WESTERN COMPANY OF NORTH AMERICA, 10-K405, 1995-03-30

WESTERN COMPANY OF NORTH AMERICA
10-K405, 1995-03-30
OIL & GAS FIELD SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 1994

/ / 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 1-7451

THE WESTERN COMPANY OF NORTH AMERICA
(Exact name of registrant as specified in its charter)

DELAWARE 75-0763484
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

515 POST OAK BLVD.,
HOUSTON, TEXAS 77027
(Address of principal executive offices)(Zip Code)

Registrant's telephone number, including area code: (713) 629-2600

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $.10 New York Stock Exchange

7-1/4% Convertible Subordinated
Debentures Due 2015 New York Stock Exchange

12-7/8% Senior Notes Due 2002 New York Stock Exchange

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

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

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 / /
<PAGE>
AGGREGATE MARKET VALUE OF VOTING STOCK:

At February 15, 1995, the aggregate market value of voting stock held by
nonaffiliates of the registrant amounted to $320,289,000.

NUMBER OF SHARES OF REGISTRANT'S
COMMON STOCK OUTSTANDING AT FEBRUARY 15, 1995:

18,285,413 shares

DOCUMENTS INCORPORATED BY REFERENCE:

1. The Western Company of North America's 1994 Audited Consolidated Financial
Statements which appear in Exhibit Number 21.4 of Current Report on Form 8-K
dated February 10, 1995 are incorporated by reference in Part II, Item 8 and
Part III, Item 14 of this Form 10-K.

2. Portions of The Western Company of North America's Proxy Statement to be
filed in connection with the 1995 Annual Meeting of Stockholders are
incorporated by reference in Part III of this Form 10-K.

<PAGE>
PART I

ITEM 1. BUSINESS.

GENERAL DEVELOPMENT OF BUSINESS

The Western Company of North America was founded in 1939 and incorporated
in 1950 under the laws of the State of Delaware. Principal executive offices are
located at 515 Post Oak Blvd., Houston, Texas 77027, telephone number (713)
629-2600. Unless the context indicates otherwise, the terms "Company" and
"Western" refer to the total business conducted by The Western Company of North
America and its subsidiaries.

Demand for pressure pumping services, offshore drilling and production
chemicals provided by the Company is significantly affected by the level of oil
and gas well drilling activity. This activity, in turn, is influenced by current
and expected oil and natural gas prices.

Most indicators of well drilling activity, including oil and natural gas
prices, were lower in 1994 than in 1993 as shown in the following table.

1994 1993
------ ------
Average domestic rig count ......................... 775 754
Average natural gas price ($/MMBtu) ................ $ 1.72 $ 1.97
Average oil price ($/barrel) ....................... $17.27 $18.39
Domestic natural gas well completions .............. 7,868 8,761
Domestic oil well completions ...................... 6,080 8,035

Negative year-over-year changes in these indicators adversely affected 1994
operating performance of the Company's pressure pumping business.

Domestic natural gas well completions declined 10% in 1994 in response to
weak natural gas prices throughout most of the year. Domestic oil well
completions fell 24% in 1994.

In international markets, where activity is affected by the level and trend
of oil prices, results were below expectations. Oil price improvement in the
second half of the year did not occur soon enough to offset the effects of low
oil prices earlier in the year. An unstable political environment in certain of
the Company's international locations also contributed to unfavorable operating
results.

The Company believes that the current weakness in natural gas prices may
continue to have a negative effect on domestic performance in 1995.

ACQUISITIONS AND DISPOSITIONS

In February 1995, the company sold its last remaining semi-submersible
drilling rig, the Western Pacesetter IV, for $37.2 million. In December 1994,
the semi-submersible drilling rig, Alaskan Star, was sold for $11.8 million, of
which $6.3 million is a bankers' acceptance drawn on a U.S. bank due within one
year, and in 1993 eleven jack-up rigs were sold for $169.3 million. The offshore
drilling business has been accounted for as a discontinued operation.

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The Company completed the acquisition in February 1994, of substantially
all of the assets of the production and process chemical business of Unichem
International, Inc. ("Unichem") for $19.8 million in cash and in June 1994, of
substantially all of the oilfield chemicals business and assets of Betz Energy
Chemicals, Inc. ("Betz") for $4.8 million in cash. The businesses acquired from
Unichem and Betz are substantially the same and are affected primarily by oil,
rather than natural gas, prices. In July 1994, the Company completed the
acquisition of the coiled tubing business of Coiltech, Inc. ("Coiltech") for
$3.1 million in cash. All three acquisitions were accounted for using the
purchase method of accounting.

MERGER AGREEMENT

In November 1994, the Company and BJ Services Company ("BJ Services")
entered into a definitive merger agreement. Subject to certain conditions and to
appraisal rights under Delaware law, this agreement provides that stockholders
of the Company will receive $20 in cash or in shares of BJ Services common stock
for each outstanding share of Company Common Stock they own. Additionally, for
each share of Common Stock they hold, each stockholder will receive .2 of a
five-year warrant to purchase one share of BJ common stock for $30 per share.
Pursuant to the merger agreement, stockholders may elect to receive any
proportion of cash and BJ Services common stock, provided that the total number
of shares of Common Stock for which such elections are made will be adjusted so
that the total shares for which each type of election is made will be
approximately equal. On March 7, 1995, BJ Services and the Company were notified
by the Department of Justice that it would not challenge the merger subject to
divestiture of certain BJ Services' assets in Brighton, Colorado. On April 13,
1995, BJ Services and the Company will hold shareholder meetings to seek
approval of the merger.

INDUSTRY SEGMENTS -- FINANCIAL INFORMATION

Information relating to industry segments is contained in Note 11 of Notes
to Consolidated Financial Statements in the Company's 1994 Audited Consolidated
Financial Statements; such information is incorporated herein by reference.

NARRATIVE DESCRIPTION OF BUSINESS

Western provides well stimulation, cementing, sand control and coiled
tubing services, referred to collectively as pressure pumping services, to oil
and gas companies operating in the continental United States, the Gulf of Mexico
and certain foreign countries and previously engaged in offshore contract
drilling in international areas. Western also provides production and industrial
chemicals to the oil, gas, refining and petrochemical industries in the United
States.

The Company provides its pressure pumping services in most of the active
hydrocarbon producing basins in the continental United States and in the Gulf of
Mexico. The Company believes it is the third largest provider of pressure
pumping services in the United States.

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Since 1989, the Company has sold pressure pumping products and equipment
outside the United States. During 1992, the Company began performing pressure
pumping services in Nigeria and Indonesia. During late 1993, the Company began
performing pressure pumping services in the North Sea, in the former Soviet
Union and in Hungary. The North Sea market was being served by the Company's
well stimulation vessel, the Western Renaissance. In July 1994, the Company
relocated the Western Renaissance from the North Sea to the U.S. Gulf of Mexico
due to the relative low level of stimulation activity that occurred during 1994
in the North Sea.

PRESSURE PUMPING SERVICES

Western's pressure pumping services consist of well stimulation, cementing,
sand control and limited coiled tubing services used in the completion of new
oil and gas wells and in remedial work on existing wells. Stimulation services
include hydraulic fracturing and acidizing programs which are designed to
improve the flow of oil and gas from new and existing wells. Cementing services
are used primarily to cement casing pipe inside an oil or gas well to allow
selective production among formations and to prevent migration of fluids between
formations. Sand control services are used primarily for areas exhibiting
formation sand problems. Coiled tubing services involve the injection of coiled
tubing into wells to perform various applications and functions for use in well
servicing operations. Western provides its pressure pumping services in most of
the active hydrocarbon producing basins in the continental United States and in
the Gulf of Mexico. Demand for Western's pressure pumping services is closely
tied to drilling and completion activity which, in turn, is related to current
and projected prices for oil and natural gas.

Stimulation services include both hydraulic fracturing and acidizing. The
hydraulic fracturing process is used to increase the production of oil and gas
from formations having such low permeability that the natural flow of fluid or
gas is restricted. Due to reservoir characteristics, fracturing services are
more likely to be required for deeper, onshore wells than offshore wells in the
United States. The fracturing process consists of pumping a fluid gel into a
cased well at sufficient pressure to fracture the formation. Acidizing involves
pumping large volumes of specially-formulated acids into a reservoir to dissolve
barriers and enlarge crevices in the formation, thereby eliminating obstacles to
the flow of oil and gas. It is also used to clean out materials which build up
over time in producing formations and, in some instances, to remedy damage that
may be caused by solids in drilling fluids.

Sand control services are required for new wells and the workover of
existing wells in areas exhibiting formation sand problems. Virtually all sand
control activity in the United States occurs in the soft, unconsolidated
sandstone formations found offshore in the Gulf of Mexico and along the Gulf
Coast and utilizes "gravel pack" methods. The goal of a gravel-packed completion
is to allow the well to produce sand-free while maintaining a high production
rate. In order to accomplish this, special gravel pack tools are used to place
sized gravel inside the casing perforations and around a slotted or screen liner
in the wellbore. The gravel pack holds back the formation sand during
production.

In July 1994, Western acquired the coiled tubing business of Coiltech, Inc.
of Longview, Texas for $3.1 million in cash. Since completing such acquisition,
Western has offered limited coiled tubing services to its customers, in addition
to its other pressure pumping services.

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In addition to Western's pressure pumping equipment and well stimulation
vessel, it also owns a manufacturing complex and distribution center in Fort
Worth, Texas. Western leases the space it occupies as its principal executive
offices in Houston, Texas and its research and engineering center located in The
Woodlands, Texas, north of Houston.

OPERATIONS. Pressure pumping services are provided to land-based and
offshore customers on a 24-hour, on-call basis through regional and district
facilities located in Colorado, Louisiana, Mississippi, New Mexico, Oklahoma,
Texas, Utah and Wyoming, with limited services in neighboring states and certain
international markets.

EQUIPMENT. The pressure pumping business utilizes complex, truck-mounted
and trailer-mounted equipment designed and constructed for the particular
pressure pumping service furnished. The amount of equipment needed for a job
depends upon the type of service to be provided, the volume of material
required, and the pressures and rates at which the material is to be pumped.
After the equipment is moved to a well location, it is configured with
appropriate connections to perform the specific services required. Equipment
mobility permits the Company to provide pressure pumping services on a limited
basis to new areas of operations geographically contiguous to existing operating
areas. It also permits jobs to be performed which require more equipment than
may be available at a single Western facility. Additionally, the Company placed
into service in late 1993 its well stimulation vessel.

SPECIALTY CHEMICALS

Specialty chemicals and technical services are provided through a division
of Western to the oil, gas, refining and petrochemical industries. This product
line includes corrosion and scale inhibitors as well as process chemicals and
paraffin control for the treatment of oil wells and for refining, gas processing
plant and petrochemical facility maintenance and flow improvement.

CONTRACT DRILLING SERVICES

Over the past year and a half, Western has disposed of its fleet of
offshore drilling rigs and withdrawn from the offshore contract drilling
business. On December 16, 1994, Western completed the sale of its
semi-submersible offshore drilling rig, ALASKAN STAR, for $11.8 million. The
gain on this sale was minimal. Additionally, on February 10, 1995, Western
completed the sale of its last remaining offshore drilling rig, the semi-
submersible WESTERN PACESETTER IV, for $37.2 million. A pre-tax loss of $6.7
million was recorded from this sale.

SOURCES AND AVAILABILITY OF RAW MATERIALS

Principal materials purchased by the pressure pumping business include
cement, proppants, acid and bulk chemical additives. Generally, these items are
available from several suppliers and the Company uses more than one supplier for
each item. However, Western obtains certain items from sole source providers,
including certain proprietary materials. Although it is unlikely that the
Company will experience shortages in the supply of any such proprietary
materials, such shortages could adversely affect pressure pumping revenues.
Except for sand, in recent years, the Company has not experienced difficulty in
obtaining necessary supplies of materials and it does not anticipate shortages
in the foreseeable future. During the fourth quarter of 1992, the Company and
other industry participants experienced difficulty in obtaining sufficient
supplies of fracturing sand as a result of an unexpected increase in demand for

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pressure pumping services. Such a sand shortage is not expected in the
foreseeable future.

Principal materials purchased by the specialty chemical business are
available from several suppliers and the Company uses more than one supplier for
each item.

SEASONAL BUSINESS

Demand for the Company's pressure pumping services is tied closely to the
seasonality of drilling and completion activity. The pressure pumping business
historically experiences its lowest level of activity during the first quarter
due in part to weather conditions which reduce drilling and completion activity.

The specialty chemical segment generally does not experience a significant
seasonal pattern in its business.

INVENTORIES

The pressure pumping business and specialty chemical business maintain
inventories of products used in conjunction with its services. 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 services. Both the pressure pumping and specialty chemical businesses
maintain inventories of repair parts and maintenance items which are necessary
to ensure continued operations without significant equipment downtime caused by
shortages of such parts.

CUSTOMERS

The principal customers for the pressure pumping business consist of major
and independent oil and gas producing companies. During 1994, the Company's
pressure pumping business provided services to approximately 1,400 customers.
The principal customers for the specialty chemical business consist primarily of
major and independent oil and gas producing companies. During 1994, the
Company's specialty chemical business provided sales and services to
approximately 400 customers. The principal customers of the offshore drilling
business included major and independent oil and gas producing companies, both
domestic and foreign, including companies owned in whole or in part by foreign
governments. No single customer accounted for 10% or more of the Company's
consolidated revenues during the years ended December 31, 1994, 1993 and 1992.
The loss of certain of the Company's largest pressure pumping customers could
have a material impact on revenues and operating results.

BACKLOG

The pressure pumping and specialty chemical businesses ordinarily do not
have a significant backlog since their services are provided on an on-call
basis.

GOVERNMENT CONTRACTS

No material portion of the Company's business is subject to renegotiation
of profits or termination of contracts or subcontracts at the election of the
federal government.
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COMPETITION

The Company competes throughout its pressure pumping service areas with
three principal competitors, two of which have larger shares of the domestic
pressure pumping market and are divisions of larger, integrated companies with
substantially greater financial and operating resources than the Company.
Western has only recently sought to enter specific geographic markets for
pressure pumping services outside the United States in which these three
competitors have participated for many years. The Company's well stimulation
vessel, which was placed in service in late 1993, was moved from the North Sea
to the Gulf of Mexico in July 1994 due to low utilization in the North Sea.
Historic and future actual utilization of the vessel will provide a basis for
determining whether future undiscounted net cash flows will be adequate to cover
its cost.

The major competitive factors in the pressure pumping business are price,
payment terms, service reputation, and product and application technology. Since
1982, domestic exploration and development drilling activity has declined,
and, as a result, demand for pressure pumping service has declined, creating
intense price competition and curtailing reinvestment in this business segment.
The industry continues to have equipment overcapacity which must diminish
through increased demand and redeployment of equipment overseas, abetted by
retirement of older equipment, before prices for pressure pumping services
improve significantly. There can be no assurance that intense price competition
will not continue in the future.

RESEARCH AND DEVELOPMENT AND PATENTS

Product and application technology is an important competitive factor in
the Company's pressure pumping and specialty chemical businesses. Western
believes that the products it offers are comparable to those of its major
competitors. During the years ended December 31, 1994, 1993 and 1992, the
Company incurred research and development costs of $8.4 million, $6.5 million
and $5.5 million, respectively. The Company owns a number of patents and has
additional patents pending relating to its pressure pumping business. While
management considers patent protection to be important, it does not believe any
one patent is essential to the overall successful operation of this business.
See Item 3 of this Annual Report on Form 10-K.

ENVIRONMENTAL MATTERS

The pressure pumping and specialty chemical businesses are subject to laws
dealing with protection of the environment enacted or promulgated by the federal
government and various of its agencies, and by state, local and foreign
governments. In particular, the chemical composition of the products utilized in
well cementing and stimulation services have made it necessary for the Company
to implement systematic procedures for the handling and disposal of such
materials and their by-products. In order to comply with existing environmental
laws and regulations relating to its pressure pumping business, certain capital
and other expenditures will be required. These expenditures relate primarily to
site clean-up, removal of underground storage tanks, construction of waste
management systems and fuel system improvements. Expenditures that relate to an
existing condition caused by past operations and that do not contribute to
current or future revenue generation are expensed. Liabilities are recorded when
remedial efforts are probably and the costs can be reasonable estimated.
Generally, the timing of these accruals coincides with the completion of an
environmental evaluation or the Company's commitment to a formal plan of action.
At December 31, 1994 and 1993, liabilities for environmental costs were $2.6
million and $2.4 million, respectively.
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EMPLOYEES

At December 31, 1994, the Company had approximately 2,300 employees, of
whom approximately 1,900 were engaged in the pressure pumping business,
approximately 200 were engaged in the specialty chemical business and
approximately 100 were engaged in the offshore drilling business which has been
accounted for as a discontinued operation in November 1994.

FOREIGN OPERATIONS

Information with respect to the Company's foreign operations is contained
in Note 11 of Notes to Consolidated Financial Statements in the Company's 1994
Audited Consolidated Financial Statements; such information is incorporated
herein by reference.

OPERATING RISKS

The pressure pumping business is subject to hazards inherent in the
drilling industry, such as blow-outs and fires, which can severely damage or
destroy the Company's equipment and surrounding areas. Actions for well damage
and for loss of oil and gas production alleging negligence and breach of
contract are incidental to many oilfield service businesses, including those of
the Company. The Company maintains such insurance protection against these
hazards as it deems prudent. It also obtains indemnity agreements whenever
possible from its customers requiring it to be held harmless in the event of
loss of production and other well damage and for material liability for
pollution. There is no assurance such insurance or contractual indemnity
protection would be sufficient or effective under all circumstances or that the
Company will be able to maintain adequate insurance coverage in the future at
rates it deems reasonable.

Additional risks associated with operations in foreign areas include
expropriation, nationalization, foreign exchange restrictions, changing
political conditions and foreign monetary policies. To date, the Company has not
experienced any material losses associated with these foreign risk factors.

ITEM 2. PROPERTIES.

In addition to Western's pressure pumping equipment, specialty chemical
equipment and well stimulation vessel (see Item 1, herein), it also owns a
manufacturing complex and distribution center in Fort Worth, Texas. The Company
leases the space it occupies as its principal executive offices in Houston,
Texas and its research and engineering center located in The Woodlands, Texas,
north of Houston.

The Company owns numerous operating facilities used by the pressure pumping
and specialty chemical businesses, which generally consist of land, office and
maintenance space and bulk material storage facilities. The Company also leases
facilities for various operating offices; such leases are not material. Several
of the Company's operating facilities have been closed or consolidated in
response to depressed business conditions, and the Company is actively
attempting to sell certain of those closed operating facilities. Remaining
operating facilities are considered adequate for conducting the Company's
business in its operating areas.
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ITEM 3. LEGAL PROCEEDINGS.

Actions for well damage and loss of oil and gas production alleging
negligence, breach of contract and fraud, under common law as well as state and
federal statutes, are incidental to the pressure pumping business. Actions for
personal injury are also incidental to that business and the offshore drilling
business where federal statutes permit employees who work on rigs to sue their
employers instead of pursuing workmen's compensation remedies. Increasingly,
plaintiffs in both property damage and personal injury litigation allege damages
for which insurance coverage generally does not exist or is prohibited, such as
punitive damages, treble damages or damages for breach of contract. Numerous
such incidental lawsuit are pending against the Company which include claims
covered by insurance and which are being defended by the Company's insurance
carriers. To the extent a plaintiff is ultimately successful on an uninsured
portion of a claim, the Company would be responsible for satisfying such
judgment. To date, the Company has not, by judgment or through settlement,
incurred a material uninsured liability arising out of personal injury or
property damage litigation.

From time to time it has been alleged by competitors of the Company that
the use by the company of certain products or methods to perform particular
pressure pumping services constitutes infringement of patents they hold. Such
claims could result in payment by the Company of damages or royalties and the
Company could be enjoined from performing services in which such products or
services are used. To date, the Company has not experienced a material reduction
in revenues or incurred a material loss as a result of such allegations.

Shortly after the public announcement by BJ Services in September 1994 of a
proposal to acquire the Company ("BJS Proposal"), four actions were commenced
against the Company and its directors in the Delaware Court of Chancery styled
CROYDEN ASSOCIATES VS. SHELDON R. ERIKSON, ET AL. AND THE WESTERN COMPANY OF
NORTH AMERICA, C. A. No. 13740, filed September 13, 1994, REGGIE P. JUDICE VS.
SHELDON R. ERIKSON, ET AL. AND THE WESTERN COMPANY OF NORTH AMERICA, C. A. No.
17342, filed September 14, 1994, WILLIAM T. HENDERSON VS. SHELDON R. ERIKSON, ET
AL. AND THE WESTERN COMPANY OF NORTH AMERICA, C. A. NO. 13743, filed September
14, 1994, and RUSS SEGER VS. SHELDON R. ERIKSON, ET AL. AND THE WESTERN COMPANY
OF NORTH AMERICA, C. A. No. 13769, filed September 27, 1994. The allegations in
these lawsuits, all of which were filed as class action complaints, are
substantially the same and relate to the rejection of the BJS Proposal by the
Company's Board of Directors. The purported class of plaintiffs on whose behalf
the class action complaints were filed is all stockholders of the Company. It is
claimed in these lawsuits, INTER ALIA, that by failing to accept the BJS
Proposal the Company and its directors breached their fiduciary duties to the
stockholders of the Company. The plaintiffs seek equitable relief to compel the
Company and its directors to perform their fiduciary duties, as such are
construed by the plaintiffs, and unspecified damages. The Company believes the
allegations in these lawsuits are untrue and that the claims they assert are
totally without merit. A motion to consolidate the four actions is pending.

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

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

Name Age Office and Business Experience
---- --- ------------------------------
SHELDON R. ERIKSON...... 53 Chairman of the Board, President and Chief
Executive Officer and President of Western
Petroleum Services Group. Chairman of the Board
of Directors since May 1988. President and
Chief Executive Officer since May 1987.
President of Joy Petroleum Equipment Company,
an oilfield equipment manufacturing company,
from November 1986, at which time it was a
subsidiary of Joy Manufacturing Company, to May
1987. President or Executive Vice President of
various subsidiaries and divisions of NL
Industries, Inc. which were engaged in
performing oilfield services and manufacturing
equipment used in the oil and gas industry,
until November 1986.

GRAHAM L. ADELMAN....... 45 Senior Vice President, General Counsel,
Secretary and Director. Senior Vice President
since May 1990. Director since May 1989.
Secretary since May 1986. General Counsel since
1980. Assistant Secretary until May 1986.

THOMAS R. HIX........... 47 Senior Vice President, Chief Financial Officer
and Treasurer since October 1993. Employed by
Oceaneering International, Inc. from November
1986 until October 1993, his last position
being Executive Vice President, Chief Financial
Officer and Treasurer.

STEVEN P. BEATTY........ 47 Vice President and Controller. Vice President
since May 1990. Controller since December 1985.

JANE L. CROWDER......... 44 Vice President, Human Resources since February
1994, Director of Human Resources from January
1993 to February 1994. Manager of Corporate
Human Resources during 1992. Manager of
Compensation and Benefits from 1989 to 1992.
Prior to 1989, Benefits Manager for Western
Atlas International, Inc. and held various
positions with Dresser Industries, Inc.,
including Personnel Manager and Manager of
Compensation for their Atlas Oilfield Services
Group.

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EDWARD E. WILL.......... 42 Vice President of The Western Company of North
America since May 1990. President, Western
Petroleum Services International Company
subsidiary since November 1988. Managing
Director of Western Petroleum Services
International Company and Vice President,
International Operations of Western Petroleum
Services Group from November 1987 to November
1988. Vice President, Marketing and
International Operations, of the NL Acme Tool
Division of NL Industries, Inc., which was
engaged in oilfield equipment rental, coring
and downhole fishing services, throughout 1986
to November 1987.

PART II

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

The Company's Common Stock is traded on the New York Stock Exchange under
the symbol WSN. At February 15, 1995, there were approximately 5,000
stockholders of record and 18,285,413 shares of Common Stock outstanding.

The following table shows the NYSE composite trading price range of the
Company's Common Stock as reported for 1994 and 1993.
High Low
------- -------
1994
First Quarter ............................... $ 15.38 $ 9.75
Second Quarter .............................. 12.88 9.75
Third Quarter ............................... 18.38 10.63
Fourth Quarter .............................. 18.75 15.63

1993
First Quarter ............................... $ 13.00 $ 5.25
Second Quarter .............................. 16.88 10.25
Third Quarter ............................... 18.88 14.50
Fourth Quarter .............................. 19.25 11.63

For the period ended March 7, 1995, high and low prices of Common Stock
were $18.88 and $16.50, respectively.

No cash dividends were paid or declared on the Company's Common Stock
during 1994 and 1993. The Company does not expect to pay any dividends on its
Common Stock in the foreseeable future.

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ITEM 6. SELECTED FINANCIAL DATA.

THE WESTERN COMPANY OF NORTH AMERICA AND SUBSIDIARIES
CONSOLIDATED HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues........................... $ 342,501 $ 294,073 $ 225,353 $ 224,378 $ 246,747
Cost of sales and services......... 319,468 264,408 214,690 223,059 225,273
General and administrative......... 9,956 9,674 8,805 8,879 11,429
Operating income (loss)............ 13,077 19,991 1,858 (7,560) 10,045
Interest expense, net.............. (8,796) (8,852) (9,348) (9,049) (8,010)
Merger related expenses, writedowns
and other........................ (21,118)<F1> (7,132)<F2> -- -- (3,594)
Provision for income taxes......... 495 627 353 -- --
Income (loss) from continuing
operations before extraordinary
gains (losses)................... (17,332) 3,380 (7,843) (16,609) (1,559)
Discontinued operations, net of
income taxes<F3>................. (4,197) 35,321 9,510 11,188 4,101
Extraordinary gains (losses), net
of income taxes.................. -- (25,713)<F4> (1,223) -- 1,635
Net income (loss).................. (21,529) 12,988 444 (5,421) 4,177
Income (loss) from continuing
operations before extraordinary
gains (losses) per share......... (0.95) 0.18 (0.44) (1.07) (0.12)
Net income (loss) per share........ (1.18) 0.70 0.02 (0.35) 0.32
OTHER DATA:
Depreciation and amortization...... $ 18,814 $ 14,589 $ 14,887 $ 14,478 $ 11,850
Capital expenditures............... 28,002 63,712 38,773 46,285 32,336
Operating income before
depreciation and
amortization<F5>................. 31,891 34,580 16,745 6,918 21,895
FINANCIAL POSITION DATA
(AT END OF PERIOD):
Property, net...................... $ 186,095 $ 228,816 $ 311,235 $ 297,293 $ 271,076
Total assets....................... 353,701 488,385 431,970 421,891 396,693
Long-term debt..................... 90,909 90,910 186,261 160,454 175,716
Stockholders' equity............... 179,149 200,447 175,405 174,136 131,249
Book value per share............... 9.80
---------
<FN>
<F1>Merger-related expenses of $21.1 million represent costs associated with
the expected merger with BJ Services and include investment banker, legal
and accounting fees, certain severance costs and other miscellaneous
expenses. In addition to the expenses recorded in 1994, additional legal
fees and certain other expenses related to the Merger are expected to be
incurred and recorded in 1995.

<F2>The writedown of pressure pumping assets and other in 1993 totaled $7.1
million and included a $3.5 million writedown of older pressure pumping
equipment and idle facilities to net realizable value in anticipation of
disposal as well as various other non-operating costs.
-11-<PAGE>
<F3>Western formalized a plan in November 1994 to dispose of the remaining
assets of its offshore drilling segment. These assets consisted primarily
of two semi-submersible offshore drilling rigs and related equipment and
inventory. As a result, the offshore drilling segment has been
reclassified in the consolidated statements of operations as discontinued
operations. The results of discontinued operations were as followed:

1994 1993 1992 1991 1990
------- -------- ------- ------- -------
(IN THOUSANDS)

Revenues......................... $22,609 $ 64,676 $89,613 $89,840 $77,040
======= ======== ======= ======= =======
Income from discontinued
operations:
Operating income............... $ 2,429 $ 4,161 $13,919 $17,138 $ 9,563
Other income (loss):
Gains on sales of offshore
drilling rigs............... -- 59,161 -- -- --
Writedowns of offshore
drilling rigs............... -- (18,328) -- -- --
Interest expense............. -- -- (1,333) (3,360) (3,784)
------- -------- ------- ------- -------
Income from discontinued
operations before income
taxes......................... 2,429 44,994 12,586 13,778 5,779
Provision for income taxes..... 152 9,673 3,076 2,590 1,678
------- -------- ------- ------- -------
2,277 35,321 9,510 11,188 4,101
------- -------- ------- ------- -------
Loss on disposal, net of
income tax benefit in 1994,
of $(152)....................... (6,474) -- -- -- --
------- -------- ------- ------- -------
$(4,197) $ 35,321 $ 9,510 $11,188 $ 4,101
======= ======== ======= ======= =======

<F4>During March 1994, Western purchased through a tender offer $97.8 million
face amount of 12 7/8% Senior Notes. The aggregate purchase price of these
12 7/8% Senior Notes was $117.3 million, resulting in an extraordinary
loss of $25.7 million ($1.38 per share) including unamortized original
issue costs of $3.2 million, unamortized original issue discount of $2.3
million and offering costs of $0.7 million. The extraordinary loss was
accrued during the fourth quarter of 1993.

<F5>Operating income before depreciation and amortization is a supplemental
financial measurement used by Western in the evaluation of its business
and is presented solely as a supplemental disclosure, and should not be
construed as an alternative to operating income or to cash flows from
operating activities or any other measure of financial performance in
accordance with generally accepted accounting principles.
</FN>
</TABLE>
-12-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

BUSINESS CONDITIONS

Most indicators of well drilling activity, including oil and natural gas
prices, were lower in 1994 than in 1993 as shown in the following table.

1994 1993 1992
------ ------ ------
Average Domestic Rig Count Total ................. 775 754 721
Oil ......................................... 335 373 373
Natural gas ................................. 427 364 331
Average
natural gas price ($/MMBtu) ...................... $ 1.72 $ 1.97 $ 1.61
Average oil price ($/barrel) ..................... $17.27 $18.39 $20.59
Domestic natural gas well completions............. 7,868 8,761 7,945
Domestic oil well completions .................... 6,080 8,035 8,703

Negative year-over-year changes in these indicators adversely affected 1994
operating performance of the Company's pressure pumping business.

A 10% decline in domestic natural gas well completions in 1994, in response
to weak natural gas prices throughout most of the year, compared negatively to
the 10% increase in 1993. Domestic oil well completions fell 24% in 1994
following a decline of 8% in 1993.

The Company believes that the current weakness in natural gas prices may
continue to have a negative effect on domestic performance in 1995.

ACQUISITIONS AND DISPOSITIONS

In February 1995, the Company sold its last remaining drilling rig, the
semi-submersible Western Pacesetter IV, for $37.2 million. In December 1994, the
semi-submersible drilling rig, Alaskan Star, was sold for $11.8 million, of
which $6.3 million is a bankers' acceptance drawn on a U.S. bank due within one
year, and in 1993 eleven jack-up rigs were sold for $169.3 million. The offshore
drilling business has been accounted for as a discontinued operation. See Note 4
of Notes to Consolidated Financial Statements for additional information.

-13-
<PAGE>
The Company completed the acquisition in February 1994, of substantially
all of the assets of the production and process chemical business of Unichem
International, Inc. ("Unichem") for $19.8 million in cash and in June 1994, of
substantially all of the oilfield chemicals business and assets of Betz Energy
Chemicals, Inc. ("Betz") for $4.8 million in cash. The businesses acquired from
Unichem and Betz are substantially the same and are affected primarily by oil,
rather than natural gas, prices. In July 1994, the Company completed the
acquisition of the coiled tubing business of Coiltech, Inc. ("Coiltech") for
$3.1 million in cash. All three acquisitions were accounted for using the
purchase method of accounting. See Note 3 of Notes to Consolidated Financial
Statements for additional information.

MERGER AGREEMENT

In November 1994, the Company and BJ Services Company ("BJ Services")
entered into a definitive merger agreement. Subject to certain conditions and to
appraisal rights under Delaware law, this agreement provides that stockholders
of the Company will receive $20 in cash or in shares of BJ Services common stock
for each outstanding share of Company Common Stock they own. Additionally, for
each share of Common Stock they hold, each stockholder will receive .2 of a
five-year warrant to purchase one share of BJ common stock for $30 per share.
Pursuant to the merger agreement, stockholders may elect to receive any
proportion of cash and BJ Services common stock, provided that the total number
of shares of Common Stock for which such elections are made will be adjusted so
that the total shares for which each type of election is made will be
approximately equal. The transaction is subject to the approval of both
companies' stockholders, antitrust review and other customary closing
conditions, and is expected to close during the first half of 1995.

RESULTS OF OPERATIONS

REVENUE. Pressure pumping revenues for 1994 were $307.5 million as compared
to $294.1 million and $225.4 million for 1993 and 1992, respectively. The $13.4
million (5%) increase in 1994 was due primarily to a 5% increase in domestic
revenues from $278.1 million to $291.4 million. The Company was able to increase
revenues due to increased demand for certain of its services as well as improved
pricing despite a deterioration in most business condition indicators.
International revenues increased slightly in 1994 over 1993 as a result of
higher business volumes in Eastern Europe and the former Soviet Union offset by
lower export sales of equipment and products.

In 1993, pressure pumping revenues were $68.7 million (31%) higher than
1992 reflecting a $66.6 million increase in domestic revenues and a $2.1 million
increase in international revenues. Contributing to this increase were
significantly higher levels of business volume resulting from increased demand
and, to a lesser extent, improved pricing. This increased volume was primarily
the result of increased demand for well stimulation services commensurate with
higher levels of natural gas drilling and completion activity brought about by
sustained higher natural gas prices. The $2.1 million increase in 1993 over 1992
in international revenues resulted from higher export sales of equipment and
products partially offset by lower business volumes in Nigeria.

-14-
<PAGE>
OPERATING COSTS. Pressure pumping operating costs as a percent of revenue
were 88% in 1994 as compared to 85% in 1993. The 3% deterioration was related
primarily to domestic pressure pumping where operating costs increased from 83%
to 85%. The domestic change in operating costs was due primarily to increased
staffing levels and associated costs, environmental remediation costs and
equipment costs partially offset by improved pricing. Foreign pressure pumping
contributed to the 1994 margin decline due to lower levels of activity in
Nigeria caused by political instability and increased operating costs related to
the Company's well stimulation vessel, Western Renaissance. In July 1994, the
Company relocated the Western Renaissance from the North Sea to the U.S. Gulf of
Mexico due to the relatively low level of stimulation activity that occurred
during 1994 in the North Sea. Pressure pumping operating costs as a percent of
revenue were 85% in 1993 as compared to 89% for 1992. Domestic pressure pumping
operating costs as a percentage of revenues decreased from 89% in 1992 to 83% in
1993. This total improvement was due primarily to increased volumes and lower
variable operating costs but was somewhat offset by start-up costs relating to
the Western Renaissance and lower levels of business activity in Nigeria and
Indonesia.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for
1994 increased $4.2 million (29%) primarily as a result of two factors. The 1994
acquisitions of Unichem, Betz and Coiltech resulted in additional depreciation
and amortization expense of $2.3 million. Also, depreciation on the Western
Renaissance increased by $2.1 million in 1994 due primarily to a full year of
operations in 1994 versus only one month in 1993. Depreciation and amortization
expense in 1993 of $14.6 million was slightly lower than 1992 depreciation and
amortization expense of $14.9 million resulting from lower depreciation on
certain pressure pumping equipment that had been fully depreciated partially
offset by depreciation expense on new equipment. Utilization of the Western
Renaissance, and opportunities therefor, will continue to be assessed in
determining whether future undiscounted net cash flows will be adequate to cover
its cost.

GENERAL AND ADMINISTRATIVE. General and administrative expense for 1994 was
substantially the same as 1993. General and administrative expense for 1993 was
$0.9 million higher than 1992 due primarily to increased data processing costs
related to a systems conversion and increased training costs.

INTEREST EXPENSES, NET OF INTEREST CAPITALIZED. Interest expense for 1994
decreased $3.5 million (26%) over 1993 primarily as a result of the purchase and
retirement in March 1994 of $97.8 million face value of the Company's $100
million 12 7/8% Senior Notes Due 2002 (the "Notes"). This decrease was partially
offset by reduced capitalized interest and the impact of an interest rate swap.
See Note 5 of Notes to Consolidated Financial Statements. The Company recorded
interest expense of $0.8 million in 1994 related to the interest rate swap
compared to interest expense being reduced by $1.1 million in 1993. The effect
upon interest expense of the interest rate swap is dependent upon changes in the
six month London Interbank Offering Rate. The estimated differential to be paid
or received at each semiannual settlement date is charged or credited to
interest expense as interest rates change. The Company capitalizes interest
applicable to significant capital projects which require a period of time to
construct. No interest was capitalized in 1994. Capitalized interest which
relates principally to the Western Renaissance, which was placed in service late
in the fourth quarter of 1993, amounted to $5.8 million in 1993 and $2.3 million
in 1992. Interest expense in 1993 increased by $3.1 million (30%) over 1992 due
primarily to interest associated with issuance of the Notes in November 1992.
Proceeds from issuance of the Notes were used to retire all outstanding
institutional debt which had lower interest rates. Increased amounts of interest

-15-<PAGE>
capitalized and the impact of the interest rate swap partially offset this
higher interest cost.

INTEREST INCOME. Interest income for 1994 was $3.4 million (73%) lower than
in 1993 due primarily to decreased average cash balances in 1994 and the receipt
in 1993 of interest income associated with the settlement of a long-standing
drilling contract dispute. Interest income in 1993 increased $3.6 million (339%)
from 1992 due primarily to higher interest rates and average cash balances and
the 1993 receipt of interest income associated with the previously mentioned
drilling contract dispute.

MERGER RELATED EXPENSES. Expenses of $21.1 million were recorded in 1994
for costs associated with the expected merger with BJ Services and includes
investment banker, legal and accounting fees, certain severance costs and other
miscellaneous fees. In addition to the expense recorded in 1994, additional
legal fees and certain other merger related expenses are expected to be incurred
and recorded in 1995.

WRITEDOWN OF PRESSURE PUMPING ASSETS AND OTHER. The writedown of pressure
pumping assets and other totaled $7.1 million in 1993 and included the writedown
of older pressure pumping equipment and idle facilities to net realizable value
in anticipation of disposal and various other non-operating costs.

INCOME TAXES. Provision for income taxes from continuing operations was
substantially the same in 1994 as 1993. Provision for income taxes from
continuing operations increased $0.3 million in 1993 compared to 1992 primarily
as a result of increased profitability in domestic operations in 1993. Total
provision for income taxes, including discontinued operations, decreased by $9.8
million in 1994 compared to 1993 and increased by $6.9 million in 1993 compared
to 1992 primarily as a result of the U.S. tax provision associated with the sale
of certain offshore drilling rigs in 1993. The increase in 1993 was partially
offset by the tax benefit associated with offshore drilling rig writedowns and
decreased foreign income taxes. As a result of the Company's chapter 11
reorganization and subsequent changes in ownership of Common Stock, the Company
is subject to an annual limitation with respect to the realization of U.S. net
operating loss carryforwards. See Note 7 of Notes to Consolidated Financial
Statements.

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"),
which requires an asset and liability approach for financial accounting and
reporting of income taxes. The Company adopted SFAS No. 109 prospectively and
the initial adoption did not materially affect 1993 results of operations. The
consolidated financial statements for 1992 were prepared in accordance with the
provisions of Accounting Principles Board Opinion No. 11, "Accounting for Income
Taxes."

DISCONTINUED OPERATIONS. In November 1994, the Company formalized a plan to
dispose of the remaining assets of its offshore drilling segment. These assets
consisted primarily of two semi-submersible offshore drilling rigs and related
equipment and inventory. As a result, the offshore drilling segment has been
classified in the consolidated statements of operations as discontinued
operations.
-16-
<PAGE>
The following table summarizes the results of the discontinued operation:

1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
Revenues ..................................... $ 22,609 $ 64,676 $ 89,613
======== ======== ========
Income from discontinued operations,
net of income tax expense in 1994 -
$152, 1993 - $9,673, and 1992 - $3,076 .... $ 2,277 35,321 9,510
Loss on disposal, net of income tax
benefit in 1994 of $(152) ................. (6,474) -- --
-------- -------- --------
$ 4,197 $ 35,321 $ 9,510
======== ======== ========

See Note 4 of Notes to Consolidated Financial Statements for additional
information.

EXTRAORDINARY LOSSES. During March 1994, the Company purchased through a
tender offer $97.8 million face amount of Notes. The aggregate purchase price of
these Notes was $117.3 million, resulting in an extraordinary loss of $25.7
million ($1.38 per share) including unamortized original debt issue costs of
$3.2 million, unamortized original issue discount of $2.3 million and offering
costs of $0.7 million. This extraordinary loss was recognized in December 1993.
During 1992, the Company issued the Notes and used the proceeds to prepay
secured debt totaling $94.6 million. As a result, it incurred a $1.2 million
($0.07 per share) extraordinary loss primarily representing prepayment penalties
and the write-off of unamortized debt issuance costs.

FINANCIAL CONDITION

CAPITAL REQUIREMENTS. Capital expenditures, exclusive of acquisitions,
decreased $32.0 million (60%) in 1994 compared to 1993 primarily due to lower
1994 capital expenditures associated with the Western Renaissance and lower
capital expenditures in the offshore drilling business as a result of the sales
in 1993 of eleven offshore jack-up drilling rigs. Partially offsetting this
decrease was an increase in capital expenditures in the domestic pressure
pumping business. Capital expenditures, exclusive of acquisitions, increased
$14.5 million (38%) in 1993 over 1992 due primarily to increased capital
expenditures related to the domestic pressure pumping business. The 1994 capital
expenditures for acquisitions are associated with the purchase of Unichem, Betz
and Coiltech. In 1993, substantially all the assets of Smith Energy Services
were acquired.

During certain periods in the last few years, the Company has utilized
nearly all of the service capacity of its pressure pumping equipment.
Consequently, substantial capital expenditures may be needed for the Company to
meet any sustained demand significantly greater than it experienced during those
periods. Net revenues, however, could improve substantially without significant
capital expenditures if price discounting improves. In the short term, the
majority of capital expenditures for domestic pressure pumping equipment is
expected to be a function of demand for related services as well as normal
replacement needs. If additional operating facilities are needed, the Company
believes inactive facilities that it already owns can be reactivated, or that
new facilities can be leased, thereby limiting future capital expenditures for
facilities.
-17-
<PAGE>
Additional capital expenditures will be required in order for the Company
to continue the expansion of its pressure pumping services into international
markets and to take advantage of opportunities to acquire on favorable terms
businesses which complement or extend the Company's existing operations.

CAPITAL RESOURCES AND LIQUIDITY. The decrease in the Company's cash
position from $141.3 million to $12.7 million during 1994 was primarily due to
the purchase and retirement of the Notes and capital expenditures partially
offset by proceeds from sales of marketable securities and cash generated from
operations. In 1993 the increase in the Company's cash position from $13.2
million to $141.3 million was primarily due to proceeds from sales of offshore
drilling rigs and cash generated from operations offset by 1993 capital
expenditures. Net cash provided by operating activities decreased $31.8 million
(71%) in 1994 due primarily to lower operating results, merger related expenses
and unfavorable changes in accounts payable and accounts receivable balances.
Accounts payable was unusually high at year end 1993 and accounts receivable was
unusually high at year end 1992. Net cash generated by operations increased
$20.1 million (82%) in 1993 principally as a result of improved operating
results within the domestic pressure pumping segment and favorable changes in
accounts payable and accounts receivable balances.

Sources of liquidity to meet the Company's planned capital expenditure and
working capital needs during 1995 include cash on hand at December 31, 1994,
cash proceeds of $37.2 million received in February 1995 from the sale of the
Western Pacesetter IV, anticipated 1995 cash flow from operations and the $30
million available at December 31, 1994 under the Company's $30 million revolving
credit facility. Based on management's current operating capital plan, these
sources should provide the Company sufficient liquidity.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Response to this Item is contained in the Company's 1994 Audited
Consolidated Financial Statements and Notes thereto, together with Report of
Independent Accountants dated February 22, 1995, which appears in Exhibit Number
21.4 of Current Report on Form 8-K dated February 10, 1995; such information is
incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES.

None.
PART III

In accordance with General Instruction G(3) to Form 10-K, Items 10, 11, 12
and 13 have been omitted, and the Company incorporates by reference the
information in response to such items that is set forth in its definitive Proxy
Statement complying with Regulation 14A to be filed with the Securities and
Exchange Commission in connection with the Company's Annual Meeting of
Stockholders for 1995.
-18-
<PAGE>
PART IV

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

a(1) FINANCIAL STATEMENTS

Response to this Item is contained in the Company's 1994 Audited
Consolidated Financial Statements and Notes thereto, together with Report of
Independent Accountants, in Exhibit 21.4 of Current Report on Form 8-K dated
February 10, 1995; such information is incorporated herein by reference.

a(2) FINANCIAL STATEMENT SCHEDULES

THE WESTERN COMPANY OF NORTH AMERICA
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
WRITE-OFFS
BALANCE REVERSALS NET OF
BEGINNING CREDITED RECOVERIES BALANCE
OF YEAR TO EXPENSE AND REVERSALS END OF YEAR
--------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
For the year ended December 31, 1994
Allowance for doubtful accounts receivable ................. $ 4,373 $ (207) $ 107 $ 4,273
For the year ended December 31, 1993
Allowance for doubtful accounts receivable ................. 14,915 (450) (10,092) 4,373
For the year ended December 31, 1992
Allowance for doubtful accounts receivable ................. 18,207 -- (3,292) 14,915
</TABLE>
a(3) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K. Management contracts or
compensatory plans or arrangements required to be filed as an exhibit to this
Form 10-K are designated with an asterisk(*).

EXHIBIT NUMBER DESCRIPTION
-------------- -----------

2.1 -- Agreement and Plan of Merger, dated as of November 17,
1994, among BJ Services Company, WCNA Acquisition Corp., and
The Western Company of North America(1)

2.2 -- First Amendment to Agreement and Plan of Merger, dated as
of March 7, 1995, among BJ Services Company, WCNA Acquisition
Corp., and the Western Company of North America

3.1 -- Restated Certificate of Incorporation of The Western Company
of North America(2)

3.2 -- Bylaws of The Western Company of North America, as amended(3)

4.1 -- Specimen Stock Certificate(4)

4.2 -- Stockholder Protection Rights Plan, dated March 5, 1990, of
The Western Company of North America, as amended (5)

-19-
4.3 -- Indenture, dated as of November 15, 1992, between The Western
Company of North America and United States Trust Company of
New York, Trustee(6)

4.4 -- First Supplemental Indenture, dated March 2, 1994, to
Indenture, dated as of November 15, 1992, between The Western
Company of North America and United States Trust Company of
New York, Trustee(7)

4.5 -- Indenture, dated as of January 31, 1990, between The Western
Company of North America and Harris Trust and Savings Bank, as
Trustee(8)

4.6 -- First Amended and Restated Revolving Credit Agreement, dated
as of May 18, 1992, among The Western Company of North America
and The Chase Manhattan Bank, N.A. and Den norske Bank AS(9)

4.7 -- First Amendment, dated August 31, 1992, to First Amended and
Restated Revolving Credit Agreement, dated as of May 18, 1992,
among The Western Company of North America and The Chase
Manhattan Bank, N.A. and Den norske Bank AS(6)

4.8 -- Security Agreement, dated December 21, 1990, by The Western
Company of North America in favor of The Chase Manhattan Bank,
N.A. as agent(10)

4.9 -- First Amendment to Security Agreement made and entered into on
December 20, 1991 by and among The Western Company of North
America and The Chase Manhattan Bank, N.A. and Den norske Bank
AS(11)

4.10 -- Second Amendment to Security Agreement made and entered into
on May 18, 1992 by and among The Western Company of North
America and The Chase Manhattan Bank, N.A. and Den norske
Bank AS(12)

4.11 -- Third Amendment to Security Agreement made and entered into on
October 1, 1993 by and among the Western Company of North
America and The Chase Manhattan Bank, N.A. and Den norske
Bank AS(7)

10.1* -- Employment and Severance Agreement with Mr. Erikson dated
March 1, 1994(7)

10.2* -- Stock Option Agreement with Mr. Erikson, dated May 12,
1989(11)

10.3* -- Severance Agreements with Ms. Crowder, Messrs. Adelman,
Beatty, Hix and Will, all dated March 1, 1994(7)

10.4* -- The Western Company of North America Management Incentive
Compensation Plan, amended and restated as of January 1,
1988(14)

10.5* -- Amendment No. 7, dated August 7, 1989, to The Western Company
of North America Management Incentive Compensation Plan, as
amended and restated as of January 1, 1988(10)

-20-
<PAGE>
10.6* -- Amendment No. 8, dated February 3, 1992, to The Western
Company of North America Management Incentive Compensation
Plan, as amended and restated as of January 1, 1988(11)

10.7* -- The Western Company of North America Long-Term Performance
Incentive Plan, amended and restated as of May 3, 1993(15)

10.8* -- The Western Company of North America Stock Option Plan for
Non- Employee Directors, amended and restated as of
February 1, 1993(15)

10.9* -- The Western Company of North America Non-Employee Directors
Retirement Plan dated November 17, 1994(16)

11 -- Explanation of income (loss) per share calculation is included
in Note 1 of Notes to Consolidated Financial Statements in the
Company's 1994 Audited Consolidated Financial Statements(17)

21 -- Subsidiaries

23 -- Consent of Price Waterhouse LLP dated as of March 30, 1995
contained on page 23 of this Annual Report on 10-K.

27 -- Financial Data Schedule

99.1 -- Memorandum of Agreement dated December 21, 1994 by and between
CMC Hitran International Shipbuilding Company and The Western
Company of North America(17)

99.2 -- Amendment No. 1 to the Memorandum of Agreement dated
December 27, 1994 by and between CMC Hitran International
Shipbuilding Company and The Western Company of North
America(17)

99.3 -- Amendment No. 2 and Release to the Memorandum of Agreement
dated February 10, 1995 by and between CMC Hitran
International Shipbuilding Company and The Western Company
of North America(17)

(b) A report on Form 8-K was filed on November 23, 1994.

(1) Filed with the Commission as Exhibit to Report on Form 8-K
filed November 24, 1994; such Exhibit is incorporated herein by reference.

(2) Filed with the Commission as Exhibit to Report on Form 10-Q for the
three months ended March 31, 1989; such Exhibit is incorporated herein by
reference.

(3) Filed with the Commission as Exhibit to Report on Form 8-K filed
January 9, 1990, and as Exhibit to Report on Form 8-K filed May 9, 1990 and as
Exhibit to Report on Form 8-K filed February 16, 1995; such Exhibits are
incorporated herein by reference.

(4) Filed with the Commission as Exhibit to Registration Statement on Form
S-1, No. 33-33710; such Exhibit is incorporated herein by reference.

-21-
<PAGE>
(5) Filed with the Commission as Exhibit to Report on Form 8-K filed March
6, 1990, and as Exhibit to Amendment on Form 8 filed April 9, 1990, to
Registration Statement on Form 8-A filed March 7, 1990 and as Exhibit to Report
on Form 8-K filed November 23, 1994 incorporated herein by reference.

(6) Filed with the Commission as Exhibit to Registration Statement on Form
S-2, No. 33-51852; such Exhibit is incorporated herein by reference.

(7) Filed with the Commission as Exhibit to Report 10-K for the year ended
December 31, 1993; such Exhibit is incorporated herein by reference.

(8) Filed with the Commission as Exhibit to Post-Effective Amendment No. 1
to Registration Statement on Form S-1, No. 33-32287; such Exhibit is
incorporated herein by reference.

(9) Filed with the Commission as Exhibit to Report on Form 10- Q for the
three months ended March 31, 1992; such Exhibit is incorporated herein by
reference.

(10) Filed with the Commission as Exhibit to Report on Form 10- K for the
year ended December 31, 1990; such Exhibit is incorporated herein by reference.

(11) Filed with the Commission as Exhibit to Report on Form 10- K for the
year ended December 31, 1991; such Exhibit is incorporated herein by reference.

(12) Filed with the Commission as Exhibit to Report on Form 10-Q for the
three months ended June 30, 1992; such Exhibit is incorporated herein by
reference.

(13) Filed with the Commission as Exhibit to Report on Form 10-Q for the
three months ended June 30, 1989; such Exhibit is incorporated herein by
reference.

(14) Filed with the Commission as Exhibit to Report on Form 10-Q for the
three months ended September 30, 1988; such Exhibit is incorporated herein by
reference.

(15) Filed with the Commission as Exhibit to Report on Form 10-Q for the
three months ended March 31, 1993; such Exhibit is incorporated herein by
reference.

(16) Filed with the Commission as Exhibit to Report on Form 10-Q for the
three months ended September 30, 1994; such Exhibit is incorporated herein by
reference.

(17) Filed with the Commission as Exhibit to Form 8-K filed February 24,
1995; such Exhibit is incorporated herein by reference.

-22-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of The Western Company of North America

Our audits of the consolidated financial statements referred to in our report
dated February 22, 1995, which appears in Exhibit Number 21.4 of The Western
Company of North America's Current Report on Form 8-K dated February 10, 1995
(which report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K), also included an audit of the
Financial Statement Schedule listed in Item 14a(2) of this Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.

PRICE WATERHOUSE LLP

Houston, Texas
February 22, 1995

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Registration File Nos. 33-28085, 33-41729 and 33-41779)
of The Western Company of North America of our report dated February 22, 1995
which appears in Exhibit Number 21.4 of The Western Company of North America's
Current Report on Form 8-K dated February 10, 1995, which is incorporated in
this Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears on
page 23 of this Form 10-K.

PRICE WATERHOUSE LLP

Houston, Texas
March 30, 1995
-23-
<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.

THE WESTERN COMPANY OF NORTH AMERICA

March 30, 1995 SHELDON R. ERIKSON
Sheldon R. Erikson
President and Chief Executive Officer

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 in the capacities indicated on the 30th day of March 1995.

SHELDON R. ERIKSON Chairman of the Board of
Sheldon R. Erikson Directors and Chief
Executive Officer
(Principal Executive
Officer)

GRAHAM L. ADELMAN Senior Vice President,
Graham L. Adelman General Counsel,
Secretary and Director

THOMAS R. HIX Senior Vice President and
Thomas R. Hix Chief Financial Officer
(Principal Financial
Officer)

STEVEN P. BEATTY Vice President and
Steven P. Beatty Controller (Principal
Accounting Officer)

________________________
Nathan M. Avery Director

DAVID A. B. BROWN
David A. B. Brown Director

________________________
Grant A. Dove Director

WILLIAM J. JOHNSON
William J. Johnson Director

________________________
Michael E. Patrick Director

DAVID ROSS III
David Ross III Director

-24-

EXHIBIT 2.2
FIRST AMENDMENT TO AGREEMENT
AND PLAN OF MERGER

FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of March 7,
1995, among BJ SERVICES COMPANY ("BJ"), WCNA ACQUISITION CORP., a wholly owned
subsidiary of BJ ("BJ Sub"), and THE WESTERN COMPANY OF NORTH AMERICA
("Western"), each a Delaware corporation.

WHEREAS, BJ, BJ Sub and Western have entered into an Agreement and
Plan of Merger, dated as of November 17, 1994 (the "Merger Agreement"); and

WHEREAS, pursuant to Section 1.5 of the Merger Agreement, BJ hereby
notifies Western of its desire to structure the Merger so that Western merges
into BJ and BJ is the Surviving Corporation after the Effective Time;

NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the parties hereto agree as follows:

ARTICLE I
AMENDMENTS

1.1 As of the date hereof, BJ Sub shall cease to be a party to the
Merger Agreement and shall henceforth have no rights or obligations thereunder.

1.2 Sections 1.1, 1.4, 2.1, 2.2, and 8.19 of the Merger Agreement
are hereby amended by deleting each reference to "BJ Sub" therein and inserting
"BJ" in place thereof.

1.3 Section 1.2 of the Merger Agreement is hereby amended by
deleting the words ", BJ Sub" and "cause the Surviving Corporation to" in the
first sentence of such section.

1.4 Section 2.3 of the Merger Agreement is hereby amended by (i)
deleting the word "The" in the first sentence of such section and inserting the
words "Subject to Section 8.16, the" in place thereof and (ii) deleting the
reference to "BJ Sub" in the same sentence and inserting "BJ" in place thereof.

1.5 Sections 3.1(a) and 3.1(c) of the Merger Agreement are hereby
amended by deleting the references to ", BJ Sub" therein.

1.6 Section 3.1(d) of the Merger Agreement is hereby deleted in
its entirety, and the following is inserted in place thereof:

"(d) BJ SHARES. Each share of common stock, par value
$0.10 per share, of BJ ("BJ Common Stock") issued and outstanding
immediately prior to the Effective Time shall remain outstanding after
the Merger and, together with BJ Common Stock issued pursuant to the
Merger, thereafter shall constitute all of the common stock of the
Surviving Corporation issued and outstanding immediately after the
Effective Time."

1.7 Section 3.2(b) of the Merger Agreement is hereby amended by
deleting the reference to "$1.00" at the end thereof and inserting in place
thereof "$5.00".
B-1

1.8 Section 3.4 of the Merger Agreement is hereby amended by
deleting the words "Warrant Consideration Value" and inserting in place thereof
the words "Warrant Current Market Price".

1.9 Section 3.7 of the Merger Agreement is hereby amended by (i)
deleting from the first sentence thereof the words "Neither BJ nor" and
capitalizing the first letter of the following word and (ii) inserting the word
"not" between the words "shall be" in the same sentence.

1.10 Section 4.2 of the Merger Agreement is hereby amended by
deleting from the first sentence thereof the word "without" and inserting the
words "$1 per share" after the words "par value" in the same sentence.

1.11 Section 4.4 of the Merger Agreement is hereby amended by (i)
deleting from the third sentence thereof the words "each of", "and BJ Sub" and
"and of BJ Sub", (ii) deleting from the fifth sentence thereof the words
"Neither", "nor BJ Sub" and ", with respect to BJ," and (iii) inserting the
word "not" between the words "is subject" in the fifth sentence thereof.

1.12 Section 4.11 of the Merger Agreement is hereby amended by
deleting the first sentence of such section and inserting the following in
place thereof: "The affirmative vote of the holders of a majority of the
outstanding shares of BJ Common Stock entitled to vote thereon is required to
approve this Agreement and the issuance of BJ Common Stock and BJ Warrants in
the Merger."

1.13 Sections 4.14, 10.1(e), 10.2, and 11.3(a) of the Merger
Agreement are hereby amended by deleting the words "or BJ Sub" in each such
section.

1.14 Article V of the Merger Agreement is hereby deleted in its
entirety.

1.15 Article VI of the Merger Agreement is hereby amended by
deleting from the first line thereof the words "and BJ Sub".

1.16 Section 6.4 of the Merger Agreement is hereby amended by (i)
deleting from the third sentence thereof the words "each of" and "and BJ Sub"
and (ii) deleting from the fifth sentence thereof the words "or BJ Sub".

1.17 Section 8.3 of the Merger Agreement is hereby amended by (i)
deleting from the fourth sentence thereof the words "NYSE Rule 312.05" and
inserting in place thereof the words "applicable Delaware Corporation Law" and
(ii) deleting from the penultimate sentence thereof the words "or NYSE rules,
as the case may be,".

1.18 Section 8.6(a) of the Merger Agreement is hereby amended by
(i) deleting the words "BJ agrees that it or" and (ii) deleting from the
parenthetical at the end of such section the words "BJ or".

1.19 Section 8.6(b) of the Merger Agreement is hereby deleted in
its entirety and the following is inserted in place thereof:

"(b) Any Indemnified Party wishing to claim
indemnification under paragraph (a) of this Section 8.6, upon learning
of any such claim, action, suit, proceeding or investigation, shall
promptly notify the Surviving Corporation thereof, but the failure to
so notify shall not relieve the Surviving Corporation of any liability
it may have to such Indemnified Party except to the extent that such
failure materially prejudices the Surviving Corporation. In the event
of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) the Surviving
Corporation shall have the right to assume the defense thereof (which
it shall, in cooperation with the Indemnified Parties, vigorously
defend)
B-2

and the Surviving Corporation shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if the Surviving Corporation elects
not to assume such defense or there is a conflict of interest between
the Surviving Corporation and the Indemnified Parties, including
situations in which there are one or more legal defenses available to
the Indemnified Party that are different from or additional to those
available to the Surviving Corporation, the Indemnified Parties may
retain counsel satisfactory to them, and the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received;
PROVIDED, HOWEVER, that the Surviving Corporation shall not, in
connection with any one such action or proceeding or separate but
substantially similar actions or proceedings arising out of the same
general allegations, be liable for the fees and expenses of more than
one separate firm of attorneys at any time for all Indemnified Parties
except to the extent that local counsel, in addition to such parties'
regular counsel, is required in order to effectively defend against
such action or proceeding, (ii) the Indemnified Parties will cooperate
in the defense of any such matter and (iii) the Surviving Corporation
shall not be liable for any settlement effected without its prior
written consent, and PROVIDED, FURTHER, that the Surviving Corporation
shall not have any obligation hereunder to any Indemnified Party when
and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable law."

1.20 Section 8.8(a) of the Merger Agreement is hereby amended by
(i) deleting from clause (ii) of such section the words "BJ, BJ Sub, Western
or" and (ii) deleting from clause (iii) of such section the words "BJ, Western
or".

1.21 Section 8.8(b) of the Merger Agreement is hereby amended by
(i) deleting the words ", and will cause the Surviving Corporation to" and (ii)
deleting from the proviso thereof the words "or the Surviving Corporation".

1.22 Section 8.8(c) of the Merger Agreement is hereby amended by
(i) deleting the words "or BJ" and (ii) deleting the proviso in such section
and inserting the following in place thereof: "PROVIDED, HOWEVER, that
employees of the Surviving Corporation who become participants in a defined
benefit pension plan that was sponsored by BJ prior to the Effective Time or in
a defined benefit pension plan sponsored by the Surviving Corporation which is
adopted on or after the Effective Time shall not be given credit for benefit
accrual purposes to the extent such credit would result in a duplication of
benefits under more than one defined benefit pension plan."

1.23 Section 8.10(b) of the Merger Agreement is hereby amended by
deleting the words "or BJ Sub" and "and BJ Sub".

1.24 Section 8.11 of the Merger Agreement is hereby amended by (i)
deleting from the fifth sentence of such section the reference to ", BJ Sub"
and (ii) deleting from the last sentence of such section the words ", BJ and BJ
Sub" and inserting the words "and BJ" in place thereof.

1.25 Section 8.17 of the Merger Agreement is hereby amended by (i)
deleting the words "and any shares of common stock of BJ Sub" and "or BJ Sub,
respectively," and (ii) deleting the words "either Western or BJ Sub" and
inserting the word "Western" in place thereof.

1.26 Section 9.1(g) of the Merger Agreement is hereby amended by
(i) deleting the word "affirmative" and inserting in place thereof the word
"requisite" and (ii) deleting the words "required by NYSE Rule 312.05".

B-3

1.27 Section 9.2(a) of the Merger Agreement is hereby amended by
(i) deleting the words "and BJ Sub" where it appears in two places and (ii)
deleting the word "their" and inserting the word "its" in place thereof.

1.28 Section 9.3 of the Merger Agreement is hereby amended by
deleting the words "and BJ Sub" from the heading (with a corresponding change
to the index) and the first line thereof.

1.29 Section 10.1(j) of the Merger Agreement is hereby amended by
inserting between the words "approve the" the words "this Agreement and".

1.30 Section 11.2 of the Merger Agreement is hereby amended by
deleting from the first sentence of such section the words ", BJ and BJ Sub"
and inserting the words "and BJ" in place thereof.

1.31 Section 11.4(b) of the Merger Agreement is hereby amended by
deleting from clause (i) thereof the words "or the Surviving Corporation, as
the case may be".

1.32 Section 11.6 of the Merger Agreement is hereby amended by (i)
deleting the words "and BJ Sub" and (ii) deleting the words "their respective"
and inserting the word "its" in place thereof.

1.33 The form of Warrant Agreement attached as Exhibit A to the
Merger Agreement shall be deleted and replaced in its entirety with Amended
Exhibit A which is attached as Annex I to this First Amendment.

ARTICLE II
MISCELLANEOUS

2.1 Terms used in this First Amendment without definition shall
have the meanings ascribed to such terms in the Merger Agreement.

2.2 This First Amendment may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.

2.3 Except as expressly amended and modified by the terms of this
First Amendment, the terms and provisions of the Merger Agreement shall remain
in full force and effect.

2.4 This First Amendment shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
B-4

IN WITNESS WHEREOF, BJ, BJ Sub and Western have caused this First
Amendment to be executed as of the date first written above by their respective
officers thereunto duly authorized.

BJ SERVICES COMPANY

By: /s/ J. W. STEWART
Name: J. W. Stewart
Title: President and
Chief Executive Officer

WCNA ACQUISITION CORP.

By: /s/ J. W. STEWART
Name: J. W. Stewart
Title: President

THE WESTERN COMPANY OF
NORTH AMERICA

By: /s/ GRAHAM L. ADELMAN
Name: Graham L. Adelman
Title: Senior Vice President

B-5

<PAGE>
EXHIBIT 21
THE WESTERN COMPANY OF NORTH AMERICA

SUBSIDIARIES

Following is a list of wholly-owned subsidiaries of The Western Company of
North America (a Delaware corporation):

Western Oceanic, Inc. (Delaware)
Western Oceanic Services, Inc. (Delaware)
Western Services International, Inc. (Delaware)
Western Petroleum Services International Company (Delaware)
Western Petroleum Services, Incorporated (Delaware)
Saturn Energy Company (Delaware)
Colony Drilling Company Limited (Scotland)
Western Oilfield Supply & Rental, Inc. (Delaware)
Offshore International Limited (Delaware)

The following is a wholly-owned subsidiary of Western Oceanic, Inc.:

Western Oceanic International, Inc. (Panama)

Following is a list of wholly-owned subsidiaries of Colony Drilling Company
Limited:
Western Petroleum Services (U.K.), Ltd. (England)

The Western Company of North America owns 60% of Western Oceanic (Nigeria),
Ltd. The remainder is owned by Nigerian nationals.

Western Petroleum Services International Company owns 50% of Antah Western
Petroleum Services Sdn. Bhd.(Malaysia). The remainder is owned by a Malaysian
company otherwise unrelated to The Western Company of North America or its
subsidiaries.

Western Petroleum Services International Company beneficially owns 80% of
an Indonesian company, P.T. Western Petroleum Servindo. The remainder is owned
by Indonesian nationals. Western Petroleum Services International also
beneficially owns 64% of Western Rotary Petroleum Services Limited, a Hungarian
company. The remainder is owned by a Hungarian national drilling company.

Western Oceanic International, Inc. owns approximately 99% of Altomar
Perfuracoes Maritimas Limitada, a limited partnership. The remainder is owned by
Brazilian nationals.

<ARTICLE> 5
<LEGEND>
<PAGE>
The Schedule contains summary financial information extracted from the Company's
Report on 10-K for the year ended December 31, 1994 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 12,650
<SECURITIES> 0
<RECEIVABLES> 74,080
<ALLOWANCES> 4,273
<INVENTORY> 20,065
<CURRENT-ASSETS> 147,009
<PP&E> 262,791
<DEPRECIATION> 76,696
<TOTAL-ASSETS> 353,701
<CURRENT-LIABILITIES> 68,385
<BONDS> 90,909
<COMMON> 1,828
0
0
<OTHER-SE> 177,321
<TOTAL-LIABILITY-AND-EQUITY> 353,701
<SALES> 0
<TOTAL-REVENUES> 342,501
<CGS> 0
<TOTAL-COSTS> 301,764
<OTHER-EXPENSES> 48,778
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,032
<INCOME-PRETAX> (16,837)
<INCOME-TAX> 495
<INCOME-CONTINUING> (17,332)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (0.95)
<EPS-DILUTED> 0

</TABLE>