CJ 2017 Annual Report

See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” for additional detail as to our investment in technological advancement. Suppliers We purchase raw materials (such as proppant, guar, acid, chemicals, completion fluids, cement and coiled tubing strings) and finished products (such as fluid ends, power ends and pump consumables) used in our Completion Services segment and certain raw materials and finished products used in our Well Support Services segment from various third-party suppliers. We are not materially dependent on any single supply source for these materials or products and we believe that we would be able to make satisfactory alternative arrangements in the event of any interruption in the supply of these materials and/or products by one of our suppliers. However, if alternative sources of supply are unavailable and we are unable to purchase the necessary materials and/or products needed for our business in a timely manner and in the quantities required, we may be delayed in providing our services, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. For example, in the past, our industry has faced sporadic guar and proppant shortages and trucking shortages associated with hydraulic fracturing operations requiring work stoppages, which adversely impacted the operating results of several of our competitors. Additionally, increasing costs of certain raw materials, such as guar, may negatively impact demand for our services or the profitability of our business operations. During the year ended December 31, 2017, two suppliers from our Completions Services segment, Gardner Denver, Inc. and Unimin Corporation, supplied 9.7% and 7.2%, respectively, of our total Company's materials and/or products; but no single third party supplier from our Well Services segment supplied 5.0% or more of the Company's materials and/or products. Additionally, with respect to our Completion Services segment, as part of the Chapter 11 Proceeding we rejected all of our take or pay contracts for proppant and chemicals, which enabled us to negotiate two new proppant contracts covering approximately 80.0% of our forecasted volume needs for 2018 and beyond. In conjunction with the sale of our manufacturing business line, we also entered into a preferred supply agreement with a third party to supply us with components and finished goods to repair and refurbish certain of our stacked hydraulic fracturing equipment. Quality, Health, Safety and Environmental ( “ QHSE ” ) Program Our business involves the operation of heavy and powerful equipment and the use of explosive and radioactive materials which can result in serious injuries to our employees and third parties and substantial damage to property or the environment. We commit significant resources towards employee safety and have a robust new hire program. We also have comprehensive QHSE-focused training programs designed to minimize accidents in the workplace and improve the efficiency of our operations. We believe that our QHSE policies and procedures, which are reviewed internally for compliance with industry changes, provide a solid framework to ensure our operations minimize the hazards inherent in our work and meet regulatory requirements and customer demands. Further, we are in the process of developing a best-in-class quality management system that will create standardization of processes throughout all facets of our business, support our risk mitigation strategy and help ensure compliance with our procedures and processes. Our record and reputation for safety are important to all aspects of our business. In the oilfield services industry, a critical competitive factor in establishing and maintaining long-term customer relationships is having an experienced, skilled and well-trained work force. In recent years, many of our larger customers have placed an added emphasis on the safety records and quality management systems of their contractors. We strive to meet or exceed the safety and quality management requirements of our customers, and we believe our continued focus on safety will gain even further importance to our customers as the market continues to improve. Our reputation and proven safety record have allowed us to earn work certification from several industry leaders that we believe have some of the most demanding safety requirements, including ConocoPhillips, ExxonMobil, Chevron and Royal Dutch Shell. Risk Management and Insurance Our operations are subject to hazards inherent in the oil and gas industry, including blowouts, explosions, cratering, fires, the use of explosives and radioactive materials, oil spills, surface and underground pollution and contamination, hazardous material spills, loss of well control, loss of or damage to the wellbore, formation or underground reservoir, damaged or lost equipment, and damage or loss from inclement weather or natural disasters. Any of these hazards could result in personal injury or death, damage to or destruction of equipment and facilities, loss of oil and natural gas production, suspension of operations, environmental and natural resources damage and damage to the property of others. Additionally, because our business involves the transportation of heavy equipment and materials, we may also experience traffic accidents which may 10