Key Energy Services, Inc. (“Key” or the “Company”) reported fourth
quarter 2017 consolidated revenues of $116.3 million and a pre-tax
GAAP loss of $22.8 million, or $1.11 per share. The results for the
fourth quarter include a gain of $4.0 million, or $0.20 per share
associated with the cancellation of certain equity awards and a
$0.6 million, or $0.03 per share gain on the sale of assets.
Excluding this item, the Company reported a pre-tax loss of $27.4
million, or $1.34 per share.
Overview and Outlook
Key’s President and Chief Executive Officer,
Robert Drummond, stated, “Fourth quarter consolidated revenues grew
5% sequentially, with revenue in our U.S. Rig Services and Fluid
Management Services segments overcoming the usual fourth quarter
seasonal activity declines. We also had another consecutive quarter
of double-digit revenue growth in our Coiled Tubing Services
segment and had nine coiled tubing units deployed by the end of the
fourth quarter of 2017. The impact of adding crews and equipment as
we prepared to meet rising demand for our services negatively
impacted our margins in the fourth quarter."
Drummond continued, “With activity increasing
and labor tightening, we began to pursue price increases across all
of our lines of business. While some price increases were
implemented during the fourth quarter and thus far in the first
quarter, we do not expect to begin to fully benefit from these
actions until late in the first quarter. We expect a full quarter’s
benefit from price in the second quarter.”
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 fourth
quarter and full-year 2017 and prior comparable quarterly
periods:
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
Three Months Ended |
|
Period fromDecember 16,2016
throughDecember 31,2016 |
|
|
Period fromOctober 1,
2016throughDecember 15,2016 |
|
December 31,2017(Unaudited) |
|
September 30,2017(Unaudited) |
|
|
|
Revenues |
$ |
116.3 |
|
|
$ |
110.7 |
|
|
$ |
17.8 |
|
|
|
$ |
90.9 |
|
Net income (loss) |
(22.3 |
) |
|
(38.2 |
) |
|
(10.2 |
) |
|
|
173.4 |
|
Diluted income (loss)
per share |
(1.11 |
) |
|
(1.90 |
) |
|
(0.51 |
) |
|
|
1.08 |
|
Adjusted EBITDA* |
1.8 |
|
|
0.6 |
|
|
(4.9 |
) |
|
|
0.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Adjusted EBITDA does not exclude costs incurred in
connection with the Company’s FCPA investigations completed in
2016.
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
Year EndedDecember 31,
2017(Unaudited) |
|
Period fromDecember 16, 2016through December31,
2016 |
|
|
Period fromJanuary 1, 2016through December15,
2016 |
Revenues |
$ |
436.2 |
|
|
$ |
17.8 |
|
|
|
$ |
399.4 |
|
Net loss |
(120.6 |
) |
|
(10.2 |
) |
|
|
(131.7 |
) |
Diluted loss per
share |
(6.00 |
) |
|
(0.51 |
) |
|
|
(0.82 |
) |
Adjusted EBITDA* |
(9.2 |
) |
|
(4.9 |
) |
|
|
(48.7 |
) |
|
|
|
|
|
|
|
|
|
|
* Adjusted EBITDA does not exclude costs incurred in
connection with the Company’s FCPA investigations completed in
2016.
U.S. Results
Fourth quarter 2017 U.S. Rig Services revenues
of $64.8 million were up 4.6% as compared to the third quarter 2017
revenues of $61.9 million, with rig hours increasing approximately
1% to 164,480 hours with rig hours per work day increasing
approximately 5% in the fourth quarter. Production activity
as a percentage of rig hours increased approximately 250 basis
points in the fourth quarter as workover and maintenance activity
increased, primarily in the Permian Basin. Margins declined by
approximately 210 basis points in the fourth quarter of 2017 from
the third quarter of 2017 largely due to the on-boarding of
personnel and the equipment make ready costs associated with
increasing activity.
Fourth quarter 2017 Fluid Management Services
revenues of $23.3 million were up 12.3% as compared to the third
quarter 2017 revenues of $20.7 million. Fourth quarter truck hours
were up approximately 9% quarter on quarter with revenue per truck
hour increasing approximately 3% due to higher pricing and higher
water disposal volumes. Fluid Management Services margins improved
approximately 410 basis points on higher activity and pricing, as
well as the non-recurrence of a charge of $4.0 million due to a
legal settlement and of equipment make ready costs and labor
inefficiencies that were incurred in the third quarter.
Fourth quarter 2017 Coiled Tubing Services
revenues of $14.9 million were up 18.9% as compared to the third
quarter 2017 revenue of $12.5 million on higher utilization of
large diameter coiled tubing units during the fourth quarter of
2017 as compared to the third quarter of 2017. Coiled Tubing
Services margins were negatively impacted by approximately 580
basis points in the fourth quarter as compared to the third quarter
due to equipment start-up and labor inefficiencies. The Company
expects to have twelve of its 2 3/8 inch and greater diameter
coiled tubing units deployed by the end of the first quarter of
2018.
Fourth quarter 2017 Fishing & Rental
Services revenues of $13.4 million were down 5.7% as compared to
the third quarter 2017 revenues of $14.2 million. Fourth quarter
2017 Fishing & Rental Services margins were negatively impacted
by approximately 850 basis points due largely to lower fishing
activity and equipment repair costs.
International Segment
The company completed its exit of international
operations in the third quarter. Fourth quarter 2017 included a
loss of $0.4 million dollars as a result of the Company’s
liquidation of remaining legal entities. The Company does not
anticipate having an International reporting segment in 2018.
General and Administrative
Expenses
General and Administrative (G&A) expenses
were $16.8 million for the fourth quarter 2017 compared to $37.2
million in the prior quarter. Fourth quarter G&A expenses
included a $3.7 million gain related to stock-based compensation
cancellation expense. This compares to third quarter 2017 G&A
expenses of $37.2 million which included $11.6 million of legal
fees and settlements, $3.3 million of stock-based compensation
expense and $0.2 million in severance. Excluding these items and
International G&A of $0.1 million, G&A expense in the
fourth quarter was $20.4 million as compared to $21.0 million in
the third quarter of 2017.
Liquidity
As of December 31, 2017, Key had total liquidity
of $97.8 million, consisting of $73.1 million in unrestricted cash
and $24.7 million of borrowing capacity available under the
Company’s $100.0 million asset-based loan facility. This compares
to total liquidity of $104.2 million at September 30, 2017,
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. Capital expenditures for the fourth
quarter of 2017 were $6.5 million and were $16.1 million for
full-year 2017.
Conference Call
Information
As previously announced, Key management will
host a conference call to discuss its fourth quarter and full-year
2017 financial results on Tuesday, February 27, 2018 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 5698079. 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 Tuesday, February 27, 2018, 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
5698079. 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 |
|
Three Months Ended |
|
Period fromDecember 16,2016
throughDecember 31,2016 |
|
|
Period fromOctober 1,
2016throughDecember 15,2016 |
|
December 31,2017(Unaudited) |
|
September 30,2017(Unaudited) |
|
|
|
REVENUES |
$ |
116,280 |
|
|
$ |
110,653 |
|
|
$ |
17,830 |
|
|
|
$ |
90,917 |
|
COSTS AND
EXPENSES: |
|
|
|
|
|
|
|
|
Direct
operating expenses |
94,351 |
|
|
87,115 |
|
|
16,603 |
|
|
|
86,737 |
|
Depreciation and amortization expense |
21,217 |
|
|
21,114 |
|
|
3,574 |
|
|
|
26,221 |
|
General
and administrative expenses |
16,786 |
|
|
37,168 |
|
|
6,501 |
|
|
|
33,653 |
|
Impairment expense |
— |
|
|
— |
|
|
— |
|
|
|
4,646 |
|
Operating loss |
(16,074 |
) |
|
(34,744 |
) |
|
(8,848 |
) |
|
|
(60,340 |
) |
Interest
expense, net of amounts capitalized |
8,125 |
|
|
8,090 |
|
|
1,364 |
|
|
|
10,259 |
|
Other
(income) loss, net |
(1,408 |
) |
|
(4,578 |
) |
|
32 |
|
|
|
(1,778 |
) |
Reorganization items, net |
— |
|
|
60 |
|
|
— |
|
|
|
(245,571 |
) |
Income (loss) before
tax income taxes |
(22,791 |
) |
|
(38,316 |
) |
|
(10,244 |
) |
|
|
176,750 |
|
Income
tax (expense) benefit |
464 |
|
|
96 |
|
|
— |
|
|
|
(3,318 |
) |
NET INCOME
(LOSS) |
$ |
(22,327 |
) |
|
$ |
(38,220 |
) |
|
$ |
(10,244 |
) |
|
|
$ |
173,432 |
|
Income (loss)
per share: |
|
|
|
|
|
|
|
|
Basic and
diluted |
$ |
(1.11 |
) |
|
$ |
(1.90 |
) |
|
$ |
(0.51 |
) |
|
|
$ |
1.08 |
|
Weighted
average shares outstanding: |
|
|
|
|
|
|
|
|
Basic and
diluted |
20,116 |
|
|
20,106 |
|
|
20,090 |
|
|
|
160,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
Year EndedDecember 31,
2017(Unaudited) |
|
Period fromDecember 16, 2016through December31,
2016 |
|
|
Period fromJanuary 1, 2016through December15,
2016 |
REVENUES |
$ |
436,165 |
|
|
$ |
17,830 |
|
|
|
$ |
399,423 |
|
COSTS AND
EXPENSES: |
|
|
|
|
|
|
Direct
operating expenses |
332,332 |
|
|
16,603 |
|
|
|
362,825 |
|
Depreciation and amortization expense |
84,542 |
|
|
3,574 |
|
|
|
131,296 |
|
General
and administrative expenses |
115,284 |
|
|
6,501 |
|
|
|
163,257 |
|
Impairment expense |
187 |
|
|
— |
|
|
|
44,646 |
|
Operating income
(loss) |
(96,180 |
) |
|
(8,848 |
) |
|
|
(302,601 |
) |
Interest
expense, net of amounts capitalized |
31,797 |
|
|
1,364 |
|
|
|
74,320 |
|
Other
(income) loss, net |
(7,187 |
) |
|
32 |
|
|
|
(2,443 |
) |
Reorganization items, net |
1,501 |
|
|
— |
|
|
|
(245,571 |
) |
Loss before tax income
taxes |
(122,291 |
) |
|
(10,244 |
) |
|
|
(128,907 |
) |
Income
tax (expense) benefit |
1,702 |
|
|
— |
|
|
|
(2,829 |
) |
NET
LOSS |
$ |
(120,589 |
) |
|
$ |
(10,244 |
) |
|
|
$ |
(131,736 |
) |
Loss per
share: |
|
|
|
|
|
|
Basic and
diluted |
$ |
(6.00 |
) |
|
$ |
(0.51 |
) |
|
|
$ |
(0.82 |
) |
Weighted
average shares outstanding: |
|
|
|
|
|
|
Basic and
diluted |
20,105 |
|
|
20,090 |
|
|
|
160,587 |
|
|
|
|
|
|
|
|
|
|
|
|
Segment Revenue and Operating Income (in thousands, except
for percentages, unaudited): |
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
Three Months Ended |
|
Period fromDecember 16,2016
throughDecember 31,2016 |
|
|
Period fromOctober 1,
2016throughDecember 15,2016 |
|
December 31,2017(Unaudited) |
|
September 30,2017(Unaudited) |
|
|
|
Revenues |
|
|
|
|
|
|
|
|
U.S. Rig Services |
$ |
64,804 |
|
|
$ |
61,933 |
|
|
$ |
8,549 |
|
|
|
$ |
53,250 |
|
Fluid Management
Services |
23,251 |
|
|
20,713 |
|
|
3,208 |
|
|
|
14,778 |
|
Coiled Tubing
Services |
14,861 |
|
|
12,499 |
|
|
1,392 |
|
|
|
6,275 |
|
Fishing & Rental
Services |
13,364 |
|
|
14,177 |
|
|
3,389 |
|
|
|
12,017 |
|
International |
— |
|
|
1,331 |
|
|
1,292 |
|
|
|
4,597 |
|
Consolidated
Total |
$ |
116,280 |
|
|
$ |
110,653 |
|
|
$ |
17,830 |
|
|
|
$ |
90,917 |
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss) |
|
|
|
|
|
|
|
|
U.S. Rig Services |
$ |
(854 |
) |
|
$ |
(502 |
) |
|
$ |
(1,930 |
) |
|
|
$ |
(10,416 |
) |
Fluid Management
Services |
(2,106 |
) |
|
(7,262 |
) |
|
(1,138 |
) |
|
|
(10,884 |
) |
Coiled Tubing
Services |
1,737 |
|
|
1,854 |
|
|
(256 |
) |
|
|
(2,744 |
) |
Fishing & Rental
Services |
(3,745 |
) |
|
(2,366 |
) |
|
(265 |
) |
|
|
(6,669 |
) |
International |
(213 |
) |
|
(1,128 |
) |
|
67 |
|
|
|
(4,876 |
) |
Functional Support |
(10,893 |
) |
|
(25,340 |
) |
|
(5,326 |
) |
|
|
(24,751 |
) |
Consolidated
Total |
$ |
(16,074 |
) |
|
$ |
(34,744 |
) |
|
$ |
(8,848 |
) |
|
|
$ |
(60,340 |
) |
|
|
|
|
|
|
|
|
|
Operating
Income (Loss) % of Revenues |
|
|
|
|
|
|
|
|
U.S. Rig Services |
(1.3 |
)% |
|
(0.8 |
)% |
|
(22.6 |
)% |
|
|
(19.6 |
)% |
Fluid Management
Services |
(9.1 |
)% |
|
(35.1 |
)% |
|
(35.5 |
)% |
|
|
(73.7 |
)% |
Coiled Tubing
Services |
11.7 |
% |
|
14.8 |
% |
|
(18.4 |
)% |
|
|
(43.7 |
)% |
Fishing & Rental
Services |
(28.0 |
)% |
|
(16.7 |
)% |
|
(7.8 |
)% |
|
|
(55.5 |
)% |
International |
— |
% |
|
(84.7 |
)% |
|
5.2 |
% |
|
|
(106.1 |
)% |
Consolidated
Total |
(13.8 |
)% |
|
(31.4 |
)% |
|
(49.6 |
)% |
|
|
(66.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
Year EndedDecember 31,
2017(Unaudited) |
|
Period fromDecember 16, 2016through December31,
2016 |
|
|
Period fromJanuary 1, 2016through December15,
2016 |
Revenues |
|
|
|
|
|
|
U.S. Rig Services |
$ |
248,830 |
|
|
$ |
8,549 |
|
|
|
$ |
222,877 |
|
Fluid Management
Services |
80,726 |
|
|
3,208 |
|
|
|
76,008 |
|
Coiled Tubing
Services |
41,866 |
|
|
1,392 |
|
|
|
30,569 |
|
Fishing & Rental
Services |
59,172 |
|
|
3,389 |
|
|
|
55,790 |
|
International |
5,571 |
|
|
1,292 |
|
|
|
14,179 |
|
Consolidated
Total |
$ |
436,165 |
|
|
$ |
17,830 |
|
|
|
$ |
399,423 |
|
|
|
|
|
|
|
|
Operating
Income (Loss) |
|
|
|
|
|
|
U.S. Rig Services |
$ |
(3,620 |
) |
|
$ |
(1,930 |
) |
|
|
$ |
(39,460 |
) |
Fluid Management
Services |
(19,532 |
) |
|
(1,138 |
) |
|
|
(37,936 |
) |
Coiled Tubing
Services |
1,631 |
|
|
(256 |
) |
|
|
(19,322 |
) |
Fishing & Rental
Services |
7,506 |
|
|
(265 |
) |
|
|
(26,408 |
) |
International |
(4,993 |
) |
|
67 |
|
|
|
(59,226 |
) |
Functional Support |
(77,172 |
) |
|
(5,326 |
) |
|
|
(120,249 |
) |
Consolidated
Total |
$ |
(96,180 |
) |
|
$ |
(8,848 |
) |
|
|
$ |
(302,601 |
) |
|
|
|
|
|
|
|
Operating
Income (Loss) % of Revenues |
|
|
|
|
|
|
U.S. Rig Services |
(1.5 |
)% |
|
(22.6 |
)% |
|
|
(17.7 |
)% |
Fluid Management
Services |
(24.2 |
)% |
|
(35.5 |
)% |
|
|
(49.9 |
)% |
Coiled Tubing
Services |
3.9 |
% |
|
(18.4 |
)% |
|
|
(63.2 |
)% |
Fishing & Rental
Services |
12.7 |
% |
|
(7.8 |
)% |
|
|
(47.3 |
)% |
International |
(85.8 |
)% |
|
5.2 |
% |
|
|
(417.7 |
)% |
Consolidated
Total |
(22.1 |
)% |
|
(49.6 |
)% |
|
|
(75.8 |
)% |
|
|
|
|
|
|
|
|
|
|
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 |
|
Period fromDecember 16,2016
throughDecember 31,2016 |
|
|
Period fromOctober 1,
2016throughDecember 15,2016 |
|
December 31,2017(Unaudited) |
|
September 30,2017(Unaudited) |
|
|
|
Net income (loss) |
(22,327 |
) |
|
(38,220 |
) |
|
(10,244 |
) |
|
|
$ |
173,432 |
|
Income tax benefit |
(464 |
) |
|
(96 |
) |
|
— |
|
|
|
3,318 |
|
Interest expense, net
of amounts capitalized |
8,125 |
|
|
8,090 |
|
|
1,364 |
|
|
|
10,259 |
|
Interest income |
(176 |
) |
|
(182 |
) |
|
(20 |
) |
|
|
(37 |
) |
Depreciation and
amortization |
21,217 |
|
|
21,114 |
|
|
3,574 |
|
|
|
26,221 |
|
EBITDA |
$ |
6,375 |
|
|
$ |
(9,294 |
) |
|
$ |
(5,326 |
) |
|
|
$ |
213,193 |
|
% of
revenues |
5.5 |
% |
|
(8.4 |
)% |
|
(29.9 |
)% |
|
|
234.5 |
% |
|
|
|
|
|
|
|
|
|
Severance costs |
— |
|
|
369 |
|
|
— |
|
|
|
745 |
|
Stock-based
compensation |
(3,989 |
) |
|
3,330 |
|
|
— |
|
|
|
— |
|
Restructuring items,
net |
— |
|
|
60 |
|
|
— |
|
|
|
(245,571 |
) |
Impairment expense |
— |
|
|
— |
|
|
— |
|
|
|
4,646 |
|
(Gain) loss on sales of
assets |
(596 |
) |
|
(711 |
) |
|
384 |
|
|
|
81 |
|
Gain on sale of
business in Russia |
— |
|
|
(4,677 |
) |
|
— |
|
|
|
— |
|
Restructuring
professional fees |
— |
|
|
— |
|
|
— |
|
|
|
3,082 |
|
Settlement
accruals |
— |
|
|
11,562 |
|
|
— |
|
|
|
16,740 |
|
Vacation policy accrual
change |
— |
|
|
— |
|
|
— |
|
|
|
3,396 |
|
Vesting of equity
compensation in bankruptcy |
— |
|
|
— |
|
|
— |
|
|
|
1,991 |
|
Financing related and
D&O policy tail expense |
— |
|
|
— |
|
|
— |
|
|
|
2,429 |
|
Other, net |
— |
|
|
— |
|
|
— |
|
|
|
46 |
|
Adjusted EBITDA* |
$ |
1,790 |
|
|
$ |
639 |
|
|
$ |
(4,942 |
) |
|
|
$ |
778 |
|
% of
revenues |
1.5 |
% |
|
0.6 |
% |
|
(27.7 |
)% |
|
|
0.9 |
% |
|
|
|
|
|
|
|
|
|
Revenues |
$ |
116,280 |
|
|
$ |
110,653 |
|
|
$ |
17,830 |
|
|
|
$ |
90,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Adjusted EBITDA does not exclude costs incurred in
connection with the Company’s FCPA investigations completed in
2016.
|
|
|
|
|
|
Successor |
|
|
Predecessor |
|
Year EndedDecember 31,
2017(Unaudited) |
|
Period fromDecember 16, 2016through December31,
2016 |
|
|
Period fromJanuary 1, 2016through December15,
2016 |
Net loss |
$ |
(120,589 |
) |
|
$ |
(10,244 |
) |
|
|
$ |
(131,736 |
) |
Income tax benefit |
(1,702 |
) |
|
— |
|
|
|
2,829 |
|
Interest expense, net
of amounts capitalized |
31,797 |
|
|
1,364 |
|
|
|
74,320 |
|
Interest income |
(711 |
) |
|
(20 |
) |
|
|
(407 |
) |
Depreciation and
amortization |
84,542 |
|
|
3,574 |
|
|
|
131,296 |
|
EBITDA |
$ |
(6,663 |
) |
|
$ |
(5,326 |
) |
|
|
$ |
76,302 |
|
% of
revenues |
(1.5 |
)% |
|
(29.9 |
)% |
|
|
19.1 |
% |
|
|
|
|
|
|
|
Severance costs |
2,492 |
|
|
— |
|
|
|
8,992 |
|
Stock-based
compensation |
7,010 |
|
|
— |
|
|
|
— |
|
Restructuring items,
net |
1,501 |
|
|
— |
|
|
|
(245,571 |
) |
Impairment expense |
187 |
|
|
— |
|
|
|
44,646 |
|
(Gain) loss on sales of
assets |
(22,422 |
) |
|
384 |
|
|
|
5,246 |
|
Legal settlement |
11,562 |
|
|
— |
|
|
|
6,316 |
|
Gain on sale of
business in Russia |
(4,677 |
) |
|
— |
|
|
|
— |
|
FCPA settlement |
— |
|
|
— |
|
|
|
5,000 |
|
Restructuring
professional fees |
1,780 |
|
|
— |
|
|
|
25,785 |
|
Settlement
accruals |
— |
|
|
— |
|
|
|
16,740 |
|
Vacation policy accrual
change |
— |
|
|
— |
|
|
|
3,396 |
|
Vesting of equity
compensation in bankruptcy |
— |
|
|
— |
|
|
|
1,991 |
|
Financing related and
D&O policy tail expense |
— |
|
|
— |
|
|
|
2,429 |
|
Other, net |
— |
|
|
— |
|
|
|
46 |
|
Adjusted EBITDA* |
$ |
(9,230 |
) |
|
$ |
(4,942 |
) |
|
|
$ |
(48,682 |
) |
% of
revenues |
(2.1 |
)% |
|
(27.7 |
)% |
|
|
(12.2 |
)% |
|
|
|
|
|
|
|
Revenues |
$ |
436,165 |
|
|
$ |
17,830 |
|
|
|
$ |
399,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Adjusted EBITDA does not exclude costs incurred in
connection with the Company’s FCPA investigations completed in
2016.
|
|
|
Three Months Ended December 31,
2017 |
|
U.S. RigServices |
|
FluidManagementServices |
|
Coiled TubingServices |
|
Fishing andRentalServices |
|
International |
|
FunctionalSupport |
|
Total |
Net income (loss) |
$ |
(844 |
) |
|
$ |
(2,052 |
) |
|
$ |
1,737 |
|
|
$ |
(3,737 |
) |
|
$ |
(224 |
) |
|
$ |
(17,207 |
) |
|
$ |
(22,327 |
) |
Income tax benefit |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(464 |
) |
|
(464 |
) |
Interest expense, net
of amounts capitalized |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
8,125 |
|
|
8,125 |
|
Interest income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(176 |
) |
|
(176 |
) |
Depreciation and
amortization |
8,265 |
|
|
5,290 |
|
|
1,231 |
|
|
5,799 |
|
|
— |
|
|
632 |
|
|
21,217 |
|
EBITDA |
$ |
7,421 |
|
|
$ |
3,238 |
|
|
$ |
2,968 |
|
|
$ |
2,062 |
|
|
$ |
(224 |
) |
|
$ |
(9,090 |
) |
|
$ |
6,375 |
|
% of
revenues |
11.5 |
% |
|
13.9 |
% |
|
20.0 |
% |
|
15.4 |
% |
|
— |
% |
|
— |
% |
|
5.5 |
% |
Stock-based
compensation expense |
(418 |
) |
|
(7 |
) |
|
(64 |
) |
|
— |
|
|
— |
|
|
(3,500 |
) |
|
(3,989 |
) |
(Gain) loss on sale of
assets |
(342 |
) |
|
(108 |
) |
|
13 |
|
|
(159 |
) |
|
— |
|
|
— |
|
|
(596 |
) |
Adjusted EBITDA |
$ |
6,661 |
|
|
$ |
3,123 |
|
|
$ |
2,917 |
|
|
$ |
1,903 |
|
|
$ |
(224 |
) |
|
$ |
(12,590 |
) |
|
$ |
1,790 |
|
% of
revenues |
10.3 |
% |
|
13.4 |
% |
|
19.6 |
% |
|
14.2 |
% |
|
— |
% |
|
— |
% |
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
64,804 |
|
|
$ |
23,251 |
|
|
$ |
14,861 |
|
|
$ |
13,364 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
116,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
2017 |
|
U.S. RigServices |
|
FluidManagementServices |
|
Coiled TubingServices |
|
Fishing andRentalServices |
|
International |
|
FunctionalSupport |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
2017 |
|
U.S. RigServices |
|
FluidManagementServices |
|
Coiled TubingServices |
|
Fishing andRentalServices |
|
International |
|
FunctionalSupport |
|
Total |
Net income (loss) |
$ |
(3,449 |
) |
|
$ |
(19,537 |
) |
|
$ |
1,643 |
|
|
$ |
7,748 |
|
|
$ |
60 |
|
|
$ |
(107,054 |
) |
|
$ |
(120,589 |
) |
Income tax benefit |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(360 |
) |
|
(1,342 |
) |
|
(1,702 |
) |
Interest expense, net
of amounts capitalized |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
31,797 |
|
|
31,797 |
|
Interest income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(49 |
) |
|
(662 |
) |
|
(711 |
) |
Depreciation and
amortization |
31,493 |
|
|
21,917 |
|
|
5,187 |
|
|
23,454 |
|
|
791 |
|
|
1,700 |
|
|
84,542 |
|
EBITDA |
$ |
28,044 |
|
|
$ |
2,380 |
|
|
$ |
6,830 |
|
|
$ |
31,202 |
|
|
$ |
442 |
|
|
$ |
(75,561 |
) |
|
$ |
(6,663 |
) |
% of
revenues |
11.3 |
% |
|
2.9 |
% |
|
16.3 |
% |
|
52.7 |
% |
|
7.9 |
% |
|
— |
% |
|
(1.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance costs |
1,067 |
|
|
36 |
|
|
78 |
|
|
146 |
|
|
286 |
|
|
879 |
|
|
2,492 |
|
Stock-based
compensation expense |
1,001 |
|
|
(6 |
) |
|
97 |
|
|
— |
|
|
— |
|
|
5,918 |
|
|
7,010 |
|
Restructuring items,
net |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,501 |
|
|
1,501 |
|
Impairment expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
187 |
|
|
— |
|
|
187 |
|
(Gain) loss on sales of
assets |
(1,064 |
) |
|
(485 |
) |
|
9 |
|
|
(21,283 |
) |
|
392 |
|
|
9 |
|
|
(22,422 |
) |
Gain on sale of
Russia |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,677 |
) |
|
— |
|
|
(4,677 |
) |
Restructuring
professional fees |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,780 |
|
|
1,780 |
|
Legal settlements |
— |
|
|
4,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
7,562 |
|
|
11,562 |
|
Adjusted EBITDA |
$ |
29,048 |
|
|
$ |
5,925 |
|
|
$ |
7,014 |
|
|
$ |
10,065 |
|
|
$ |
(3,370 |
) |
|
$ |
(57,912 |
) |
|
$ |
(9,230 |
) |
% of
revenues |
11.7 |
% |
|
7.3 |
% |
|
16.8 |
% |
|
17.0 |
% |
|
(60.5 |
)% |
|
— |
% |
|
(2.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
248,830 |
|
|
$ |
80,726 |
|
|
$ |
41,866 |
|
|
$ |
59,172 |
|
|
$ |
5,571 |
|
|
$ |
— |
|
|
$ |
436,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
“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 Services
Key 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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