Halliburton 2011 Annual Report Download - page 29

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14
Trends in oil and natural gas prices affect the level of exploration, development, and production
activity of our customers and the demand for our services and products which could have a material
adverse effect on our consolidated results of operations and consolidated financial condition.
Demand for our services and products is particularly sensitive to the level of exploration,
development, and production activity of, and the corresponding capital spending by, oil and natural gas
companies, including national oil companies. The level of exploration, development, and production
activity is directly affected by trends in oil and natural gas prices, which, historically, have been volatile
and are likely to continue to be volatile.
Prices for oil and natural gas are subject to large fluctuations in response to relatively minor
changes in the supply of and demand for oil and natural gas, market uncertainty, and a variety of other
economic factors that are beyond our control. Any prolonged reduction in oil and natural gas prices will
depress the immediate levels of exploration, development, and production activity which could have a
material adverse effect on our consolidated results of operations and consolidated financial condition. Even
the perception of longer-term lower oil and natural gas prices by oil and natural gas companies can
similarly reduce or defer major expenditures given the long-term nature of many large-scale development
projects. Factors affecting the prices of oil and natural gas include:
- the level of supply and demand for oil and natural gas, especially demand for natural gas in
the United States;
- governmental regulations, including the policies of governments regarding the exploration for
and production and development of their oil and natural gas reserves;
- weather conditions and natural disasters;
- worldwide political, military, and economic conditions;
- the level of oil production by non-OPEC countries and the available excess production
capacity within OPEC;
- oil refining capacity and shifts in end-customer preferences toward fuel efficiency and the use
of natural gas;
- the cost of producing and delivering oil and natural gas; and
- potential acceleration of development of alternative fuels.
Our business is dependent on capital spending by our customers and reductions in capital
spending could have a material adverse effect on our consolidated results of operations.
Our business is directly affected by changes in capital expenditures by our customers, and
restrictions in capital spending could have a material adverse effect on our consolidated results of
operations. Some of the changes that may materially and adversely affect us include:
- the consolidation of our customers, which could:
• cause customers to reduce their capital spending, which would in turn reduce the demand
for our services and products; and
• result in customer personnel changes, which in turn affect the timing of contract
negotiations; and
- adverse developments in the business and operations of our customers in the oil and natural
gas industry, including write-downs of reserves and reductions in capital spending for
exploration, development, and production.