Acquisitions and Dispositions

Pending acquisition of Baker Hughes

On November 16, 2014, we and Baker Hughes entered into a merger agreement under which, subject to the conditions set forth in the merger agreement, we will acquire all the outstanding shares of Baker Hughes in a stock and cash transaction. Baker Hughes is a leading supplier of oilfield services, products, technology and systems to the worldwide oil and natural gas industry. Under the terms of the merger agreement, at the effective time of the acquisition, each share of Baker Hughes common stock will be converted into the right to receive 1.12 shares of our common stock and $19.00 in cash.

Because the exchange ratio was fixed at the time of the merger agreement and the market value of our common stock will continue to fluctuate, the total value of the consideration exchanged will not be determinable until the closing date. The number of shares to be issued will not fluctuate based upon changes in the price of shares of our common stock or shares of Baker Hughes common stock prior to the closing date, but the exact number of Halliburton shares to be issued with respect to Baker Hughes stock awards will not be determinable until the closing of the transaction. We have estimated the total consideration expected to be issued and paid to Baker Hughes stockholders in the acquisition to consist of approximately 492 million shares of our common stock and approximately $8.3 billion to be paid in cash. We intend to finance the cash portion of the acquisition through a combination of cash on hand and debt financing. We have obtained a commitment letter for an $8.6 billion senior unsecured bridge facility, which is greater than the expected cash consideration required upon closing of the Baker Hughes acquisition. We may issue debt securities, obtain bank loans or other debt financings, or use cash on hand in lieu of utilizing all or a portion of the bridge facility.

The merger agreement has been unanimously approved by both companies' Board of Directors, our stockholders have approved the issuance of shares necessary to complete the acquisition of Baker Hughes, and Baker Hughes’ stockholders have adopted the merger agreement and thereby approved the acquisition. During 2015, we announced some of our and Baker Hughes's businesses will be marketed for sale to obtain competition authorities' approvals of the pending transaction. See the section below for further information on these anticipated divestitures. The closing of the transaction is subject to receipt of certain regulatory approvals and other conditions specified in the merger agreement. We and Baker Hughes have entered into a timing agreement with the U.S. Department of Justice (DOJ) under which we have agreed that we will not close the acquisition until the later of December 15, 2015 and 30 days following the date that both companies have certified final, substantial compliance with the DOJ’s second request. In connection therewith, we and Baker Hughes entered into a Notice of Extension on July 10, 2015, extending the termination date under the merger agreement to December 1, 2015, and an additional Notice of Extension on September 25, 2015, further extending the termination date under the merger agreement to December 16, 2015. We continue to target a 2015 close, but the transaction could move into 2016, which is allowed under the merger agreement.

Assets Held for Sale

In April 2015, we announced our decision to market for sale our Fixed Cutter and Roller Cone Drill Bits, our Directional Drilling, and our Logging-While-Drilling/Measurement-While-Drilling businesses in connection with the pending Baker Hughes acquisition. The assets and liabilities for these businesses, which are included within our Drilling and Evaluation operating segment, were classified as held for sale beginning in the second quarter of 2015 and, therefore, the corresponding depreciation and amortization expense was ceased at that time. These anticipated divestitures are not presented as discontinued operations in our condensed consolidated statements of operations, because they do not represent a strategic shift in our business, as we will continue operating similar businesses of Baker Hughes after the acquisition. During the three and nine months ended September 30, 2015, we generated revenue from these assets of $639 million and $2.1 billion, respectively, as compared to $916 million and $2.7 billion during the three and nine months ended September 30, 2014, respectively. Additionally, during the three and nine months ended September 30, 2015, we recognized operating income from these assets, consistent with our business segments presentation in Note 4, of $136 million and $336 million, respectively, as compared to $70 million and $260 million during the three and nine months ended September 30, 2014, respectively. These amounts reflect the impact of ceasing the recording of depreciation and amortization expense for these businesses subsequent to their held for sale reclassification in 2015; the recording of such expenses would have reduced operating income by $86 million and $158 million during the three and nine months ended September 30, 2015, respectively.

When an asset is classified as held for sale, the asset’s book value is evaluated and adjusted to the lower of its carrying amount or fair value less cost to sell. As of September 30, 2015, we determined the fair value less cost to sell exceeded the carrying amount of our assets held for sale.

A summary of the carrying amounts of assets and liabilities held for sale on our condensed consolidated balance sheet as of September 30, 2015 related to the anticipated divestitures discussed above is detailed below.



Millions of dollars	September 30, 2015
Assets
Property, plant, and equipment	$	1,193
Inventories	563
Goodwill	271
Patents and other intangibles	55
Total assets	$	2,082
Liabilities
Employee benefit liabilities (a)	$	50
Other liabilities (a)	6
Total liabilities	$	56

(a) Liabilities held for sale are classified within “Other current liabilities” on our condensed

consolidated balance sheet as of September 30, 2015.

On September 28, 2015, we announced additional businesses that will be marketed for sale in connection with the pending Baker Hughes acquisition. We intend to divest our expandable liner hangers business, which is included within our Completion and Production operating segment. This anticipated divestiture did not meet all of the requirements for classification as assets held for sale at September 30, 2015 and, therefore, is not included in the table above. Additionally, Baker Hughes announced their intention to divest its core completions business, sand control business in the Gulf of Mexico, and offshore cementing businesses in Australia, Brazil, the Gulf of Mexico, Norway, and the United Kingdom.

The final sale of each of the businesses described above will be subject to the ability to negotiate acceptable terms and conditions, each company's Board of Directors approval, as applicable, and final approval of the Baker Hughes acquisition by competition authorities. We anticipate that each company will complete the sale of these businesses concurrent with the closing of the Baker Hughes acquisition.