National Oilwell Varco 2015 Annual Report Download - page 19

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Table of Contents
 
You should carefully consider the risks described below, in addition to other information contained or incorporated by reference herein. Realization of any
of the following risks could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We are dependent upon the level of activity in the oil and gas industry, which is volatile.
The oil and gas industry historically has experienced significant volatility. Demand for our products and services depends primarily upon the number of oil
rigs in operation, the number of oil and gas wells being drilled, the depth and drilling conditions of these wells, the volume of production, the number of well
completions, capital expenditures of other oilfield service companies and the level of workover activity. Drilling and workover activity can fluctuate
significantly in a short period of time, particularly in the United States and Canada. The willingness of oil and gas operators to make capital expenditures to
explore for and produce oil and natural gas and the willingness of oilfield service companies to invest in capital equipment will continue to be influenced by
numerous factors over which we have no control, including:
• the current and anticipated future prices for oil and natural gas;
• the ability or willingness of the members of the Organization of Petroleum Exporting Countries, or OPEC, to maintain price stability through
voluntary production limits;
• the level of production by non-OPEC countries;
• level of excess production capacity;
• cost of exploring for and producing oil and gas;
• level of drilling activity and drilling rig dayrates;
• worldwide economic activity and associated demand for oil and gas;
• availability and access to potential hydrocarbon resources;
• national government political requirements;
• development of alternate energy sources; and
• environmental regulations.
The current significant oil and gas industry downturn has resulted in reduced demand for oilfield services, which has had, and may continue to have, a
significant adverse impact on our financial results. If these conditions worsen or oil and gas prices do not improve, further reductions in spending by the oil
and gas industry could have a material adverse effect on our financial condition, results of operations and cash flows.
Volatile oil and gas prices affect demand for our products.
Expectations for future oil and gas prices cause many shifts in the strategies and expenditure levels of oil and gas companies and drilling contractors,
particularly with respect to decisions to purchase major capital equipment of the type we manufacture. Oil and gas prices, which are determined by the
marketplace, may fall below a range that is acceptable to our customers, which could reduce demand for our products.
There are risks associated with certain contracts for our equipment.
As of December 31, 2015, we had a backlog of capital equipment to be manufactured, assembled, tested and delivered by Rig Systems and Completion &
Production Solutions in the amount of $6.1 billion and $1.0 billion, respectively. The following factors, in addition to others not listed, could reduce our
margins on these contracts, adversely impact completion of these contracts, adversely affect our position in the market or subject us to contractual penalties:
• financial challenges for consumers of our capital equipment;
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