Baker Hughes 2014 Annual Report Download - page 39

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Demand for pressure pumping services could be reduced or eliminated by governmental regulation or a change in
the law.
Some federal, state and foreign governmental bodies have adopted laws and regulations or are considering
legislative and regulatory proposals that, if signed into law, would among other things require the public disclosure
of chemicals used in hydraulic fracturing operations in more detail than the Company currently provides and would
subject hydraulic fracturing to more stringent regulation with respect to, for example, construction standards for
wells intended for hydraulic fracturing, certifications concerning the conduct of hydraulic fracturing operations,
management of flowback waters from hydraulic fracturing operations, or other measures intended to prevent
operational hazards. Such federal, state or foreign legislation and/or regulations could impair our operations,
increase our operating costs, and/or greatly reduce or eliminate demand for the Company’s hydraulic fracturing
services. The EPA and other governmental bodies are studying hydraulic fracturing operations. Government
actions relating to the development of unconventional oil and natural gas resources may impede the development of
these resources by our customers, delaying or reducing the demand for our services. We are unable to predict
whether the proposed changes in laws or regulations or any other governmental proposals or responses will
ultimately occur, and accordingly, we are unable to assess the potential financial or operational impact they may
have on our business.
Uninsured claims and litigation against us could adversely impact our operating results.
We could be impacted by the outcome of pending litigation as well as unexpected litigation or proceedings. We
have insurance coverage against operating hazards, including product 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 limitations of liability and/or limit the customer’s indemnity obligations to the Company. In addition,
insurance and customer agreements do not provide complete protection against losses and risks from an event like
a well control failure that can lead to property damage, personal injury, death or the discharge of hazardous
materials into the environment. Our results of operations could be adversely affected by unexpected claims not
covered by insurance.
Control of oil and natural gas reserves by state-owned oil companies may impact the demand for our services and
create additional risks in our operations.
Much of the world’s oil and natural gas reserves are controlled by state-owned oil companies. State-owned oil
companies may require their contractors to meet local content requirements or other local standards, such as joint
ventures, that could be difficult or undesirable for the Company to meet. The failure to meet the local content
requirements and other local standards may adversely impact the Company’s operations in those countries. In
addition, our ability to work with state-owned oil companies is subject to our ability to negotiate and agree upon
acceptable contract terms.
Providing services on an integrated or turnkey basis could require the Company to assume additional risks.
Many state-owned oil companies and other operators may require integrated contracts or turnkey contracts and
the Company may choose to provide services outside its core business. Providing services on an integrated or