National Oilwell Varco 2012 Annual Report Download - page 24

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Index to Financial Statements
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.
We had revenues of 12% of total revenue from one of our customers for the year ended December 31, 2011.
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.
Our information systems may experience an interruption or breach in security.
We rely heavily on information systems to conduct our business. Any failure, interruption or breach in security of our information systems could result in failures or
disruptions in our customer relationship management, general ledger systems and other systems. While we have policies and procedures designed to prevent or limit the effect
of the failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or,
if they do occur, that they will be adequately addressed. The occurrence of any failures, interruptions or security breaches of the our information systems could damage our
reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could
have a material adverse effect on our financial position or results of operations.
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