Baker Hughes 2007 Annual Report Download - page 94

2007 Form 10-K 11
will be our ultimate liability in the matter. Further, other PRPs
involved in the sites have substantial assets and may reason-
ably be expected to pay their share of the cost of remediation,
and, in some circumstances, we have insurance coverage or
contractual indemnities from third parties to cover a portion
of or the ultimate liability.
We are subject to various other governmental proceedings
and regulations, including foreign regulations, relating to envi-
ronmental matters, but we do not believe that any of these
matters is likely to have a material adverse effect on our con-
solidated financial statements. We continue to focus on reduc-
ing future environmental liabilities by maintaining appropriate
company standards and improving our assurance programs.
See Note 15 of the Notes to Consolidated Financial Statements
in Item 8 herein for further discussion of environmental matters.
“Environmental Matters” contains forward-looking state-
ments within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”), and Section 21E of
the Exchange Act (each a “Forward-Looking Statement”). The
words “will,” “believe,” “to be,” “expect,” “estimate” and
similar expressions are intended to identify forward-looking
statements. Our expectations regarding our compliance with
Environmental Regulations and our expenditures to comply
with Environmental Regulations, including (without limitation)
our capital expenditures for environmental 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 factors: changes in Environmental
Regulations; a material change in our allocation or other unex-
pected, adverse outcomes with respect to sites where we have
been named as a PRP, including (without limitation) the Super-
fund sites described above; the discovery of new sites of which
we are not aware and where additional expenditures may be
required to comply with Environmental Regulations; an unex-
pected discharge of hazardous materials in the course of our
business or operations; a catastrophic event causing discharges
into the environment; or an acquisition of one or more
new businesses.
ITEM 1A. RISK FACTORS
An investment in our common stock involves various risks.
When considering an investment in our Company, one should
consider carefully all of the risk factors described below, as
well as other information included and incorporated by refer-
ence in this report. There may be additional risks, uncertainties
and matters not listed below, that we are unaware of, or that
we currently consider immaterial. Any of these could adversely
affect our business, financial condition, results of operations
and cash flows and, thus, the value of an investment in
our Company.
Risk Factors Related to the Worldwide
Oil and Natural Gas Industry
Our business is focused on providing products and services
to the worldwide oil and natural gas industry; therefore, our
risk factors include those factors that impact, either positively
or negatively, the markets for oil and natural gas. Expenditures
by our customers for exploration, development and production
of oil and natural gas are based on their expectations of future
hydrocarbon demand, the risks associated with developing
the reserves and the future value of the hydrocarbon reserves.
Their evaluation of the future value is based, in part, on their
expectations for global demand, global supply and other
factors that influence oil and natural gas prices. The key risk
factors currently influencing the worldwide oil and natural
gas markets are discussed below.
Demand for oil and natural gas is subject to factors
beyond our control, which may adversely affect our
operating results.
Growth in worldwide demand for oil and natural gas, as
well as the demand for our services, is highly correlated with
global economic growth, and in particular by the economic
growth of countries such as the U.S. and China, who are signifi-
cant users of oil and natural gas. Increases in global economic
activity, particularly in China and developing Asia, create more
demand for oil and natural gas and higher oil and natural
gas prices. A slowing of global economic growth, and in par-
ticular in the U.S. or China, will likely reduce demand for oil
and natural gas, increase spare productive capacity and result
in lower prices and adversely impact the demand for our ser-
vices. In addition, demand for hydrocarbons could be impacted
by environmental regulation targeting reduction of green-
house gas emissions including the cost for Carbon Capture
and Sequestration.
Volatility of oil and natural gas prices can adversely
affect demand for our products and services.
Volatility in oil and natural gas prices can also impact our
customers’ activity levels and spending for our products and
services. While current energy prices are important contri-
butors to positive cash flow for our customers, expectations
about future prices and price volatility are generally more
important for determining future spending levels. While higher
oil and natural gas prices generally lead to increased spend-
ing by our customers, sustained high energy prices can be an
impediment to economic growth, and can therefore negatively
impact spending by our customers. Our customers also take
into account the volatility of energy prices and other risk fac-
tors by requiring higher returns for individual projects if there
is higher perceived risk. Any of these factors could affect the
demand for oil and natural gas and could have a material
adverse effect on our results of operations.
Supply of oil and natural gas is subject to factors
beyond our control, which may adversely affect our
operating results.
Productive capacity for oil and natural gas is dependent on
our customers’ decisions to develop and produce oil and natu-
ral gas reserves. The ability to produce oil and natural gas can
be affected by the number and productivity of new wells drilled
and completed, as well as the rate of production and resulting
depletion of existing wells. Advanced technologies, such as
horizontal drilling, improve total recovery but also result in a
more rapid production decline.