CJ 2017 Annual Report

in customer requirements. As a result of competition, we may lose market share or be unable to maintain or increase prices for our present services or to acquire additional business opportunities, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Increases in market capacity can lead to active price competition, which could adversely affect our business and utilization levels. Significant increases in overall market capacity have caused active price competition and led to lower pricing and utilization levels for our services. Completion and well servicing equipment, such as hydraulic fracturing fleets, can be moved from one region to another in response to changes in levels of activity and market conditions, which may result in an oversupply of equipment in an area. For example, natural gas prices declined sharply in 2009 and remained depressed through 2015, which resulted in reduced drilling activity in natural gas shale plays. This drove many oilfield services companies operating in those areas to relocate their equipment to more oil- and liquids-rich shale plays, such as the Eagle Ford Shale and Permian Basin. As drilling activity and completion capacity migrated into the oil- and liquids-rich regions from the gas-rich regions, the increase in supply relative to demand negatively impacted pricing and utilization of our services, particularly for hydraulic fracturing services. Furthermore, as we entered 2015, we experienced a slowdown in activity across our customer base as operators reacted to the rapid decline in commodity prices that began during the fourth quarter of 2014. The entire year proved to be extremely challenging for the North American oilfield services industry due to the sustained weakness and volatility in oil prices at levels that caused severe reductions in drilling, completion and production activities, which in turn resulted in reduced demand and increased competition and pricing pressure to varying degrees across our service lines and operating areas. Adoption of fresh start accounting beginning in the first quarter of 2017 limits the comparability of our current and future financial condition and results of operations to our financial condition and results of operations for periods prior to our emergence from the Chapter 11 Proceeding. Upon our emergence from the Chapter 11 Proceeding, we adopted fresh start accounting in accordance with the provisions set forth in Accounting Standards Codification Topic 852 - Reorganizations . Our consolidated financial statements also reflect all of the transactions contemplated by the Restructuring Plan. Accordingly, our financial condition and results of operations subsequent to emergence are not comparable to the financial condition or results of operations reflected in our historical financial statements prior to emergence. We may be unable to implement price increases or maintain existing prices on our core services. We generate revenue from our core service lines, the majority of which is provided on a spot market basis. Pressure on pricing for our core services, including due to competition and industry and/or economic conditions, may impact, among other things, our ability to implement price increases or maintain pricing on our core services. We operate in a very competitive industry and, as a result, we may not always be successful in raising, or maintaining our existing prices. Additionally, during periods of increased market demand, a significant amount of new service capacity, including hydraulic fracturing equipment, may enter the market, which also puts pressure on the pricing of our services and limits our ability to increase or maintain prices. Furthermore, during periods of declining pricing for our services, we may not be able to reduce our costs accordingly, which could further adversely affect our profitability. Even when we are able to increase our prices, we may not be able to do so at a rate that is sufficient to offset such rising costs. Also, we may not be able to successfully increase prices without adversely affecting our activity levels. The inability to maintain our prices or to increase our prices as costs increase could have a material adverse effect on our business, financial position and results of operations. We may not be able to service our debt obligations in accordance with their terms. On January 6, 2017, we entered into a new revolving credit and security agreement (the “New Credit Facility”). We subsequently amended and restated the New Credit Facility in full pursuant to an amended and restated revolving credit and security agreement (the “Amended Credit Facility”) on May 4, 2017. Our ability to meet our debt service obligations under, and comply with the financial covenants contained in, our Amended Credit Facility or future debt agreements depends on our future performance, which is affected by financial, business, economic and other factors, many of which are beyond our control, including volatility in commodity prices and pressure from competitors. Should our revenues decline, we may not be able to generate sufficient cash flow to pay our debt service obligations when due. Additionally, revenue, utilization and pricing level declines may result in our not being in compliance with one or more of the financial covenants under our Amended Credit Facility or future debt agreements in future periods. Any failure to satisfy our debt obligations or to comply with the applicable 20