Baker Hughes 2010 Annual Report Download - page 91

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Compliance with and changes in laws or adverse
positions taken by taxing authorities could be costly
and could affect operating results.
We have operations in the U.S. and in over 80 countries
that can be impacted by expected and unexpected changes
in the legal and business environments in which we operate.
Our ability to manage our compliance costs and compliance
programs will impact our ability to meet our earnings goals.
Compliance related issues could also limit our ability to do
business in certain countries. Changes that could impact the
legal environment include new legislation, new regulations,
new policies, investigations and legal proceedings and new
interpretations of existing legal rules and regulations, in partic-
ular, changes in export control laws or exchange control laws,
additional restrictions on doing business in countries subject to
sanctions, and changes in laws in countries where we operate
or intend to operate. Changes that impact the business envi-
ronment include changes in accounting standards, changes in
environmental laws, changes in tax laws or tax rates, the reso-
lution of tax assessments or audits by various tax authorities,
and the ability to fully utilize our tax loss carryforwards and tax
credits. In addition, we may periodically restructure our legal
entity organization. If taxing authorities were to disagree with
our tax positions in connection with any such restructurings,
our effective tax rate could be materially impacted.
These changes could have a significant financial impact
on our future operations and the way we conduct, or if we
conduct, business in the affected countries.
The May 2010 moratorium on drilling offshore in the U.S.,
as well as changes in and compliance with restrictions
or regulations on offshore drilling in the U.S. Gulf of Mex-
ico and in other areas around the world, has and may
continue to adversely affect our business and operating
results and reduce the need for our services in those areas.
While the moratorium on drilling offshore in the U.S. was
lifted on October 12, 2010, there is a delay in resuming permit-
ting of operations related to drilling offshore in the U.S. and
there is no assurance that operations related to drilling offshore
in the U.S. will reach the same levels that existed prior to the
moratorium. The delay in resuming these activities or the failure
of these activities to reach levels that existed prior to the mora-
torium has and could continue to adversely impact our operat-
ing results. The April 2010 Deepwater Horizon accident in the
Gulf of Mexico and its aftermath has resulted in new and pro-
posed legislation and regulation in the U.S. of the offshore oil
and gas industry, which may result in substantial increases in
costs or delays in drilling or other operations in the Gulf of Mex-
ico, oil and gas projects becoming potentially non-economic,
and a corresponding reduced demand for our services. We
cannot predict with any certainty the impact of the prior mor-
atorium or the substance or effect of any new or additional
regulations. If the U.S. or other countries where we operate,
enact stricter restrictions on offshore drilling or further regulate
offshore drilling or contracting services operations, including
without limitation cementing, higher operating costs could
result and adversely affect our business and operating results.
Uninsured claims and litigation against us could
adversely impact our operating results.
We could be impacted by the outcome of pending litiga-
tion as well as unexpected litigation or proceedings. We have
insurance coverage against operating hazards, including prod-
uct liability claims and personal injury claims related to our
products, to the extent deemed prudent by our management
and to the extent insurance is available; however, no assurance
can be given that the nature and amount of that insurance
will be sufficient to fully indemnify us against liabilities arising
out of pending and future claims and litigation. This insurance
has deductibles or self-insured retentions and contains certain
coverage exclusions. The insurance does not cover damages
from breach of contract by us or based on alleged fraud
or deceptive trade practices. In addition, the following risks
apply with respect to our insurance coverage:
• we may not be able to continue to obtain insurance
on commercially reasonable terms;
• we may be faced with types of liabilities that will not
be covered by our insurance;
• our insurance carriers may not be able to meet their
obligations under the policies; or
• the dollar amount of any liabilities may exceed our
policy limits.
Whenever possible, we obtain agreements from customers
that limit our liability. However, state law, laws or public policy
in countries outside the U.S., or the negotiated terms of the
agreement with the customer may not recognize those limita-
tions of liability and/or limit the customer’s indemnity obliga-
tions to the Company. In addition, insurance and customer
agreements do not provide complete protection against losses
and risks from an event, like a well blow out that can lead to
property damage, personal injury, death or the discharge of
hazardous materials into the environment. Our results of oper-
ations could be adversely affected by unexpected claims not
covered by insurance.
Compliance with and rulings and litigation in connection
with environmental regulations may adversely affect our
business and operating results.
Our business is impacted by unexpected outcomes or
material changes in environmental regulations. Our expecta-
tions regarding our compliance with environmental regulations
and our expenditures to comply with environmental regulations,
including (without limitation) our capital expenditures for envi-
ronmental control equipment, are only our forecasts regarding
these matters. These forecasts may be substantially different
from actual results, which may be affected by the following fac-
tors: changes in environmental regulations; a material change
in our allocation or other unexpected, adverse outcomes with
respect to sites where we have been named as a PRP, including
(without limitation) Superfund sites; the discovery of new sites
of which we are not aware and where additional expenditures
may be required to comply with environmental regulations;
an unexpected discharge of hazardous materials.