Baker Hughes Announces Third Quarter Results
Adjusted net income for the third quarter of 2012 excludes an after-tax charge of
Adjusted net income for the third quarter of 2012 includes after-tax charges of
Net income attributable to
Revenue for the third quarter of 2012 was
"For the third quarter,
Craighead added, "Looking ahead, we are well positioned in growing and emerging markets. Our share in the Gulf of
Craighead continued, "We will continue investing in technologies, product lines and regions that strengthen the core of our business and supply chain. At the same time, we remain focused on increasing returns through a disciplined approach to capital investment."
The Company recently made the decision to sell its Process and Pipeline Services ("PPS") business. As a result, the Company has reclassified in all prior periods the revenue, expenses, cash flows, assets and liabilities of PPS to discontinued operations. PPS previously was a component of the Industrial Services segment, which now primarily consists of the Company's downstream chemicals and specialty polymers businesses.
The Company was cash flow positive in the third quarter of 2012, as cash increased by $215 million to
Capital expenditures were $732 million, depreciation and amortization expense was $399 million, and dividend payments were $66 million in the third quarter of 2012.
Adjusted EBITDA (a non-GAAP measure) in the third quarter of 2012 was $924 million, down
Consolidated Condensed Statements of Income |
|||||||||||||||||||
(Unaudited) |
|||||||||||||||||||
Three Months Ended |
|||||||||||||||||||
September 30, |
June 30, |
||||||||||||||||||
(In millions, except per share amounts) |
2012 |
2011 |
2012 |
||||||||||||||||
Revenue |
$ 5,228 |
$ 5,064 |
$ 5,212 |
||||||||||||||||
Costs and Expenses: |
|||||||||||||||||||
Cost of revenue |
4,305 |
3,843 |
4,168 |
||||||||||||||||
Research and engineering |
117 |
115 |
126 |
||||||||||||||||
Marketing, general and administrative |
344 |
301 |
298 |
||||||||||||||||
Total costs and expenses |
4,766 |
4,259 |
4,592 |
||||||||||||||||
Operating income |
462 |
805 |
620 |
||||||||||||||||
Interest expense, net |
(49) |
(58) |
(50) |
||||||||||||||||
Loss on early extinguishment of debt |
— |
(40) |
— |
||||||||||||||||
Income from continuing operations before income taxes |
413 |
707 |
570 |
||||||||||||||||
Income taxes |
(143) |
(9) |
(144) |
||||||||||||||||
Income from continuing operations |
270 |
698 |
426 |
||||||||||||||||
Income from discontinued operations, net of tax |
14 |
8 |
12 |
||||||||||||||||
Net income |
284 |
706 |
438 |
||||||||||||||||
Net (income) loss attributable to noncontrolling interests |
(5) |
— |
1 |
||||||||||||||||
Net income attributable to Baker Hughes |
$ 279 |
$ 706 |
$ 439 |
||||||||||||||||
Amounts attributable to Baker Hughes: |
|||||||||||||||||||
Income from continuing operations |
$ 265 |
$ 698 |
$ 427 |
||||||||||||||||
Income from discontinued operations |
14 |
8 |
12 |
||||||||||||||||
Net income attributable to Baker Hughes |
$ 279 |
$ 706 |
$ 439 |
||||||||||||||||
Basic earnings per share: |
|||||||||||||||||||
Income from continuing operations |
$ 0.60 |
$ 1.60 |
$ 0.97 |
||||||||||||||||
Income from discontinued operations |
0.03 |
0.02 |
0.03 |
||||||||||||||||
Basic earnings per share attributable to Baker Hughes |
$ 0.63 |
$ 1.62 |
$ 1.00 |
||||||||||||||||
Diluted earnings per share: |
|||||||||||||||||||
Income from continuing operations |
$ 0.60 |
$ 1.59 |
$ 0.97 |
||||||||||||||||
Income from discontinued operations |
0.03 |
0.02 |
0.03 |
||||||||||||||||
Diluted earnings per share attributable to Baker Hughes |
$ 0.63 |
$ 1.61 |
$ 1.00 |
||||||||||||||||
Weighted average shares outstanding, basic |
440 |
437 |
439 |
||||||||||||||||
Weighted average shares outstanding, diluted |
441 |
439 |
440 |
||||||||||||||||
Depreciation and amortization expense |
$ 399 |
$ 322 |
$ 370 |
||||||||||||||||
Capital expenditures |
$ 732 |
$ 627 |
$ 764 |
||||||||||||||||
Consolidated Condensed Statements of Income |
|||||||
(Unaudited) |
|||||||
Nine Months Ended September 30, |
|||||||
(In millions, except per share amounts) |
2012 |
2011 |
|||||
Revenue |
$ 15,708 |
$ 14,136 |
|||||
Costs and Expenses: |
|||||||
Cost of revenue |
12,660 |
10,900 |
|||||
Research and engineering |
366 |
331 |
|||||
Marketing, general and administrative |
975 |
862 |
|||||
Total costs and expenses |
14,001 |
12,093 |
|||||
Operating income |
1,707 |
2,043 |
|||||
Interest expense, net |
(153) |
(164) |
|||||
Loss on early extinguishment of debt |
— |
(40) |
|||||
Income from continuing operations before income taxes |
1,554 |
1,839 |
|||||
Income taxes |
(479) |
(434) |
|||||
Income from continuing operations |
1,075 |
1,405 |
|||||
Income from discontinued operations, net of tax |
27 |
20 |
|||||
Net income |
1,102 |
1,425 |
|||||
Net (income) attributable to noncontrolling interests |
(5) |
— |
|||||
Net income attributable to Baker Hughes |
$ 1,097 |
$ 1,425 |
|||||
Amounts attributable to Baker Hughes: |
|||||||
Income from continuing operations |
$ 1,070 |
$ 1,405 |
|||||
Income from discontinued operations |
27 |
20 |
|||||
Net income attributable to Baker Hughes |
$ 1,097 |
$ 1,425 |
|||||
Basic earnings per share: |
|||||||
Income from continuing operations |
$ 2.43 |
$ 3.22 |
|||||
Income from discontinued operations |
0.06 |
0.05 |
|||||
Basic earnings per share attributable to Baker Hughes |
$ 2.49 |
$ 3.27 |
|||||
Diluted earnings per share: |
|||||||
Income from continuing operations |
$ 2.43 |
$ 3.21 |
|||||
Income from discontinued operations |
0.06 |
0.04 |
|||||
Diluted earnings per share attributable to Baker Hughes |
$ 2.49 |
$ 3.25 |
|||||
Weighted average shares outstanding, basic |
440 |
436 |
|||||
Weighted average shares outstanding, diluted |
441 |
438 |
|||||
Depreciation and amortization expense |
$ 1,122 |
$ 951 |
|||||
Capital expenditures |
$ 2,160 |
$ 1,624 |
|||||
Consolidated Condensed Balance Sheets |
||||||||
(Unaudited) |
||||||||
September 30, |
December 31, |
|||||||
(In millions) |
2012 |
2011 |
||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ 1,007 |
$ 1,050 |
||||||
Accounts receivable - less allowance for doubtful accounts (2012 - $255, 2011 - $226) |
5,003 |
4,794 |
||||||
Inventories, net |
3,879 |
3,211 |
||||||
Other current assets |
684 |
644 |
||||||
Assets of discontinued operations |
707 |
646 |
||||||
Total current assets |
11,280 |
10,345 |
||||||
Property, plant and equipment, net |
8,225 |
7,245 |
||||||
Goodwill |
5,612 |
5,637 |
||||||
Intangible assets, net |
989 |
1,086 |
||||||
Other assets |
650 |
534 |
||||||
Total assets |
$ 26,756 |
$ 24,847 |
||||||
LIABILITIES AND EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ 1,829 |
$ 1,774 |
||||||
Short-term debt and current portion of long-term debt |
1,306 |
224 |
||||||
Accrued employee compensation |
661 |
695 |
||||||
Other accrued liabilities |
681 |
752 |
||||||
Liabilities of discontinued operations |
55 |
56 |
||||||
Total current liabilities |
4,532 |
3,501 |
||||||
Long-term debt |
3,839 |
3,845 |
||||||
Deferred income taxes and other tax liabilities |
602 |
810 |
||||||
Long-term liabilities |
712 |
727 |
||||||
Equity |
17,071 |
15,964 |
||||||
Total liabilities and equity |
$ 26,756 |
$ 24,847 |
||||||
Consolidated Condensed Statements of Cash Flows |
|||||||
(Unaudited) |
|||||||
Nine Months Ended September 30, |
|||||||
(In millions) |
2012 |
2011 |
|||||
Cash flows from operating activities: |
|||||||
Income from continuing operations |
$ 1,075 |
$ 1,405 |
|||||
Adjustments to reconcile income from continuing operations to net cash flows from operating activities: |
|||||||
Depreciation and amortization |
1,122 |
951 |
|||||
Other, primarily working capital |
(1,250) |
(1,674) |
|||||
Net cash flows from operating activities |
947 |
682 |
|||||
Cash flows from investing activities: |
|||||||
Expenditures for capital assets |
(2,160) |
(1,624) |
|||||
Other |
264 |
447 |
|||||
Net cash flows from investing activities |
(1,896) |
(1,177) |
|||||
Cash flows from financing activities: |
|||||||
Net proceeds (payments) of debt |
1,075 |
(112) |
|||||
Dividends |
(197) |
(195) |
|||||
Other |
24 |
143 |
|||||
Net cash flows from financing activities |
902 |
(164) |
|||||
Effect of foreign exchange rate changes on cash |
4 |
6 |
|||||
Decrease in cash and cash equivalents |
(43) |
(653) |
|||||
Cash and cash equivalents, beginning of period |
1,050 |
1,456 |
|||||
Cash and cash equivalents, end of period |
$ 1,007 |
$ 803 |
Table 1: Reconciliation of GAAP and Non-GAAP Financial Measures |
The following table reconciles net income attributable to Baker Hughes, which is the directly comparable financial result determined in accordance with Generally Accepted Accounting Principles (GAAP), to adjusted net income 1 (a non-GAAP financial measure). This excludes identified items with respect to the third quarter of 2012 and 2011. There were no identified items requiring adjustment for the second quarter of 2012. |
Three Months Ended September 30, 2012 |
||||||||
(Unaudited) (In millions, except per share amounts) |
Net Income |
Diluted Earnings Per Share |
||||||
Net income attributable to Baker Hughes (GAAP) |
$ 279 |
$ 0.63 |
||||||
Identified Items: |
||||||||
Information technology charges 2 |
28 |
0.07 |
||||||
Facility closure 3 |
15 |
0.03 |
||||||
Adjusted net income (non-GAAP) 1 |
$ 322 |
$ 0.73 |
||||||
Three Months Ended September 30, 2011 |
||||||||
(Unaudited) (In millions, except per share amounts) |
Net Income |
Diluted Earnings Per Share |
||||||
Net income attributable to Baker Hughes (GAAP) |
$ 706 |
$ 1.61 |
||||||
Identified Item: |
||||||||
Tax benefit associated with reorganization 4 |
(214) |
(0.49) |
||||||
Loss on early extinguishment of debt 5 |
26 |
0.06 |
||||||
Adjusted net income (non-GAAP) 1 |
$ 518 |
$ 1.18 |
||||||
1 |
Adjusted net income is a non-GAAP measure comprised of net income attributable to Baker Hughes excluding the impact of certain identified items. The Company believes that adjusted net income is useful to investors because it is a consistent measure of the underlying results of the Company's business. Furthermore, management uses adjusted net income as a measure of the performance of the Company's operations. Reconciliation of net income attributable to Baker Hughes, a GAAP measure, to adjusted net income for historical periods can be found in the Supplemental Financial Information on the Company's website at: www.bakerhughes.com/investor. |
|
2 |
Charge of $43 million before-tax ($28 million after-tax) related to internally developed software and other information technology assets in the third quarter of 2012. |
|
3 |
Charge of $20 million before-tax ($15 million after-tax) resulting from the closure of a chemical manufacturing facility in the United Kingdom in the third quarter of 2012. |
|
4 |
Noncash tax benefit of $214 million associated with the reorganization of certain foreign subsidiaries in the third quarter of 2011. |
|
5 |
Loss of $40 million before-tax ($26 million after-tax) related to the early extinguishment in the third quarter of 2011 of $500 million notes due 2013. |
Table 2: Calculation of EBIT, EBITDA and Adjusted EBITDA (non-GAAP measures) 1 |
||||||||||||
Three Months Ended |
||||||||||||
September 30, |
June 30, |
|||||||||||
(In millions) |
2012 |
2011 |
2012 |
|||||||||
Net income attributable to Baker Hughes |
$ 279 |
$ 706 |
$ 439 |
|||||||||
Net income attributable to noncontrolling interests |
5 |
— |
(1) |
|||||||||
Income from discontinued operations, net of tax |
(14) |
(8) |
(12) |
|||||||||
Income taxes |
143 |
9 |
144 |
|||||||||
Income from continuing operations before income taxes |
413 |
707 |
570 |
|||||||||
Interest expense, net |
49 |
58 |
50 |
|||||||||
Earnings before interest and taxes (EBIT) |
462 |
765 |
620 |
|||||||||
Depreciation and amortization expense |
399 |
322 |
370 |
|||||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) |
861 |
1,087 |
990 |
|||||||||
Adjustments to EBITDA: |
||||||||||||
Information technology charges 2 |
43 |
|||||||||||
Facility closure 3 |
20 |
|||||||||||
Loss on early extinguishment of debt 4 |
40 |
|||||||||||
Adjusted EBITDA |
$ 924 |
$ 1,127 |
$ 990 |
Nine Months Ended September 30, |
||||||||
(In millions) |
2012 |
2011 |
||||||
Net income attributable to Baker Hughes |
$ 1,097 |
$ 1,425 |
||||||
Net income attributable to noncontrolling interests |
5 |
— |
||||||
Income from discontinued operations, net of tax |
(27) |
(20) |
||||||
Income taxes |
479 |
434 |
||||||
Income from continuing operations before income taxes |
1,554 |
1,839 |
||||||
Interest expense, net |
153 |
164 |
||||||
Earnings before interest and taxes (EBIT) |
1,707 |
2,003 |
||||||
Depreciation and amortization expense |
1,122 |
951 |
||||||
Earnings before interest, taxes, depreciation and amortization (EBITDA) |
2,829 |
2,954 |
||||||
Adjustments to EBITDA: |
||||||||
Information technology charges 2 |
43 |
|||||||
Facility closure 3 |
20 |
|||||||
Expenses related to Libya 5 |
70 |
|||||||
Loss on early extinguishment of debt 4 |
40 |
|||||||
Adjusted EBITDA |
$ 2,892 |
$ 3,064 |
1 |
EBIT, EBITDA and Adjusted EBITDA (as defined in the calculations above) are non-GAAP measures. Management is providing these measures because it believes that such measures are widely accepted financial indicators used by investors and analysts to analyze and compare companies on the basis of operating performance. |
|
2 |
Charge of $43 million before-tax ($28 million after-tax) related to internally developed software and other information technology assets in the third quarter of 2012. |
|
3 |
Charge of $20 million before-tax ($15 million after-tax) resulting from the closure of a chemical manufacturing facility in the United Kingdom in the third quarter of 2012. |
|
4 |
Loss of $40 million before-tax ($26 million after-tax) related to the early extinguishment in the third quarter of 2011 of $500 million notes due 2013. |
|
5 |
Expenses of $70 million (before and after-tax) associated with increasing the allowance for doubtful accounts and reserves for inventory and certain other assets in the second quarter of 2011 as a result of civil unrest in Libya. |
Table 3: Segment Revenue, Profit Before Tax, and Profit Before Tax Margin 1 |
||||||||||||
Three Months Ended |
||||||||||||
September 30, |
June 30, |
|||||||||||
(In millions) |
2012 |
20112 |
2012 |
|||||||||
Segment Revenue |
||||||||||||
North America |
$ 2,742 |
$ 2,721 |
$ 2,672 |
|||||||||
Latin America |
583 |
570 |
604 |
|||||||||
Europe/Africa/Russia Caspian |
866 |
863 |
925 |
|||||||||
Middle East/Asia Pacific |
844 |
711 |
804 |
|||||||||
Industrial Services 3 |
193 |
199 |
207 |
|||||||||
Total Operations |
$ 5,228 |
$ 5,064 |
$ 5,212 |
|||||||||
Profit Before Tax |
||||||||||||
North America |
$ 288 |
$ 602 |
$ 357 |
|||||||||
Latin America 4 |
45 |
71 |
77 |
|||||||||
Europe/Africa/Russia Caspian 4 |
104 |
103 |
156 |
|||||||||
Middle East/Asia Pacific |
71 |
75 |
87 |
|||||||||
Industrial Services 3 |
13 |
32 |
25 |
|||||||||
Total Operations |
$ 521 |
$ 883 |
$ 702 |
|||||||||
Corporate and Other Profit Before Tax |
||||||||||||
Interest expense, net |
(49) |
(58) |
(50) |
|||||||||
Loss on early extinguishment of debt |
— |
(40) |
— |
|||||||||
Corporate and other |
(59) |
(78) |
(82) |
|||||||||
Corporate, net interest and other |
(108) |
(176) |
(132) |
|||||||||
Profit Before Tax |
$ 413 |
$ 707 |
$ 570 |
|||||||||
Profit Before Tax Margin 1 |
||||||||||||
North America |
11% |
22% |
13% |
|||||||||
Latin America 4 |
8% |
12% |
13% |
|||||||||
Europe/Africa/Russia Caspian 4 |
12% |
12% |
17% |
|||||||||
Middle East/Asia Pacific |
8% |
11% |
11% |
|||||||||
Industrial Services 3 |
7% |
16% |
12% |
|||||||||
Total Operations |
10% |
17% |
13% |
1 |
Profit before tax margin is a non-GAAP measure defined as profit before tax ("income from continuing operations before income taxes") divided by revenue. Management uses the profit before tax margin because it believes it is a widely accepted financial indicator used by investors and analysts to analyze and compare companies on the basis of operating performance. |
|
2 |
The revenue and profit before tax of Reservoir Development Services was reclassified from the Industrial Services segment into the geographic operating segments at the beginning of 2012. Quarterly segment revenue and profit before tax for the two years ended December 31, 2011 have been reclassified to reflect this change and are available online at: www.bakerhughes.com/investor in the financial information section. |
|
3 |
Quarterly revenue and profit before tax for the Industrial Services segment have been reclassified for all prior periods to exclude the discontinued operations of the Process and Pipeline Services business and are available online at: www.bakerhughes.com/investor in the financial information section. |
|
4 |
Profit before tax and profit before tax margin include bad debt provisions of $22 million in Latin America and $7 million in Europe/Africa/Russia Caspian in the third quarter of 2012. |
Table 4: Charges Associated with Information Technology and Facility Closure 1 |
|||
Three Months Ended |
|||
(In millions) |
September, 2012 |
||
Adjustments to Operating Profit Before Tax |
|||
North America |
$ 33 |
||
Latin America |
7 |
||
Europe/Africa/Russia Caspian |
11 |
||
Middle East/Asia Pacific |
10 |
||
Industrial Services |
2 |
||
Total Operations |
$ 63 |
1 |
Charges of $43 million before-tax ($28 million after-tax) related to internally developed software and other information technology assets in the third quarter of 2012. Charges associated with the closure of a chemical manufacturing facility in the United Kingdom were $20 million before-tax ($15 million after-tax) in the third quarter of 2012. The information technology assets and manufacturing facility supported our global operations. Therefore, these costs have been allocated to all segments. There were no identified items requiring adjustments for operating profit before tax for the second quarter of 2012 or the third quarter of 2011. |
Table 5: Supplemental Financial Information Excluding Certain Identified Items |
The following table contains non-GAAP measures of operating profit before tax and operating profit before tax margin, excluding charges related to information technology, as well as the closure of a chemical manufacturing facility recorded in the third quarter of 2012 (see Table 4). There were no items requiring adjustment for the second quarter of 2012 or the third quarter of 2011. |
Three Months Ended |
||||||||||||
September 30, |
June 30, |
|||||||||||
(In millions) |
2012 |
20112 |
2012 |
|||||||||
Segment Revenue |
||||||||||||
North America |
$ 2,742 |
$ 2,721 |
$ 2,672 |
|||||||||
Latin America |
583 |
570 |
604 |
|||||||||
Europe/Africa/Russia Caspian |
866 |
863 |
925 |
|||||||||
Middle East/Asia Pacific |
844 |
711 |
804 |
|||||||||
Industrial Services 3 |
193 |
199 |
207 |
|||||||||
Total Operations |
$ 5,228 |
$ 5,064 |
$ 5,212 |
|||||||||
Operating Profit Before Tax 1 |
||||||||||||
North America |
$ 321 |
$ 602 |
$ 357 |
|||||||||
Latin America 4 |
52 |
71 |
77 |
|||||||||
Europe/Africa/Russia Caspian 4 |
115 |
103 |
156 |
|||||||||
Middle East/Asia Pacific |
81 |
75 |
87 |
|||||||||
Industrial Services 3 |
14 |
32 |
25 |
|||||||||
Total Operations |
$ 583 |
$ 883 |
$ 702 |
|||||||||
Operating Profit Before Tax Margin 1 |
||||||||||||
North America |
12% |
22% |
13% |
|||||||||
Latin America 4 |
9% |
12% |
13% |
|||||||||
Europe/Africa/Russia Caspian 4 |
13% |
12% |
17% |
|||||||||
Middle East/Asia Pacific |
10% |
11% |
11% |
|||||||||
Industrial Services 3 |
7% |
16% |
12% |
|||||||||
Total Operations |
11% |
17% |
13% |
1 |
Operating profit before tax is a non-GAAP measure defined as profit before tax ("income from continuing operations before income taxes") less certain identified costs. Operating profit before tax margin is a non-GAAP measure defined as operating profit before tax divided by revenue. Management uses each of these measures because it believes they are widely accepted financial indicators used by investors and analysts to analyze and compare companies on the basis of operating performance and that these measures may be used by investors to make informed investment decisions. |
|
2 |
The revenue and profit before tax of Reservoir Development Services was reclassified from the Industrial Services segment into the geographic operating segments at the beginning of 2012. Quarterly segment revenue and operating profit before tax for the two years ended December 31, 2011, have been reclassified to reflect this change and are available online at: www.bakerhughes.com/investor in the financial information section. |
|
3 |
Quarterly revenue and profit before tax for the Industrial Services segment have been reclassified for all prior periods to exclude the discontinued operations of the Process and Pipeline Services business and are available online at: www.bakerhughes.com/investor in the financial information section. |
|
4 |
Operating profit before tax and operating profit before tax margin include bad debt provisions of $22 million in Latin America and $7 million in Europe/Africa/Russia Caspian in the third quarter of 2012. |
Baker Hughes Operational Highlights
Recent contract awards have made
The industry adoption of
Only two years since the OilPump Service acquisition,
Supplemental Financial Information
Supplemental financial information can be found on our website at: www.bakerhughes.com/investor in the financial information section.
Conference Call
The Company has scheduled a conference call to discuss management's outlook and the results reported in today's earnings announcement. The call will begin at 8 a.m. Eastern time, 7 a.m. Central time on
Forward-Looking Statements
This news release (and oral statements made regarding the subjects of this release, including on the conference call announced herein) contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (each a "forward–looking statement"). The words "anticipate," "believe," "ensure," "expect," "if," "intend," "estimate," "project," "forecasts," "predict," "outlook," "aim," "will," "could," "should," "potential," "would," "may," "probable," "likely," and similar expressions, and the negative thereof, are intended to identify forward–looking statements. There are many risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These forward-looking statements are also affected by the risk factors described in the company's Annual Report on Form 10-K for the year ended December 31, 2011;
Our expectations regarding our business outlook and business plans; the business plans of our customers; oil and natural gas market conditions; cost and availability of resources; economic, legal and regulatory conditions and other matters are only our forecasts regarding these matters.
These forward looking statements, including forecasts, may be substantially different from actual results, which are affected by many risks including the following risk factors and the timing of any of these risk factors:
Economic conditions – the impact of worldwide economic conditions and sovereign debt crises in
Oil and gas market conditions – the level of petroleum industry exploration, development and production expenditures; the price of, volatility in pricing of, and the demand for crude oil and natural gas; drilling activity; drilling permits for and regulation of the shelf and the deepwater drilling; excess productive capacity; crude and product inventories; LNG supply and demand; seasonal and other adverse weather conditions that affect the demand for energy; severe weather conditions, such as tornadoes and hurricanes, that affect exploration and production activities;
Terrorism and geopolitical risks – war, military action, terrorist activities or extended periods of international conflict, particularly involving any petroleum–producing or consuming regions; labor disruptions, civil unrest or security conditions where we operate; expropriation of assets by governmental action; cybersecurity risks and cyber incidents or attacks.
Price, market share, contract terms, and customer payments – our ability to obtain market prices for our products and services; the ability of our competitors to capture market share; our ability to retain or increase our market share; changes in our strategic direction; the effect of industry capacity relative to demand for the markets in which we participate; our ability to negotiate acceptable terms and conditions with our customers, especially national oil companies, to successfully execute these contracts, and receive payment in accordance with the terms of our contracts with our customers; our ability to manage warranty claims and improve performance and quality; our ability to effectively manage our commercial agents.
Costs and availability of resources – our ability to manage the costs, availability, distribution and delivery of sufficient raw materials and components (especially steel alloys, chromium, copper, carbide, lead, nickel, titanium, beryllium, barite, synthetic and natural diamonds, sand, gel, chemicals, and electronic components); our ability to manage energy-related costs; our ability to manage compliance-related costs; our ability to recruit, train and retain the skilled and diverse workforce necessary to meet our business needs and manage the associated costs; the effect of manufacturing and subcontracting performance and capacity; the availability of essential electronic components used in our products; the effect of competition, particularly our ability to introduce new technology on a forecasted schedule and at forecasted costs; potential impairment of long-lived assets; unanticipated changes in the levels of our capital expenditures; the need to replace any unanticipated losses in capital assets; labor-related actions, including strikes, slowdowns and facility occupations; our ability to maintain information security.
Litigation and changes in laws or regulatory conditions – the potential for unexpected litigation or proceedings and our ability to obtain adequate insurance on commercially reasonable terms; the legislative, regulatory and business environment in the U.S. and other countries in which we operate; outcome of government and legal proceedings, as well as costs arising from compliance and ongoing or additional investigations in any of the countries where the company does business; new laws, regulations and policies that could have a significant impact on the future operations and conduct of all businesses; laws, regulations or restrictions on hydraulic fracturing; any restrictions on new or ongoing offshore drilling or permit and operational delays or program reductions as a result of the regulations in the Gulf of
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