UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 25, 2015 (February 25, 2015)
KEY ENERGY SERVICES, INC.
(Exact name of registrant as specified in its charter)
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| Maryland |
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001-08038 |
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04-2648081 |
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of Incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
1301 McKinney Street, Suite 1800
Houston, Texas 77010
(Address of principal executive offices and Zip Code)
713-651-4300
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01 |
Regulation FD Disclosure. |
Key Energy Services, Inc. (the “Company”) is
furnishing presentation materials that representatives from the Company intend to use in one or more meetings with investors and analysts from time to time. The Company also intends to make the materials available on its website,
www.keyenergy.com, under “Investor Relations”. The Company is furnishing the presentation materials as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Item 7.01 shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a
filing.
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The
attached presentation materials and the Company’s webcast presentation contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Any matters that are not of historic fact are
forward-looking statements. These forward-looking statements are based on the Company’s current expectations, estimates and projections about the Company, its industry, its management’s beliefs and certain assumptions made by management,
including the Company’s activity levels and capital expenditure expectations. No assurance can be given that such expectations, estimates or projections will prove to have been correct. Whenever possible, these forward-looking statements are
identified by words such as “expects,” “believes,” “anticipates” and similar phrases.
Because such
statements involve risks and uncertainties, the Company’s actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned
not to place undue reliance on such forward-looking statements. Other important risk factors that may affect the Company’s business, results of operations and financial position are discussed in its most recently filed Annual Report on Form
10-K, recent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and in other Securities and Exchange Commission filings. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks
or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. However, readers should review carefully reports and documents that the Company files periodically with the Securities and Exchange
Commission.
| Item 9.01 |
Financial Statements and Exhibits. |
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99.1 |
February 2015 Investor Presentation |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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KEY ENERGY SERVICES, INC. |
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| Date: February 25, 2015 |
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By: |
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/s/ Kimberly R. Frye |
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Kimberly R. Frye |
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Senior Vice President, General Counsel and Secretary |
Exhibit Index
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Exhibit
No. |
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Description |
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| 99.1 |
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February 2015 Investor Presentation |
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| Exhibit 99.1
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February 2015 Investor Presentation
Harbor This presentation and related commentary may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Any
statements as to matters that are not of historic fact are forward-looking statements. These forward-looking statements are based on Key’s curent expectations, estimates and projections about Key, its industry, its management“s beliefs and
certain assumptions made by management, and include statements regarding estimated capital expenditures, future operational and activity expectations, international growth, and anticipated financial performance for the first quarter and full-year
2015. No assurance can be given that such expectations, estimates or projections will prove to have been correct. Whenever possible, these “forward-looking statements” are identified by words such as “expects,”
“believes,” “anticipates” and similar phrases.
Readers and any audience are cautioned that
any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict, including, but not limited to: risks that Key will be unable to achieve its
financial, capital expenditure and operational projections, including quarterly and annual projections of revenue and/or operating income and risks that Keys expectations regarding future activity levels, customer demand, and pricing stability may
not materialize (whether for Key as a whole or for geographic regions and/or business segments individually); risks that fundamentals in the U.S. oil and gas markets may not yield anticipated future growth in Key’s businesses, or could further
deteriorate or worsen from the recent market declines, and/or that Key could experience further unexpected declines in activity and demand for its rig service, fluid management service, coiled tubing service, and fishing and rental service
businesses; risks relating to Key’s ability to implement technological developments and enhancements; risks relating to compliance with Safe environmental, health and safety laws and regulations, as well as actions by governmental and
regulatory authorities; risks relating to compliance with the FCPA and anti-corruption laws, including risks related to increased costs in connection with FCPA investigations; risks affecting Key’s international operations, including risks that
Key may not be able to achieve its international growth and mobilization strategy in the foreign countries in which Key operates; risks that Key may be unable to achieve the benefits expected from acquisition and disposition transactions, and risks
associated with integration of the acquired operations into Key’s operations; risks, in responding to changing or declining market conditions, that Key may not be able to reduce, and could even experience increases in, the costs of labor, fuel,
equipment and supplies employed and used in Key’s businesses; risks relating to changes in the demand for or the price of oil and natural gas; risks that Key may not be able to execute its capital expenditure program and/or that any such
capital expenditure investments, if made, will not generate adequate returns; and other risks affecting Key’s ability to maintain or improve operations, including its ability to maintain prices for services under market pricing pressures,
weather risks, and the impact of potential increases in general and administrative expenses.
+
Because such statements involve risks and uncertainties, many of which are outside of Key’s control, Key’s
actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Other important risk factors that may affect Key’s business, results of operations and financial position are discussed in its most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q, recent Current Reports on Form
8-K and in other Securities and Exchange Commission filings. Unless otherwise required by law, Key also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the
forward-looking statements made here. However, readers should review carefully reports and documents that Key files periodically with the Securities and Exchange Commission.
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commentary Market conditions have shifted&
rig services coiled tubing services
+ we believe well servicing activity + stacked four 2” units since the end of the exhibits roughly half the downside impact third quarter, brings working count to eight of the
drilling rig count + 70% of coiled tubing revenue generated + currently seeing high-single to low- in the Eagle Ford and the Permian double digit pricing concessions + currently seeing low teens to low 20“s pricing concessions
+recent fluid management services fishing & rental services
+ approximately 90% of disposal well volumes + segment revenue currently split two-thirds are generated from produced
water production and one-third completion-driven + while hauling and disposal of produced water services does show more resilience than frac water in a + pricing discussions of late have been low oil environment, these activities aren“t most
notable in items such as drill pipe and immune other equipment used in drilling & completion processes
Source: KEG Q4 2014 earnings call on 2/19/2015.
commentary & and Key is responding
operational changes non-operational changes
+ reduced wages by up to 10% in many + reduced supply chain costs and areas commitments
+ eliminated field bonus programs + wage reductions and furlough programs throughout the company, including senior + reducing work hours to minimize management overtime +recent + headcount
reductions representing + headcount reductions and de-layering approximately 25% of our functional support management structures headcount
+ combining and closing service facilities
+
manage capital spending to maximize liquidity with a first half 2015 capital plan of up to $50 million
Source:
KEG Q4 2014 earnings call on 2/19/2015.
market Even in a lower oil price scenario
robust
growth in HZ wellbores continues to materially outpace conventional market
Vert. & Dir. Wells in
Production (000“s) HZ Wells in Production (000“s)
1,200 Forecast
175 Forecast
1,000 150 131
878 893 901 906 908 909 911
+ 125 116
800
103
100 88 600 71
75
55
400
50 42
200
25
0 0
2011 2012 2013 2014 2015 2016 2017 2011 2012
2013 2014 2015 2016 2017
Source: PacWest Consulting Partners analysis; analysis contemplates the following oil
prices: 2015—$43 / bbl; 2016—$59 bbl; 2017—$65—$75 / bbl. Note: Data is for U.S. Land only.
advantage Key’s solutions
provide the
equipment and service necessary to optimize production on existing wells and efficiently complete new wells
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services Industry-leading asset base
provides
flexibility and scale to capture market opportunities across the U.S.
Rig Services Market Share
(1) Actively Marketed Rigs by Class (2) Revenue by Geographic Play (3)
Class 5
Class 1
1% “Other Gas
9%
10%
#1
20% Class 4 Class 2
19% “Other Oil “Permian
Others 14%
20% 31%
44% #2 12%
“Bakken
rig #3 13%
11% Class 3
“California
#5 #4 57%
5% 26%
8%
+ over the course of 2014, saw well
maintenance and workover activity with class 4 rigs increase 58%, + with these rigs now account for nearly 30% of total rig activity + we believe the demand for these services will continue to grow, even in a moderated oil price environment, as well
servicing can provide compelling returns for a fraction of what a new well costs Well Life-Cycle Exposure
Drilling Completion Production Intervention Abandonment
(1) Wall Street research, based on rig count.
(2) Class 4 rigs include 365 “ 500 horsepower series rigs.
(3) Revenue from Continuing Operations in the U.S. during Q4 2014.
management Strong logistical footprint
allows for
near real-time asset mobility to take advantage of
“frontier” markets while maintaining exposure to
legacy production markets
Revenue by Geographic Play (1)
“Barnett
4%
“Other Gas
14%
“Permian “Haynesville 39% 10%
“Other Oil
Regions 24% fluid Basins
“Bakken
+ saltwater disposal well disposal revenues have increased 10% since June 2% 2014, consistent with strategy to
leverage existing footprint “Eagle
Ford 8%
+ produced water hauling and disposal activities much more stable than frac water hauling and disposal in moderated oil
price environment
Well Life-Cycle Exposure
+ Drilling Completion Production Intervention Abandonment
(1) Revenue from Continuing Operations in the U.S. during Q4 2014.
Exploit operating leverage
through optimization
of large-unit utilization and focusing on markets where we maintain the strongest competitive position
Fleet
Composition “ 47 Units (1) Revenue by Geographic Play (2)
“Other Gas “Haynesville 5% 6%
coiled Marcellus
Less than 2” 15%
Greater than in Diameter
“Other Oil “Eagle Ford
2” in 40% 6% 42% Diameter 60% “California
5%
“Permian
25%
+ During the fourth quarter, we generated approximately 90% of our Coiled Tubing revenue from completion-driven activities
with our largest units, the 2 3/8-inch class, contributing 61% of total revenue and our 2-inch units contributing 28% of total revenue
+ + Currently working 8 2” units and will continue to evaluate the merit of stacking additional units to help mitigate negative margin impacts
Well Life-Cycle Exposure
Drilling Completion Production Intervention Abandonment
(1) As of March 2014.
(2) Revenue from Continuing
Operations in the U.S. during Q4 2014.
rental Strong execution and attractive footprint
in the traditional fishing & rental business and opportunity for turn-around in frac stack & well
testing
Revenue by Geographic Play (1)
“Other
Gas 5%
& “Permian
“Haynesville
33%
19%
fishing
“Other Oil
23% Eagle
Regions Ford
8%
Basins
“California “Bakken 8%
+ frac stack and well testing services accounted for 25% of the fishing and 6% rental segment revenue in 2014, yet generated an operating loss of approximately $14 million over the same
period + strides we“ve made in frac stack and well testing should provide some level of stability for the fishing and rental segment
Well Life-Cycle Exposure
+ Drilling Completion
Production Intervention Abandonment
(1) Revenue from Continuing Operations in the U.S. during Q4 2014.
opportunities
+
Though the opportunities are still before us,
we must now weather the storm
rig services
+ customer de-concentration
+ grow “big rig” asset base
+ exploit
horizontal shale oil wellbores
+ shift to 24-hour operations
fluid management services
+ target legacy and fringe markets
+ leverage SWD
footprint and mobile assets
+ tactical additions of SWDs
coiled tubing services
+ focus full efforts on 2 3/8” units
+
convert 2” unit candidates to 2 3/8”
+ stack chronically under-utilized 2” units
+ concentrate regional exposure
fishing & rental services
+ drive
structural re-build of FS/WT
+ install new management team
+ “boots on the ground” sales force
+ eliminate low margin services
global Global presence
provides opportunities to
diversify revenue base as well as an opportunity to apply expertise abroad
+ Russia North America
Canada Mexico
United States Middle East Bahrain Oman
Latin
America
Colombia Ecuador
highlights + We are the global leader in onshore, rig-based well services
+ We have a strong reputation as a production-enhancement service provider
+ We are well-positioned to benefit from long-term secular trends
+ We have developed a differentiated asset base
+
We believe that our assets, differentiated technology and + market position provide the leverage to deliver value to shareholders