BJ SERVICES CO, S-3/A, 1996-06-28

BJ SERVICES CO
S-3/A, 1996-06-28
OIL & GAS FIELD SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION JUNE 28, 1996

REGISTRATION NO. 333-02731

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 2

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

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

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

<TABLE>
<S> <C> <C>
DELAWARE 1389 63-0084140
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

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

5500 NORTHWEST CENTRAL DRIVE
HOUSTON, TEXAS 77092
(713) 462-4239
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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

MARGARET BARRETT SHANNON, ESQ.
VICE PRESIDENT -- GENERAL COUNSEL
5500 NORTHWEST CENTRAL DRIVE
HOUSTON, TEXAS 77092
(713) 462-4239
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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

COPIES TO:

<TABLE>
<S> <C>
ANDREWS & KURTH L.L.P. BAKER & BOTTS, L.L.P.
4200 TEXAS COMMERCE TOWER 3000 ONE SHELL PLAZA
600 TRAVIS 910 LOUISIANA
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
(713) 220-4200 (713) 229-1234
ATTENTION: G. MICHAEL O'LEARY ATTENTION: J. DAVID KIRKLAND, JR.
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

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

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

===============================================================================
<PAGE> 2

***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any State in which *
* such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* State. *
* *
***************************************************************************

SUBJECT TO COMPLETION

PRELIMINARY PROSPECTUS DATED JUNE 28, 1996

P R O S P E C T U S

8,500,000 SHARES

BJ SERVICES COMPANY
COMMON STOCK [BJ SERVICES LOGO]

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

The shares of Common Stock, par value $0.10 per share ("Common Stock"),
offered hereby (the "Shares") are being sold by BJ Services Company (the
"Company"). The Common Stock is listed on the New York Stock Exchange ("NYSE")
under the trading symbol "BJS." On June 27, 1996, the last reported sales price
of the Common Stock on the NYSE composite tape was $34 7/8 per share. See "Price
Range of Common Stock and Warrants and Dividend Policy."

---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- -------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $500,000.

(3) The Company has granted to the several Underwriters an option for 30 days to
purchase up to an additional 1,275,000 shares of Common Stock at the Price
to Public, less Underwriting Discount, solely to cover over-allotments, if
any. If such option is exercised in full, the Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."

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

The Shares are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Shares
will be made in New York, New York on or about , 1996.

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

MERRILL LYNCH & CO.
CS FIRST BOSTON

RAUSCHER PIERCE REFSNES, INC.

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

The date of this Prospectus is , 1996.
<PAGE> 3

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement," which term shall include all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations promulgated thereunder,
covering the shares of Common Stock being offered hereby. This Prospectus does
not contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission and to which reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder and, in accordance therewith, files reports,
proxy statements and other information with the Commission. All such information
and items or information omitted from this Prospectus but contained or
incorporated by reference in the Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the
following Regional Offices of the Commission: Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and New York Regional
Office, 7 World Trade Center, New York, New York 10048, or may be obtained on
the Internet from the Commission's Web site at http://www.sec.gov. Copies of
such material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and such information may also be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Common Stock, the Company's warrants to purchase Common Stock and the
Company's 12 7/8% Senior Notes due 2002 are listed for trading on the NYSE, and
the Company's 7% Notes due 2006 have been approved for listing on the NYSE,
subject to notice of issuance.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN SHARES OF COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES
10B-6, 10B-7 AND 10B-8 UNDER THE EXCHANGE ACT.

2
<PAGE> 4

SUMMARY

The following is a summary of certain information contained elsewhere in
this Prospectus and does not purport to be complete. Reference is made to, and
this Summary is qualified in its entirety by and should be read in conjunction
with, the more detailed information contained elsewhere herein or incorporated
by reference in this Prospectus. Unless otherwise defined herein, capitalized
terms used in this Summary have the respective meanings ascribed to them
elsewhere in this Prospectus. References in this Prospectus to "BJ Services" and
the "Company," unless the context requires otherwise, are to BJ Services Company
and its subsidiaries, which include former subsidiaries of The Western Company
of North America ("Western") following the acquisition of Western by BJ Services
on April 13, 1995 (the "Western Acquisition"). Financial and other information
included in this Prospectus includes the Western operations since April 1, 1995.
Currency is expressed as U.S. dollars ("$") or Canadian dollars ("Cdn $").

THE COMPANY

BJ Services is a leading provider of pressure pumping and other oilfield
services for the petroleum industry worldwide. Pressure pumping services offered
by BJ Services consist of well stimulation, cementing, sand control and coiled
tubing services used in the completion of new oil and natural gas wells and in
remedial work on existing wells, both onshore and offshore. The Company
successfully strengthened its U.S. presence, expanded its presence in certain
international markets and realized significant consolidation benefits through
the Western Acquisition, which was completed on April 13, 1995. The Company is
further expanding and complementing its existing pressure pumping operations
through its acquisition of Nowsco Well Service Ltd. ("Nowsco"), an Alberta,
Canada corporation (the "Nowsco Acquisition").

The Company believes that as a result of the Western Acquisition and the
Nowsco Acquisition, it will be better positioned to take advantage of several
trends in the industry. These trends include: (i) the demand for more
technologically advanced services and products; (ii) the preference by certain
customers for engaging larger oilfield service providers with worldwide
operations; and (iii) the ability to provide cost effective solutions for the
drilling, completion and workover of oil and gas wells. As a result of being
better able to satisfy the demands of its customers, the Company believes it is
well positioned to realize the growth opportunities presented by these trends.

The Company's services are provided through domestic and international
locations to customers in most of the major oil and natural gas producing
regions of the United States, Canada (as a result of the Nowsco Acquisition),
Latin America, Europe, Asia, Africa and the Middle East. The Company believes
that it is the third largest provider of pressure pumping services worldwide,
with a particularly strong presence in the Alaskan North Slope, the Gulf of
Mexico, Canada, the North Sea, Indonesia and most of Latin America. The Company
also believes that it is one of the largest suppliers of casing and tubular
services in the U.K. North Sea, and it is continuing to expand these services in
Latin America, the Middle East and Southeast Asia. The Company provides
commissioning and leak detection services to offshore platforms and pipelines
and also provides specialty chemical services to the oil, gas, refining and
petrochemical industries in the United States.

BUSINESS STRATEGY

The Company's business strategy consists of: (i) expanding both its
geographic presence and service lines through strategic corporate acquisitions
and through internal capital investment in its existing operations; (ii)
maintaining its position as a technological leader in the industry; (iii)
pursuing alliances with industry participants when necessary to meet customer
requirements; and (iv) continuing to improve internal efficiencies.

Consistent with this strategy, the Company consummated the Western
Acquisition in April 1995 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 (the "Warrants") to purchase 4.8
million shares of Common Stock at an exercise price of $30.00 per share,
exercisable until the close of business on April 13, 2000. The Western
Acquisition

3
<PAGE> 5

provided the Company with a greater critical mass with which to compete in
domestic and international markets and permitted it to realize 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 while eliminating approximately $40 million in annual
overhead and redundant operating costs by combining the two companies.

The Nowsco Acquisition represents the Company's most recent step in
implementing its business strategy. The Company expects the Nowsco Acquisition
to provide BJ Services with: (i) opportunities to grow the earnings and cash
flow of the combined companies, primarily by achieving complementary revenue
enhancements, operating and service efficiencies and eliminating an estimated
$20.0 million in annual overhead and operating costs; (ii) opportunities to
expand and further develop its existing business strengths, including service
lines, technology and customer base; (iii) the addition of operations in Canada,
an area which is complementary with the Company's existing North American
operations, and in certain other key international oil and gas producing
regions; and (iv) the opportunity to be a larger and more effective presence in
the worldwide pressure pumping and coiled tubing markets. The Nowsco Acquisition
will provide the Company with a strong, established presence in Canada and will
expand the Company's presence in the U.S. market and in certain international
markets, including Europe, Southeast Asia and Argentina. The Nowsco Acquisition
will also significantly expand the Company's coiled tubing services and
commissioning and leak detection services. The Nowsco Acquisition is expected to
increase the Company's total revenue base by approximately 42%, and the
Company's North American and international revenue base by 42% and 43%,
respectively. On a pro forma basis in fiscal 1995, the Company would have
generated approximately 63% of its revenue from North American operations and
37% from international operations.

BJ Services believes that Nowsco is recognized as the premier pumping
services company and the market share leader in pumping services in Canada. In
the area of coiled tubing services, Nowsco is a recognized technological leader
in developing applications and providing services for oil and gas wells. Based
upon existing customer demand and new applications for coiled tubing technology
identified by operators, BJ Services believes that coiled tubing represents an
area with significant growth opportunities. The Nowsco Acquisition will permit
the Company to package such coiled tubing services with the Company's existing
pressure pumping services and to take advantage of such growth opportunities in
the area of coiled tubing.

The Company has entered into a number of alliances with other industry
participants to offer a broader complement of products and services in response
to customer demands. Such alliances take various forms, including packaged or
integrated services, single source suppliers and turnkey agreements, and
generated approximately 20% of the Company's revenue during 1995. The Company
expects that the Nowsco Acquisition will increase the Company's participation in
industry alliances, including the packaging of BJ Services' existing pressure
pumping services with Nowsco's coiled tubing services.

In response to customer demand for technological expertise, the Company has
directed significant capital expenditures and other resources toward research
and development. Such research and development commitments have enabled the
Company to maintain or increase the overall competitiveness of its primary
services by focusing on the improvement of existing products and services, the
design of new products and processes and the packaging of services to meet
specific customer needs. The Company expects the Nowsco Acquisition to further
strengthen BJ Services' position as a technological leader in the pressure
pumping industry.

THE NOWSCO ACQUISITION

On April 12, 1996, the Company announced a tender offer (the "Nowsco Tender
Offer") to acquire all of the outstanding common shares of Nowsco for a price
per share of Cdn $27.00 ($19.50 per share). On May 6, 1996, Great Lakes Chemical
Corporation ("Great Lakes") made a competing tender offer to acquire all the
outstanding common shares of Nowsco for a price per share of Cdn $30.90 ($22.55
per share). On June 3, 1996, the Company amended the Nowsco Tender Offer by
increasing the consideration offered to Cdn $35.00 per Nowsco common share
($25.55 per share) and in connection therewith was provided access to Nowsco's
confidential information that had been provided to Great Lakes. On June 7, 1996,
Great Lakes announced

4
<PAGE> 6

that it would neither extend nor increase the consideration offered under its
tender offer for all the common shares of Nowsco. On that date, the Great Lakes
tender offer expired. In June 1996, the Company consummated the Nowsco
Acquisition. For the fiscal year ended December 31, 1995, Nowsco reported
revenue of Cdn $480.1 million, net income of Cdn $16.2 million (Cdn $.78 per
share) and total shareholders' equity of Cdn $286.5 million.

The total purchase price for the Nowsco Acquisition (including estimated
transaction costs of $7.0 million) is estimated to be $581.3 million (Cdn $796.3
million). In connection with the financing of the Nowsco Acquisition, the
Company has entered into a committed, unsecured bank credit facility (the "New
Bank Credit Facility") with Bank of America National Trust and Savings
Association ("Bank of America") and Bank of America Canada, as agents. A portion
of the borrowings under the New Bank Credit Facility is being used to fund the
Nowsco Acquisition. The New Bank Credit Facility includes a $285.0 million
one-year bridge loan, a six-year $315.0 million term loan facility and a $250.0
million revolving credit facility. The Company will use the net proceeds from
the offering to repay certain indebtedness under the New Bank Credit Facility
incurred to fund the Nowsco Acquisition, including indebtedness under the bridge
loan portion of such facility. See "Capitalization," "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition -- Capital Resources and Liquidity."

The Company's principal executive offices are located at 5500 Northwest
Central Drive, Houston, Texas 77092, and its telephone number is (713) 462-4239.

THE OFFERING

COMMON STOCK OFFERED(1)..... 8,500,000 shares

COMMON STOCK OUTSTANDING:
BEFORE THE OFFERING(2).... 28,164,670 shares

AFTER THE OFFERING(1)(2).. 36,664,670 shares

USE OF PROCEEDS............. The estimated net proceeds of $278.6 million to be
received by the Company from the offering of the
Shares (the "Offering") will be used to repay
certain indebtedness under the New Bank Credit
Facility incurred to fund the Nowsco Acquisition,
including indebtedness under the bridge loan
portion of such facility. See "Use of Proceeds."

NEW YORK STOCK EXCHANGE
SYMBOL.................... BJS
- ---------------
(1) Excludes 1,275,000 shares of Common Stock subject to purchase upon exercise
of the Underwriters' over-allotment option.
(2) Based on shares outstanding as of March 31, 1996. Does not include (i)
4,792,651 shares issuable upon the exercise of outstanding Warrants or (ii)
1,584,957 shares of Common Stock reserved for issuance pursuant to
outstanding stock options and other outstanding awards under the Company's
employee benefit plans, 631,450 of which were exercisable as of such date.

5
<PAGE> 7

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth summary consolidated financial data for the
Company and its subsidiaries as of and for the five years ended September 30,
1995 and as of and for the six-month periods ended March 31, 1996 and 1995. The
financial information presented below, as of and for the six-month periods ended
March 31, 1996 and 1995, reflects all adjustments, consisting of normal and
recurring adjustments, that in the opinion of management are necessary for a
fair presentation of the Company's consolidated results of operations and
financial position for such periods. The information shown for the six-month
periods is not necessarily indicative of full-year results. The following data
should be read in conjunction with the Company's consolidated financial
statements and notes thereto included herein.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
------------------- -----------------------------------------------------
1996(1) 1995 1995(1) 1994 1993 1992 1991
-------- -------- --------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................... $407,295 $226,083 $ 633,660 $434,476 $394,363 $330,028 $390,296
Operating expenses, excluding unusual charges
and goodwill amortization.................. 376,456 214,943 592,905 414,493 373,934 316,305 358,475
Goodwill amortization........................ 2,671 578 3,266 1,298 691
Unusual charges(2)........................... 17,200 15,700
Operating income (loss)...................... 28,168 10,562 20,289 18,685 19,738 (1,977) 31,821
Interest expense............................. (11,095) (4,618) (15,164) (7,383) (5,414) (2,977) (3,135)
Other income -- net.......................... 1,575 1,677 2,734 877 2,014 297 1,736
Income tax expense (benefit)................. 5,170 1,674 (1,102) 2,006 1,593 (3,657) 5,170
Income (loss) before cumulative effect of
accounting change.......................... 13,568 6,122 9,889 10,770 14,561 (1,104) 24,422
Cumulative effect of change in accounting
principle, net of tax(3)................... (10,400)
Net income (loss)............................ 13,568 6,122 9,889 370 14,561 (1,104) 24,422
Net income (loss) per share before cumulative
effect of accounting change:
Primary.................................... $ .48 $ .38 $ .46 $ .69 $ .94 $ (.08) $ 1.88
Fully Diluted.............................. $ .46 $ .38 $ .46 $ .69 $ .94 $ (.08) $ 1.88
STATEMENT OF CASH FLOWS DATA:
Net cash flows provided from (used for)
operating activities....................... $ 18,582 $ 17,087 $ 39,384 $ 26,255 $ (315) $ 8,392 $ 26,414
Net cash used for investing activities....... (24,760) (11,197) (228,886) (38,757) (40,768) (76,314) (30,459)
Net cash flows provided from (used for)
financing activities....................... 7,427 (3,410) 188,126 14,100 41,228 64,257 5,492
OTHER DATA:
Depreciation and amortization(4)............. $ 29,305 $ 13,612 $ 42,064 $ 25,335 $ 24,170 $ 12,742 $ 14,497
Capital expenditures(5)...................... 21,795 15,003 30,966 39,345 37,350 26,197 34,588
EBITDA(6).................................... 59,374 26,185 65,986 45,626 46,422 11,527 48,765
FINANCIAL POSITION DATA (AT END OF PERIOD):
Property -- net.............................. $414,080 $197,033 $ 416,810 $198,844 $183,962 $171,420 $134,139
Total assets................................. 995,966 413,618 989,683 410,066 369,531 328,799 265,686
Long-term debt, including current
maturities................................. 291,870 98,200 295,166 105,900 90,500 56,500 32,396
Stockholders' equity......................... 485,158 197,146 466,795 189,927 187,132 134,794 135,307
</TABLE>

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

(1) Includes the effect of the Western Acquisition since April 1, 1995, which
was accounted for as a purchase in accordance with generally accepted
accounting principles.
(2) Unusual charges for the fiscal year ended September 30, 1995 represent
nonrecurring costs associated with the Western Acquisition, including a
non-cash charge for impairment of facilities (approximately $3.6 million),
and charges for severance of employees of BJ Services and other Western
Acquisition related costs. Unusual charges for 1992, which primarily
represent a provision for restructuring the Company's North American
operations, include non-cash charges of approximately $10.6 million for
asset writedowns.
(3) In the year ended September 30, 1994, the Company changed its method of
accounting for postretirement benefits other than pensions.
(4) In October 1991, the Company revised the estimated salvage values and
remaining useful lives of certain of its U.S. pumping services equipment to
more closely reflect expected remaining lives. The effect of this change in
accounting estimate resulted in a decrease of $2.9 million, or $.22 per
share, in the Company's net loss for 1992.
(5) Excluding acquisitions of businesses.
(6) Earnings before interest expense, taxes, depreciation and amortization and
cumulative effect of accounting change ("EBITDA") is a supplemental
financial measurement used by the Company in the evaluation of its business
and is presented solely as a supplemental disclosure, and should not be
construed as an alternative to net income, operating income, cash flows from
operating activities or any other measure of financial performance presented
in accordance with generally accepted accounting principles. The amounts
include unusual charges of $17.2 million and $15.7 million in the years
ended September 30, 1995 and 1992, respectively.

6
<PAGE> 8

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

(UNAUDITED)

The following table sets forth certain unaudited historical information for
the Company and Nowsco and certain pro forma combined financial information
giving effect to the Nowsco Acquisition, which is accounted for as a purchase in
accordance with generally accepted accounting principles, and to the Offering.
The information below may not be indicative of the results that actually would
have occurred if the Nowsco Acquisition and the Offering had been consummated on
the dates indicated or that will be obtained in the future. For a complete
description of the assumptions and adjustments made in calculating such pro
forma information, see the Pro Forma Financial Information (Unaudited) and the
related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
SIX MONTHS ENDED MARCH 31, 1996 SEPTEMBER 30, 1995
-------------------------------- --------------------------------
HISTORICAL HISTORICAL
------------------- PRO ------------------- PRO
COMPANY NOWSCO FORMA(1) COMPANY NOWSCO FORMA(1)
-------- -------- ---------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue....................... $407,295 $182,183 $ 589,478 $633,660 $339,269 $1,146,851
Cost of sales and services.... 359,734 164,731 524,465 564,587 306,849 1,040,533
General and administrative.... 16,722 7,998 24,720 28,318 16,133 49,484
Goodwill amortization......... 2,671 7,633 3,266 15,348
Unusual charges............... 3,349 3,349 17,200 481 481
Operating income (loss)....... 28,168 6,105 29,311 20,289 15,806 41,005
Interest expense.............. (11,095) (60) (20,755) (15,164) (640) (44,803)
Income tax expense
(benefit).................. 5,170 341 4,224 (1,102) 2,007 1,211
Net income (loss)............. 13,568 6,557 6,850 9,889 16,248 2,104
Net income per share.......... $ .48 $ .18 $ .46 $ .06
Average shares outstanding.... 28,560 37,060 21,376 36,426
OTHER DATA:
Depreciation and
amortization............... $ 29,305 $ 15,126 $ 49,393 $ 42,064 $ 28,512 $ 94,364
Capital expenditures.......... 21,795 16,476 38,271 30,966 36,499 67,465
EBITDA(2)..................... 59,374 22,084 81,458 65,986 47,407 142,453
FINANCIAL POSITION DATA (AT END
OF PERIOD):
Property -- net............... $414,080 $139,084 $ 553,164
Total assets.................. 995,966 272,535 1,653,501
Long-term debt, including
current maturities......... 291,870 590,418
Stockholders' equity.......... 485,158 217,133 758,743
</TABLE>

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

(1) The pro forma statements of operations were prepared as if the Nowsco
Acquisition and the Offering had occurred as of October 1, 1994 and do not
include any estimate for loss of revenue from overlapping locations, any
consolidation savings or the effect of any modifications in operations that
might have occurred had BJ Services owned and operated the business during
the periods presented, except as described in the Notes to Pro Forma
Financial Statements. Pro forma adjustments were also made to reflect the
pro forma results of the Western Acquisition during the first six months of
fiscal 1995, assuming the acquisition had occurred on October 1, 1994.

(2) EBITDA is a supplemental financial measurement used by BJ Services in the
evaluation of its business and is presented solely as a supplemental
disclosure, and should not be construed as an alternative to net income,
operating income, cash flows from operating activities or any other measure
of financial performance presented in accordance with generally accepted
accounting principles. The historical amounts for the twelve months ended
September 30, 1995 include unusual charges of $17.2 million.

7
<PAGE> 9

RECENT DEVELOPMENTS
ACQUISITION OF NOWSCO

On April 12, 1996, the Company announced the Nowsco Tender Offer to acquire
all of the outstanding common shares of Nowsco for a price per share of Cdn
$27.00 ($19.50 per share). On May 6, 1996, Great Lakes made a competing tender
offer to acquire all the outstanding common shares of Nowsco for a price per
share of Cdn $30.90 ($22.55 per share). On June 3, 1996, the Company amended the
Nowsco Tender Offer by increasing the consideration offered to Cdn $35.00 per
Nowsco common share ($25.55 per share) and in connection therewith was provided
access to Nowsco's confidential information that had been provided to Great
Lakes. On June 7, 1996, Great Lakes announced that it would neither extend nor
increase the consideration offered under its tender offer for all the common
shares of Nowsco. On that date, the Great Lakes tender offer expired. In June
1996, the Company consummated the Nowsco Acquisition.

The total purchase price for the Nowsco Acquisition (including estimated
transaction costs of $7.0 million) is estimated to be $581.3 million (Cdn $796.3
million). For the fiscal year ended December 31, 1995, Nowsco reported revenue
of Cdn $480.1 million, net income of Cdn $16.2 million (Cdn $.78 per share) and
total shareholders' equity of Cdn $286.5 million. Nowsco's operations are
conducted in Canada, the United States, Europe, Southeast Asia and Argentina and
include oil and gas pressure pumping, coiled tubing, commissioning and pipeline
service businesses.

The Company expects the Nowsco Acquisition to provide BJ Services with: (i)
opportunities to grow the earnings and cash flow of the combined companies,
primarily by achieving certain financial and operating efficiencies; (ii)
opportunities to expand and further develop the Company's business strengths
through combining the strengths of Nowsco with the Company's existing strengths;
(iii) opportunities to expand the Company's geographic presence in North America
with the addition of Nowsco's Canadian and United States operations and in
certain other key international oil and gas producing regions; and (iv) the
opportunity to have a larger and more effective presence in the worldwide
pressure pumping and coiled tubing markets.

Financial and Operating Efficiencies. The Company believes that the Nowsco
Acquisition provides it with opportunities to improve its financial and
operating efficiencies by growing the earnings and cash flow of the combined
companies. The Company believes that these results can be achieved primarily by
realizing complementary revenue enhancements, operating and service efficiencies
and the elimination of certain overhead and operating costs. The Company
estimates that it will be able to eliminate $20.0 million in annual overhead and
redundant operating costs by combining the Company and Nowsco. These cost
savings are expected to result primarily from the elimination of (i) duplicate
corporate and administrative functions and (ii) overlapping operations and
facilities.

Integration of Relative Business Strengths. The management of the Company
expects that the Nowsco Acquisition will expand and further develop its existing
business strengths, particularly with respect to service lines, technology and
customer base. Through the Nowsco Acquisition, the Company expects to extend its
presence in coiled tubing services and to combine those services with BJ
Services' cementing and stimulation services. The Company believes that such a
combination has significant growth opportunities based upon existing customer
demand and new applications being identified by operators. In addition,
operations to be acquired from Nowsco include industrial nitrogen services
provided to refineries and process facilities, which, when combined with the
existing leak detection and commissioning business conducted by BJ Services,
will give the Company the leading market share position in providing such
services.

Expansion of Geographic Presence. In geographical terms, the Nowsco
Acquisition will provide a significant operating presence in Canada and will
continue the expansion of the Company's service areas, both in the United States
and internationally. In recent years, BJ Services has significantly increased
its international presence, and the Nowsco Acquisition continues the expansion
of the Company's operations to Canada and in other key international oil and gas
producing regions. In the United States, the acquisition of Nowsco will also
enable the Company to expand its stimulation business into the northeastern
United States and add further operations in the midcontinent and the Gulf of
Mexico.

8
<PAGE> 10

Larger and More Effective Competitor. The Company's management believes
that the Nowsco Acquisition will enable the combined company to compete more
effectively with its primary competitors, Halliburton Energy Services, a
division of Halliburton Company ("Halliburton"), and Dowell, a division of
Schlumberger Limited ("Schlumberger"). In addition, the Company believes that
the Nowsco Acquisition will permit BJ Services to remain a technological leader
in its industry for the foreseeable future. Furthermore, the Company believes
that its increased size resulting from the Nowsco Acquisition will permit it to
realize certain economies of scale, which should enhance its ability to compete
successfully with its competitors.

The discussion of benefits from the Nowsco Acquisition set forth above and
under the captions "Summary -- Business Strategy" and "Summary -- The Nowsco
Acquisition" is based upon analyses and beliefs of members of the Company's
management with respect to the anticipated benefits of the Nowsco Acquisition to
BJ Services. Because of the highly competitive nature of the oilfield service
industry, the adverse impact on the industry resulting from oil and gas price
fluctuations, the inherent uncertainties involved in combining two companies and
the limited time available to conduct a due diligence review of the assets and
operations of Nowsco, there can be no assurance that the combined company will
be able to participate fully in the opportunities or to realize the benefits
described herein. Information presented in this Prospectus includes
forward-looking statements that are based upon numerous assumptions with respect
to the Company's operations following the Nowsco Acquisition, including the
benefits to be realized from the consolidation of the acquired operations and
other factors affecting the Company's business that are beyond the Company's
control. Many of such factors are discussed herein under the caption "Business."
Any changes in such factors could produce significantly different results.

9
<PAGE> 11

CAPITALIZATION

The following table sets forth the short-term borrowings and the
capitalization of the Company at March 31, 1996 and as adjusted to reflect (i)
the Nowsco Acquisition, including borrowings under the New Bank Credit Facility
and (ii) the issuance of the Shares offered hereby and the application of the
net proceeds therefrom (estimated to be $278.6 million).

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings.................................................. $ 10,426 $ 10,426
======== =========
Long-term debt:
7% Notes due 2006, net of discount................................... $124,250 $ 124,250
12 7/8% Senior Notes due 2002........................................ 2,170 2,170
9.2% Notes due August 1998........................................... 18,000 18,000
Notes payable to banks............................................... 147,450 445,998
-------- -----------
Total long-term debt, including current maturities........... 291,870 590,418
Stockholders' equity:
Preferred stock, $1.00 par value; 5,000,000 shares authorized; none
issued............................................................
Common stock, $.10 par value; 80,000,000 shares authorized;
28,164,670 and 36,664,670 shares issued, respectively(1).......... 2,817 3,667
Capital in excess of par............................................. 419,772 697,507
Retained earnings, less cumulative translation adjustment............ 62,569 62,569
-------- -----------
Total stockholders' equity................................... 485,158 763,743
-------- -----------
Total capitalization................................................... $777,028 $ 1,354,161
======== =========
</TABLE>

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

(1) As of March 31, 1996, the Company had 4,792,651 outstanding Warrants, and
1,584,957 shares of Common Stock were reserved for issuance pursuant to
outstanding stock options and other outstanding awards under the Company's
employee benefit plans.

In connection with the financing of the Nowsco Acquisition, the Company
entered into the New Bank Credit Facility. The borrowers and guarantors under
the New Bank Credit Facility are the Company and three of its subsidiaries, BJ
Services Company, U.S.A., BJ Service International, Inc. and BJ Services Company
Middle East. BJ Services Canada Inc. is a borrower in Canadian dollars under the
New Bank Credit Facility. Outstanding borrowings under the New Bank Credit
Facility as of June 28, 1996 totaled $733.0 million at a weighted average
interest rate of 6.5%. After giving effect to the application of the estimated
net proceeds from the Offering to repay certain indebtedness under the New Bank
Credit Facility (see "Use of Proceeds"), the Company would have an estimated
$117.0 million in additional availability under the New Bank Credit Facility as
of June 28, 1996. See the Pro Forma Financial Information included elsewhere
herein and "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition -- Capital Resources and
Liquidity."

10
<PAGE> 12

On February 20, 1996, in a transaction exempt from the registration
requirements of the Securities Act, the Company issued $125.0 million of 7%
Notes due 2006. Three of the Company's subsidiaries that are obligors with
respect to the New Bank Credit Facility and the Company's 9.2% Notes Due August
1, 1998 (the "9.2% Notes"), BJ Services Company, U.S.A., BJ Service
International, Inc. and BJ Services Company Middle East, are guarantors of the
7% Notes. The Company has an effective registration statement under the
Securities Act with respect to up to $125.0 million of 7% Series B Notes due
2006 (the "7% Series B Notes") to be offered in exchange for the 7% Notes. The
form and terms of the 7% Series B Notes are identical in all material respects
to the form and terms of the 7% Notes except that the 7% Series B Notes will be
issued in a transaction registered under the Securities Act. The net proceeds
from the issuance of the 7% Notes ($123.3 million) were used by the Company to
repay indebtedness outstanding under the term loan portion of the Company's then
existing bank credit facility.

As of March 31, 1996, pursuant to certain note agreements entered into in
August 1991, the Company had $18.0 million aggregate principal amount
outstanding under the 9.2% Notes. BJ Services Company, U.S.A., BJ Service
International, Inc. and BJ Services Company Middle East are also borrowers under
the 9.2% Notes. The principal amount of the 9.2% Notes is payable annually on
August 1 in installments of $6.0 million until maturity on August 1, 1998. The
Company expects either to prepay the 9.2% Notes or to amend the 9.2% Note
agreements to include covenants substantially similar to the covenants under the
New Bank Credit Facility.

11
<PAGE> 13

PRICE RANGE OF COMMON STOCK AND
WARRANTS AND DIVIDEND POLICY

The Common Stock and Warrants are traded on the NYSE under the symbols
"BJS" and "BJSW," respectively. The following table sets forth the range of the
high and low per share sales prices for the Common Stock and Warrants for the
periods indicated, as reported on the NYSE Composite Trading Tape.

<TABLE>
<CAPTION>
BJ SERVICES BJ SERVICES
COMMON STOCK WARRANTS(1)
----------------- -----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1993
Quarter ended December 31, 1992....................... $18.00 $14.25
Quarter ended March 31, 1993.......................... 23.00 13.63
Quarter ended June 30, 1993........................... 31.63 21.00
Quarter ended September 30, 1993...................... 30.00 20.00

FISCAL YEAR ENDED SEPTEMBER 30, 1994
Quarter ended December 31, 1993....................... $26.50 $18.00
Quarter ended March 31, 1994.......................... 22.50 17.50
Quarter ended June 30, 1994........................... 22.38 17.38
Quarter ended September 30, 1994...................... 22.13 18.25

FISCAL YEAR ENDED SEPTEMBER 30, 1995
Quarter ended December 31, 1994....................... $21.00 $16.25
Quarter ended March 31, 1995.......................... 20.50 15.50
Quarter ended June 30, 1995........................... 26.00 20.38 $ 5.63 $ 3.63
Quarter ended September 30, 1995...................... 27.38 22.63 6.88 4.13

FISCAL YEAR ENDED SEPTEMBER 30, 1996
Quarter ended December 31, 1995....................... $29.00 $20.50 $ 7.88 $ 3.00
Quarter ended March 31, 1996.......................... 33.63 25.13 11.50 5.38
Quarter through June 26, 1996......................... 39.38 31.38 15.75 10.00
</TABLE>

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

(1) The Warrants were issued in connection with the Western Acquisition, and
regular way trading in the Warrants commenced in April 1995.

The Company does not currently intend to pay dividends on its outstanding
shares of Common Stock, and there can be no assurance that it will pay dividends
at any time in the future. It is anticipated that for the foreseeable future any
earnings generated from operations will be retained for use in the Company's
business. Any future determination as to the payment of dividends will be at the
discretion of the Company's Board of Directors and will depend upon the
Company's operating results, financial condition and capital requirements, and
such other factors as the Board of Directors may deem relevant.

The Company's Note Agreements governing its 9.2% Notes and the New Bank
Credit Facility each restrict the payment of dividends unless certain financial
tests are satisfied.

12
<PAGE> 14

USE OF PROCEEDS

The net proceeds to be received by the Company from the Offering are
estimated to be $278.6 million ($320.4 million if the Underwriters'
over-allotment option is exercised in full), after deducting the underwriting
discounts and commissions and the estimated offering expenses. The Company will
use the net proceeds from the Offering to repay certain indebtedness incurred
under the New Bank Credit Facility to fund the Nowsco Acquisition. Such proceeds
will be first applied to repay indebtedness under the bridge loan portion of
such facility, and any excess proceeds will be applied to repay other borrowings
under the New Bank Credit Facility. As of June 28, 1996, $733.0 million was
outstanding under the New Bank Credit Facility at a weighted average interest
rate of 6.5% per annum. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Financial Condition -- Capital Resources
and Liquidity." The bridge loan portion of the New Bank Credit Facility matures
in June 1997 (unless earlier repaid under certain circumstances). See
"Capitalization."

EXCHANGE RATES

Nowsco's accounts are expressed in Canadian dollars. All dollar amounts
provided in this Prospectus with respect to Nowsco are in Canadian dollars
except where otherwise indicated. The ending, average, high and low exchange
rates for each of the five years ended with December 31, 1995, are set forth in
the following table (such rates, which are expressed in United States dollars,
being the noon buying rates in New York City for cable transfers in Canadian
dollars as certified for customs purposes by the Federal Reserve Bank of New
York). In each case, the table shows the amount of United States dollars which 1
Canadian dollar would buy.

<TABLE>
<CAPTION>
RANGE OF RATES FOR
YEAR
RATE AT AVERAGE ---------------------
YEAR END FOR YEAR* HIGHEST LOWEST
-------- --------- -------- --------
<S> <C> <C> <C> <C>
1995........................................ US$.7329 US$ .7311 US$.7533 US$.7007
1994........................................ .7129 .7300 .7632 .7105
1993........................................ .7544 .7729 .9245 .7439
1992........................................ .7858 .8275 .8650 .7777
1991........................................ .8652 .8721 .8921 .8587
</TABLE>

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

* The average rate means the average of the exchange rates on the last day of
each month during the period.

On June 26, 1996, the exchange rate was Cdn $1.00 -- $.7353.

13
<PAGE> 15

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 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 is especially true in the United States, where the Company generates
approximately 60% of its revenues.

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.
As a result, pumping service companies have been unable to recapitalize their
aging United States fleets due to the inability, under current market
conditions, to generate adequate returns on new capital investments. The Company
believes that it is important to operate with a greater critical mass in key
U.S. markets to improve returns in this environment. This conclusion led to the
decision to withdraw from certain low activity areas in the past several years
and to consolidate its remaining operations with those acquired in April 1995
from Western, which had a larger presence in the United States.

The rig count in the United States averaged 739 active drilling rigs during
fiscal 1995, a 6% and 2% decline, compared with 1994 and 1993, respectively, and
the second lowest count on record. The rig count in the United States averaged
708 and 737 active drilling rigs during the respective three-month and six-month
periods ended March 31, 1996. Compared with the same periods of the prior fiscal
year, drilling activity was flat for the three-month period and 4% lower for the
six-month period, primarily due to lower oil-related drilling. Drilling for
natural gas increased by 11% and was flat during the respective three-month and
six-month periods. Due to the relatively strong oil and natural gas prices
recently being realized, management expects U.S. drilling activity levels for
the last half of the fiscal year to be above prior year levels.

While international drilling activity (excluding Canada) has historically
been less volatile than domestic drilling activity, the international active rig
count had declined in each of the last four years prior to fiscal 1995 due to
weak oil prices and economic and political instability in certain overseas
countries. The most significant declines in international drilling activity
occurred in the North Sea, Italy, Nigeria and Mexico. The activity decline has
leveled off somewhat with the active rig count for 1995 up slightly from 1994.
International drilling activity increased by 4% and 5% during the most recent
three-month and six-month periods, respectively, compared with the same periods
of the prior year on the strength of development work in Latin America,
especially Argentina and Venezuela, and renewed exploration programs in the U.K.
North Sea.

In both the United States and internationally, there has been a continuing
trend by oil and gas companies toward "alliances" with the service companies.
These alliances take various forms, including packaged or integrated services,
single source suppliers and turnkey agreements. Approximately 20% of the
Company's revenues were generated under such alliances, or approximately $117
million of the Company's revenues during 1995. Approximately 19% of the
Company's revenues were generated under such alliances during the first six
months of fiscal 1996.

EXPANSIONS AND ACQUISITIONS

Management believes the primary opportunities for geographic and product
expansion remain in international markets. As a result, other than the Western
Acquisition, the Company's capital spending and expansion efforts have been
primarily focused outside of the United States. The Company's expansion efforts
during the past three years have included expanding pumping services into
several key international markets, including Saudi Arabia, Qatar and Vietnam;
expanding tubular services and commissioning and leak detection services into
geographic regions outside the North Sea; adding additional pumping service
capacity in key Latin American markets; and acquiring Norsk Bronnservice A/S
("NBS") in April 1993, Italog S.p.A. ("SIAT") in July 1993, the remaining 50%
ownership of its joint venture in Egypt in February 1994 and the remaining 60%
of the Company's Brazilian joint venture in December 1995.

14
<PAGE> 16

The Company consummated the Nowsco Acquisition during June 1996 for a total
purchase price (including estimated transaction costs of $7.0 million) estimated
to be $581.3 million (Cdn $796.3 million). For the two months ended May 31,
1996, Nowsco's results of operations were adversely affected by a longer than
usual period of reduced activity caused by weather conditions. As a result,
Nowsco's operating income and net income for the two month period are expected
to be lower than for the comparable period for 1995.

For a more complete description of the Nowsco Acquisition, see "Summary -- The
Nowsco Acquisition" and "Recent Developments." The information presented in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" does not include the Nowsco Acquisition, which occurred after the
periods presented. For pro forma financial information giving effect to the
Nowsco Acquisition, see "Summary -- Summary Historical and Pro Forma Financial
Information (Unaudited)" and the Pro Forma Financial Information (unaudited) and
the related notes thereto included elsewhere in this Prospectus.

RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1996
AND 1995

Revenue. Revenue for the quarter ended March 31, 1996 was $200.8 million,
an 88% increase from the prior year's second quarter. For the six months ended
March 31, 1996, revenue was $407.3 million, an 80% increase over the same period
of the previous year. Both such increases were primarily driven by increased
international activity and expansions, and the acquisition of Western.

U.S. revenue more than doubled during the three-month and six-month periods
ended March 31, 1996 as a result of adding the former Western operations. On a
pro forma basis, however, U.S. revenue declined by 3% and 8%, respectively,
primarily as a result of activity reductions in the oil regions and a
significant revenue decline in the Company's Rocky Mountain region as a result
of lower spending by the Company's primary customers, mostly independent oil and
gas producers. Pricing of the Company's services has remained relatively stable
in the United States, or has declined slightly, over the past year.

Management's U.S. revenue outlook for the remainder of the fiscal year is
positive as a result of the recent strengthening of oil and gas prices. The
Company's March 1996 revenue exceeded that of March's prior year revenue and
March's rig count showed the first year over year increase in several years. The
Company expects this trend to continue throughout the remainder of the fiscal
year.

International revenue for the three-month and six-month periods ended March
31, 1996 increased by 38% and 31%, respectively, over the same periods of fiscal
1995. This represents the thirteenth consecutive quarter of international
revenue improvement. Each of the Company's international regions has experienced
higher revenue growth compared with the year earlier periods. The Company's
Latin America region has generated the highest revenue increases (up 47% for
both the three-month and six-month periods) as a result of strong activity
increases in Argentina as well as revenue increases in Venezuela and Colombia
from recent capital investments. Revenue from the Company's pumping service
expansions into Vietnam, Saudi Arabia and Brazil, combined with improving
activity in the United Kingdom and Nigeria, also contributed to the
international revenue growth. The Company's tubular services and commissioning
and leak detection product lines also showed strong gains during the most recent
quarter from strong North Sea activity and as a result of their recent
expansions into parts of the Far East, Middle East and South America.

Management expects the year-over-year international revenue increases to
continue over the remainder of the fiscal year, but at a much lower growth rate.
In January 1996, the Company decided to "warm stack" a stimulation vessel
acquired from Western, the "Renaissance." The vessel's hull is expected to be
sold by the

15
<PAGE> 17

end of the fiscal year with the proceeds used to reduce outstanding debt, while
the vessel's stimulation equipment will be removed and redeployed to other of
the Company's operating locations. The Company believes that the liquidation of
the vessel, if consummated, will not have a material adverse impact on the
Company's operating results.

Operating Income. The Company's operating income more than doubled for
both the three-month and six-month periods ended March 31, 1996 as a result of
the previously mentioned revenue increases. All operating expenses were higher
as a result of the Western Acquisition. The cost of sales and services as a
percentage of revenue, however, declined by 1.7% and 2.1%, respectively,
primarily as a result of cost reduction efforts implemented after the
acquisition of Western and the economies of scale in having a larger U.S.
operation. Marketing expenses represent a higher percentage of revenue than the
prior year due to the higher concentration of the additional revenues being in
the United States, which requires a relatively greater marketing effort.
Marketing expenses also increased due to commissions on international business.
The increase in goodwill amortization also resulted from the Western
Acquisition, which was accounted for under the purchase method with the
resulting goodwill being amortized over a 40-year period.

Interest expense increased by $3.2 million and $6.5 million, respectively,
over the same three-month and six-month periods of the previous year as a result
of increased borrowings to fund the Western Acquisition. See "-- Financial
Condition -- Capital Resources and Liquidity."

The year-to-date effective tax rate increased to 28% from 21% in the
comparable six-month period of the prior year primarily due to marginal tax
rates on higher U.S. profitability.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1995, 1994 AND
1993

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,
------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Average active rigs:(1)
United States.............................................. 739 784 755
Canada..................................................... 246 244 162
International (excluding Canada)........................... 750 747 783
Revenue per rig (in thousands)............................... $425.6 $283.8 $256.4
Revenue per employee (in thousands).......................... $168.3 $160.4 $151.4
Percentage of gross profit to revenue(2)..................... 15.1% 13.1% 14.3%
Percentage of marketing expense to revenue................... 4.2% 3.3% 3.3%
Percentage of general and administrative expense to
revenue.................................................... 4.5% 5.2% 5.8%
</TABLE>

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

(1) Industry estimate of average active rigs published by Baker Hughes
Incorporated.
(2) Gross profit represents revenue less cost of sales and services and research
and engineering expenses.

Revenue. Revenue increased by 10% in 1994 and 46% during 1995, the third
consecutive yearly increase. The increase in 1994 was driven primarily by the
Company's international expansion program and an increase in domestic natural
gas drilling and stimulation activity. In 1995, the increase was due primarily
to continued growth of the international expansion, increased activity in Latin
America and the Western Acquisition.

U.S. revenues increased by 6% and 67% in 1994 and 1995, respectively. The
1994 increase was due primarily to a 12% increase in the active rig count for
gas-related drilling, partially offset by a 4% decline in the rig count for
oil-related drilling. In addition, customer alliances contributed an additional
$14.5 million in revenues during the year. During the first six months of 1995
(prior to the Western Acquisition), the Company's revenues increased 5% over the
same period in 1994 due primarily to the increased placement of cementing units
and the addition of a stimulation vessel in the Gulf of Mexico. With the Western
Acquisition, the Company's U.S. revenues over the balance of the year more than
doubled, accounting for the remainder of the 67% increase for 1995.

16
<PAGE> 18

In the last quarter of 1995, continued weak natural gas prices caused many
of the Company's customers to significantly curtail their drilling activity.
During this period, management believes it retained most of the key customers of
both the Company and Western. However, since the former Western operations were
more heavily concentrated in the natural gas regions of the United States, the
decline in natural gas drilling activity significantly impacted the Company's
operations. While pricing for the Company's U.S. pumping services remained
relatively stable during 1995, pricing remains depressed compared to levels
realized in the past. Management expects these competitive pricing conditions to
remain until a significant increase in drilling activity occurs.

International revenues increased by 14% and 27% during 1994 and 1995,
respectively. The increases were primarily attributable to three factors: (a)
continued geographic expansion of the Company's tubular services and
commissioning and leak detection service lines, (b) significant increase in
Latin America business and (c) acquisitions. The tubular services and
commissioning and leak detection product lines have now been expanded into 13
countries, including parts of the Middle East, Africa, South America, Southeast
Asia and Australia. Most of the revenue growth in Latin America (up 36% and 46%
in 1994 and 1995, respectively) was a result of increased cementing and
stimulation activity with both private and national oil and gas companies in
Argentina and the addition of a stimulation vessel in 1994 and a coiled tubing
barge in 1995 to service the Lake Maracaibo, Venezuela market. The acquisitions
which contributed to the Company's revenue growth were NBS in April 1993, SIAT
in July 1993, the former Egypt joint venture in February 1994 and Western in
April 1995, which added international operations in Indonesia, Hungary and
Nigeria. These acquisitions added approximately $14 million and $30 million in
international revenue during 1994 and 1995, respectively, compared with 1993.

Operating Income. Operating income decreased by $1.1 million in 1994 and
increased by $1.6 million in 1995. In 1994, the decrease was due primarily to
lower margins on the Company's North Sea stimulation business caused by lower
activity and pricing, and a decline in U.S. pricing. In 1995, the increase was
primarily due to the revenue increases described above, partially offset by a
$17.2 million unusual charge incurred in 1995. The unusual charge was taken in
conjunction with a consolidation program that is designed to improve
efficiencies and reduce costs resulting from the Western Acquisition. Included
in the unusual charge is an adjustment to the carrying value of duplicate
operating facilities, severance and related benefit costs, benefits due under
agreements covering the Company's executives which were triggered as a result of
the Western Acquisition, and legal and other costs that would not have been
incurred had the Western Acquisition not occurred.

The cost of sales and services as a percentage of revenue decreased to
83.0% in 1995 as compared to 84.9% and 83.4% in 1994 and 1993, respectively. The
increase from 1993 to 1994 was due primarily to a decline in U.S. pricing, which
negatively impacted margins by $5.5 million, and lower margins on the Company's
North Sea stimulation business caused by lower activity and pricing. The
reduction in 1995 was primarily as a result of cost reduction efforts
implemented after the Western Acquisition and the economies of scale by having a
larger U.S. operation.

Other operating expenses, excluding the unusual charge and goodwill
amortization, increased by 1% and 47% in 1994 and 1995, respectively. The 1994
increase was attributable to higher marketing expenses from international
expansion efforts and corporate marketing and alliance programs, partially
offset by lower research and engineering and general and administrative expenses
due to the Company's continued overhead reduction efforts. The 1995 increase was
primarily attributable to overhead from the former Western operations, along
with increased marketing expenses related to international expansions. Marketing
expenses are expected to increase as a percentage of sales due to the higher
concentration of Western's revenues earned in the United States, which requires
a relatively greater marketing effort. The increase in goodwill amortization
resulted from the aforementioned acquisitions, most significantly Western, which
will result in annual goodwill amortization expense of $4.4 million.

Other. Interest expense increased by $2.0 million and $7.8 million in 1994
and 1995, respectively. The 1994 increase resulted from higher interest rates
and increased borrowings to fund the Company's international expansions and
acquisitions. While interest rates continued to increase marginally during 1995,
the

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<PAGE> 19

additional interest expense is primarily attributed to borrowings incurred to
finance the Western Acquisition. See "-- Financial Condition -- Capital
Resources and Liquidity" and Notes 4 and 5 of the Notes to Consolidated
Financial Statements.

Other income was a net gain in both 1994 and 1995 due to nonrecurring gains
on asset sales and, in 1995, $1.4 million of royalty income from one of the
Company's proprietary products.

Primarily as a result of profitability in international jurisdictions where
the statutory rate is below the U.S. rate 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 remained below the U.S. statutory rate
during 1995. Additionally, certain nonrecurring benefits have reduced the
Company's effective tax rate, including $1.3 million in 1993 resulting from a
change in the valuation reserve for net operating losses and from changes in tax
laws in the United States and other countries, $1.9 million in 1994 from a
change in the valuation reserve for net operating losses and $1.5 million in
1995 from the favorable settlement of a tax audit and from tax losses
attributable to foreign exchange fluctuations in certain international
jurisdictions.

Minority interest expense declined in both 1994 and 1995, as a result of
lower profitability of the Company's Southeast Asian joint ventures and losses
by the Company's Nigerian joint venture. Results in 1994 include a $16.0 million
($10.4 million after tax) charge for the cumulative effect of an accounting
change for retiree health benefits. See Note 9 of the Notes to Consolidated
Financial Statements.

FINANCIAL CONDITION

Capital Resources and Liquidity. Net cash provided from operating
activities for the six months ended March 31, 1996 increased by $1.4 million
from the prior year's figure. Higher profitability and depreciation was
partially offset by the payment of merger-related and various other expenses
previously accrued for. Cash flows from operating activities increased to $26.3
million in 1994 and $39.4 in 1995 as compared to cash used for operating
activities of $.3 million in 1993. The 1994 improvement resulted primarily from
a smaller increase in both receivables and other current assets and liabilities
compared with 1993. In 1995, cash flows from operating activities increased
primarily as a result of higher profitability and higher noncash expenses during
the period.

At March 31, 1996, borrowings outstanding under the Company's then existing
bank credit facility amounted to $146.0 million. Management strives to maintain
low cash balances while utilizing available credit facilities to meet the
Company's capital needs. Excess cash generated is used to pay down outstanding
borrowings.

In June 1996, in connection with the Nowsco Acquisition, the Company
entered into the New Bank Credit Facility among the Company, BJ Services
Company, U.S.A., BJ Services Company Middle East, BJ Service International,
Inc., BJ Services Canada Inc., Bank of America, as agent for the U.S. Banks and
as Letter of Credit Issuing Bank, Bank of America Canada, as agent for the
Canadian Banks, and the financial institutions named therein (collectively, the
"Banks"). The New Bank Credit Facility currently provides for up to $850.0
million in unsecured borrowings in connection with the Nowsco Acquisition to pay
certain existing indebtedness and for general corporate purposes, including a
one-year bridge loan facility of $285.0 million, a six-year term loan facility
of $315.0 million (repayable in 22 quarterly installments beginning in March
1997) and a five-year revolving credit facility of $250.0 million (including
stand-by letters of credit). An affiliate of Bank of America will act as
arranger in syndicating a part of the commitment to a group of financial
institutions. The New Bank Credit Facility includes the following covenants,
among others: a limitation on liens, security interests and other encumbrances;
a limitation on the sale, lease, transfer or other disposition of property; a
limitation on permitted consolidations and mergers; a limitation on permitted
investments; a limitation on the indebtedness incurred by certain subsidiaries
to 10% of consolidated net worth; a limitation on contingent obligations to 10%
of consolidated net worth; the maintenance of a maximum capitalization ratio
(the ratio of funded indebtedness to total capitalization) of 70% (to be reduced
upon giving effect to the Offering) and then declining to 45% in the third
fiscal quarter of 1997 and to 40% in the third fiscal quarter of 1998; the
maintenance of a minimum consolidated net worth of no less than 90% of net worth
as of the end of the most recent fiscal quarter end plus 90% of the aggregate
amount of the first

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<PAGE> 20

$285.0 million of net assets (cash or otherwise) received by the Company from
the issuance of any class of capital stock plus 50% of the aggregate amount of
any other net assets (cash or otherwise) received by the Company from the
issuance of any class of capital stock plus 50% of cumulative net income from
April 1, 1996; the maintenance of an EBITDA-to-interest-expense ratio of at
least 3.0 to 1.0 during fiscal year 1997 increasing to 3.75 to 1.0 during fiscal
year 1998 and 4.25 to 1.0 thereafter; a restriction on amounts payable as
dividends and as other "Restricted Payments" (as defined in the New Bank Credit
Facility), including the repurchase of stock (no dividends are payable and no
stock may be repurchased by the Company until the capitalization ratio is equal
to or less than 35%); a limitation on annual capital expenditures for so long as
the one-year bridge loan is outstanding to $70.0 million in the aggregate; a
mandatory prepayment obligation with respect to certain asset sales; and an
obligation to prepay the term loan facility by 50% of the "Free Cash Flow" (as
defined in the New Bank Credit Facility) during any fiscal year as long as the
Company's capitalization ratio exceeds 35% during any fiscal quarter of such
year. Any outstanding amounts under the bridge loan facility will be prepaid
from net cash proceeds received by the Company from sales of equity (including
the Shares) to the extent necessary to reduce the capitalization ratio to 35%.

On February 20, 1996, in a transaction exempt from the registration
requirements of the Securities Act, the Company issued $125.0 million of 7%
Notes. Three of the Company's subsidiaries that are obligors with respect to the
New Bank Credit Facility and the 9.2% Notes, BJ Services Company, U.S.A., BJ
Service International, Inc. and BJ Services Company Middle East, are guarantors
of the 7% Notes. The Company has an effective registration statement under the
Securities Act with respect to up to $125.0 million of 7% Series B Notes due
2006 (the "7% Series B Notes") to be offered in exchange for the 7% Notes. The
form and terms of the 7% Series B Notes are identical in all material respects
to the form and terms of the 7% Notes, except that the 7% Series B Notes will be
issued in a transaction registered under the Securities Act. The net proceeds
from the issuance of the 7% Notes ($123.3 million) were used by the Company to
repay indebtedness outstanding under the term loan portion of the Company's then
existing bank credit facility.

The outstanding balance of the 9.2% Notes, issued in 1991, was $18.0
million at March 31, 1996. Principal reductions of $6.0 million are required
annually each August until maturity on August 1, 1998.

The Company's interest-bearing debt represented 38.4% of its total
capitalization at March 31, 1996, a slight decrease from 38.9% at the previous
fiscal year-end. The New Bank Credit Facility and 9.2% Notes contain various
customary covenants, including the maintenance of certain profitability and
solvency ratios and restrictions on dividend payments. Management believes that
the New 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 March 31, 1996, the Company had approximately $512 million of U.S. tax
net operating loss carryforwards expiring between 2000 and 2010. With the
Western Acquisition, the Company acquired approximately $375 million of tax net
operating loss carryforwards, subject to certain limitations, expiring between
2000 and 2008. Under Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," the Company is required to record a deferred tax
asset for the future tax benefit of these tax net operating loss carryforwards,
as well as other items, if realization is "more likely than not." As previously
discussed, the Western Acquisition gives the Company a greater critical mass
with which to compete in the United States as it has more than doubled the
Company's U.S. revenue base. In addition, with the combination of the Company
and Western, the Company has realized significant consolidation benefits.
Management estimates that approximately $40 million of overhead and redundant
operating costs have been eliminated annually as a result of the combination of
the two companies. Management has concluded that the Company's future U.S.
taxable income will be sufficient over the remaining carryforward periods to
realize the tax benefits represented by approximately $332 million of tax net
operating loss carryforwards acquired with Western and generated by the
Company's operations prior to the Western Acquisition. The tax benefits
resulting from the Western Acquisition have been included in the approximately
$84 million net deferred tax asset recognized in the purchase price allocation
at the acquisition date. Valuation allowances have been established for the
benefits of the tax net operating loss carryforwards that are estimated to
expire prior to their utilization.

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<PAGE> 21

Requirements for Capital. Excluding acquisitions, capital expenditures
during the six months ended March 31, 1996 were $21.8 million, or $6.8 million
higher than the spending in the comparable six months of the prior year. The
current period's spending related primarily to international expansion
opportunities (primarily in Latin America), offshore cementing skids and
upgrades of the Company's information systems. Other investing activities
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 of cash and $1.7 million of debt assumed by the Company. Excluding
acquisitions, capital expenditures during 1995 were $31.0 million, or $8.4
million below 1994 spending. Spending for 1995 related primarily to offshore
operations both in the United States and abroad, and international growth
opportunities, including geographic expansions and expansions of services. The
prior year's spending included approximately $11 million for the construction of
two offshore stimulation vessels. Investing activities in the fiscal year ended
September 30, 1995 included $5.4 million of proceeds from the sale of a
duplicate facility and other disposals of assets.

Capital expenditures for fiscal 1996 are projected to be approximately $45
million, excluding acquisitions, and are expected to include spending for
continued geographic expansions of all service lines, construction or upgrading
of at least two offshore vessels, additional capacity in certain high margin
locations and normal levels of replacement capital. The actual amount of fiscal
1996 capital expenditures will be primarily dependent upon the availability of
expansion opportunities and will 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.

When used in this Prospectus, the words "expect," "estimate," "project,"
"believe" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions. 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.

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<PAGE> 22

BUSINESS
THE COMPANY

General

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 well stimulation, cementing, sand control
and coiled tubing 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 casing and tubular services provided to the oil and
gas exploration and production industry, commissioning and leak detection
services provided to offshore platforms and pipelines and specialty chemical
services.

On April 13, 1995, the Company completed 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 provides the Company with a greater critical mass with which to
compete in both domestic and international markets and the opportunity to
realize significant consolidation benefits. The Western Acquisition has
increased the Company's existing total revenue base by approximately 75% and has
more than doubled the Company's existing domestic revenue base. In addition,
approximately $40 million in annual overhead and redundant operating costs have
been eliminated by combining the two companies. During the year ended September
30, 1995, the Company generated approximately 39% of its revenue from cementing
services, 47% from stimulation services and 14% from product and equipment sales
and other oilfield services (37%, 48% and 15%, respectively, during the portion
of the 1995 fiscal year since the Western Acquisition). Over the same period,
the Company generated approximately 55% of its revenue from domestic operations
and 45% from international operations (60% and 40%, respectively, since the
Western Acquisition).

The Company consummated the Nowsco Acquisition during June 1996 for a total
purchase price (including estimated transaction costs of $7.0 million) estimated
to be $581.3 million (Cdn $796.3 million). For a more complete description of
the Nowsco Acquisition, see "Summary -- The Nowsco Acquisition" and "Recent
Developments." For the fiscal year ended December 31, 1995, Nowsco reported
revenue of Cdn $480.1 million, net income of Cdn $16.2 million (Cdn $.78 per
share) and total shareholders' equity of Cdn $286.5 million. Nowsco's operations
are conducted in Canada, the United States, Europe, Southeast Asia and Argentina
and include oil and gas pressure pumping, coiled tubing, commissioning and
pipeline service businesses.

Cementing Services

The Company's cementing services, which accounted for approximately 39% of
the Company's total revenue during 1995, 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 ensure 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 behind 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
between the casing and productive formations and other formations which would
damage the productivity of hydrocarbon producing zones or damage the quality of
freshwater aquifers, (ii) seal the casing from corrosive

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<PAGE> 23

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 47%
of the Company's total revenue during 1995, consist of fracturing, acidizing,
sand control, nitrogen and coiled tubing services designed to improve the flow
of oil and gas from producing formations and are summarized as follows:

Fracturing. Fracturing services are performed to enhance the production of
oil and 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 three to four 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. Over the past decade, the Company has successfully introduced
equipment to respond to these technological advances. During 1991, the Company
introduced a patented, borate-based fracturing fluid, Spectra Frac G(R). During
1993, the Company introduced two additional fracturing fluids, Medallion
Frac(SM) and Spartan Frac(SM). These fracturing fluids are now used in most of
the Company's fracturing treatments. During 1994, the Company commercialized a
proprietary enzyme chemistry used in conjunction with the three fracturing
fluids. These "enzyme breakers" can significantly enhance the production of oil
and gas in a wide range of wells.

Acidizing. Acidizing services are performed to enhance the flow rate of
oil and 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 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
gas is then free to move through the gravel into the wellbore to be produced.
These services are primarily provided in the Gulf of Mexico, the North Sea,
Venezuela, Trinidad and Indonesia.

Nitrogen. There are a number of uses for nitrogen, an inert gas, in
pressure pumping operations. Used alone, it is effective in displacing fluids
during drill stem testing. However, nitrogen services are used principally in
applications which support the Company's cementing and fracturing services.

Coiled Tubing. Coiled tubing involves 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 also 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 three inches manufactured in 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 production pipe 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

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<PAGE> 24

(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.

The Company participates in the offshore stimulation market through the use
of skid-mounted pump units and through operation of several stimulation vessels
including the "Vestfonn" in the North Sea, the "Sea Hero," the "Tad Tide" and
the "Jan Tide" in the Gulf of Mexico and the "BJ003" and the "BJ007" on Lake
Maracaibo in Venezuela. The Jan Tide and the BJ003 were commissioned in the
spring of 1994 and the BJ007 in the summer of 1995. The "Renaissance," formerly
used as a stimulation vessel in the North Sea, has been "warm stacked" and is
currently being marketed for sale for use other than as a stimulation vessel.

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 stimulation services is likely to increase. The Company has
recently increased its pressure pumping capabilities in certain international
markets.

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 14% of the Company's total revenue in 1995. Such product and
equipment sales to customers are generally made in the course of providing
cementing and stimulation services to certain customers and, other than the
specialty chemical business, the Company generally does not sell proprietary
products to other companies involved in well servicing.

Casing and Tubular Services. Casing services principally consist of
installing (or "running") pipe in a wellbore 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. Tubular
services, which consist of running pipe inside the casing to improve the flow of
oil and gas, are principally provided during workovers. The Company expects that
workover activity and the demand for tubular services in the North Sea should
increase during at least the next several years as operators there attempt to
mitigate the decline in production from the North Sea's mature fields.

Commissioning and Leak Detection Services. Leak detection services,
provided through the Company's Comtec division, 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.

Specialty Chemical Services. Specialty chemical services, provided through
the Company's Unichem division acquired as part of Western, include 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.

Operations

The Company's cementing and stimulation services are used in the completion
of new oil and gas wells and in remedial work on existing wells. These services
are provided through domestic and international locations to customers in most
of the major oil and natural gas producing regions of the United States, Latin
America, Europe, Southeast Asia, Africa and the Middle East. The Company
believes that it is the third largest provider of cementing and stimulation
services worldwide, with a particularly strong presence in the Alaskan North
Slope, the Gulf of Mexico, the North Sea, Indonesia and most of Latin America.
Cementing and stimulation services are provided to both land-based and offshore
customers on a 24-hour, on-call basis,

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<PAGE> 25

through regional and district facilities in over 70 locations worldwide,
utilizing complex, truck- or skid-mounted equipment designed and constructed for
the particular service furnished. After such equipment is moved to a well
location, it is configured with appropriate connections to perform the specific
services required. The mobility of this equipment permits the Company to provide
cementing and stimulation services to changing geographic areas. Management
believes that the Company's cementing and stimulation 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 blending and pumping
equipment for onshore operations. Offshore operations are performed with
skid-mounted cement pumping units. The Company has successfully utilized its
patented RAM (Recirculating Averaging Mixer) both for onshore applications and
as an offshore skid. In 1991, the Company introduced a sand control blender, the
Cyclone, which also has pressure pumping and fracturing applications. Responding
to its customers' monitoring needs, in 1992 the Company introduced a
computerized monitor, which allows for real-time monitoring of the cementing
process.

Principal materials utilized in cementing and stimulation services include
cement, fracturing proppants, acid and bulk chemical additives. Generally, these
items are available from several suppliers, and the Company generally utilizes
more than one supplier for each item. The Company also produces certain of its
specialized products through Company-owned blending facilities in Germany and
Singapore. 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 cementing and stimulation services. An inventory of
repair parts and maintenance items for cementing and stimulation equipment is
carried to ensure continued operations without significant downtime caused by
parts shortages. The Company has not experienced significant difficulty in
obtaining necessary supplies of these materials or replacing equipment parts and
does not anticipate a shortage 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 two 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.

The Company's operations are subject to hazards inherent in the oil and gas
industry, such as fire, explosion, blowouts and oil spills, which can cause
personal injury or loss of life, damage to property, equipment, the environment
and marine life, and suspension of operations. In addition, claims for loss of
oil and gas production and damages to formations are incidental to the pressure
pumping business. The Company maintains insurance coverage that it believes to
be customary in the industry against these hazards and whenever possible obtains
agreements from customers providing indemnification against liability to others.
However, such insurance provides for substantial deductibles and premium
adjustments based on claims experience and excludes coverage for damages
resulting from breach of contract or based on alleged fraud or deceptive trade
practices. Neither insurance nor indemnity agreements can provide complete
protection against casualty losses.

Engineering and Support Services

The Company maintains a manufacturing and research and development center
near Houston, Texas. The Company's research and development organization is
divided into three distinct areas -- Petroleum Engineering, Instrumentation
Engineering and Mechanical 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.

In addition to fluids technology, the Company's Petroleum Engineering group
develops and supports a wide range of proprietary software utilized in the
monitoring of both cement and stimulation job parameters.

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<PAGE> 26

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 among the major
competitors in the general design of their pumping equipment, the actual
engine/transmission configurations as well as the mixing and blending systems
differ significantly. Additionally, different approaches to the integrated
control systems result in equipment designs which are usually distinct in
performance characteristics for each competitor. The Company's Mechanical
Engineering group is responsible for the design and manufacturing of virtually
all of the Company's primary pumping and blending equipment. However, some
peripheral support equipment that 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.

Manufacturing

In addition to the engineering facility, the Company's technology and
research center houses its main equipment and instrumentation manufacturing
facility. This operation currently occupies approximately 65,000 square feet and
includes complete fabrication, engine and transmission rebuilding, pump
manufacturing and assembly capabilities. As a result of the Western Acquisition,
the Company acquired a research and engineering center located in The Woodlands,
north of Houston, Texas. The Company also has ancillary manufacturing facilities
in Singapore and Scotland. The Company employs outside vendors for some
fabrication but is not dependent on any one source.

Competition

Pressure Pumping Services. The Company competes with larger pumping
service companies, in particular Halliburton Energy Services, a division of
Halliburton, and Dowell, a division of Schlumberger, in all areas of the United
States in which the Company participates and in most international regions.
Several smaller companies compete with the Company in certain areas of the
United States and in certain foreign countries. The principal methods of
competition that 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 pumping service markets, including many regions in
the United States, the North Sea and Latin America.

Other Services. The Company believes that it is one of the largest
suppliers of casing and tubular services in the U.K. North Sea and is expanding
such services in Latin America. The largest provider of casing and tubular
services in Europe is Weatherford Enterra, Inc. In the United Kingdom, casing
and 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 casing and tubular services. The Company believes it is
one of the largest suppliers of commissioning and leak detection services in the
U.K. North Sea. In specialty chemical services, there are several major chemical
suppliers significantly larger than the Company's Unichem division.

Markets and Customers

General. Demand for the Company's services and products depends primarily
upon the number of oil and 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
gas producing companies. During 1995, the Company provided oilfield services to
over 2,500 customers, none of which accounted for

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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.

In both the United States and internationally, there has been a continuing
trend by oil and gas companies toward "alliances" with the service companies.
These alliances take various forms including packaged or integrated services,
single source suppliers and turnkey agreements. Approximately 20% of the
Company's revenues are generated under such alliances, or approximately $117
million of the Company's revenues during 1995, and approximately 19% of the
Company's revenues were generated under such alliances during the first six
months of fiscal 1996.

United States. The Company provides its pumping services to its U.S.
customers through a network of over 40 locations, a majority of which offer both
cementing and stimulation services. Demand for the Company's services in the
United States 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 United States has declined more than 75% from its peak in 1981.
Record low drilling activity levels were experienced in 1986 and 1992. As a
result, pumping service companies have been unable to recapitalize their aging
U.S. fleets due to the inability, under current market conditions, to generate
adequate returns on new capital investments. Management believes it is important
to operate with a greater critical mass in key U.S. markets to improve returns
in this environment. This conclusion led to the decision to withdraw from
certain low activity areas in the past several years and to consolidate the
Company's operations with those acquired from Western, which had a larger
presence in the United States.

International. The Company operates in more than 30 countries in the major
international oil and natural gas producing areas of Latin America, Europe,
Africa, Southeast Asia 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 joint venture companies, through which it conducts a portion of its
international operations. For geographic information, see Note 8 of the Notes to
Consolidated Financial Statements.

The international market is somewhat less volatile than the U.S. market
despite energy price fluctuations. 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 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 flexibility than the typical
independent producer in the United States. International activities have been
increasingly important to the Company's results of operations since 1992, when
it implemented a strategy to expand its international presence.

In general, the Company operates in those international markets where it
can achieve and maintain both a significant share position and an attractive
return on its investment. The Company's major international revenue and income
producing operations are in the North Sea in the European market; Indonesia and
Malaysia in the Southeast Asian market; and Argentina, Venezuela, Ecuador and
Colombia in the Latin American market. In Brazil, the Company recently completed
the acquisition of the 60% interest of its local joint venture partner. Foreign
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.

Employees

At September 30, 1995, the Company had a total of 4,777 employees.
Approximately 37% of the Company's employees are employed outside the United
States.

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<PAGE> 28

Governmental and Environmental Regulation

The Company's business is affected both directly and indirectly by
governmental regulations relating to the oil and 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 cost for
such procedures, including other environmental investigations and remedial
actions, is approximately $14 million which will be distributed over a period of
several years, 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 has been named as a
potentially responsible party for cleanup at 10 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 are directed primarily toward
improvement of existing products and services and the design of new products and
processes to meet specific customer needs. Research and development expenses for
each of the three fiscal years ended September 30, 1995 were approximately $6.8
million, $6.4 million and $6.5 million, respectively.

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.

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 of a material nature.

To remain competitive, the Company devotes significant resources to
developing technological improvements to its products. In 1991, the Company
introduced a borate-based fracturing fluid, Spectra Frac G(R), 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(SM)
and Medallion Frac(SM), which have expanded the Company's service line offerings
to cover a broader range of economic and downhole design variables. These
products replaced several products previously made available to customers.
During 1994, the Company commercialized a proprietary enzyme chemistry used in
conjunction with the three fracturing fluids. These "enzyme breakers"
significantly enhance the production of oil and gas in a wide range of wells. In
1991,

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<PAGE> 29

the Company introduced its "Cyclone" blender which, along with Western's
completion tool technology, have helped address the growing sand control and
frac pack markets in the Gulf of Mexico and the North Sea. The Company believes
that these products and equipment have enabled the Company to maintain or
increase its market share in the United States, the Gulf of Mexico and the North
Sea.

In 1995, the Company developed Sandstone Acid(TM), a matrix acidizing
chemistry used in sandstone formations. While still in the early stages of
testing, management believes this product offers significant advantages over
conventional acidizing methods in sandstone reservoirs. The Company intends to
continue to devote significant resources to its research and development
efforts.

NOWSCO

General

Nowsco Well Service Ltd. is a corporation incorporated under The Companies
Act (Alberta) on August 3, 1965 and continued under the Business Corporations
Act (Alberta) by a Certificate of Continuance dated April 19, 1985. Nowsco Well
Service Ltd. has a number of wholly owned subsidiaries that conduct business
internationally. Unless the context otherwise indicates, Nowsco Well Service
Ltd. and its subsidiaries are collectively referred to herein as "Nowsco."
Information provided in this Prospectus regarding Nowsco is taken from or based
upon its annual report on Form 20-F for the year ended December 31, 1995, filed
by Nowsco under the Exchange Act, its annual report to shareholders for the year
ended December 31, 1995 and its quarterly reports to shareholders for the fiscal
quarters ended December 31, 1995 and March 31, 1996.

Nowsco commenced operations in 1962 in Red Deer, Alberta. Its initial
activities involved the introduction of various applications for liquid nitrogen
to the oil and gas industry in western Canada. Activities were subsequently
expanded by adding specialized products and equipment including acidizing (in
1965), cementing (in 1966) and coiled tubing and hydraulic fracturing (in 1970).
The common shares of Nowsco Well Service Ltd. were first listed on the Toronto
Stock Exchange in April 1972.

Nowsco made its first sale outside of Canada in 1967 and in 1973
established its first international base in England, providing specialized
products, equipment and technology to the developing North Sea oil and gas
industry. In 1975, Nowsco opened its first base in continental Europe (at
Vechta, West Germany), with other international bases subsequently established
in Southeast Asia (in 1977), the United States (in 1981) and the Middle East (in
1984). The Middle East operation was discontinued in 1988 but recommenced in
January 1990, when a base in Syria was established. During 1992, Nowsco expanded
its operations into Argentina with the acquisition of 49% of an Argentine well
service company.

Nowsco's recent acquisitions have included (i) a Texas-based pipeline
service company, (ii) a well service company operating in North Texas, Kansas,
Oklahoma and Colorado, (iii) businesses providing onshore stimulation services
primarily in Texas and also in New Mexico and Louisiana and (iv) a business
specializing in offshore coiled tubing services in the Louisiana Gulf Coast.

Nowsco is headquartered in Calgary, Alberta, Canada and provides, on an
international basis, specialized products, equipment and technology principally
to owners and operators of oil and gas wells for use in the drilling, completion
and reworking of such wells and to pipeline operators for testing, commissioning
and maintenance services. Nowsco's specialized products, equipment and
technology for oil and gas wells are applied primarily in the cementing and
stimulation (including acidizing and fracturing) of wells, coiled tubing
services and in related applications involving nitrogen and carbon dioxide.
Nowsco also offers an industrial nitrogen service to refineries and process
facilities, specializing in leak testing, the purging of existing plant
facilities and the commissioning of new plant facilities. Services are provided
by Nowsco to pipeline operators including engineering, commissioning and
isolation services as well as pipeline monitoring technology that measures
critical pipeline parameters. In Canada and the United States, Nowsco designs
specialized equipment for its own worldwide use and for sale to third parties.
Nowsco provides training to a variety of customers and conducts research and
development activities that have resulted in technological advances in the areas
of the oil and gas industry in which it operates.

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<PAGE> 30

Principal Services and Products

The specialized products, equipment and technology that Nowsco provides to
its customers are used principally in the drilling and initial completion stages
of oil and gas wells and, thereafter, from time to time during the operating
life of such wells. In addition, Nowsco's pipeline, industrial and process
services are used by customers during the commissioning, decommissioning and
ongoing monitoring of pipelines and industrial facilities. Nowsco's customers
consist primarily of oil and gas companies and their representatives in the
Canadian, American and international markets described under "-- Geographic
Areas." Nowsco generally renders this service at the well site or downstream in
the delivery pipeline, and the specialized products, equipment and technology
sold outright by Nowsco are generally provided on a demand basis, as well as
pursuant to both short-term and long-term contracts.

Cementing Services. Nowsco provides specialized blends of cement and
chemicals to meet the requirements of a particular project, which vary with
geological and operating conditions and the depth of the well. For example, the
oil in heavy-oil producing formations must be heated in order to enhance its
flow. The result is that cement blends used in such wells must be able to
withstand the high temperatures subjected by super heated steam or fire flood.
Cement blends used in the foothills region of western Canada must be suited to
high pressure, high temperature environments. By contrast, cement blends used in
wells in the high Arctic must be capable of setting in permafrost and sub-zero
temperature conditions. Nowsco uses testing and various chemical additives to
produce cement blends for these diverse requirements.

To address the variety of problems associated with cementing, Nowsco works
with several cement manufacturing companies around the world. Nowsco's product
studies at its Calgary laboratory facility provide technical information to the
industry for particular cementing requirements. Nowsco also participated in the
development of foamed cement for use in wells sensitive to conventional density
slurry. Nowsco has also developed and is manufacturing portable cement-testing
equipment.

Nowsco operates a fleet of mobile processing units that are capable of
mixing and pumping cement at the well site and also blends and delivers the bulk
dry cement required for each job. Depending upon the requirements of the
particular well, Nowsco may supply cement blend in amounts ranging from 1,000 to
500,000 kilograms (approximately 2,200 to 1,103,000 pounds) or more.

Stimulation Services. Nowsco provides two principal forms of stimulation,
acidizing and hydraulic fracturing, design of the latter being supported by
hydraulic fracture computer simulation.

Fracturing. Nowsco generally performs fracturing operations with two or
more mobile equipment units coordinated at the job site by remote control. This
equipment is used to transfer and blend mixtures of treating fluid and proppant
and to pump such mixtures down the well and into the formation. A fracturing
treatment may involve the sale of approximately 3,000 to 1,400,000 kilograms
(approximately 6,600 to 3,000,000 pounds) or more of proppant blended into
20,000 to 1,200,000 liters (approximately 5,300 to 317,000 gallons) or more of
treating fluid. Assisted by computer modeling facilities located at Nowsco
headquarters and field locations, Nowsco's engineers work together with
customers in the planning of individual fracturing treatments. Nowsco has been
involved in the development of new fracturing systems and fluids.

Acidizing. Nowsco uses raw materials purchased from suppliers in its acid
blends. Nowsco has the required acid blends delivered to a site and introduces
such blends into the oil or gas well, using mobile pumping units with
permanently mounted high pressure pumps and mixing tanks. Acid is pumped, often
at high pressure, down the well into the producing formation. The majority of
wells drilled and completed are acidized in the course of completion. The amount
of acid blend sold in respect of any particular application varies from 1,000 to
400,000 liters (approximately 260 to 110,000 gallons) or more. Nowsco's research
staff tests chemical products, acids and formation core samples to identify
blends that increase productivity while limiting detrimental effects to the
producing formation and production facilities.

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<PAGE> 31

Other Operations

Nitrogen. The application of liquid nitrogen to well completions was
introduced by Nowsco to the Canadian oil and gas industry in 1962. Since then,
the development of nitrogen technology and its application on a worldwide basis
has grown significantly, in certain instances supplanting products and
procedures previously used. Liquid nitrogen is purchased and sometimes stored by
Nowsco and later transferred to its mobile pumping units. At the well site,
nitrogen is pumped in liquid form and converted, through the application of
heat, to a gaseous state in which it is used alone or in conjunction with
cementing, acidizing and fracturing applications. With respect to acidizing, the
addition of nitrogen can enhance acid penetration of the producing formation and
improve the recovery of spent acid from the well. In connection with fracturing,
the addition of nitrogen to the treating fluid results in improved treating
fluid recovery and proppant carrying characteristics.

Other uses for nitrogen include displacing fluids from the wellbore,
providing pressure when the well casing is being perforated, facilitating
drill-stem testing, providing a substitute for drilling mud in certain
operations (including underbalanced drilling) and purging, drying and testing
various industrial systems and pipelines, inerting the environment to extinguish
fires in mines and facilities and providing an inert atmosphere for various
maintenance operations. Nowsco has also participated in the development of a
system whereby nitrogen is used for the purpose of leak detection (see "-- Leak
Detection"). During 1995, Nowsco provided nitrogen services to the underbalanced
drilling market using two types of membrane extraction units.

Carbon Dioxide. Nowsco has used liquid carbon dioxide in many oil and gas
industry applications since 1970. Carbon dioxide is used primarily as an aid to
recovery of treating or formation fluids. It can in some cases be used as an
initial cleanup fluid which may supplement or replace acid treatments or as a
component of fracturing fluid to improve treating fluid recovery. Because it is
pumped in liquid form, carbon dioxide has become a major component of certain
fracturing fluids.

Coiled Tubing. Mobile coiled tubing units were introduced to the Canadian
oil and gas industry by Nowsco in 1971 and coiled tubing has since become an
integral part of many well completion and maintenance operations, both onshore
and offshore around the world. Coiled tubing is continuous, jointless and high
pressure rated steel tubing (from 1 inch up to 3 1/2 inches in diameter) that,
except for the larger sizes, may be run into oil and gas wells to depths of up
to 7,600 meters (approximately 25,000 feet). Coiled tubing is fed into the well,
often while such wells are under pressure, to create either a temporary or
permanent circulating system that can be used to introduce nitrogen or other
fluids into the well for the purpose of removing unwanted liquids, proppant or
other debris. On occasion, acids, chemicals or cement are pumped through the
coiled tubing to repair or remedy a variety of downhole problems. Coiled tubing
has been used with specialized equipment to drill out hard-fill or cement and to
deepen the well. It also has been used to place and retrieve downhole equipment
and, in conjunction with electric wireline, has been used to log and perforate
high deviation and horizontal wells. Development work continues on coiled tubing
directional drilling technology including directional underbalanced drilling.
Nowsco 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. Nowsco has installed insulated concentric
coiled tubing string (ICCT, a steam injection medium) for use in improving the
reserve recovery of heavy oil wells. Nowsco's SandVac system is a patented jet
pump system that is 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.

Leak Detection. 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

30
<PAGE> 32

in some instances be more expensive. Accordingly its use is restricted to those
instances where environmental and safety concerns are particularly acute.

Pipeline Servicing. Nowsco provides pipeline testing and commissioning
services including filling, pressure testing, de-watering, purging and vacuum
drying of pipelines. In 1996, Nowsco obtained a contract to pneumatically test
and dry a large diameter pipeline in southern Colombia. Other services include
grouting and insulating of pipeline bundles, abandonment of pipelines and tank
desludging services for large storage tanks. Nowsco has been involved in the
development of pipeline gels, both hydrocarbon and aqueous, for pipeline
cleaning and transport as well as plugs used for isolation purposes. Nowsco has
also developed and is using high friction pig trains and freezing techniques for
the isolation of pipelines.

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 pipeline internal condition. In addition, the
client can develop a structural analysis using the measured pipeline geometry
information. The operator's planning is improved by the capability of
efficiently analyzing 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.

Pipeline packers provide a low pressure isolation device by braking and
sealing against the wall of the pipeline. Used in tandem, these packers
temporarily isolate a section of the pipeline that requires repair and
maintenance. These sealing packers allow pipeline repairs to take place with
less operational complexity and less operator downtime as a result of having to
drain only the isolated section of the pipeline of oil or gas.

Operations and Sources of Raw Materials

The liquid nitrogen, acids, chemicals, sand and cement required by Nowsco
as raw materials are produced and sold by numerous suppliers. Nitrogen is
available in North America from three major suppliers, one of which presently
supplies Nowsco under a long-term contract. This contract restricts the purchase
of nitrogen from other sources unless the supplier cannot meet Nowsco's needs.
Long-term supply contracts for nitrogen also exist in other operating areas.
Nowsco maintains short-term storage facilities for these materials and to date
has been able to locate alternative sources when these materials have not been
readily available from its primary suppliers.

Properties and Facilities

Nowsco owns and leases operating bases worldwide, from which its
specialized products, equipment and technology are provided and where inventory
is stored. The original cost of Nowsco-owned locations at December 31, 1995 was
Cdn $39.2 million, of which approximately Cdn $21.4 million related to bases
located in Canada, the majority of which are in Alberta, Saskatchewan and
British Columbia. In addition, Nowsco owns properties in the United Kingdom,
Germany and Syria with a total cost of Cdn $13.6 million and in the United
States with a cost of Cdn $3.5 million and in Argentina totalling Cdn $.7
million. During 1994, Nowsco completed construction of a new operations center
in Aberdeen, Scotland to service the North Sea market. During 1995, Nowsco
completed construction of a new operations center in Red Deer, Canada to service
the central Alberta market. Nowsco also conducts operations from leased premises
in various locations. The availability of premises in these areas is not
restricted at comparable costs, and Nowsco does not report these to be a
significant factor in its operations.

Nowsco's Fabrication, Research and Development and Training Center in
Calgary is a 45,000-square-foot complex located on a seven-acre site owned by
Nowsco. Nowsco has invested a total of approximately Cdn $6.9 million in this
facility, which opened in November 1979, and also has fabrication facilities in
Texas.

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<PAGE> 33

Competition

Nowsco's major competitors are multinational companies that are
substantially larger than Nowsco. In certain regions Nowsco also competes with a
number of small companies, some of which have competitive advantages, such as
lower overhead costs. Competition between Nowsco and its competitors is intense,
particularly in the form of severe price discounting. Although price is an
important factor in competition, to many customers technology and dependability
are also important.

Geographic Areas

Canada and the United States. Nowsco maintains a total of 43 operating
bases in Canada and the United States. Its most significant operations in Canada
are currently conducted in Alberta, Saskatchewan and British Columbia. Nowsco's
corporate head office and Canadian operations regional head office are located
in Calgary, Alberta. Services provided in Canada include cementing, fracturing,
nitrogen, underbalanced drilling, coiled tubing and acidizing services. In the
United States, Nowsco conducts business through wholly owned subsidiaries and
presently maintains operating bases in Texas, Louisiana, Pennsylvania, Michigan,
Mississippi, West Virginia, Colorado, Kansas, New Mexico, Oklahoma, Indiana and
Iowa. Nowsco's U.S. regional head office is located in Houston, Texas. Services
provided in the United States are primarily related to pressure pumping and
coiled tubing and include fracturing, acidizing, cementing and nitrogen
services. In 1995, Nowsco recorded a charge against income of Cdn $5.2 million
relating to its U.S. operations, representing a writedown of assets and
severance, relocation and reorganization costs.

International. Nowsco's operations outside of North America are carried
out in the United Kingdom/ Europe, Africa & Middle East and Asia Pacific with
regional head offices located in Aberdeen, Scotland, Nicosia, Cyprus, and
Jakarta, Indonesia. The majority of these operations are conducted through
branches or wholly owned subsidiaries utilizing manpower and expertise available
in the country of operation. Operations in Argentina are conducted through
Nowsco's associated company, Nowsco Americas S.A., and are headquartered in
Buenos Aires. The business consists primarily of cementing, coiled tubing and
stimulation services. Nowsco maintains 18 international operating bases
including those located in the United Kingdom, the Netherlands, Germany, Norway,
Syria, Zaire, Dubai, Australia, Indonesia, Sarawak, Malaysia, Thailand, Vietnam,
Russia and Argentina.

During the fourth quarter of 1994, Nowsco commenced well servicing
operations in the Tyumen Region of Western Siberia for a Russian production
association, Varyeganneftegaz. This two-year contract, under which Nowsco
received a monthly minimum fee, is funded by the World Bank in U.S. dollars.
Nowsco has also held interests in other operations in Russia. In 1995, Nowsco
provided pumping services on a well blowout in Syria and entered into a contract
to provide well services, including coiled tubing and fracturing services, in
Holland.

Research and Development; Patents

The testing and development of new products and applications is an integral
part of Nowsco's business. Recent developments reported by Nowsco include a
prototype corrosion inspection tool, insulated concentric coiled tubing (ICCT, a
stream injection medium, which has a patent pending), SandVac (a tool for use
with concentric coiled tubing to remove sand from low pressure horizontal
wells), Rotojet (a tool for use in wellbore scale removal) and drilling using
coiled tubing (DUCT). Nowsco has also developed industry specific software
products.

Expenditures by Nowsco during the last three years on product and equipment
research and development have been as follows:

1995 -- Cdn $7.2 million
1994 -- Cdn $6.1 million
1993 -- Cdn $4.6 million

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<PAGE> 34

Nowsco holds several patents and non-exclusive licenses which it uses in
its operations including licenses relating to the technique of commingling
nitrogen with acidizing and fracturing fluids, and licenses relating to a
process that allows Nowsco to provide certain fracturing products. Other
non-exclusive patent licenses have been obtained from various oil and gas
companies. Many of the licenses held by Nowsco are subject to termination by the
respective patent holder under certain circumstances. Nowsco maintains an
exclusive patent relating to certain mechanical packer pig service technologies.

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<PAGE> 35

MANAGEMENT

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------------------------- --- ---------------------------------------
<S> <C> <C>
J. W. Stewart.......................... 52 Director, Chairman of the Board,
President and Chief Executive Officer
Michael McShane........................ 41 Director, Vice President -- Finance and
Chief Financial Officer
David D. Dunlap........................ 34 Vice President -- International
Operations
Thomas H. Koops........................ 49 Vice President -- Technology and
Logistics
Margaret B. Shannon.................... 46 Vice President -- General Counsel
Kenneth A. Williams.................... 45 Vice President -- North American
Operations
Matthew D. Fitzgerald.................. 38 Controller
Taylor M. Whichard..................... 37 Treasurer
Stephen A. Wright...................... 48 Director of Human Resources
L. William Heiligbrodt................. 54 Director
John R. Huff........................... 50 Director
Don D. Jordan.......................... 64 Director
R. A. LeBlanc.......................... 66 Director
James E. McCormick..................... 68 Director
Michael E. Patrick..................... 52 Director
</TABLE>

Mr. Stewart, director (Class III) of the Company since 1990, 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, director (Class II) of the Company since 1990, joined the
Company in 1987 from Reed Tool Company, an oilfield tool company, where he was
employed for seven years. 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 1995. He has previously served as
Vice President -- Sales for the Coastal Division of North America and U.S. Sales
and Marketing Manager.

Mr. Koops joined the Company as Manager -- Products and Technical Services
in 1976. He was named Vice President -- Manufacturing and Logistics of the
Company in 1988 and began serving in his current position in 1992.

Ms. Shannon joined the Company in February 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. 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. Fitzgerald joined the Company as Controller in 1989 from Baker Hughes
Incorporated, where he was the Director of Corporate Audit. Prior to that, he
was a Senior Manager with the certified public accounting firm of Ernst &
Whinney.

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

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<PAGE> 36

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

Mr. Heiligbrodt, director (Class III) of the Company since 1992, is
President, Chief Operating Officer and a director of Service Corporation
International, a funeral services corporation ("SCI"). He has served in various
management positions with SCI since February 1990. Prior to joining SCI, Mr.
Heiligbrodt served as President of Provident Services, Inc. from March 1988 to
February 1990. Prior to that, he served for five years as Vice Chairman and
Chief Executive Officer of WEDGE Group, Incorporated, a multi-industry holding
company. He is Chairman of the Nominating Committee and a member of the
Executive Compensation Committee.

Mr. Huff, director (Class I) of the Company since 1992, is Chairman,
President and Chief Executive Officer of Oceaneering International, Inc., an
oilfield services corporation. Mr. Huff has been President, Chief Executive
Officer and a director of Oceaneering since 1986 and Chairman of the Board of
Oceaneering since 1990. Mr. Huff is also a director of Production Operators
Corp. He is a member of the Audit Committee and the Executive Compensation
Committee.

Mr. Jordan, director (Class II) of the Company since 1990, is Chairman,
Chief Executive Officer and a director of Houston Industries Incorporated, a
public utility holding company with interests in domestic and international
electric utility companies and projects. Mr. Jordan has been employed by various
subsidiaries of Houston Industries Incorporated since 1956. He currently serves
as a director of Texas Commerce Bancshares, UTECH Joint Venture and AEGIS
Insurance Services. He is Chairman of the Executive Compensation Committee and a
member of the Audit Committee.

Mr. LeBlanc, director (Class I) of the Company since 1994, served in
various executive positions with Keystone International, Inc., a manufacturer of
flow control products, including Chairman of the Board, Chief Executive Officer
and a director, from 1959 until his retirement in July 1995. Mr. LeBlanc also
serves as an advisory member of the board of directors of Texas Commerce Bank
National Association. He is a member of the Audit Committee and the Nominating
Committee.

Mr. McCormick, director (Class III) of the Company since 1990, served in
various executive positions with ORYX Energy Company, a diversified energy
company, including President and Chief Operating Officer and a director, from
1977 until his retirement on March 1, 1992. Mr. McCormick currently serves on
the board of directors of Lone Star Technology, Snyder Oil Company and Texas
Commerce Bank National Association. He is Chairman of the Audit Committee and a
member of the Executive Compensation Committee and the Nominating Committee.

Mr. Patrick, director (Class I) of the Company since April 1995, Chief
Investment Officer of the Meadows Foundation since December 1, 1995; consultant
from 1994 to 1995; President of Lomas Information Systems, Inc., a subsidiary of
Lomas Financial Corporation, from 1993 to 1994; Executive Vice President, Chief
Financial Officer and a director of Lomas Financial Corporation and President
and Chief Operating Officer of its Lomas Mortgage USA subsidiary, both of which
are engaged in mortgage banking, real estate and information services, from 1992
until 1994; and Executive Vice Chancellor for Asset Management of the University
of Texas System, where he was responsible for the investment of all endowment
funds, from 1984 to 1991. He is a member of the Executive Compensation
Committee.

The terms of the Class I, Class II and Class III directors expire in 1997,
1998 and 1996, respectively.

A Special Committee of the Board of Directors is responsible for
administering certain employee arrangements related to the acquisition of
Western. The Special Committee is composed of Messrs. McCormick (Chairman),
LeBlanc and Patrick.

35
<PAGE> 37

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of BJ Services consists of 80,000,000 shares
of Common Stock and 5,000,000 shares of preferred stock, par value $1.00 per
share, including 400,000 currently authorized shares of Series Two Junior
Participating Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), issuable upon exercise of the Company's preferred share purchase rights
(the "Rights"). The following description of the capital stock of BJ Services
does not purport to be complete or to give full effect to the provisions of
statutory or common law and is subject in all respects to the applicable
provisions of the Certificate of Incorporation (the "Charter") and Bylaws (the
"Bylaws") of the Company, the Certificate of Designation for the Preferred
Stock, the stockholder rights agreement between BJ Services and First Chicago
Trust Company of New York, as rights agent (the "Rights Agreement"), and the
Warrant Agreement dated April 13, 1995, between BJ Services and First Chicago
Trust Company of New York, as warrant agent (the "Warrant Agreement"), each as
amended, which are incorporated by reference into the registration statement of
which this Prospectus is a part. The information herein is qualified in its
entirety by this reference.

COMMON STOCK

BJ Services is authorized by its Charter to issue 80,000,000 shares of
Common Stock, of which 28,164,670 shares were issued and outstanding as of March
31, 1996. Each outstanding share of Common Stock includes an associated Right.

The holders of shares of Common Stock are entitled to one vote for each
share held on all matters submitted to a vote of common stockholders. The Bylaws
provide that, in general, when a quorum is present at any meeting of
stockholders, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy and entitled to vote shall
decide questions brought before such meeting (except as otherwise required by
statute or the Charter or Bylaws). See "-- Certain Anti-takeover Provisions."
The Common Stock does not have cumulative voting rights.

Each share of Common Stock is entitled to participate equally in dividends,
if, as and when declared by BJ Services' Board of Directors, and in the
distribution of any assets in the event of liquidation, subject in all cases to
any prior claims and prior rights of outstanding shares of preferred stock. The
shares of Common Stock have no preemptive or conversion rights, redemption
provisions or sinking fund provisions. The outstanding shares of Common Stock
are duly and validly issued, fully paid and nonassessable.

PREFERRED SHARE PURCHASE RIGHTS

On January 5, 1994, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of Common Stock.
Each Right entitles the registered holder to purchase from BJ Services one
one-hundredth of a share of Preferred Stock, at a price of $75.00 per one
one-hundredth of a share (the "Purchase Price"), subject to adjustment under
certain circumstances.

The Rights attach to all certificates representing outstanding shares of
Common Stock, and no separate Rights certificates have been distributed. The
Rights are not exercisable until the earlier to occur of (i) 30 days following a
public announcement that a person or group of affiliated or associated persons
has acquired or obtained the right to acquire beneficial ownership or 20% or
more of the outstanding shares of Common Stock (an "Acquiring Person") or (ii)
30 days following the commencement or announcement of an intention to make a
tender offer or exchange offer that would result in a person or group
beneficially owning 30% or more of such outstanding shares (the earlier of such
dates being called the "Distribution Date"). The Rights will expire at the close
of business on January 17, 2004, unless such date is extended or the Rights are
earlier redeemed by the Company.

With certain exceptions, in the event (i) BJ Services is acquired in a
merger or other business combination transaction or (ii) more than 50% of BJ
Services' consolidated assets or earning power is sold, each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, that number of shares of common stock of
the acquiring person that, at the time of such transaction, would have a market
price (as defined in the Rights Agreement) of two times the Purchase Price of
the Right. In the event (i) BJ Services is the surviving corporation in certain
mergers and the outstanding Common Stock is not changed or exchanged, or (ii)
any person acquires 30% or more of the

36
<PAGE> 38

outstanding Common Stock, each holder of a Right, other than Rights that were or
are beneficially owned by the Acquiring Person on or after the earlier of the
Distribution Date or the date an Acquiring Person acquires 20% or more of the
Common Stock (which Rights will thereafter be void), will thereafter have the
right to receive upon exercise that number of shares of Common Stock (or cash,
other securities or property) having a market price (as defined in the Rights
Agreement) of two times the Purchase Price of the Right.

At any time prior to 30 days after such time as any person or group has
become an Acquiring Person (or a longer period if BJ Services' Board of
Directors extends such period), BJ Services may redeem the Rights in whole, but
not in part, at a price of $0.01 per Right (the "Redemption Price"). In certain
circumstances, the decision to redeem the Rights requires the concurrence of a
majority of the Continuing Directors (as defined in the Rights Agreement).
Immediately upon the action of the Board of Directors of BJ Services electing to
redeem the Rights, a holder's right to exercise the Rights will terminate and he
or she will only be entitled to receive the Redemption Price.

PREFERRED STOCK

Pursuant to the Charter, BJ Services is authorized to issue 5,000,000
shares of preferred stock, and BJ Services' Board of Directors by resolution may
establish one or more series of preferred stock having such number of shares,
designation, relative voting rights, dividend rates, liquidation and other
rights, preferences and limitations as may be fixed by the Board of Directors
without any further stockholder approval. A Certificate of Designation has been
filed with the Secretary of State of the State of Delaware with respect to the
Preferred Stock authorized by the Board of Directors. The preferred stock could
include dividend, liquidation and voting rights that would limit or qualify the
rights of the holders of the Common Stock.

WARRANTS

The Warrants were issued under the Warrant Agreement in connection with the
Western Acquisition. Each Warrant will entitle the registered holder thereof
(the "holder"), subject to and upon compliance with the provisions thereof and
of the Warrant Agreement, at such holder's option, prior to the close of
business on April 13, 2000, to purchase the number of shares of Common Stock set
forth therein at an initial exercise price of $30.00 per share (the "Exercise
Price"), with the number of such shares and the Exercise Price to be subject to
adjustment under certain circumstances.

Holders of Warrants will not be entitled to vote, receive dividends or
distributions on, or be deemed for any purpose the holder of, Common Stock or
any other securities of BJ Services which may at any time be issuable on the
exercise or conversion of the Warrants. Nothing contained in the Warrant
Agreement or in any Warrant Certificate shall be construed to confer upon the
holder of any Warrant Certificate any rights of a stockholder of BJ Services or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders, or to receive dividends or distributions or subscription rights,
or otherwise, until the Warrant or Warrants evidenced by such Warrant
Certificate shall have been exercised in accordance with the provisions of the
Warrant Agreement.

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Charter and Bylaws, as well as the Rights
Agreement, may be deemed to have an anti-takeover effect and may delay, defer or
prevent a tender offer or takeover attempt that a stockholder might consider to
be in such stockholder's best interest, including those attempts that might
result in a payment of a premium over the market price for the shares held by
stockholders. Such provisions include a classified board of directors and the
preferred stock authorized pursuant to the Charter. The Charter further provides
that (i) stockholders may act only at an annual or special meeting of
stockholders and may not act by written consent; (ii) special meetings of
stockholders can be called only by BJ Services' Board of Directors; (iii) a 75%
vote of the outstanding voting stock is required for the stockholders to amend
the Bylaws; and (iv) a 75% vote of the outstanding voting stock is required to
amend the Charter with respect to certain matters, including, without
limitation, the matters set forth in clauses (i) and (iii) above and a 75%
voting requirement required for certain business combinations.

37
<PAGE> 39

UNDERWRITING

Subject to the terms and conditions set forth in a Purchase Agreement (the
"Purchase Agreement") between the Company and each of the underwriters named
below (the "Underwriters"), the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters, for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), CS First Boston Corporation and
Rauscher Pierce Refsnes, Inc. are acting as representatives (the
"Representatives"), has severally agreed to purchase, the number of shares of
Common Stock set forth below opposite their respective names. The Underwriters
are committed to purchase all of such shares if any are purchased. Under certain
circumstances, the commitments of non-defaulting Underwriters may be increased
as set forth in the Purchase Agreement.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................................
CS First Boston Corporation.......................................................
Rauscher Pierce Refsnes, Inc......................................................
---------
Total................................................................ 8,500,000
========
</TABLE>

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public initially at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.

The Company has granted the Underwriters an option, exercisable by the
Representatives, to purchase up to 1,275,000 additional shares of Common Stock
initially at the public offering price, less the underwriting discount. Such
option, which expires 30 days after the date of this Prospectus, may be
exercised solely to cover over-allotments. To the extent that the
Representatives exercise such option, each of the Underwriters will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of the option shares that the number of shares to be purchased
initially by that Underwriter bears to the total number of shares to be
purchased initially by the Underwriters.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.

In connection with the Offering, the Company, its directors and executive
officers have agreed that they will not, for a period of 90 days from the date
of this Prospectus, without the prior written consent of Merrill Lynch, offer,
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into shares of Common Stock, except, in the case of the Company, (i)
for sales to the Underwriters pursuant to the Purchase Agreement, (ii) for the
issuance of shares upon exercise of the Company's outstanding warrants to
purchase Common Stock, (iii) for private placements of Common Stock to
purchasers who agree to be bound by similar restrictions, (iv) for the issuance
of shares upon the exercise of options granted pursuant to the Company's
employee benefit plans prior to the date hereof and (v) subject to certain
limitations, the grant of options, restricted shares, restricted stock units,
stock unit awards payable in the form of Common Stock or performance shares
issued or granted pursuant to the Company's employee benefit plans.

Merrill Lynch has acted from time to time as financial advisor to and
underwriter for to the Company and has received customary fees for such services
and acted as U.S. dealer manager and financial advisor to the Company in
connection with the Nowsco Acquisition.

38
<PAGE> 40

LEGAL MATTERS

The validity of the Common Stock being offered hereby will be passed upon
for the Company by Andrews & Kurth L.L.P., Houston, Texas. Certain legal matters
in connection with the Common Stock offered hereby will be passed upon for the
Underwriters by Baker & Botts, L.L.P., Houston, Texas.

EXPERTS

The consolidated financial statements and the related financial statement
schedule of the Company as of September 30, 1995 and 1994 and for each of the
three years in the period ended September 30, 1995, included or incorporated by
reference in this Registration Statement, have been audited by Deloitte & Touche
LLP, independent accountants, as stated in their reports, which are included or
incorporated by reference herein, and have been so included or incorporated by
reference in reliance upon the reports of such firm given upon their authority
as experts in accounting and auditing.

The consolidated financial statements of Nowsco Well Service Ltd. as of
December 31, 1995, 1994 and 1993 and for each of the years in the three-year
period ended December 31, 1995, have been included and incorporated by reference
herein in reliance upon the report of KPMG Peat Marwick Thorne, Chartered
Accountants, and upon the authority of said firm as experts in accounting and
auditing.

The consolidated financial statements of The Western Company of North
America as of December 31, 1994 and 1993 and for each of the three years in the
period ended December 31, 1994 incorporated by reference in this Registration
Statement have been so incorporated by reference in reliance on the report of
Price Waterhouse LLP, independent accountants, and have been so incorporated by
reference in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company incorporates herein by reference the following documents (File
No. 1-10570):

(a) Annual Report on Form 10-K for the fiscal year ended September 30,
1995;

(b) Quarterly Report on Form 10-Q for the quarterly periods ended
December 31, 1995 and March 31, 1996;

(c) Current Report on Form 8-K filed April 28, 1995, as amended by
Form 8-K/A filed May 31, 1995, and Form 8-K/A filed May 30, 1996, Current
Report on Form 8-K filed February 6, 1996, as amended by Form 8-K/A filed
May 23, 1996 and Current Reports on Form 8-K filed April 16, 1996 and June
28, 1996;

(d) The description of the Common Stock, contained in the Registration
Statement on Form 8-A/A dated January 9, 1996 (Registration No. 1-10570)
filed by the Company under the Exchange Act; the description of the
Company's preferred share purchase rights included in the Company's
Registration Statement on Form 8-A dated January 12, 1994, and the
Company's Registration Statements on Form 8-A/A dated August 26, 1994 and
September 30, 1994; and the description of the Series Two Junior
Participating Preferred Stock of the Company included in the Company's
Registration Statement on Form 8-A dated January 12, 1994 and the Company's
Registration Statements on Form 8-A/A dated August 26, 1994 and September
30, 1994; and

(e) All other documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof
and prior to termination of the offering made hereby.

Any statement contained herein or in a document all or a portion of which
is incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such

39
<PAGE> 41

statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document,
copies of which are available from the Company as described below, each such
statement being qualified in all respects by such reference.

THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH
PERSON TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR
ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED
TO ABOVE WHICH ARE INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUESTS FOR DOCUMENTS SHOULD BE
DIRECTED TO BJ SERVICES COMPANY, 5500 NORTHWEST CENTRAL DRIVE, HOUSTON, TEXAS
77092, ATTENTION: CORPORATE COMMUNICATIONS MANAGER, TELEPHONE NUMBER (713)
462-4239.

40
<PAGE> 42

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Accountants of BJ Services..................................... F-2

Consolidated Statement of Operations of BJ Services for the Years Ended September 30,
1995, 1994 and 1993................................................................ F-3

Consolidated Statement of Financial Position of BJ Services as of September 30, 1995
and 1994........................................................................... F-4

Consolidated Statement of Stockholders' Equity of BJ Services for the Years Ended
September 30, 1995, 1994 and 1993.................................................. F-5

Consolidated Statement of Cash Flows of BJ Services for the Years Ended September 30,
1995, 1994 and 1993................................................................ F-6

Notes to Consolidated Financial Statements of BJ Services............................ F-7

Consolidated Condensed Statement of Operations of BJ Services (Unaudited) -- Three-
and six-month periods ended March 31, 1996 and 1995................................ F-22

Consolidated Condensed Statement of Financial Position of BJ Services -- March 31,
1996 (Unaudited) and September 30, 1995............................................ F-23

Consolidated Condensed Statement of Cash Flows of BJ Services (Unaudited) -- Six
months ended March 31, 1996 and 1995............................................... F-24

Notes to Unaudited Consolidated Condensed Financial Statements of BJ Services........ F-25

Report of Independent Auditors of Nowsco............................................. F-27

Consolidated Balance Sheets of Nowsco as of December 31, 1995, 1994 and 1993......... F-28

Consolidated Statements of Operations of Nowsco for the Years Ended December 31,
1995, 1994 and 1993................................................................ F-29

Consolidated Statements of Retained Earnings of Nowsco for the Years Ended December
31, 1995, 1994 and 1993............................................................ F-30

Consolidated Statements of Changes in Cash Position of Nowsco for the Years Ended
December 31, 1995, 1994 and 1993................................................... F-31

Notes to Consolidated Financial Statements of Nowsco................................. F-32

Condensed Consolidated Statements of Operations of Nowsco (Unaudited) -- Three Months
Ended March 31, 1996 and 1995...................................................... F-42

Condensed Consolidated Balance Sheets of Nowsco (Unaudited) -- March 31, 1996 and
1995 and December 31, 1995......................................................... F-43

Condensed Consolidated Statements of Changes in Cash Position of Nowsco
(Unaudited) -- Three Months Ended March 31, 1996 and 1995.......................... F-44

Notes to Unaudited Condensed Consolidated Financial Statements of Nowsco............. F-45

Pro Forma Financial Information (Unaudited).......................................... F-46
</TABLE>

F-1
<PAGE> 43

REPORT OF INDEPENDENT ACCOUNTANTS

Stockholders of BJ Services Company:

We have audited the accompanying consolidated statements of financial position
of BJ Services Company and its subsidiaries as of September 30, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended September 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements 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 its
subsidiaries at September 30, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1995 in conformity with generally accepted accounting principles.

As described in Note 9 to the consolidated financial statements, the Company
changed its method of accounting for postretirement benefits other than pensions
effective October 1, 1993 to conform with Statement of Financial Accounting
Standards No. 106.

DELOITTE & TOUCHE LLP

Houston, Texas
November 21, 1995

F-2
<PAGE> 44

BJ SERVICES COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenue.................................................... $633,660 $434,476 $394,363
Operating Expenses:
Cost of sales and services............................... 525,859 368,994 329,042
Research and engineering................................. 12,299 8,621 9,098
Marketing................................................ 26,429 14,169 12,969
General and administrative............................... 28,318 22,709 22,825
Goodwill amortization.................................... 3,266 1,298 691
Unusual charge........................................... 17,200
-------- -------- --------
Total operating expenses................................. 613,371 415,791 374,625
-------- -------- --------
Operating income........................................... 20,289 18,685 19,738
Interest expense........................................... (15,164) (7,383) (5,414)
Interest income............................................ 899 729 500
Other income -- net........................................ 2,734 877 2,014
-------- -------- --------
Income before income taxes, minority interest and
cumulative effect of accounting change................... 8,758 12,908 16,838
Income tax expense (benefit)............................... (1,102) 2,006 1,593
-------- -------- --------
Income before minority interest and cumulative effect of
accounting change........................................ 9,860 10,902 15,245
Minority interest.......................................... (29) 132 684
-------- -------- --------
Income before cumulative effect of accounting change....... 9,889 10,770 14,561
Cumulative effect of change in accounting principle, net of
tax benefit of $5,600,000................................ (10,400)
-------- -------- --------
Net income................................................. $ 9,889 $ 370 $ 14,561
======== ======== ========
Net Income Per Share:
Income per share before cumulative effect of accounting
change................................................ $ .46 $ .69 $ .94
Cumulative effect of change in accounting principle, net
of tax................................................ (.67)
-------- -------- --------
Net income per share....................................... $ .46 $ .02 $ .94
======== ======== ========
Weighted average shares outstanding........................ 21,376 15,665 15,456
======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements

F-3
<PAGE> 45

BJ SERVICES COMPANY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................................... $ 1,842 $ 3,218
Receivables, less allowance for doubtful accounts: 1995, $7,483,000; 1994,
$2,184,000................................................................... 168,771 103,754
Inventories:
Finished goods............................................................... 46,242 30,970
Work in process.............................................................. 2,392 1,118
Raw materials................................................................ 18,217 6,591
-------- --------
Total inventories....................................................... 66,851 38,679
Deferred income taxes.......................................................... 9,370 4,478
Other current assets........................................................... 10,101 8,230
-------- --------
Total current assets.................................................... 256,935 158,359
Property:
Land........................................................................... 13,031 12,031
Buildings...................................................................... 83,205 47,042
Machinery and equipment........................................................ 634,692 446,739
-------- --------
Total property.......................................................... 730,928 505,812
Less accumulated depreciation.................................................. 314,118 306,968
-------- --------
Property -- net.............................................................. 416,810 198,844
Goodwill, net of amortization.................................................... 193,263 20,998
Deferred income taxes............................................................ 107,889 20,607
Investments and other assets..................................................... 14,786 11,258
-------- --------
$989,683 $410,066
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable -- trade...................................................... $ 85,675 $ 54,609
Short-term borrowings.......................................................... 2,000 2,250
Current portion of long-term debt.............................................. 35,600 31,200
Accrued employee compensation and benefits..................................... 24,885 10,521
Income taxes................................................................... 5,915 7,719
Taxes other than income........................................................ 5,460 2,751
Accrued insurance.............................................................. 12,867 2,637
Other accrued liabilities...................................................... 31,869 9,162
-------- --------
Total current liabilities............................................... 204,271 120,849
Long-term debt................................................................... 259,566 74,700
Deferred income taxes............................................................ 11,496 7,194
Accrued postretirement benefits.................................................. 25,146 15,834
Minority interest and other long-term liabilities................................ 22,409 1,562
Commitments and contingencies
Stockholders' Equity:
Preferred stock (authorized 5,000,000 shares)
Common stock, $.10 par value (authorized 80,000,000 shares; issued and
outstanding
1995 -- 27,951,784 shares, 1994 -- 15,670,903 shares)...................... 2,795 1,567
Capital in excess of par....................................................... 415,242 151,340
Retained earnings.............................................................. 53,505 43,616
Cumulative translation adjustment.............................................. (4,747) (4,133)
Unearned compensation.......................................................... (2,463)
-------- --------
Total stockholders' equity.............................................. 466,795 189,927
-------- --------
$989,683 $410,066
======== ========
</TABLE>

See Notes to Consolidated Financial Statements

F-4
<PAGE> 46

BJ SERVICES COMPANY

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
CAPITAL CUMULATIVE
COMMON IN EXCESS UNEARNED RETAINED TRANSLATION
STOCK OF PAR COMPENSATION EARNINGS ADJUSTMENT TOTAL
------ --------- ------------ -------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1992........ $1,304 $ 105,374 $ $ 28,685 $ (569) $134,794
Net income....................... 14,561 14,561
Issuance of stock for:
Business acquisition.......... 250 40,537 40,787
Stock options................. 3 504 507
Stock purchase plan........... 4 619 623
Stock performance awards...... 2,855 (2,855)
Amortization of unearned
compensation.................. 500 500
Cumulative translation
adjustment.................... (4,640) (4,640)
------ --------- -------- -------- ------- --------
Balance, September 30, 1993........ 1,561 149,889 (2,355) 43,246 (5,209) 187,132
Net income....................... 370 370
Issuance of stock for:
Stock options................. 2 294 296
Stock purchase plan........... 4 680 684
Stock performance awards...... 944 (944)
Buyback of stock rights.......... (155) (155)
Amortization of unearned
compensation.................. 524 524
Revaluation of stock performance
awards........................ (312) 312
Cumulative translation
adjustment.................... 1,076 1,076
------ --------- -------- -------- ------- --------
Balance, September 30, 1994........ 1,567 151,340 (2,463) 43,616 (4,133) 189,927
Net income....................... 9,889 9,889
Issuance of stock for:
Business acquisition.......... 1,204 262,347 263,551
Stock options................. 2 535 537
Stock purchase plan........... 5 733 738
Stock performance awards...... 17 287 1,803 2,107
Amortization of unearned
compensation.................. 660 660
Cumulative translation
adjustment.................... (614) (614)
------ --------- -------- -------- ------- --------
Balance, September 30, 1995........ $2,795 $ 415,242 $ $ 53,505 $(4,747) $466,795
====== ========= ======== ========= ======== ========
</TABLE>

See Notes to Consolidated Financial Statements

F-5
<PAGE> 47

BJ SERVICES COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 9,889 $ 370 $14,561
Adjustments to reconcile net income to cash provided from
(used for) operating activities:
Cumulative effect of accounting change................ 10,400
Depreciation and amortization......................... 42,064 25,335 24,170
Net (gain) loss on disposal of assets................. (830) (346) 62
Recognition of unearned compensation.................. 2,463 524 500
Deferred income tax benefit........................... (8,861) (4,959) (4,877)
Unusual charge (noncash).............................. 3,646
Minority interest..................................... (29) 132 684
Changes in:
Receivables........................................... (1,091) (9,235) (17,550)
Accounts payable-trade................................ 7,707 8,417 6,687
Inventories........................................... (8,078) (621) (572)
Other current assets and liabilities.................. (1,170) (1,960) (16,481)
Other, net............................................ (6,326) (1,802) (7,499)
-------- ------- -------
Net cash flows provided from (used for) operating
activities............................................... 39,384 26,255 (315)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions......................................... (30,966) (39,345) (37,350)
Proceeds from disposal of assets........................... 5,393 2,588 3,982
Acquisitions of businesses, net of cash acquired........... (203,313) (2,000) (7,400)
-------- ------- -------
Net cash used for investing activities..................... (228,886) (38,757) (40,768)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock..................... 40,787
Proceeds from exercise of stock options and stock purchase
grants................................................... 1,275 980 1,130
Proceeds from (reduction of) borrowings-net................ 192,851 19,120 (689)
Principal payment on long-term notes....................... (6,000) (6,000)
-------- ------- -------
Net cash flows provided from financing activities.......... 188,126 14,100 41,228
Increase (decrease) in cash and cash equivalents........... (1,376) 1,598 145
Cash and cash equivalents at beginning of year............. 3,218 1,620 1,475
-------- ------- -------
Cash and cash equivalents at end of year................... $ 1,842 $ 3,218 $ 1,620
======== ======= =======
</TABLE>

See Notes to Consolidated Financial Statements

F-6
<PAGE> 48

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 1994 and 1993 have been reclassified in the
accompanying consolidated financial statements to conform to the current year
presentation. The amounts changed were foreign exchange gains and losses,
previously classified as other income -- net and now classified in cost of sales
and services, and goodwill amortization previously classified as other
income -- net and now classified as a separate component of operating expenses.
Net income was not affected by these changes.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Net income per share: Net income per share has been computed by dividing
net income by the weighted average number of outstanding common shares. Common
stock equivalents had no material dilutive effect on the computation of net
income per share for each year presented.

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 (a) products which
are consumed in the Company's services provided to customers, (b) spare parts
for equipment used in providing these services and (c) manufactured components
and attachments for equipment used in providing services, are stated primarily
at the lower of average cost or market.

Property: Property is stated at cost less amounts provided for permanent
impairments and includes capitalized interest of $216,000, $541,000 and $167,000
for the years ended September 30, 1995, 1994 and 1993, 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.

Goodwill: 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.
Accumulated amortization at September 30, 1995 and 1994 was $5,174,000 and
$1,880,000, respectively. The Company utilizes undiscounted cash flows of
acquired operations to evaluate any possible impairment of the related goodwill.

Impairment of long-lived assets: In March 1995, the Financial Accounting
Standards Board issued Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"),
which requires impairment losses to be recorded on 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. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. SFAS 121's methodology of accounting for
impairment and assets to be disposed of is not significantly different from the
Company's current policy, and

F-7
<PAGE> 49

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

therefore the Company does not expect the adoption of this Statement in fiscal
1997 to have a material impact on the Company's financial statements.

Investments: Investments in corporate joint ventures 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. The Company maintains no investments in equity securities which have a
readily determinable market value.

Foreign currency translation: Gains and losses resulting from the
remeasurement of assets and liabilities 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 stockholders' equity. The Company's foreign
operations primarily 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, 1995 and 1994.

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. The
accrual is based on facts known at the current time; however, changes in
Environmental Protection Agency standards, improvements in cleanup technology
and discovery of additional information concerning these exposures could affect
the estimated costs in the future. Additionally, there are other potentially
responsible parties at certain disposal facilities used by the Company or its
predecessors. The accrual reflects an estimate of the allocation of remediation
costs between the various parties. The Company expects to pay out such
environmental remediation and compliance costs over the next several years. No
amounts have been estimated for any potential recovery from the Company's
insurance policies.

3. UNUSUAL CHARGE

During 1995, the Company recorded an unusual charge of $17.2 million ($.52
per share after-tax) for costs incurred in connection with the acquisition of
The Western Company of North America ("Western"). The components of the unusual
charge are as follows:

<TABLE>
<CAPTION>
BALANCE AT
1995 1995 SEPTEMBER 30,
PROVISION EXPENDITURES 1995
--------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Facility closings.............................. $ 5,596(1) $ (5,003)(1) $ 593
Change in control costs........................ 5,381 (4,081) 1,300
Legal and other................................ 4,047 (3,570) 477
Severance costs................................ 2,176 (1,976) 200
-------- -------- -------
Total................................ $ 17,200 $(14,630) $ 2,570
======== ======== =======
</TABLE>

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

(1) Includes $3.6 million noncash impairment of facilities.

The Company and Western both operated facilities in many of the same
locations. Management has made the decision to close the duplicate facilities
previously operated by BJ Services and retain those operated by Western. A
provision was recorded to adjust the carrying value of these duplicate
facilities to estimated net

F-8
<PAGE> 50

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

realizable value and accruals were recorded for the estimated costs associated
with their closings, including maintenance of the facilities until their
ultimate sale and relocation of assets. Substantially all of the duplicate
facilities were closed as of September 30, 1995.

The consummation of the Western acquisition triggered the change in control
provision under the Company's 1990 Stock Incentive Plan. As a result, 168,547
performance units previously granted to the Company's executive officers became
fully vested and 168,547 shares of common stock were subsequently issued. The
unusual charge includes an amount for the excess of the value of the performance
units on the date of issuance over the estimated amount which otherwise was
earned had the acquisition not occurred.

The unusual charge also includes legal, severance of BJ employees and other
merger-related costs that would not have been incurred had the acquisition of
Western not occurred.

4. ACQUISITIONS OF BUSINESSES

In April 1995, the Company acquired Western for total consideration,
including transaction costs, of $511.4 million in cash, Company common stock and
warrants to purchase common stock. The transaction may be summarized as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Cash................................................... $247,880
Stock issued (12,036,393 shares)....................... 239,551
Warrants issued (4,800,037 warrants)................... 24,000
--------
Total consideration............................... 511,431
Net assets acquired.................................... 335,891(1)
--------
Goodwill............................................... $175,540
========
</TABLE>

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

(1) Includes cash acquired of $44.5 million.

This acquisition was accounted for using the purchase method of accounting.
Accordingly, the results of Western are included in the financial statements
beginning April 1, 1995. The assets and liabilities of Western have been
recorded on the Company's books at estimated fair market value on April 1, 1995
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, giving no effect
to estimated consolidation savings, of the Company for the two years ended
September 30, 1995 and 1994 as if the acquisition had occurred at the beginning
of each fiscal year:

<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenue........................................................ $807,582 $763,313
Net income (loss) from continuing operations before cumulative
effect of accounting change.................................. 2,308 (15,330)
Net income (loss).............................................. 2,308 (25,730)
Net income (loss) per share from continuing operations before
cumulative effect of accounting change....................... .08 (.55)
Net income (loss) per share.................................... .08 (.92)
</TABLE>

On February 9, 1994, the Company acquired the remaining 50% ownership of
its joint venture in Egypt, Hughes Services C.I., Ltd., for $2.0 million. Prior
to the acquisition, this joint venture was accounted for using the equity method
of accounting.

F-9
<PAGE> 51

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On April 1, 1993, the Company completed a transaction to acquire the
assets, including existing service contracts, of Norsk Bronnservice A/S, a
subsidiary of Odfjell Drilling & Consulting A/S, for $5.4 million. These
operations provide cementing, gravel packing and completion fluids services to
the Norwegian oil and gas industry.

On July 30, 1993, the Company acquired the coiled tubing operations of
Italog, S.p.A. for $2.0 million. Italog is based in Milan, Italy and provides
coiled tubing and nitrogen pumping services in Italy and Nigeria, under the name
of SIAT. The acquisition included the assets and existing contracts of SIAT.

The 1993 and 1994 acquisitions have been accounted for as purchases and
accordingly, the acquired assets and liabilities have been recorded at their
estimated fair values at the date of acquisition. The excess of the
consideration paid over the estimated fair value of net assets acquired has been
recorded as goodwill and is being amortized over periods ranging from 5 to 40
years.

5. LONG-TERM DEBT AND BANK CREDIT FACILITIES

Long-term debt at September 30, 1995 and 1994 consisted of the following:

<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes payable, banks........................................... $275,000 $ 81,900
9.2% notes due August 1998..................................... 18,000 24,000
Other.......................................................... 2,166
-------- --------
295,166 105,900
Less current maturities of long-term debt...................... 35,600 31,200
-------- --------
Long-term debt................................................. $259,566 $ 74,700
======== ========
</TABLE>

On April 15, 1995, the Company canceled its existing credit facility and
the outstanding borrowings were repaid with funds from a committed, unsecured
credit facility ("Bank Credit Facility") executed to accommodate the acquisition
of Western. The Bank Credit Facility consists of a five-year $175.0 million
revolver and a six-year $225.0 million term loan, providing an aggregate of
$400.0 million in available principal borrowings to the Company. The Company is
charged various fees in connection with this Bank Credit Facility, including a
commitment fee based on the average daily unused portion of the commitment.
Borrowings outstanding under the Bank Credit Facility at September 30, 1995
amounted to $275.0 million, which is comprised of $225.0 million under the term
loan and $50.0 million under the revolver. Interest is determined, at the
Company's option, by reference to (i) the higher of the reference rate announced
from time to time by the lender or the federal funds rate plus .5% per annum, or
(ii) the London Interbank Offered Rate ("LIBOR"). A spread over the LIBOR rate
is charged at a percentage ranging from .45% to .875% depending on the Company's
debt to capital ratio. The weighted average interest rate for such outstanding
borrowings was 6.4% and 5.4% at September 30, 1995 and 1994, respectively.

The Bank Credit Facility incorporates a swingline facility allowing the
Company to borrow up to $20.0 million for up to seven days in minimum advances
of $1.0 million. In addition, standby letters of credit are available in an
amount not to exceed $20.0 million. No such borrowings were outstanding at
September 30, 1995.

At September 30, 1995, long-term debt was due in aggregate annual
installments of $35,600,000, $37,200,000, $49,200,000, $48,400,000 and
$98,400,000 in the years ending September 30, 1996, 1997, 1998, 1999 and 2000,
respectively, and an aggregate of $26,366,000 thereafter.

Commitment fees under the Company's credit facilities were $207,206,
$16,223 and $63,679 for 1995, 1994 and 1993, respectively.

F-10
<PAGE> 52

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In addition to the committed facility, the Company had $50.0 million in
various unsecured, discretionary lines of credit at September 30, 1995 which
expire at various dates in 1996. 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, 1995, there was
$2.0 million in outstanding borrowings under these lines of credit (none at
September 30, 1994).

In August 1991, the Company placed $30.0 million of unsecured notes (the
"Notes") with private investors. The Notes bear interest at a fixed rate of 9.2%
with principal payments due in five equal annual installments, the first of
which was paid in August 1994. From October 1991 to May 1995, the Company
entered into interest rate swap agreements which effectively converted the Notes
from fixed rate debt with an interest rate of 9.2% to floating rate debt. The
swap agreement was liquidated in May 1995 at a loss of $679,000. The agreements
resulted in an average annual effective interest rate of 11.5% (excluding the
loss) and 9.3% on the Notes for 1995 and 1994, respectively.

At September 30, 1995, the Company had outstanding letters of credit and
performance related bonds totaling $16.6 million and $14.8 million,
respectively. The letters of credit are issued to guarantee various trade and
insurance activities.

The Company's debt agreements contain various customary covenants including
maintenance of certain profitability and solvency ratios and restrictions on
dividend payments, as defined in the Bank Credit Facility. At September 30,
1995, the Company's debt to capitalization ratio exceeded 35%. As a result, the
Company is prohibited, under its Bank Credit Facility from making any dividend
payments until such time as the ratio drops below 35%. The Company is also
required to make mandatory prepayments from free cash flow (as defined in the
Bank Credit Facility) subject to certain ratios as calculated at the end of each
fiscal year. At September 30, 1995, an estimate of $4 million of such
prepayments has been classified as current maturities of long-term debt.

6. FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments held by the Company:

Cash and cash equivalents, trade receivables and trade payables: The
carrying amount approximates fair value because of the short maturity of those
instruments.

Long-term debt: The fair value of the Company's Notes 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.

Interest Rate Swap Agreements: The fair value is based on the amount at
which they could be settled, based on amounts obtained from the issuer.

Disclosure of the fair value of financial instruments which differed from
their carrying value as of September 30, 1995 and 1994 was as follows:

<TABLE>
<CAPTION>
1995 1994
------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- -------
<S> <C> <C> <C> <C>
9.2% Notes..................................... $ 18,000 $19,100 $ 24,000 $26,000
Interest rate swap agreement (unrealized
loss)........................................ (1,300)
</TABLE>

See Note 2 for disclosure of accounting for foreign exchange contracts.

F-11
<PAGE> 53

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. INCOME TAXES

The geographical sources of income (loss) before income taxes, minority
interest and cumulative effect of accounting change for the three years ended
September 30, 1995, were as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
United States....................................... $(31,879) $(12,793) $(8,540)
Foreign............................................. 40,637 25,701 25,378
-------- -------- -------
Income before income taxes, minority interest and
cumulative effect of accounting change............ $ 8,758 $ 12,908 $16,838
======== ======== =======
</TABLE>

The provision (benefit) for income taxes for the three years ended
September 30, 1995 is summarized as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
United States
Foreign........................................... $ 7,759 $ 6,965 $ 6,470
-------- -------- -------
Total current............................. 7,759 6,965 6,470
Deferred:
United States..................................... (8,336) (2,831) (4,414)
Foreign........................................... (525) (2,128) (463)
-------- -------- -------
Total deferred............................ (8,861) (4,959) (4,877)
-------- -------- -------
Income tax expense (benefit)........................ $ (1,102) $ 2,006 $ 1,593
======== ======== =======
</TABLE>

The consolidated effective income tax rates (as a percent of income before
income taxes, minority interest and cumulative effect of accounting change) for
the three years ended September 30, 1995 varied from the United States statutory
income tax rate for the reasons set forth below:

<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory rate............................................ 35.0% 35.0% 35.0%
Foreign earnings at varying tax rates..................... (79.8) (17.4) (11.9)
Amortization of excess tax basis over book basis resulting
from separation from former parent...................... (20.4) (13.8) (10.6)
Changes in valuation reserve.............................. (14.5) (3.7)
Foreign income recognized domestically.................... 37.2 25.6 4.3
Goodwill amortization..................................... 10.3 1.3 .9
Nondeductible expenses.................................... 6.1 1.0 .7
Other -- net.............................................. (1.0) (1.6) (5.2)
----- ----- -----
Effective income tax rate (benefit)....................... (12.6)% 15.6% 9.5%
===== ===== =====
</TABLE>

The income tax provisions for 1994 and 1993 included $1,867,000 and
$620,000 of deferred foreign tax benefits related to the recognition of foreign
net loss carryforwards which were reserved for in the valuation account at
September 30, 1993 and September 30, 1992, respectively.

F-12
<PAGE> 54

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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
liability for financial reporting. The estimated deferred tax effect of
temporary differences and carryforwards at September 30, 1995 and 1994 was as
follows:

<TABLE>
<CAPTION>
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred assets:
Expenses accrued for financial reporting, not yet deducted
for tax................................................... $ 45,469 $ 7,956
Net operating loss carryforwards............................. 181,400 44,621
Valuation allowance.......................................... (54,420) (11,164)
-------- --------
Total deferred tax asset....................................... 172,449 41,413
Deferred liabilities:
Differences in depreciable basis of property................. (60,520) (16,838)
Income accrued for financial reporting, not yet reported for
tax....................................................... (6,166) (6,684)
-------- --------
Total deferred tax liability................................... (66,686) (23,522)
-------- --------
Deferred tax asset -- net...................................... $105,763 $ 17,891
======== ========
</TABLE>

The net change in the deferred tax asset valuation allowance reflects
purchase accounting adjustments made to properly state the anticipated future
benefit of the combined net operating loss carryforwards of BJ Services and
Western. The entire deferred tax asset valuation allowance, if realized, will be
recorded as a reduction to goodwill.

At September 30, 1995, the Company had approximately $512 million of U.S.
tax net operating loss carryforwards expiring in varying amounts between 2000
and 2010. As a result of Western having experienced changes in control as
defined in Internal Revenue Code Section 382 in prior years, and in the current
year due to the merger with BJ Services, the usage of approximately $375 million
of the tax net operating loss carryforwards is subject to an annual limitation.
The potential impact that the annual limitation may have on the usage of tax net
operating loss carryforwards has been reflected in the deferred tax asset
valuation allowance.

The Company also has foreign tax net operating loss carryovers of $6.7
million as of September 30, 1995. The foreign tax net operating loss
carryforwards are not subject to an annual limitation and will carry forward
indefinitely.

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 $147 million at September 30, 1995. If
these earnings were to be remitted to the Company, any U.S. income taxes payable
would be substantially reduced by foreign tax credits generated by the
repatriation of the earnings.

F-13
<PAGE> 55

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. GEOGRAPHIC INFORMATION

The Company operates exclusively in one business segment -- the oilfield
services industry. Summarized information concerning geographic areas in which
the Company operated at September 30, 1995, 1994 and 1993 and for each of the
years then ended is shown as follows:

<TABLE>
<CAPTION>
WESTERN HEMISPHERE
-------------------------- EASTERN HEMISPHERE
UNITED LATIN AMERICA --------------------
STATES AND CANADA EUROPE OTHER TOTAL
-------- ------------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1995:
Revenue................ $345,922 $ 111,447 $104,840 $71,451 $633,660
Operating income
(loss).............. (13,683) 22,095 4,942 6,935 20,289
Identifiable assets.... 627,545 88,655 201,838 71,645 989,683
1994:
Revenue................ $208,279 $ 75,745 $ 95,181 $55,271 $434,476
Operating income
(loss).............. (2,634) 9,590 4,560 7,169 18,685
Identifiable assets.... 127,561 72,558 156,594 53,353 410,066
1993:
Revenue................ $196,674 $ 60,560 $ 83,553 $53,576 $394,363
Operating income....... 1,694 2,477 6,217 9,350 19,738
Identifiable assets.... 117,543 54,950 150,612 46,426 369,531
</TABLE>

Export sales totaled $2,807,000, $1,392,000 and $1,861,000 for the years
ended September 30, 1995, 1994 and 1993, 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 $8,357,000, $6,847,000 and $8,390,000
for the years ended September 30, 1995, 1994 and 1993, respectively.

9. EMPLOYEE BENEFIT PLANS

The Company has 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 his 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 Western are
covered under a thrift plan which is being merged into the Company's thrift plan
effective December 31, 1995. During the period since the acquisition, the
Company intends to match employee contributions at the same rate as the
Company's existing thrift plan. The Company's contributions to these thrift
plans amounted to $2,862,000, $2,551,000 and $2,324,000 in 1995, 1994 and 1993,
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 highest
paid years during the last ten years worked. Pension benefits are fully vested
after five years of service.

Management intends to freeze benefits under this plan effective December
31, 1995 and merge all employees under the thrift plan. Management has not yet
made a decision on when to terminate the plan and therefore will fund the
amounts necessary to meet minimum funding requirements under the Employees'

F-14
<PAGE> 56

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Retirement Income Security Act, as amended. Because management intends to freeze
the plan effective December 31, 1995, the accrued pension liability as of the
acquisition date and the net pension expense since the acquisition date have
been reflected under that assumption. The funded status of this plan as of
September 30, 1995 was as follows (in thousands):

<TABLE>
<S> <C>
Vested benefit obligation........................................ $39,669
=======
Accumulated benefit obligation................................... $40,701
Plan assets at fair value........................................ 34,394
-------
Benefit obligation in excess of plan assets...................... 6,307
Unrecognized gain................................................ 71
-------
Net pension liability.................................. $ 6,378
=======
</TABLE>

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

<TABLE>
<S> <C>
Weighted average discount rate...................................... 7.3%
Weighted average rate of increase in future compensation............ 5.0%
Weighted average expected long-term rate of return on assets........ 9.0%
</TABLE>

Costs for the period from April 1, 1995 to September 30, 1995 for the
Company's U.S. defined benefit plan were as follows (in thousands):

<TABLE>
<S> <C>
Service cost for benefits earned................................. $ 586
Interest cost on projected benefit obligation.................... 1,382
Actual return on plan assets..................................... (3,267)
Net amortization and deferral.................................... 1,916
-------
Net pension cost....................................... $ 617
=======
</TABLE>

In addition, the Company sponsors defined benefit plans for foreign
operations which cover substantially all employees in the United Kingdom and
Venezuela. Due to differences in foreign pension laws and economics, the defined
benefit plans are at least partially unfunded. The funded status of these plans
at September 30, 1995 and 1994 was as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation...................................... $ 5,357 $ 4,789
======= =======
Accumulated benefit obligation................................. $ 6,474 $ 5,292
======= =======
Projected benefit obligation..................................... $ 9,846 $ 7,155
Plan assets at fair value........................................ (6,718) (5,531)
------- -------
Projected benefit obligation in excess of plan assets............ 3,128 1,624
Unrecognized gain (loss)......................................... (1,093) 248
Unrecognized transition asset, net of amortization............... 155 166
Unrecognized prior service cost.................................. (253) (281)
------- -------
Net pension liability............................................ $ 1,937 $ 1,757
======= =======
</TABLE>

F-15
<PAGE> 57

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

Combined costs for the Company's international defined benefit plans for
the two years ended September 30, 1995 were as follows (in thousands):

<TABLE>
<CAPTION>
1995 1994
------ -----
<S> <C> <C>
Net periodic foreign pension cost:
Service cost for benefits earned................................. $1,090 $ 830
Interest cost on projected benefit obligation.................... 660 497
Actual return on plan assets..................................... (617) (45)
Net amortization and deferral.................................... 158 (391)
------ -----
Net pension cost................................................... $1,291 $ 891
====== =====
</TABLE>

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.

Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions" ("SFAS 106"). In accordance with the requirements of SFAS
106, the Company changed its accounting for postretirement benefits from a cash
basis to an accrual basis over an employee's period of service. On October 1,
1993, the Company elected to immediately recognize the cumulative effect of the
change in accounting principle of $16.0 million ($10.4 million after tax, or
$.67 per share).

Effective January 1, 1994, the Company amended its postretirement medical
benefit plan to provide credits based on years of service which could be used to
purchase coverage under the active employee plans. This change effectively caps
the Company's health care inflation rate at a 4% increase per year. The
reduction of approximately $5.7 million in the accumulated postretirement
benefit obligation due to this amendment is being amortized over the average
period of future service to the date of full eligibility for such postretirement
benefits of the active employees. Postretirement medical benefit costs were
$946,000, $639,000 and $590,000 in 1995, 1994 and 1993, respectively.

Net periodic postretirement benefit costs for the two years ended September
30, 1995 included the following components (in thousands):

<TABLE>
<CAPTION>
1995 1994
------ -----
<S> <C> <C>
Service cost -- benefits attributed to service during the period... $ 807 $ 512
Interest cost on accumulated postretirement benefit obligation..... 1,033 798
Amortization of prior service costs................................ (894) (671)
------ -----
Net periodic postretirement benefit cost........................... $ 946 $ 639
====== =====
</TABLE>

F-16
<PAGE> 58

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The actuarial and recorded liabilities for these postretirement benefits
were as follows at September 30, 1995 and 1994 (in thousands):

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees....................................................... $ 7,680 $ 5,312
Fully eligible active plan participants........................ 3,525 1,569
Other active plan participants................................. 8,988 3,881
------- -------
20,193 10,762
Unrecognized cumulative net gain................................. 776
Unrecognized prior service cost.................................. 4,177 5,072
------- -------
Accrued postretirement benefit liability......................... $25,146 $15,834
======= =======
</TABLE>

The accumulated postretirement benefit obligation was determined using a
discount rate of 7% and a health care cost trend rate of 13%, decreasing ratably
to 5.2% in the year 2020 and thereafter. Increasing the assumed health care cost
trend rates by one percentage point in each year 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's 1994 plan amendment.

10. 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 is in the process of removing these tanks
and has identified certain tanks with leaks which will require remedial
cleanups. In addition, the Company is conducting a number of environmental
investigations and remedial actions at current and former company locations and,
along with other companies, has been named a potentially responsible party at 10
waste disposal sites. The Company has established an accrual of $13,986,000 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.

Lease commitments: At September 30, 1995, the Company had long-term
operating leases covering certain facilities and equipment with varying
expiration dates. Minimum annual rental commitments for the years ended
September 30, 1996, 1997, 1998, 1999 and 2000 are $16,198,000, $12,132,000,
$10,023,000, $6,866,000 and $5,674,000, respectively, and $35,732,000 in the
aggregate thereafter.

F-17
<PAGE> 59

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. SUPPLEMENTAL FINANCIAL INFORMATION

Supplemental financial information for the three years ended September 30,
1995 is as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Consolidated Statement of Operations:
Research and development expense................... $ 6,801 $ 6,421 $ 6,500
Rent expense....................................... 16,759 15,580 11,020
Net foreign exchange gain (loss)................... 1,537 (762) 228
Consolidated Statement of Cash Flows:
Income taxes paid.................................. $ 5,980 $ 6,233 $ 7,168
Interest paid...................................... 12,798 10,330 5,112
Details of acquisitions:
Fair value of assets acquired................... $447,622 $ 1,808 $ 4,483
Liabilities assumed............................. 111,731 501
Goodwill........................................ 175,540 693 2,917
Cash paid for acquisitions, net of cash
acquired...................................... 203,313 2,000 7,400
Noncash financing activity:
Common Stock and warrants issued................ $263,551
Performance shares issued....................... 3,792
</TABLE>

The Company's common stock ("Common Stock"), warrants and performance
shares were issued in connection with the Western Acquisition as described in
Notes 4 and 12.

Other income -- net for the three years ended September 30, 1995 is
summarized as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Gain (loss) on sales of assets -- net................ $ 830 $ 346 $ (62)
Gain on Argentine bonds.............................. 400 800
Royalty income....................................... 1,385
Dividend income...................................... 430
Other -- net......................................... 89 131 1,276
-------- ------- -------
Other income -- net.................................. $ 2,734 $ 877 $ 2,014
======== ======= =======
</TABLE>

12. EMPLOYEE STOCK PLANS

Stock Option Plans:

The Company's 1990 Stock Incentive Plan and 1995 Incentive Plan (the
"Plans") provide for the granting of options for the purchase of the Common
Stock and other performance-based awards to officers, key employees and
nonemployee directors of the Company. Such options vest over a three-year period
and are exercisable for periods ranging from one to ten years. An aggregate of
3,000,000 shares of Common Stock have been reserved for grants, of which
1,324,386 were available at September 30, 1995.

F-18
<PAGE> 60

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock option activity under the Company's Plans is summarized below:

<TABLE>
<CAPTION>
NUMBER OF SHARES 1995 1994 1993
----------------------------------------------------------------- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Stock options outstanding, beginning of year..................... 767 621 451
Changes during the year:
Granted (per share):
1995, $16.89 to $21.62...................................... 697
1994, $19.63 to $22.75...................................... 188
1993, $16.28................................................ 195
Exercised/surrendered (per share):
1995, $16.28 to $21.62...................................... (29)
1994, $13.63 to $23.25...................................... (42)
1993, $19.38 to $23.25...................................... (25)
----- --- ---
Stock options outstanding, end of year (per share: $12.00 to
$23.25)........................................................ 1,435 767 621
===== === ===
Stock options exercisable, end of year (per share: $12.00 to
$23.25)........................................................ 630 417 250
===== === ===
</TABLE>

Pursuant to the terms of the 1990 Stock Incentive Plan, during 1993 and
1994 the Company also issued a total of 220,316 Performance Units ("Units") to
officers of the Company. Each Unit represented the right to receive from the
Company at the end of a stipulated period an unrestricted share of Common Stock,
contingent upon achievement of certain financial performance goals over the
stipulated period. Should the Company have failed to achieve the specific
financial goals as set by the Executive Compensation Committee of the Board of
Directors, the Units would have been canceled and the related shares reverted to
the Company for reissuance under the plan. The aggregate fair market value of
the underlying shares granted under this plan was considered unearned
compensation at the time of grant and was adjusted annually based on the current
market price for the Company's Common Stock. Compensation expense was determined
based on management's current estimate of the likelihood of meeting the specific
financial goals and charged ratably over the stipulated period. In connection
with the acquisition of Western, which triggered certain change of control
provisions in the Company's 1990 Stock Incentive Plan, a total of 168,547 Units
were converted into Common Stock and issued to officers, with the remaining
51,769 Units canceled. The difference between the amount accrued as of the
acquisition date and the value of the shares issued has been reflected as an
unusual charge in the accompanying financial statements (see Note 3). As of
September 30, 1995, there were no Units outstanding.

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 Company's 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 750,000
shares has been reserved under the Purchase Plan, 576,826 of which were
available for future purchase at September 30, 1995. In October 1995, 55,440
shares were purchased at $16.68 per share.

13. STOCKHOLDERS' EQUITY

Stockholder Rights Plan:

The Company has a Stockholder 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

F-19
<PAGE> 61

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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 20% 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 Two Junior Participating
Preferred Stock, at a price of $75, subject to adjustment under certain
circumstances. Upon the occurrence of certain events specified in the
Stockholder 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 Two Junior Participating
Preferred Stock have been issued by the Company at September 30, 1995.

In January 1994, the former Stockholder Rights Plan was triggered and the
Company redeemed all of the preferred share purchase rights issued under its
Stockholder Rights agreement to acquire Series One Junior Participating
Preferred Stock. The Rights were redeemed at a price of $.01 per Right, a total
cost to the Company of $155,000.

Stock Purchase Warrants:

In connection with the acquisition of Western (see Note 4), 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. Each Warrant
represents the right to purchase one share of the Company's common stock at an
exercise price of $30, until the expiration date of April 13, 2000. As of
September 30, 1995, no Warrants had been exercised.

F-20
<PAGE> 62

BJ SERVICES COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. 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 1995:
Revenue............................ $119,415 $106,668 $199,542 $208,035 $633,660
Gross profit(a).................... 17,753 13,788 28,782 35,179 95,502
Net income (loss).................. 4,744 1,378 (5,848)(b) 9,615(c)(d) 9,889
Net income (loss) per share........ .30 .09 (.22)(b) .34(c)(d) .46
Fiscal Year 1994:
Revenue............................ $104,757 $ 98,451 $106,318 $124,950 $434,476
Gross profit(a).................... 15,071 10,325 13,327 18,138 56,861
Income before cumulative effect of
accounting change................ 3,572 445 2,067 4,686(e) 10,770
Cumulative effect of change in
accounting principle, net of tax
benefit of $5,600,000............ (10,400) (10,400)
Net income (loss).................. (6,828) 445 2,067 4,686(e) 370
Net income (loss) per share:
Before cumulative effect of
accounting change............. .23 .03 .13 .30(e) .69
Cumulative effect of change in
accounting principle, net of
tax........................... (.67) (.67)
Net income (loss) per share........ (.44) .03 .13 .30(e) .02
</TABLE>

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

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

(b) Includes $16.0 million ($10.4 million after tax or $.40 per share) unusual
charge resulting from the acquisition of Western. See Note 3.

(c) Includes $1.2 million ($.8 million after tax or $.03 per share) unusual
charge resulting from the acquisition of Western. See Note 3.

(d) Includes $1.5 million ($.05 per share) of nonrecurring tax benefits.

(e) Includes $1.3 million ($.08 per share) of nonrecurring tax benefits.

F-21
<PAGE> 63

BJ SERVICES COMPANY

CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenue......................................... $200,794 $106,668 $407,295 $226,083
Operating expenses:
Cost of sales and services.................... 167,163 90,665 334,249 190,264
Research and engineering...................... 3,858 2,215 7,602 4,278
Marketing..................................... 9,600 4,004 17,883 7,948
General and administrative.................... 8,233 6,349 16,722 12,453
Goodwill amortization......................... 1,329 289 2,671 578
-------- -------- -------- --------
Total operating expenses.............. 190,183 103,522 379,127 215,521
-------- -------- -------- --------
Operating income................................ 10,611 3,146 28,168 10,562
Interest expense................................ (5,557) (2,311) (11,095) (4,618)
Interest income................................. 247 197 326 334
Other income - net.............................. 739 682 1,339 1,518
-------- -------- -------- --------
Income before income taxes...................... 6,040 1,714 18,738 7,796
Income taxes.................................... 1,617 336 5,170 1,674
-------- -------- -------- --------
Net income...................................... $ 4,423 $ 1,378 $ 13,568 $ 6,122
======== ======== ======== ========
Net income per share:
Primary....................................... $ .15 $ .09 $ .48 $ .38
Fully diluted................................. $ .15 $ .09 $ .46 $ .38
Average shares outstanding:
Primary....................................... 28,664 15,959 28,560 15,963
Fully diluted................................. 29,281 16,087 29,241 16,087
</TABLE>

See Notes to Unaudited Consolidated Condensed Financial Statements

F-22
<PAGE> 64

BJ SERVICES COMPANY

CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
---------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 3,091 $ 1,842
Receivables -- net............................................... 168,574 168,771
Inventories:
Finished goods................................................ 57,074 50,665
Work in process............................................... 2,815 2,394
Raw materials................................................. 11,104 13,792
---------- ---------
Total inventories........................................ 70,993 66,851
Deferred income taxes............................................ 10,348 9,370
Other current assets............................................. 13,255 10,101
---------- ---------
Total current assets.......................................... 266,261 256,935
Property -- net.................................................... 414,080 416,810
Deferred income taxes.............................................. 109,564 107,889
Goodwill and other assets.......................................... 206,061 208,049
---------- ---------
$ 995,966 $ 989,683
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 87,671 $ 85,675
Short-term borrowings and current portion of long-term debt...... 20,275 37,600
Accrued employee compensation and benefits....................... 20,447 24,885
Income and other taxes........................................... 12,199 11,375
Accrued insurance................................................ 9,804 12,867
Other accrued liabilities........................................ 26,264 31,869
---------- ---------
Total current liabilities................................ 176,660 204,271
Long-term debt..................................................... 282,021 259,566
Deferred income taxes.............................................. 9,633 11,496
Accrued postretirement benefits and other.......................... 42,494 47,555
Stockholders' equity............................................... 485,158 466,795
---------- ---------
$ 995,966 $ 989,683
========== =========
</TABLE>

See Notes to Unaudited Consolidated Condensed Financial Statements

F-23
<PAGE> 65

BJ SERVICES COMPANY

CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
---------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................. $ 13,568 $ 6,122
Adjustments to reconcile net income to cash provided by operating
activities:
Amortization of unearned compensation................................ 546 660
Depreciation and amortization........................................ 29,305 13,612
Deferred income taxes (benefit)...................................... 593 (2,264)
Net gain on disposal of property..................................... (2) (692)
Changes in:
Receivables.......................................................... 3,141 5,701
Inventories.......................................................... (2,111) (4,134)
Accounts payable..................................................... 1,139 (5,696)
Other current assets and liabilities................................. (17,889) 2,351
Other, net........................................................... (9,708) 1,427
-------- --------
Net cash provided from operating activities............................ 18,582 17,087
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions..................................................... (21,795) (15,003)
Proceeds from disposal of assets....................................... 735 3,806
Acquisition of business, net of cash acquired.......................... (3,700)
-------- --------
Net cash used for investing activities................................. (24,760) (11,197)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (reduction of) borrowings -- net......................... 3,421 (4,159)
Proceeds from issuance of stock........................................ 4,006 749
-------- --------
Net cash provided from (used for) financing activities................. 7,427 (3,410)
Increase in cash and cash equivalents.................................. 1,249 2,480
Cash and cash equivalents at beginning of period....................... 1,842 3,218
-------- --------
Cash and cash equivalents at end of period............................. $ 3,091 $ 5,698
======== ========
</TABLE>

See Notes to Unaudited Consolidated Condensed Financial Statements

F-24
<PAGE> 66

BJ SERVICES COMPANY

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. GENERAL

In the opinion of management, the unaudited consolidated condensed
financial statements for BJ Services Company (the "Company") include all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of the financial position as of March 31, 1996, and the
results of operations and cash flows for each of the six-month periods ended
March 31, 1996 and 1995. The consolidated condensed statement of financial
position at September 30, 1995 is derived from the September 30, 1995 audited
consolidated financial statements. Although management believes the disclosures
in these financial statements are adequate to make the information presented not
misleading, certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The results of operations
and the cash flows for the six-month period ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.

Certain amounts for fiscal 1995 have been reclassified in the accompanying
consolidated condensed financial statements to conform to the current period
presentation.

2. EARNINGS PER SHARE

Primary earnings per share are 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.

Fully diluted earnings per share are 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 closing market price of the Company's
common stock for each of the periods presented.

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------- -------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net income.......................................... $ 4,423 $ 1,378 $13,568 $ 6,122
======= ======= ======= =======
Average primary common and common equivalent shares
outstanding:
Common stock...................................... 28,095 15,717 28,055 15,717
Common stock equivalents from assumed exercise of
stock options.................................. 569 242 505 246
------- ------- ------- -------
28,664 15,959 28,560 15,963
======= ======= ======= =======
Primary earnings per share.......................... $ .15 $ .09 $ .48 $ .38
======= ======= ======= =======
Average fully diluted common and common equivalent
shares outstanding:
Common stock...................................... 28,095 15,717 28,055 15,717
Common stock equivalents from assumed exercise of
stock options.................................. 685 370 685 370
Common stock equivalents from assumed exercise of
warrants....................................... 501 501
------- ------- ------- -------
29,281 16,087 29,241 16,087
======= ======= ======= =======
Fully diluted earnings per share.................... $ .15 $ .09 $ .46 $ .38
======= ======= ======= =======
</TABLE>

F-25
<PAGE> 67

BJ SERVICES COMPANY

NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)

3. ACQUISITION OF BUSINESS

Effective December 1, 1995, the Company acquired the remaining 60%
ownership of its previously unconsolidated joint venture in Brazil, for total
consideration of $5.4 million consisting of $3.7 million in cash and $1.7
million in debt assumed by the Company. This acquisition was accounted for as a
purchase and, accordingly, the acquired assets and liabilities have been
recorded at their estimated fair values at the date of acquisition. The
consolidated statement of operations includes operating results of the
subsidiary acquired since the date of acquisition. This acquisition is not
material to the Company's financial statements and therefore pro forma
information is not presented.

4. LONG-TERM DEBT

On February 20, 1996, BJ Services Company ("Parent") issued $125.0 million
of 7% Notes due 2006 ("Notes") as to which its direct wholly owned subsidiaries,
BJ Services Company, U.S.A., BJ Service International, Inc., and BJ Services
Company Middle East (collectively "Guarantor Subsidiaries" and individually
"Guarantor") have fully and unconditionally guaranteed, on a joint and several
basis, its obligation to pay principal and interest with respect to the Notes.
Each of the guarantees is an unsecured obligation of the Guarantor and ranks
pari passu with the guarantees provided by and the obligations of such Guarantor
Subsidiaries under the Bank Credit Facility and the obligations of such
Guarantor Subsidiaries under the Company's 9.2% Notes due August 1, 1998 and
with all existing and future unsecured indebtedness of such Guarantor for
borrowed money that is not, by its terms, expressly subordinated in right of
payment to such guarantee.

The net proceeds from the issuance of the 7% Notes ($123.3 million) were
used by the Company to repay indebtedness outstanding under the term loan
portion of the Bank Credit Facility. In connection therewith, the Bank Credit
Facility was amended to provide for a new maturity schedule for the remaining
$96.0 million term loan. At March 31, 1996, principal reductions of the term
loan are due in aggregate installments of $5,600,000, $18,800,000, $23,800,000,
$23,800,000 and $24,000,000 in the years ended September 30, 1997, 1998, 1999,
2000 and 2001, respectively.

F-26
<PAGE> 68

REPORT OF INDEPENDENT AUDITORS

To the Shareholders
Nowsco Well Service Ltd.

We have audited the consolidated balance sheets of Nowsco Well Service Ltd.
as at December 31, 1995, 1994 and 1993 and the consolidated statements of
operations, retained earnings and changes in cash position for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.

In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
1995, 1994 and 1993 and the results of its operations and the changes in its
cash position for the years then ended in accordance with generally accepted
accounting principles.

KPMG PEAT MARWICK THORNE

Chartered Accountants
Calgary, Alberta
February 8, 1996

F-27
<PAGE> 69

THE FINANCIAL STATEMENTS OF NOWSCO WELL SERVICE LTD. PRESENTED ON
PAGES F-28 THROUGH F-45 HAVE BEEN PREPARED IN ACCORDANCE WITH
ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA.

NOWSCO WELL SERVICE LTD.

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and short-term deposits............................. $ 14,807 $ 2,016 $ 30,007
Short-term investments................................... 11,784 4,997 53,534
Accounts receivable...................................... 92,104 100,856 80,463
Inventories.............................................. 21,717 26,880 17,963
Prepaid expenses......................................... 4,107 5,544 4,460
-------- -------- --------
Total current assets............................. 144,519 140,293 186,427
INVESTMENT................................................. -- -- 3,300
DUE FROM AFFILIATE......................................... 6,275 4,804 2,597
PROPERTY, PLANT AND EQUIPMENT (NOTE E)..................... 191,645 194,718 131,565
GOODWILL (NOTE F).......................................... 15,951 18,322 21,714
-------- -------- --------
TOTAL............................................ $358,390 $358,137 $345,603
======== ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities................. $ 67,034 $ 74,017 $ 53,237
Income taxes payable..................................... 2,454 2,319 1,066
Current maturities of long-term debt..................... -- 2,739 34,757
-------- -------- --------
Total current liabilities........................ 69,488 79,075 89,060
LONG-TERM DEBT (NOTE G).................................... -- -- 2,757
DEFERRED INCOME TAXES...................................... 2,358 2,445 3,121
SHAREHOLDERS' EQUITY:
Share Capital (Note H)................................... 131,955 131,603 131,240
Retained Earnings........................................ 158,154 149,241 127,444
Equity Translation Adjustment (Note I)................... (3,565) (4,227) (8,019)
-------- -------- --------
TOTAL............................................ 286,544 276,617 250,665
-------- -------- --------
$358,390 $358,137 $345,603
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-28
<PAGE> 70

NOWSCO WELL SERVICE LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
(THOUSANDS OF CANADIAN DOLLARS
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUE:
Operations............................................... $480,128 $405,577 $291,513
OPERATING COSTS AND EXPENSES:
Material and operating................................... 395,570 326,126 222,942
General and administrative............................... 22,435 20,188 18,240
Depreciation and amortization............................ 40,403 31,135 23,798
Restructuring charge (Note M)............................ 5,194 -- --
-------- -------- --------
Total operating costs and expenses............... 463,602 377,449 264,980
-------- -------- --------
OPERATING INCOME BEFORE UNDERNOTED......................... 16,526 28,128 26,533
Interest and other income................................ 2,908 4,470 7,713
Interest expense......................................... (819) (1,633) (5,280)
-------- -------- --------
INCOME BEFORE INCOME TAXES................................. 18,615 30,965 28,966
Income taxes (Note N)...................................... 2,435 1,683 2,530
-------- -------- --------
NET INCOME FOR THE YEAR.................................... $ 16,180 $ 29,282 $ 26,436
======== ======== ========
Net income per share....................................... $ 0.78 $ 1.41 $ 1.38
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-29
<PAGE> 71

NOWSCO WELL SERVICE LTD.

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Retained earnings at beginning of year..................... $149,241 $127,444 $106,382
Net income for the year.................................... 16,180 29,282 26,436
Dividends.................................................. (7,267) (7,485) (5,374)
-------- -------- --------
RETAINED EARNINGS AT END OF YEAR........................... $158,154 $149,241 $127,444
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-30
<PAGE> 72

NOWSCO WELL SERVICE LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN CASH POSITION

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
(THOUSANDS OF CANADIAN DOLLARS)
OPERATING ACTIVITIES:
Net income before discontinued operations................ $ 16,180 $ 29,282 $ 26,436
Add (deduct) items not affecting cash:
Depreciation and amortization......................... 40,403 31,135 23,798
Writedown of assets included in restructuring
charge.............................................. 2,613 -- --
Deferred income taxes (recovery)(Note N).............. (75) (1,077) 646
-------- -------- --------
FUNDS FROM CONTINUING OPERATIONS........................... 59,121 59,340 50,880
Decrease (increase) in non-cash working capital from
continuing operations (Note P)........................ 17,472 (16,627) (2,615)
-------- -------- --------
CASH FLOW FROM CONTINUING OPERATIONS....................... 76,593 42,713 48,265
Cash flow from discontinued operations..................... -- -- 2,900
-------- -------- --------
CASH FLOW FROM OPERATIONS.................................. 76,593 42,713 51,165
-------- -------- --------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment................ (45,543) (56,256) (18,565)
Proceeds from disposals of property, plant and
equipment............................................. 4,293 2,129 2,866
Advances to affiliate.................................... (1,471) (2,207) (136)
Acquisition of businesses (Note J)....................... -- (43,205) (29,075)
Cash acquired upon acquisition of businesses (Note J).... -- 9,574 --
Debt associated with acquisitions........................ -- -- 4,108
Decrease in investment................................... -- 3,300 415
Decrease (increase) in non-cash working capital related
to property, plant and equipment (Note P)............. (4,339) 7,238 1,945
-------- -------- --------
Cash (out) flow from investing activities.................. (47,060) (79,427) (38,442)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of common shares (Note H)......... 352 1,213 71,961
Reduction in long-term debt.............................. (2,739) (34,709) (13,312)
Dividends paid........................................... (7,267) (7,485) (5,374)
-------- -------- --------
Cash (out) flow from financing activities.................. (9,654) (40,981) 53,275
-------- -------- --------
INCREASE (DECREASE) IN NET CASH POSITION................... 19,879 (77,695) 65,998
Effect of exchange rate changes on cash position........... (301) 1,167 177
Net cash position, at beginning of year.................... 7,013 83,541 17,366
-------- -------- --------
Net cash position, at end of year.......................... $ 26,591 $ 7,013 $ 83,541
======== ======== ========
</TABLE>

Net cash position comprises cash, short-term deposits and short-term
investments.

See notes to consolidated financial statements.

F-31
<PAGE> 73

NOWSCO WELL SERVICE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995, 1994 AND 1993

UNLESS STATED OTHERWISE, ALL AMOUNTS ARE EXPRESSED IN CANADIAN DOLLARS.

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements are prepared on the
historical cost basis in accordance with accounting principles generally
accepted in Canada, which conform in all material respects with those in the
United States, except as disclosed in Note Q.

BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Nowsco Well Service Ltd. (the "Company") and its subsidiaries. The
Company uses the proportionate consolidation method of accounting for
investments in which it exercises joint control, and the cost method of
accounting for other long-term investments. When there has been a loss in value
of an investment that is other than temporary, the investment is written down to
recognize such loss.

TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS AND BALANCES: The
Company's foreign operations' financial statements are translated from the
foreign entity currency to Canadian dollars as follows:

Self-Sustaining Foreign Operations: All assets and liabilities are
translated at the rates prevailing at the balance sheet date. Revenues and
expenses are translated at the weighted average rates throughout the year.
Adjustments arising from translation are accumulated in the equity translation
adjustment account, a separate component of shareholders' equity.

Integrated Foreign Operations: Monetary items are translated at the rates
prevailing at the balance sheet date and non-monetary items are translated at
historic rates. Revenues and expenses are translated at weighted average rates
throughout the year (other than depreciation which is translated at the same
rates as the related fixed assets). Translation gains and losses are included in
income.

Exchange gains and losses resulting from both the translation of unhedged
foreign currency monetary items and reductions in the Company's net investment
in self-sustaining foreign operations are included in income.

SHORT-TERM INVESTMENTS: Short-term investments consisting of commercial
paper are carried at the lower of cost or market value. At December 31, 1995,
1994 and 1993, cost approximated market value.

INVENTORIES: Inventories are carried at the lower of cost, determined under
the first-in, first-out or average cost method, and net realizable value.

REVENUE RECOGNITION: The Company recognizes revenue for services and
products at the time they are provided, except for long-term contracts which are
recognized on the percentage of completion method.

PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. The net cost of assets retired or otherwise disposed of and the related
accumulated allowance for depreciation are eliminated from the accounts in the
year of disposal and the resulting gain or loss is included in income at that
time.

The provision for depreciation is computed using the straight-line method
over the estimated useful life of the assets. The weighted average estimated
useful life is 33 years for buildings, 5 years for leasehold improvements, 8
years for equipment, and 6 years for furniture and fixtures.

GOODWILL: Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight-line basis over the
expected periods to be benefited, currently 6 - 40 years. The net book value of
goodwill would be written down if the value were permanently impaired. The
Company assesses impairment by determining whether the unamortized goodwill
balance can be recovered through undiscounted future operating cashflows of the
acquired operation over its remaining life.

F-32
<PAGE> 74

NOWSCO WELL SERVICE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RESEARCH AND DEVELOPMENT: Research costs are expensed in the year in which
they are incurred. Development costs related to a specific product or process
that is proven to be technically and economically feasible would be capitalized
and amortized over the economic life of the product or process.

NET INCOME PER COMMON SHARE: Net income per common share is based on the
weighted average number of shares outstanding during the year. Fully diluted net
income per share is not presented because the dilutive effect of common shares
under option, if such options were exercised, would not be material.

NOTE B -- CHANGE IN ACCOUNTING POLICY

INVESTMENT IN JOINT VENTURES: Effective January 1, 1995, in response to a
recommendation of the Canadian Institute of Chartered Accountants, the Company
changed its method of accounting for its 49% investment in a jointly owned
Argentine company from the equity method to proportionate consolidation. The
financial statements of prior periods have been restated. There is no effect on
net income as a result of this change.

NOTE C -- FINANCIAL INSTRUMENTS

During the year ended December 31, 1995, the Company has used financial
instruments as part of its investment strategy. Specifically, the Company has
engaged in "cross currency" swaps involving the conversion of Canadian dollars
into US dollars and investing the foreign currency in US dollar interest bearing
deposit accounts. A forward contract was purchased to convert the US dollar to
Canadian dollars on a predetermined date. The Company believes there is no risk
associated with this vehicle since exchange rates and interest rates are fixed
on the date of the initial conversion. The US dollar interest bearing deposit
accounts were maintained with chartered banks in Canada. The maximum funds
invested at any time in 1995 was $13.8 million. At December 31, 1995, no such
investment vehicle was in use.

NOTE D -- INVESTMENT IN JOINT VENTURE

The Company owns a 49 percent interest in an Argentine well servicing joint
venture, a 40 percent interest in a Malaysian joint venture and a 65 percent
interest in an Indonesian joint operation. These joint ventures and operations
provide products and services similar to those offered by the Company.

These investments are not material to the Company's financial statements.

NOTE E -- PROPERTY, PLANT & EQUIPMENT

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Property, plant and equipment:
Land.......................................... $ 4,922 $ 5,811 $ 5,741
Buildings and improvements.................... 34,807 24,453 22,516
Equipment..................................... 362,090 353,168 265,604
Furniture and fixtures........................ 2,518 2,670 2,495
-------- -------- --------
Total property, plant and equipment...... 404,337 386,102 296,356
-------- -------- --------
Accumulated depreciation:
Buildings and improvements.................... 10,334 10,180 9,382
Equipment..................................... 200,541 179,379 153,587
Furniture and fixtures........................ 1,817 1,825 1,822
-------- -------- --------
Total accumulated depreciation........... 212,692 191,384 164,791
-------- -------- --------
$191,645 $194,718 $131,565
======== ======== ========
</TABLE>

F-33
<PAGE> 75

NOWSCO WELL SERVICE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE F -- GOODWILL

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Goodwill........................................... $ 33,208 $ 32,866 $ 33,556
Accumulated amortization........................... (17,257) (14,544) (11,842)
-------- -------- --------
$ 15,951 $ 18,322 $ 21,714
======== ======== ========
</TABLE>

NOTE G -- LONG-TERM DEBT

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Notes payable(1)................................... $ -- $ 2,153 $ 4,351
Capital lease obligations(2)....................... -- 586 1,372
Notes payable(3)................................... -- -- 31,791
-------- -------- --------
-- 2,739 37,514
Less current maturities............................ -- 2,739 34,757
-------- -------- --------
Long-term debt..................................... $ -- $ -- $ 2,757
======== ======== ========
</TABLE>

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

(1) As part of the purchase price of an acquisition the Company issued
non-interest bearing notes denominated in US dollars and secured by the
property and equipment acquired. Repaid in full in 1995.

(2) Payable in Canadian and US dollars with fixed interest rates ranging from
4.9% to 8.0% per annum. Repaid in full in 1995.

(3) Denominated in Australian dollars and repaid in full in April 1994. By way
of a foreign exchange swap and forward contracts, the loan was effectively
repayable in Canadian dollars and was amortized over five years at an
effective interest rate of 13.4%. Secured by a demand debenture and a
general assignment of accounts receivable and shares of certain of the
Company's subsidiaries.

Interest on long-term debt in 1995 was $13,000 (1994 -- $1,383,000;
1993 -- $5,003,000).

F-34
<PAGE> 76

NOWSCO WELL SERVICE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE H -- SHARE CAPITAL

1. AUTHORIZED -- an unlimited number of common shares without nominal or par
value.

2. ISSUED AND OUTSTANDING -- details of changes in issued share capital, for
the three year period ended December 31, 1995 are:

<TABLE>
<CAPTION>
NUMBER OF SHARES AMOUNT
---------------- -----------------
(THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Balance, December 31, 1992.......................... 16,418,266 $ 59,279
Issued upon exercise of employee stock options...... 350,800 3,522
Issued upon exercise of special warrants............ 4,000,000 68,950
Cancellation of acquired shares..................... (61,836) (511)
---------- --------
Balance, December 31, 1993.......................... 20,707,230 131,240
Issued upon exercise of employee stock options...... 117,940 1,213
Cancellation of acquired shares..................... (55,624) (850)
---------- --------
Balance, December 31, 1994.......................... 20,769,546 131,603
Issued upon exercise of employee stock options...... 37,000 352
---------- --------
BALANCE, DECEMBER 31, 1995.......................... 20,806,546 $ 131,955
========== ========
</TABLE>

3. STOCK RELATED INCENTIVE PLANS

At December 31, 1995 the Company maintained an Incentive Stock Option Plan.

Under the terms of the Incentive Stock Option Plan, options may be granted
at the discretion of the Board of Directors to full time officers and employees
of the Company. The option price equals the closing price of the Company's
shares on the day preceding the date of grant. The options are not assignable,
are vested as to 20% of the shares covered thereby for each full year of
employment over a five year period commencing on the date of grant, and expire
after the 10th anniversary of the date of grant. All options granted under the
plan become immediately vested upon a change in control, defined as the
acquisition by any purchaser of 20% or more of the common shares of the Company.

As at December 31, 1995, the Company also maintained a Stock Appreciation
Rights Plan which mirrors the terms of the Incentive Stock Option Plan, except
that upon exercise of a right the holder receives, as cash remuneration, the
positive difference between the base value of the right and the closing price of
the Company's shares on the exercise date. The plan was available to officers
and employees of the Company who reside in the United States. During 1995, the
Company has taken steps to eliminate this plan by converting Stock Appreciation
Rights to Stock Options. A total of 216,800 Stock Appreciation Rights were
converted during the period. As at December 31, 1995, 15,200 Stock Appreciation
Rights remain outstanding.

F-35
<PAGE> 77

NOWSCO WELL SERVICE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The purchase price of common shares under options outstanding as at
December 31, 1995 ranged from $9.00 to $23.50. The base value of stock
appreciation rights outstanding as at December 31, 1995 ranged from $9.00 to
$10.125. The Company has reserved 327,640 shares (1994 -- 555,200;
1993 -- 739,500) for possible future allocations under the Incentive Stock
Option Plan. The maximum number of shares available for allocation under the
stock option plan is 2,070,000.

<TABLE>
<CAPTION>
COMMON SHARES UNDER OPTION STOCK APPRECIATION RIGHTS
------------------------------------- ---------------------------------
1995 1994 1993 1995 1994 1993
--------- ------------- --------- -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of
year........................ 1,320,860 1,254,500 830,200 269,000 131,000 49,600
Granted....................... 589,300 209,100 826,500 -- 146,000 110,500
Cancelled..................... (167,800) (24,800) (51,400) (253,200) (3,000) (1,000)
Exercised..................... (37,000) (117,940) (350,800) (600) (5,000) (28,100)
--------- --------- --------- -------- ------- -------
Outstanding, end of year...... 1,705,360 1,320,860 1,254,500 15,200 269,000 131,000
========= ========= ========= ======== ======= =======
</TABLE>

4. SHAREHOLDER PROTECTION RIGHTS PLAN

Under the Company's Shareholders Protection Rights Agreement, one right has
been issued in respect of each outstanding common share. The rights are not
exercisable and will not trade separately from the common shares at any time
prior to a person or group acquiring, or announcing an intention to acquire
19.9% or more of the Company's common shares. If this event occurs, the rights
may be exercised by all holders to purchase a determined number of common shares
of the Company at a 50% discount to the then prevailing market price. The Rights
Plan was ratified by shareholders in 1995 and will expire January 4, 2000.

NOTE I -- EQUITY TRANSLATION ADJUSTMENT

The following is an analysis of the equity translation adjustment component
of shareholders' equity:

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Balance, beginning of year............................ $(4,227) $(8,019) $(9,705)
Translation of self-sustaining foreign operations..... 662 5,310 2,145
Partial repatriation of capital from self-sustaining
foreign operations.................................. -- (1,518) (459)
------- ------- -------
Balance, end of year.................................. $(3,565) $(4,227) $(8,019)
======= ======= =======
</TABLE>

NOTE J -- ACQUISITIONS

In 1994 and 1993, the Company expanded its operations in the US through the
acquisition of four businesses. On September 28, 1994, the Company acquired,
through a tender offer, the shares of Service Fracturing Company, a public
company with onshore stimulation services comparable to those offered by the
Company. On December 1, 1994 the Company acquired the shares of Pipeline
Dehydrators Inc., a private company providing pipeline services.

On June 1, 1993, the Company acquired the shares of Nitrogen Pumping and
Coiled Tubing, Inc., a private company specializing in offshore coiled tubing
applications in the Louisiana Gulf Coast region. On November 1, 1993 the Company
acquired the assets and ongoing business of Acid Engineering, Inc. and the
shares of Acid Engineering of Louisiana, Inc., private companies with onshore
stimulation services similar to those offered by the Company.

The acquisitions have been recorded using the purchase method with results
from operations included in these financial statements from the dates of
acquisition.

F-36
<PAGE> 78

NOWSCO WELL SERVICE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The net assets acquired have been recorded as follows:

<TABLE>
<CAPTION>
1994 1993
------- -------
(THOUSANDS OF
CANADIAN DOLLARS)
<S> <C> <C>
Combined net assets acquired, at assigned values:
Cash........................................................... $ 9,574 $ --
Non-cash current assets........................................ 9,272 12,183
Property, plant and equipment.................................. 29,076 19,130
------- -------
Total combined net assets.............................. 47,922 31,313
------- -------
Less:
Current liabilities............................................ 4,717 5,453
Long-term debt................................................. -- 559
------- -------
4,717 6,012
------- -------
Net assets acquired............................................ 43,205 25,301
Goodwill....................................................... -- 3,774
------- -------
$43,205 $29,075
======= =======
Combined Consideration:
Cash........................................................... $43,205 $24,967
Issuance of note payable....................................... -- 4,108
------- -------
$43,205 $29,075
======= =======
</TABLE>

NOTE K -- CONTINGENCIES AND COMMITMENTS

The Company has been named a defendant in various legal actions arising in
the normal course of business. It is the opinion of management that final
determination of these claims will not materially affect the financial position
or operating results of the Company.

Canadian Federal taxation authorities have indicated their intention to
issue Notices of Reassessment with respect to certain deductions claimed by the
Company in connection with interest rate swaps and forward exchange contracts
entered into in conjunction with the issuance of Australian denominated notes in
1989. The Company has received an opinion from special legal counsel that it
should be entitled to the deductions claimed in its tax returns. Management of
the Company is of the opinion that the Company's tax returns, as filed, are
substantially correct. Accordingly, no provision has been made in the Company's
accounts. If the Company had computed its income tax provisions for the years
1989 to 1995 on the basis of the position advanced by the tax authorities and,
after giving effect to the resulting reduction in tax loss carryforwards
available in 1995, net income in 1995 would have been reduced by a deferred tax
charge of $6.3 million. In addition, future available scientific research and
development deductions would be reduced to zero, and investment and scientific
research and development tax credits would be reduced from $9.6 million to $8.0
million.

The Company has letters of credit outstanding totalling $15,600,000
(1994 -- $16,543,000; 1993 -- $7,828,000) relating to performance under
contracts.

NOTE L -- PENSION PLANS

The Company has defined benefit or defined contribution pension plans
covering most of its employees. Benefits for defined benefit plans are based on
years of service and employees' compensation levels. The Company is obligated to
fund defined benefit plans based on requirements as determined by independent
actuaries.

F-37
<PAGE> 79

NOWSCO WELL SERVICE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFINED BENEFIT PLANS: At December 31, 1995, the actuarial present value of
projected benefit obligations for services rendered is $47,292,000
(1994 -- $46,511,000; 1993 -- $42,113,000). The average market value of pension
assets is $48,072,000 at December 31, 1995 (1994 -- $45,922,000;
1993 -- $43,990,000).

Pension plan assets are stated at average market value using a five-year
moving average and include marketable equity and corporate and government debt
securities.

NOTE M -- RESTRUCTURING CHARGE

During 1995, the Company recorded a charge against income of $5,194,000
related to a restructuring of its United States well service operations. Costs
were incurred of $980,000 related to employee severance, relocation and base
closure expenses. A further $1,278,000 was recorded as a result of the writedown
of goodwill and intangibles and $2,936,000 for the writedown of inventory and
equipment.

NOTE N -- INCOME TAXES

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Income (loss) before income taxes and discontinued
operations:
Canada.............................................. $11,798 $18,817 $14,796
Foreign............................................. 6,817 12,148 14,170
------- ------- -------
$18,615 $30,965 $28,966
======= ======= =======
Income taxes (recovery):
Current:
Canada.............................................. $ 281 $ 81 $ 387
Foreign............................................. 2,229 2,679 1,497
------- ------- -------
$ 2,510 $ 2,760 $ 1,884
======= ======= =======
Deferred:
Canada.............................................. $ -- $ -- $ --
Foreign............................................. (75) (1,077) 646
------- ------- -------
$ (75) $(1,077) $ 646
======= ======= =======
Total:
Canada.............................................. $ 281 $ 81 $ 387
Foreign............................................. 2,154 1,602 2,143
------- ------- -------
$ 2,435 $ 1,683 $ 2,530
======= ======= =======
</TABLE>

The provision for deferred income taxes results from timing differences in
the recognition of revenues and expenses for income tax and financial statement
purposes. The tax effects of these differences are as follows:

<TABLE>
<CAPTION>
1995 1994 1993
----- ------- -----
(THOUSANDS OF CANADIAN DOLLARS)

<S> <C> <C> <C>
Depreciation........................................... $(799) $(1,628) $(252)
Interest and Other..................................... 724 551 898
------ ------- -----
Provision for deferred income taxes (recovery)......... $ (75) $(1,077) $ 646
===== ======= =====
</TABLE>

F-38
<PAGE> 80

NOWSCO WELL SERVICE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's consolidated income tax provision is based upon the tax rates
and allowances applicable to each of the various tax jurisdictions under which
the Company operates. As a result, the consolidated tax position differs from
that expected by applying the combined Canadian federal and provincial income
tax rate to consolidated income before income taxes and discontinued operations
for the following reasons:

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Expected combined Canadian federal and provincial
tax................................................. $ 8,247 $13,651 $12,783
Differences in foreign statutory tax rates............ (4,462) (2,332) (5,046)
Manufacturing and processing deduction................ (169) (1,925) (456)
Net impact of current and prior year losses........... (1,783) (7,831) (5,957)
Capital and other indirect taxes...................... 760 459 1,370
Other differences..................................... (158) (339) (164)
------- ------- -------
Consolidated income tax provision..................... $ 2,435 $ 1,683 $ 2,530
======= ======= =======
</TABLE>

As at December 31, 1995, the Company and its subsidiaries have unrecorded
income tax benefits resulting from income tax losses and scientific research and
development expenditures of $88.1 million (Canada -- $30.0 million;
Foreign -- $58.1 million).

Canadian amounts represent scientific research and development deductions
which have an unlimited carryforward period. Foreign amounts are comprised
mainly of losses which expire in varying amounts between 1998 and 2010.
Recognition has been given in the financial statements to $28.0 million of these
amounts (Canada -- $15.4 million; Foreign -- $12.6 million).

In addition, the Company has investment and scientific research and
development tax credits in Canada of $9.6 million which are available to reduce
future federal income taxes payable. The tax credits expire in varying amounts
between 1999 and 2005.

Please refer also to Note K -- Contingencies and Commitments.

NOTE O -- GEOGRAPHIC INFORMATION

The Company has identified one industry segment which provides skilled
people, specialized technology, products and equipment to the oil and gas
industry and to the pipeline, mining and industrial sectors throughout the
world.

The Company has identified Canada, United States and International as
geographic segments. International includes operations in the United Kingdom,
Europe, Africa, Middle East, Asia Pacific, Russia and Argentina.

F-39
<PAGE> 81

NOWSCO WELL SERVICE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The revenue, operating income (loss), funds from operations and
identifiable assets by geographic region are as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
REVENUE:
Canada........................................... $151,349 $160,703 $125,057
United States.................................... 141,660 112,241 45,826
International.................................... 187,119 132,633 120,630
-------- -------- --------
$480,128 $405,577 $291,513
======== ======== ========
OPERATING INCOME (LOSS):
Canada........................................... $ 13,701 $ 26,246 $ 16,748
United States.................................... (10,065)(1) (206) 1,107
International.................................... 12,890 2,088 8,678
-------- -------- --------
$ 16,526 $ 28,128 $ 26,533
======== ======== ========
FUNDS FROM OPERATIONS BEFORE ALLOCATION OF INDIRECT
COSTS(2):
Canada........................................... $ 28,131 $ 38,731 $ 30,002
United States.................................... 12,000 13,247 6,193
International.................................... 31,680 20,453 25,624
-------- -------- --------
$ 71,811 $ 72,431 $ 61,819
======== ======== ========
IDENTIFIABLE ASSETS:
Canada........................................... $ 99,743 $114,327 $ 76,832
United States.................................... 99,360 113,965 64,251
International.................................... 132,696 122,832 117,191
-------- -------- --------
$331,799 $351,124 $258,274
======== ======== ========
Cash and equivalents............................... 26,591 7,013 87,329
-------- -------- --------
$358,390 $358,137 $345,603
======== ======== ========
</TABLE>

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

(1) Includes restructuring charge of $5.2 million.

(2) Funds from operations exclude non-cash items, interest, other income and
indirect corporate and research and development expenditures.

F-40
<PAGE> 82

NOWSCO WELL SERVICE LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE P -- NON-CASH WORKING CAPITAL

The decrease (increase) in non-cash working capital comprises the
following:

<TABLE>
<CAPTION>
1995 1994 1993
------- -------- --------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Accounts receivable................................. $ 8,752 $(11,112) $(12,482)
Inventories......................................... 5,163 (8,917) 1,243
Prepaid expenses.................................... 1,437 (1,084) (1,538)
Accounts payable and accrued liabilities............ (2,509) 10,282 10,563
Effects of exchange rate changes.................... 4,629 (5,796) (401)
------- -------- --------
Decrease (increase) in non-cash working capital .... 17,472 (16,627) (2,615)
Decrease (increase) in non-cash working capital
related to property, plant and equipment.......... (4,339) 7,238 1,945
------- -------- --------
$13,133 $ (9,389) $ (670)
======= ======== ========
</TABLE>

NOTE Q -- UNITED STATES ACCOUNTING PRINCIPLES

The consolidated financial statements, prepared in accordance with Canadian
generally accepted accounting principles (GAAP), conform with those generally
accepted in the United States, except:

EQUITY TRANSLATION ADJUSTMENT: During 1994, the Company released $1,518,000
(1993 -- $459,000) of the equity translation adjustment balance into interest
and other income on partial repatriation of capital from foreign operations.
Under United States GAAP, adjustments to the equity translation account are made
only where there is a disposition of ownership to a third party.

RECOGNITION OF DEFERRED TAX ASSETS: Under United States GAAP, deferred tax
assets and liabilities are recognized and measured based on the likelihood of
realization of a tax benefit in future years from the utilization of operating
loss and tax credit carryforwards and temporary differences. Applying these
provisions to the Company's loss and tax credit carryforwards and temporary
differences would result in recognition of a deferred tax asset and an increase
in retained earnings of $3,000,000.

RETAINED EARNINGS: If the consolidated financial statements were prepared
in accordance with United States GAAP, retained earnings would be as follows:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C>
Retained earnings per Canadian GAAP................ $158,154 $149,241 $127,444
Add (deduct):
Equity translation adjustment.................... (2,956) (2,956) (1,438)
Deferred taxes................................... 3,000 -- --
-------- -------- --------
Retained earnings per United States GAAP........... $158,198 $146,285 $126,006
======== ======== ========
</TABLE>

F-41
<PAGE> 83

NOWSCO WELL SERVICE LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenue
Operations........................................................ $ 126,552 $ 120,287
Operating costs and expenses
Material and operating............................................ 101,139 99,285
General and administrative........................................ 5,325 5,711
Depreciation and amortization..................................... 9,884 9,783
---------- ----------
116,348 114,779
---------- ----------
Operating income before undernoted.................................. 10,204 5,508
Interest and other income......................................... 718 159
Interest expense.................................................. (30) (127)
---------- ----------
Income before income taxes.......................................... 10,892 5,540
Income taxes...................................................... 786 888
---------- ----------
Net income.......................................................... $ 10,106 $ 4,652
========== ==========
Number of shares outstanding at end of period....................... 20,828,796 20,770,146
========== ==========
Net income per share $ 0.49 $ 0.22
========== ==========
</TABLE>

See notes to condensed consolidated financial statements.

F-42
<PAGE> 84

NOWSCO WELL SERVICE LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1996 1995 1995
--------- ------------ ---------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents....................................... $ 29,708 $ 26,591 $ --
Accounts receivable and other.............................. 104,012 96,211 119,894
Inventories................................................ 24,659 21,717 25,571
--------- -------- ---------
158,379 144,519 145,465
Due from affiliate........................................... 6,193 6,275 --
Property, plant and equipment -- net......................... 187,952 191,645 205,398
Goodwill -- net.............................................. 15,767 15,951 17,735
--------- -------- ---------
$ 368,291 $358,390 $ 368,598
========= ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank indebtedness.......................................... $ -- $ -- $ 3,542
Accounts payable and other................................. 72,485 69,488 76,833
Current maturities of long-term debt....................... -- -- 2,656
--------- -------- ---------
72,485 69,488 83,031
Deferred income taxes........................................ 2,383 2,358 2,491
Shareholders' equity
Share capital.............................................. 132,181 131,955 131,609
Retained earnings.......................................... 168,260 158,154 153,893
Equity translation adjustment.............................. (7,018) (3,565) (2,426)
--------- -------- ---------
293,423 286,544 283,076
--------- -------- ---------
$ 368,291 $358,390 $ 368,598
========= ======== =========
</TABLE>

See notes to condensed consolidated financial statements.

F-43
<PAGE> 85

NOWSCO WELL SERVICE LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CASH POSITION
(UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Operating activities:
Net income from operations........................................... $ 10,106 $ 4,652
Add item not affecting cash:
Depreciation and amortization..................................... 9,884 9,783
-------- --------
Funds from operations.................................................. 19,990 14,435
(Increase) in non-cash working capital............................... (10,983) (11,234)
-------- --------
Cash flow from operations.............................................. 9,007 3,201
Investing activities:
Purchase of property, plant and equipment -- net..................... (6,137) (13,913)
Due from affiliate................................................... 82 --
-------- --------
Cash (out) flow resulting from investing activities.................... (6,055) (13,913)
-------- --------
Financing activities:
Proceeds from issuance of common shares.............................. 226 6
Reduction in long-term debt.......................................... -- (86)
-------- --------
Cash (out) flow resulting from financing activities.................. 226 (80)
-------- --------
Increase (decrease) in net cash position............................... 3,178 (10,792)
Effect of exchange rate changes on cash position....................... (61) 237
Net cash position at beginning of year................................. 26,591 7,013
-------- --------
Net cash position* at end of period.................................... $ 29,708 $ (3,542)
======== ========
</TABLE>

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

* Net cash position comprises cash, short term deposits, and short term
investments less bank indebtedness.

See notes to condensed consolidated financial statements.

F-44
<PAGE> 86

NOWSCO WELL SERVICE LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated financial statements, expressed in Canadian
dollars, are unaudited, but in the opinion of the Company, all normal recurring
adjustments considered necessary for a fair presentation of the consolidated
results of the operations for the interim period have been made.

Net income per common share was computed by dividing net income by the
weighted average number of shares outstanding during the period.

Certain comparative information has been reclassified to conform with
current period's presentation.

FINANCIAL INFORMATION REGARDING GEOGRAPHIC SEGMENTS
(UNAUDITED)
(THOUSANDS OF CANADIAN DOLLARS)

THREE MONTHS ENDED MARCH 31:

<TABLE>
<CAPTION>
OPERATING INCOME FUNDS FROM
REVENUE (LOSS) OPERATIONS(1)
------------------- ----------------- -----------------
1996 1995 1996 1995 1996 1995
-------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Canada................................. $ 52,152 $ 50,206 $ 8,636 $ 7,401 $12,965 $10,976
United States.......................... 34,161 33,546 (371) (542) 4,005 4,023
International.......................... 40,239 36,535 1,939 (1,351) 6,357 3,154
-------- -------- ------- ------- ------- -------
Total........................ $126,552 $120,287 $10,204 $ 5,508 $23,327 $18,153
======== ======== ======= ======= ======= =======
</TABLE>

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

(1) Funds from operations exclude indirect corporate costs and research and
development expenditures.

F-45
<PAGE> 87

PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The following pro forma financial statements are based on the historical
financial information of BJ Services, Nowsco and Western giving effect to the
Nowsco Acquisition and the Western Acquisition under the purchase method of
accounting, the issuance of 8.5 million shares of Common Stock in the Offering
made hereby, the application of the net proceeds therefrom and the other
adjustments described in the accompanying Notes to Pro Forma Financial
Statements. For purposes of the pro forma financial statements, Nowsco's
statement of operations has been translated from Canadian dollars into U.S.
dollars using the average exchange rates prevailing during the respective
periods, and Nowsco's statement of financial position has been translated using
the exchange rate as of March 31, 1996. The exchange rates used to translate
Nowsco's financial information from Canadian dollars to U.S. dollars are as
follows:

<TABLE>
<S> <C>
March 31, 1996............................................................ U.S.$.74
Six months ended March 31, 1996........................................... .73
Twelve months ended September 30, 1995.................................... .72
</TABLE>

The pro forma financial statements are derived from the historical
consolidated financial statements of BJ Services, Nowsco and Western for the
indicated periods which, in the case of the statements of operations of Nowsco,
differ from the period used for presentation of Nowsco's financial statements.
The historical financial information with respect to Nowsco has been taken from
or based upon Nowsco's annual report on Form 20-F for the fiscal year ended
December 31, 1995, and its quarterly reports to shareholders for the fiscal
quarters ended December 31, 1994, September 30, 1995 and March 31, 1996. In the
case of Nowsco, the statement of operations for the twelve months ended
September 30, 1995 was derived by combining the last three months of its fiscal
year ended December 31, 1994 with the first nine months of its fiscal 1995 and
the statement of operations for the six months ended March 31, 1996 was derived
by combining the last three months of its fiscal year ended December 31, 1995
with the first three months of its fiscal year ended December 31, 1996. The pro
forma statement of financial position was prepared as if the Nowsco Acquisition
had occurred on March 31, 1996. The pro forma statements of operations were
prepared as if the Nowsco Acquisition had occurred as of October 1, 1994 and do
not include any estimate for loss of revenue from overlapping locations, any
consolidation savings or the effect of any modifications in operations that
might have occurred had BJ Services owned and operated the businesses during the
periods presented except as described in the Notes to the Pro Forma Financial
Statements. In the case of Western, pro forma adjustments were made to the pro
forma statement of operations for the twelve months ended September 30, 1995 to
reflect the pro forma results of the Western Acquisition during the first six
months of fiscal 1995 assuming the Western Acquisition occurred on October 1,
1994. The adjustments were derived from Western's historical financial
statements and from pro forma financial information filed in conjunction with
the Western Acquisition on Form 8-K/A dated May 23, 1996. Actual results of
Western's operations were included with BJ Services' results beginning April 1,
1995.

The pro forma financial statements should be read in conjunction with the
Notes to Pro Forma Financial Statements and with the Consolidated Financial
Statements of BJ Services and Nowsco and the related notes thereto included
elsewhere in this Prospectus. The pro forma financial statements have been
prepared based upon assumptions deemed appropriate by management of BJ Services.
This information is prepared for informational purposes only and is not
necessarily indicative of the actual results that would have been achieved had
the Nowsco Acquisition and related financing occurred on these dates, or of
future results. Actual results of Nowsco's operations will be included with BJ
Services' results only from the date on which the Nowsco Acquisition is
consummated.

F-46
<PAGE> 88

PRO FORMA STATEMENT OF FINANCIAL POSITION (UNAUDITED)
MARCH 31, 1996

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------- ---------------------------
BJ SERVICES NOWSCO ADJUSTMENTS COMBINED
----------- -------- ----------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents..................... $ 3,091 $ 21,984 $ (17,804)(2) $
(4,180)(3) 3,091
Receivables -- net............................ 168,574 76,969 245,543
Inventories................................... 70,993 18,248 89,241
Deferred income taxes and other............... 23,603 23,603
--------- -------- --------- ----------
Total current assets.................. 266,261 117,201 (21,984) 361,478
Property -- net................................. 414,080 139,084 553,164
Deferred income taxes........................... 109,564 10,000(1) 119,564
Goodwill and other assets....................... 206,061 16,250 396,984(1) 619,295
--------- -------- --------- ----------
$ 995,966 $272,535 $ 385,000 $1,653,501
========= ======== ========= ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 87,671 $ 53,639 $ $ 141,310
Short-term borrowings and current portion of
long-term debt............................. 20,275 20,275
Accrued liabilities........................... 68,714 25,000(1)
5,000(9) 98,714
--------- -------- --------- ----------
Total current liabilities............. 176,660 53,639 30,000 260,299
Long-term debt.................................. 282,021 298,548(3) 580,569
Other long-term liabilities..................... 52,127 1,763 53,890
Stockholders' equity............................ 485,158 217,133 (17,804)(2)
(199,329)(1)
278,585(3)
(5,000)(9) 758,743
--------- -------- --------- ----------
$ 995,966 $272,535 $ 385,000 $1,653,501
========= ======== ========= ==========
</TABLE>

See Notes to Pro Forma Financial Statements

F-47
<PAGE> 89

PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED MARCH 31, 1996

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------- -------------------------
NOWSCO
BJ SERVICES NOWSCO ADJUSTMENTS COMBINED
----------- -------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenue.......................................... $ 407,295 $182,183 $ $589,478
Operating Expenses:
Cost of sales and services..................... 359,734 164,731 524,465
General and administrative..................... 16,722 7,998 24,720
Goodwill amortization.......................... 2,671 4,962(4) 7,633
Unusual charge................................. 3,349 3,349
---------- -------- ----------- --------
Total operating expenses.................. 379,127 176,078 4,962 560,167
---------- -------- ----------- --------
Operating income................................. 28,168 6,105 (4,962) 29,311
Interest expense................................. (11,095) (60) (9,600)(5) (20,755)
Interest and other income........................ 1,665 853 2,518
---------- -------- ----------- --------
Income before income taxes....................... 18,738 6,898 (14,562) 11,074
Income tax expense............................... 5,170 341 (1,287)(6) 4,224
---------- -------- ----------- --------
Net income....................................... $ 13,568 $ 6,557 $ (13,275) $ 6,850
========= ======== ========= ========
Weighted average shares outstanding.............. 28,560 8,500(3) 37,060
========= ========= ========
Net income per share............................. $ .48 $ .18
========= ========
</TABLE>

See Notes to Pro Forma Financial Statements

F-48
<PAGE> 90

PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
TWELVE MONTHS ENDED SEPTEMBER 30, 1995

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ------------------------------------------
---------------------- WESTERN NOWSCO
BJ SERVICES NOWSCO ADJUSTMENTS ADJUSTMENTS COMBINED
----------- -------- ----------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenue............................. $ 633,660 $339,269 $ 173,922(7) $ $1,146,851
Operating Expenses:
Cost of sales and services........ 564,587 306,849 169,097(7) 1,040,533
General and administrative........ 28,318 16,133 5,033(7) 49,484
Goodwill amortization............. 3,266 2,157(7) 9,925(4) 15,348
Unusual charge.................... 17,200 481 (17,200)(8) 481
--------- -------- -------- -------- ----------
Total operating expenses..... 613,371 323,463 159,087 9,925 1,105,846
--------- -------- -------- -------- ----------
Operating income.................... 20,289 15,806 14,835 (9,925) 41,005
Interest expense.................... (15,164) (640) (8,499)(7) (20,500)(5) (44,803)
Interest and other income........... 3,662 3,089 362(7) 7,113
--------- -------- -------- -------- ----------
Income before income taxes.......... 8,787 18,255 6,698 (30,425) 3,315
Income tax expense (benefit)........ (1,102) 2,007 3,099(6) (2,793)(6) 1,211
--------- -------- -------- -------- ----------
Net income.......................... $ 9,889 $ 16,248 3,599 $ (27,632) $ 2,104
========= ======== ======== ======== ==========
Weighted average shares
outstanding....................... 21,376 6,550(7) 8,500(3) 36,426
========= ======== ======== ==========
Net income per share................ $ .46 $ .06
========= ==========
</TABLE>

See Notes to Pro Forma Financial Statements

F-49
<PAGE> 91

NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(1) The pro forma financial statements reflect the purchase of 100% of the
outstanding shares of Nowsco common stock at a price of Cdn $35.00, or
$25.55 per share. In accordance with purchase accounting, the assets and
liabilities of Nowsco will be recorded on BJ Services' books at estimated
fair market value with the remaining purchase price reflected as goodwill.
Valuation and other studies which will be used to determine the fair market
value of Nowsco's assets and liabilities are not yet available.
Accordingly, for purposes of these pro forma financial statements, the
allocation of the purchase price has been made based on the historical book
value of Nowsco. Such allocation of the purchase price is, therefore,
preliminary and the final allocation may be substantially different.

The following reflects management's estimates of the necessary adjustments
to Nowsco's historical statement of financial position:

<TABLE>
<S> <C>
BJ Services Consideration Paid:
Cash to Nowsco stockholders..................................... $574,313
Transaction costs............................................... 7,000
--------
Total consideration............................................. 581,313
Less: Nowsco's stockholders' equity............................... 199,329(a)
--------
Net adjustment.................................................. $381,984
========
Allocation of Adjustment:
Deferred tax asset.............................................. $ 10,000
Accrual for severance, facility closings and other nonrecurring
costs associated with the acquisition........................ (25,000)
Goodwill........................................................ 396,984
--------
$381,984
========
</TABLE>

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

(a) Reflects material cash transactions of $(17,804) directly related and
prior to the Nowsco Acquisition. See Note 2.

(2) Reflects material cash transactions directly related and prior to the
Nowsco Acquisition as follows:

<TABLE>
<S> <C>
Exercise of stock options......................................... $ 17,996
Payment of Great Lakes termination and breakup fees............... (22,300)
Payment of Nowsco advisory fees................................... (13,500)
--------
$(17,804)
========
</TABLE>

(3) Assumes approximately one-half of the acquisition price is financed through
the issuance of 8,500,000 shares of Common Stock at a net price of $33.00
per share, and after using the available cash from Nowsco, the Company uses
the New Bank Credit Facility to retire its borrowings under its previously
existing bank credit facility and to finance the remaining portion of the
cash consideration.

The financing of the total consideration is summarized as follows:

<TABLE>
<S> <C>
Cash from New Bank Credit Facility................................ $298,548
Cash and short-term investments................................... 4,180
Net proceeds from the Offering.................................... 278,585
--------
$581,313
========
</TABLE>

(4) Reflects amortization of the increase to goodwill over a 40-year period.

(5) Reflects interest expense on the borrowings to finance the Nowsco
Acquisition at an average assumed rate of 6.8% for the fiscal year and 6.3%
for the six-month period. The effect of each .125% change in the assumed
rate would change interest expense by $726 per annum.

F-50
<PAGE> 92

NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

(6) Adjustment to reflect a 35% assumed tax rate for the acquired operations
and the tax effect of the pro forma adjustments, with the exception of
goodwill amortization.

(7) Adjustments to reflect the pro forma results of the Western Acquisition for
the first six months of the fiscal year, assuming that the Western
Acquisition occurred on October 1, 1994.

(8) Adjustments to eliminate the following nonrecurring charges incurred by BJ
Services following and directly related to the Western Acquisition:

<TABLE>
<S> <C>
Facility closings.................................................. $ 5,596
Change in control costs............................................ 5,381
Legal and other.................................................... 4,047
Severance costs.................................................... 2,176
-------
Total.................................................... $17,200
=======
</TABLE>

(9) The pro forma statement of operations has not been adjusted for the
following nonrecurring charges which are estimated and are expected to be
incurred by BJ Services within the 12-month period following the Nowsco
Acquisition.

<TABLE>
<S> <C>
Writeoff of unamortized bank fees.................................. $2,000
Legal, accounting and other........................................ 3,000
------
$5,000
======
</TABLE>

These items have been reflected in the pro forma statement of financial
position as an addition to accrued liabilities and a reduction to
stockholders' equity.

F-51
<PAGE> 93

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

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Recent Developments................... 8
Capitalization........................ 10
Price Range of Common Stock and
Warrants and Dividend Policy........ 12
Use of Proceeds....................... 13
Exchange Rates........................ 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 21
Management............................ 34
Description of Capital Stock.......... 36
Underwriting.......................... 38
Legal Matters......................... 39
Experts............................... 39
Incorporation of Certain Documents by
Reference........................... 39
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
8,500,000 SHARES

[BJ SERVICES COMPANY LOGO]

BJ SERVICES COMPANY

COMMON STOCK
---------------------------

PROSPECTUS
---------------------------
MERRILL LYNCH & CO.

CS FIRST BOSTON

RAUSCHER PIERCE REFSNES, INC.

, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 94

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Set forth below are the expenses (other than underwriting discounts and
commissions) expected to be incurred in connection with the issuance and
distribution of the securities registered hereby. With the exception of the
Securities and Exchange Commission filing fees, the amounts set forth below are
estimates.

<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee..................................... $110,188
New York Stock Exchange Listing Fee............................................... 34,213
Printing and Engraving Expenses................................................... 100,000
Accountants' Fees and Expenses.................................................... 100,000
Legal Fees and Expenses........................................................... 100,000
Blue Sky Fees and Expenses........................................................ 10,000
Transfer Agent Fees and Expenses.................................................. 5,000
Miscellaneous Expenses............................................................ 40,599
--------
Total................................................................... $500,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

BJ Services Company (the "Company") is governed by Section 145 of the
Delaware General Corporation Law (the "DGCL") which permits a corporation to
indemnify certain persons, including officers and directors, who are (or are
threatened to be made) parties to any threatened, pending or completed action or
suit (other than an action by or in the right of the corporation) by reason of
their being directors, officers or other agents of the corporation.

The Company's Certificate of Incorporation provides that no director of the
Company shall be held personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) under Section
174 of the DGCL or (iv) for any transaction from which the director derived an
improper personal benefit. The Company's Certificate of Incorporation also
provides that if the DGCL is amended to authorize further limitation or
elimination of the personal liability of directors, then the liability of the
Company's directors shall be limited or eliminated to the full extent permitted
by the DGCL.

Section 16 of Article III of the Company's Bylaws provides as follows: (a)
the Company shall indemnify every person who is or was a party or is or was
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director, officer, employee or agent of the Company or any of its direct
or indirect wholly owned subsidiaries or, while a director, officer, employee or
agent of the Company or any of its direct or indirect wholly owned subsidiaries,
is or was serving at the request of the Company or any of its direct or indirect
wholly owned subsidiaries, as a director, officer, employee, agent or trustee of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including counsel fees), judgments, fines,
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, to the full extent permitted by
applicable laws provided that the Company shall not be obligated to indemnify
any such person against any such action, suit or proceeding which is brought by
such person against the Company or any of its direct or indirect wholly owned
subsidiaries or the directors of the Company or any of its direct or indirect
wholly owned subsidiaries, other than an action brought by such person to
enforce his rights to indemnification hereunder, unless a majority of the Board
of Directors of the Company shall have previously approved the bringing of such
action, suit or proceeding. The Company shall indemnify every person who is or
was a party or is or was threatened to be made a party to any action, suit, or
proceeding,

II-1
<PAGE> 95

whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was licensed to practice law and an employee (including an
employee who is or was an officer) of the Company or any of its direct or
indirect wholly owned subsidiaries and, while acting in the course of such
employment committed or is alleged to have committed any negligent acts, errors
or omissions in rendering professional legal services at the request of the
Company or pursuant to his employment (including, without limitation, rendering
written or oral legal opinions to third parties) against expenses (including
counsel fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
to the full extent permitted by applicable law; provided that the Company shall
not be obligated to indemnify any such person against any action, suit or
proceeding arising out of any adjudicated criminal, dishonest or fraudulent
acts, errors or omissions of such person or any adjudicated willful, intentional
or malicious acts, errors or omissions of such person.

(b) Expenses incurred by an officer or director of the Company or any of
its direct or indirect wholly owned subsidiaries in defending a civil or
criminal action, suit or proceeding shall be paid by the Company in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Company as authorized in this Section 16. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the Board of Directors deems appropriate.

(c) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section 16 shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any provision of law, the Company's Certificate of Incorporation,
the Certificate of Incorporation or Bylaws or other governing documents of any
direct or indirect wholly owned subsidiary of the Company, or any agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding any
of the positions or having any of the relationships referred to in this Section
16.

ITEM 16. EXHIBITS

(a) The following is a complete list of Exhibits filed as part of this
Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- -----------------------
<S> <C> <C>
*1.1 -- Form of Underwriting Agreement.
4.1 -- Certificate of Incorporation of the Registrant, as amended (filed as Exhibit 3.1 to
Form 8-K filed April 18, 1995, and incorporated herein by reference).
4.2 -- Certificate of Designation of Series Two Junior Participating Preferred Stock
(filed as Exhibit 3.1 to Registration Statement on Form 8-A dated January 12, 1994
and incorporated herein by reference).
4.3 -- Bylaws of the Registrant, as amended (filed as Exhibit 3.1 to Form 10-Q for the
quarter ended December 31, 1995 and incorporated herein by reference).
4.4 -- Specimen form of certificate for the Common Stock (filed as Exhibit 4.1 to
Registration Statement on Form S-1 (Reg. No. 33-35187) and incorporated herein by
reference).
4.5 -- Stockholder Rights Agreement dated as of January 12, 1994, between the Company and
First Chicago Trust Company of New York, as Rights Agent (filed as Exhibit 3.1 to
Registration Statement on Form 8-A dated January 12, 1994 and incorporated herein
by reference).
4.6 -- First Amendment to Stockholder Rights Agreement dated as of June 22, 1994 (filed as
Exhibit 2 to Registration Statement on Form 8-A/A dated August 26, 1994 and
incorporated herein by reference).
4.7 -- Second Amendment to Stockholder Rights Agreement dated as of September 22, 1994
(filed as Exhibit 3 to Registration Statement on Form 8-A/A dated September 30,
1994 and incorporated herein by reference).
</TABLE>

II-2
<PAGE> 96

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- -----------------------------------------------------------------------------------
<S> <C> <C>
4.8 -- Warrant Agreement between BJ Services Company and First Chicago Trust Company of
New York, including form of warrant certificate (filed as Exhibit 4.6 to Form 10-K
for the year ended September 30, 1995, and incorporated herein by reference).
4.9 -- Indenture between The Western Company of North America ("Western") and United
States Trust Company of New York, Trustee, dated as of November 15, 1992 (the "Note
Indenture"), which includes the form of 12 7/8% Senior Note due 2002 as Exhibit
thereto (filed as Exhibit to Registration Statement of Western on Form S-2 (Reg.
No. 33-51852) and incorporated herein by reference).
4.10 -- First Supplemental Indenture, dated March 2, 1994, to the Note Indenture between
The Western Company of North America and United States Trust Company of New York,
Trustee (filed as Exhibit to Form 10-K of Western for the year ended December 31,
1993, and incorporated herein by reference).
4.11 -- Second Supplemental Indenture to the Note Indenture, dated as of April 13, 1995,
between The Western Company of North America, BJ Services Company and United States
Trust Company of New York, Trustee (filed as Exhibit 10.5 to Post-Effective
Amendment No. 1 to Registration Statement on Form S-4 (Reg. No. 33-58017), and
incorporated herein by reference).
4.12 -- 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%
Series A Notes due 2006 as Exhibit thereto (filed as Exhibit 4.1 to Registration
Statement on Form S-4 (Reg. No. 333-02287), and incorporated herein by reference).
*5.1 -- Opinion of Andrews & Kurth L.L.P. as to the legality of the securities being
registered.
*23.1 -- Consent of Deloitte & Touche LLP.
*23.2 -- Consent of Price Waterhouse LLP.
*23.3 -- Consent of KPMG Peat Marwick Thorne.
*23.4 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1).
24.1 -- Powers of Attorney (included in Part II of the Registration Statement).
</TABLE>

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

* Filed herewith.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 97

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-4
<PAGE> 98

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 28th day of June, 1996.

BJ SERVICES COMPANY

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

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- ---------------
<S> <C> <C>
/s/ J. W. STEWART Chairman of the Board, President June 28, 1996
- --------------------------------------------- and Chief Executive Officer;
J. W. Stewart Director (Principal Executive
Officer)

/s/ MICHAEL MCSHANE* Vice President -- Finance and June 28, 1996
- --------------------------------------------- Chief Financial Officer;
Michael McShane Director (Principal Financial
Officer)

/s/ MATTHEW D. FITZGERALD* Controller (Principal Accounting June 28, 1996
- --------------------------------------------- Officer)
Matthew D. Fitzgerald

/s/ L. WILLIAM HEILIGBRODT* Director June 28, 1996
- ---------------------------------------------
L. William Heiligbrodt

/s/ JOHN R. HUFF* Director June 28, 1996
- ---------------------------------------------
John R. Huff

Director
- ---------------------------------------------
Don D. Jordan

/s/ R. A. LEBLANC* Director June 28, 1996
- ---------------------------------------------
R. A. LeBlanc

/s/ JAMES E. MCCORMICK* Director June 28, 1996
- ---------------------------------------------
James E. McCormick

/s/ MICHAEL E. PATRICK* Director June 28, 1996
- ---------------------------------------------
Michael E. Patrick

*By: /s/ J.W. STEWART
- ---------------------------------------------
J. W. Stewart
Attorney-in-fact
</TABLE>

II-5
<PAGE> 99

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- -----------------------------------------------------------------------------------
<S> <C> <C>
*1.1 -- Form of Underwriting Agreement.
4.1 -- Certificate of Incorporation of the Registrant, as amended (filed as Exhibit 3.1 to
Form 8-K filed April 18, 1995, and incorporated herein by reference).
4.2 -- Certificate of Designation of Series Two Junior Participating Preferred Stock
(filed as Exhibit 3.1 to Registration Statement on Form 8-A dated January 12, 1994
and incorporated herein by reference).
4.3 -- Bylaws of the Registrant, as amended (filed as Exhibit 3.1 to Form 10-Q for the
quarter ended December 31, 1995 and incorporated herein by reference).
4.4 -- Specimen form of certificate for the Common Stock (filed as Exhibit 4.1 to
Registration Statement on Form S-1 (Reg. No. 33-35187) and incorporated herein by
reference).
4.5 -- Stockholder Rights Agreement dated as of January 12, 1994, between the Company and
First Chicago Trust Company of New York, as Rights Agent (filed as Exhibit 3.1 to
Registration Statement on Form 8-A dated January 12, 1994 and incorporated herein
by reference).
4.6 -- First Amendment to Stockholder Rights Agreement dated as of June 22, 1994 (filed as
Exhibit 2 to Registration Statement on Form 8-A/A dated August 26, 1994 and
incorporated herein by reference).
4.7 -- Second Amendment to Stockholder Rights Agreement dated as of September 22, 1994
(filed as Exhibit 3 to Registration Statement on Form 8-A/A dated September 30,
1994 and incorporated herein by reference).
4.8 -- Warrant Agreement between BJ Services Company and First Chicago Trust Company of
New York, including form of warrant certificate (filed as Exhibit 4.6 to Form 10-K
for the year ended September 30, 1995, and incorporated herein by reference).
4.9 -- Indenture between The Western Company of North America ("Western") and United
States Trust Company of New York, Trustee, dated as of November 15, 1992 (the "Note
Indenture"), which includes the form of 12 7/8% Senior Note due 2002 as Exhibit
thereto (filed as Exhibit to Registration Statement of Western on Form S-2 (Reg.
No. 33-51852) and incorporated herein by reference).
4.10 -- First Supplemental Indenture, dated March 2, 1994, to the Note Indenture between
The Western Company of North America and United States Trust Company of New York,
Trustee (filed as Exhibit to Form 10-K of Western for the year ended December 31,
1993, and incorporated herein by reference).
4.11 -- Second Supplemental Indenture to the Note Indenture, dated as of April 13, 1995,
between The Western Company of North America, BJ Services Company and United States
Trust Company of New York, Trustee (filed as Exhibit 10.5 to Post-Effective
Amendment No. 1 to Registration Statement on Form S-4 (Reg. No. 33-58017), and
incorporated herein by reference).
4.12 -- 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%
Series A Notes due 2006 as Exhibit thereto (filed as Exhibit 4.1 to Registration
Statement on Form S-4 (Reg. No. 333-02287), and incorporated herein by reference).
*5.1 -- Opinion of Andrews & Kurth L.L.P. as to the legality of the securities being
registered.
*23.1 -- Consent of Deloitte & Touche LLP.
*23.2 -- Consent of Price Waterhouse LLP.
*23.3 -- Consent of KPMG Peat Marwick Thorne.
*23.4 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1).
24.1 -- Powers of Attorney (included in Part II of the Registration Statement).
</TABLE>

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

* Filed herewith.

<PAGE> 1

EXHIBIT 1.1

================================================================================

DRAFT: JUNE 27, 1996

BJ SERVICES COMPANY

(a Delaware corporation)

8,500,000 Shares of Common Stock

PURCHASE AGREEMENT

Dated: July __, 1996

================================================================================

<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
SECTION 1. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Representations and Warranties by the Company. . . . . . . . . . . . . . . . . . . . . . . 3
(b) Officer's Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

SECTION 2. Sale and Delivery to Underwriters; Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Initial Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Option Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Denominations; Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

SECTION 3. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) Compliance with Securities Regulations and Commission Requests . . . . . . . . . . . . . . 10
(b) Filing of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Delivery of Registration Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) Delivery of Prospectuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Continued Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . 11
(f) Blue Sky Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(g) Rule 158. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(h) Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(i) Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(j) Restriction on Sale of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(k) Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

SECTION 4. Payment of Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

SECTION 5. Conditions of Underwriters' Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Effectiveness of Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Opinion of Counsel for the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Opinion of Margaret B. Shannon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(d) Opinion of Counsel for the Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . 17
(e) Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(f) Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(g) Accountant's (Deloitte & Touche LLP) Comfort Letter. . . . . . . . . . . . . . . . . . . . 18
(h) Accountant's (Price Waterhouse LLP) Comfort Letter. . . . . . . . . . . . . . . . . . . . . 19
(i) Accountant's (KPMG Peat Marwick Thorne) Comfort Letter . . . . . . . . . . . . . . . . . . 19
(j) Bring-down Comfort Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(k) Approval of Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(l) No Objection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

</TABLE>

i
<PAGE> 3
<TABLE>
<S> <C> <C>

(m) Lock-up Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(n) Conditions to Purchase of Option Securities. . . . . . . . . . . . . . . . . . . . . . . 20
(o) Additional Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(p) Termination of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

SECTION 6. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Indemnification of Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Indemnification of the Company, Directors and Officers. . . . . . . . . . . . . . . . . . 22
(c) Actions Against Parties; Notification. . . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Settlement Without Consent if Failure to Reimburse. . . . . . . . . . . . . . . . . . . . 23

SECTION 7. Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

SECTION 8. Representations, Warranties and Agreements to Survive Delivery. . . . . . . . . . . . . . 25

SECTION 9. Termination of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) Termination; General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

SECTION 10. Default by One or More of the Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . 26

SECTION 11. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

SECTION 12. Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

SECTION 13. GOVERNING LAW AND TIME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

SECTION 14. Effect of Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

</TABLE>

ii
<PAGE> 4

BJ SERVICES COMPANY
(A DELAWARE CORPORATION)

8,500,000 SHARES OF COMMON STOCK

(PAR VALUE $.10 PER SHARE)

PURCHASE AGREEMENT

July __, 1996

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CS First Boston Corporation
Rauscher Pierce Refsnes, Inc.,
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

Ladies and Gentlemen:

BJ Services Company, a Delaware corporation (the "Company"), confirms
its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, CS First Boston Corporation and Rauscher
Pierce Refsnes, Inc. are acting as representatives (in such capacity, the
"Representatives"), with respect to (i) the issuance and sale by the Company
and the purchase by the Underwriters, acting severally and not jointly, of the
respective number of shares of Common Stock, par value $.10 per share, of the
Company ("Common Stock") set forth in Schedule A hereto and (ii) the grant by
the Company to the Underwriters, acting severally and not jointly, of the
option described in Section 2(b) hereof to purchase all or any part of
1,275,000 additional shares of Common Stock to cover over-allotments, if any.
The aforesaid 8,500,000 shares of Common Stock (the "Initial Securities") to be
purchased by the Underwriters and all or any part of the 1,275,000 shares of
Common Stock subject to the option described in Section 2(b) hereof (the
"Option Securities") are hereinafter called, collectively, the "Securities."
As used herein, all references to "Common Stock" shall include the associated

<PAGE> 5

preferred share purchase rights ("Rights") issued pursuant to the Stockholder
Rights Agreement dated as of January 12, 1994, between the Company and First
Chicago Trust Company of New York, as rights agent, as amended and supplemented
to date.

The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered.

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-02731) covering the
registration of the Securities under the Securities Act of 1933, as amended
(the "1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
either (i) prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely
upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term
sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule
424(b). The information included in such prospectus or in such Term Sheet, as
the case may be, that was omitted from such registration statement at the time
it became effective but that is deemed to be part of such registration
statement at the time it became effective (a) pursuant to paragraph (b) of Rule
430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d)
of Rule 434 is referred to as "Rule 434 Information." Each prospectus used
before such registration statement became effective, and any prospectus that
omitted, as applicable, the Rule 430A Information or the Rule 434 Information,
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, is herein called a "preliminary prospectus." Such
registration statement, including the exhibits thereto, schedules thereto, if
any, and the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the 1933 Act, at the time it became effective and including the
Rule 430A Information and the Rule 434 Information, as applicable, is herein
called the "Registration Statement." Any registration statement filed pursuant
to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule
462(b) Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The final
prospectus, including the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act, in the form first furnished to the
Underwriters for use in connection with the offering of the Securities is
herein called the "Prospectus." If Rule 434 is relied on, the term
"Prospectus" shall refer to the preliminary prospectus dated June 14, 1996
together with the Term Sheet and all references in this Agreement to the date
of the Prospectus shall mean the date of the Term Sheet. For purposes of this
Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any Term Sheet or any amendment or supplement to
any of the foregoing shall be deemed to include the copy filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").

All references in this Agreement to financial statements, schedules
and other information which are "contained," "included" or "stated" in the
Registration Statement, any preliminary

2
<PAGE> 6

prospectus or the Prospectus (or other references of like import) shall be
deemed to mean and include all such financial statements, schedules and other
information which are incorporated by reference in the Registration Statement,
any preliminary prospectus or the Prospectus, as the case may be; and all
references in this Agreement to amendments or supplements to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to mean
and include the filing of any document under the Securities Exchange Act of
1934, as amended (the "1934 Act"), which is incorporated by reference in the
Registration Statement, such preliminary prospectus or the Prospectus, as the
case may be.

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The
Company represents and warrants to each Underwriter as of the date hereof, as of
the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each
Underwriter, as follows:

(i) Compliance with Registration Requirements. The Company
meets the requirements for use of Form S-3 under the 1933 Act. Each of
the Registration Statement and any Rule 462(b) Registration Statement
has become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information has
been complied with.

At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities
are purchased, at the Date of Delivery), the Registration Statement, the
Rule 462(b) Registration Statement and any amendments and supplements
thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. Neither the Prospectus nor any
amendments or supplements thereto, at the time the Prospectus or any
such amendment or supplement was issued and at the Closing Time (and, if
any Option Securities are purchased, at the Date of Delivery), included
or will include an untrue statement of a material fact or omitted or
will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. If Rule 434 is used, the Company will comply
with the requirements of Rule 434. The representations and warranties in
this subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement or Prospectus.

3
<PAGE> 7

Each preliminary prospectus and the prospectus filed as part of
the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and, if applicable, each preliminary prospectus and the
Prospectus delivered to the Underwriters for use in connection with this
offering was identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.

(ii) Incorporated Documents. The documents
incorporated or deemed to be incorporated by reference in the
Registration Statement and the Prospectus (the "Incorporated
Documents"), at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read
together with the other information in the Prospectus, at the time the
Registration Statement became effective, at the time the Prospectus was
issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.

(iii) Independent Accountants. Deloitte & Touche LLP, the
accountants who certified the financial statements and supporting
schedules of the Company included in or incorporated by reference into
the Registration Statement and the Prospectus, are independent public
accountants with respect to the Company as required by the 1933 Act and
the 1933 Act Regulations. Price Waterhouse LLP, the accountants who
certified the financial statements of The Western Company of North
America, formerly a Delaware corporation ("Western"), incorporated by
reference into the Registration Statement and the Prospectus, are
independent public accountants with respect to Western and the Company
as required by the 1933 Act and the 1933 Act Regulations. KPMG Peat
Marwick Thorne, the accountants who certified the financial statements
of Nowsco Well Service Ltd., [formerly] a corporation organized under
the laws of Alberta, Canada ("Nowsco"), included in or incorporated by
reference into the Registration Statement and the Prospectus, are
independent public accountants with respect to Nowsco and the Company as
required by the 1933 Act and the 1933 Act Regulations.

(iv) Financial Statements. The historical financial
statements (including the related notes thereto) included in or
incorporated by reference into the Registration Statement and the
Prospectus present fairly the financial position of the Company, Western
or Nowsco, as of the dates indicated and the results of operations and
cash flows thereof for the periods specified, and the related financial
statement schedules incorporated by reference into the Registration
Statement and the Prospectus present fairly the information required to
be stated therein. Such financial statements (including the related
notes thereto) and related financial statement schedules have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis, except to the extent disclosed

4
<PAGE> 8

therein. The summary consolidated financial information of the Company
for the five years ended September 30, 1995 and for the six months ended
March 31, 1995 and March 31, 1996, included in the Registration
Statement and the Prospectus, presents fairly the information shown
therein and has been derived from the audited, and with respect to such
six-month periods, the unaudited financial statements of the Company
incorporated by reference into the Registration Statement and the
Prospectus. The pro forma financial statements (including the related
notes thereto) included in or incorporated by reference into the
Registration Statement and the Prospectus (the "pro forma financial
statements") have been prepared in accordance with the applicable
accounting requirements of Rule 11-02 of Regulation S-X; the pro forma
adjustments reflected in the pro forma financial statements have been
properly applied to the historical amounts in the compilation of such
statements; and the assumptions used in the preparation of the pro forma
financial statements are, in the opinion of the Company, reasonable.

(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as set forth or contemplated
therein, (A) there has been no material adverse change in the business,
financial condition, results of operations or prospects of the Company
and the Subsidiaries (as hereinafter defined) taken as a whole
("Material Adverse Effect"), whether or not arising from transactions in
the ordinary course of business, (B) there has been no dividend or
distribution of any kind declared, paid or made by the Company on its
shares of capital stock and (C) neither the Company nor any Subsidiary
has issued any securities (except as may be issued pursuant to employee
benefit plans and the Company's outstanding warrants to purchase shares
of Common Stock described in the Registration Statement) or incurred any
material liability or obligation, direct or contingent, for borrowed
money.

(vi) Good Standing of the Company. The Company has been
duly incorporated and is an existing corporation in good standing under
the laws of the State of Delaware, with corporate power and authority to
own or lease its properties and conduct its business as described in the
Prospectus; and the Company is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in which
it owns or leases substantial properties or in which the conduct of its
business requires such qualification, except where the failure so to
qualify or to be in good standing would not result in a Material Adverse
Effect.

(vii) Good Standing of Subsidiaries. The only direct or
indirect subsidiaries of the Company are the corporations listed on
Schedule C hereto (individually, a "Subsidiary" and collectively, the
"Subsidiaries"). Each Subsidiary has been duly incorporated and is an
existing corporation in good standing under the laws of the jurisdiction
of its incorporation, with corporate power and authority to own or lease
its properties and conduct its business; each Subsidiary is duly
qualified to do business as a foreign corporation in good standing in
all other jurisdictions in which it owns or leases substantial
properties or in which the conduct of its business requires such
qualification (except where the failure to so qualify

5
<PAGE> 9

would not have a Material Adverse Effect); all outstanding shares (or
such percentage of the outstanding shares as is set forth on Schedule C
hereto) of capital stock of each Subsidiary have been duly authorized
and validly issued, are fully paid and nonassessable and are owned,
directly or indirectly, by the Company free and clear of any liens,
encumbrances or claims [OTHER THAN RIGHTS TO PURCHASE, OR CONSENT TO THE
TRANSFER OF, SHARES IN CERTAIN NON-U.S. SUBSIDIARIES]; and there are no
outstanding options, rights or warrants to acquire, or securities
convertible into or exchangeable for, any shares of capital stock or
other equity interest in any Subsidiary other than, in respect of
additional equity capital to be raised by certain non-U.S. Subsidiaries
that are not wholly owned by the Company, the right or option of the
Company and the other stockholder(s) of each such Subsidiary to
subscribe to such additional capital shares as are proposed to be issued
in order that the Company and such stockholder(s) may maintain their
respective percentage ownership in such Subsidiary [OTHER THAN RIGHTS TO
PURCHASE, OR CONSENT TO THE TRANSFER OF, SHARES IN CERTAIN NON-U.S.
SUBSIDIARIES]. Except for (A) the shares of capital stock of each of
the Subsidiaries and (B) as set forth in the Registration Statement,
neither the Company nor any Subsidiary owns or holds, directly or
indirectly, a material number of shares of capital stock or any other
securities of any corporation or has any material equity or other
interest in any firm, partnership, association or other entity.

(viii) Capitalization. The Company's capitalization is as
set forth in the Prospectus.

(ix) Authorization of Agreement. This Agreement has been
duly authorized, executed and delivered by the Company.

(x) Authorization and Description of Securities. All
outstanding shares of Common Stock are, and the Securities, when issued,
delivered and paid for in the manner herein described, will be, duly
authorized and validly issued and fully paid and nonassessable, with no
personal liability attaching to the ownership thereof; and, except as
disclosed in the Prospectus, the stockholders of the Company have no
preemptive or similar rights with respect to any shares of capital stock
of the Company. The description of the Common Stock in the Registration
Statement is complete and accurate in all material respects. Except as
disclosed in the Prospectus, (A) there are no outstanding rights,
options or warrants to purchase any shares of the capital stock of the
Company or securities convertible into or exercisable or exchangeable
for any shares of the capital stock of the Company, and (B) there are no
restrictions upon the voting or transfer of any shares of the capital
stock of the Company pursuant to the Company's charter or by-laws or any
agreement or other instrument to which the Company is a party or by
which it is bound.

(xi) Absence of Defaults. No default exists, and no event
has occurred that with notice or passage of time, or both, would
constitute a default, in the due performance or observance of any term,
condition or provision of the charter or by-laws of the Company or of
any Subsidiary, or the terms of any indenture or other agreement or
instrument to which any of them or any of their respective properties
are bound, or that may result in, or has

6
<PAGE> 10

resulted in, any material violation by any of them of any existing law,
order, rule or regulation of any court, governmental agency or body or
any arbitrator, domestic or foreign, having jurisdiction over any of
them or any of their respective properties, except for defaults or
violations (in the case of indentures or other agreements or
instruments) that would not have a Material Adverse Effect.

(xii) Authorization of Offering; Absence of Conflicts. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and in the
Registration Statement (including the Nowsco Acquisition and Nowsco
Tender Offer (both terms as defined in the Prospectus)) have been duly
authorized by all necessary corporate action of the Company and the
Subsidiaries and (A) do not and will not result in a breach or violation
of, or constitute a default or Repayment Event (as defined below) under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any Subsidiary
pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which
the Company or any Subsidiary is a party or by which it or any of them
may be bound, or to which any of the property or assets of the Company
or any Subsidiary is subject, excluding in each case breaches,
violations or defaults which, individually or in the aggregate, would
not have a Material Adverse Effect, (B) nor will such action result in
any violation of the provisions of any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or any of their assets
or properties excluding in each case violations which, individually or
in the aggregate, would not have a Material Adverse Effect and (C) nor
will such action result in any violation of the provisions of the
charter or by-laws of the Company or any Subsidiary. As used herein, a
"Repayment Event" means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Subsidiary.

(xiii) Absence of Proceedings. There are no legal or
governmental proceedings pending or threatened (A) required to be
described in the Incorporated Documents that are not described as
required or (B) likely (individually or in the aggregate) to materially
and adversely affect the business, financial condition, results of
operations or prospects of the Company and the Subsidiaries taken as a
whole.

(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement, the Prospectus or the Incorporated Documents or to be filed
as exhibits thereto which have not been so described and filed as
required.

(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental

7
<PAGE> 11

authority or agency (whether foreign or domestic) is necessary or
required in connection with (A) the due authorization, execution and
delivery of this Agreement or the performance by the Company of its
obligations hereunder, (B) the offering, issuance or sale of the
Securities hereunder or (C) the consummation of the transactions
contemplated by this Agreement, except such as have been already
obtained or as may be required under the 1933 Act or the 1933 Act
Regulations or under state securities or "blue sky" laws of any
jurisdiction.

(xvi) Compliance with Laws. The Company and the
Subsidiaries are operating in compliance with all statutes, laws,
regulations and ordinances applicable to their respective businesses and
operations, except where any non-compliance would not result in a
Material Adverse Effect.

(xvii) Investment Company Act. The Company is not, and upon
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").

(xviii) Absence of Manipulation. The Company and the
Subsidiaries have not taken, directly or indirectly, any action designed
to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or
resale of the Securities.

(xix) Compliance with Cuba Act. The Company has complied
with, and is and will be in compliance with, the provisions of that
certain Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.

(b) Officer's Certificates. Any certificate signed by any officer
of the Company or any Subsidiary delivered to the Representatives or to counsel
for the Underwriters shall be deemed a representation and warranty by the
Company to each Underwriter as to the matters covered thereby.

SECTION 2. Sale and Delivery to Underwriters; Closing.

(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B, the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, subject to such adjustments among the Underwriters as the

8
<PAGE> 12

Representatives in their sole discretion shall make to eliminate any sales or
purchases of fractional securities.

(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional
1,275,000 shares of Common Stock at the price per share set forth in Schedule B,
less an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial Securities but not payable on the Option
Securities. The option hereby granted will expire 30 days after the date hereof
and may be exercised in whole or in part from time to time only for the purpose
of covering over-allotments which may be made in connection with the offering
and distribution of the Initial Securities upon notice by the Representatives to
the Company setting forth the number of Option Securities as to which the
several Underwriters are then exercising the option and the time and date of
payment and delivery for such Option Securities. Any such time and date of
delivery (a "Date of Delivery") shall be determined by the Representatives, but
shall not be later than seven full business days after the exercise of said
option, nor in any event prior to the Closing Time, as hereinafter defined. If
the option is exercised as to all or any portion of the Option Securities, each
of the Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of Option Securities then being purchased which
the number of Initial Securities set forth in Schedule A opposite the name of
such Underwriter bears to the total number of Initial Securities, subject in
each case to such adjustments as the Representatives in their sole discretion
shall make to eliminate any sales or purchases of fractional shares.

(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Baker &
Botts, L.L.P., One Shell Plaza, 910 Louisiana, Houston, Texas 77002, or at such
other place as shall be agreed upon by the Representatives and the Company at
10:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10 hereof), or such other
time not later than ten business days after such date as shall be agreed upon by
the Representatives and the Company (such time and date of payment and delivery
being herein called the "Closing Time").

In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company, on each Date of Delivery as specified in the notice from the
Representatives to the Company.

Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company against delivery to
the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the

9
<PAGE> 13

Option Securities, if any, which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Initial Securities
or the Option Securities, if any, to be purchased by any Underwriter whose funds
have not been received by the Closing Time or the relevant Date of Delivery, as
the case may be, but such payment shall not relieve such Underwriter from its
obligations hereunder.

(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.

SECTION 3. Covenants of the Company. The Company covenants
with each Underwriter as follows:

(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify the
Representatives immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become effective,
or any supplement to the Prospectus or any amended Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information and (iv)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus, or of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the initiation or
threatening of any proceedings for any of such purposes. The Company will
promptly effect the filings necessary pursuant to Rule 424(b) and will take such
steps as it deems necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 424(b) was received for filing by the
Commission and, in the event that it was not, it will promptly file such
prospectus. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.

(b) Filing of Amendments. The Company will give the
Representatives notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term Sheet
or any amendment, supplement or revision to either the prospectus included in
the Registration Statement at the time it became effective or to the Prospectus,
whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the
Representatives with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case

<PAGE> 14

may be, and will not file or use any such document to which the Representatives
or counsel for the Underwriters shall object.

(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents incorporated or
deemed to be incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Representatives, without charge, a conformed copy of the Registration Statement
as originally filed and of each amendment thereto (without exhibits) for each of
the Underwriters. These copies of the Registration Statement and each amendment
thereto furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T. In addition, the Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, copies of the Registration Statement and of each
amendment thereto as electronically transmitted to and filed with the Commission
pursuant to EDGAR.

(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such
number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request. The Prospectus and any amendments or
supplements thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.

(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the
1934 Act Regulations so as to permit the completion of the distribution of the
Securities as contemplated in this Agreement and in the Prospectus. If at any
time when a prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, any event shall occur or condition shall exist as
a result of which it is necessary, in the opinion of counsel for the
Underwriters or for the Company, to amend the Registration Statement or amend or
supplement the Prospectus in order that the Prospectus will not include any
untrue statements of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement the Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectus comply with
such requirements, and the Company will furnish to the Underwriters

11
<PAGE> 15

such number of copies of such amendment or supplement as the Underwriters may
reasonably request.

(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Representatives may designate and to
maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.

(g) Rule 158. The Company will timely file such reports pursuant
to the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.

(h) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds."

(i) Listing. The Company will use its best efforts to effect the
listing of the Securities on the New York Stock Exchange.

(j) Restriction on Sale of Securities. During a period of 90 days
from the date of the Prospectus, the Company will not, without the prior written
consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant outstanding on the date
hereof and referred to in the Prospectus, (C) shares issued in private
placements of Common Stock to purchasers who agree to be bound by restrictions
similar to those contained in this subsection or (D) the grant of options,
restricted shares, restricted stock units, stock unit awards payable in the form
of Common Stock or performance shares issued or granted pursuant to the
Company's employee

12
<PAGE> 16

benefit plans, provided that the aggregate number of shares of Common Stock
issued or issuable pursuant to such options, units or awards shall not exceed
_____________.

(k) Reporting Requirements. The Company, during the period
when the Prospectus is required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission pursuant
to the 1934 Act within the time periods required by the 1934 Act and the 1934
Act Regulations.

SECTION 4. Payment of Expenses.

(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectus and any amendments
or supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii)
the fees and expenses of any transfer agent or registrar for the Securities and
(ix) the fees and expenses incurred in connection with the listing of the
Securities on the New York Stock Exchange.

(b) Termination of Agreement. If this Agreement is terminated by
the Representatives in accordance with the provisions of Section 5, Section
9(a)(i) or Section 11 hereof, the Company shall reimburse the Underwriters for
all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.

SECTION 5. Conditions of Underwriters' Obligations. The
obligations of the several Underwriters hereunder are subject to the accuracy of
the representations and warranties of the Company contained in Section 1 hereof
or in certificates of any officer of the Company or any Subsidiary delivered
pursuant to the provisions hereof, to the performance by the Company of its
covenants and other obligations hereunder, and to the following further
conditions:

(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933

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<PAGE> 17

Act or proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of counsel to the Underwriters. A
prospectus containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) (or a post-effective amendment
providing such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Company has elected to
rely upon Rule 434, a Term Sheet shall have been filed with the Commission in
accordance with Rule 424(b).

(b) Opinion of Counsel for the Company. At Closing Time,
the Representatives shall have received the favorable opinion, dated as of
Closing Time, of Andrews & Kurth L.L.P., counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, to the effect that:

(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus; and the Company is
duly qualified to do business as a foreign corporation in good standing
in all other United States jurisdictions in which it owns or leases
substantial properties or in which the conduct of its business requires
such qualification (except where the failure to so qualify would not
have a material adverse effect on the business, financial condition or
results of operations of the Company and the Subsidiaries taken as a
whole);

(ii) Each of BJ Services Company, U.S.A., a Delaware
corporation, BJ Services Middle East, a Delaware corporation, and BJ
Service International, Inc., a Delaware corporation (collectively, the
"Material Domestic Subsidiaries"), has been duly incorporated and is an
existing corporation in good standing under the laws of the jurisdiction
of its incorporation, with corporate power and authority to own its
properties and conduct its business as described in the Prospectus; each
Material Domestic Subsidiary is duly qualified to do business as a
foreign corporation in good standing in all other United States
jurisdictions in which it owns or leases substantial properties or in
which the conduct of its business requires such qualification (except
where the failure to so qualify would not have a material adverse effect
on the business, financial condition or results of operations of the
Company and the Subsidiaries taken as a whole); and all outstanding
shares of capital stock of each Material Domestic Subsidiary have been
duly authorized and validly issued, are fully paid and nonassessable
and, to the knowledge of such counsel, are owned, directly or
indirectly, by the Company free and clear of any liens, encumbrances or
claims [EXCEPT FOR RIGHTS TO PURCHASE, OR CONSENT TO THE TRANSFER OF,
SHARES IN CERTAIN NON-U.S. SUBSIDIARIES];

(iii) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus in the column entitled
"Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to reservations, agreements or employee

14
<PAGE> 18

benefit plans referred to in the Prospectus or pursuant to the exercise
of convertible securities, options or warrants referred to in the
Prospectus or the Incorporated Documents);

(iv) This Agreement has been duly authorized, executed and
delivered by the Company;

(v) The Securities delivered at Closing Time and all other
outstanding shares of Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable and such shares (including the
related Rights) conform in all material respects to the description
thereof contained in the Prospectus, and the stockholders of the Company
have no preemptive rights with respect to the Securities;

(vi) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is required of
the Company for the consummation of the transactions contemplated by
this Agreement, except such as have been obtained and made under the
1933 Act and the 1933 Act Regulations and such as may be required under
state securities laws;

(vii) The execution, delivery and performance of this
Agreement will not result in a material breach or violation of any of
the terms and provisions of, or constitute a material default under, any
statute, any rule or regulation or, to such counsel's knowledge, any
order of any governmental agency or body or any court having
jurisdiction over the Company or any Material Domestic Subsidiary or any
of their properties, or the charter or by-laws of the Company or any
Material Domestic Subsidiary or, to such counsel's knowledge, any
agreement or instrument that relates to the borrowing of funds or that
is filed as an exhibit to the Incorporated Documents to which the
Company or any Material Domestic Subsidiary is bound or, to such
counsel's knowledge, to which any of the properties of the Company or
any such Material Domestic Subsidiary is subject;

(viii) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act;
any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b);
and, to the best of counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or
threatened by the Commission;

(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the Prospectus, excluding the documents
incorporated by reference therein, and each amendment or supplement to
the Registration Statement and Prospectus, excluding the documents
incorporated by reference therein, as of their respective effective or
issue dates (other than the financial statements and supporting
schedules included therein or omitted therefrom, as

15
<PAGE> 19

to which counsel need express no opinion) complied as to form in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations;

(x) The Incorporated Documents (other than the financial
statements and supporting schedules included therein or omitted
therefrom, as to which such counsel need express no opinion) when filed
with the Commission complied as to form in all material respects with
the requirements of the 1934 Act and the 1934 Act Regulations;

(xi) The descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings and contracts
and other documents are accurate in all material respects and fairly
present the information required to be shown; and such counsel do not
know of any legal or governmental proceedings required to be described
in the Registration Statement and the Prospectus which are not described
as required or of any contracts or documents of a character required to
be described in the Registration Statement or the Prospectus or to be
filed as exhibits to the Registration Statement or the Incorporated
Documents which are not described and filed as required; and

(xii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the 1940 Act.

In rendering such opinion, such counsel may rely, as to matters of
fact (but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it
is otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991).

(c) Opinion of Margaret B. Shannon. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Margaret B. Shannon, Vice President and General Counsel of the Company,
in form and substance satisfactory to counsel for the Underwriters, stating that
she has no reason to believe that (1) any Subsidiary of the Company organized
under the laws of a non-United States jurisdiction ("Foreign Subsidiary") has
not been duly incorporated or is not an existing corporation in good standing
under the laws of the jurisdiction of its incorporation, with corporate power
and authority to own its properties and conduct its business as described in the
Registration Statement and the Prospectus, (2) any Foreign Subsidiary is not
duly qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which it owns or leases substantial properties or in
which the conduct of its business requires such qualification or (3) all
outstanding shares (or such percentage of the outstanding shares as is set forth
in Schedule C hereto) of capital stock of each Foreign Subsidiary have not been
duly authorized and validly issued, are not fully paid and nonassessable or are
not owned, directly or indirectly, by the Company free and clear of any liens,
encumbrances or claims [EXCEPT FOR RIGHTS TO PURCHASE, OR CONSENT TO THE
TRANSFER OF, SHARES IN CERTAIN NON-U.S. SUBSIDIARIES], and except where any
failure specified in clause (1), (2) or (3) would not have a

16
<PAGE> 20

material adverse effect on the business, financial condition or results of
operations of the Company and the Subsidiaries taken as a whole.

(d) Opinion of Counsel for the Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Baker & Botts, L.L.P., counsel for the Underwriters, with respect to
(1) the Company's due incorporation and valid existence as a corporation in good
standing under the laws of Delaware, (2) the Company's corporate power and
authority to own, lease and operate its properties and conduct its business as
described in the Prospectus and to enter into and perform its obligations under
this Agreement and (3) the matters set forth in clauses (iv), (v) (solely with
respect to the Securities and not other outstanding shares of Common Stock, and
solely as to preemptive or other similar rights arising by operation of law or
under the charter or by-laws of the Company), (viii) and (ix) of subsection (b)
of this Section. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials.

(e) Opinions of Counsel. In giving their opinions required by
subsections (b), (c) and (d), respectively, of this Section, Andrews & Kurth
L.L.P., Margaret B. Shannon and Baker & Botts, L.L.P. shall each additionally
state that they have participated in conferences with officers and other
representatives of the Company, with representatives of Deloitte & Touche LLP
and with the Representatives at which the contents of the Registration Statement
and the Prospectus and related matters were discussed and that nothing has come
to their attention that would lead them to believe that the Registration
Statement or any amendment thereto, including the Rule 430A Information and Rule
434 Information (if applicable) (except for financial statements and schedules
and other financial or related statistical data included therein or incorporated
by reference therein, as to which such counsel need make no statement), at the
time such Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus or any amendment or supplement thereto
(except for financial statements and schedules and other financial or related
statistical data included therein or incorporated by reference therein, as to
which such counsel need make no statement), at the time the Prospectus was
issued, at the time any such amended or supplemented prospectus was issued or at
Closing Time, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

(f) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
business, financial condition, results of operations or prospects of the Company
and the Subsidiaries taken as a whole, whether or not arising in the ordinary
course of business, and the Representatives shall have received a certificate of
the President or a Vice President of the Company and of the chief financial or
chief accounting officer of the Company, dated as of Closing Time, to the effect
that (i) there has been no such material adverse change, (ii)

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<PAGE> 21

the representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of Closing
Time, (iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to Closing Time
and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or are contemplated by the Commission.

(g) Accountant's (Deloitte & Touche LLP) Comfort Letter. At the
time of the execution of this Agreement, the Representatives shall have received
from Deloitte & Touche LLP a letter dated such date, in form and substance
satisfactory to the Representatives, together with signed or reproduced copies
of such letter for each of the other Underwriters, to the effect that (1) they
are independent certified public accountants with respect to the Company and the
Subsidiaries within the meaning of the 1933 Act and the applicable 1933 Act
Regulations; (2) the financial statements and schedule examined by them and
included in the Registration Statement and the Prospectus and/or included in the
Incorporated Documents comply in form in all material respects with the
applicable requirements of the 1933 Act and the 1933 Act Regulations, and the
1934 Act and the 1934 Act Regulations; (3) based upon limited procedures set
forth in detail in such letter (which shall include, without limitation, the
procedures specified by the American Institute of Certified Public Accountants
for a review of interim financial information as described in SAS No. 71,
Interim Financial Information, with respect to the unaudited condensed
consolidated financial statements of the Company included in the Registration
Statement and the Prospectus and/or included in the Incorporated Documents),
nothing has come to their attention which causes them to believe that (A) any
material modifications should be made to the unaudited condensed consolidated
financial statements included in the Registration Statement and the Prospectus
and/or included in the Incorporated Documents for them to be in conformity with
generally accepted accounting principles or (B) at a specified date not more
than five days prior to the date of this Agreement, there has been any change in
the consolidated capital stock of the Company or any increase in short-term
indebtedness or the consolidated long-term debt or any decrease in the
consolidated net current assets or consolidated stockholders' equity of the
Company as compared with the amounts shown in the March 31, 1996 unaudited
condensed consolidated balance sheet included in the Registration Statement and
the Prospectus or, during the period from April 1, 1996 to a specified date not
more than five days prior to the date of this Agreement, there were any
decreases as compared with the corresponding period in the preceding year or the
period of corresponding length commencing January 1, 1996, in consolidated
revenue, operating income (excluding unusual charges for the period commencing
January 1, 1996), income before income taxes, minority interest and cumulative
effect of accounting change, net income or net income per share of the Company,
except in all instances for changes, increases or decreases which the
Registration Statement and the Prospectus disclose have occurred or may occur;
(4) in addition to the examination referred to in their opinions and the limited
procedures referred to in clause (3) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are included in or
incorporated by reference into the Registration Statement and the Prospectus and
which are specified by the Representatives, and have found such amounts,
percentages and financial information to be in

18
<PAGE> 22

agreement with the relevant accounting, financial and other records of the
Company and the subsidiaries identified in such letter; and (5) based upon
limited procedures set forth in detail in such letter, nothing came to their
attention that caused them to believe that the unaudited pro forma condensed
consolidated financial statements included in the Registration Statement and the
Prospectus and/or included in the Incorporated Documents do not comply as to
form in all material respects with the applicable accounting requirements of
Rule 11-02 of Regulation S-X or that the pro forma adjustments were not properly
applied to the historical amounts in the compilation of those statements.

(h) Accountant's (Price Waterhouse LLP) Comfort Letter. At the
time of the execution of this Agreement, the Representatives shall have received
from Price Waterhouse LLP a letter dated such date, in form and substance
satisfactory to the Representatives, together with signed or reproduced copies
of such letter for each of the other Underwriters, to the effect that (1) they
are independent certified public accountants with respect to Western within the
meaning of the 1933 Act and the applicable 1933 Act Regulations; and (2) the
financial statements of Western examined by them and included in the
Incorporated Documents comply in form in all material respects with the
applicable requirements of the 1934 Act and the 1934 Act Regulations.

(i) Accountant's (KPMG Peat Marwick Thorne) Comfort Letter. At the
time of the execution of this Agreement, the Representatives shall have received
from KPMG Peat Marwick Thorne a letter dated such date, in form and substance
satisfactory to the Representatives, together with signed or reproduced copies
of such letter for each of the other Underwriters, to the effect that (1) they
are independent certified public accountants with respect to Nowsco within the
meaning of the 1933 Act and the applicable 1933 Act Regulations; (2) the
financial statements and schedule examined by them and included in the
Registration Statement and the Prospectus and/or included in the Incorporated
Documents comply in form in all material respects with the applicable
requirements of the 1934 Act and the 1934 Act Regulations; (3) based upon
limited procedures set forth in detail in such letter (which shall include,
without limitation, the procedures specified by the American Institute of
Certified Public Accountants for a review of interim financial information as
described in SAS No. 71, Interim Financial Information, with respect to the
unaudited condensed consolidated financial statements of Nowsco included in the
Registration Statement and the Prospectus and/or included in the Incorporated
Documents), nothing has come to their attention which causes them to believe
that any material modifications should be made to the unaudited condensed
consolidated financial statements included in the Registration Statement and the
Prospectus and/or included in the Incorporated Documents for them to be in
conformity with generally accepted accounting principles; and (4) in addition to
the examination referred to in their opinions and the limited procedures
referred to in clause (3) above, they have carried out certain specified
procedures, not constituting an audit, with respect to certain amounts,
percentages and financial information which are included in or incorporated by
reference into the Registration Statement and the Prospectus and which are
specified by the Representatives, and have found such amounts, percentages and
financial information to be in agreement with the relevant accounting, financial
and other records of Nowsco and its subsidiaries identified in such letter.

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<PAGE> 23

(j) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from Deloitte & Touche LLP, Price Waterhouse LLP and KPMG
Peat Marwick Thorne letters, dated as of Closing Time, in form and substance
satisfactory to the Representatives, together with signed or reproduced copies
of such letters for each of the other Underwriters, to the effect that they
reaffirm the statements made in their respective letters furnished pursuant to
subsections (g), (h) and (i) of this Section, except that the specified date
referred to shall be a date not more than two business days prior to Closing
Time.

(k) Approval of Listing. At Closing Time, the Securities shall have
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.

(l) No Objection. The NASD shall not have raised any objection with
respect to the fairness and reasonableness of the underwriting terms and
arrangements.

(m) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit A hereto signed by the persons listed on Schedule D hereto.

(n) Conditions to Purchase of Option Securities. In the event that
the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations and
warranties of the Company contained herein and the statements in any
certificates furnished by the Company and any Subsidiary hereunder shall be true
and correct as of each Date of Delivery and, at the relevant Date of Delivery,
the Representatives shall have received:

(i) Officers' Certificate. A certificate, dated such Date
of Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at Closing Time pursuant to
Section 5(f) hereof remains true and correct as of such Date of
Delivery.

(ii) Opinion of Counsel for Company. The favorable opinion
of Andrews & Kurth L.L.P., counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(b) hereof.

(iii) Opinion of Margaret B. Shannon. The favorable opinion
of Margaret B. Shannon, Vice President and General Counsel of the
Company, in form and substance satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(c) hereof.

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<PAGE> 24

(iv) Opinion of Counsel for Underwriters. The favorable
opinion of Baker & Botts, L.L.P., counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities to be purchased
on such Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(d) hereof.

(v) Bring-down Comfort Letter. A letter from each of
Deloitte & Touche LLP, Price Waterhouse LLP and KPMG Peat Marwick
Thorne, in form and substance satisfactory to the Representatives and
dated such Date of Delivery, substantially in the same form and
substance as the letters furnished to the Representatives pursuant to
subsections (g), (h) and (i), respectively, of this Section, except that
the "specified date" in the letter furnished pursuant to this paragraph
shall be a date not more than five days prior to such Date of Delivery.

(o) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the
Representatives and counsel for the Underwriters.

(p) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of Option
Securities on a Date of Delivery which is after Closing Time, the obligations
of the several Underwriters to purchase the relevant Option Securities, may be
terminated by the Representatives by notice to the Company at any time at or
prior to Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party except
as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive
any such termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of Underwriters. The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:

(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or
the Prospectus

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<PAGE> 25

(or any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;

(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company; and

(iii) against any and all expense whatsoever, as
incurred (including, subject to the third sentence of Section 6(c)
hereof, the fees and disbursements of counsel chosen by Merrill Lynch),
reasonably incurred in investigating, preparing or defending against
any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto); and provided, further,
that this indemnity agreement with respect to any untrue statement or omission
or alleged untrue statement or omission made in any preliminary prospectus
shall not inure to the benefit of any Underwriter from whom the person
asserting any such losses, claims, damages or liabilities purchased Securities
(or any person who controls such Underwriter within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act) to the extent that a copy of the
Prospectus (as then amended or supplemented and furnished by the Company to
such Underwriter) was not sent or given by or on behalf of such Underwriter to
such person at or prior to the sale of such Securities and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability and the Company has complied with its
obligations under Section 3(a) hereof.

(b) Indemnification of the Company, Directors and Officers.
Each Underwriter severally agrees to indemnify and hold harmless the Company,
its directors, each of its officers who signed the Registration Statement and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act, against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including the Rule 430A

22
<PAGE> 26

Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).

(c) Actions Against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. An indemnifying party may participate at its own expense
in the defense of any such action. If it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with any other
indemnifying party receiving such notice, may assume the defense of such action
with counsel chosen by it and approved by the indemnified parties defendant in
such action; provided, however, that if such indemnified parties reasonably
object to such assumption on the ground (based on the advice of counsel) that
there may be legal defenses available to them which are different from or in
addition to those available to such indemnifying party, such indemnified parties
shall be entitled to choose separate counsel with respect to such defenses and
to retain or assume control of such defenses at the expense of the indemnifying
party. If an indemnifying party assumes the defense of such action (other than
with respect to defenses addressed in the immediately preceding sentence), the
indemnifying party shall not be liable for any fees and expenses of counsel for
the indemnified parties incurred thereafter in connection with such action
(other than with respect to defenses addressed in the immediately preceding
sentence). In no event shall the indemnifying party be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.

(d) Settlement Without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii)

23
<PAGE> 27

such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.

SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Securities pursuant to this Agreement or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.

The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the Securities
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Securities
pursuant to this Agreement (before deducting expenses) received by the Company
and the total underwriting discount received by the Underwriters, in each case
as set forth on the cover of the Prospectus, or, if Rule 434 is used, the
corresponding location on the Term Sheet bears to the aggregate initial public
offering price of the Securities as set forth on such cover.

The relative fault of the Company on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.

24
<PAGE> 28

Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.

No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any Subsidiary
submitted pursuant hereto shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or
controlling person, or by or on behalf of the Company, and shall survive
delivery of the Securities to the Underwriters.

SECTION 9. Termination of Agreement.

(a) Termination; General. The Representatives may
terminate this Agreement, by notice to the Company, at any time at or prior to
Closing Time (1) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Prospectus, any material adverse change in the business, financial condition,
results of operations or prospects of the Company and the Subsidiaries taken as
a whole, whether or not arising in the ordinary course of business, or (2) if
there has occurred any material adverse change in the financial markets in the
United States or elsewhere, any outbreak of hostilities or escalation thereof or
other calamity or crisis or any change or development involving a prospective
change in national or international political, financial or economic conditions,
in each case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (3) if trading in any securities of the
Company has been suspended or limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or limited,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such

25
<PAGE> 29

system or by order of the Commission, the National Association of Securities
Dealers, Inc. or any other governmental authority, or (4) if a banking
moratorium has been declared by New York, Delaware, Texas or United States
authorities.

(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6 and 7 shall survive such termination and remain in full force and effect.

SECTION 10. Default by One or More of the Underwriters. If one or
more of the Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Representatives shall not
have completed such arrangements within such 24-hour period, then:

(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or

(b) if the number of Defaulted Securities exceeds 10% of the number
of Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after Closing Time, the obligation of the
Underwriters to purchase and of the Company to sell the Option Securities to be
purchased and sold on such Date of Delivery shall terminate without liability on
the part of any non-defaulting Underwriter.

No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.

In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the Representatives or the Company shall have the
right to postpone Closing Time or the relevant Date of Delivery, as the case may
be, for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10.

26
<PAGE> 30

SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at 1221 McKinney, Suite
2700, Houston, Texas 77010, attention of Samuel R. Dodson; notices to the
Company shall be directed to it at 5500 Northwest Central, P. O. Box 4442,
Houston, Texas 77210-4442, attention of Margaret B. Shannon. If any day on
which any notice, demand, instruction or other communication is given by either
party hereto is not a Business Day or is received after normal business hours on
a Business Day, such notice, demand, instruction or other communication shall be
deemed to have been given on the Business Day succeeding such day. For purposes
of this Section 11, "Business Day" shall mean any day other than a Saturday,
Sunday, legal holiday or any other day on which commercial banking institutions
in Texas (in the case of notices being given to the Company) and The City of New
York (in the case of notices being given to the Underwriters) are required or
authorized by law or executive order to close.

SECTION 12. Parties. This Agreement shall each inure to the benefit
of and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely because of such purchase.

SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. EXCEPT AS OTHERWISE SET
FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 14. Effect of Headings. The Section headings herein and the
Table of Contents are for convenience only and shall not affect the construction
hereof.

27
<PAGE> 31

If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement among the Underwriters and the Company in accordance with its terms.

Very truly yours,

BJ SERVICES COMPANY

By: ____________________________________
Name:
Title:

CONFIRMED AND ACCEPTED,
as of the date first above written:

MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
CS FIRST BOSTON CORPORATION
RAUSCHER PIERCE REFSNES, INC.

By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED

By: _______________________________________
Authorized Signatory

For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.

28
<PAGE> 32
SCHEDULE A

<TABLE>
<CAPTION>
Number of
Initial
Name of Underwriter Securities
------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . .
CS First Boston Corporation . . . . . . . . . . . . . . .
Rauscher Pierce Refsnes, Inc. . . . . . . . . . . . . . .
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . 8,500,000
============

</TABLE>

Sch A - 1
<PAGE> 33

SCHEDULE B

BJ SERVICES COMPANY
8,500,000 SHARES OF COMMON STOCK
(PAR VALUE $.10 PER SHARE)

1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $_________.

2. The purchase price per share for the Securities to be paid by
the several Underwriters shall be $_________, being an amount equal to the
initial public offering price set forth above less $__________ per share;
provided that the purchase price per share for any Option Securities purchased
upon the exercise of the over-allotment option described in Section 2(b) shall
be reduced by an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities but not payable
on the Option Securities.

Sch B - 1
<PAGE> 34
SCHEDULE C

Subsidiaries of the Company

<TABLE>
<CAPTION>
Percentage Owned By
---------------------------
Name of Entity/Jurisdiction of Organization Company Subsidiary
------------------------------------------- ------- ----------

<S> <C> <C>
BJ Services Company Middle East (Delaware) . . . . . . . . . . . . . . . . . . 100%
Gulf Well Services Company (Kuwait) . . . . . . . . . . . . . . . . . . . 40%
BJ Services Company Overseas (Delaware) . . . . . . . . . . . . . . . . . . . . 100%
BJ Services Company, U.S.A. (Delaware) . . . . . . . . . . . . . . . . . . . . 100%
Western Petroleum Services, Incorporated (Delaware) . . . . . . . . . . . 100%
WOI, Inc. (Delaware) . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Saturn Energy Company (Delaware) . . . . . . . . . . . . . . . . . . . . . 100%
Offshore International, Ltd. (Delaware) . . . . . . . . . . . . . . . . . 100%
Western Services International, Inc. (Delaware) . . . . . . . . . . . . . 100%
Western Petroleum Services International Company (Delaware) . . . . . . . 100%
Western Petroleum Services International (Nigeria) Ltd. . . . . . . . 80%
P.T. Western Petroleum Servinco (Indonesia) . . . . . . . . . . . . . 64%
Western Rotary Petroleum Company Limited (Hungary) . . . . . . . . . . 50%
Western Oceanic, Inc. (Delaware) . . . . . . . . . . . . . . . . . . . . . 100%
Western Oceanic International, Inc. (Panama) . . . . . . . . . . . . . 100%
Altomar Perfuracoes Maritmas Ltda. (Brazil) . . . . . . . . . . . 99.99%
Western Oceanic (Nigeria) Limited . . . . . . . . . . . . . . . . . . . . 60%
Western Oilfield Supply & Rental, Inc. (Delaware) . . . . . . . . . . . . 100%
Western Oceanic Services, Inc. (Delaware) . . . . . . . . . . . . . . . . 100%
Colony Drilling Company Limited (UK) . . . . . . . . . . . . . . . . . . . 100%
Western Petroleum Services (UK) Ltd. . . . . . . . . . . . . . . . . . 100%
BJ Service International, Inc. (Delaware) . . . . . . . . . . . . . . . . 100%
BJ-Hughes C.I., Ltd. (Cayman Islands) . . . . . . . . . . . . . . . . . . 100%
BJ Oilwell Services (Malaysia) Sdn. Bhd. . . . . . . . . . . . . . . . . . 65%
BJ Service International (Thailand) Ltd. . . . . . . . . . . . . . . . . . 100%
BJ Service Arabia Ltd. (Saudi Arabia) . . . . . . . . . . . . . . . . . . 70%
BJ Services C.I., Ltd. (Cayman Islands) . . . . . . . . . . . . . . . . . 100%
Nowsco Well Service Ltd (Alberta) . . . . . . . . . . . . . . . . . . . . 100%
BJ Services Canada Inc. (Alberta) . . . . . . . . . . . . . . . . . . . . 100%
Nowsco Well Service Company Limited (Barbados) . . . . . . . . . . . . 100%
Nowsco International Limited (Barbados) . . . . . . . . . . . . . . . 100%
Nowsco Well Service International (Bermuda) . . . . . . . . . . . . . 100%
Nowsco Well Service (Cyprus) Limited (Cyprus) . . . . . . . . . . . . 100%
Nowsco Well Service (Vestok) Limited (Russia) . . . . . . . . . . 100%
Siarno Overseas Limited (Cyprus) . . . . . . . . . . . . . . . . . . . 100%

</TABLE>

Sch C - 1
<PAGE> 35
<TABLE>
<S> <C> <C>

NMS Oil Field Limited (Cyprus) . . . . . . . . . . . . . . . . . . 100%
Nowsco Americas S.A. (Argentina) . . . . . . . . . . . . . . . . . . . 49%
Nowsco Inc. (USA) . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Nowsco Pipeline Services Inc. (USA) . . . . . . . . . . . . . . . 100%
Nowsco Pipeline Cleaners Inc. (USA) . . . . . . . . . . . . . . . 100%
Nowsco Well Service Inc. (USA) . . . . . . . . . . . . . . . . . . 100%
CECO Fabricanes Inc. (USA) . . . . . . . . . . . . . . . . . . . . 100%
International Nowsco Well Service Inc. (USA) . . . . . . . . . . . . . 100%
Nowsco Well Service GmbH (Germany) . . . . . . . . . . . . . . . . . . 100%
Nowsco (Netherlands) Group BV (Netherlands) . . . . . . . . . . . . . 100%
Nowsco (IFC) AV (Netherlands) . . . . . . . . . . . . . . . . . . 100%
Nowsco (Middle East) LLC . . . . . . . . . . . . . . . . . . . . . 51%
Nowsco (UAE) LLC . . . . . . . . . . . . . . . . . . . . . . . . . 49%
Nowsco Well Service (Europe) BV (Netherlands) . . . . . . . . . . . . 100%
Nowsco Norge A/S (Norway) . . . . . . . . . . . . . . . . . . . . . . 100%
Nowsco U.K. Limited (U.K.) . . . . . . . . . . . . . . . . . . . . . . 100%
Nowsco Well Service Limited (U.K.) . . . . . . . . . . . . . . . . 100%
McKenne & Sullivan Limited (U.K.) . . . . . . . . . . . . . . . . 100%
Nowsco (U.K.) Group Limited (U.K.) . . . . . . . . . . . . . . . . . . 100%
Nowsco Well Service SRL (Italy) . . . . . . . . . . . . . . . . . . . 100%
Nowsco Well Service (Ireland) Limited . . . . . . . . . . . . . . . . 100%
Nowsco Well Service (SEA) PTE (Singapore) . . . . . . . . . . . . . . 100%
PT Nowsco Well Service (Indonesia) . . . . . . . . . . . . . . . . . . 70%
Sarka Nowsco Well Service SDN BHD (Maylasia) . . . . . . . . . . . . . 40%
Nowsco (B) SDN BHD (Brunei) . . . . . . . . . . . . . . . . . . . . . 60%
BJ Services Company B.V. (Netherlands) . . . . . . . . . . . . . . . . . . 100%
BJ Services Company GmbH (Germany) . . . . . . . . . . . . . . . . . . 100%
BJ Services AS (Norway) . . . . . . . . . . . . . . . . . . . . . . . 100%
BJ Services Company Italia S.r.l. (Italy) . . . . . . . . . . . . . . 100%

</TABLE>
<TABLE>
<CAPTION>
Percentage Owned By
-------------------------
Name of Entity/Jurisdiction of Organization Company Subsidiary
------------------------------------------- ------- ----------
<S> <C> <C>
BJ Services Company Mexicana S.A. de C.V. (Mexico) . . . . . . . . . . . . 100%
BJ Services Company (Nigeria) Limited . . . . . . . . . . . . . . . . . . 60%
BJ Services Company, S.A. (Panama) . . . . . . . . . . . . . . . . . . . . 100%
BJ Services Company Limited (Scotland) . . . . . . . . . . . . . . . . . . 100%
BJ Services Company (UK) Limited (Scotland) . . . . . . . . . . . . . 100%
BJ Leasing Company Limited (Scotland-Vestfonn) . . . . . . . . . . . . 100%
BJS Oilfield Technology Limited (Scotland) . . . . . . . . . . . . 100%
BJ Comtec AS (Norway) . . . . . . . . . . . . . . . . . . . . . . 100%

</TABLE>

Sch C - 2
<PAGE> 36
<TABLE>
<S> <C> <C>
BJ Services International Limited (Eastern Europe)
(Scotland) . . . . . . . . . . . . . . . . . . . . . . . . . 100%
BJ Services Company (Singapore) Pte. Ltd . . . . . . . . . . . . . . . 100%
BJ Services De Venezuela IV, C.A. (Venezuela) . . . . . . . . . . . . 100%
BJ Services de Venezuela, C.A. (Venezuela) . . . . . . . . . . . . 100%
BJ Services De Venezuela II, C.A. (Venezuela) . . . . . . . . 100%
BJ Services De Venezuela III, C.A. (Venezuela) . . . . . . 100%
BJ Services International S.A. (Panama) . . . . . . . . . . . . . . . 100%
BJ Pumping Services Company S.A. (Panama) . . . . . . . . . . . . . . 65%
BJ Services S.A. (Argentina) . . . . . . . . . . . . . . . . . . . . . 100%
Compania de Servicios Petroleros BJ Boliviana S.A. (Bolivia) . . . . . 49%
Hughes Services Eastern Hemisphere S.A.R.L. (France) . . . . . . . . . 100%
International Specialty Chemicals Ltd. (Cayman Islands) . . . . . . . 75%
P.T. BJ-Hughes Services Indonesia (Indonesia) . . . . . . . . . . . . 75%
Servicios Brasileiros Especializados em Petroleo S.A.
(SEBEP) (Brazil) . . . . . . . . . . . . . . . . . . . . . . . 40%
SEBEP Quimica Industria e Comercia Ltda. (Brazil) . . . . . . . 100%
SEBEX Oil Well Services, S.A. (Brazil) . . . . . . . . . . . . . 100%
Societe Algerienne de Climentation (Algeria) . . . . . . . . . . . . . 49%

</TABLE>

Sch C - 3
<PAGE> 37
SCHEDULE D

List of persons subject to lock-up

J. W. Stewart
Michael McShane
David D. Dunlap
Thomas H. Koops
Margaret B. Shannon
Kenneth A. Williams
Matthew D. Fitzgerald
Taylor M. Whichard
Stephen A. Wright
L. William Heiligbrodt
John R. Huff
William J. Johnson
Don D. Jordan
R. A. LeBlanc
James E. McCormick
Michael E. Patrick

Sch D - 1
<PAGE> 38
EXHIBIT A

Form of Lock-Up Agreement

_____________________________, 1996

MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CS First Boston Corporation
Rauscher Pierce Refsnes, Inc.,
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209

Re: Proposed Public Offering by BJ Services Company

Ladies and Gentlemen:

The undersigned, a stockholder, officer and/or director of BJ Services
Company, a Delaware corporation (the "Company"), understands that Merrill Lynch
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), CS
First Boston Corporation and Rauscher Pierce Refsnes, Inc. propose to enter
into a Purchase Agreement (the "Purchase Agreement") with the Company providing
for the public offering of shares (the "Securities") of the Company's common
stock, par value $.10 per share (the "Common Stock"). In recognition of the
benefit that such an offering will confer upon the undersigned as a
stockholder, officer and/or director of the Company, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named in the
Purchase Agreement that, during a period of 90 days from the date of the final
prospectus for the proposed public offering of the Securities, the undersigned
will not, without the prior written consent of Merrill Lynch, directly or
indirectly, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of, or otherwise dispose of or transfer
any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or file any registration statement under the
Securities Act of 1933, as amended, with

Sch D - 2
<PAGE> 39

respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise.

Very truly yours,

Signature:______________________________

Print Name: ____________________________

Sch D - 3

<PAGE> 1
[LETTERHEAD OF ANDREWS & KURTH L.L.P.]

Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002

EXHIBIT 5.1

June 28, 1996

Board of Directors
BJ Services Company
5500 Northwest Central
Houston, Texas 77092

Ladies and Gentlemen:

We have acted as counsel to BJ Services Company, a Delaware
corporation (the "Company"), in connection with the Company's Registration
Statement on Form S-3 (the "Registration Statement") relating to the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of the public offering by the Company of up to 9,775,000 shares of the
Company's common stock (the "Shares"), par value $0.10 per share ("Common
Stock").

As the basis for the opinions hereinafter expressed, we have
examined such statutes, regulations, corporate records and documents and such
other instruments as we have deemed necessary for the purposes of the opinions
contained herein. As to all matters of fact material to such opinions, we have
relied upon the representations of officers of the Company and certificates of
public officials. We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
with the original documents of all documents submitted to us as copies.

Based upon the foregoing and having due regard for such
legal considerations as we deem relevant, we are of the opinion that the
Shares have been duly authorized and, when sold in the manner described in the
Registration Statement, will be legally issued and constitute fully paid and
nonassessable shares of Common Stock.

This opinion is limited in all respects to the General
Corporation Law of the State of Delaware and the laws of the United States of
America insofar as such laws are applicable.

We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to our firm name
under the caption "Legal Opinions" therein. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the Securities and Exchange Commission thereunder.

Very truly yours,

Andrews & Kurth L.L.P.

<PAGE> 1

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 2 to the Registration Statement of
BJ Services Company on Form S-3 (No. 333-02731) of our report dated November 21,
1995 appearing in the Prospectus, which is part of this Registration Statement,
and to the incorporation by reference in this Registration Statement of our
report dated November 21, 1995, appearing in the Annual Report on Form 10-K of
BJ Services Company for the year ended September 30, 1995, and to the
incorporation by reference in this Registration Statement of our report dated
November 21, 1995 (March 28, 1996 as to Note 15) appearing in the Current Report
on Form 8-K of BJ Services Company filed June 28, 1996.

We also consent to the reference to us under the heading "Experts" in such
Prospectus.

DELOITTE & TOUCHE LLP

Houston, Texas

June 28, 1996

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 2 to the Registration Statement on Form
S-3 (No. 333-02731) of BJ Services Company of our report dated February 22, 1995
relating to the financial statements of The Western Company of North America,
which appears in the Current Report of Form 8-K/A of BJ Services Company dated
April 13, 1995. We also consent to the reference to us under the heading
"Experts" in such Prospectus.

PRICE WATERHOUSE LLP

Houston, Texas

June 27, 1996

<PAGE> 1

EXHIBIT 23.3

ACCOUNTANTS' CONSENT

We consent to the inclusion and the incorporation by reference in the Amendment
No. 2 to the Registration Statement on Form S-3 (No. 333-02731) of BJ Services
Company of our report dated February 8, 1996, relating to the consolidated
balance sheets of Nowsco Well Service Ltd. and subsidiaries as of December 31,
1995, 1994 and 1993, and the related consolidated statements of operations,
retained earnings, and changes in cash position for each of the years in the
three-year period ended December 31, 1995, which report is included and
incorporated by reference herein. We also consent to the reference to us under
the heading "Experts" in such Prospectus.

KPMG Peat Marwick Thorne

Calgary, Canada

June 26, 1996