Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has adequate credit facilities in place to meet its current commitments as they become due and further manages its liquidity risk by continuously monitoring forecasts and actual cash flows.
Fair values of financial instruments
The fair value of The Company's financial instruments included on the consolidated balance sheet approximate their carrying amounts due to their short term maturity.
The business of the Company is subject to certain risks and uncertainties, including those listed below. Prior to making any investment decision regarding the Company, investors should carefully consider, among other things, the risk factors set forth below.
Volatility of Industry Conditions: The demand, pricing and terms for The Company's fracturing and well stimulation services largely depend upon the level of exploration and development activity for North American oil and natural gas. Industry conditions are influenced by numerous factors over which the Company has no control, including the level of oil and natural gas prices, expectations about future oil and natural gas prices, the cost of exploring for, producing and delivering oil and natural gas, the decline rates for current production, the discovery rates of new oil and natural gas reserves, available pipeline and other oil and natural gas transportation capacity, weather conditions, political, military, regulatory and economic conditions, and the ability of oil and natural gas companies to raise equity capital or debt financing. A material decline in global oil and natural gas prices or North American activity levels as a result of any of the above factors could have a material adverse effect on The Company's business, financial condition, results of operations and cash flows. Because of the current economic environment and related decrease in demand for energy, natural gas exploration and development in North America has decreased from peak levels in 2008. Warmer than normal winters in North America, among other factors, may adversely impact demand for natural gas and, therefore, demand for oilfield services. If the economic conditions deteriorate further or do not improve, the decline in natural gas exploration and development could cause a decline in the demand for The Company's services. Such decline could have a material adverse effect on The Company's business, financial condition, results of operations and cash flows.
Demand for Oil and Natural Gas: Fuel conservation measures, alternative fuel requirements, increasing consumer demand for alternatives to oil and natural gas, and technological advances in fuel economy and energy generation devices could reduce the demand for crude oil and other hydrocarbons. The Company cannot predict the impact of changing demand for oil and natural gas products, and any major changes could have a material adverse effect on The Company's business, financial condition, results of operations and cash flows.
Seasonality: The Company's financial results are directly affected by the seasonal nature of the North American oil and natural gas industry. The first quarter incorporates the winter drilling season when a disproportionate amount of the activity takes place in western Canada. During the second quarter, soft ground conditions typically curtail oilfield activity in all of The Company's Canadian operating areas such that many rigs are unable to move about due to road bans. This period, commonly referred to as "spring breakup", occurs earlier in the year in southeastern Alberta than it does in northern Alberta and northeastern British Columbia. Consequently, this is The Company's weakest three-month revenue period. Additionally, if an unseasonably warm winter prevents sufficient freezing, the Company may not be able to access well sites and The Company's operating results and financial condition may therefore be adversely affected. The demand for fracturing and well stimulation services may also be affected by severe winter weather in North America. In addition, during excessively rainy periods in any of The Company's operating areas, equipment moves may be delayed, thereby adversely affecting revenues. The volatility in the weather and temperature can therefore create unpredictability in activity and utilization rates, which can have a material adverse effect on The Company's business, financial condition, results of operations and cash flows.
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