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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2003

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From              to             .

Commission file number 1-10570

BJ SERVICES COMPANY

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (713) 462-4239

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ    NO ¨.

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). YES þ    NO ¨.

At December 5, 2003, the registrant had outstanding 158,917,102 shares of Common Stock, $.10 par value per share. The aggregate market value of the Common Stock on March 31, 2003 (based on the closing prices in the daily composite list for transactions on the New York Stock Exchange) held by nonaffiliates of the registrant was approximately $5.4 billion.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held January 22, 2004 are incorporated by reference into Part II and Part III.

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PART I

ITEM 1.    Business

General

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

In April 1995, the Company completed the acquisition of The Western Company of North America (“Western” and the “Western Acquisition”), which provided the Company with a greater critical mass with which to better compete in domestic and international markets and the realization of significant consolidation benefits. The Western Acquisition increased the Company’s then existing revenue base by approximately 75% and more than doubled the Company’s domestic revenue base at that time.

In June 1996, the Company completed the acquisition of Nowsco Well Service Ltd. (“Nowsco” and the “Nowsco Acquisition”). Nowsco’s operations were conducted primarily in Canada, the United States, Europe, Southeast Asia and Argentina and included pressure pumping and commissioning and inspection services. The Nowsco Acquisition added approximately 40% to the Company’s then existing revenue base.

On May 31, 2002, the Company completed the acquisition of OSCA, Inc. (“OSCA”), a completion services (pressure pumping), completion tools and completion fluids company based in Lafayette, Louisiana, with operations primarily in the U.S. Gulf of Mexico, Brazil and Venezuela.

During the year ended September 30, 2003, the Company generated approximately 83% of its revenue from pressure pumping services and 17% from other oilfield services. Over the same period, the Company generated approximately 50% of its revenue from U.S. operations and 50% from international operations. For geographic revenue, segment revenue, operating income, identifiable asset, and long-lived asset details for each of the three years ended September 30, 2003, see Note 8 of the Notes to Consolidated Financial Statements.

Pressure Pumping Services

Cementing Services

The Company’s cementing services, which accounted for approximately 28% of total revenue during 2003, consist of blending high-grade cement and water with various solid and liquid additives to create a cement slurry that is pumped into a well between the casing and the wellbore. The additives and the properties of the slurry are designed to achieve the proper cement set up time, compressive strength and fluid loss control, and vary depending upon the well depth, downhole temperatures and pressures, and formation characteristics. For revenue by product line for each of the three years ended September 30, 2003, see Note 8 of the Notes to Consolidated Financial Statements.

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

The principal application for cementing services used in oilfield operations is the cementing between the casing pipe and the wellbore during the drilling and completion phase of a well (“primary cementing”). Primary cementing is performed to (i) isolate fluids behind the casing between productive formations and other formations that would damage the productivity of hydrocarbon producing zones or damage the quality of

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freshwater aquifers, (ii) seal the casing from corrosive formation fluids and (iii) provide structural support for the casing string. Cementing services are also utilized when recompleting wells from one producing zone to another and when plugging and abandoning wells.

Stimulation Services

The Company’s stimulation services, which accounted for approximately 53% of total revenue during 2003, consist of fracturing, acidizing, sand control, nitrogen, coiled tubing and service tools. The Company participates in the offshore stimulation market through the use of skid-mounted pumping units and operation of several stimulation vessels including one in the North Sea, three in the Gulf of Mexico and four in South America.

The Company believes that as production continues to decline in key producing fields of the U.S. and certain international regions, the demand for fracturing and other stimulation services is likely to increase. Consequently, the Company has been increasing its pressure pumping capabilities in certain international markets over the past several years. For revenue by product line for each of the three years ended September 30, 2003, see Note 8 of the Notes to Consolidated Financial Statements. These services are designed to improve the flow of oil and natural gas from producing formations and are summarized as follows:

Fracturing.    Fracturing services are performed to enhance the production of oil and natural gas from formations having such permeability that the natural flow is restricted. The fracturing process consists of pumping a fluid gel into a cased well at sufficient pressure to “fracture” the formation. Sand, bauxite or synthetic proppants are suspended in the gel and are pumped into the fracture to prop it open. The size of a fracturing job is generally expressed in terms of pounds of proppant, which can exceed 200,000 lbs. In some cases, fracturing is performed by an acid solution pumped under pressure without a proppant or with small amounts of proppant. The main pieces of equipment used in the fracturing process are a blender, which blends the proppant and chemicals into the fracturing fluid, multiple pumping units capable of pumping significant volumes at high pressures, and a monitoring van loaded with real time monitoring equipment and computers used to control the fracturing process. The Company’s fracturing units are capable of pumping slurries at pressures of up to 20,000 pounds per square inch. In 1998, the Company embarked on a program to replace its aging U.S. fracturing pumps fleet with new, more efficient and higher horsepower pressure pumping equipment. The Company has made significant progress with this program, which is now approximately 65% complete.

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 provide technical evaluation and job design recommendations as an integral element of its fracturing service for the customer. Technological developments in the industry over the past several years have focused on proppant concentration control (i.e., proppant density), liquid gel concentrate capabilities, computer design and monitoring of jobs and cleanup properties for fracturing fluids. The Company has introduced equipment and products to respond to these technological advances.

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

Sand Control.    Sand control services involve pumping gravel to fill the cavity created around a wellbore during drilling. The gravel provides a filter for the exclusion of formation sand from the producing wellbore. Oil and natural gas are then free to move through the gravel into the wellbore. These services are utilized primarily in unconsolidated sandstone reservoirs, mostly in the Gulf of Mexico, the North Sea, Venezuela, Brazil, Trinidad, West Africa, Indonesia and India. Completion tools, as described elsewhere herein, are often utilized in conjunction with sand control services.

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

Coiled Tubing.    Coiled tubing services involve injecting coiled tubing into wells to perform various well-servicing operations. The application of coiled tubing has increased in recent years due to improvements in coiled tubing technology. Coiled tubing is a flexible steel pipe with a diameter of less than five inches manufactured in continuous lengths of thousands of feet and wound or coiled along a large reel on a truck or skid-mounted unit. Due to the small diameter of coiled tubing, it can be inserted through existing production tubing and used to perform workovers without using a larger, more costly workover rig. The other principal advantages of employing coiled tubing in a workover include (i) not having to “shut-in” the well during such operations, thereby allowing production to continue and reducing the risk of formation damage to the well, (ii) the ability to reel continuous coiled tubing in and out of a well significantly faster than conventional pipe, which must be jointed and unjointed, (iii) the ability to direct fluids into a wellbore with more precision, allowing for localized stimulation treatments and providing a source of energy to power a downhole motor or manipulate downhole tools and (iv) enhanced access to remote or offshore fields due to the smaller size and mobility of a coiled tubing unit. The Company has developed a line of specialty downhole tools that may be run on coiled tubing, including rotary jetting equipment and through-tubing inflatable packer systems.

Service Tools.    The Company provides service tools and technical personnel for well servicing applications in select markets throughout the world. Service tools, which are used to perform a wide range of downhole operations to maintain or improve a well, generally are rented by customers from the Company. While marketed separately, service tools are usually provided during the course of providing other pressure pumping services.

Other Oilfield Services

The Company’s other oilfield services accounted for approximately 17% of the Company’s total revenue in 2003. The other oilfield services segment consists of casing and tubular services, process and pipeline services, production chemicals, and, with the acquisition of OSCA on May 31, 2002, completion tools and completion fluids services in the U.S. and select markets internationally. Revenue for this segment for each of the three years ended September 30, 2003, is presented in Note 8 of the Notes to Consolidated Financial Statements.

Casing and Tubular Services.    Casing and tubular services comprise installing (or “running”) casing and production tubing into a wellbore. Casing is run to protect the structural integrity of the wellbore and to seal various zones in the well. These services are primarily provided during the drilling and completion phases of a well. Production tubing is run inside the casing. Oil and natural gas are produced through the tubing. These services are provided during the completion and workover phases.

Process and Pipeline Services.    Process services involve inspecting and testing the integrity of pipe connections in offshore drilling and production platforms and onshore and offshore pipelines and industrial plants. These services are provided during the commissioning, decommissioning, installation or construction stages of these infrastructures, as well as during routine maintenance checks. Historically, hydrocarbon storage and production facilities have been tested for leaks using either water under pressure or a “live” system whereby oil, gas or water was introduced at operating pressure. At remote locations such as offshore facilities, the volume of fresh water required to test a 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 be more expensive. Accordingly its use is restricted to those instances where environmental and safety concerns are particularly acute.

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Pipeline testing and commissioning services include filling the pipeline with water, pressure testing, de-watering, and then either vacuum, dry air or nitrogen drying of pipelines. Recent technical innovations include the development of pipeline gels, both hydrocarbon and aqueous, for pipeline cleaning and transport of debris that has settled out in the pipelines. The Company has also developed high friction pig trains used in cleaning pipelines and has freezing techniques for the isolation of sections of pipelines.

In conducting its pipeline inspection business, the Company uses “intelligent pigs.” Intelligent pigs are pipeline monitoring vehicles which, together with interpretational software, offer to pipeline operators, constructors and regulators measurement of pipeline wall thickness (detects corrosion), geometry (detects the movement, dents, and ovality of the pipeline), determination of pipeline location (latitude, longitude, and height or plan and profile). Using the acquired data, the customer can develop a structural analysis to ascertain if the pipeline is fit for purpose. The operator’s planning is improved through the utilization of the data to determine the pipeline’s status, estimate current and future reliability and determine appropriate remedial or maintenance requirements. Some pipeline operators routinely use intelligent pigs as part of their maintenance monitoring programs as a method for increasing safety for people, property and the environment.

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

Completion Tools.    The Company designs, builds and installs downhole completion tools that deploy gravel to control the migration of reservoir sand into the well and direct the flow of oil and natural gas into the production tubing. The Company has a specialty tool manufacturing plant in Mansfield, Texas which manufactures some of the components required in the completion tools. In addition, spare parts for completion tools and production packers are sold to customers that have purchased tools in the past.

The Company’s completion tools are sold as complete systems, which are customized based on each well’s particular mechanical and reservoir characteristics, such as downhole pressure, wellbore size and formation type. Many wells produce from more than one productive zone simultaneously. Depending on the customer’s preference, the Company has the ability to install tools that can either isolate one producing zone from another or integrate the production from multiple zones. Once the tool systems are designed and customized, each is inspected for quality assurance before it is delivered to the well location. The Company’s field specialists, working with the rig crews, deploy completion tools in the well during the completion process.

To further enhance reservoir optimization, the Company has also developed the tools necessary to provide the operator with “intelligent completion” capabilities. The Company’s tools selectively control flow from multiple productive zones in the same wellbore from a remote activation site on surface. The Company from time to time may also outsource the equipment necessary to monitor downhole parameters such as temperature, pressure and reservoir flow to allow optimization of well productivity.

In addition to tools that are designed to control sand migration, the Company also provides completion tools that are generally used in conventional completions for reservoirs that do not require sand control. These tools include non-proprietary production packers and other tools that are delivered through distribution networks located in key domestic markets and select international markets.

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Completion Fluids.    The Company sells and reclaims clear completion fluids and performs related fluid maintenance activities, such as filtration and reclamation. Completion fluids are used to control well pressure and facilitate other completion activities, while minimizing reservoir damage. The Company provides commodity completion fluids as well as a broad line of specially formulated and customized fluids for critical completion applications.

Completion fluids are available either as pure salt solutions or in combination with other materials for increased flexibility and greater cost-effectiveness. These fluids are solids-free, and therefore will not physically plug oil and natural gas reservoirs. In contrast, drilling mud, the fluid typically used during drilling and for some well completions contains solids to achieve densities greater than water. These solids plug the reservoir, causing reservoir damage and restricting the flow of oil and natural gas into the well. When completion fluids are placed into a well, they typically become contaminated with solids that are left in the well after drilling mud is displaced. To remove these contaminants, the Company deploys filtering equipment and technicians that work in conjunction with the Company’s on-site fluid engineers to maintain the solids-free condition of the completion fluids throughout the project. The Company provides an entire range of completion fluids, as well as all support services needed to properly apply completion fluids in the field, including filtration, on-site engineering, additives and rental equipment.

Pressure Pumping Operations

Pressure pumping services are provided both on land and offshore on a 24-hour, on-call basis through regional and district facilities in approximately 200 locations worldwide. Services are provided utilizing complex truck or skid-mounted equipment designed and constructed for the particular pressure pumping service furnished. After equipment is transported to a well location it is configured with appropriate connections to perform the services required. The mobility of this equipment permits the Company to provide pressure pumping services to wellsites in virtually all geographic areas. Most units are equipped with computerized systems that allow for real-time monitoring and control of the cementing processes. Management believes that the Company’s pressure pumping equipment is adequate to service both current and projected levels of market activity in the near term.

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

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

Engineering and Support Services

The Company maintains three primary engineering and support service centers—one in Tomball, Texas, one in Houston, Texas and the other in Calgary, Alberta. The Company’s research and development organization is divided into six distinct areas: Product Development, Software Applications, Instrumentation Engineering, Mechanical Engineering, Coiled Tubing Engineering and Completion Tools Engineering.

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Product Development.    The product development laboratory specializes in developing products with enhanced performance characteristics in the fracturing, acidizing, sand control 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 process is a critical element in developing products to meet customer needs.

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

Instrumentation Engineering.    The pressure pumping industry utilizes an array of monitoring and control instrumentation as an integral element of providing cementing and stimulation services. The Company’s monitoring and control instrumentation, developed by its instrumentation engineering group, complements its products and equipment and provides customers with desired real-time monitoring of critical applications.

Mechanical Engineering.    Though similarities exist between the major pressure pumping 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 of virtually all of the Company’s primary pumping and blending equipment. The Company’s mechanical engineering group provides new product design as well as support to the rebuilding and field maintenance functions.

Coiled Tubing Engineering.    The coiled tubing engineering group is located in Calgary, Alberta. This group provides most of the support and research and development activities for the Company’s coiled tubing services, including coiled tubing directional drilling technology. The Company is also actively involved in the ongoing development of downhole tools that may be run on coiled tubing.

Completion Tools Engineering.    The completions tools research facility in Houston, Texas specializes in the designing, manufacturing and testing of completion tools. Since the Company’s tools are often installed miles below the earth’s surface, it is critical that potential design flaws be diagnosed and prevented prior to installation. Optimal tool configuration is determined by considering a variety of factors, including different raw materials, operating conditions and design specifications.

Manufacturing

In addition to the engineering facility, the Company’s research and technology center in Tomball, Texas also houses its main equipment and instrumentation manufacturing facility. This operation currently includes equipment design, manufacturing and testing, warehousing, distribution, laboratory, training and engineering capabilities along with numerous support operations. The Company produces certain components and spare parts required for the assembly of downhole completion tools and service tools at a manufacturing facility in Mansfield, Texas. The Company also has smaller manufacturing capabilities in several international locations. The Company employs outside vendors for manufacturing various units, engine and transmission rebuilding, and certain fabrication work, but is not dependent on any one source.

Competition

Pressure Pumping Services.    There are two primary companies with which the Company competes in pressure pumping services, Halliburton Energy Services, a division of Halliburton Company, and Schlumberger Ltd. These companies have operations in most areas of the U.S. in which the Company participates and in most international regions. It is estimated that these two competitors, along with the Company, provide approximately 90% of pressure pumping services to the industry. Several smaller companies compete with the Company in

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certain areas of the U.S. and in certain international locations. The principal methods of competition which apply to the Company’s business are its prices, service record and reputation in the industry. While Halliburton Energy Services and Schlumberger are larger in terms of overall pressure pumping revenue, the Company has the largest market share position in certain geographic areas.

Other Oilfield Services.    The Company believes that it is one of the largest suppliers of casing and tubular services in the U.K. North Sea and has expanded such services into other international markets in the past several years. The largest provider of casing and tubular services is Weatherford International, Inc. In the U.K., 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 the largest provider of commissioning and leak detection services and one of the largest providers of pipeline inspection services. Pipeline Integrity International Ltd. (a division of General Electric) and H. Rosen Engineering GmbH are our principal competitors in pipeline inspection. In production chemical services, there are several competitors significantly larger than the BJ Chemical Services. The Company’s principal competitors in completion fluids are Baroid Corporation, a subsidiary of Halliburton Company; M-I LLC, a joint venture of Smith International, Inc. and Schlumberger Limited; and Tetra Technologies, Inc. The Company’s principal competitors in completion tools are Halliburton Energy Services, a division of Halliburton Company; Schlumberger Limited, Baker Hughes Incorporated and Weatherford International, Inc.

Markets and Customers

Demand for the Company’s services and products depends primarily upon the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells, the number of well completions and the level of workover activity worldwide. With the exception of Canada and to a lesser degree Process and Pipeline Services, the Company is not significantly impacted by seasonality.

The Company’s principal customers consist of major and independent oil and natural gas producing companies. During 2003, the Company provided services to several thousand customers, none of which accounted for more than 5% of consolidated revenue. While the loss of certain of the Company’s largest customers could have a material adverse effect on Company revenue and operating results in the near term, management believes the Company would be able to obtain other customers for its services in the event of a loss of any of its largest customers.

United States.    The United States represents the largest single pressure pumping market in the world. The Company provides its pressure pumping services to its U.S. customers through a network of more than 50 locations throughout the U.S., a majority of which offer both cementing and stimulation services. Demand for the Company’s pressure pumping services in the U.S. is primarily driven by oil and natural gas drilling activity, which tends to be extremely volatile depending on the current and anticipated prices of oil and natural gas. Due to aging oilfields and lower-cost sources of oil internationally, drilling activity in the U.S. has declined more than 75% from its peak in 1981. Record low drilling activity levels were experienced in 1986 and 1992 and again in 1999. Despite a recovery in the latter half of fiscal 1999, the U.S. average fiscal 1999 rig count of 601 active rigs represented the lowest in recorded history. The recovery in U.S. drilling, however, continued throughout fiscal 2000 and 2001 due to exceptionally strong oil and natural gas prices, yet drilling activity retreated in fiscal 2002. For the 12 months ended September 30, 2003, the active U.S. rig count averaged 966 rigs, a 11% increase from fiscal 2002. Much of the increase occurred in the number of rigs drilling for natural gas, which increased 12% from the previous fiscal year. Crude oil and natural gas prices have stabilized over the past several months and U.S. drilling activity has leveled out. The Company’s management believes that average rig count for fiscal 2004 will be approximately 14% higher than fiscal 2003, essentially flat with current levels of approximately 1,100 rigs. During fiscal 2002, the Company expanded its deepwater offshore stimulation capabilities in the Gulf of Mexico through the acquisition of OSCA, which added two stimulation vessels, and the commissioning of the “Blue Ray” stimulation vessel in November 2001.

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International.    The Company operates in more than 50 countries in the major international oil and natural gas producing areas of Latin America, Europe, Africa, Russia, Asia, Canada and the Middle East. The Company generally provides services to its international customers through wholly-owned foreign subsidiaries. Additionally, the Company holds certain controlling and minority interests in several joint venture companies, through which it conducts a portion of its international operations. The Company’s Canadian operations now represent its largest international operation with approximately 12% of the Company’s consolidated revenue in fiscal 2003.

Drilling activity outside North America has historically been less volatile than the U.S. markets. Due to the significant investment and complexity in international projects, management believes drilling decisions relating to such projects tend to be evaluated and monitored with a longer-term perspective with regard to oil and natural gas pricing. Additionally, the international market is dominated by major oil companies and national oil companies which tend to have different objectives and more operating stability than the typical independent producer in North America. International activities have been increasingly important to the Company’s results of operations since 1992, when the Company implemented a strategy to expand its international presence. During fiscal 2001, the Company completed expansion projects in Saudi Arabia, Kazakhstan and West Africa. In fiscal 2002, the Company expanded in Russia through the purchase of additional workover rigs and enhanced its market position in the Brazilian offshore market with the addition of the “Blue Shark” stimulation vessel. In addition, the Company expanded its service offering in Brazil through the acquisition of OSCA, and by acquiring the assets and business of a leading provider of coiled tubing services in Brazil. During fiscal 2003, the Company established a new operating base in El Salvador to provide pumping services to clients operating in the area. In addition, during fiscal 2003 the Company’s pumping service activities were expanded to New Zealand, Mozambique and Turkey to provide services for drilling, workover and stimulation projects.

The Company now operates in most of the major oil and natural gas producing regions of the world. International operations are subject to 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. The Company mitigates the risk of currency exchange rate fluctuations by invoicing the majority of its international services in U.S. dollars.

Employees

At September 30, 2003, the Company had a total of 11,990 employees. Approximately 63% of the Company’s employees were employed outside the United States. At September 30, 2003, the Company had a sufficient number of trained employees to meet customer requirements. However, in times of rapidly expanding activity temporary labor shortages may occur.

Governmental and Environmental Regulation

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

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

The Company has implemented and continues to implement various procedures to further assure its compliance with environmental regulations. Such procedures generally pertain to the operation of underground storage tanks, disposal of empty chemical drums, improvement to acid and wastewater handling facilities and cleaning of certain areas at the Company’s facilities. The estimated future cost for such procedures is

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$3.3 million, which will be incurred over a period of several years, and for which the Company has provided appropriate reserves. In addition, the Company maintains insurance for certain environmental liabilities which the Company believes is reasonable based on its knowledge of the industry.

The Comprehensive Environmental Response, Compensation and Liability Act, also known as “Superfund,” imposes liability without regard to fault or the legality of the original conduct, on certain classes of persons that contributed to the release of a “hazardous substance” into the environment. Certain third-party owned disposal facilities used by the Company or its predecessors have been investigated under state and federal Superfund statutes, and the Company is currently named as a potentially responsible party for cleanup at three 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 adverse effect on the Company’s operations or financial position.

Research and Development: Patents

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

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

In 1991, the Company introduced a borate-based fracturing fluid, Spectra Frac G^®, which is being widely used in the U.S. stimulation market and the North Sea. In 1993, this product was complemented with two additional fracturing fluids, Spartan Frac^® and Medallion Frac^®, which have expanded the Company’s services line offering to cover a broader range of economic and downhole design variables. During 1994, the Company commercialized a proprietary enzyme process used in conjunction with these three fracturing fluids. These “enzyme breakers” significantly enhance the production of oil and natural gas in a wide range of wells. During 1998, the Company introduced a low polymer fracturing fluid (Vistar^®) designed to provide greater fracture length with minimal polymer residue. This product has been successfully utilized in a wide variety of applications since 1998. During 1999 and 2000, the Company successfully field tested in the U.S. a low and mid stress range deformable particle (FlexSand^™) designed to prevent proppant flowback and extend the life of the fracturing treatment. During 2001 and 2002, the Company commercialized the FlexSand additive globally and successfully field tested a high stress range version of the deformable particle.

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

During 2000 and 2001, the Company successfully field tested and commercialized the TST-3^™ service tool packer. This packer provides the latest in service tool technology and operational efficiency. During 2001 and 2002, the Company successfully field tested and commercialized a composite drillable bridge plug, the Python^™, for which patents have been granted and are pending. The Python plug performs at temperatures in excess of 375°F and differential pressures greater than 10,000 pounds per square inch.

The testing and development of new products is an integral part of the Company’s pipeline inspection and coiled tubing businesses. Developments include a magnetic flux leakage (MFL) corrosion inspection tool; ROTO-JET^®, a tool for use in wellbore scale removal; the SandVac^®/Well Vac^™ treatment tool (a tool

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incorporating a hydraulic jet pump to effectively remove sand and other particles hindering production from the wellbore); the Tornado^™ treatment tool and well cleaning system (a patented tool and method employing switchable forward and rearward facing jets that can be used to remove sand from deviated wellbores at much higher efficiencies than previously obtainable); and various downhole tools and other technologies used in directional drilling applications using coiled tubing. During 2001 and 2002, the Company globally commercialized the LEGS^™ (lateral entry guidance system) tool for use with coiled tubing re-entry into vertical and horizontal wells containing lateral wellbores. The LEGS^™ tool provides the technology to locate and successfully enter laterals for workover operations in existing wells. Additionally, the Company operates under various license arrangements, generally ranging from 10 to 20 years in duration, relating to certain products or techniques. None of these license arrangements is material to the Company’s operations overall.

During 2002, the Company actively marketed Liquid Stone^®, a patented storable cement slurry, as a primary cementing method in both land and offshore operations. Liquid Stone technology produces a high quality, fit-for-purpose cement slurry that can be stored in a liquid state for a period of days or weeks prior to placement in the well. During 2002, the Company also actively marketed AquaCon^™ Relative Permeability Modifier (“RPM”) technology for water control and production enhancement applications. AquaCon^™ is a patented RPM system that is effective in both sandstone and carbonate formations.

During 2003, the Company introduced LiteProp^™ lightweight proppants. LiteProp^™ lightweight proppants are stand-alone sand substitutes having lower specific gravities than sand. The patent pending LiteProp proppants and systems provide an improved ability to place proppant deeper into the producing zones of the formation and achieve longer effective fracture lengths.

The Company intends to continue to devote significant resources to its research and development efforts. For information regarding the amounts of research and development expenses for each of the three fiscal years ended September 30, 2003, see Note 12 of the Notes to Consolidated Financial Statements.

Risk Factors

This document and our other filings with the Securities and Exchange Commission and our other materials released to the public contain “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements discuss the Company’s prospects, expected revenue, expenses and profits, strategies for its operations and other subjects, including conditions in the oilfield service and oil and gas industries and in the United States and international economy in general.

Our forward-looking statements are based on assumptions that we believe to be reasonable but that may not prove to be accurate. All of the Company’s forward-looking information is, therefore, subject to risks and uncertainties that could cause actual results to differ materially from the results expected. Although it is not possible to identify all factors, these risks and uncertainties include the risk factors discussed below.

Business Risks.    The Company’s results of operations could be adversely affected if its business assumptions do not prove to be accurate or if adverse changes occur in the Company’s business environment, including the following areas:

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Risks of Economic Downturn.    In the event of an economic downturn in the United States or globally, there may be decreased demand and lower prices for oil and natural gas and therefore for our products and services. The Company’s customers are generally involved in the energy industry, and if these customers experience a business decline, we may be subject to increased exposure to credit risk. If an economic downturn occurs, our results of operations may be adversely affected.

Risks from Operating Hazards.    The Company’s operations are subject to hazards present in the oil and natural gas industry, such as fire, explosion, blowouts and oil spills. These incidents as well as accidents or problems in normal operations can cause personal injury or death and damage to property or the environment. The customer’s operations can also be interrupted. From time to time, customers seek to recover from the Company for damage to their equipment or property that occurred while the Company was performing work. Damage to the customer’s property could be extensive if a major problem occurred. For example, operating hazards could arise:

Risks from Unexpected Litigation.    The Company has insurance coverage against operating hazards that it believes is customary in the industry. This insurance has deductibles or self-insured retentions and contains certain coverage exclusions. The Company’s insurance premiums can be increased or decreased based on the claims made by the Company under its insurance policies. The insurance does not cover damages from breach of contract by the Company or based on alleged fraud or deceptive trade practices. Whenever possible, the Company obtains agreements from customers that limit the Company’s liability. Insurance and customer agreements do not provide complete protection against losses and risks, and the Company’s results of operations could be adversely affected by unexpected claims not covered by insurance.

Risks from International Operations.    The Company’s international operations are subject to special risks that can materially affect the Company’s sales and profits. These risks include:

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Weather.    The Company’s performance is significantly impacted by the demand for natural gas in North America. Warmer than normal winters in North America, among other factors, may adversely impact demand for natural gas and therefore, demand for the Company’s services. Conversely, colder than normal winters may positively impact demand for natural gas and the Company’s services.

Other Risks.    Other risk factors that could cause actual results to be different from the results we expect include:

Many of these risks are beyond the control of the Company. In addition, future trends for pricing, margins, revenue and profitability remain difficult to predict in the industries we serve and under current economic and political conditions. Except as required by applicable law, we do not assume any responsibility to update any of our forward-looking statements.

Available Information

The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section13 (a) or 15 (d) of the Exchange Act are made available free of charge on the Company’s internet website at http://www.bjservices.com on the same day that we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

Executive Officers of the Registrant

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

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

Mr. Airola joined the Company as Assistant General Counsel in 1995 from Cooper Industries, Inc., a diversified manufacturing company, where he served as Senior Litigation Counsel. He was named Chief Compliance Officer in 2003.

Ms. Douget joined the Company in October 1979 and was promoted to Director, Human Resources in June 2003. Prior to being promoted Director, she held various positions within the Human Resources function.

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

Mr. Hoel joined the Company in 1992 as an Account Manager and was named Region Sales Manager in 1993. He previously served as Vice President of Sales for the U.S. Western Division, prior to being named Vice President—Technology and Logistics in 2002.

Mr. McCole originally joined the Company as Director of Internal Audit in 1991. He also served as Controller of the Asia Pacific Region and Controller of BJ Chemical Services (formerly BJ Unichem). He left the Company in 1998 and returned in 2001 to serve as Director of Internal Audit until becoming Controller in 2002.

Ms. Shannon joined the Company in 1994 as Vice President—General Counsel from the law firm of Andrews Kurth LLP, where she had been a partner since 1984.

Mr. Smith joined the Company in 1990 as Financial Reporting Manager. He also served as Director, Financial Planning. In 1997 he was promoted to Director, Business Development, a position he held until being named Treasurer in 2002. Prior to joining BJ Services, he held various positions with Baker Hughes Incorporated.

Mr. Whichard joined the Company as Tax and Treasury Manager in 1989 from Weatherford International and was named Treasurer in 1992 and Vice President in 1998. Prior to being named Vice President, Finance and Chief Financial Officer in 2002, he served in various positions including Treasurer, Tax Director and Assistant Treasurer.

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

ITEM 2.    Properties

The Company’s properties consist primarily of pressure pumping and blending units and related support equipment such as bulk storage and transport units. Although a portion of the Company’s U.S. pressure pumping and blending fleet is being utilized through a servicing agreement with an outside party (see Lease and Other Long-Term Commitments in Note 10 of the Notes to the Consolidated Financial Statements), the majority of its worldwide fleet is owned and unencumbered. The Company’s tractor fleet, most of which is owned, is used to transport the pumping and blending units. The majority of the Company’s light duty truck fleet, both in the U.S. and international operations, is also owned.

The Company owns and leases regional and district facilities from which pressure pumping services and other oilfield services are provided to land-based and offshore customers. The Company’s principal executive offices in Houston, Texas are leased. The technology and research centers located near Houston, Texas and Calgary, Alberta are owned by the Company, as are blending facilities located in Germany, Singapore, U.S., Canada and Brazil. The Company owns and operates a calcium chloride manufacturing plant in Geismar, Louisiana for its completion fluids. This facility neutralizes hydrochloric acid with calcium carbonate, generating industrial strength, technical grade calcium chloride. The Company leases a 37,000 square foot facility in Mansfield, Texas that houses the manufacturing of some of the components used in its downhole completion tools. The Company operates several stimulation vessels including one in the North Sea, which is owned, four in South America and four in the Gulf of Mexico for which the hulls are leased. The Company believes that its facilities are adequate for its current operations. For additional information with respect to the Company’s lease commitments, see Note 10 of the Notes to Consolidated Financial Statements.

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ITEM 3.    Legal Proceedings

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

Through acquisition the Company assumed responsibility for certain claims and proceedings made against Western, Nowsco and OSCA in connection with their businesses. Some, but not all, of such claims and proceedings will continue to be covered under insurance policies of the Company’s predecessors that were in place at the time of the acquisitions. Although the outcome of the claims and proceedings against the Company (including Western, Nowsco and OSCA) cannot be predicted with certainty, management believes that there are no existing claims or proceedings that are likely to have a material adverse effect on the Company’s financial position or results of operations for which it has not already provided.

Chevron Phillips Litigation

On July 10, 2002, Chevron Phillips Chemical Company (“Chevron Phillips”) filed a lawsuit against BJ Services Company (“BJ”) for patent infringement in the United States District Court for the Southern District of Texas (Corpus Christi). The lawsuit relates to a patent issued in 1992 to the Phillips Petroleum Company (“Phillips”). This patent (the ‘477 patent) relates to a method for using enzymes to decompose used drilling