Patents and Proprietary Technology: The Company's success will depend, in part, on its ability to obtain patents, maintain trade secret protection and operate without infringing on the rights of third parties. The LPG Fracturing Process patents for the U.S., Canada and International markets remain in examination. However, there can be no assurance that any issued patents will provide the Company with any competitive advantages or will not be successfully challenged by any third parties, or that the patents of others will not have an adverse effect on the ability of the Company to do business. In addition, there can be no assurance that others will not independently develop similar products, duplicate some or all of The Company's products, or, if patents are issued to the Company, design their products so as to circumvent the patent protection that may be held by the Company. In addition, the Company could incur substantial costs in lawsuits in which the Company attempts to enforce its own patents against other parties.
Operational Risks: The Company's operations are subject to hazards inherent in the oil and natural gas industry, such as equipment defects, malfunction and failures, and natural disasters which result in fires, vehicle accidents, explosions and uncontrollable flows of natural gas or well fluids that can cause personal injury, loss of life, suspension of operations, damage to formations, damage to facilities, business interruption and damage to or destruction of property, equipment and the environment. These hazards could expose the Company to substantial liability for personal injury, wrongful death, property damage, loss of oil and natural gas production, pollution, contamination of drinking water and other environmental damages. the Company continuously monitors its activities for quality control and safety, and although it maintains insurance coverage that it believes to be adequate and customary in the industry, such insurance may not be adequate to cover the Company 's liabilities and may not be available in the future at rates that the Company considers reasonable and commercially justifiable.
Availability of Qualified Staff: Attracting and retaining qualified workers is necessary for the Company to provide reliable services to its customers. With high industry activity there is also high demand for qualified workers and, as such, it is a challenge for the Company to add a significant number of workers to support its planned growth. The Company attempts to overcome this challenge by offering an attractive compensation package, providing an in-depth training program, and offering career growth opportunities.
Availability of Debt Financing: The Company has facilities with its bank for $100 million of debt financing. As discussed in Note 15 of the 2012 Consolidated Audited Financial Statements this amount is limited to $60 million during the period in which certain financial covenants have been suspended. During 2012 the Company incurred a significant EBITDA loss in the second quarter and had large capital expenditure commitments for the completion of its 2011 capital program. To fund these costs, the Company issued a convertible debenture and drew on its bank line of credit. The EBITDA loss in the second quarter negatively impacted trailing twelve month EBITDA amounts used in the calculation of certain of the financial covenants under its credit facility. Accordingly, the Company reached an agreement with its bankers to suspend these covenants until the measuring date for the second quarter of 2013. Additionally, the Company implemented reductions to its operating costs in September 2012 through staff reductions, facility consolidation and the parking of certain equipment. The Company also renegotiated commitments for the purchase of raw materials for operations reducing 2013 commitments to $14.1 million from $58.1 million. Capital expenditure commitments for 2013 are $2.5 million. As a result of these actions the Company anticipates that operating cash flow and its bank credit facility will be sufficient to fund ongoing operations. The bank credit facility matures August 31 and should it not be renewed is subject to repayment in seven quarterly repayments equal to one twelve of the outstanding amount commencing in the second quarter following maturity with the remainder due with an eight payment two years following the maturity date. Should the Company be unable to renew these facilities in the amount it requires or on terms acceptable to it, significant liquidity issues could result.
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