CLB 2018 Annual Report

9 ITEM 1A. RISK FACTORS Our forward-looking statements are based on assumptions that we believe to be reasonable but that may not prove to be accurate. All of our forward-looking information is, therefore, subject to risks and uncertainties that could cause actual results to differ materially from the results expected. All known, material risks and uncertainties are discussed below. Downturns in the oil and gas industry, or in the oilfield services business, may have a material adverse effect on our financial condition or results of operations. The oil and gas industry is highly cyclical and demand for the majority of our oilfield services and products is substantially dependent on the level of expenditures by the oil and gas industry for the exploration, development and production of crude oil and natural gas reserves, which are sensitive to oil and natural gas prices and generally dependent on the industry's view of future oil and gas prices. There are numerous factors affecting the supply of and demand for our services and products, which are summarized as: general and economic business conditions, including market prices of oil and gas and expectations about future prices; the adoption of legal requirements or taxation; changes in existing laws, regulations or other governmental actions; cost of producing and the ability to deliver oil and natural gas; the level of drilling and production activity; financial condition of our client base and their ability to fund capital expenditures; coordination by the OPEC; weather conditions and the physical effects of climatic change; civil unrest or political uncertainty in oil producing or consuming countries; level of consumption of oil, gas and petrochemicals by consumers; availability of services and materials for our clients to grow their capital expenditures and to deliver product to market; and availability of materials and equipment from key suppliers. The oil and gas industry has historically experienced periodic downturns, which have been characterized by diminished demand for our oilfield services and products and downward pressure on the prices we charge. A significant downturn in the oil and gas industry could result in a reduction in demand for oilfield services and could adversely affect our operating results. Changes in macro-economic factors impacting the oil and gas industry may negatively affect our ability to accurately predict client demand, which could cause us to hold excess or obsolete inventory and experience a reduction in gross margins and financial results. We cannot accurately predict which or what level of our services and products our clients will need in the future. Orders are placed with our suppliers based on forecasts of client demand and, in some instances, we may establish buffer inventories to accommodate anticipated demand. Our forecasts of client demand are based on multiple assumptions, each of which may introduce errors into the estimates. In addition, many of our suppliers require a longer lead time to provide products than our clients demand for delivery of our finished products. If we overestimate client demand, we may allocate resources to the purchase of materials or manufactured products that we may not be able to sell when we expect to, if at all. As a result, we could hold excess or obsolete inventory, which would reduce gross margin and adversely affect financial results. Conversely, if we underestimate client demand or if insufficient manufacturing capacity is available, we could miss revenue opportunities and potentially lose market share and damage our client relationships. In addition, any future significant cancellations or deferrals of service contracts or product orders could materially and adversely affect profit margins, increase product obsolescence and restrict our ability to fund our operations. We depend on the results of our international operations, which expose us to risks inherent in doing business abroad. We conduct our business in over 50 countries; business performed outside of the United States accounted for 54%, 56% and 62% of our revenue during the years ended December 31, 2018, 2017 and 2016, respectively. We attribute service revenue to the country in which the service was performed rather than where the reservoir or project is located while we attribute product