National Oilwell Varco 2010 Annual Report Download - page 22

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Our current and past activities, as well as the activities of our former divisions and subsidiaries, could result in our facing substantial
environmental, regulatory and other liabilities. These could include the costs of cleanup of contaminated sites and site closure obligations. These
liabilities could also be imposed on the basis of one or more of the following theories:
negligence;
strict liability;
breach of contract with customers; or
as a result of our contractual agreement to indemnify our customers in the normal course of business, which is normally the case.
We may not have adequate insurance for potential environmental liabilities.
While we maintain liability insurance, this insurance is subject to coverage limits. In addition, certain policies do not provide coverage for
damages resulting from environmental contamination. We face the following risks 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.
Even a partially uninsured claim, if successful and of significant size, could have a material adverse effect on our consolidated financial
statements.
The adoption of climate change legislation or regulations restricting emissions of greenhouse gases could increase our operating costs or
reduce demand for our products.
Environmental advocacy groups and regulatory agencies in the United States and other countries have been focusing considerable attention on
the emissions of carbon dioxide, methane and other greenhouse gases and their potential role in climate change. The adoption of laws and
regulations to implement controls of greenhouse gases, including the imposition of fees or taxes, could adversely impact our operations and
financial condition. The U.S. Congress is currently working on legislation to control and reduce emissions of greenhouse gases in the United
States, which includes establishing cap-and-trade programs. In addition to the pending climate legislation, the U.S. Environmental Protection
Agency has proposed regulations that would require permits for and reductions in greenhouse gas emissions for certain facilities, and may issue
final rules this year. These changes in the legal and regulatory environment could reduce oil and natural gas drilling activity and result in a
corresponding decline in the demand for our products and services, which could adversely impact our operating results and financial condition.
The Company had revenues of 17% of total revenue from one of its customers for the year ended December 31, 2010.
The loss of this customer (Samsung Heavy Industries) or a significant reduction in its purchases could adversely affect our future revenues and
earnings.
The recent moratorium on deepwater drilling in the U.S. Gulf of Mexico and its consequences could have a material adverse effect on our
business.
A moratorium on deepwater drilling in the U.S. Gulf of Mexico was enacted during the second quarter of 2010 following the Macondo well
blowout and oil spill. Even though such moratorium has been lifted, any prolonged reduction in oil and natural gas drilling and production
activity as a result of such moratorium or permitting issues in this area could result in a corresponding decline in the demand for our products and
services, which could adversely impact our operating results and financial condition.
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