expense..................     (31,365)     (25,685)     (30,715)     (26,948)   (15,164)
  Other income (expense)--net.......         613         (772)       1,727        3,321      2,763
  Income tax expense (benefit)......     (15,221)      54,654       46,462       12,105     (1,102)
  Net income (loss).................     (29,688)     117,400      107,906       40,486      9,889
  Earnings (loss) per share:
    Basic...........................        (.42)        1.58         1.40          .66        .23
    Diluted.........................        (.42)        1.44         1.31          .65        .23
  Depreciation and amortization.....      99,800       91,497       90,376       66,050     42,064
  Capital expenditures(3)...........     110,566      167,961      102,198       54,158     30,966

FINANCIAL POSITION DATA (AT END OF PERIOD):
  Property--net.....................  $  659,717   $  602,028   $  540,356   $  558,156   $416,810
  Total assets......................   1,824,764    1,743,701    1,726,768    1,709,160    989,683
  Long-term debt, excluding current
    maturities......................     422,764      241,869      298,634      523,004    259,566
  Stockholders' equity..............     877,089      900,064      960,227      841,703    466,795
</TABLE>

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

(1) Includes the effect of the acquisitions of Fracmaster in 1999, Nowsco in
    1996 and Western in 1995, all of which were accounted for as purchases in
    accordance with generally accepted accounting principles. For further
    details of the Fracmaster acquisition, see Note 3 of the Notes to
    Consolidated Financial Statements.

(2) Unusual charges represent nonrecurring costs associated with the downturn in
    oilfield drilling activity in 1999 and 1998 and the acquisitions of Nowsco
    in 1996 and Western in 1995. For further details of the 1999 and 1998
    unusual charges, see Note 4 of the Notes to Consolidated Financial
    Statements.

(3) Excluding acquisitions of businesses.

                                       15
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

GENERAL

    The Company's operations are primarily driven by the number of oil and
natural gas wells being drilled, the depth and drilling conditions of such
wells, the number of well completions and the level of workover activity
worldwide. Drilling activity, in turn, is largely dependent on the price of oil
and natural gas. This situation often leads to volatility in the Company's
revenues and profitability, especially in the United States and Canada, where
the Company historically has generated in excess of 50% of its revenues. This
volatility has been particularly evident during the last year when, as a result
of low oil prices (falling below $11 per barrel), the industry experienced the
lowest worldwide oilfield drilling activity levels in recorded history. However,
a recent recovery in oil prices to above $20 per barrel has led to a recovery in
North American drilling activity during the last half of 1999.

    Due to "aging" oilfields and lower-cost sources of oil internationally,
drilling activity in the United States has declined more than 75% from its peak
in 1981. Record low drilling activity levels were experienced in 1986, 1992 and
again in early 1999. The U.S. drilling activity temporarily rebounded during
1997 (exceeding 1,000 active rigs for the first time since 1991); however, it
subsequently retracted due to weak oil prices. Although drilling activity had
begun to recover somewhat toward the end of the fiscal year, the U.S. average
fiscal 1999 active rig count represented the lowest in history and was down 34%
from the average level of both fiscal 1997 and 1998. Most of the decline
occurred in the number of rigs drilling for oil, which was down 62% over the
two-year period.

    Drilling activity outside North America has historically been less volatile
than domestic drilling activity. Due to low oil prices during most of the year,
international drilling activity also reached record low levels during 1999 as
each of the Company's international regions experienced double digit activity
declines. While Canadian drilling activity began to recover during the latter
part of the fiscal year, activity in most of the other international regions is
not expected to recover until at least the middle of fiscal 2000.

ACQUISITION

    On June 28, 1999, the Company completed the acquisition of selected assets
and subsidiaries of Fracmaster Ltd. ("Fracmaster"), an oilfield services company
based in Calgary, Alberta with operations in Canada, the United States, Russia
and China. The acquisition was completed for a total purchase price of
$78.4 million. Fracmaster generated worldwide revenue of $209.1 million during
its most recent fiscal year ended December 31, 1998. In the near-term, the
acquisition of Fracmaster is expected to primarily impact the Company's
operations in Canada.

                                       16
<PAGE>
RESULTS OF OPERATIONS

    The following table sets forth selected key operating statistics reflecting
industry rig count and the Company's financial results:

<TABLE>
<CAPTION>
                                                            YEAR ENDED SEPTEMBER 30,
                                                         ------------------------------
                                                           1999       1998       1997
                                                         --------   --------   --------
<S>                                                      <C>        <C>        <C>
Rig Count:(1)
  U.S..................................................     601        906        906
  International........................................     828      1,109      1,147
Revenue per rig (in thousands).........................  $791.7     $758.0     $714.4
Revenue per employee (in thousands)....................  $152.0     $173.0     $185.8
Percentage of gross profit to revenue(2)...............    14.2%      24.5%      21.8%
Percentage of research and engineering expense to
  revenue..............................................     2.1%       2.0%       1.7%
Percentage of marketing expense to revenue.............     4.6%       3.6%       3.5%
Percentage of general and administrative expense to
  revenue..............................................     4.2%       3.3%       3.1%
</TABLE>

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

(1) Industry estimate of drilling activity as measured by average active rigs.

(2) Gross profit represents revenue less cost of sales and services.

    REVENUE:  After six consecutive years of revenue growth, the Company's 1999
revenue declined for the first time since 1992. Overall, 1999 revenues declined
by 26% compared to 1998, with each of the Company's service lines--pressure
pumping, process and pipeline services, tubular services and specialty
chemicals--experiencing revenue decreases. The largest revenue declines occurred
in the Company's U.S. and Canadian pressure pumping operations. Revenues
increased by 4% during 1998, with each of the Company's major service lines
increasing during the year despite the 2% decline in worldwide drilling
activity. The Company's revenues reached their lowest level for fiscal 1999
during the third quarter and rebounded during the fourth quarter with a 24%
sequential increase. Management expects the Company to show year-over-year
revenue increases beginning in the first quarter of fiscal 2000.

U.S./MEXICO PRESSURE PUMPING REVENUE

    The Company's U.S./Mexico pressure pumping revenues declined by 38% in 1999
after increasing by 1% in 1998. The 1999 revenue decline was the result of lower
activity and pricing caused by the record low drilling levels. The fiscal 1999
average active rig count, down 34% from the previous year, was the lowest in
recorded history. Workover activity was also weak, down 32% during the year.
Excluding Mexico, each of the Company's U.S. regions experienced revenue
declines, with the oil producing regions of Texas and Oklahoma being the most
severely impacted. Pricing declined by approximately 16% in 1999 compared to the
previous year. Revenue in the Company's Mexico operations increased as a result
of a new contract and the expansion of operations in Northeast Mexico.

    The 1998 revenue increase was due to approximately 8-10% better pricing,
which was partially offset by a slight decline in market share. U.S. activity
was flat during the year. Fiscal 1998 also showed a continuation of the shift
away from oilfield drilling and more toward drilling for natural gas.

INTERNATIONAL PRESSURE PUMPING REVENUE

    International revenues decreased by 17% in 1999 compared to 1998, after
increasing by 5% the previous year. With the exception of its Russia operations,
each of the Company's international regions experienced revenue declines during
1999, with its Canadian and Latin American operations showing the largest
declines. The revenue declines were a result of lower drilling activity and
lower pricing in each of these regions. Subsequent to the 1999 spring breakup
period (April through June), however, Canadian

                                       17
<PAGE>
activity has increased substantially. Management expects Canadian drilling
activity to continue to be strong during the winter drilling season and increase
at least 20-30% during 2000. Excluding its Canadian operations, management does
not expect to experience a recovery in its international operations until at
least the second half of fiscal 2000.

    With the exception of its Canadian operations, each of the Company's
international pressure pumping regions generated revenue increases during 1998.
The largest increases occurred in the Far East and Middle East regions due to
growth in stimulation and coiled tubing services and expansions into Saudi
Arabia and Bangladesh. Partially offsetting these increases were revenue
declines in Canada and Venezuela due to lower oil drilling activity and a $15.0
million decline in international equipment sales.

OTHER REVENUE

    Revenue for each of the Company's other service lines, which consist of
specialty chemicals, tubular services and process and pipeline services, in
total was down 8% in 1999 after increasing in the previous two years. The
drilling activity declines were mostly offset by expansions into new markets and
these service lines' greater concentration of revenues from nondrilling oilfield
activities, which are not as greatly impacted by the decline in the active rig
count.

    OPERATING INCOME (LOSS):  The Company incurred an operating loss in 1999
after improved operating income during both 1998 and 1997. The 1999 operating
loss was primarily a result of the Company recording a pretax unusual charge of
$39.7 million ($.36 per diluted share after-tax), comprised of $12.8 million of
severance costs, $23.1 million of asset writedowns and $3.8 million of other
costs associated with the downturn in the oilfield services industry. In
addition, the operating loss includes $16.7 million recorded in the third fiscal
quarter for costs resulting from the acquisition of Fracmaster, and additional
severance costs and asset writedowns primarily associated with the Company's
international operations, all of which have been included in cost of sales.
Excluding these items, the operating income decline was primarily a result of
the decline in North and Latin American drilling and workover activity, and
lower pricing, all of which were discussed in the Revenue section above. In
response to the downturn in activity, the Company consolidated its worldwide
pressure pumping operations, resulting in over 2,000 personnel reductions and
the closure of several operating locations. Additionally, idle equipment has
been moved from U.S. operating locations to a central location. A portion of
this equipment will be sold or salvaged for spare parts. The remainder will be
redistributed to other operating locations as the need arises.

    In addition to the 1999 writedown, the Company also recorded a $26.6 million
($.22 per diluted share after-tax) unusual charge in 1998 to reflect employee
severance, asset writedowns and other costs associated with the downturn in the
industry which began during the later part of 1998.

    Research and engineering, marketing and general and administrative expenses
in total decreased by $13.8 million in 1999 due to the implementation of three
phases of cost reduction programs beginning in July 1998. The increase in other
operating expenses in 1998 was reflective of increased support costs from the
higher activity levels at the beginning of the fiscal year, as well as increased
spending on coiled tubing and downhole tool research, international commissions
and information systems. No further reductions in operating expenses are
expected to be realized in the near-term as the cost reduction programs have
been substantially implemented. The Company is in the process of hiring
additional equipment operators and other field personnel to address the current
increase in drilling activity occurring in North America.

    OTHER:  Interest expense increased by $5.7 million in 1999 due primarily to
additional borrowings to finance the Company's stock repurchase program
implemented in December 1997. The Company has repurchased the equivalent of 6.0
million shares totaling $196.6 million under this program. Interest expense
decreased by $5.0 million in 1998 due to strong operating cash flows during the
year (see Capital Resources and Liquidity) and from the effects of an equipment
financing transaction which occurred near the end of fiscal 1997. Interest
expense is expected to decline in 2000 from the reduction of debt resulting from
$144.0 million received from the private placement of common stock in October
1999. This stock was

                                       18
<PAGE>
issued under a financing arrangement structured around the expected exercise of
the Company's outstanding warrants in April 2000 (see also Capital Resources and
Liquidity).

    INCOME TAXES:  The Company's effective tax rate has remained below the U.S.
statutory rate during each of the past three years primarily as a result of
profitability in international jurisdictions where the statutory tax rate is
below the U.S. rate, the availability of certain nonrecurring tax benefits and
the availability of tax benefits from the Company's reorganization pursuant to
its initial public offering in 1990. The effective tax rate increased to 34% in
1999 from 32% and 30% in 1998 and 1997, respectively, as the majority of the
operating losses occurred in the U.S.

CAPITAL RESOURCES AND LIQUIDITY

    Net cash provided from operating activities decreased to $64.4 million in
1999 primarily as a result of the lower profitability. In addition, the tax
benefit from U.S. operating losses is noncash due to its cumulative net
operating loss position. This was partially offset by the additional liquidation
of working capital balances from the reduction in activity. The increase in cash
provided from operating activities in 1998 was the result of higher
profitability, the majority of the 1998 unusual charge being noncash and the
liquidation of working capital balances (primarily receivables) from the
slowdown in business during the last half of the year.

    Net cash used for investing activities in 1999 was $176.7 million, an
increase of $15.7 million compared to 1998. The increase is due to the
acquisition of Fracmaster in June 1999 for net cash consideration of
$73.4 million. Excluding this acquisition, investing activities declined by
$57.8 million, primarily due to a curtailment of capital spending caused by the
depressed business environment. The 1999 capital spending related primarily to
upgrades to the Company's U.S. fracturing fleet, which was already in process
before the beginning of the fiscal year, and expansion of the Tomball
Manufacturing and Research and Development facility. The 1998 capital spending
related primarily to additional fracturing and coiled tubing capacity for the
Company's international growth initiatives, upgrades to the Company's U.S.
pumping fleet and upgrades to the Company's information systems. The 1997
property additions include two additional pumping service vessels (both
operating in Latin America), expansion of cementing and stimulation capacity in
the Gulf of Mexico and Latin America, and upgrades to the Company's information
systems. Net cash used for 1997 investing activities was offset by a transaction
involving the transfer of certain pumping service equipment assets. Subsequent
to the transfer of equipment, the Company received $100.0 million, which was
used to repay outstanding bank debt. As a result of the reduced debt, the
Company realized a reduction in annual interest expense of approximately
$6 million. The equipment is being used to provide services to the Company for
its customers for which the Company is paying a service fee for a period of at
least eight, but not more than fourteen, years. The transaction generated a
deferred gain for book purposes of approximately $38 million, which is being
amortized over a twelve-year period. The taxable gain of $91.0 million was
completely offset with net operating loss carryforwards that are available to
the Company as a result of the Western acquisition in 1995. Net cash used for
1997 investing activities was also impacted by the receipt of $20.3 million from
the sale of an idle stimulation vessel (the Renaissance), and the acquisitions
of Top Tool Company, Inc. and the remaining 51% ownership of the Company's
previously unconsolidated joint venture in Argentina.

    Projected capital expenditures for fiscal 2000 (currently expected to be
approximately $75 million) are expected to decline from 1999 to more of a
maintenance level. The actual amount of 2000 capital expenditures will be
primarily dependent on maintenance capital levels and the availability of
expansion opportunities and are expected to be funded by cash flows from
operating activities and available credit facilities. Management believes cash
flows from operating activities and available lines of credit, if necessary,
will be sufficient to fund projected capital expenditures.

    Cash flows provided by financing activities in 1999 were $114.6 million
compared to a usage of cash for financing activities in 1998 of $125.6 million.
The 1999 proceeds from borrowings were used to fund the

                                       19
<PAGE>
Fracmaster acquisition and the Company's capital spending program. In 1998, the
Company used $196.6 million to purchase its common stock under a stock
repurchase program approved by the Company's Board of Directors in
December 1997. Due to reduced profitability and the resulting reduction in cash
flows from operating activities, the Company did not repurchase any of its
common stock during 1999. Subsequent to the fiscal year end (in October 1999),
the Company received $144.0 million through the private placement of 4,027,972
shares of common stock with certain financial institutions. The proceeds from
the private placement have been used to pay down outstanding debt. The Company
has also entered into privately negotiated option agreements pursuant to which
it currently intends to repurchase an equivalent number of shares in April 2000
for a total of $149.0 million. The Company expects to utilize proceeds of
approximately $144 million from the exercise of outstanding warrants, or, if the
warrants are not exercised, borrowing under new and existing credit facilities
to fund the repurchase. These outstanding warrants expire in April 2000 at an
exercise price of $15 per share.

    Management strives to maintain low cash balances while utilizing available
credit facilities to meet the Company's capital needs. Any excess cash generated
has historically been used to pay down outstanding borrowings or fund the
Company's stock repurchase program. The Company has a committed, unsecured bank
credit facility (the "Bank Credit Facility") which consists of a six-year term
loan of approximately $121.1 million (currently drawn partially in Canadian
dollars under a provision which is renewable annually at the option of the
banks), which is repayable in 22 quarterly installments that began in March
1997, and a five year U.S. $225.0 million revolving facility available through
June 2001. At September 30, 1999, borrowings outstanding under the Bank Credit
Facility totaled $341.1 million, consisting of $121.1 million under the term
loan and $220.0 million of borrowings under the revolver. Principal reductions
of term loans under the Bank Credit Facility are due in aggregate annual
installments of $44.1 million, $44.1 million and $32.9 million in the years
ending September 30, 2000, 2001 and 2002, respectively.

    In addition to the committed facility, the Company had $202.0 million in
various unsecured, discretionary lines of credit at September 30, 1999, which
expire at various dates in 2000. There are no requirements for commitment fees
or compensating balances in connection with these lines of credit. Interest on
borrowings is based on prevailing market rates. At September 30, 1999, there was
$106.0 million in outstanding borrowings under these lines of credit.

    The Company has issued and outstanding $125.0 million of unsecured 7% Notes
due 2006. The net proceeds from the issuance of the 7% notes ($123.3 million) in
August 1996 were used by the Company to repay indebtedness outstanding under the
term loan portion of the Company's then existing bank credit facility.

    The Company's interest-bearing debt increased to 39.5% of its total
capitalization at September 30, 1999, compared to 34.1% at September 30, 1998,
due to borrowings to fund the Fracmaster acquisition and the Company's capital
spending. The Bank Credit Facility includes various customary covenants and
other provisions including the maintenance of certain profitability and solvency
ratios and restrictions on dividend payments under certain circumstances, none
of which materially restrict the Company's activities. Management believes that
the Bank Credit Facility, combined with other discretionary credit facilities
and cash flows from operations, provides the Company with sufficient capital
resources and liquidity to manage its routine operations, meet debt service
obligations and fund projected capital expenditures. If the discretionary lines
of credit are not renewed, or if borrowings under these lines of credit
otherwise become unavailable, the Company expects to refinance this debt by
arranging additional committed bank facilities or through other long-term
borrowings alternatives.

YEAR 2000 COMPLIANCE

    Historically, many computer programs have been written using two digits
rather than four to define the applicable year. This programming practice could
result in certain computerized applications failing to

                                       20
<PAGE>
properly recognize a year that begins with "20" instead of "19." This, in turn,
could result in major system failures or miscalculations, and is generally
referred to as the "Year 2000 issue."

    In July 1997, the Company established a formal program to assess the global
impact of Year 2000 issues. The Company's own internal systems are the primary
area of focus under this program. Such systems include, but are not limited to,
data processing and financial reporting software applications, computerized job
monitoring hardware and software used at the wellsite and in the Company's labs,
embedded control systems and telecommunications and other support equipment. In
addition, the program addresses the Company's reliance on third party suppliers
to determine the extent to which the Company is vulnerable to those third
parties' failure to remediate their own Year 2000 issues. The Company's Year
2000 program is comprised of four primary phases: (i) inventory of all existing
equipment and systems; (ii) assessment of equipment and systems to identify
those which are not Year 2000 ready and to prioritize critical systems and
equipment; (iii) remediation or replacement of non-Year 2000 ready equipment and
systems; (iv) testing and certification of Year 2000 readiness. The Company
completed the worldwide inventory of its systems and equipment in September
1997. The Company has substantially completed the remediation or replacement of
noncompliant systems and equipment that are critical to its operations. The
remainder of calendar 1999 will be focused on the testing and certification of
new and modified programs. Certain non-critical systems may not be addressed
until after January 2000; however, the Company believes such systems will not
disrupt the Company's operations in a material way.

    The Company has contacted all of its critical external suppliers of goods
and services to assess their compliance efforts and the Company's exposure in
the event of a failure of third party compliance efforts. The Company has
received a favorable response from a majority of these critical suppliers. For
situations where the remaining suppliers are not compliant or do not respond,
the Company is in the process of developing contingency plans, including
utilizing alternative suppliers.

    The comprehensive plan designed to achieve an uninterrupted transition into
calendar year 2000 cost the Company approximately $2.3 million, of which $2.2
million has been incurred as of September 30, 1999. In addition, the program has
resulted in the acceleration of approximately $1.4 million in hardware and
software expenditures to replace non-compliant systems. The cost of the project
and the dates on which the Company believes it will complete the Year 2000
modifications are based on management's best estimates.

    On June 28, 1999, the Company acquired certain assets of Fracmaster Ltd. The
hardware and software which are being retained have been thoroughly inventoried
and an assessment of all Year 2000 related issues has been completed.
Remediation and testing activities are in progress. Prior to December 31, 1999,
the Company will either upgrade, replace or remove from service all Fracmaster
assets with any Year 2000 related risks.

    Failure to completely remedy Year 2000 issues, including those critical
internal systems, infrastructure and third party suppliers mentioned above,
could result in business disruption that could materially affect the Company's
operations. In an effort to minimize business interruptions, the Company is in
the process of developing contingency plans in the event that circumstances
prevent the Company or any of its third party suppliers from meeting any portion
of their Year 2000 program schedules. These contingency plans are expected to be
completed and in place by the end of December 1999.

FORWARD LOOKING STATEMENTS

    This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and Section 21E of the
Securities Exchange Act of 1934 concerning, among other things, the Company's
prospects, expected revenues, expenses and profits, developments and business
strategies for its operations and Year 2000 readiness, all of which are subject
to certain risks, uncertainties and assumptions. These forward-looking
statements are identified by their use of terms and

                                       21
<PAGE>
phrases such as "expect," "estimate," "project," "believe," and similar terms
and phrases. These statements are based on certain assumptions and analyses made
by the Company in light of its experience and its perception of historical
trends, current conditions, expected future developments and other factors it
believes are appropriate under the circumstances. Such statements are subject to
general economic and business conditions, conditions in the oil and natural gas
industry, the business opportunities that may be presented to and pursued by the
Company, changes in law or regulations and other factors, many of which are
beyond the control of the Company. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those expected, estimated or projected.

                                       22
<PAGE>
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    The table below provides information about the Company's market sensitive
financial instruments and constitutes a "forward-looking statement." The
Company's major market risk exposure is changing interest rates, primarily in
the United States and Canada. The Company's policy is to manage interest rates
through use of a combination of fixed and floating rate debt. A portion of the
Company's borrowings are denominated in foreign currencies which exposes the
Company to market risk associated with exchange rate movements. When necessary,
the Company enters into forward foreign exchange contracts to hedge the impact
of foreign currency fluctuations. There were no material foreign exchange
contracts outstanding at September 30, 1999. All items described are non-trading
and are stated in U.S. dollars.

<TABLE>
<CAPTION>
                                                         EXPECTED MATURITY DATES                                FAIR VALUE
                                          ------------------------------------------------------              SEPTEMBER 30,
                                            2000       2001       2002       2003     THEREAFTER    TOTAL          1999
(IN THOUSANDS)                            --------   --------   --------   --------   ----------   --------   --------------
<S>                                       <C>        <C>        <C>        <C>        <C>          <C>        <C>
SHORT TERM BORROWINGS
Bank borrowings; US $ denominated         $43,763                                                  $ 43,763      $ 43,763
Average variable interest rate--6.17% at
September 30, 1999

Bankers' acceptance notes; Canadian $     $61,111                                                  $ 61,111      $ 61,111
denominated
Average variable interest rate--5.24% at
September 30, 1999

Bank borrowings; Deutsche mark            $ 1,091                                                  $  1,091      $  1,091
denominated
Average variable interest rate--2.95% at
September 30, 1999

LONG TERM BORROWINGS
Current-term loan; US $ denominated       $13,011                                                  $ 13,011      $ 13,011
Variable interest rate--5.84% at
September 30, 1999

Current-term loan; Canadian $             $31,084                                                  $ 31,084      $ 31,084
denominated
Variable interest rate--5.15% at
September 30, 1999

Current Leases; US $ denominated          $   392                                                  $    392      $    392
Variable interest rate--5.06% at
September 30, 1999

Non-current bank borrowings; US $                    $220,000                                      $220,000      $220,000
denominated
Variable interest rate--5.84% at
September 30, 1999

Non-current-term loan; US $ denominated              $ 13,011     9,902                            $ 22,913      $ 22,913
Variable interest rate--5.84% at
September 30, 1999

Non-current-term loan; Canadian $                    $ 31,084    22,972                            $ 54,056      $ 54,056
denominated
Variable interest rate--5.15% at
September 30, 1999

Non-current leases; US $ denominated                 $    767       383       128                  $  1,278      $  1,278
Variable interest rate--5.06% at
September 30, 1999

7% Series B Notes--US $ denominated                                                    $124,517    $124,517      $121,936
Fixed interest rate--7%
</TABLE>

                                       23
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

Stockholders of BJ Services Company:

    We have audited the accompanying consolidated statements of financial
position of BJ Services Company and subsidiaries as of September 30, 1999 and
1998, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
September 30, 1999. Our audits also included the financial statement schedule
listed at Item 14. These financial statements and the financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and the financial
statement schedule based on our audits.

    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of BJ Services Company and
subsidiaries at September 30, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1999 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

DELOITTE & TOUCHE LLP
Houston, Texas
November 23, 1999

                                       24
<PAGE>
                              BJ SERVICES COMPANY

                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                    YEAR ENDED SEPTEMBER 30,
                                                           ------------------------------------------
                                                               1999           1998           1997
                                                           ------------   ------------   ------------
                                                            (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                        <C>            <C>            <C>
Revenue..................................................   $1,131,334     $1,527,468     $1,466,573
Operating Expenses:
  Cost of sales and services.............................      970,280      1,152,910      1,147,170
  Research and engineering...............................       23,269         30,308         24,820
  Marketing..............................................       51,883         55,333         51,555
  General and administrative.............................       47,447         50,744         46,186
  Goodwill amortization..................................       13,525         13,824         14,435
  Unusual charges........................................       39,695         26,586
                                                            ----------     ----------     ----------
    Total operating expenses.............................    1,146,099      1,329,705      1,284,166
                                                            ----------     ----------     ----------
Operating income (loss)..................................      (14,765)       197,763        182,407
Interest expense.........................................      (31,365)       (25,685)       (30,715)
Interest income..........................................          608            748            949
Other income (expense)--net..............................          613           (772)         1,727
                                                            ----------     ----------     ----------
Income (loss) before income taxes........................      (44,909)       172,054        154,368
Income tax expense (benefit).............................      (15,221)        54,654         46,462
                                                            ----------     ----------     ----------
Net income (loss)........................................   $  (29,688)    $  117,400     $  107,906
                                                            ==========     ==========     ==========

Earnings (Loss) Per Share:
  Basic..................................................   $     (.42)    $     1.58     $     1.40
  Diluted................................................   $     (.42)    $     1.44     $     1.31

Weighted-Average Shares Outstanding:
  Basic..................................................       70,789         74,482         76,868
  Diluted................................................       70,789         81,263         82,496
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       25
<PAGE>
                              BJ SERVICES COMPANY

                  CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                     ASSETS

<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>          <C>
Current Assets:
  Cash and cash equivalents.................................  $    3,924   $    1,625
  Receivables, less allowance for doubtful accounts: 1999,
    $20,572,000; 1998, $9,090,000...........................     297,975      300,140

  Inventories:
    Products................................................      64,995       78,459
    Work in process.........................................       2,116        2,574
    Parts...................................................      30,176       30,153
                                                              ----------   ----------
      Total inventories.....................................      97,287      111,186
    Deferred income taxes...................................      15,668       12,767
    Other current assets....................................      24,109       26,078
                                                              ----------   ----------
      Total current assets..................................     438,963      451,796

Property:
  Land......................................................      12,410       12,086
  Buildings and other.......................................     170,111      153,519
  Machinery and equipment...................................     957,314      883,600
                                                              ----------   ----------
      Total property........................................   1,139,835    1,049,205
  Less accumulated depreciation.............................     480,118      447,177
                                                              ----------   ----------
      Property--net.........................................     659,717      602,028

Goodwill, net of amortization...............................     489,736      503,259
Deferred income taxes.......................................     201,774      171,164
Investments and other assets................................      34,574       15,454
                                                              ----------   ----------
                                                              $1,824,764   $1,743,701
                                                              ==========   ==========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       26
<PAGE>
                              BJ SERVICES COMPANY

                  CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>          <C>
Current Liabilities:
  Accounts payable--trade...................................  $  128,422   $  140,726
  Short-term borrowings.....................................     105,965      184,874
  Current portion of long-term debt.........................      44,487       39,932
  Accrued employee compensation and benefits................      37,749       41,686
  Income taxes..............................................      15,641       17,777
  Taxes other than income...................................       9,798        8,336
  Accrued insurance.........................................      12,041       12,303
  Other accrued liabilities.................................      91,043       67,491
                                                              ----------   ----------
    Total current liabilities...............................     445,146      513,125
Long-term debt..............................................     422,764      241,869
Deferred income taxes.......................................       6,578        9,021
Accrued postretirement benefits.............................      29,932       28,353
Minority interest and other long-term liabilities...........      43,255       51,269
Commitments and contingencies
Stockholders' Equity:
  Preferred stock (authorized 5,000,000 shares)
  Common stock, $.10 par value (authorized 160,000,000
    shares; 76,382,162 shares issued and 71,177,549 shares
    outstanding in 1999; 76,375,440 shares issued and
    70,434,295 shares outstanding in 1998;..................       7,638        7,638
  Capital in excess of par..................................     765,866      765,547
  Retained earnings.........................................     269,797      313,629
  Accumulated other comprehensive income....................       4,924        7,419
  Unearned compensation.....................................        (614)        (365)
  Treasury stock at cost (1999--5,204,613 shares;
    1998--5,941,145 shares).................................    (170,522)    (193,804)
                                                              ----------   ----------
    Total stockholders' equity..............................     877,089      900,064
                                                              ----------   ----------
                                                              $1,824,764   $1,743,701
                                                              ==========   ==========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       27
<PAGE>
                              BJ SERVICES COMPANY

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                         ACCUMULATED
                                                       CAPITAL                                              OTHER
                                            COMMON    IN EXCESS   TREASURY      UNEARNED     RETAINED   COMPREHENSIVE
                                            STOCK      OF PAR       STOCK     COMPENSATION   EARNINGS      INCOME        TOTAL
                                           --------   ---------   ---------   ------------   --------   -------------   --------
                                                                              (IN THOUSANDS)
<S>                                        <C>        <C>         <C>         <C>            <C>        <C>             <C>
BALANCE, SEPTEMBER 30, 1996.............    $3,809    $748,712                  $(3,186)     $ 93,991      $(1,623)     $841,703
Comprehensive income:
  Net income............................                                                      107,906
  Other comprehensive income, net of
    tax.................................
    Cumulative translation
      adjustments.......................                                                                     2,163
    Minimum pension liability
      adjustment........................                                                                    (2,051)
Comprehensive income....................                                                                                 108,018
Issuance of stock for:
  Stock options.........................        36       7,270                                                             7,306
  Stock purchase plan...................         8       1,676                                                             1,684
  Warrants surrendered..................                    16                                                                16
  Stock performance awards..............                   964                     (964)
Recognition of unearned compensation....                                          1,500                                    1,500
Revaluation of stock performance........                 4,425                   (4,425)
                                            ------    --------    ---------     -------      --------      -------      --------
BALANCE, SEPTEMBER 30, 1997.............     3,853     763,063                   (7,075)      201,897       (1,511)      960,227
Comprehensive income:
  Net income............................                                                      117,400
  Other comprehensive income, net of
    tax.................................
    Cumulative translation
      adjustments.......................                                                                    12,855
    Minimum pension liability
      adjustment........................                                                                    (3,925)
Comprehensive income....................                                                                                 126,330
Issuance of stock for:
  Stock options.........................         7       1,873                                                             1,880
  Stock purchase plan...................         9       2,861                                                             2,870
  Warrants surrendered..................                    39                                                                39
  Stock performance awards..............                 1,068                   (1,068)
  Stock split...........................     3,769                                             (3,769)
Treasury stock purchased................                          $(196,608)                                            (196,608)
Treasury stock reissued.................                              2,804                    (1,899)                       905
Recognition of unearned compensation....                                          1,850                                    1,850
Revaluation of stock performance........                (7,790)                   5,928                                   (1,862)
Tax benefit from exercise of options....                 4,433                                                             4,433
                                            ------    --------    ---------     -------      --------      -------      --------
BALANCE, SEPTEMBER 30, 1998.............     7,638     765,547     (193,804)       (365)      313,629        7,419       900,064
Comprehensive income:
  Net loss..............................                                                      (29,688)
  Other comprehensive income, net of
    tax.................................
    Cumulative translation
      adjustments.......................                                                                    (5,585)
    Minimum pension liability
      adjustment........................                                                                     3,090
Comprehensive loss......................                                                                                 (32,183)
Issuance of stock for:
  Warrants surrendered..................                    70                                                                70
Reissuance of treasury stock for:
  Stock options.........................                             14,796                    (9,750)                     5,046
  Stock purchase plan...................                              4,144                    (2,172)                     1,972
  Stock performance awards..............                (2,235)       4,342         115        (2,222)
Recognition of unearned compensation....                                          1,140                                    1,140
Revaluation of stock performance
  awards................................                 1,504                   (1,504)
Tax benefit from exercise of options....                   980                                                               980
                                            ------    --------    ---------     -------      --------      -------      --------
BALANCE, SEPTEMBER 30, 1999.............    $7,638    $765,866    $(170,522)    $  (614)     $269,797      $ 4,924      $877,089
                                            ======    ========    =========     =======      ========      =======      ========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       28
<PAGE>
                              BJ SERVICES COMPANY

                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                  YEAR ENDED SEPTEMBER 30,
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
                                                                       (IN THOUSANDS)
<S>                                                           <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...........................................  $ (29,688)  $ 117,400   $ 107,906
Adjustments to reconcile net income to cash provided from
  operating activities:
  Depreciation and amortization.............................     99,800      91,497      90,376
  Net (gain) loss on disposal of assets.....................        147          89        (169)
  Recognition of unearned compensation......................      1,140       1,850       1,500
  Deferred income tax expense (benefit).....................    (32,866)     31,426      28,764
  Unusual charge (noncash)..................................     23,051      15,278
  Minority interest.........................................      2,585       3,206         805
Changes in:
  Receivables...............................................     19,191      28,689     (59,307)
  Accounts payable--trade...................................    (22,444)    (22,248)     18,188
  Inventories...............................................     19,921      (5,750)    (13,355)
  Other current assets and liabilities......................     (5,837)     13,580      (6,638)
  Other, net................................................    (10,571)      9,325     (24,525)
                                                              ---------   ---------   ---------
Net cash flows provided from operating activities...........     64,429     284,342     143,545

CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions..........................................   (110,566)   (167,961)   (102,198)
Proceeds from disposal of assets............................      7,270       9,372     127,490
Acquisitions of businesses, net of cash acquired............    (73,442)     (2,459)    (20,810)
                                                              ---------   ---------   ---------
Net cash provided from (used for) investing activities......   (176,738)   (161,048)      4,482

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and stock purchase
  grants....................................................      8,067       5,696       9,006
Purchase of treasury stock..................................               (196,608)
Proceeds from (repayment of) bank borrowings--net...........    106,541      71,343    (150,030)
Principal payment on other long-term notes..................                 (6,000)     (6,000)
                                                              ---------   ---------   ---------
Net cash flows provided from (used for) financing
  activities................................................    114,608    (125,569)   (147,024)
Increase (decrease) in cash and cash equivalents............      2,299      (2,275)      1,003
Cash and cash equivalents at beginning of year..............      1,625       3,900       2,897
                                                              ---------   ---------   ---------
Cash and cash equivalents at end of year....................  $   3,924   $   1,625   $   3,900
                                                              =========   =========   =========
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       29
<PAGE>
                              BJ SERVICES COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION

    BJ Services Company is a leading provider of pressure pumping and other
oilfield services to the petroleum industry. The consolidated financial
statements include the accounts of BJ Services Company and its majority-owned
subsidiaries (the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.

    Certain amounts for 1998 and 1997 have been reclassified in the accompanying
consolidated financial statements to conform to the current year presentation.
Fiscal 1997 number of shares and price per share amounts have been restated to
reflect the 2 for 1 stock split in fiscal year 1998. See Notes 13 and 14.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    USE OF ESTIMATES:  The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting periods. Actual results could differ from these estimates.

    CASH AND CASH EQUIVALENTS:  The Company considers all highly liquid debt
instruments purchased with original maturities of three months or less to be
cash equivalents.

    INVENTORIES:  Inventories, which consist principally of (i) products which
are consumed in the Company's services provided to customers, (ii) spare parts
for equipment used in providing these services and (iii) manufactured components
and attachments for equipment used in providing services, are stated primarily
at the lower of weighted-average cost or market.

    PROPERTY:  Property is stated at cost less amounts provided for permanent
impairments and includes capitalized interest of $2,317,000, $1,665,000 and
$684,000 for the years ended September 30, 1999, 1998 and 1997, respectively, on
funds borrowed to finance the construction of capital additions. Depreciation is
generally provided using the straight-line method over the estimated useful
lives of individual items. Leasehold improvements are amortized on a
straight-line basis over the shorter of the estimated useful life or the lease
term.

    INTANGIBLE ASSETS:  Goodwill represents the excess of cost over the fair
value of the net assets of companies acquired in purchase transactions. Goodwill
is being amortized on a straight-line method over periods ranging from 5 to 40
years. Patents are being amortized on a straight line basis over their estimated
useful lives, not to exceed 17 years. Accumulated amortization on intangible
assets at September 30, 1999 and 1998 was $51,934,000 and $43,525,000
respectively. The Company utilizes undiscounted estimated cash flows to evaluate
any possible impairment of intangible assets. If such cash flows exceed the net
carrying value of the intangible assets, the Company records an impairment
charge equal to the difference in discounted estimated cash flows and the net
carrying value. The discount rate utilized is based on market factors at the
time the charge is determined.

    INVESTMENTS:  Investments in companies in which the Company's ownership
interest ranges from 20 to 50 percent and the Company exercises significant
influence over operating and financial policies are accounted for using the
equity method. Other investments are accounted for using the cost method.

    REVENUE RECOGNITION:  The Company recognizes revenue as services are
rendered or products are delivered. Certain revenues from the Company's process
and pipeline services are reported on the

                                       30
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

percentage of completion method of accounting using measurements of progress
towards completion appropriate for the work performed.

    FOREIGN CURRENCY TRANSLATION:  Gains and losses resulting from financial
statement translation of foreign operations where the U.S. dollar is the
functional currency are included in the consolidated statement of operations as
cost of sales. Gains and losses resulting from financial statement translation
of foreign operations where a foreign currency is the functional currency are
included as a separate component of stockholders' equity. Except in Canada, the
Company's foreign operations use the U.S. dollar as the functional currency.

    FOREIGN EXCHANGE CONTRACTS:  From time to time, the Company enters into
forward foreign exchange contracts to hedge the impact of foreign currency
fluctuations on certain assets and liabilities denominated in foreign
currencies. Changes in market value are offset against foreign exchange gains or
losses on the related assets or liabilities and are included in cost of sales
and services. There were no material foreign exchange contracts outstanding at
September 30, 1999 and 1998.

    ENVIRONMENTAL REMEDIATION AND COMPLIANCE:  Environmental remediation and
compliance costs are accrued based on estimates of known environmental
exposures. Liabilities are recorded when environmental assessments and/or
remedial efforts are probable, and the cost can be reasonably estimated.

    IMPAIRMENT OF LONG-LIVED ASSETS:  In accordance with Financial Accounting
Standards Board Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), the Company
recognizes impairment losses for long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. In
the years ended September 30, 1999 and 1998, the Company recorded an impairment
of $23.1 million and $12.3 million, respectively, against certain long-lived
assets based on a decrease in the undiscounted cash flows expected to be
generated by these assets as a result of the downturn in oilfield drilling
activity. See Note 4.

    EMPLOYEE STOCK-BASED COMPENSATION:  In fiscal 1997, the Company adopted
Financial Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). Under SFAS 123, the Company is permitted
to either record expenses for stock options and other stock-based employee
compensation plans based on their fair value at the date of grant or to continue
to apply Accounting Principles Board Opinion No. 25 ("APB 25") and recognize
compensation expense, if any, based on the intrinsic value of the equity
instrument at the measurement date. The Company elected to continue following
APB 25; therefore, no compensation expense has been recognized because the
exercise price of employee stock options equals the market price of the
underlying stock on the date of grant.

    NEW ACCOUNTING PRONOUNCEMENTS:  Effective October 1, 1998, the Company
adopted Financial Accounting Standards Board Statement No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), Statement No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131") and Statement
No. 132, "Employer's Disclosures about Pensions and Other Postretirement
Benefits" ("SFAS 132"). SFAS 130 establishes standards for the reporting and
displaying of comprehensive income and its components. SFAS 131 establishes
standards for the way that public business enterprises report information about
operating segments in interim and annual financial statements. SFAS 132
standardizes employers' disclosures for pensions and other postretirement
benefit plans to the extent

                                       31
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

possible, and it requires additional information about changes in the benefit
obligations and the fair value of plan assets.

    In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. This statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This statement
is effective for all fiscal quarters of fiscal years beginning after June 15,
2000 and therefore was not used in preparing the Company's 1999 financial
statements. Management is currently evaluating what, if any, additional
adjustment or disclosure may be required when these statements are adopted in
fiscal 2001.

3.  ACQUISITIONS OF BUSINESSES

    Effective June 28, 1999, the Company acquired selected assets and
subsidiaries of Fracmaster Ltd. for total consideration of $78.4 million.

    This acquisition was accounted for using the purchase method of accounting.
Accordingly, the results of Fracmaster Ltd.'s operations were included in the
Company's statement of operations beginning July 1, 1999. The assets and
liabilities of Fracmaster Ltd. have been recorded in the Company's statement of
financial position at estimated fair market value of $78.4 million at September
30, 1999. The allocation of the purchase price may be summarized as follows (in
millions):

<TABLE>
<S>                                                           <C>
Fair value of assets acquired(1)............................  $129.6
Debt assumed................................................    (1.7)
Liabilities assumed.........................................   (37.1)
Excess of fair value over cost..............................   (12.4)
                                                              ------
                                                              $ 78.4
                                                              ======
</TABLE>

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

(1) Includes cash acquired of $4.9 million.

    Pro forma financial information is not presented as this acquisition is not
material to the Company's consolidated financial statements.

    OTHER:  Effective September 30, 1998, the Company acquired the remaining 51%
ownership of its previously unconsolidated joint venture in Bolivia for total
consideration of $2.6 million in cash.

    Effective July 1, 1997, the Company acquired Top Tool Company, Inc. for a
total cash outlay of $7.3 million, including transaction costs. Top Tool
provides oilfield servicing tools to customers operating along the Louisiana
Gulf Coast. The acquisition provides added capacity and tool expertise to the
Company's downhole tool operations. The consolidated statement of operations
includes operating results of the subsidiary acquired since the date of
acquisition.

    Effective December 1, 1996, the Company acquired the remaining 51% ownership
of its previously unconsolidated joint venture in Argentina, for total
consideration of $13.5 million which was funded

                                       32
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3.  ACQUISITIONS OF BUSINESSES (CONTINUED)

through borrowings under existing credit facilities. The consolidated statement
of operations includes operating results of the subsidiary acquired since the
date of acquisition.

    Each of these "other" acquisitions have been accounted for using the
purchase method of accounting and, accordingly, any excess of the total
consideration over the estimated fair value of the net assets acquired has been
recorded as goodwill and is being amortized over 40 years. These acquisitions
are not material to the Company's financial statements and therefore pro forma
information is not presented.

4.  UNUSUAL CHARGES

    During the first two quarters of fiscal 1999, the Company recorded pretax
unusual charges totaling $39.7 million ($26.0 million after tax, or $.36 per
diluted share) to reflect changes in its operations as a result of the downturn
in oilfield drilling activity. The components of the unusual charge are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                        BALANCE AT
                                                 1999      INCURRED   SEPTEMBER 30,
                                               PROVISION   TO DATE         1999
                                               ---------   --------   --------------
<S>                                            <C>         <C>        <C>
Asset impairments (noncash)..................   $23,051    $(23,051)
Severance and related benefits...............    12,798     (12,792)       $  6
Facility closures and other..................     3,846      (3,317)        529
                                                -------    --------        ----
                                                $39,695    $(39,160)       $535
                                                =======    ========        ====
</TABLE>

    The asset impairment of $23.1 million primarily relates to certain equipment
previously utilized in the Company's U.S. operations which will be sold or
decommissioned and salvaged for spare parts. The severance and related benefits
relate to the cost of the involuntary termination of approximately 1,100
employees worldwide. The Company had paid out substantially all severance
benefits by the end of fiscal 1999. The facility closures and other costs
primarily represent remaining lease obligations related to the closure of
several locations in the oil producing regions of the U.S. and also one location
in Latin America, and costs incurred during the first six months of fiscal 1999
for the relocation of equipment and personnel resulting from the closing of
these facilities.

    During the fourth quarter of fiscal 1998, the Company recorded a pretax
unusual charge of $26.6 million ($17.6 million after tax, or $.22 per diluted
share) to reflect changes in its operations as a result of

                                       33
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.  UNUSUAL CHARGES (CONTINUED)

the downturn in oilfield drilling activity. The components of the unusual charge
are as follows (in thousands):

<TABLE>
<CAPTION>
                                                              1998 PROVISION
                                                              --------------
<S>                                                           <C>
Asset impairments (noncash).................................     $12,218
Severance and related benefits..............................       7,830
Bad debt expense (noncash)..................................       3,005
Facility closure(1).........................................       2,455
Other.......................................................       1,078
                                                                 -------
                                                                 $26,586
                                                                 =======
</TABLE>

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

(1) Includes $55 noncash impairment of facilities.

    The asset impairment losses of $12.2 million consist principally of the
write-down of certain non-productive facilities and equipment in the U.S., and
result from the evaluation of the Company's ability to recover asset costs given
the downturn in oilfield drilling activity. The severance and related benefits
costs relate to the involuntary termination of approximately 850 permanent and
contracted personnel worldwide, substantially all of which had been notified as
of September 30, 1998. The bad debt expense relates to the write-off of
uncollectible receivables resulting from certain customers' inability to pay
their obligations due to reduced production revenue as a result of the lower
prices for oil and natural gas. The facility closure costs relate to the closing
of certain marginal operating locations which were most impacted by the drilling
downturn and also cancellation costs related to a proposed new office building.
The other costs relate primarily to legal expenses resulting from the employee
terminations and cancellation costs related to certain proposed equipment
purchases. All expenditures for the 1998 provision were made as of
September 30, 1999.

5.  EARNINGS PER SHARE

    In October 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 "Earnings Per Share ("EPS")." In accordance with this standard
the Company has replaced the presentation of primary EPS and fully diluted EPS
with the presentation of basic EPS and diluted EPS for all periods presented.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS is based on the weighted-average number of shares
outstanding during each period and the assumed exercise of dilutive stock
options and warrants less the number of treasury shares assumed to be purchased
from the proceeds using the average market price of the Company's common stock
for each of the periods presented.

    At the annual meeting of stockholders on January 22, 1998, the Company's
stockholders approved an amendment to the Company's charter increasing the
number of authorized shares of common stock from 80 million to 160 million
shares. A 2 for 1 stock split approved by the Board of Directors on December 11,
1997 (effected in the form of a stock dividend) was distributed on February 20,
1998 to stockholders of record as of January 30, 1998. Accordingly, all
references in the financial statements to number of shares outstanding and
earnings per share amounts have been retroactively restated for all periods
presented to reflect the increased number of common shares outstanding resulting
from the stock split.

                                       34
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5.  EARNINGS PER SHARE (CONTINUED)

    The following table presents information necessary to calculate earnings per
share for the three years ended September 30, 1999 (in thousands, except per
share amounts):

<TABLE>
<CAPTION>
                                                  1999       1998       1997
                                                --------   --------   --------
<S>                                             <C>        <C>        <C>
Net income (loss).............................  $(29,688)  $117,400   $107,906
Average common shares outstanding.............    70,789     74,482     76,868
                                                --------   --------   --------
Basic earnings (loss) per share...............  $   (.42)  $   1.58   $   1.40
                                                ========   ========   ========

Average common and dilutive potential common
  shares outstanding:
  Average common shares outstanding...........    70,789     74,482     76,868
  Assumed exercise of stock options...........     1,777      1,780      1,568
  Assumed exercise of warrants................     3,353      5,001      4,060
                                                --------   --------   --------
                                                  75,919(1)   81,263    82,496
                                                --------   --------   --------
Diluted earnings (loss) per share.............  $   (.42)  $   1.44   $   1.31
                                                ========   ========   ========
</TABLE>

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

(1) Antidilutive because the Company incurred a net loss in this period.

6.  LONG-TERM DEBT AND BANK CREDIT FACILITIES

    Long-term debt at September 30, 1999 and 1998 consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                                            1999       1998
                                                          --------   --------
<S>                                                       <C>        <C>
Notes payable, banks....................................  $341,064   $157,135
7% Series B Notes due 2006, net of discount.............   124,517    124,441
Other...................................................     1,670        225
                                                          --------   --------
                                                           467,251    281,801
Less current maturities of long-term debt...............    44,487     39,932
                                                          --------   --------
Long-term debt..........................................  $422,764   $241,869
                                                          ========   ========
</TABLE>

    The Company has a committed, unsecured bank credit facility (the "Bank
Credit Facility") consisting of a six-year term loan of approximately $121.1
million (currently drawn partially in Canadian dollars under a provision which
is renewable annually at the option of the banks), which is repayable in 22
quarterly installments that began in March 1997, and a five year U.S. $225.0
million revolving facility available through June 2001. Interest on outstanding
borrowings is charged based on prevailing market rates. The Company is charged
various fees in connection with the Bank Credit Facility, including a commitment
fee based on the average daily unused portion of the commitment. Commitment fees
under the Company's credit facilities were $155,000, $355,000, and $414,000 for
1999, 1998 and 1997, respectively. At September 30, 1999, borrowings outstanding
under the Bank Credit Facility totaled $341.1 million, consisting of $121.1
million under the term loan and $220.0 million under the revolving loan.
Principal reductions of term loans under the Bank Credit Facility are due in
aggregate annual installments

                                       35
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.  LONG-TERM DEBT AND BANK CREDIT FACILITIES (CONTINUED)

of $44.1 million, $44.1 million, and $32.9 million in the years ending
September 30, 2000, 2001 and 2002, respectively.

    In addition to the committed facility, the Company had $202.0 million in
various unsecured, discretionary lines of credit at September 30, 1999, which
expire at various dates in 2000. There are no requirements for commitment fees
or compensating balances in connection with these lines of credit. Interest on
borrowings is based on prevailing market rates. At September 30, 1999, there
were $106.0 million in outstanding borrowings under these lines of credit,
consisting of $61.1 million in Canadian borrowings, $43.8 million in U.S.
borrowings and $1.1 million in other currencies. At September 30, 1998, there
were $184.9 million in outstanding borrowings under these lines of credit. The
weighted average interest rates on short-term borrowings outstanding as of
September 30, 1999 and 1998 were 5.6% and 6.1%, respectively.

    The Company has issued and outstanding $125.0 million of unsecured 7% Notes
due 2006. The net proceeds from the issuance of the 7% Notes ($123.3 million) in
August 1996 were used by the Company to repay indebtedness outstanding under the
term loan portion of the Company's then existing bank credit facility.

    At September 30, 1999, the Company had outstanding letters of credit and
performance related bonds totaling $18.6 million and $33.3 million,
respectively. The letters of credit are issued to guarantee various trade
activities.

    The Company's debt agreements contain various customary covenants including
maintenance of certain profitability and solvency ratios and restrictions on
dividend payments, as defined in the Bank Credit Facility, none of which
materially restrict the Company's activities.

7.  FINANCIAL INSTRUMENTS

    The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value.

    CASH AND CASH EQUIVALENTS, TRADE RECEIVABLES, TRADE PAYABLES AND SHORT-TERM
BORROWINGS:  The carrying amount approximates fair value because of the short
maturity of those instruments.

    LONG-TERM DEBT:  Fair value is based on the rates currently available to the
Company for debt with similar terms and average maturities. Other long-term debt
consists of borrowings under the Company's Bank Credit Facility. The carrying
amount of such borrowings approximates fair value as the individual borrowings
bear interest at current market rates.

    The fair value of financial instruments which differed from their carrying
value at September 30, 1999 and 1998 was as follows (in thousands):

<TABLE>
<CAPTION>
                                              1999                    1998
                                      ---------------------   ---------------------
                                      CARRYING                CARRYING
                                       AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE
                                      --------   ----------   --------   ----------
<S>                                   <C>        <C>          <C>        <C>
7.0% Series B Notes.................  $124,517    $121,936    $124,441    $128,439
</TABLE>

                                       36
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8.  INCOME TAXES

    The geographical sources of income (loss) before income taxes for the three
years ended September 30, 1999 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                  1999       1998       1997
                                                --------   --------   --------
<S>                                             <C>        <C>        <C>
United States.................................  $(67,887)  $ 72,120   $ 70,638
Foreign.......................................    22,978     99,934     83,730
                                                --------   --------   --------
Income (loss) before income taxes.............  $(44,909)  $172,054   $154,368
                                                ========   ========   ========
</TABLE>

    The provision (benefit) for income taxes for the three years ended September
30, 1999 is summarized below (in thousands):

<TABLE>
<CAPTION>
                                                    1999       1998       1997
                                                  --------   --------   --------
<S>                                               <C>        <C>        <C>
Current:
  United States.................................             $   379
  Foreign.......................................  $ 17,645    22,849    $17,698
                                                  --------   -------    -------
    Total current...............................    17,645    23,228     17,698
Deferred:
  United States.................................   (26,501)   28,353     18,312
  Foreign.......................................    (6,365)    3,073     10,452
                                                  --------   -------    -------
    Total deferred..............................   (32,866)   31,426     28,764
                                                  --------   -------    -------
Income tax (benefit) expense....................  $(15,221)  $54,654    $46,462
                                                  ========   =======    =======
</TABLE>

    The consolidated effective income tax rates (as a percent of income before
income taxes) for the three years ended September 30, 1999 varied from the
United States statutory income tax rate for the reasons set forth below:

<TABLE>
<CAPTION>
                                                       1999          1998          1997
                                                     --------      --------      --------
<S>                                                  <C>           <C>           <C>
Statutory rate.....................................   (35.0)%        35.0%         35.0%
Foreign earnings at varying rates..................   (10.4)         (7.2)         (3.1)
Amortization of excess tax basis over book
  resulting from separation from former parent.....                                (6.6)
Changes in tax laws and tax rates..................                                  .3
Foreign income recognized domestically.............    (4.8)           .6            .9
Goodwill amortization..............................    10.5           2.8           3.4
Nondeductible expenses.............................     5.6            .8            .7
Other--net.........................................      .2           (.2)          (.5)
                                                      -----         -----         -----
                                                      (33.9)%        31.8%         30.1%
                                                      =====         =====         =====
</TABLE>

    Deferred tax assets and liabilities are recognized for the estimated future
tax effects of temporary differences between the tax basis of an asset or
liability and its reported amount in the financial statements. The measurement
of deferred tax assets and liabilities is based on enacted tax laws and rates
currently in effect in each of the jurisdictions in which the Company has
operations. Generally, deferred tax assets and

                                       37
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8.  INCOME TAXES (CONTINUED)

liabilities are classified as current or noncurrent according to the
classification of the related asset or liability for financial reporting. The
estimated deferred tax effect of temporary differences and carryforwards as of
September 30, 1999 and 1998 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                            1999       1998
                                                          --------   --------
<S>                                                       <C>        <C>
Assets:
  Expenses accrued for financial reporting purposes, not
    yet deducted for tax................................  $ 50,590   $ 48,226
  Net operating loss carryforwards......................   233,314    202,627
  Valuation allowance...................................   (34,920)   (25,300)
                                                          --------   --------
    Total deferred tax asset............................   248,984    225,553

Liabilities:
  Differences in depreciable basis of property..........   (33,723)   (47,564)
  Income accrued for financial reporting purposes, not
    yet reported for tax................................    (4,397)    (3,079)
                                                          --------   --------
    Total deferred tax liability........................   (38,120)   (50,643)
                                                          --------   --------
Net deferred tax asset..................................  $210,864   $174,910
                                                          ========   ========
</TABLE>

    At September 30, 1999, the Company had approximately $537 million of U.S.
tax net operating loss carryforwards expiring in varying amounts between 2000
and 2011. The Company also had approximately $79 million of foreign tax net
operating loss carryforwards and approximately $10 million of foreign investment
tax credit carryforwards as of September 30, 1999. Of the foreign tax net
operating loss carryforwards, approximately $40 million is not subject to an
annual limitation and will carryforward indefinitely. The foreign investment tax
credit carryforward and the remaining loss carryforward, if not used, will
expire in varying amounts beginning in 2000. The potential impact of the
expiration of net operating loss and investment tax credit carryforwards has
been reflected in the deferred tax asset valuation allowance balance as of
September 30, 1999 and 1998. The increase in the deferred tax valuation
allowance from 1998 to 1999 reflects the calculable portion of the gross tax
asset recorded with respect to the Fracmaster acquisition that the Company
believes may not be realized. Any subsequent decrease in the deferred tax
valuation allowance will be recorded as a reduction to goodwill.

    The Company does not provide federal income taxes on the undistributed
earnings of its foreign subsidiaries that the Company considers to be
permanently reinvested in foreign operations. The cumulative amount of such
undistributed earnings was approximately $395 million at September 30, 1999.

9.  SEGMENT INFORMATION

    The Company has three business segments: U.S./Mexico Pressure Pumping,
International Pressure Pumping and Other Oilfield Services. The U.S./Mexico
Pressure Pumping Services segment includes cementing services and stimulation
services (consisting of fracturing, acidizing, sand control, nitrogen, coiled
tubing and downhole tools services) which are provided throughout the United
States and Mexico. The International Pressure Pumping Services segment also
includes cementing and stimulation services which are provided to over 40
countries in the major international oil and natural gas producing areas of
Latin America, Europe, Africa, Southeast Asia, Canada and the Middle East. The
Other Oilfield Services

                                       38
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.  SEGMENT INFORMATION (CONTINUED)

segment consists of specialty chemicals, tubular services and process and
pipeline services, both throughout the U.S. and internationally.

    The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates the
performance of its operating segments based on operating income excluding
goodwill amortization and unusual charges. Intersegment sales and transfers are
not significant.

    Summarized financial information concerning the Company's segments is shown
in the following table. The "Corporate" column includes corporate general and
administrative expenses, goodwill amortization, unusual charges, interest
expense and other income and expense items not allocated to reportable segments.

BUSINESS SEGMENTS

<TABLE>
<CAPTION>
                                        U.S./MEXICO   INTERNATIONAL    OTHER
                                         PRESSURE       PRESSURE      OILFIELD
                                          PUMPING        PUMPING      SERVICES   CORPORATE     TOTAL
                                        -----------   -------------   --------   ---------   ----------
                                                                (IN THOUSANDS)
<S>                                     <C>           <C>             <C>        <C>         <C>
1999
Revenues..............................    $453,912      $505,613      $171,184   $    625    $1,131,334
Operating income (loss)...............      (3,889)       39,791        18,973    (69,640)      (14,765)
Identifiable assets...................     394,824       584,936       122,121    722,883     1,824,764
Capital expenditures..................      42,460        36,515        12,607     18,984       110,566
Depreciation and amortization.........      36,532        44,951        10,677      7,640        99,800

1998
Revenues..............................    $726,729      $612,672      $185,329   $  2,738    $1,527,468
Operating income......................     117,604        97,494        27,611    (44,946)      197,763
Identifiable assets...................     407,761       530,848       123,613    681,479     1,743,701
Capital expenditures..................      58,070        89,924        14,853      5,114       167,961
Depreciation and amortization.........      34,280        40,822        10,145      6,250        91,497

1997
Revenues..............................    $719,028      $585,334      $161,536   $    675    $1,466,573
Operating income......................     107,539        77,242        23,248    (25,622)      182,407
Identifiable assets...................     425,901       494,468       108,500    697,899     1,726,768
Capital expenditures..................      38,341        52,292        10,127      1,438       102,198
Depreciation and amortization.........      32,815        34,795         8,856     13,910        90,376
</TABLE>

                                       39
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9.  SEGMENT INFORMATION (CONTINUED)

GEOGRAPHIC INFORMATION

<TABLE>
<CAPTION>
                                                                    LONG-LIVED
                                                        REVENUES      ASSETS
                                                       ----------   ----------
                                                           (IN THOUSANDS)
<S>                                                    <C>          <C>
1999
United States........................................  $  488,566   $  769,492
Canada...............................................     118,996      114,159
Other foreign countries..............................     523,772      300,376
                                                       ----------   ----------
  Consolidated total.................................  $1,131,334   $1,184,027
                                                       ==========   ==========

1998
United States........................................  $  779,715   $  780,029
Canada...............................................     153,611       68,582
Other foreign countries..............................     594,142      272,130
                                                       ----------   ----------
  Consolidated total.................................  $1,527,468   $1,120,741
                                                       ==========   ==========

1997
United States........................................  $  770,075   $  769,448
Canada...............................................     179,869       68,663
Other foreign countries..............................     516,629      230,837
                                                       ----------   ----------
  Consolidated total.................................  $1,466,573   $1,068,948
                                                       ==========   ==========
</TABLE>

REVENUES BY PRODUCT LINE

<TABLE>
<CAPTION>
                                              1999         1998         1997
                                           ----------   ----------   ----------
                                                      (IN THOUSANDS)
<S>                                        <C>          <C>          <C>
Cementing................................  $  356,762   $  499,789   $  484,375
Stimulation..............................     577,077      797,578      757,642
Other....................................     197,495      230,101      224,556
                                           ----------   ----------   ----------
  Total revenue..........................  $1,131,334   $1,527,468   $1,466,573
                                           ==========   ==========   ==========
</TABLE>

10.  EMPLOYEE BENEFIT PLANS

    The Company administers a thrift plan whereby eligible employees elect to
contribute from 2% to 12% of their base salaries to an employee benefit trust.
Employee contributions are matched by the Company at the rate of $.50 per $1.00
up to 6% of the employee's base salary. In addition, the Company contributes
between 2% and 5% of each employee's base salary depending on their age as of
January 1 each year as a base contribution. Company matching contributions vest
immediately while base contributions become fully vested after five years of
employment. The Company's contributions to these thrift plans amounted to
$7,365,000, $7,916,000 and $6,887,000 in 1999, 1998 and 1997, respectively.

                                       40
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  EMPLOYEE BENEFIT PLANS (CONTINUED)

    The Company's Canadian employees formerly employed by Fracmaster Ltd. (See
Note 3) are currently covered under a registered retirement savings plan whereby
eligible employees elect to contribute from 1% to 5% of their salary based on
years of service. In addition, the Company also contributes from 4% to 6% of the
employee's base salary based on years of service beginning after the first year,
for those employees participating in the plan. The Company contributions vest
immediately. During the fiscal year ended September 30, 1999, the Company
contributed approximately $227,000 to the plan. Management is in the process of
developing a unified plan for all Canadian employees.

    The Company's U.S. employees formerly employed by The Western Company of
North America ("Western") with at least one year of service are covered under a
defined benefit pension plan as a carryover from the Western acquisition.
Pension benefits are based on years of service and average compensation for each
employee's five consecutive highest paid years during the last ten years worked.
Benefits under the Western plan were frozen effective December 31, 1995, at
which time all earned benefits were vested. Management has not yet made a
decision on whether to terminate the plan and therefore will fund the amounts
necessary to meet minimum funding requirements under the Employees' Retirement
Income Security Act, as amended. The funded status of this plan at September 30,
1999 and 1998 was as follows (in thousands):

<TABLE>
<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
Vested benefit obligation.................................  $53,383    $56,577
                                                            =======    =======

Accumulated benefit obligation............................  $53,383    $56,577
Plan assets at fair value.................................   48,970     47,377
                                                            -------    -------
Benefit obligation in excess of plan assets...............    4,413      9,200
Unrecognized loss.........................................   (4,440)    (9,194)
Adjustment required to recognize minimum liability........    4,440      9,194
                                                            -------    -------
Net pension liability.....................................  $ 4,413    $ 9,200
                                                            =======    =======
</TABLE>

    The following provides a reconciliation of the benefit obligation and plan
assets:

<TABLE>
<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
CHANGE IN BENEFIT OBLIGATION
Defined benefit plan obligation, beginning of year........  $56,577    $50,847
Interest cost.............................................    3,589      3,571
Actuarial (gain)/loss.....................................   (3,617)     4,866
Benefits paid from plan assets............................   (3,166)    (2,707)
                                                            -------    -------
Defined benefit plan obligation, end of year..............  $53,383    $56,577
                                                            =======    =======
</TABLE>

                                       41
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  EMPLOYEE BENEFIT PLANS (CONTINUED)

<TABLE>
<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets, beginning of year..............  $47,377    $46,285
Company contributions.....................................                 927
Actual return on plan assets..............................    4,759      2,872
Benefits paid from plan assets............................   (3,166)    (2,707)
                                                            -------    -------
Fair value of plan assets, end of year....................  $48,970    $47,377
                                                            =======    =======
</TABLE>

    Pursuant to the provisions of Statement of Financial Accounting Standards
No. 87, "Employers' Accounting for Pensions," the Company recorded in other
noncurrent liabilities a minimum pension liability adjustment of $4.4 million
and $9.2 million as of September 30, 1999 and 1998, respectively, representing
the amount by which the accumulated benefit obligation exceeded the fair value
of plan assets. As there were no previously unrecognized prior service costs at
September 30, 1999 and 1998, the full amount of the adjustments, net of related
deferred tax benefit, were recorded as a reduction of stockholders' equity. See
Note 12 for disclosure of the amounts included in other comprehensive income.

    Assumptions used in accounting for the Company's U.S. defined benefit plan
were as follows:

<TABLE>
<CAPTION>
                                                         1999          1998          1997
                                                       --------      --------      --------
<S>                                                    <C>           <C>           <C>
Weighted-average discount rate.......................    7.25%         6.50%         7.25%
Weighted-average expected long-term rate of return on
  assets.............................................    9.00%         9.00%         9.00%
</TABLE>

    Costs for each of the three years ended September 30, 1999 for the Company's
U.S. defined benefit plan were as follows (in thousands):

<TABLE>
<CAPTION>
                                                      1999       1998       1997
                                                    --------   --------   --------
<S>                                                 <C>        <C>        <C>
Interest cost on projected benefit obligation.....  $ 3,589    $ 3,571    $ 3,537
Expected return on plan assets....................   (4,759)    (2,872)    (7,779)
Net amortization and deferral.....................    1,137     (1,172)     4,452
                                                    -------    -------    -------
Net pension cost (benefit)........................  $   (33)   $  (473)   $   210
                                                    =======    =======    =======
</TABLE>

    In addition, the Company sponsors defined benefit plans for foreign
operations which cover substantially all employees in Canada and the United
Kingdom. The Company also sponsored a defined benefit plan in Venezuela. During
fiscal year 1998, a new labor law was enacted in Venezuela which resulted in
termination of the plan. The new labor law in essence prospectively requires
employers to fund stipulated amounts based on employees' salaries into a trust
fund. After making the contribution, the Company has no further obligation.
Therefore, no obligation is included for Venezuela as of September 30, 1999 and

                                       42
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  EMPLOYEE BENEFIT PLANS (CONTINUED)

1998. The funded status of the Company's international plans at September 30,
1999 and 1998 was as follows (in thousands):

<TABLE>
<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
Actuarial present value of:
  Vested benefit obligation...............................  $53,998    $50,451
                                                            =======    =======
  Accumulated benefit obligation..........................  $55,327    $51,922
                                                            =======    =======
Projected benefit obligation..............................  $61,519    $58,667
Plan assets at fair value.................................   65,311     52,668
                                                            -------    -------
Plan assets in (excess of) less than projected benefit
  obligation..............................................   (3,792)     5,999
Unrecognized gain (loss)..................................    5,344     (6,002)
Unrecognized transition asset, net of amortization........       26         29
Unrecognized prior service cost...........................     (170)      (200)
                                                            -------    -------
Net pension (asset) liability.............................  $ 1,408    $  (174)
                                                            =======    =======
</TABLE>

    The following provides a reconciliation of the benefit obligation and plan
assets of the Company's international defined benefit plans (in thousands):

<TABLE>
<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
CHANGE IN BENEFIT OBLIGATION
Defined benefit obligation, beginning of year.............  $58,667    $57,903
Service cost..............................................    5,478      5,492
Interest cost.............................................    3,860      4,112
Actuarial (gain)/loss.....................................   (3,894)     1,156
Benefits paid from plan assets............................   (3,658)    (2,429)
Contributions by plan participants........................    1,045        973
Settlement................................................              (1,816)
Curtailment of plan.......................................              (5,696)
Foreign currency exchange rate change.....................       21     (1,028)
                                                            -------    -------
Defined benefit obligation, end of year...................  $61,519    $58,667
                                                            =======    =======

<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets, beginning of year..............  $52,668    $54,599
Actual return on plan assets..............................   11,286     (3,357)
Company contributions.....................................    2,783      3,224
Contributions by plan participants........................    1,981      1,775
Benefits paid from plan assets............................   (3,658)    (2,429)
Foreign currency exchange rate change.....................      251     (1,144)
                                                            -------    -------
Fair value of plan assets, end of year....................  $65,311    $52,668
                                                            =======    =======
</TABLE>

                                       43
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  EMPLOYEE BENEFIT PLANS (CONTINUED)

    Assumptions used in accounting for the Company's international defined
benefit pension plans were as follows:

<TABLE>
<S>                                                           <C>
Weighted-average discount rate..............................  6-7%
Weighted-average rate of increase in future compensation....  2-5%
Weighted-average expected long-term rate of return on
  assets....................................................  2-9%
</TABLE>

    Combined costs for the Company's international defined benefit plans for the
three years ended September 30, 1999 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                    1999       1998       1997
                                                  --------   --------   --------
<S>                                               <C>        <C>        <C>
Net periodic foreign pension cost:
  Service cost for benefits earned..............  $  5,478   $ 5,492    $  4,687
  Interest cost on projected benefit
    obligation..................................     3,860     4,112       4,238
  Expected return on plan assets................   (11,387)    3,335     (12,846)
  Net amortization and deferral.................     7,309    (7,615)      9,005
                                                  --------   -------    --------
Net pension cost................................  $  5,260   $ 5,324    $  5,084
                                                  ========   =======    ========
</TABLE>

    In addition, the Company expensed $780,000 and $910,000 during 1999 and
1998, respectively, relating to the settlement of the pension liability
resulting from the enactment of the new labor law in Venezuela.

    The Company also sponsors a plan whereby certain health care and life
insurance benefits are provided for retired employees (primarily U.S.) and their
eligible dependents if the employee meets specified age and service
requirements. These plans are unfunded and the Company retains the right,
subject to existing agreements, to modify or eliminate these plans.

    The Company's postretirement medical benefit plan provides credits based on
years of service which can be used to purchase coverage under the active
employee plans. This plan effectively caps the Company's health care inflation
rate at a 4% increase per year. The reduction of approximately $5.7 million in
the accumulated postretirement benefit obligation due to this amendment is being
amortized over the average period of future service to the date of full
eligibility for such postretirement benefits of the active employees.

                                       44
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10.  EMPLOYEE BENEFIT PLANS (CONTINUED)

    Net periodic postretirement benefit costs for the three years ended
September 30, 1999 included the following components (in thousands):

<TABLE>
<CAPTION>
                                                        1999       1998       1997
                                                      --------   --------   --------
<S>                                                   <C>        <C>        <C>
Service cost for benefits attributed to service
  during the period.................................   $1,786     $1,563     $1,388
Interest cost on accumulated postretirement benefit
  obligation........................................    1,532      1,513      1,532
Amortization of prior service costs.................     (894)      (894)      (894)
Amortization of cumulative unrecognized net gain....                 (65)
                                                       ------     ------     ------
Net periodic postretirement benefit cost............   $2,424     $2,117     $2,026
                                                       ======     ======     ======
</TABLE>

    The actuarial and recorded liabilities for these postretirement benefits
were as follows at September 30, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
Accumulated postretirement benefit obligation:
  Retirees................................................  $ 7,683    $ 6,650
  Fully eligible active plan participants.................    2,155      2,494
  Other active plan participants..........................   13,864     15,873
                                                            -------    -------
                                                             23,702     25,017
Unrecognized cumulative net gain..........................    5,631      1,842
Unrecognized prior service cost...........................      599      1,494
                                                            -------    -------
Accrued postretirement benefit liability..................  $29,932    $28,353
                                                            =======    =======
</TABLE>

    The following provides a reconciliation of the benefit obligation and plan
assets (in thousands):

<TABLE>
<CAPTION>
                                                              1999       1998
                                                            --------   --------
<S>                                                         <C>        <C>
CHANGE IN BENEFIT OBLIGATION
Postretirement benefit obligation, beginning of year......  $25,017    $22,137
Service cost..............................................    1,786      1,563
Interest cost.............................................    1,532      1,513
Actuarial (gain)/loss.....................................   (3,787)       797
Benefits paid.............................................     (846)      (993)
                                                            -------    -------
Postretirement benefit obligation, end of year............  $23,702    $25,017
                                                            =======    =======
</TABLE>

    The accumulated postretirement benefit obligation at September 30, 1999 and
1998 was determined using a discount rate of 7.25% and 6.25%, respectively, and
a health care cost trend rate of 4%, reflecting the cap discussed above.
Increasing the assumed health care cost trend rates by one percentage point
would not have a material impact on the accumulated postretirement benefit
obligation or the net periodic postretirement benefit cost because these
benefits are effectively capped by the Company.

                                       45
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11.  COMMITMENTS AND CONTINGENCIES

    The Company, through performance of its service operations, is sometimes
named as a defendant in litigation, usually relating to claims for bodily
injuries or property damage (including claims for well or reservoir damage). The
Company maintains insurance coverage against such claims to the extent deemed
prudent by management. The Company believes that there are no existing claims of
a potentially material adverse nature for which it has not already provided
appropriate accruals.

    Federal, state and local laws and regulations govern the Company's operation
of underground fuel storage tanks. Rather than incur additional costs to restore
and upgrade tanks as required by regulations, management has opted to remove the
existing tanks. The Company has completed the removal of these tanks and has
remedial cleanups in progress related to the tank removals. In addition, the
Company is conducting a number of environmental investigations and remedial
actions at current and former company locations and, along with other companies,
has been named a potentially responsible party at five waste disposal sites. The
Company has established an accrual of approximately $6 million for such
environmental matters which management believes to be its best estimate of the
Company's portion of future costs to be incurred. The Company also maintains
insurance for environmental liabilities which the Company believes is reasonable
based on its knowledge of its industry.

    In 1997, the Company completed a transaction involving the transfer of
certain pumping service equipment assets. The Company received $100.0 million
which was used to pay outstanding bank debt. The equipment will be used to
provide services to the Company's customers for which the Company will pay a
service fee over a period of at least eight, but not more than fourteen years.
The transaction generated a deferred gain for book purposes of approximately $38
million which will be amortized over twelve years. The balance of the deferred
gain was $28.3 million and $33.4 million as of September 30, 1999 and 1998,
respectively.

    LEASE AND OTHER LONG-TERM COMMITMENTS:  At September 30, 1999, the Company
had long-term operating leases and service fee commitments covering certain
facilities and equipment, as well as other long-term commitments, with varying
expiration dates. Minimum annual commitments for the years ended September 30,
2000, 2001, 2002, 2003 and 2004 are $36,162,000, $32,968,000, $27,152,000,
$20,930,000 and $19,927,000 respectively, and $71,100,000 in the aggregate
thereafter.

                                       46
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12.  SUPPLEMENTAL FINANCIAL INFORMATION

    Supplemental financial information for the three years ended September 30,
1999 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                     1999       1998       1997
                                                   --------   --------   --------
<S>                                                <C>        <C>        <C>
Consolidated Statement of Operations:
  Research and development expense...............  $10,573    $11,908    $ 9,904
  Rent expense...................................   46,871     46,153     26,576
  Net foreign exchange gain (loss)...............     (103)      (214)       148
Consolidated Statement of Cash Flows:
  Income taxes paid..............................  $15,571    $23,953    $20,387
  Interest paid..................................   31,835     25,595     30,407
  Details of acquisitions:
    Fair value of assets acquired................  112,276      3,855      5,366
    Liabilities assumed..........................   38,834      2,949      9,600
    Goodwill.....................................               1,553     25,044
    Cash paid for acquisitions, net of cash
      acquired...................................   73,442      2,459     20,810
</TABLE>

    Other income (expense)--net for the three years ended September 30, 1999 is
summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                      1999       1998       1997
                                                    --------   --------   --------
<S>                                                 <C>        <C>        <C>
Rental income.....................................  $   114    $   384     $  349
Gain on Argentine bonds...........................                            276
Income from equity method investments.............      145        234        246
Royalty income....................................      157        495        213
Gain (loss) on sales of assets--net...............     (147)       (89)       169
Minority interest.................................   (2,585)    (3,206)      (805)
Non-operating net foreign exchange gain...........       35      1,110
Dividend income...................................    2,197                    20
Other--net........................................      697        300      1,259
                                                    -------    -------     ------
Other income (expense)--net.......................  $   613    $  (772)    $1,727
                                                    =======    =======     ======
</TABLE>

                                       47
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12.  SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)

    Accumulated other comprehensive income consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                           MINIMUM PENSION   CUMULATIVE
                                              LIABILITY      TRANSLATION
                                             ADJUSTMENT      ADJUSTMENT     TOTAL
                                           ---------------   -----------   --------
<S>                                        <C>               <C>           <C>
Balance, September 30, 1996..............                      $(1,623)    $(1,623)
Changes..................................      $(2,051)          2,163         112
                                               -------         -------     -------
Balance, September 30, 1997..............       (2,051)            540      (1,511)
Changes..................................       (3,925)         12,855       8,930
                                               -------         -------     -------
Balance, September 30, 1998..............       (5,976)         13,395       7,419
Changes..................................        3,090          (5,585)     (2,495)
                                               -------         -------     -------
Balance, September 30, 1999..............      $(2,886)        $ 7,810     $ 4,924
                                               =======         =======     =======
</TABLE>

    The tax effects allocated to each component of other comprehensive income
may be summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                              BEFORE-TAX   TAX (EXPENSE)   NET-OF-TAX
                                                AMOUNT        BENEFIT        AMOUNT
                                              ----------   -------------   ----------
<S>                                           <C>          <C>             <C>
Year Ended September 30, 1997:
  Foreign currency translation adjustment...    $ 2,163                      $ 2,163
  Minimum pension liability adjustment......     (3,156)      $ 1,105         (2,051)
                                                -------       -------        -------
  Other comprehensive income................    $  (993)      $ 1,105        $   112
                                                =======       =======        =======

Year Ended September 30, 1998:
  Foreign currency translation adjustment...    $12,855                      $12,855
  Minimum pension liability adjustment......     (6,038)      $ 2,113         (3,925)
                                                -------       -------        -------
  Other comprehensive income................    $ 6,817       $ 2,113        $ 8,930
                                                =======       =======        =======

Year Ended September 30, 1999:
  Foreign currency translation adjustment...    $(5,585)                     $(5,585)
  Minimum pension liability adjustment......      4,754       $(1,664)         3,090
                                                -------       -------        -------
  Other comprehensive income................    $  (831)      $(1,664)       $(2,495)
                                                =======       =======        =======
</TABLE>

13.  EMPLOYEE STOCK PLANS

    STOCK OPTION PLANS:  The Company's 1990 Stock Incentive Plan, 1995 Incentive
Plan and 1997 Incentive Plan (the "Plans") provide for the granting of options
for the purchase of the Company's common stock ("Common Stock") and other
performance based awards to officers, key employees and nonemployee directors of
the Company. Such options vest over a three or four-year period and are
exercisable for periods ranging from one to ten years. The options granted in
December 1996 also had an acceleration clause which provided that such options
would vest immediately if the closing price of the Common Stock reached $37.50.
On October 1, 1997, the Company's Common Stock closed at $37.53 and all options
granted on December 12, 1996 became vested in full. An aggregate of 9,000,000
shares of

                                       48
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13.  EMPLOYEE STOCK PLANS (CONTINUED)

Common Stock have been reserved for grants, of which 1,858,717 were available
for future grants at September 30, 1999.

    A summary of the status of the Company's stock option activity, and related
information for the years ended September 30, 1999, 1998 and 1997 is presented
below (in thousands, except per share prices):

<TABLE>
<CAPTION>
                                              1999                       1998                       1997
                                    ------------------------   ------------------------   ------------------------
                                               WEIGHTED-AVG.              WEIGHTED-AVG.              WEIGHTED-AVG.
                                                 EXERCISE                   EXERCISE                   EXERCISE-
                                     SHARES        PRICE        SHARES        PRICE        SHARES        PRICE
                                    --------   -------------   --------   -------------   --------   -------------
<S>                                 <C>        <C>             <C>        <C>             <C>        <C>
Outstanding at beginning of
  year............................   2,888        $16.64        2,582        $13.14        2,772        $10.37
Granted...........................   2,023         14.73          503         35.22          558         23.14
Exercised.........................    (468)        10.78         (164)        16.92         (718)        10.04
Forfeited.........................     (55)        18.01          (33)        30.31          (30)        17.22
                                     -----                      -----                      -----
Outstanding at end of year........   4,388         16.36        2,888         16.64        2,582         13.14
                                     =====                      =====                      =====
Options exercisable at year-end...   2,143        $15.41        2,260        $12.94        1,968        $12.93
Weighted-average fair value of
  options granted during the
  year............................                $11.16                     $26.30                     $12.28
</TABLE>

    The following table summarizes information about stock options outstanding
as of September 30, 1999 (in thousands, except per share prices):

<TABLE>
<CAPTION>
                                                     OPTIONS OUTSTANDING                 OPTIONS EXERCISABLE
                                         -------------------------------------------   ------------------------
                                                     WEIGHTED-AVG.     WEIGHTED-AVG.              WEIGHTED-AVG.
                                                       REMAINING         EXERCISE                   EXERCISE
RANGE OF EXERCISE PRICE                   SHARES    CONTRACTUAL LIFE       PRICE        SHARES        PRICE
-----------------------                  --------   ----------------   -------------   --------   -------------
<S>                                      <C>        <C>                <C>             <C>        <C>
$6.00 to 10.78.........................     969           4.8              $8.95          969        $ 8.95
10.79 to 21.56.........................   2,479           8.4              14.12          583         13.95
21.57 to 35.93.........................     940           7.2              29.88          591         27.44
                                          -----                                         -----
                                          4,388           7.4              16.36        2,143         15.41
                                          =====                                         =====
</TABLE>

    SFAS 123 encourages, but does not require, companies to record compensation
cost for employee stock-based compensation plans at fair value as determined by
generally recognized option pricing models such as the Black-Scholes model or
the binomial model. Because of the inexact and subjective nature of deriving
stock option values using these methods, the Company has adopted the
disclosure-only provisions of SFAS 123 and continues to account for stock-based
compensation as it has in the past using the intrinsic value method prescribed
in APB 25. Accordingly, no compensation expense has been recognized for the
Company's employee stock option plans. Had compensation cost for the Company's
employee stock option plans been determined based on the fair value at the grant
date for awards issued in 1999, 1998 and 1997 consistent with the provisions of
SFAS 123, the Company's net earnings and diluted earnings per share would have
been reduced by $6.0 million or $.08 per share, $4.4 million or $.05 per share
and $5.1 million or $.07 per share in 1999, 1998 and 1997, respectively. As this
calculation does not consider the effect of awards issued prior to 1996, it may
not be representative of the effects on pro forma net income in future

                                       49
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13.  EMPLOYEE STOCK PLANS (CONTINUED)

years. The pro forma fair value of options at the date of grant was estimated
using the Black-Scholes model and the following assumptions:

<TABLE>
<CAPTION>
                                                   1999          1998          1997
                                                 --------      --------      --------
<S>                                              <C>           <C>           <C>
Expected life (years)..........................      7.9           7.7           7.6
Interest rate..................................      6.2%          4.9%          5.8%
Volatility.....................................     65.4%         66.2%         37.4%
Dividend yield.................................        0             0             0

Weighted-average fair value per share at grant
  date.........................................   $11.16        $26.30        $12.28
</TABLE>

    STOCK PURCHASE PLAN:  The Company's 1990 Employee Stock Purchase Plan and
the Company's 1999 Employee Stock Purchase Plan (together, the "Purchase Plan")
are plans under which all employees may purchase shares of the Common Stock at
85% of market value on the first or last business day of the twelve-month plan
period beginning each October, whichever is lower. Such purchases are limited to
10% of the employee's regular pay. A maximum aggregate of 4,500,000 shares has
been reserved under the Purchase Plan, 3,567,636 of which were available for
future purchase at September 30, 1999. In October 1999, 347,316 shares were
purchased at $13.81 per share and in October 1998, 131,435 shares were purchased
at $15.04 per share. Had compensation cost for the Company's stock purchase plan
been determined consistent with the provisions of SFAS 123, the Company's net
earnings and diluted earnings per share would have been reduced by $1.4 million
or $.02 per share, $.6 million or $.01 per share and $.6 million or $.01 per
share in 1999, 1998 and 1997, respectively. The pro forma value of the
employees' purchase rights was estimated using the Black-Scholes model with the
following assumptions; no dividend yield; an expected life of 1 year; expected
volatility of 65.4% in 1999, 66.2% in 1998 and 37.4% in 1997; and a risk free
interest rate of 4.99% in 1999, 4.68% in 1998 and 5.8% in 1997. The
weighted-average fair value per share of these purchase rights granted in 1999,
1998 and 1997 was $6.23, $6.81 and $10.79, respectively.

    STOCK INCENTIVE PLAN:  Pursuant to the terms of the 1990 Stock Incentive
Plan, during 1993 through 1997 the Company also issued a total of 632,932
Performance Units ("Units") to officers of the Company. Each Unit represents the
right to receive from the Company at the end of a stipulated period one
unrestricted share of Common Stock, contingent upon achievement of certain
financial performance goals over the stipulated period. Should the Company fail
to achieve the specific financial goals as set by the Executive Compensation
Committee of the Board of Directors, the Units are canceled and the related
shares revert to the Company for reissuance under the plan. The aggregate fair
market value of the underlying shares granted under this plan is considered
unearned compensation at the time of grant and is adjusted annually based on the
current market price for the Common Stock. Compensation expense is determined
based on management's current estimate of the likelihood of meeting the specific
financial goals and charged ratably over the stipulated period. On October 12,
1998, the Executive Compensation Committee of the Board of Directors reviewed
the Company's performance for the three-year period ending September 30, 1998
for purposes of determining the performance criteria achievement level for the
Unit awards made in November 1995. Based on various performance factors
including comparison of the Company's stock price to the peer group established
at the time of grant (which has changed significantly due to mergers and
acquisitions in the oilfield sector), earnings growth, return on equity growth
and return on assets growth, the Compensation Committee decided that the 1995
Units should vest at the level of 66% of the maximum level. Therefore, a total
of 137,353 Units were converted into Common Stock and issued to officers, 11,287
Units were deferred for later issuance and 76,572 Units were cancelled. As of

                                       50
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13.  EMPLOYEE STOCK PLANS (CONTINUED)

September 30, 1999 there were 81,913 Units outstanding. On November 23, 1999,
the Executive Compensation Committee of the Board of Directors reviewed the
Company's performance for the three-year period ending September 30, 1999 and
determined that the highest level of performance criteria was achieved for the
Unit awards made in December 1996. Therefore, a total of 40,924 Units were
converted into Common Stock and issued to officers.

14.  STOCKHOLDERS' EQUITY

    STOCKHOLDER RIGHTS PLAN:  The Company has a Stockholder Rights Plan (the
"Rights Plan") designed to deter coercive takeover tactics and to prevent an
acquirer from gaining control of the Company without offering a fair price to
all of the Company's stockholders. Under this plan, each outstanding share of
the Common Stock includes one preferred share purchase right ("Right") which
becomes exercisable under certain circumstances, including when beneficial
ownership of the Common Stock by any person, or group, equals or exceeds 15% of
the Company's outstanding Common Stock. Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock at a price of $150, subject to adjustment
under certain circumstances. Upon the occurrence of certain events specified in
the Rights Plan, each holder of a Right (other than an Acquiring Person) will
have the right, upon exercise of such Right, to receive that number of shares of
common stock of the Company (or the surviving corporation) that, at the time of
such transaction, would have a market price of two times the purchase price of
the Right. No shares of Series A Junior Participating Preferred Stock have been
issued by the Company at September 30, 1999. The Rights were proportionately
adjusted as of the stock split record date to reflect the effect of the February
1998 stock split.

    STOCK PURCHASE WARRANTS:  In connection with the acquisition of Western in
1995, the Company issued 4,800,037 stock purchase warrants ("Warrants"). The
Warrants were issued on April 14, 1995 at an initial value of $5.00 per Warrant.
Subsequent to the February 1998 stock split, each Warrant represents the right
to purchase two shares of the Common Stock at an exercise price of $15 per
share, until the expiration date of April 13, 2000. As of September 30, 1999,
4,923 Warrants had been exercised.

    STOCK SPLIT:  At the annual meeting of stockholders on January 22, 1998, the
Company's stockholders approved an amendment to the Company's charter increasing
the number of authorized shares of common stock from 80 million to 160 million
shares. This allowed the Company to effect a 2 for 1 stock split (in the form of
a dividend) previously authorized by the Board of Directors on December 11,
1997. The distribution on February 20, 1998 increased the number of shares
outstanding from 37,694,427 to 75,388,854 (net of treasury shares of 986,000,
which did not split). All share and per share data, including stock option and
stock purchase plan information have been restated to reflect the stock split.

    TREASURY STOCK:  In December 1997, the Board of Directors approved a share
repurchase program authorizing purchases up to $150 million of Common Stock at
the discretion of the Company's management. In May 1998, the Board approved an
increase in the authorized amount up to $300 million. Under this program, the
Company repurchased 5,996,400 shares at a cost of $196.6 million during fiscal
1998 and no shares during fiscal 1999. In October 1999, the Company reissued
4,027,972 shares of treasury stock through a private placement with certain
financial institutions. The proceeds from the private placement of $144.0
million were used to pay down outstanding debt. The Company has also entered
into privately negotiated option agreements pursuant to which it currently
intends to repurchase an equivalent number of shares in April 2000 for a total
of $149.0 million.

                                       51
<PAGE>
                              BJ SERVICES COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15.  QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                        FIRST         SECOND        THIRD      FOURTH       FISCAL YEAR
                                       QUARTER       QUARTER       QUARTER    QUARTER          TOTAL
                                       --------      --------      --------   --------      -----------
                                                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                    <C>           <C>           <C>        <C>           <C>
Fiscal Year 1999:
Revenue..............................  $294,435      $269,601      $253,093   $314,205      $1,131,334
Gross profit(1)......................    44,632        37,239        11,524     44,390         137,785
Net income (loss)....................    (7,026)(2)   (11,387)(3)   (16,095)     4,820         (29,688)
Earnings (loss) per share:
  Basic..............................      (.10)         (.16)         (.23)       .07            (.42)
  Diluted............................      (.10)         (.16)         (.23)       .06            (.42)

Fiscal Year 1998:
Revenue..............................  $415,360      $395,602      $365,343   $351,163      $1,527,468
Gross profit(1)......................   102,937        95,575        81,815     63,923         344,250
Net income...........................    44,077        38,606        32,871      1,846(4)      117,400
Earnings per share:
  Basic..............................       .57           .51           .44        .03            1.58
  Diluted............................       .52           .47           .41        .02            1.44
</TABLE>

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

(1) Represents revenue less cost of sales and services and research and
    engineering expenses.

(2) Includes $21.6 million ($14.0 million after tax, or $.19 per diluted share)
    unusual charge resulting from the restructuring of worldwide operations due
    to the downturn in oilfield drilling activity. See Note 4.

(3) Includes $18.1 million ($12.1 million after tax, or $.17 per diluted share)
    unusual charge resulting from the restructuring of worldwide operations due
    to the downturn in oilfield drilling activity. See Note 4.

(4) Includes $26.6 million ($17.6 million after tax, $.22 per diluted share)
    unusual charge resulting from the restructuring of worldwide operations due
    to the downturn in oilfield drilling activity. See Note 4.

                                       52
<PAGE>
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

    None.

                                       53
<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    Information concerning the directors of the Company is set forth in the
section entitled "Election of Directors" in the Proxy Statement of the Company
for the Annual Meeting of Stockholders to be held January 28, 1999 which section
is incorporated herein by reference. For information regarding executive
officers of the Company, see page 11 hereof. Information concerning compliance
with Section 16(a) of the Exchange Act is set forth in the section entitled
"Compliance with Section 16(a) of the Exchange Act" in the Proxy Statement of
the Company for the Annual Meeting of Stockholders to be held January 27, 2000,
which section is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

    Information for this item is set forth in the sections entitled "Executive
Compensation" and "Severance Agreements" in the Proxy Statement of the Company
for the Annual Meeting of Stockholders to be held January 27, 2000, which
sections are incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    Information for this item is set forth in the sections entitled "Voting
Securities" and "Election of Directors" in the Proxy Statement of the Company
for the Annual Meeting of Stockholders to be held January 27, 2000, which
sections are incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    None.

                                       54
<PAGE>
                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) List of documents filed as part of this report or incorporated herein by
    reference:

    (1) Financial Statements:

       The following financial statements of the Registrant as set forth under
       Part II, Item 8 of this report on Form 10-K on the pages indicated.

<TABLE>
<CAPTION>
                                                              PAGE IN THIS
                                                                FORM 10-K
                                                              -------------
<S>                                                           <C>
Report of Independent Auditors..............................        24
Consolidated Statement of Operations for the years ended
  September 30, 1997, 1998 and 1999.........................        25
Consolidated Statement of Financial Position as of
  September 30, 1998 and 1999...............................        26
Consolidated Statement of Stockholders' Equity for the years
  ended September 30, 1997, 1998 and 1999...................        28
Consolidated Statement of Cash Flows for the years ended
  September 30, 1997, 1998 and 1999.........................        29
Notes to Consolidated Financial Statements..................        30
</TABLE>

    (2) Financial Statement Schedules:

<TABLE>
<CAPTION>
SCHEDULE                                                               PAGE
 NUMBER    DESCRIPTION OF SCHEDULE                                    NUMBER
--------   -----------------------                                   ---------
<C>        <S>                                                       <C>
   II      Valuation and Qualifying Accounts.......................     60
</TABLE>

       All other financial statement schedules are omitted because of the
       absence of conditions under which they are required or because all
       material information required to be reported is included in the
       consolidated financial statements and notes thereto.

(b) A report on Form 8-K was filed on October 29,1999, reporting other events
    under Item 5 regarding a private financing arrangement structured around the
    expected exercise of the Company's outstanding warrants in April 2000, and
    attaching as an exhibit under Item 7 the related press release.

    (3) Exhibits:

<TABLE>
<CAPTION>
               EXHIBIT
               NUMBER           DESCRIPTION OF EXHIBIT
        ---------------------   ----------------------
        <C>                     <S>
                 2.1            Agreement and Plan of Merger dated as of November 17, 1994
                                (Merger Agreement), among BJ Services Company, WCNA
                                Acquisition Corp. and The Western Company of North America
                                (filed as Exhibit 2.1 to the Company's Annual Report on Form
                                10-K for the year ended September 30, 1995, and incorporated
                                herein by reference).

                 2.2            First Amendment to Agreement and Plan of Merger dated
                                March 7, 1995, among BJ Services Company, WCNA Acquisition
                                Corp. and The Western Company of North America (filed as
                                Exhibit 2.2 to the Company's Annual Report on Form 10-K for
                                the year ended September 30, 1995, and incorporated herein
                                by reference).

                *3.1            Certificate of Incorporation, as amended as of April 13,
                                1995.

                *3.2            Certificate of Amendment to Certificate of Incorporation,
                                dated January 22, 1998.
</TABLE>

                                       55
<PAGE>

<TABLE>
<CAPTION>
               EXHIBIT
               NUMBER           DESCRIPTION OF EXHIBIT
        ---------------------   ----------------------
        <C>                     <S>
                 3.3            Certificate of Designation of Series A Junior Participating
                                Preferred Stock, as amended (filed as Exhibit 3.2 to the
                                Company's Annual Report on Form 10-K for the year ended
                                September 30, 1996, and incorporated herein by reference).

                *3.4            Bylaws of the Company, as amended as of December 9, 1999.

                 4.1            Specimen form of certificate for the Common Stock (filed as
                                Exhibit 4.1 to the Company's Registration Statement on Form
                                S-1 (Reg. No. 33-35187) and incorporated herein by
                                reference).

                 4.2            Amended and Restated Rights Agreement dated September 26,
                                1996, between the Company and First Chicago Trust Company of
                                New York, as Rights Agent (filed as Exhibit 4.1 to the
                                Company's Form 8-K dated October 21, 1996 and incorporated
                                herein by reference).

                 4.3            First Amendment to Amended and Restated Rights Agreement and
                                Appointment of Rights Agent, dated March 31, 1997, among the
                                Company, First Chicago Trust Company of New York and The
                                Bank of New York.

                 4.4            Warrant Agreement with respect to the Company's warrants to
                                purchase common stock (filed as Exhibit 4.6 to the Company's
                                Annual Report on Form 10-K for the year ended September 30,
                                1995, and incorporated herein by reference).

                 4.5            First Amendment to Warrant Agreement and Appointment of
                                Warrant Agent, dated as of March 31, 1997, among the
                                Company, First Chicago Trust Company of New York, and The
                                Bank of New York.

                 4.6            Indenture among BJ Services Company, BJ Services Company,
                                U.S.A., BJ Services Company Middle East, BJ Service
                                International, Inc. and Bank of Montreal Trust Company,
                                Trustee, dated as of February 1, 1996, which includes the
                                form of 7% Notes due 2006 and Exhibits thereto (filed as
                                Exhibit 4.1 to the Company's Registration Statement on Form
                                S-4 (Reg. No. 333-02287) and incorporated herein by
                                reference).

                10.1            Relationship Agreement dated as of July 20, 1990, between
                                the Company and Baker Hughes Incorporated (filed as Exhibit
                                10.1 to the Company's Registration Statement on Form S-1
                                (Reg. No. 33-35187) and incorporated herein by reference).

                10.2            Tax Allocation Agreement dated as of July 20, 1990, between
                                the Company and Baker Hughes Incorporated (included as
                                Exhibit A to Exhibit 10.1) (filed as Exhibit 10.2 to the
                                Company's Registration Statement on Form S-1 (Reg. No.
                                33-35187) and incorporated herein by reference).

                10.3            1990 Stock Incentive Plan, as amended and restated (filed as
                                Exhibit 10.1 to the Company's Registration Statement on Form
                                S-8 (Reg. No. 33-62098) and incorporated herein by
                                reference.

                10.4            Amendment effective December 12, 1996, to 1990 Stock
                                Incentive Plan, as amended and restated (filed as Exhibit
                                10.4 to the Company's Annual Report on Form 10-K for the
                                year ended September 30, 1996, and incorporated herein by
                                reference).

                10.5            1990 Employee Stock Purchase Plan (filed as Exhibit 10.4 to
                                the Company's Registration Statement on Form S-1 (Reg. No.
                                33-35187) and incorporated herein by reference).

                10.6            Amendment effective December 12, 1996, to 1990 Employee
                                Stock Purchase Plan (filed as Exhibit 10.6 to the Company's
                                Annual Report on form 10-K for the year ended September 30,
                                1996, and incorporated herein by reference).
</TABLE>

                                       56
<PAGE>

<TABLE>
<CAPTION>
               EXHIBIT
               NUMBER           DESCRIPTION OF EXHIBIT
        ---------------------   ----------------------
        <C>                     <S>
                10.7            BJ Services Company 1995 Incentive Plan (filed as Exhibit
                                4.5 to the Company's Registration Statement on Form S-8
                                (Reg. No. 33-58637) and incorporated herein by reference).

                10.8            Amendments effective January 25, 1996, and December 12,
                                1996, to BJ Services Company 1995 Incentive Plan (filed as
                                Exhibit 10.9 to the Company's Annual Report on form 10-K for
                                the year ended September 30, 1996, and incorporated herein
                                by reference).

                10.9            Form of Severance Agreement between BJ Services Company and
                                certain executive officers (filed as Exhibit 10.6 to the
                                Company's Annual Report on Form 10-K for the year ended
                                September 30, 1993 and incorporated herein by reference).

                10.10           Credit Agreement dated as of August 7, 1996, among the
                                Company, BJ Services Company U.S.A., BJ Service
                                International, Inc., and BJ Services Company Middle East,
                                Nowsco Well Service, Ltd., and Bank of America National
                                Trust and Savings Association and Bank of America Canada, as
                                agents, and the other financial institutions parties thereto
                                (the "Credit Agreement") (filed as Exhibit 10.1 to the
                                Company's Form 10-Q for the quarter ended June 30, 1996, and
                                incorporated herein by reference).

                10.11           Form of Revolving Note, U.S. Term Note, Prime Rate Note and
                                Swing Loan Note pursuant to the Credit Agreement (filed as
                                Exhibit 10.15 to the Company's Annual Report on Form 10-K
                                for the year ended September 30, 1996 and incorporated
                                herein by reference).

                10.12           Parent Guaranty Agreement dated as of August 7, 1996, by the
                                Company under the Credit Agreement (filed as Exhibit 10.16
                                to the Company's Annual Report on Form 10-K for the year
                                ended September 30, 1996 and incorporated herein by
                                reference).

                10.13           Form of Amendment to Executive Severance Agreement between
                                BJ Services Company and certain executive officers (filed as
                                Exhibit 10.18 to the Company's Annual Report on Form 10-K
                                for the year ended September 30, 1995 and incorporated
                                herein by reference).

                10.14           Key Employee Security Option Plan (filed as Exhibit 10.14 to
                                the Company's Annual Report on Form 10-K for the year ended
                                September 30, 1997 and incorporated herein by reference).

                10.15           Trust Indenture and Security Agreement dated as of
                                August 7, 1997 among First Security Bank, National
                                Association, BJ Services Equipment, L.P. and State Street
                                Bank and Trust Company, as Indenture Trustee (filed as
                                Exhibit 10.15 to the Company's Annual Report on Form 10-K
                                for the year ended September 30, 1997 and incorporated
                                herein by reference).

                10.16           Amended and Restated Agreement of Limited Partnership dated
                                as of August 7, 1997 of BJ Services Equipment, L.P (filed as
                                Exhibit 10.16 to the Company's Annual Report on Form 10-K
                                for the year ended September 30, 1997 and incorporated
                                herein by reference).

                10.17           Indenture Supplement No. 1 dated as of August 8, 1997
                                between First Security Bank, as Nonaffiliated Partner
                                Trustee, and BJ Services Equipment, L.P., and State Street
                                Bank and Trust Company, as Indenture Trustee (filed as
                                Exhibit 10.17 to the Company's Annual Report on Form 10-K
                                for the year ended September 30, 1997 and incorporated
                                herein by reference).
</TABLE>

                                       57
<PAGE>

<TABLE>
<CAPTION>
               EXHIBIT
               NUMBER           DESCRIPTION OF EXHIBIT
        ---------------------   ----------------------
        <C>                     <S>
                10.18           First Amendment to Amended and Restated Credit Agreement
                                dated as of November 14, 1997 among the Company, BJ Services
                                Company, U.S.A., BJ Service International, Inc., BJ Services
                                Company Middle East, Nowsco Well Service Ltd., Bank of
                                America National Trust and Savings Association, Bank of
                                America Canada, The Chase Manhattan Bank, Bank of Montreal,
                                Royal Bank of Canada, Toronto Dominion (Texas), Inc., Credit
                                Lyonnais New York Branch, and Wells Fargo Bank (Texas),
                                National Association (filed as Exhibit 10.18 to the
                                Company's Annual Report on Form 10-K for the year ended
                                September 30, 1997 and incorporated herein by reference).

                10.19           Second Amendment to Amended and Restated Credit Agreement
                                dated as of October 30, 1998 among the Company, BJ Services
                                Company, U.S.A., BJ Service International, Inc., BJ Services
                                Company Middle East, Nowsco Well Service Ltd., Bank of
                                America National Trust and Savings Association, Bank of
                                America Canada, The Chase Manhattan Bank, Bank of Montreal,
                                Royal Bank of Canada, Toronto Dominion (Texas), Inc. and
                                Wells Fargo Bank (Texas), National Association (filed as
                                Exhibit 10.19 to the Company's Annual Report on Form 10-K
                                for the year ended September 30, 1998 and incorporated
                                herein by reference).

                10.20           1997 Incentive Plan (filed as Appendix B to the Company's
                                Proxy Statement dated December 22, 1997 and incorporated
                                herein by reference).

                10.21           1999 Employee Stock Purchase Plan (filed as Appendix A to
                                the Company's Proxy Statement dated December 21, 1998 and
                                incorporated herein by reference).

               *10.22           Form of Amended and Restated Executive Severance Agreement
                                between BJ Services Company and certain executive officers.

               *10.23           Purchase Agreement dated October 25, 1999 between the
                                Company and Bank of America, N.A. and related agreements.

               *10.24           Amendment effective July 22, 1999 to 1990 Stock Incentive
                                plan.

               *10.25           Amendment effective July 22, 1999 to BJ Services Company
                                1995 Incentive Plan.

               *10.26           Amendment effective July 22, 1999 to 1997 Incentive Plan.

               *10.27           Amendment effective September 23, 1999 to 1990 Employee
                                Stock Purchase Plan.

               *21.1            Subsidiaries of the Company.

               *23.1            Consent of Deloitte & Touche LLP.

               *27.1            Financial data schedule.
</TABLE>

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

*Filed herewith.

                                       58
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15 (d) 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.

<TABLE>
<S>                                                    <C>  <C>
                                                       BJ SERVICES COMPANY

                                                       By                /s/ J.W. STEWART
                                                            -----------------------------------------
                                                                          J. W. Stewart
                                                              PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Date: December 20, 1999

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                SIGNATURE                                  TITLE                        DATE
                ---------                                  -----                        ----
<C>                                         <S>                                   <C>
             /s/ J.W. STEWART               Chairman of the Board, President,
    ---------------------------------         and Chief Executive Officer         December 20, 1999
               J.W. Stewart                   (Principal Executive Officer)

                                            Senior Vice President--Finance,
           /s/ MICHAEL MCSHANE                Chief Financial Officer and
    ---------------------------------         Director (Principal Financial       December 20, 1999
             Michael McShane                  Officer)

        /s/ MATTHEW D. FITZGERALD
    ---------------------------------       Vice President and Controller         December 20, 1999
          Matthew D. Fitzgerald               (Principal Accounting Officer)

        /s/ L. WILLIAM HEILIGBRODT
    ---------------------------------       Director                              December 20, 1999
          L. William Heiligbrodt

    ---------------------------------       Director
               John R. Huff

            /s/ DON D. JORDAN
    ---------------------------------       Director                              December 20, 1999
              Don D. Jordan

            /s/ R. A. LEBLANC
    ---------------------------------       Director                              December 20, 1999
              R. A. LeBlanc

          /s/ JAMES E. MCCORMICK
    ---------------------------------       Director                              December 20, 1999
            James E. McCormick

          /s/ MICHAEL E. PATRICK
    ---------------------------------       Director                              December 20, 1999
            Michael E. Patrick

            /s/ JAMES L. PAYNE
    ---------------------------------       Director                              December 20, 1999
              James L. Payne
</TABLE>

                                       59
<PAGE>
                              BJ SERVICES COMPANY

                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
             FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1998 AND 1999
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                            ADDITIONS
                                      BALANCE AT   ---------------------------
                                      BEGINNING     CHARGED       CHARGED TO                   BALANCE AT
                                      OF PERIOD    TO EXPENSE   OTHER ACCOUNTS   DEDUCTIONS   END OF PERIOD
                                      ----------   ----------   --------------   ----------   -------------
<S>                                   <C>          <C>          <C>              <C>          <C>
YEAR ENDED SEPTEMBER 30, 1997
Allowance for doubtful accounts
  receivable........................    $ 6,223      $2,098        $   337(4)      $ 2,464(1)    $ 6,194
Reserve for inventory obsolescence
  and adjustment....................     11,010       1,056            521(3)        3,050(2)      9,537

YEAR ENDED SEPTEMBER 30, 1998
Allowance for doubtful accounts
  receivable........................    $ 6,194      $4,140                        $ 1,244(1)    $ 9,090
Reserve for inventory obsolescence
  and adjustment....................      9,537         893        $   479(3)        2,458(2)      8,451

YEAR ENDED SEPTEMBER 30, 1999
Allowance for doubtful accounts
  receivable........................    $ 9,090      $3,301        $10,344(3)      $ 2,163(1)    $20,572
Reserve for inventory obsolescence
  and adjustment....................      8,451       1,749          1,831(3)        2,356(2)      9,675
</TABLE>

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

(1) Deductions in the allowance for doubtful accounts principally reflect the
    write-off of previously reserved accounts.

(2) Deductions in the reserve for inventory obsolescence and adjustment
    principally reflect the sale or disposal of related inventory.

(3) Additions to the reserve resulting from acquisitions of businesses.

(4) Additions to the reserve resulting from recoveries of accounts previously
    written-off.

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