CJ 2017 Annual Report

Item 1A. Risk Factors We face many challenges and risks in the industry in which we operate. Before investing in our common stock you should carefully consider each of the following risk factors and all of the other information set forth in this Annual Report, including under the section titled “Cautionary Note Regarding Forward-Looking Statements”, and in our other reports filed with the SEC, and the documents and other information incorporated by reference herein and therein, for a detailed discussion of known material factors which could materially affect our business, financial condition or future results. The risks and uncertainties described are not the only ones we face. Additional risk factors not presently known to us or which we currently consider immaterial may also adversely affect our business, financial condition or future results. If any of these risks were actually to occur, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our common stock could decline, and you could lose all or part of your investment. Risks Related to Our Business and Financial Condition Our business is cyclical and dependent upon conditions in the oil and natural gas industry that impact the level of exploration, development and production of oil and natural gas and capital expenditures by oil and natural gas companies. Our customers’ willingness to undertake drilling, completion and production activities depends largely upon prevailing industry conditions that are influenced by numerous factors that are beyond our control. Any of these factors could have a material adverse effect on our business, financial condition, results of operations and cash flow. We depend on our customers’ willingness to make operating and capital expenditures to explore for, develop and produce oil and natural gas. If these expenditures decline, our business will suffer. The oil and gas industry has traditionally been volatile, is highly sensitive to supply and demand cycles and is influenced by a combination of long-term, short-term and cyclical trends. Our customers’ willingness to conduct drilling, completion and production activities depends largely upon prevailing industry conditions that are influenced by numerous factors over which we have no control, such as: • the supply of and demand for oil and natural gas, including current natural gas storage capacity and usage; • the current and expected future prices for oil and natural gas and the perceived stability and sustainability of those prices; • the supply of and demand for hydraulic fracturing and other well service equipment in the continental United States; • the level of global and domestic oil and natural gas inventories; • the cost of exploring for, developing, producing and delivering oil and natural gas; • the ability or willingness of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels for oil; • public pressure on, and legislative and regulatory interest within, federal, state and local governments to stop, significantly limit or regulate hydraulic fracturing activities; • the expected rates of decline of current oil and natural gas production; • lead times associated with acquiring equipment and products and availability of personnel; • regulation of drilling activity; • the availability of water resources, suitable proppant and chemicals in sufficient quantities for use in hydraulic fracturing fluids; • the discovery and development rates of new oil and natural gas reserves; • available pipeline and other transportation capacity; • weather conditions, including hurricanes that can affect oil and natural gas operations over a wide area; • political instability in oil and natural gas producing countries; • domestic and worldwide economic conditions; • technical advances affecting energy consumption; • the price and availability of alternative fuels; and • merger and divestiture activity among oil and natural gas producers. Volatility or weakness in oil prices or natural gas prices (or the perception that oil prices or natural gas prices will decline) generally leads to decreased spending by our customers, which in turn negatively impacts drilling, completion and production activity. In particular, the demand for new or existing drilling, completion and production work is driven by available investment capital for such work. When these capital investments decline, our customers’ demand for our services declines. Because these types of services can be easily “started” and “stopped,” and oil and natural gas producers generally tend to be less risk tolerant when commodity prices are low or volatile, we typically experience a more rapid decline in demand for our services compared with demand for other types of energy services. Any negative impact on the spending patterns of our customers may cause lower pricing and utilization for our core service lines, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. 18