Baker Hughes 2013 Annual Report Download - page 45

Baker Hughes Incorporated15
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 generally requires 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
turnkey basis generally subjects the Company to additional risks, such as costs associated with unexpected delays
or difficulties in drilling or completion operations and risks associated with subcontracting arrangements.
Currency fluctuations or devaluations may impact our operating results.
Fluctuations or devaluations in foreign currencies relative to the U.S. Dollar can impact our revenue and our
costs of doing business. Most of our products and services are sold through contracts denominated in U.S. Dollars
or local currency indexed to U.S. Dollars; however, some of our revenue, local expenses and manufacturing costs
are incurred in local currencies and therefore changes in the exchange rates between the U.S. Dollar and foreign
currencies can increase or decrease our revenue and expenses reported in U.S. Dollars and may impact our results
of operations.
Changes in economic and/or market conditions may impact any stock repurchases, our ability to borrow and/or cost
of borrowing.
To the extent the Company engages in stock repurchases, such activity is subject to economic and market
conditions, such as the trading prices for our stock, as well as the terms of any stock purchase plans intended to
comply with Rule 10b5-1 or Rule 10b-18 of the Exchange Act. At our discretion, we may engage in or discontinue
stock repurchases at any time.
The condition of the capital markets and equity markets in general can affect the price of our common stock and
our ability to obtain financing, if necessary. If the Company’s credit rating is downgraded, this would increase
borrowing costs under our credit facility and commercial paper program, as well as the cost of renewing or
obtaining, or make it more difficult to renew or obtain or issue new debt financing.