CJ 2017 Annual Report

holiday season in the fourth quarter, which may be compounded as our customers exhaust their annual capital spending budgets towards year end. Additionally, our operations are directly affected by weather conditions. During the winter months our customers may delay operations or we may not be able to operate or move our equipment between locations during periods of heavy snow, ice or rain, and during the spring some areas impose transportation restrictions due to the muddy conditions caused by the spring thaws. During the summer months, our operations may be impacted by tropical weather systems. Sales and Marketing Sales of our Completion Services and Well Support Services are primarily generated by the efforts of our sales force, working closely with our operations teams. In our core business lines of fracturing and rig services, these services are typically contracted well in advance for relatively long durations, which can result in sales backlogs during periods of high demand for our services. Our other core services are typically contracted on an ad hoc basis and as such generally have no, or very limited, sales backlogs. Our ability to deliver integrated services through the life of the well and strong track record provides cross-selling opportunities with existing customers. Sales and marketing activities are typically performed through our local operations in each geographic region, with the exception of fracturing, which is centralized to a specific sales team at the corporate level. For our other core business lines, we believe our local field sales personnel have a strong understanding of region-specific issues and customer operating procedures and, therefore, can effectively target marketing activities. We also have multiple corporate sales representatives that supplement our field sales efforts and focus on large accounts and selling technical services. Our sales representatives collaborate with our legal team to identify customer contracting needs in advance of potential operations, which we believe streamlines our customer onboarding process. Our sales representatives work closely with our local managers and field sales personnel to target compelling market opportunities. We facilitate teamwork among our sales representatives by basing a portion of their compensation on aggregate company sales targets rather than individual sales targets. We believe this emphasis on teamwork enables us to better serve our existing customers and will also allow us to further expand our customer base. Customers We serve a diverse group of independent and major national oil and gas companies that are active in our core areas of operations across the continental United States. We seek customers who value our technology, scale, diversification, expertise and efficiency capabilities. We monitor closely the financial condition of our customers, their capital expenditure plans and other indications of their drilling, completion and production services activity. In particular, we seek to identify distressed customers and apply what we believe to be appropriate business and legal measures to protect us from any defaults or failures to pay. Our top ten customers accounted for approximately 40.7%, 46.0% and 53.6% of our consolidated revenue for the years ended December 31, 2017, 2016 and 2015, respectively. There were no individual customers that accounted for more than 10.0% of our consolidated revenues during the year ended December 31, 2017 and December 31, 2016. For the year ended December 31, 2015, revenue from Oxy USA, Inc. individually represented 15.5% of our consolidated revenue. Other than the customer listed above, no other customer accounted for more than 10.0% of our consolidated revenue in 2015. If we were to lose any material customer, we may not be able to redeploy our equipment at similar utilization or pricing levels and such loss could have an adverse effect on our business until the equipment is redeployed at similar utilization or pricing levels. Competition We operate in highly competitive areas of the oilfield services industry with significant potential for excess capacity. Equipment 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 assets relative to activity in any particular area. Utilization and pricing for our services have in the past been negatively affected by increases in supply relative to demand in our core operating areas and geographic markets. The demand for our services depends primarily on the level of spending by oil and gas companies for drilling, completion and production activities, which is affected by short-term and long-term trends in oil and natural gas prices and numerous other factors over which we have no control. Severe declines and sustained weakness and volatility in commodity prices over the course of 2015 and 2016, and the consequent negative impact on the level of drilling, completion and production activity and capital expenditures by our customers, adversely affected the demand for our services. This, in turn, negatively impacted our ability to maintain adequate utilization of our asset base and to negotiate pricing at levels generating sufficient margins. The impact to our financial and operational performance ultimately led to the Chapter 11 Proceeding. 8