Concentration of Customer Base: The Company's customer base consists of over thirty oil and natural gas exploration and production companies, ranging from large multinational public companies to small private companies. The Company had three significant customers that collectively accounted for approximately 72% of The Company's revenue for the year ended December 31, 2012. One of these customers accounted for 43% of revenue. The Company's strong relationships with exploration and production companies may result in increased concentration of revenues during periods of reduced activity levels such as the first three months of the year. However, there can be no assurance that the Company 's relationship with its primary customers will continue, and a significant reduction or total loss of the business from these customers, if not offset by sales to new or existing customers, would have a material adverse effect on the Company 's business, financial condition, results of operations and cash flows.
Competition: Each of the markets in which the Company participates is highly competitive. To be successful, a service provider must provide services that meet the specific needs of oil and natural gas exploration and production companies at competitive prices. The principal competitive factors in the markets in which the Company operates are product and service quality and availability, technical knowledge and experience, reputation for safety and price. The Company competes with large national and multinational oilfield service companies that have greater financial and other resources. These companies offer a wide range of well stimulation services in all geographic regions in which the Company operates. In addition, the Company competes with several regional competitors. As a result of competition, it may suffer from a significant reduction in revenue or be unable to pursue additional business opportunities.
Equipment Inventory Levels: Because of the long-life nature of oilfield service equipment and the lag between when a decision to build additional equipment is made and when the equipment is placed into service, the inventory of oilfield service equipment in the industry does not always correlate with the level of demand for service equipment. Periods of high demand often spur increased capital expenditures on equipment, and those capital expenditures may add capacity that exceeds actual demand. This capital overbuild could cause The Company's competitors to lower their rates and could lead to a decrease in rates in the oilfield services industry generally, which could have a material adverse effect on the Company 's business, financial condition, results of operations and cash flows.
Sources, Pricing and Availability of Raw Materials and Component Parts: The Company sources its raw materials, such as proppant, chemicals, nitrogen, carbon dioxide and diesel fuel, and component parts, from a variety of suppliers in North America. Should The Company's suppliers be unable to provide the necessary raw materials and component parts at an acceptable price or otherwise fail to deliver products in the quantities required, any resulting delays in the provision of services could have a material adverse effect on The Company's business, financial condition, results of operations and cash flows.
Capital-Intensive Industry: The Company's business plan is subject to the availability of additional financing for future costs of operations or expansion that might not be available, or may not be available on favourable terms. The Company's activities may also be financed partially or wholly with debt, which could increase The Company's debt levels above industry standards. The level of The Company's indebtedness from time to time could impair The Company's ability to obtain additional financing in the future on a timely basis to take advantage of business opportunities that may arise. If the Company 's cash flow from operations is not sufficient to fund the Company 's capital expenditure requirements, there can be no assurance that additional debt or equity financing will be available to meet these requirements or, if available, on favourable terms.
Most Popular Stories
- Twitter Coming to Phones Without Internet
- Entravision Initiates Quarterly Cash Dividend
- NASA Fellowships, Scholarships Bring Diversity to Workforce
- Dish Network Leads 2013 Top 50 Advertisers List
- Warner Bros. Unleashes 'Hobbit: Desolation of Smaug' Merchandise
- Shanghai Smog Forces Factory Shutdowns
- Amanda Bynes Enrolls in California's FIDM
- How to Arm Yourself Against CryptoLocker Virus
- Networks Vie for U.S. Hispanic TV Viewers
- Ad Counts Rise in 2013 for Hispanic Magazines