Key Energy Services, Inc. (NYSE:KEG) reported third quarter 2017
consolidated revenues of $110.7 million and a pre-tax GAAP loss of
$38.3 million, or $1.90 per share. The results for the third
quarter include legal fees and settlements of $11.6 million, $3.3
million of stock-based compensation expense, $5.4 million in gain
on the sale of assets, including Key’s Russian operations, and $0.4
million of severance expense. Excluding these items, the Company
reported a pre-tax loss of $28.4 million, or $1.41 per share.
Overview and Outlook
Key’s President and Chief Executive Officer,
Robert Drummond, stated, “During the third quarter we made
continued progress strategically and operationally which we believe
will drive cash flow improvement in the coming months. Completions
activity drove revenue improvement quarter over quarter,
particularly within our coiled tubing business. We expect
that the continued systematic re-deployment of our larger coiled
tubing units, coupled with the gains that we are making in our
other business lines, will lead to fourth quarter revenues slightly
ahead of third quarter levels despite the typical fourth quarter
seasonal activity slowdowns.
Drummond continued “Our progress towards neutral
free cash flow continued, and I believe that the improvements we
are seeing in our business today will allow us to achieve at least
free cash flow neutrality as we move through 2018. I am pleased
with the growth we are seeing in coiled tubing and other
completion-oriented activity in our other business segments, with
completion-oriented revenue representing over a quarter of total
U.S. revenue in the third quarter of 2017. I am also excited about
the opportunities developing in our production services businesses
and the increases in activity we’re experiencing today,
particularly with our industry-leading fleet of 346 AESC Class IV
and Class V rigs, the largest such fleet of rigs in the industry
today. We believe this fleet of fit-for-purpose,
horizontal-capable well service rigs provides us with significant
earnings growth potential as the industry resumes more high-return
well maintenance activity.”
Financial Overview
Upon emergence from Chapter 11 bankruptcy on
December 15, 2016, the Company adopted fresh start accounting,
which resulted in the Company becoming a new entity for financial
reporting purposes. References to "Successor" relate to the
financial position of the reorganized Key as of and subsequent to
December 16, 2016; references to "Predecessor" refer to the
financial position of Key as of and prior to December 15, 2016 and
the results of operations through December 15, 2016. References to
fourth quarter 2016 will reflect pro-forma results for the
Predecessor and Successor entities.
The following table sets forth summary data for the third
quarter 2017 and prior comparable quarterly periods:
|
|
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
|
Three Months Ended September 30,
2017 |
|
Three Months Ended June 30, 2017 |
|
|
Three Months Ended September 30,
2016 |
Revenues |
|
$ |
110.7 |
|
|
$ |
107.8 |
|
|
|
$ |
102.4 |
|
Net loss |
|
(38.2 |
) |
|
(13.2 |
) |
|
|
(130.8 |
) |
Diluted loss per
share |
|
(1.90 |
) |
|
(0.66 |
) |
|
|
(0.81 |
) |
Adjusted EBITDA* |
|
0.6 |
|
|
(0.7 |
) |
|
|
(14.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
* Adjusted EBITDA does not exclude costs incurred in
connection with the Company’s FCPA investigations completed in
2016.
U.S. Results
Third quarter 2017 U.S. Rig Services revenues of
$61.9 million were up 0.2% as compared to second quarter 2017
revenues of $61.8 million, with rig hours declining approximately
1% to 161,725 hours. While revenue was up less than 1% quarter on
quarter, revenue per workday was up 8% in the last month of the
quarter as compared to the first month of the quarter with hours
per workday up 3% in the last month of the quarter as compared to
the first month of the quarter. Completions activity was up 200
basis points quarter on quarter comprising 17% of the well service
rig hours in the third quarter of 2017. Margins were reduced 200
basis points in the third quarter of 2017 from the second quarter
of 2017 due to adding personnel associated with increasing
activity.
Third quarter 2017 Fluid Management Services
revenues of $20.7 million were up 9.8% as compared to second
quarter 2017 revenues of $18.9 million. Third quarter truck hours
were up 7% quarter on quarter with hours per calendar day up 14% in
the last month of the quarter as compared to the first month of the
quarter, largely on higher completion driven demand. Fluid
Management Services margins were impacted by a charge of $4.0
million due to a legal settlement and an approximately 200 basis
points quarter on quarter reduction in margin due to make ready
costs and labor inefficiency associated with increasing
activity.
Third quarter 2017 Coiled Tubing Services
revenues of $12.5 million were up 36.4% as compared to second
quarter 2017 revenues of $9.2 million. Activity in our largest,
completions-driven coiled tubing units increased approximately 30%
and pricing on these units was up approximately 4% from the second
quarter of 2017 to the third quarter of 2017. Coiled Tubing
Services margins benefited by approximately 700 basis points in the
third quarter from the second quarter on the higher activity and
pricing. The Company expects to have all of its 2 3/8 inch or
larger diameter coiled tubing units deployed and active over the
next several months.
Third quarter 2017 Fishing & Rental Services
margins improved by approximately 500 basis points due to higher
activity and the impact of selling the Company’s frac stack and
well testing business in the second quarter of 2017. These assets
contributed $2 million in revenue during the second quarter of
2017, and the sale of these assets resulted in the approximately
10% decline in revenues from $15.8 million in the second quarter of
2017 to $14.2 million in the third quarter of 2017. Excluding
the frac stack and well testing revenues from the second quarter,
revenue increased 2.9% in the third quarter.
International Segment
The company completed its exit of international
operations in the third quarter with the sale of its Russian
operations. Third quarter 2017 International revenues were $1.3
million, down 38.7% as compared to second quarter 2017 revenues of
$2.2 million as a result of the sale. The company recorded a gain
on this sale of $4.7 million which is reflected in Other Income.
Third quarter operating loss was $1.1 million, or -84.7% of
revenues. These results compare to second quarter 2017 operating
loss of $1.3 million, or -62.3% of revenues, which included a $0.3
million loss on sale of assets; excluding this item, normalized
operating income was $1.0 million, or -46.7% of revenue.
General and Administrative
Expenses
General and Administrative (G&A) expenses
were $37.2 million for the third quarter 2017. Third quarter
G&A expenses included $11.6 million of legal fees and
settlements, $3.3 million of stock-based compensation expense and
$0.2 million in severance. This compares to second quarter 2017
G&A expenses of $30.3 million which included $3.7 million of
stock-based compensation expense and $1.5 million in severance.
Excluding these items and International G&A of $1.1 million in
third quarter and $0.9 million in the second quarter, G&A
expense in the third quarter was $21.0 million as compared to $24.2
million in the second quarter.
Liquidity
As of September 30, 2017, Key had total
liquidity of $104.2 million, consisting of $77.7 million in
unrestricted cash and $26.5 million of borrowing capacity available
under the Company’s $100.0 million asset-based loan facility. This
compares to total liquidity of $120.4 million at June 30, 2017,
consisting of $94.7 million in unrestricted cash and $25.7 million
of borrowing capacity available under the Company’s $100.0 million
asset-based loan facility. Capital expenditures for the third
quarter of 2017 were $2.4 million and the Company also paid
approximately $5 million in legal fees and settlements in the third
quarter of 2017.
Conference Call Information
As previously announced, Key management will
host a conference call to discuss its third quarter 2017 financial
results on Thursday, November 9, 2017 at 10:00 a.m. CST. Callers
from the United States and Canada should dial 888-794-4637 to
access the call. International callers should dial 352-204-8973.
All callers should ask for the "Key Energy Services Conference
Call" or provide the access code 8686568. The conference call will
also be available live via the internet. To access the webcast, go
to www.keyenergy.com and select "Investor Relations."
A telephonic replay of the conference call will
be available on Thursday, November 9, 2017, beginning approximately
two hours after the completion of the conference call and will
remain available for two weeks. To access the replay, call
855-859-2056 or 800-585-8367. The access code for the replay is
8686568. The replay will also be accessible at
www.keyenergy.com under "Investor Relations" for a period of
at least 90 days.
Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
Successor |
|
|
Predecessor |
|
|
Three Months Ended September 30,
2017 |
|
Three Months Ended June 30, 2017 |
|
|
Three Months Ended September 30,
2016 |
|
Nine Months Ended September 30,
2017 |
|
|
Nine Months Ended September 30,
2016 |
REVENUES |
|
$ |
110,653 |
|
|
$ |
107,780 |
|
|
|
$ |
102,406 |
|
|
$ |
319,885 |
|
|
|
$ |
308,506 |
|
COSTS AND
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating expenses |
|
87,115 |
|
|
63,560 |
|
|
|
96,071 |
|
|
237,981 |
|
|
|
276,088 |
|
Depreciation and amortization expense |
|
21,114 |
|
|
20,910 |
|
|
|
33,467 |
|
|
63,325 |
|
|
|
105,075 |
|
General
and administrative expenses |
|
37,168 |
|
|
30,334 |
|
|
|
42,456 |
|
|
98,498 |
|
|
|
129,604 |
|
Impairment expense |
|
— |
|
|
— |
|
|
|
40,000 |
|
|
187 |
|
|
|
40,000 |
|
Operating loss |
|
(34,744 |
) |
|
(7,024 |
) |
|
|
(109,588 |
) |
|
(80,106 |
) |
|
|
(242,261 |
) |
Interest
expense, net of amounts capitalized |
|
8,090 |
|
|
7,872 |
|
|
|
21,120 |
|
|
23,672 |
|
|
|
64,061 |
|
Other
(income) loss, net |
|
(4,578 |
) |
|
(961 |
) |
|
|
154 |
|
|
(5,779 |
) |
|
|
(665 |
) |
Reorganization items, net |
|
60 |
|
|
101 |
|
|
|
— |
|
|
1,501 |
|
|
|
— |
|
Loss before tax income
taxes |
|
(38,316 |
) |
|
(14,036 |
) |
|
|
(130,862 |
) |
|
(99,500 |
) |
|
|
(305,657 |
) |
Income
tax benefit |
|
96 |
|
|
853 |
|
|
|
110 |
|
|
1,238 |
|
|
|
489 |
|
NET
LOSS |
|
$ |
(38,220 |
) |
|
$ |
(13,183 |
) |
|
|
$ |
(130,752 |
) |
|
$ |
(98,262 |
) |
|
|
$ |
(305,168 |
) |
Loss per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(1.90 |
) |
|
$ |
(0.66 |
) |
|
|
$ |
(0.81 |
) |
|
$ |
(4.89 |
) |
|
|
$ |
(1.90 |
) |
Weighted
average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
20,106 |
|
|
20,099 |
|
|
|
160,846 |
|
|
20,101 |
|
|
|
160,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Revenue and Operating Income (in
thousands, except for percentages, unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
Successor |
|
|
Predecessor |
|
|
Three Months Ended September 30,
2017 |
|
Three Months Ended June 30, 2017 |
|
|
Three Months Ended September 30,
2016 |
|
Nine Months Ended September 30,
2017 |
|
|
Nine Months Ended September 30,
2016 |
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Rig Services |
|
$ |
61,933 |
|
|
$ |
61,802 |
|
|
|
$ |
59,137 |
|
|
$ |
184,026 |
|
|
|
$ |
169,627 |
|
Fluid Management
Services |
|
20,713 |
|
|
18,867 |
|
|
|
18,969 |
|
|
57,475 |
|
|
|
61,230 |
|
Coiled Tubing
Services |
|
12,499 |
|
|
9,165 |
|
|
|
7,146 |
|
|
27,005 |
|
|
|
24,294 |
|
Fishing & Rental
Services |
|
14,177 |
|
|
15,776 |
|
|
|
14,078 |
|
|
45,808 |
|
|
|
43,773 |
|
International |
|
1,331 |
|
|
2,170 |
|
|
|
3,076 |
|
|
5,571 |
|
|
|
9,582 |
|
Consolidated
Total |
|
$ |
110,653 |
|
|
$ |
107,780 |
|
|
|
$ |
102,406 |
|
|
$ |
319,885 |
|
|
|
$ |
308,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Rig Services |
|
$ |
(502 |
) |
|
$ |
(177 |
) |
|
|
$ |
(9,004 |
) |
|
$ |
(2,766 |
) |
|
|
$ |
(29,044 |
) |
Fluid Management
Services |
|
(7,262 |
) |
|
(3,227 |
) |
|
|
(13,225 |
) |
|
(17,426 |
) |
|
|
(27,052 |
) |
Coiled Tubing
Services |
|
1,854 |
|
|
325 |
|
|
|
(4,372 |
) |
|
(106 |
) |
|
|
(16,578 |
) |
Fishing & Rental
Services |
|
(2,366 |
) |
|
17,494 |
|
|
|
(6,951 |
) |
|
11,251 |
|
|
|
(19,739 |
) |
International |
|
(1,128 |
) |
|
(1,352 |
) |
|
|
(44,389 |
) |
|
(4,780 |
) |
|
|
(54,350 |
) |
Functional Support |
|
(25,340 |
) |
|
(20,087 |
) |
|
|
(31,647 |
) |
|
(66,279 |
) |
|
|
(95,498 |
) |
Consolidated
Total |
|
$ |
(34,744 |
) |
|
$ |
(7,024 |
) |
|
|
$ |
(109,588 |
) |
|
$ |
(80,106 |
) |
|
|
$ |
(242,261 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss) % of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Rig Services |
|
(0.8 |
)% |
|
(0.3 |
)% |
|
|
(15.2 |
)% |
|
(1.5 |
)% |
|
|
(17.1 |
)% |
Fluid Management
Services |
|
(35.1 |
)% |
|
(17.1 |
)% |
|
|
(69.7 |
)% |
|
(30.3 |
)% |
|
|
(44.2 |
)% |
Coiled Tubing
Services |
|
14.8 |
% |
|
3.5 |
% |
|
|
(61.2 |
)% |
|
(0.4 |
)% |
|
|
(68.2 |
)% |
Fishing & Rental
Services |
|
(16.7 |
)% |
|
110.9 |
% |
|
|
(49.4 |
)% |
|
24.6 |
% |
|
|
(45.1 |
)% |
International |
|
(84.7 |
)% |
|
(62.3 |
)% |
|
|
(1,443.1 |
)% |
|
(85.8 |
)% |
|
|
(567.2 |
)% |
Consolidated
Total |
|
(31.4 |
)% |
|
(6.5 |
)% |
|
|
(107.0 |
)% |
|
(25.0 |
)% |
|
|
(78.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following is a reconciliation of net loss as
presented in accordance with United States generally accepted
accounting principles (GAAP) to EBITDA and Adjusted EBITDA as
required under Regulation G of the Securities Exchange Act of
1934.
Reconciliations of EBITDA and Adjusted EBITDA to net
loss (in thousands, except for percentages,
unaudited):
|
|
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
|
Three Months Ended September 30,
2017 |
|
Three Months Ended June 30, 2017 |
|
|
Three Months Ended September 30,
2016 |
Net loss |
|
$ |
(38,220 |
) |
|
$ |
(13,183 |
) |
|
|
$ |
(130,752 |
) |
Income tax benefit |
|
(96 |
) |
|
(853 |
) |
|
|
(110 |
) |
Interest expense, net
of amounts capitalized |
|
8,090 |
|
|
7,872 |
|
|
|
21,120 |
|
Interest income |
|
(182 |
) |
|
(155 |
) |
|
|
(104 |
) |
Depreciation and
amortization |
|
21,114 |
|
|
20,910 |
|
|
|
33,467 |
|
EBITDA |
|
$ |
(9,294 |
) |
|
$ |
14,591 |
|
|
|
$ |
(76,379 |
) |
% of
revenues |
|
(8.4 |
)% |
|
13.5 |
% |
|
|
(74.6 |
)% |
|
|
|
|
|
|
|
|
Severance costs |
|
369 |
|
|
1,650 |
|
|
|
313 |
|
Stock-based
compensation |
|
3,330 |
|
|
3,969 |
|
|
|
— |
|
Restructuring items,
net |
|
60 |
|
|
101 |
|
|
|
— |
|
Impairment expense |
|
— |
|
|
— |
|
|
|
40,000 |
|
(Gain) loss on sales of
assets |
|
(711 |
) |
|
(20,968 |
) |
|
|
2,163 |
|
Legal settlements |
|
11,562 |
|
|
— |
|
|
|
6,316 |
|
Gain on sale of
business in Russia |
|
(4,677 |
) |
|
— |
|
|
|
— |
|
Restructuring
professional fees |
|
— |
|
|
— |
|
|
|
13,181 |
|
Adjusted EBITDA* |
|
$ |
639 |
|
|
$ |
(657 |
) |
|
|
$ |
(14,406 |
) |
% of
revenues |
|
0.6 |
% |
|
(0.6 |
)% |
|
|
(14.1 |
)% |
|
|
|
|
|
|
|
|
Revenues |
|
$ |
110,653 |
|
|
$ |
107,780 |
|
|
|
$ |
102,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Adjusted EBITDA does not exclude costs incurred in
connection with the Company’s FCPA investigations completed in
2016.
|
|
|
|
|
Three Months Ended September 30,
2017 |
|
U.S. Rig Services |
|
Fluid Management Services |
|
Coiled Tubing Services |
|
Fishing and Rental Services |
|
International |
|
Functional Support |
|
Total |
Net loss |
$ |
(495 |
) |
|
$ |
(7,249 |
) |
|
$ |
1,854 |
|
|
$ |
(2,355 |
) |
|
$ |
3,310 |
|
|
$ |
(33,285 |
) |
|
$ |
(38,220 |
) |
Income tax benefit |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(99 |
) |
|
3 |
|
|
(96 |
) |
Interest expense, net
of amounts capitalized |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
8,090 |
|
|
8,090 |
|
Interest income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1 |
) |
|
(181 |
) |
|
(182 |
) |
Depreciation and
amortization |
8,009 |
|
|
5,350 |
|
|
1,259 |
|
|
5,855 |
|
|
234 |
|
|
407 |
|
|
21,114 |
|
EBITDA |
$ |
7,514 |
|
|
$ |
(1,899 |
) |
|
$ |
3,113 |
|
|
$ |
3,500 |
|
|
$ |
3,444 |
|
|
$ |
(24,966 |
) |
|
$ |
(9,294 |
) |
% of
revenues |
12.1 |
% |
|
(9.2 |
)% |
|
24.9 |
% |
|
24.7 |
% |
|
258.8 |
% |
|
— |
% |
|
(8.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance costs |
202 |
|
|
— |
|
|
4 |
|
|
— |
|
|
— |
|
|
163 |
|
|
369 |
|
Stock-based
compensation |
340 |
|
|
(108 |
) |
|
54 |
|
|
— |
|
|
— |
|
|
3,044 |
|
|
3,330 |
|
Restructuring items,
net |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
60 |
|
|
60 |
|
(Gain) loss on sales of
assets |
(365 |
) |
|
(72 |
) |
|
4 |
|
|
(278 |
) |
|
— |
|
|
— |
|
|
(711 |
) |
Legal settlements |
— |
|
|
4,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
7,562 |
|
|
11,562 |
|
Gain on sale of
business in Russia |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,677 |
) |
|
— |
|
|
(4,677 |
) |
Adjusted EBITDA* |
$ |
7,691 |
|
|
$ |
1,921 |
|
|
$ |
3,175 |
|
|
$ |
3,222 |
|
|
$ |
(1,233 |
) |
|
$ |
(14,137 |
) |
|
$ |
639 |
|
% of
revenues |
12.4 |
% |
|
9.3 |
% |
|
25.4 |
% |
|
22.7 |
% |
|
(92.6 |
)% |
|
— |
% |
|
0.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
61,933 |
|
|
$ |
20,713 |
|
|
$ |
12,499 |
|
|
$ |
14,177 |
|
|
$ |
1,331 |
|
|
$ |
— |
|
|
$ |
110,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Adjusted EBITDA does not exclude costs incurred in
connection with the Company’s FCPA investigations completed in
2016.
|
|
|
|
|
Three Months Ended June 30, 2017 |
|
U.S. Rig Services |
|
Fluid Management Services |
|
Coiled Tubing Services |
|
Fishing and Rental Services |
|
International |
|
Functional Support |
|
Total |
Net loss |
$ |
(19 |
) |
|
$ |
(3,071 |
) |
|
$ |
330 |
|
|
$ |
17,514 |
|
|
$ |
(1,074 |
) |
|
$ |
(26,863 |
) |
|
$ |
(13,183 |
) |
Income tax benefit |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
31 |
|
|
(884 |
) |
|
(853 |
) |
Interest expense, net
of amounts capitalized |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7,872 |
|
|
7,872 |
|
Interest income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(18 |
) |
|
(137 |
) |
|
(155 |
) |
Depreciation and
amortization |
7,895 |
|
|
5,469 |
|
|
1,284 |
|
|
5,850 |
|
|
32 |
|
|
380 |
|
|
20,910 |
|
EBITDA |
$ |
7,876 |
|
|
$ |
2,398 |
|
|
$ |
1,614 |
|
|
$ |
23,364 |
|
|
$ |
(1,029 |
) |
|
$ |
(19,632 |
) |
|
$ |
14,591 |
|
% of
revenues |
12.7 |
% |
|
12.7 |
% |
|
17.6 |
% |
|
148.1 |
% |
|
(47.4 |
)% |
|
— |
% |
|
13.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance costs |
855 |
|
|
29 |
|
|
11 |
|
|
94 |
|
|
— |
|
|
661 |
|
|
1,650 |
|
Stock-based
compensation |
641 |
|
|
55 |
|
|
54 |
|
|
— |
|
|
— |
|
|
3,219 |
|
|
3,969 |
|
Restructuring cost,
net |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
101 |
|
|
101 |
|
(Gain) loss on sales of
assets |
(357 |
) |
|
(239 |
) |
|
(8 |
) |
|
(20,711 |
) |
|
338 |
|
|
9 |
|
|
(20,968 |
) |
Adjusted EBITDA* |
$ |
9,015 |
|
|
$ |
2,243 |
|
|
$ |
1,671 |
|
|
$ |
2,747 |
|
|
$ |
(691 |
) |
|
$ |
(15,642 |
) |
|
$ |
(657 |
) |
% of
revenues |
14.6 |
% |
|
11.9 |
% |
|
18.2 |
% |
|
17.4 |
% |
|
(31.8 |
)% |
|
— |
% |
|
(0.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
61,802 |
|
|
$ |
18,867 |
|
|
$ |
9,165 |
|
|
$ |
15,776 |
|
|
$ |
2,170 |
|
|
$ |
— |
|
|
$ |
107,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Adjusted EBITDA does not exclude costs incurred in
connection with the Company’s FCPA investigations completed in
2016.
“EBITDA” is defined as income or loss
attributable to Key before interest, taxes, depreciation, and
amortization.
“Adjusted EBITDA” is EBITDA as further adjusted
for certain non-recurring or extraordinary items such as impairment
expense, severance expense, loss on debt extinguishment, gains or
losses on asset sales, asset retirements and impairments, and
certain non-recurring transaction or other costs.
EBITDA and Adjusted EBITDA are non-GAAP measures
that are used as supplemental financial measures by the Company’s
management and directors and by external users of the Company’s
financial statements, such as investors, to assess:
- The financial performance of the Company’s assets without
regard to financing methods, capital structure or historical cost
basis;
- The ability of the Company’s assets to generate cash sufficient
to pay interest on its indebtedness;
- The Company’s operating performance and return on invested
capital as compared to those of other companies in the well
services industry, without regard to financing methods and capital
structure; and
- The Company’s operating trends underlying the items that tend
to be of a non-recurring nature.
Normalized operating loss is a non-GAAP
financial measure and is defined as operating loss plus or minus
certain items such as impairment expense, severance expense, FCPA
settlement costs and FCPA investigation costs. Normalized
operating loss is used as a supplemental financial measure by the
Company’s management and directors and by external users of the
Company’s financial statements, such as investors, primarily to
compare the Company’s core operating and financial performance from
period to period without regard to the many non-cash accounting
charges or unusual expenses that have impacted the Company’s GAAP
operating income and net income due to the severe downturn in the
company’s business.
EBITDA, Adjusted EBITDA and normalized operating
income have limitations as analytical tools and should not be
considered an alternative to net income, operating income, cash
flow from operating activities, or any other measure of financial
performance or liquidity presented in accordance with GAAP. EBITDA,
Adjusted EBITDA and normalized operating income exclude some, but
not all, items that affect net income and operating income and
these measures may vary among other companies. Limitations in using
normalized operating loss as an analytical tool include that
normalized operating loss excludes certain cash costs and losses
actually incurred by the Company. Limitations to using EBITDA and
Adjusted EBITDA as an analytical tool include:
- EBITDA and Adjusted EBITDA do not reflect Key’s current or
future requirements for capital expenditures or capital
commitments;
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash
requirements necessary to service, interest or principal payments
on Key’s debt;
- EBITDA and Adjusted EBITDA do not reflect income taxes;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and EBITDA and Adjusted EBITDA do not
reflect any cash requirements for such replacements;
- Other companies in Key’s industry may calculate EBITDA and
Adjusted EBITDA differently than Key does, limiting their
usefulness as a comparative measure; and
- EBITDA and Adjusted EBITDA are a different calculation from
earnings before interest, taxes, depreciation and amortization as
defined for purposes of the financial covenants in the Company’s
senior secured credit facility, and therefore should not be relied
upon for assessing compliance with covenants.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Statements that are not historical in nature or that relate
to future events and conditions are, or may be deemed to be,
forward-looking statements. These forward-looking statements are
based on Key’s current expectations, estimates and projections and
its management’s beliefs and assumptions concerning future events
and financial trends affecting its financial condition and results
of operations. In some cases, you can identify these statements by
terminology such as “may,” “will,” “should,” “predicts,” “expects,”
“believes,” “anticipates,” “projects,” “potential” or “continue” or
the negative of such terms and other comparable terminology. These
statements are only predictions and are subject to substantial
risks and uncertainties and are not guarantees of performance.
Future actions, events and conditions and future results of
operations may differ materially from those expressed in these
statements. In evaluating those statements, you should carefully
consider the information above as well as the risks outlined in
“Item 1A. Risk Factors,” in Key’s Annual Report on Form 10-K for
the year ended December 31, 2016 and in other reports Key files
with the Securities and Exchange Commission.
Key undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date of this
press release except as required by law. All of Key’s written and
oral forward-looking statements are expressly qualified by these
cautionary statements and any other cautionary statements that may
accompany such forward-looking statements.
Important factors that may affect Key’s expectations, estimates
or projections include, but are not limited to, the following:
conditions in the oil and natural gas industry, especially oil and
natural gas prices and capital expenditures by oil and natural gas
companies; volatility in oil and natural gas prices; Key’s ability
to implement price increases or maintain pricing on its core
services; risks that Key may not be able to reduce, and could even
experience increases in, the costs of labor, fuel, equipment and
supplies employed in its businesses; industry capacity; asset
impairments or other charges; the periodic low demand for Key’s
services and resulting operating losses and negative cash flows;
Key’s highly competitive industry as well as operating risks, which
are primarily self-insured, and the possibility that its insurance
may not be adequate to cover all of its losses or liabilities;
significant costs and potential liabilities resulting from
compliance with applicable laws, including those resulting from
environmental, health and safety laws and regulations, specifically
those relating to hydraulic fracturing, as well as climate change
legislation or initiatives; Key’s historically high employee
turnover rate and its ability to replace or add workers, including
executive officers and skilled workers; Key’s ability to incur debt
or long-term lease obligations; Key’s ability to implement
technological developments and enhancements; severe weather impacts
on Key’s business, including hurricane activity; Key’s ability to
successfully identify, make and integrate acquisitions and its
ability to finance future growth of its operations or future
acquisitions; Key’s ability to achieve the benefits expected from
disposition transactions; the loss of one or more of Key’s larger
customers; Key’s ability to generate sufficient cash flow to meet
debt service obligations; the amount of Key’s debt and the
limitations imposed by the covenants in the agreements governing
its debt, including its ability to comply with covenants under its
current debt agreements; an increase in Key’s debt service
obligations due to variable rate indebtedness; Key’s inability to
achieve its financial, capital expenditure and operational
projections, including quarterly and annual projections of revenue
and/or operating income and its inaccurate assessment of future
activity levels, customer demand, and pricing stability which may
not materialize (whether for Key as a whole or for geographic
regions and/or business segments individually); Key’s ability to
respond to changing or declining market conditions, including Key’s
ability to reduce the costs of labor, fuel, equipment and supplies
employed and used in its businesses; Key’s ability to maintain
sufficient liquidity; the adverse impact of litigation; and other
factors affecting Key’s business described in “Item 1A. Risk
Factors” in its Annual Report on Form 10-K for the year ended
December 31, 2016, and other reports Key files with the Securities
and Exchange Commission.
About Key Energy ServicesKey
Energy Services is the largest onshore, rig-based well servicing
contractor based on the number of rigs owned. Key provides a
complete range of well intervention services and has operations in
all major onshore oil and gas producing regions of the continental
United States.
Contact:West
Gotcher713-757-5539
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