<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
                                       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)
 
                  DELAWARE                             63-0084140
      (State or other jurisdiction of        (I.R.S. Employer Identification
       incorporation or organization)                     No.)
 
       5500 NORTHWEST CENTRAL DRIVE,
               HOUSTON, TEXAS                             77092
  (Address of principal executive offices)             (Zip Code)
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 462-4239
                            ------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
<TABLE>
<CAPTION>
            TITLE OF EACH CLASS                NAME OF EACH EXCHANGE 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 YES _X_ .
 
    At December 4, 1998, the registrant had outstanding 70,693,078 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 $990,485,779.
 
                      DOCUMENTS INCORPORATED BY REFERENCE:
 
    Portions of Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held January 28, 1999 are incorporated by reference into Part
III.
<PAGE>
                                     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 stimulation 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, 1998, the Company generated
approximately 88% of its revenue from pressure pumping services and 12% from
product and equipment sales and other oilfield services. Over the same period,
the Company generated approximately 51% of its revenue from U.S. operations and
49% from international operations.
 
PRESSURE PUMPING SERVICES
 
CEMENTING SERVICES
 
    The Company's cementing services, which accounted for approximately 33% of
the Company's total revenue during 1998, consist of blending 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 pump 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 properties. Job
design recommendations are developed by the Company's field engineers to achieve
desired porosity 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 55% of
the Company's total revenue during 1998, 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 low 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. The main pieces of equipment used in the
fracturing process are the blender, which blends the proppant and chemicals into
the fracturing fluid, and the pumping unit, which is capable of pumping
significant volumes at high pressures. 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 has 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.
 
    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.
 
    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 provided in the Gulf of Mexico, the North Sea, Venezuela, Trinidad and
Indonesia.
 
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    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 stimulation
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 12% of the Company's total revenue in 1998. 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.
 
    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. These services are provided during
the completion and workover phases. The Company expects that
 
                                       4
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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.
 
    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 client 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 chemicals 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.
 
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
 
                                       5
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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"). Since 1992, the Company has utilized 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 both monitoring and control instrumentation as an integral element of
providing cementing and stimulation services. The 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
 
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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
instrumentation 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 in the process of expanding 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 revenues, the Company has a number one or a number two share position in
several markets, including many regions in the United States, the North Sea,
Latin America and Canada.
 
    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 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.
 
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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 1998, the Company provided oilfield
services to over 2,500 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 it lost any of its largest
customers.
 
    UNITED STATES.  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 is affected by 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. 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 has since retracted due to weak oil prices.
 
    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 several joint venture companies, through which it conducts a
portion of its international operations. For geographic information, see Note 9
of the Notes to Consolidated Financial Statements.
 
    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 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, 1998, the Company had a total of 8,220 employees.
Approximately 53% of the Company's employees are employed outside the United
States. As a result of continued worsening of industry conditions, the Company
has further reduced its workforce to a total of 7,903 employees as of November
30, 1998.
 
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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.
 
    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
 
                                       9
<PAGE>
(Vistar-TM-) designed to provide greater fracture length with minimal polymer
residue. This product has been successfully utilized in over a hundred
applications during 1998. At the same time, the Company is currently working
with its suppliers to develop a new type of proppant coating designed to control
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, 1998, 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 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.
 
                                       10
<PAGE>
    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
                                                                                                                   HELD
              NAME                    AGE     POSITION WITH THE COMPANY                                            SINCE
---------------------------------     ---     -----------------------------------------------------------------  ---------
<S>                                <C>        <C>                                                                <C>
J. W. Stewart....................     54      Chairman of the Board, President and Chief Executive Officer         1986
 
Michael McShane..................     44      Senior Vice President--Finance and Chief Financial Officer           1998
 
David Dunlap.....................     37      Vice President, President--International Division                    1995
 
Matthew D. Fitzgerald............     41      Vice President and Controller                                        1998
 
Thomas H. Koops..................     52      Vice President--Technology and Logistics                             1988
 
Margaret B. Shannon..............     49      Vice President--General Counsel                                      1994
 
T. M. Whichard...................     40      Vice President and Treasurer                                         1998
 
Kenneth A. Williams..............     48      Vice President, President--U.S. Division                             1991
 
Stephen A. Wright................     51      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.
 
    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.
 
    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.
 
                                       11
<PAGE>
    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 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 in the 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, 1998.
 
                                       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 4, 1998 there were approximately 2,011 holders of record of the
Company's Common Stock and 1,219 holders of record of the Warrants.
 
    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 PRICE   WARRANT PRICE RANGE
                                                                                    RANGE
                                                                             --------------------  --------------------
                                                                               HIGH        LOW       HIGH        LOW
                                                                             ---------  ---------  ---------  ---------
<S>                                                                          <C>        <C>        <C>        <C>
Fiscal 1997
  1st Quarter..............................................................  $   26.25  $   18.19  $   27.63  $   14.00
  2nd Quarter..............................................................      27.69      19.13      30.50      15.25
  3rd Quarter..............................................................      29.25      21.69      33.38      19.25
  4th Quarter..............................................................      37.85      26.88      49.75      29.00
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 (through December 4, 1998)...................................      22.50      12.88      18.69       6.50
</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, 1998, there were 76,375,440 shares of Common Stock issued and
70,434,295 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), effective immediately. 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.
 
    The 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.
 
    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
 
                                       13
<PAGE>
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.
 
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, 1998 have been derived
from the audited consolidated financial statements of the Company. 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,
                                                      --------------------------------------------------------------------
                                                          1998          1997        1996(1)       1995(1)         1994
                                                      ------------  ------------  ------------  ------------  ------------
                                                                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                   <C>           <C>           <C>           <C>           <C>
OPERATING DATA:
  Revenue...........................................  $  1,527,468  $  1,466,573  $    965,261  $    633,660  $    434,476
  Operating expenses, excluding unusual charges and
    goodwill amortization...........................     1,289,295     1,269,731       875,022       592,905       414,493
  Goodwill amortization.............................        13,824        14,435         7,910         3,266         1,298
  Unusual charges(2)................................        26,586                       7,425        17,200
  Operating income..................................       197,763       182,407        74,904        20,289        18,685
  Interest expense..................................       (25,685)      (30,715)      (26,948)      (15,164)       (7,383)
  Other income (expense)--net.......................          (772)        1,727         3,321         2,763           745
  Income tax expense (benefit)......................        54,654        46,462        12,105        (1,102)        2,006
  Income before cumulative effect of accounting
    change..........................................       117,400       107,906        40,486         9,889        10,770
  Cumulative effect of change in accounting
    principle, net of tax(3)........................                                                               (10,400)
  Net income........................................       117,400       107,906        40,486         9,889           370
  Earnings per share before cumulative effect of
    accounting change:
    Basic...........................................          1.58          1.40           .66          0.23          0.34
    Diluted.........................................          1.44          1.31           .65          0.23          0.34
  Depreciation and amortization.....................        91,497        90,376        66,050        42,064        25,335
  Capital expenditures(4)...........................       167,961       102,198        54,158        30,966        39,345
 
FINANCIAL POSITION DATA (AT END OF PERIOD):
  Property--net.....................................  $    602,028  $    540,356  $    558,156  $    416,810  $    198,844
  Total assets......................................     1,743,701     1,726,768     1,709,160       989,683       410,066
  Long-term debt, excluding current maturities......       241,869       298,634       523,004       259,566        74,700
  Stockholders' equity..............................       900,064       960,227       841,703       466,795       189,927
</TABLE>
 
------------------------
 
(1) Includes the effect of the acquisitions of Nowsco in 1996 and Western in
    1995, both of which were accounted for as purchases in accordance with
    generally accepted accounting principles. For further details of the Nowsco
    Acquisition, see Note 3 of the Notes to Consolidated Financial Statements.
 
                                       14
<PAGE>
(2) Unusual charges represent nonrecurring costs associated with the downturn in
    oilfield drilling activity in 1998 and the acquisitions of Nowsco in 1996
    and Western in 1995. For further details of the 1998 and 1996 unusual
    charges, see Note 4 of the Notes to Consolidated Financial Statements.
 
(3) In 1994, the Company changed its method of accounting for postretirement
    benefits other than pensions in accordance with SFAS 106.
 
(4) Excluding acquisitions of businesses.
 
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 generated approximately 60% of its revenues during fiscal 1998. This
volatility has been particularly evident during the latter half of 1998 when, as
a result of low oil prices (recently falling below $11 per barrel), the industry
has recently experienced the lowest worldwide oilfield drilling activity levels
in the last 50 years.
 
    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 and 1992.
While U.S. drilling activity temporarily rebounded during 1997 and the beginning
of 1998, exceeding 1,000 active rigs for the first time since 1991, it has since
retracted due to weak oil prices. While the average active rig count in the U.S.
for the fiscal year ended September 30, 1998 was flat with the prior year,
averaging 906 rigs, the last quarter of the fiscal year averaged only 794 active
rigs, or 20% below the prior year's fourth quarter. Most of the decline occurred
in rigs drilling for oil, down 41% during the period. The U.S. active rig count
has continued to decline subsequent to the end of the fiscal year, reaching a
low of 669 during December 1998.
 
    With the exception of Canada, international drilling activity has
historically been less volatile than domestic drilling activity. Due mainly to
reduced activity in Latin America, the average international rig count,
excluding Canada, declined 2% during fiscal 1998. While the Canadian average rig
count declined only 5% during the fiscal year, it was down 49% during the fourth
fiscal quarter compared to the same period in the prior year and has continued
to decline subsequent to the fiscal year end.
 
EXPANSIONS AND ACQUISITIONS
 
    The Company's expansion and acquisition efforts over the past several years
have been focused on adding critical mass to its U.S. operations and
international geographic expansions of its existing service lines. The Company
has completed two major acquisitions since 1995--the acquisition of The Western
Company of North America in April 1995 (the "Western Acquisition") and the
acquisition of Nowsco Well Service Ltd. in June 1996 (the "Nowsco Acquisition").
 
    The Western Acquisition was completed for a total purchase price of $511.4
million (including transaction costs of $7.2 million), for which the Company
paid approximately half in cash and half in shares of the Company's common stock
and warrants to purchase common stock. The Western Acquisition provided the
Company with a greater critical mass with which to compete in domestic and
international markets and the realization of significant consolidation benefits.
The Western Acquisition increased the Company's existing total revenue base by
approximately 75% and more than doubled the Company's domestic revenue base. In
addition, in excess of $40 million of annual overhead and redundant operating
costs were eliminated by combining the two companies.
 
                                       15
<PAGE>
    The Nowsco Acquisition was completed for a total purchase price of $582.6
million (including transaction costs of $6.2 million) in cash. The Nowsco
Acquisition accomplished three primary objectives: (i) it gave the Company the
number one pumping services market position in Canada (where the Company had not
operated since 1992) and added to the Company's existing market position in
several key U.S. and international markets; (ii) it provided a technological
leadership position in the high-growth coiled tubing service line; and (iii) it
provided in excess of $20 million of additional annual cost savings through
consolidation of redundant overhead and operating bases. The Nowsco Acquisition
added approximately 40% to the Company's then existing revenue base.
 
    The Company's other expansion efforts during the past three years have
included the expansion of pumping services into several key international
markets including Bolivia and Brazil (through acquisition of shares from the
Company's joint venture partners), Saudi Arabia, Bangladesh and Vietnam;
expanding tubular services and process and pipeline services into geographic
regions outside the North Sea, and adding additional stimulation equipment
capacity in key Latin American markets.
 
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,
                                                             -------------------------------
                                                               1998       1997       1996
                                                             ---------  ---------  ---------
<S>                                                          <C>        <C>        <C>
Rig Count:(1)
  U.S......................................................        906        906        759
  International............................................      1,109      1,147      1,032
Revenue per rig (in thousands).............................  $   758.0  $   714.4  $   539.0
Revenue per employee (in thousands)........................  $   174.8  $   185.8  $   173.0
Percentage of gross profit to revenue(2)...................       24.5%      21.8%      18.6%
Percentage of research and engineering expense to
  revenue..................................................        2.0%       1.7%       1.8%
Percentage of marketing expense to revenue.................        3.6%       3.5%       4.1%
Percentage of general and administrative expense to
  revenue..................................................        3.3%       3.1%       3.5%
</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:  The Company's revenue increased for the sixth consecutive year
during 1998, albeit at a slower growth rate than the previous two fiscal years
which were influenced by major acquisitions. Revenues increased by 4% during
1998, with each of the Company's major service lines--pressure pumping, process
and pipeline services, tubular services and specialty chemicals--increasing
during the year despite the 2% decline in worldwide drilling activity. The 1997
revenue increase of 52% was primarily as a result of the Nowsco Acquisition and
the recovery in U.S. drilling activity.
 
UNITED STATES REVENUE
 
    The Company's U.S. revenue increased by 1% and 42% in 1998 and 1997,
respectively. The 1998 increase was due to approximately 8-10% better pricing
offset by a slight decline in market share. U.S. drilling activity was flat
during the year. Fiscal 1998 also showed a continuation of the shift away from
oilfield drilling and more towards drilling for natural gas. This trend is
expected to continue for the near future as oil prices remain weak and the
better drilling prospects appear to be in the natural gas regions of
 
                                       16
<PAGE>
the U.S. In addition, U.S. pricing declined by approximately 5% from the third
to the fourth fiscal quarter and may decline further if drilling activity
continues to decline.
 
    The 1997 increase was due to a combination of the Nowsco acquisition,
improved drilling activity and better pricing. The Nowsco Acquisition added
approximately 15-20% to the Company's U.S. revenues beginning in the fourth
quarter of fiscal 1996, providing nine months of additional benefit during
fiscal 1997. Taking into account the previous year's pre-acquisition Nowsco
revenues, the U.S. operations showed a pro forma revenue increase of 26%.
Activity, as measured by the rig count, increased by 19% during this period.
Pricing improved by approximately 7-8% mainly through price book increases
implemented in July 1996 and June 1997. Pricing showed stronger improvement
(12-13%) during the last quarter of the year due to tightening capacity in the
U.S. pressure pumping market. While management believes the Company retained
most of the key customers of Nowsco, it estimates the Company may have
experienced 1-2% of market share deterioration on a pro forma basis during 1997
due to the loss of certain low-priced Nowsco business to a new competitor and
job turndowns due to personnel and equipment limitations.
 
INTERNATIONAL REVENUE
 
    International revenue increased by 8% and 64% during 1998 and 1997,
respectively. 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 Asia Pacific 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 million decline in international equipment sales.
 
    The 1997 increase was primarily driven by the Nowsco Acquisition, as
approximately two-thirds of Nowsco's business was generated outside the United
States (mostly in Canada and the North Sea). As a result of the Nowsco
Acquisition, the Company now has the largest pressure pumping operation in
Canada. Pro forma for the Nowsco operations, 1997 international pressure pumping
revenues increased by 18% due primarily to strong Canadian drilling activity,
which increased by 38% over 1996. Other international pressure pumping
operations showing the most significant revenue increases during the year were
Venezuela, due to increased activity and coiled tubing capacity additions; the
Middle East, reflecting new contracts in India and Egypt and expansions into
Saudi Arabia and Bangladesh; and Brazil and Indonesia. Partially offsetting
these increases were pro forma revenue declines in the North Sea and Russia.
 
    Each of the Company's other international service lines, which primarily
consist of tubular services and process and pipeline services, also showed
revenue increases in both 1998 and 1997 due to stronger activity and expansions
into new markets.
 
    OPERATING INCOME:  Operating income increased in both 1998 and 1997 due to
strong oilfield services activity and pricing during 1997 and the first half of
1998, improved margins in each of the Company's service lines, and in 1997 due
to the Nowsco Acquisition. Partially offsetting this improvement was a $26.6
million unusual charge recorded in 1998 primarily associated with the downturn
in the oilfield services industry during the later part of 1998.
 
    The cost of sales and services as a percentage of revenue declined to 75.5%
in 1998, down from 78.2% and 81.4% in 1997 and 1996, respectively. The
improvement resulted primarily from cost reduction efforts implemented after the
Nowsco Acquisition and from the operating leverage from the stronger activity
levels. Net pricing also improved during 1998 and 1997 as a result of U.S. price
book increases in June and November 1997, and from discount reductions during
1997 through the first half of 1998. During the fourth quarter of fiscal 1998,
however, U.S. pricing declined by approximately 5% and could decline further
should drilling activity continue to decline. The increases in the other
operating expenses (research and engineering, marketing and general and
administrative expenses) are reflective of increased support costs from the
higher activity levels, as well as increased spending on coiled tubing and
downhole tool research,
 
                                       17
<PAGE>
international commissions and information systems. In addition, these expenses
increased during 1997 due to additional overhead from the former Nowsco
operations and higher incentives.
 
    Goodwill amortization increased in 1997 due to the Nowsco Acquisition, which
resulted in additional goodwill amortization of $9.5 million during the year.
The 1998 unusual charge includes employee severance, writedown of idle equipment
and facilities, and various other costs primarily associated with the 1998
downturn in the oilfield services industry. The 1996 unusual charge was taken in
conjunction with consolidation programs associated with the Nowsco Acquisition.
Included in the 1996 unusual charge were adjustments to the carrying value of
duplicate operating facilities, severance and related benefit costs, and legal
and other costs that would not have been incurred had the Nowsco Acquisition not
occurred. For further details of the unusual charges, see Note 4 of the Notes to
Consolidated Financial Statements.
 
    OTHER:  Interest expense declined 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 the prior fiscal
year. These items were partially offset by repurchases of the Company's
outstanding stock, which totaled $196.6 million during 1998. In 1997, interest
expense increased as a result of additional borrowings to fund the Nowsco
Acquisition. The Company's weighted average borrowing costs, however, declined
during 1997 primarily as a result of two factors: (i) utilization of lower
interest rate facilities and (ii) improvement in the Company's credit ratings.
See also "Financial Condition--Capital Resources and Liquidity" and Note 6 of
the Notes to Consolidated Financial Statements. Other income (expense)--net
resulted in a net expense due to higher profitability from the Company's
international joint ventures resulting in increased amounts payable to its
minority partners. Each of the previous two years was a net gain due primarily
to gains on asset sales and royalty income. See Note 12 of Notes to Consolidated
Financial Statements.
 
    INCOME TAXES:  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 Company's effective tax rate has remained below the U.S.
statutory rate during each of the past three years. The effective tax rate
increased to 30% in 1997 and 32% in 1998 primarily as a result of a higher U.S.
profitability and a reduction in the above mentioned reorganization benefits.
While increasing the Company's effective tax rate, the greater U.S.
profitability does not result in higher cash taxes due to the existence of U.S.
net operating loss carryovers. The Company also recognized nonrecurring tax
benefits of $1.9 million in 1996 from the favorable settlement of tax audits and
tax losses attributable to foreign exchange fluctuations in certain
international jurisdictions. See Note 8 of the Notes to Consolidated Financial
Statements.
 
CAPITAL RESOURCES AND LIQUIDITY
 
    Net cash provided from operating activities increased in each of the last
two years primarily due to the recovery in U.S. drilling activity during 1997
and the first half of 1998, gains from the Company's international growth
initiatives and, in 1997, from the Nowsco Acquisition. In addition, in 1998 the
slowdown in business during the last half of the year resulted in the
liquidation in receivable balances of $28.7 million. In 1997, cash flows from
operating activities were reduced by higher receivable balances and the payment
of merger related expenses.
 
    Net cash used for investing activities was $161.0 million in 1998 compared
to net cash provided from investing activities of $4.5 million in 1997 and net
cash used for investing activities of $635.6 million in 1996. Capital spending
increased to $168.0 million in 1998 compared to $102.2 million and $54.2 million
in 1997 and 1996, respectively. The 1998 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 Company's 1997 property additions
included two additional pumping service vessels (both operating in Latin
America), expansion of cementing and
 
                                       18
<PAGE>
stimulation capacity in the Gulf of Mexico and Latin America and upgrades to the
Company's information systems. Major items included in 1996 spending were
related to international expansion opportunities (primarily in Latin America)
and offshore cementing skids. 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 future interest expense of
approximately $6 million per year. 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 million was completely offset with net operating loss carryforwards that are
available to the Company as a result of the Western Acquisition. The tax benefit
of the net operating loss utilization was recorded as a reduction to goodwill.
Net cash used for 1997 investing activities was also impacted by the receipt of
$20.3 from the sale of an idle stimulation vessel (the Renaissance) partially
offset by higher property additions, and the acquisitions of Top Tool Company,
Inc. and the remaining 51% ownership of the Company's previously unconsolidated
joint venture in Argentina acquired with Nowsco. Investing activities in 1996
included the acquisition of the remaining 60% interest in the Company's joint
venture in Brazil for total consideration of $5.4 million (consisting of $3.7
million cash and $1.7 million of debt assumed by the Company) and the Nowsco
Acquisition for $582.6 million in cash.
 
    Projected capital expenditures for fiscal 1999 are expected to be
significantly below 1998 levels due to the slowdown in worldwide drilling
activity levels. The actual amount of 1999 capital expenditures (excluding
acquisitions) will be primarily dependent upon 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.
 
    The Company utilized net cash flows from operating and financing activities
to repurchase $196.6 million of its common stock during 1998. The common stock
was purchased under a stock repurchase program approved by the Company's Board
of Directors in December 1997 and increased in May 1998, authorizing purchases
up to $300 million at the discretion of the Company's management. Because net
cash flows from operating activities exceeded the Company's capital requirements
in 1997, the Company was able to reduce existing borrowings by $150.0 million
during the year. In 1996, the Nowsco Acquisition was financed with the proceeds
from the sale of 9.8 million shares of the Company's common stock that generated
net proceeds of $323.1 million, with the remainder from borrowings under its
credit facility.
 
    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 $157.1 million (currently drawn in both U.S. and Canadian
dollars under a provision which is renewed 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, 1998, borrowings outstanding under the Bank Credit Facility
totaled $157.1 million, consisting solely of borrowings under the term loan.
Principal reductions of term loans under the Bank Credit Facility are due in
aggregate annual installments of $39.8 million; $42.6 million; $42.6 million and
$32.1 million in the years ending September 30, 1999, 2000, 2001 and 2002,
respectively.
 
    In addition to the committed facility, the Company had $246.3 million in
various unsecured, discretionary lines of credit at September 30, 1998, which
expire at various dates in 1999. 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, 1998 and
September 30,
 
                                       19
<PAGE>
1997, there were $184.9 million and $59.8 million, respectively 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
guarantees of the 7% Notes by certain subsidiaries of the Company were released
in accordance with their terms in December 1997.
 
    The $6.0 million outstanding balance of the Company's 9.2% Notes and the
$2.2 million outstanding balance of the Company's 12 7/8% Notes were repaid in
December 1997.
 
    The Company's interest-bearing debt increased to 34.1% of its total
capitalization at September 30, 1998, compared to 29.5% at September 30, 1997,
due to the repurchases of the Company's stock. 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. Management believes that the Bank Credit Facility,
combined with other discretionary credit facilities and cash flow from
operations, provides the Company with sufficient capital resources and liquidity
to manage its routine operations and fund projected capital expenditures.
 
    At September 30, 1998, the Company had approximately $443 million of U.S.
tax net operating loss carryforwards expiring in varying amounts between 2000
and 2011. The Company also had approximately $80 million of foreign tax net
operating loss carryforwards and approximately $10 million of foreign investment
tax credit carryforwards as of September 30, 1998. Of the foreign tax net
operating loss carryforwards, approximately $45 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 1999. 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, 1998 and 1997.
 
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 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 internal 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 also completed the assessment phase
(which included testing of any systems deemed to be already Year 2000 compliant)
and developed plans for remediation or replacement of all non-compliant systems
that are critical to its operations. The Company expects to have remediated
those systems and equipment that are critical to its operations by no later than
the end of June 1999. The remainder of 1999 will be focused on
 
                                       20
<PAGE>
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 is in the
process of reviewing and validating the responses from the suppliers of those
products and services and in some cases is seeking additional information or
certification. In situations where these suppliers are not compliant or do not
respond, the Company is planning to develop contingency plans, including
utilizing alternative suppliers.
 
    The comprehensive plan designed to achieve an uninterrupted transition into
the Year 2000 is expected to cost the Company approximately $2.2 million. In
1998, the Company expensed $1.7 million related to Year 2000 readiness. In
addition, the program has resulted in the acceleration of approximately $3.0
million in hardware and software expenditures to replace non-compliant systems.
All expenditures related to the Year 2000 initiative are expected to be funded
by cash flows from operations and are not expected to materially impact the
results of operations. 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. There can be no assurances that these estimates
will be achieved and actual results could differ from what is currently
anticipated.
 
    The Year 2000 issue is a pervasive problem for most companies due to the
interdependence of computer systems. Therefore, the Company is continually
assessing the risks surrounding this issue and its potential impact on the
Company. Failure to address 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 the first quarter of 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 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.
 
                                       21
<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 foreign exchange contracts
outstanding at September 30, 1998. All items described are non-trading and are
stated in U.S. dollars.
<TABLE>
<CAPTION>
                                                                      EXPECTED MATURITY DATES
                                                          -----------------------------------------------
                                                            1999     2000     2001     2002    THEREAFTER
                                                          --------  -------  -------  -------  ----------
<S>                                                       <C>       <C>      <C>      <C>      <C>
                                                                          (IN THOUSANDS)
 
SHORT TERM BORROWINGS
Bank borrowings; US $ denominated.......................  $ 79,114
Average variable interest rate--6.00% at September 30,
 1998
 
Bankers' acceptance notes; Canadian $ denominated.......  $104,636
Average variable interest rate--6.21% at September 30,
 1998
 
Bank borrowings; Deutsche mark denominated..............  $  1,124
Average variable interest rate--3.97% at September 30,
 1998
 
DEBT
 
Current-term loan; US $ denominated.....................  $ 10,599
Variable interest rate--6.03% at September 30, 1998
 
Current-term loan; Canadian $ denominated...............  $ 29,333
Variable interest rate--6.18% at September 30, 1998
 
Non current-term loan; US $ denominated.................            $11,337   11,268    8,588
Variable interest rate--6.03% at September 30, 1998
 
Non current-term loan; Canadian $ denominated...........            $31,358   31,358   23,519
Variable interest rate--6.18% at September 30, 1998
 
7% Series B Notes--US $ denominated.....................                                        $124,441
Fixed interest rate--7%
 
<CAPTION>
                                                                     FAIR VALUE
                                                                    SEPTEMBER 30,
                                                           TOTAL        1998
                                                          --------  -------------
<S>                                                       <C>       <C>
SHORT TERM BORROWINGS
Bank borrowings; US $ denominated.......................  $ 79,114    $ 79,114
Average variable interest rate--6.00% at September 30,
 1998
Bankers' acceptance notes; Canadian $ denominated.......  $104,636    $104,636
Average variable interest rate--6.21% at September 30,
 1998
Bank borrowings; Deutsche mark denominated..............  $  1,124    $  1,124
Average variable interest rate--3.97% at September 30,
 1998
DEBT
Current-term loan; US $ denominated.....................  $ 10,599    $ 10,599
Variable interest rate--6.03% at September 30, 1998
Current-term loan; Canadian $ denominated...............  $ 29,333    $ 29,333
Variable interest rate--6.18% at September 30, 1998
Non current-term loan; US $ denominated.................  $ 31,193    $ 31,193
Variable interest rate--6.03% at September 30, 1998
Non current-term loan; Canadian $ denominated...........  $ 86,235    $ 86,235
Variable interest rate--6.18% at September 30, 1998
7% Series B Notes--US $ denominated.....................  $124,441    $128,439
Fixed interest rate--7%
</TABLE>
 
                                       22
<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, 1998 and
1997, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended September
30, 1998. 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, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1998 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basis consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
 
DELOITTE & TOUCHE LLP
Houston, Texas
November 24, 1998
 
                                       23
<PAGE>
                              BJ SERVICES COMPANY
 
                      CONSOLIDATED STATEMENT OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                YEAR ENDED SEPTEMBER 30,
                                                             -------------------------------
                                                               1998       1997       1996
                                                             ---------  ---------  ---------
                                                             (IN THOUSANDS, EXCEPT PER SHARE
                                                                        AMOUNTS)
<S>                                                          <C>        <C>        <C>
Revenue....................................................  $1,527,468 $1,466,573 $ 965,261
Operating Expenses:
    Cost of sales and services.............................  1,152,910  1,147,170    785,314
    Research and engineering...............................     30,308     24,820     17,094
    Marketing..............................................     55,333     51,555     39,309
    General and administrative.............................     50,744     46,186     33,305
    Goodwill amortization..................................     13,824     14,435      7,910
    Unusual charges........................................     26,586                 7,425
                                                             ---------  ---------  ---------
        Total operating expenses...........................  1,329,705  1,284,166    890,357
                                                             ---------  ---------  ---------
Operating income...........................................    197,763    182,407     74,904
Interest expense...........................................    (25,685)   (30,715)   (26,948)
Interest income............................................        748        949      1,314
Other income(expense)--net.................................       (772)     1,727      3,321
                                                             ---------  ---------  ---------
Income before income taxes.................................    172,054    154,368     52,591
Income tax expense.........................................     54,654     46,462     12,105
                                                             ---------  ---------  ---------
Net income.................................................  $ 117,400  $ 107,906  $  40,486
                                                             ---------  ---------  ---------
                                                             ---------  ---------  ---------
Earnings Per Share:
    Basic..................................................  $    1.58  $    1.40  $     .66
    Diluted................................................  $    1.44  $    1.31  $     .65
 
Weighted-Average Shares Outstanding:
    Basic..................................................     74,482     76,868     61,188
    Diluted................................................     81,263     82,496     62,762
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       24
<PAGE>
                              BJ SERVICES COMPANY
 
                  CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                          SEPTEMBER 30,
                                                                       --------------------
                                                                         1998       1997
                                                                       ---------  ---------
                                                                          (IN THOUSANDS)
<S>                                                                    <C>        <C>
Current Assets:
  Cash and cash equivalents..........................................  $   1,625  $   3,900
  Receivables, less allowance for doubtful accounts: 1998,
    $9,090,000; 1997, $6,194,000.....................................    300,140    332,851
  Inventories:
    Finished goods...................................................     78,459     73,343
    Work in process..................................................      2,574      6,969
    Raw materials....................................................     30,153     23,922
                                                                       ---------  ---------
      Total inventories..............................................    111,186    104,234
  Deferred income taxes..............................................     12,767     12,986
  Other current assets...............................................     26,078     20,773
                                                                       ---------  ---------
      Total current assets...........................................    451,796    474,744
Property:
  Land...............................................................     12,086     14,332
  Buildings and other................................................    153,519    136,366
  Machinery and equipment............................................    883,600    781,883
                                                                       ---------  ---------
      Total property.................................................  1,049,205    932,581
  Less accumulated depreciation......................................    447,177    392,225
                                                                       ---------  ---------
      Property--net..................................................    602,028    540,356
  Goodwill, net of amortization......................................    503,259    513,388
  Deferred income taxes..............................................    171,164    183,076
  Investments and other assets.......................................     15,454     15,204
                                                                       ---------  ---------
                                                                       $1,743,701 $1,726,768
                                                                       ---------  ---------
                                                                       ---------  ---------
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       25
<PAGE>
                              BJ SERVICES COMPANY
 
            CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                                          SEPTEMBER 30,
                                                                       --------------------
                                                                         1998       1997
                                                                       ---------  ---------
                                                                          (IN THOUSANDS)
<S>                                                                    <C>        <C>
Current Liabilities:
  Accounts payable--trade............................................  $ 140,726  $ 162,467
  Short-term borrowings..............................................    184,874     62,492
  Current portion of long-term debt..................................     39,932     40,206
  Accrued employee compensation and benefits.........................     41,686     38,807
  Income taxes.......................................................     17,777     10,859
  Taxes other than income............................................      8,336     10,267
  Accrued insurance..................................................     12,303     15,486
  Other accrued liabilities..........................................     67,491     44,760
                                                                       ---------  ---------
      Total current liabilities......................................    513,125    385,344
Long-term debt.......................................................    241,869    298,634
Deferred income taxes................................................      9,021      7,598
Accrued postretirement benefits......................................     28,353     27,228
Minority interest and other long-term liabilities....................     51,269     47,737
Commitments and contingencies
Stockholders' Equity:
  Preferred stock (authorized 5,000,000 shares)
  Common stock, $.10 par value (authorized 160,000,000 shares;
    76,375,440 shares issued and 70,434,295 shares outstanding in
    1998; 77,061,524 shares issued and outstanding in 1997)..........      7,638      3,853
  Capital in excess of par...........................................    765,547    763,063
  Retained earnings..................................................    313,629    201,897
  Minimum pension liability adjustment...............................     (5,976)    (2,051)
  Cumulative translation adjustment..................................     13,395        540
  Unearned compensation..............................................       (365)    (7,075)
  Treasury stock at cost (1998--5,941,145 shares)....................   (193,804)
                                                                       ---------  ---------
      Total stockholders' equity.....................................    900,064    960,227
                                                                       ---------  ---------
                                                                       $1,743,701 $1,726,768
                                                                       ---------  ---------
                                                                       ---------  ---------
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       26
<PAGE>
                              BJ SERVICES COMPANY
 
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                          CAPITAL                                                MINIMUM      CUMULATIVE
                            COMMON       IN EXCESS    TREASURY      UNEARNED      RETAINED       PENSION      TRANSLATION
                             STOCK        OF PAR        STOCK     COMPENSATION    EARNINGS      LIABILITY     ADJUSTMENT
                         -------------  -----------  -----------  -------------  -----------  -------------  -------------
                                                                  (IN THOUSANDS)
<S>                      <C>            <C>          <C>          <C>            <C>          <C>            <C>
BALANCE, SEPTEMBER 30,
  1995.................    $   2,795     $ 415,242                                $  53,505                    $  (4,747)
Net income.............                                                              40,486
Issuance of stock for:
  Business
    acquisition........          978       322,086
  Stock options........           31         5,985
  Stock purchase
    plan...............            5           908
  Stock performance
    awards.............                      4,491                  $  (4,491)
Recognition of unearned
  compensation.........                                                 1,305
Cumulative translation
  adjustments..........                                                                                            3,124
                              ------    -----------  -----------  -------------  -----------  -------------  -------------
BALANCE, SEPTEMBER 30,
  1996                         3,809       748,712                     (3,186)       93,991                       (1,623)
Net income.............                                                             107,906
Issuance of stock for:
  Stock options........           36         7,270
  Stock purchase
    plan...............            8         1,676
  Warrants
    surrendered........                         16
  Stock performance
    awards.............                        964                       (964)
Recognition of unearned
  compensation.........                                                 1,500
Revaluation of stock
  performance awards...                      4,425                     (4,425)
Minimum pension
  liability, net of
  deferred tax
  benefit..............                                                                         $  (2,051)
Cumulative translation
  adjustments..........                                                                                            2,163
                              ------    -----------  -----------  -------------  -----------  -------------  -------------
BALANCE, SEPTEMBER 30,
  1997.................        3,853       763,063                     (7,075)      201,897        (2,051)           540
Net income.............                                                             117,400
Issuance of stock for:
  Stock options........            7         1,873
  Stock purchase
    plan...............            9         2,861
  Warrants
    surrendered........                         39
  Stock performance
    awards.............                      1,068                     (1,068)
  Stock split..........        3,769                                                 (3,769)
Treasury stock
  purchased............                               $(196,608)
Treasury stock
  reissued.............                                   2,804                      (1,899)
Recognition of unearned
  compensation.........                                                 1,850
Revaluation of stock
  performance awards...                     (7,790)                     5,928
Minimum pension
  liability, net of
  deferred tax
  benefit..............                                                                            (3,925)
Tax benefit from
  exercise of
  options..............                      4,433
Cumulative translation
  adjustments..........                                                                                          12 ,855
                              ------    -----------  -----------  -------------  -----------  -------------  -------------
BALANCE, SEPTEMBER 30,
  1998.................    $   7,638     $ 765,547    $(193,804)    $    (365)    $ 313,629     $  (5,976)     $  13,395
                              ------    -----------  -----------  -------------  -----------  -------------  -------------
                              ------    -----------  -----------  -------------  -----------  -------------  -------------
 
<CAPTION>
 
                            TOTAL
                         -----------
 
<S>                      <C>
BALANCE, SEPTEMBER 30,
  1995.................   $ 466,795
Net income.............      40,486
Issuance of stock for:
  Business
    acquisition........     323,064
  Stock options........       6,016
  Stock purchase
    plan...............         913
  Stock performance
    awards.............
Recognition of unearned
  compensation.........       1,305
Cumulative translation
  adjustments..........       3,124
                         -----------
BALANCE, SEPTEMBER 30,
  1996                      841,703
Net income.............     107,906
Issuance of stock for:
  Stock options........       7,306
  Stock purchase
    plan...............       1,684
  Warrants
    surrendered........          16
  Stock performance
    awards.............
Recognition of unearned
  compensation.........       1,500
Revaluation of stock
  performance awards...
Minimum pension
  liability, net of
  deferred tax
  benefit..............      (2,051)
Cumulative translation
  adjustments..........       2,163
                         -----------
BALANCE, SEPTEMBER 30,
  1997.................     960,227
Net income.............    117, 400
Issuance of stock for:
  Stock options........       1,880
  Stock purchase
    plan...............       2,870
  Warrants
    surrendered........          39
  Stock performance
    awards.............
  Stock split..........
Treasury stock
  purchased............    (196,608)
Treasury stock
  reissued.............         905
Recognition of unearned
  compensation.........       1,850
Revaluation of stock
  performance awards...      (1,862)
Minimum pension
  liability, net of
  deferred tax
  benefit..............      (3,925)
Tax benefit from
  exercise of
  options..............       4,433
Cumulative translation
  adjustments..........      12,855
                         -----------
BALANCE, SEPTEMBER 30,
  1998.................   $ 900,064
                         -----------
                         -----------
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       27
<PAGE>
                              BJ SERVICES COMPANY
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED SEPTEMBER 30,
                                                                -------------------------------
                                                                  1998       1997       1996
                                                                ---------  ---------  ---------
                                                                        (IN THOUSANDS)
<S>                                                             <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................  $ 117,400  $ 107,906  $  40,486
Adjustments to reconcile net income to cash provided from
  operating activities:
  Depreciation and amortization...............................     91,497     90,376     66,050
  Net (gain) loss on disposal of assets.......................         89       (169)    (2,271)
  Recognition of unearned compensation........................      1,850      1,500      1,305
  Deferred income tax benefit.................................     31,426     28,764       (136)
  Unusual charge (noncash)....................................     15,278                 4,300
  Minority interest...........................................      3,206        805        519
Changes in:
  Receivables.................................................     28,689    (59,307)   (32,475)
  Accounts payable--trade.....................................    (22,248)    18,188      8,620
  Inventories.................................................     (5,750)   (13,355)    (3,717)
  Other current assets and liabilities........................     13,580     (6,638)   (29,438)
  Other, net..................................................      9,325    (24,525)    (2,037)
                                                                ---------  ---------  ---------
Net cash flows provided from operating activities.............    284,342    143,545     51,206
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions............................................   (167,961)  (102,198)   (54,158)
Proceeds from disposal of assets..............................      9,372    127,490      4,805
Acquisitions of businesses, net of cash acquired..............     (2,459)   (20,810)  (586,282)
                                                                ---------  ---------  ---------
Net cash provided from (used for) investing activities........   (161,048)     4,482   (635,635)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock........................                          323,064
Proceeds from exercise of stock options and stock purchase
  grants......................................................      5,696      9,006      6,929
Purchase of treasury stock....................................   (196,608)
Proceeds from (repayment of) bank borrowings--net.............     71,343   (150,030)   261,491
Principal payment on other long-term notes....................     (6,000)    (6,000)    (6,000)
                                                                ---------  ---------  ---------
Net cash flows provided from (used for) financing
  activities..................................................   (125,569)  (147,024)   585,484
Increase (decrease) in cash and cash equivalents..............     (2,275)     1,003      1,055
Cash and cash equivalents at beginning of year................      3,900      2,897      1,842
                                                                ---------  ---------  ---------
Cash and cash equivalents at end of year......................  $   1,625  $   3,900  $   2,897
                                                                ---------  ---------  ---------
                                                                ---------  ---------  ---------
</TABLE>
 
                 See Notes to Consolidated Financial Statements
 
                                       28
<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 1997 and 1996 have been reclassified in the accompanying
consolidated financial statements to conform to the current year presentation.
Fiscal 1997 and 1996 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 $1,665,000, $684,000 and
$200,000 for the years ended September 30, 1998, 1997 and 1996, 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, 1998 and 1997 was $43,525,000 and $29,612,000
respectively. The Company utilizes undiscounted estimated cash flows to evaluate
any possible impairment of intangible assets.
 
    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.
 
    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.
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
 
                                       29
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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 foreign exchange contracts outstanding at September
30, 1998 and 1997.
 
    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
September 1998, the Company recorded an impairment of $12.2 million 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:  In June 1997, the Financial Accounting
Standards Board issued Statement No. 130, "Reporting Comprehensive Income,"
("SFAS 130") and Statement No. 131, "Disclosures About Segments of an Enterprise
and Related Information," ("SFAS 131"). In February 1998, the Financial
Accounting Standards Board issued 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 the disclosures for
employers' disclosures for pensions and other postretirement benefit plans to
the extent possible, and it requires additional information about changes in the
benefit obligations and the fair value of plan assets. These statements are
effective for periods beginning after December 15, 1997. 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, 1999.
These statements had no effect on the Company's 1997 or 1998 financial
 
                                       30
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
statements. Management is currently evaluating what, if any, additional
adjustment or disclosure may be required when these statements are adopted in
fiscal 1999 and 2000.
 
3. ACQUISITIONS OF BUSINESSES
 
    NOWSCO:  In June 1996, the Company completed the acquisition of Nowsco Well
Service Ltd. ("Nowsco") for a total purchase price of $582.6 million (including
transaction costs) in cash. The transaction may be summarized as follows (in
thousands):
 
<TABLE>
<S>                                                                 <C>
Cash..............................................................  $ 576,361
Transaction costs.................................................      6,221
                                                                    ---------
      Total consideration.........................................    582,582
Net assets acquired...............................................    188,587
                                                                    ---------
      Goodwill....................................................  $ 393,995
                                                                    ---------
                                                                    ---------
</TABLE>
 
    This acquisition was accounted for using the purchase method of accounting.
Accordingly, the results of Nowsco's operations are included in the statement of
operations beginning July 1, 1996. The assets and liabilities of Nowsco have
been recorded in the Company's statement of financial position at estimated fair
market value on June 30, 1996 with the remaining purchase price reflected as
goodwill, which is being amortized on a straight line basis over 40 years.
 
    The following unaudited pro forma summary presents the consolidated results
of operations, excluding estimated consolidation savings, of the Company for the
year ended September 30, 1996 as if the Nowsco acquisition and the related
issuance of common stock had occurred at the beginning of 1996 (in thousands,
except per share amounts):
 
<TABLE>
<CAPTION>
                                                                                      1996
                                                                                  ------------
<S>                                                                               <C>
Revenue.........................................................................  $  1,228,032
Net income......................................................................        31,458
Earnings per share:
    Basic.......................................................................           .41
    Diluted.....................................................................           .40
</TABLE>
 
    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 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 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
 
                                       31
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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 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 the downturn in
oilfield drilling activity. The components of the unusual charge are as follows
(in thousands):
 
<TABLE>
<CAPTION>
                                               1998         INCURRED TO        BALANCE AT
                                             PROVISION         DATE        SEPTEMBER 30, 1998
                                           -------------  ---------------  -------------------
<S>                                        <C>            <C>              <C>
Asset impairments (noncash)..............    $  12,218      $   (12,218)
Severance and related benefits...........        7,830           (3,791)        $   4,039
Bad debt expense (noncash)...............        3,005           (3,005)
Facility closure(1)......................        2,455             (896)            1,559
Other....................................        1,078             (378)              700
                                           -------------  ---------------          ------
                                             $  26,586      $   (20,288)        $   6,298
                                           -------------  ---------------          ------
                                           -------------  ---------------          ------
</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 have been notified as
of September 30, 1998. The Company expects to pay all remaining severance
benefits by the end of March 1999. 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.
 
    During 1996, the Company recorded an unusual charge of $7.4 million ($.07
per share after-tax) for costs incurred in connection with the acquisition of
Nowsco. The components of the unusual charge were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                        1996
                                                                                      PROVISION
                                                                                     -----------
<S>                                                                                  <C>
Interest...........................................................................   $   1,917
Writeoff of bank fees (noncash)....................................................       1,622
Asset writeoffs (noncash)..........................................................       1,212
Severance and relocation...........................................................       1,357
Legal and other....................................................................       1,317
                                                                                     -----------
Unusual charge.....................................................................   $   7,425
                                                                                     -----------
                                                                                     -----------
</TABLE>
 
    The interest charge represents the incremental interest accrued from the
date of financing the Nowsco acquisition (June 13, 1996) to the date Nowsco's
results were consolidated for financial reporting purposes
 
                                       32
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
(July 1, 1996). The bank fees represent a writeoff of the unamortized portion of
the Company's prior credit facility which was replaced by the credit facility to
finance the Nowsco acquisition. Asset writeoffs include computer systems,
inventory and other assets purchased in previous years which were not used
subsequent to the acquisition. The remaining portion of the unusual charge
reflects severance costs of terminated BJ Services employees, relocation of
personnel and equipment, legal fees and other costs which would not have been
incurred had the acquisition of Nowsco not occurred. All expenditures for such
costs were made as of September 30, 1997.
 
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.
 
    The following table presents information necessary to calculate earnings per
share for the three years ended September 30, 1998 (in thousands, except per
share amounts):
 
<TABLE>
<CAPTION>
                                                                1998        1997       1996
                                                             ----------  ----------  ---------
<S>                                                          <C>         <C>         <C>
Net income.................................................  $  117,400  $  107,906  $  40,486
 
Average common shares outstanding..........................      74,482      76,868     61,188
                                                             ----------  ----------  ---------
Basic earnings per share...................................  $     1.58  $     1.40  $     .66
                                                             ----------  ----------  ---------
                                                             ----------  ----------  ---------
Average common and dilutive potential common shares
  outstanding:
  Average common shares outstanding........................      74,482      76,868     61,188
  Assumed exercise of stock options........................       1,780       1,568      1,226
  Assumed exercise of warrants.............................       5,001       4,060        348
                                                             ----------  ----------  ---------
                                                                 81,263      82,496     62,762
                                                             ----------  ----------  ---------
Diluted earnings per share.................................  $     1.44  $     1.31  $     .65
                                                             ----------  ----------  ---------
                                                             ----------  ----------  ---------
</TABLE>
 
                                       33
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6. LONG-TERM DEBT AND BANK CREDIT FACILITIES
 
    Long-term debt at September 30, 1998 and 1997 consisted of the following (in
thousands):
 
<TABLE>
<CAPTION>
                                                                           1998        1997
                                                                        ----------  ----------
<S>                                                                     <C>         <C>
Notes payable, banks..................................................  $  157,135  $  205,936
9.2% notes due August 1998............................................                   6,000
7% Series B Notes due 2006, net of discount...........................     124,441     124,365
Other.................................................................         225       2,539
                                                                        ----------  ----------
                                                                           281,801     338,840
Less current maturities of long-term debt.............................      39,932      40,206
                                                                        ----------  ----------
Long-term debt........................................................  $  241,869  $  298,634
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>
 
    The Company has a committed, unsecured bank credit facility (the "Bank
Credit Facility") consisting of a six-year term loan of approximately $157.1
million (currently drawn in both U.S. and Canadian dollars under a provision
which is renewed 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 $355,000, $414,000 and $366,000 for
1998, 1997 and 1996, respectively. At September 30, 1998, borrowings outstanding
under the Bank Credit Facility totaled $157.1 million, consisting solely of
borrowings under the term loan. Principal reductions of term loans under the
Bank Credit Facility are due in aggregate annual installments of $39.8 million;
$42.6 million; $42.6 million; and $32.1 million in the years ending September
30, 1999, 2000, 2001 and 2002, respectively.
 
    In addition to the committed facility, the Company had $246.3 million in
various unsecured, discretionary lines of credit at September 30, 1998, which
expire at various dates in 1999. 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, 1998, there
were $184.9 million in outstanding borrowings under these lines of credit,
consisting of $104.6 million in Canadian borrowings, $79.1 million in U.S.
borrowings and $1.2 million in other currencies. At September 30, 1997, there
were $59.8 million in outstanding borrowings under these lines of credit.
 
    The weighted average interest rates on short-term borrowings outstanding as
of September 30, 1998 and 1997 were 6.1% and 4.7%, 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.
 
    The $6.0 million outstanding balance of the Company's 9.2% Notes and the
$2.2 million outstanding balance of the Company's 12 7/8% Notes were repaid in
December 1997.
 
    At September 30, 1998, the Company had outstanding letters of credit and
performance related bonds totaling $18.6 million and $33.9 million,
respectively. The letters of credit are issued to guarantee various trade
activities.
 
                                       34
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    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
 
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, 1998 and 1997 was as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                1998                  1997
                                        --------------------  --------------------
                                        CARRYING     FAIR     CARRYING     FAIR
                                         AMOUNT      VALUE     AMOUNT      VALUE
                                        ---------  ---------  ---------  ---------
<S>                                     <C>        <C>        <C>        <C>
9.2% Notes............................                        $   6,000  $   6,255
7.0% Series B Notes...................  $ 124,441  $ 128,439    124,365    126,050
</TABLE>
 
8. INCOME TAXES
 
    The geographical sources of income (loss) before income taxes for the three
years ended September 30, 1998 were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                1998        1997       1996
                                                             ----------  ----------  ---------
<S>                                                          <C>         <C>         <C>
United States..............................................  $   72,120  $   70,638  $  (8,369)
Foreign....................................................      99,934      83,730     60,960
                                                             ----------  ----------  ---------
Income before income taxes and cumulative effect of
  accounting change........................................  $  172,054  $  154,368  $  52,591
                                                             ----------  ----------  ---------
                                                             ----------  ----------  ---------
</TABLE>
 
                                       35
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    The provision (benefit) for income taxes for the three years ended September
30, 1998 is summarized below (in thousands):
 
<TABLE>
<CAPTION>
                                                                 1998       1997       1996
                                                               ---------  ---------  ---------
<S>                                                            <C>        <C>        <C>
Current:
  United States..............................................  $     379
  Foreign....................................................     22,849  $  17,698  $  12,241
                                                               ---------  ---------  ---------
    Total current............................................     23,228     17,698     12,241
Deferred:
  United States..............................................     28,353     18,312     (1,616)
  Foreign....................................................      3,073     10,452      1,480
                                                               ---------  ---------  ---------
    Total deferred...........................................     31,426     28,764       (136)
                                                               ---------  ---------  ---------
Income tax expense...........................................  $  54,654  $  46,462  $  12,105
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
</TABLE>
 
    The consolidated effective income tax rates (as a percent of income before
income taxes) for the three years ended September 30, 1998 varied from the
United States statutory income tax rate for the reasons set forth below:
 
<TABLE>
<CAPTION>
                                                                     1998       1997       1996
                                                                   ---------  ---------  ---------
<S>                                                                <C>        <C>        <C>
Statutory rate...................................................       35.0%      35.0%      35.0%
Foreign earnings at varying rates................................       (7.2)      (3.1)      (9.5)
Amortization of excess tax basis over book resulting from
  separation from former parent..................................                  (6.6)      (2.2)
Changes in tax laws and tax rates................................                    .3       (1.3)
Foreign income recognized domestically...........................         .6         .9        1.0
Goodwill amortization............................................        2.8        3.4        4.8
Nondeductible expenses...........................................         .8         .7        1.6
Other--net.......................................................        (.2)       (.5)      (6.4)
                                                                         ---        ---        ---
                                                                        31.8%      30.1%      23.0%
                                                                         ---        ---        ---
                                                                         ---        ---        ---
</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 liabilities are classified as
current or noncurrent according to the classification of the related asset or
 
                                       36
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
liability for financial reporting. The estimated deferred tax effect of
temporary differences and carryforwards as of September 30, 1998 and 1997 were
as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                           1998        1997
                                                                        ----------  ----------
<S>                                                                     <C>         <C>
Assets:
  Expenses accrued for financial reporting purposes, not yet deducted
    for tax...........................................................  $   48,226  $   54,961
  Net operating loss carryforwards....................................     202,627     215,070
  Valuation allowance.................................................     (25,300)    (25,300)
                                                                        ----------  ----------
      Total deferred tax asset........................................     225,553     244,731
Liabilities:
  Differences in depreciable basis of property........................     (47,564)    (52,964)
  Income accrued for financial reporting purposes, not yet reported
    for tax...........................................................      (3,079)     (3,303)
                                                                        ----------  ----------
      Total deferred tax liability....................................     (50,643)    (56,267)
                                                                        ----------  ----------
Net deferred tax asset................................................  $  174,910  $  188,464
                                                                        ----------  ----------
                                                                        ----------  ----------
</TABLE>
 
    In 1997, the deferred tax valuation allowance was decreased due to an
increase in the projected taxable income following the combination of Western,
Nowsco and BJ Services' operations. This adjustment to the deferred tax
valuation allowance was recorded as a reduction to goodwill. Any subsequent
decreases in the deferred tax valuation allowance will also be recorded as a
reduction to goodwill.
 
    At September 30, 1998, the Company had approximately $443 million of U.S.
tax net operating loss carryforwards expiring in varying amounts between 2000
and 2011. The Company also had approximately $80 million of foreign tax net
operating loss carryforwards and approximately $10 million of foreign investment
tax credit carryforwards as of September 30, 1998. Of the foreign tax net
operating loss carryforwards, approximately $45 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 1999. 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, 1998 and 1997.
 
    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 $360 million at September 30, 1998.
 
                                       37
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
9. GEOGRAPHIC INFORMATION
 
    The Company operates primarily in one business segment--oilfield services.
Summarized information concerning geographic areas in which the Company operated
at September 30, 1998, 1997, and 1996 and for each of the years then ended is
shown as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                      OTHER
                                         UNITED       NORTH       LATIN
                                         STATES      AMERICA     AMERICA      EUROPE      OTHER        TOTAL
                                      ------------  ----------  ----------  ----------  ----------  ------------
<S>                                   <C>           <C>         <C>         <C>         <C>         <C>
1998:
  Revenue...........................  $    774,189  $  174,899  $  180,438  $  203,208  $  194,734  $  1,527,468
  Operating income..................        97,521      13,505      27,048      30,452      29,237       197,763
  Identifiable assets...............     1,104,785     121,253     160,001     175,102     182,560     1,743,701
 
1997:
  Revenue...........................  $    766,453  $  187,191  $  171,129  $  188,992  $  152,808  $  1,466,573
  Operating income..................       100,844      20,343      29,164      19,284      12,772       182,407
  Identifiable assets...............     1,160,360     122,666     144,696     163,089     135,957     1,726,768
 
1996:
  Revenue...........................  $    539,652  $   45,951  $  140,390  $  127,111  $  112,157  $    965,261
  Operating income..................        21,062         223      26,824      13,897      12,898        74,904
  Identifiable assets...............     1,210,077     110,659     104,993     166,829     116,602     1,709,160
</TABLE>
 
    Export sales totaled $11,541,000, $11,547,000, and $2,744,000 for the years
ended September 30, 1998, 1997 and 1996, respectively.
 
    Corporate general and administrative expense, research and engineering
expense and certain other expenses related to worldwide manufacturing and other
support functions benefit both domestic and international operations. An
allocation of these expenses has been made to foreign areas based on total
revenues. The expenses allocated totaled $7,117,000, $12,106,000, and
$10,853,000, for the years ended September 30, 1998, 1997 and 1996,
respectively.
 
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 U.S. employees formerly employed by The Western
Company of North America ("Western") are covered under a thrift plan which was
merged into the Company's thrift plan effective December 31, 1995. The Company's
U.S. employees formerly employed by Nowsco are covered under a thrift plan which
was merged into the Company's thrift plan effective October 1, 1996. The
Company's contributions to these thrift plans amounted to $7,916,000,
$6,887,000, and $5,095,000 in 1998, 1997 and 1996, respectively.
 
    The Company's U.S. employees formerly employed by Western with at least one
year of service are also 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
 
                                       38
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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, 1998 and 1997 was as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                                            1998       1997
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
Vested benefit obligation...............................................  $  56,577  $  50,847
                                                                          ---------  ---------
                                                                          ---------  ---------
Accumulated benefit obligation..........................................  $  56,577  $  50,847
Plan assets at fair value...............................................     47,377     46,285
                                                                          ---------  ---------
Benefit obligation in excess of plan assets.............................      9,200      4,562
Unrecognized gain (loss)................................................     (9,194)    (3,156)
Adjustment required to recognize minimum liability......................      9,194      3,156
                                                                          ---------  ---------
Net pension liability...................................................  $   9,200  $   4,562
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
    Pursuant to the provisions of Statement of Financial Accounting Standards
No. 87, "Employers' Accounting for Pensions," the Company recorded in other
noncurrent liabilities additional minimum pension liability adjustments of $6.0
million and $3.2 million as of September 30, 1998 and 1997, respectively,
representing the amount by which the accumulated benefit obligation exceeded the
fair value of plan assets plus accrued amounts previously recorded. As there
were no previously unrecognized prior service costs at September 30, 1998 and
1997, the full amount of the adjustments, net of related deferred tax benefit,
were recorded as a reduction of stockholder's equity of $3.9 million and $2.1
million, respectively.
 
    Assumptions used in accounting for the Company's U.S. defined benefit plan
were as follows:
 
<TABLE>
<CAPTION>
                                                                             1998         1997         1996
                                                                             -----        -----        -----
<S>                                                                       <C>          <C>          <C>
Weighted-average discount rate..........................................         6.5%         7.3%         7.5%
Weighted-average expected long-term rate of return on assets............         9.0%         9.0%         9.0%
</TABLE>
 
    Costs for each of the three years ended September 30, 1998 for the Company's
U.S. defined benefit plan were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                  1998       1997       1996
                                                                ---------  ---------  ---------
<S>                                                             <C>        <C>        <C>
Service cost for benefits earned..............................                        $     359
Interest cost on projected benefit obligation.................  $   3,571  $   3,537      2,862
Actual return on plan asset...................................     (2,872)    (7,779)    (3,997)
Net amortization and deferral.................................     (1,172)     4,452        862
                                                                ---------  ---------  ---------
Net pension cost (benefit)....................................  $    (473) $     210  $      86
                                                                ---------  ---------  ---------
                                                                ---------  ---------  ---------
</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
 
                                       39
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
no further obligation. Therefore, no obligation is included for Venezuela as of
September 30, 1998. The funded status of the Company's international plans at
September 30, 1998 and 1997 was as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                            1998       1997
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
Actuarial present value of:
  Vested benefit obligation.............................................  $  50,451  $  43,618
                                                                          ---------  ---------
                                                                          ---------  ---------
  Accumulated benefit obligation........................................  $  51,922  $  48,070
                                                                          ---------  ---------
                                                                          ---------  ---------
Projected benefit obligation............................................  $  57,726  $  57,020
Plan assets at fair value...............................................     52,668     54,599
                                                                          ---------  ---------
Projected benefit obligation in excess of plan assets...................      5,058      2,421
Unrecognized gain (loss)................................................     (6,140)       424
Unrecognized transition asset, net of amortization......................         29        126
Unrecognized prior service cost.........................................       (200)      (344)
                                                                          ---------  ---------
Net pension (asset) liability...........................................  $  (1,253) $   2,627
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
    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...............        3-5%
Weighted-average expected long-term rate of return on assets...........        3-8%
</TABLE>
 
    Combined costs for the Company's international defined benefit plans for the
three years ended September 30, 1998 were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                 1998        1997       1996
                                                               ---------  ----------  ---------
<S>                                                            <C>        <C>         <C>
Net periodic foreign pension cost:
  Service cost for benefits earned...........................  $   5,492  $    4,687  $   2,836
  Interest cost on projected benefit obligation..............      4,112       4,238      2,450
  Actual return on plan assets...............................      3,335     (12,846)    (2,719)
  Net amortization and deferral..............................     (7,615)      9,005        468
                                                               ---------  ----------  ---------
Net pension cost.............................................  $   5,324  $    5,084  $   3,035
                                                               ---------  ----------  ---------
                                                               ---------  ----------  ---------
</TABLE>
 
    In addition, the Company expensed $910,000 during 1998 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
 
                                       40
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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.
 
    Net periodic postretirement benefit costs for the three years ended
September 30, 1998 included the following components (in thousands):
 
<TABLE>
<CAPTION>
                                                                                         1998       1997       1996
                                                                                       ---------  ---------  ---------
<S>                                                                                    <C>        <C>        <C>
Service cost for benefits attributed to service during the period....................  $   1,563  $   1,388  $   1,194
Interest cost on accumulated postretirement benefit obligation.......................      1,513      1,532      1,381
Amortization of prior service costs..................................................       (894)      (894)      (894)
Amortization of cumulative unrecognized net gain.....................................        (65)
                                                                                       ---------  ---------  ---------
Net periodic postretirement benefit cost.............................................  $   2,117  $   2,026  $   1,681
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
</TABLE>
 
    The actuarial and recorded liabilities for these postretirement benefits
were as follows at September 30, 1998 and 1997 (in thousands):
 
<TABLE>
<CAPTION>
                                                                            1998       1997
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
Accumulated postretirement benefit obligation:
  Retirees..............................................................  $   6,650  $   7,047
  Fully eligible active plan participants...............................      2,494      2,174
  Other active plan participants........................................     15,873     12,916
                                                                          ---------  ---------
                                                                             25,017     22,137
Unrecognized cumulative net gain........................................      1,842      2,703
Unrecognized prior service cost.........................................      1,494      2,388
                                                                          ---------  ---------
Accrued postretirement benefit liability................................  $  28,353  $  27,228
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
    The accumulated postretirement benefit obligation at September 30, 1998 and
1997 was determined using a discount rate of 6.25% and 7.0%, 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.
 
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
 
                                       41
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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 $6,300,000 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.
 
    LEASE AND OTHER LONG-TERM COMMITMENTS:  At September 30, 1998, the Company
had long-term operating leases and service fee commitments covering certain
facilities and equipment with varying expiration dates. Minimum annual
commitments for the years ended September 30, 1999, 2000, 2001, 2002 and 2003
are $36,279,000, $32,290,000, $29,791,000, $22,778,000, and $18,138,000
respectively, and $78,273,000 in the aggregate thereafter.
 
12. SUPPLEMENTAL FINANCIAL INFORMATION
 
    Supplemental financial information for the three years ended September 30,
1998 is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                    1998       1997        1996
                                                                                  ---------  ---------  ----------
<S>                                                                               <C>        <C>        <C>
Consolidated Statement of Operations:
  Research and development expense..............................................  $  11,908  $   9,904  $    7,157
  Rent expense..................................................................     36,262     24,960      19,148
  Net foreign exchange gain (loss)..............................................       (214)       148        (214)
 
Consolidated Statement of Cash Flows:
  Income taxes paid.............................................................  $  23,953  $  20,387  $   11,768
  Interest paid.................................................................     25,595     30,407      24,533
  Details of acquisitions:
    Fair value of assets acquired...............................................      3,855      5,366     283,505
    Liabilities assumed.........................................................      2,949      9,600      91,218
    Goodwill....................................................................      1,553     25,044     393,995
    Cash paid for acquisitions, net of cash acquired............................      2,459     20,810     586,282
</TABLE>
 
                                       42
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    Other income (expense)--net for the three years ended September 30, 1998 is
summarized as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                    1998       1997       1996
                                                                  ---------  ---------  ---------
<S>                                                               <C>        <C>        <C>
Rental income...................................................  $     384  $     349  $     356
Gain on Argentine bonds.........................................                   276
Income from equity method investments...........................        234        246        114
Royalty income..................................................        495        213        785
Gain on sales of assets--net....................................        (89)       169      2,271
Minority interest...............................................     (3,206)      (805)      (519)
Non-operating net foreign exchange gain.........................      1,110
Other--net......................................................        300      1,279        314
                                                                  ---------  ---------  ---------
Other income (expense)--net.....................................  $    (772) $   1,727  $   3,321
                                                                  ---------  ---------  ---------
                                                                  ---------  ---------  ---------
</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 Common Stock have been reserved for grants, of which 3,827,164 were
available for future grants at September 30, 1998.
 
    A summary of the status of the Company's stock option activity, and related
information for the years ended September 30, 1998, 1997 and 1996 is presented
below (in thousands, except per share prices):
 
<TABLE>
<CAPTION>
                                                         1998                        1997
                                              --------------------------  --------------------------             1996
                                                           WEIGHTED-AVG.               WEIGHTED-AVG.  --------------------------
                                                             EXERCISE                    EXERCISE                  WEIGHTED-AVG.
                                                SHARES         PRICE        SHARES         PRICE        SHARES     EXERCISE-PRICE
                                              -----------  -------------  -----------  -------------  -----------  -------------
<S>                                           <C>          <C>            <C>          <C>            <C>          <C>
Outstanding at beginning of year............       2,582     $   13.14         2,772     $   10.37         2,864     $    9.48
Granted.....................................         503         35.22           558         23.14           674         13.52
Exercised...................................        (164)        16.92          (718)        10.04          (626)         9.80
Forfeited...................................         (33)        30.31           (30)        17.22          (140)         9.84
                                                   -----                       -----                       -----
Outstanding at end of year..................       2,888         16.64         2,582         13.14         2,772         10.37
                                                   -----                       -----                       -----
                                                   -----                       -----                       -----
Options exercisable at year-end.............       2,260     $   12.94         1,968     $   12.93         1,006     $    9.69
Weighted-average fair value of options
  granted during the year...................                 $   26.30                   $   12.28                   $    7.59
</TABLE>
 
                                       43
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
    The following table summarizes information about stock options outstanding
as of September 30, 1998 (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  9.32.............         775              5.9         $    8.38           775     $    8.38
  9.62 to 18.67.............       1,223              6.4             12.12         1,065         12.07
 23.56 to 35.94.............         890              8.7             30.04           420         23.56
                                   -----                                            -----
                                   2,888              7.0             16.64         2,260         12.94
                                   -----                                            -----
                                   -----                                            -----
</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 1998, 1997 and 1996 consistent with the provisions of
SFAS 123, the Company's net earnings and diluted earnings per share would have
been reduced by $4.4 million or $.05 per share, $5.1 million or $.07 per share
and $1.8 million or $.03 per share in 1998, 1997 and 1996, 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 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>
                                                                  1998       1997       1996
                                                                ---------  ---------  ---------
<S>                                                             <C>        <C>        <C>
Expected life (years).........................................  7.7        7.6        7.6
Interest rate.................................................  4.9%       5.8%       5.8%
Volatility....................................................  66.2%      37.4%      37.4%
Dividend yield................................................      0          0          0
 
Weighted-average fair value at grant date.....................  $26.30     $12.28     $ 7.59
</TABLE>
 
    STOCK PURCHASE PLAN:  The Company's 1990 Employee Stock Purchase Plan (the
"Purchase Plan") is a plan 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 1,500,000 shares has been reserved under the Purchase Plan, 698,731 of which
were available for future purchase at September 30, 1998. In October 1998,
131,435 shares were purchased at $15.04 per share and in October 1997, 186,220
shares were purchased at $15.41 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 $.6 million or $.01 per share, $.6 million or $.01 per share and
$.4 million or $.01 per share in 1998, 1997 and 1996, respectively. The pro
forma value of the
 
                                       44
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
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 66.2% in 1998 and 37.4% in 1997 and 1996; and a risk free interest
rate of 4.68% in 1998 and 5.8% in 1997 and 1996. The weighted-average fair value
of these purchase rights granted in 1998, 1997 and 1996 was $6.81, $10.79 and
$7.51, respectively.
 
    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. As of September 30, 1998 there were 295,838
Units outstanding. 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 performance 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 performance units should vest at
the level of 66% of the maximum level. Therefore, a total of 123,145 Units were
converted into Common Stock and issued to officers, 25,495 Units were deferred
for later issuance and 76,572 Units were cancelled.
 
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, 1998. The Rights were proportionately
adjusted as of the stock split record date to reflect the effect of the stock
split.
 
    STOCK PURCHASE WARRANTS:  In connection with the acquisition of The Western
Company of North America 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 stock split which was effective on
February 20, 1998, each Warrant represents the right to purchase two shares of
the Common
 
                                       45
<PAGE>
                              BJ SERVICES COMPANY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
Stock at an exercise price of $15 per share, until the expiration date of April
13, 2000. As of September 30, 1998, 1,562 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 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.
 
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                                        FISCAL
                                                       FIRST       SECOND      THIRD       FOURTH        YEAR
                                                      QUARTER     QUARTER     QUARTER     QUARTER       TOTAL
                                                     ----------  ----------  ----------  ----------  ------------
                                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                  <C>         <C>         <C>         <C>         <C>
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(2)      117,400
Earnings per share:
  Basic............................................         .57         .51         .44         .03          1.58
  Diluted..........................................         .52         .47         .41         .02          1.44
 
Fiscal Year 1997:
Revenue............................................  $  340,380  $  343,698  $  368,619  $  413,876  $  1,466,573
Gross profit(1)....................................      62,260      62,908      76,511      92,904       294,583
Net income.........................................      19,974      20,197      28,111      39,624       107,906
Earnings per share:
  Basic............................................         .26         .26         .37         .52          1.40
  Diluted..........................................         .25         .25         .34         .47          1.31
</TABLE>
 
------------------------
 
(1) Represents revenue less cost of sales and services and research and
    engineering expenses.
 
(2) Includes $26.6 million ($17.6 million after tax, or $.22 per diluted share)
    unusual charge resulting from the restructuring of worldwide operations due
    to the downturn in oilfield drilling activity. See Note 4.
 
                                       46
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
    None.
 
                                    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 28, 1999,
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 28, 1999, 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 28, 1999, which
sections are incorporated herein by reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    None.
 
                                       47
<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.......................................................................            23
 
Consolidated Statement of Operations for the years ended September 30, 1996, 1997 and 1998...........            24
 
Consolidated Statement of Financial Position as of September 30, 1997 and 1998.......................            25
 
Consolidated Statement of Stockholders' Equity for the years ended September 30, 1996, 1997 and
  1998...............................................................................................            27
 
Consolidated Statement of Cash Flows for the years ended September 30, 1996, 1997 and 1998...........            28
 
Notes to Consolidated Financial Statements...........................................................            29
</TABLE>
 
    (2) Financial Statement Schedules:
 
<TABLE>
<CAPTION>
   SCHEDULE
     NUMBER                                     DESCRIPTION OF SCHEDULE                                      PAGE NUMBER
-------------  ------------------------------------------------------------------------------------------  ---------------
<S>            <C>                                                                                         <C>
         II                                Valuation and Qualifying Accounts                                         53
</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) The Company did not file any reports on Form 8-K during the fourth quarter
    of fiscal 1998.
 
    (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 (filed as Exhibit 3.1 to the Company's Annual Report on Form
            10-K for the year ended September 30, 1995, and incorporated herein by reference).
 
      3.2   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).
</TABLE>
 
                                       48
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER                                             DESCRIPTION OF EXHIBIT
----------  --------------------------------------------------------------------------------------------------------
<C>         <S>
     *3.3   Bylaws of the Company, as amended as of December 10, 1998.
 
      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).
 
     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).
</TABLE>
 
                                       49
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER                                             DESCRIPTION OF EXHIBIT
----------  --------------------------------------------------------------------------------------------------------
<C>         <S>
     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 8,1 997 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).
 
     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.
</TABLE>
 
                                       50
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER                                             DESCRIPTION OF EXHIBIT
----------  --------------------------------------------------------------------------------------------------------
<C>         <S>
     10.20  1997 Incentive Plan (filed as Appendix B to the Company's Proxy Statement dated December 22, 1997 and
            incorporated herein by reference).
 
    *21.1   Subsidiaries of the Company.
 
    *23.1   Consent of Deloitte & Touche LLP.
 
    *27.1   Financial data schedule.
</TABLE>
 
------------------------
 
*Filed herewith.
 
                                       51
<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 21, 1998
 
    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>
                                Chairman of the Board,
       /s/ J.W. STEWART           President, and Chief
------------------------------    Executive Officer          December 21, 1998
         J.W. Stewart             (Principal Executive
                                  Officer)
 
                                Senior Vice President--
     /s/ MICHAEL MCSHANE          Finance, Chief Financial
------------------------------    Officer and Director       December 21, 1998
       Michael McShane            (Principal Financial
                                  Officer)
 
  /s/ MATTHEW D. FITZGERALD     Vice President and
------------------------------    Controller (Principal      December 21, 1998
    Matthew D. Fitzgerald         Accounting Officer)
 
------------------------------  Director
    L. William Heiligbrodt
 
       /s/ JOHN R. HUFF
------------------------------  Director                     December 21, 1998
         John R. Huff
 
      /s/ DON D. JORDAN
------------------------------  Director                     December 21, 1998
        Don D. Jordan
 
      /s/ R. A. LEBLANC
------------------------------  Director                     December 21, 1998
        R. A. LeBlanc
 
    /s/ JAMES E. MCCORMICK
------------------------------  Director                     December 21, 1998
      James E. McCormick
 
    /s/ MICHAEL E. PATRICK
------------------------------  Director                     December 21, 1998
      Michael E. Patrick
</TABLE>
 
                                       52
<PAGE>
                              BJ SERVICES COMPANY
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
             FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                           ADDITIONS
                                                                    ------------------------
                                                       BALANCE AT                CHARGED TO
                                                        BEGINNING   CHARGED TO      OTHER                   BALANCE AT
                                                        OF PERIOD     EXPENSE     ACCOUNTS    DEDUCTIONS   END OF PERIOD
                                                       -----------  -----------  -----------  -----------  -------------
<S>                                                    <C>          <C>          <C>          <C>          <C>
YEAR ENDED SEPTEMBER 30, 1996
Allowance for doubtful accounts receivable...........   $   7,483    $     357    $   1,302(3)  $   2,919(1)   $   6,223
Reserve for inventory obsolescence and adjustment....       9,545          100        2,481(3)      1,116(2)      11,010
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
</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.
 
                                       53