HOUSTON, May 9, 2016 /PRNewswire/ -- Key Energy Services,
Inc. (NYSE: KEG) reported first quarter 2016 consolidated revenues
of $111.1 million and a pre-tax GAAP
loss of $81.9 million, or
$0.51 per share. The results for the
first quarter include:
- pre-tax costs of $6.8 million, or
$0.04 per share, due to
severance;
- a pre-tax charge of $5.0 million,
or $0.03 per share, due to an accrual
associated with the offer of settlement of the previously disclosed
Foreign Corrupt Practices Act ("FCPA") investigations;
- pre-tax costs of $2.4 million, or
$0.02 per share, related to the FCPA
investigations; and
- a pre-tax charge of $2.1 million,
or $0.01 per share, related to the
loss on sale of certain U.S. assets.
Excluding these items, the Company reported a pre-tax loss of
$65.5 million, or $0.41 per share. Due to the Company's net
operating loss balance, it is not currently recognizing a tax
benefit in 2016, yielding an effective tax rate of 0.3% for the
first quarter; assuming a normalized effective tax rate of 36.0%,
the Company reported a loss of $0.26
per share, excluding the aforementioned charges.
Fourth quarter 2015 consolidated revenues were $150.2 million with a pre-tax GAAP loss of
$157.6 million, or $0.97 per share. The results for the fourth
quarter included pre-tax charges of $62.9
million, or $0.39 per share,
related to the loss on sale of and impairment of assets primarily
associated with the Company's exit from markets outside
North America, pre-tax charges of
$23.1 million, or $0.14 per share, related to the loss on sale of
assets, write-off of certain vendor deposits and a true-up to asset
impairments in the third quarter in the Company's U.S. business,
pre-tax costs of $2.7 million, or
$0.02 per share, related to the FCPA
investigations, pre-tax costs of $1.3
million, or $0.01 per share,
due to severance and an after-tax charge of $23.5 million, or $0.15 per share of tax expense, related to
deferred tax valuation allowances in the markets outside of the
U.S. Excluding these items, the Company reported a fourth quarter
2015 pre-tax loss of $67.6 million,
or $0.27 per share.
The following table sets forth summary data for the first
quarter 2016 and prior comparable quarterly periods.
|
|
Three Months
Ended (unaudited)
|
|
|
March 31,
2016
|
|
December 31,
2015
|
|
March 31,
2015
|
|
|
(in
millions, except per share amounts)
|
Revenues
|
|
$
|
111.1
|
|
|
$
|
150.2
|
|
|
$
|
267.8
|
|
Net loss
|
|
(81.6)
|
|
|
(152.5)
|
|
|
(59.7)
|
|
Diluted loss per
share
|
|
(0.51)
|
|
|
(0.97)
|
|
|
(0.39)
|
|
Adjusted
EBITDA*
|
|
(10.7)
|
|
|
(6.7)
|
|
|
0.6
|
|
|
* Adjusted
EBITDA does not exclude costs incurred in connection with the
Company's FCPA investigations.
|
Overview and Outlook
Key's President and Chief Executive Officer, Robert Drummond, stated, "Further deterioration
in oil prices early in the first quarter drove another sequential
decline in oilfield services activity. Key has remained aggressive
in anticipating incremental activity declines and has continued to
reshape its organizational structure and resize its cost structure
to mitigate the negative impact of these declines. We recognized
the potential for lower first quarter activity in the fourth
quarter and executed cost reduction measures early in the first
quarter at both the field and corporate level. As a result of the
actions taken early in the quarter in our business, we were able to
limit our normalized operating loss sequential decline, excluding
International, to approximately $3
million, even as revenue declined approximately $38 million.
"While we remain diligent in evaluating options to reduce costs
and mitigate the use of our liquidity, our liquidity declined by
approximately $50 million
sequentially as we made two interest payments on our outstanding
debt instruments totaling $31.7
million and utilized approximately $18.6 million as restricted cash to supplement
our borrowing base under our asset-based credit facility.
"While we believe the recent increase in oil prices is a
positive signal relative to the demand for our services by our
customers, we've not seen an uptick in activity commensurate with
that of oil prices. We do expect, however, that as our customers
gain more confidence in the sustainability of oil prices, our
production-driven services will benefit as our customers look for
capital-efficient avenues to increase production and cash
flows.
"Finally, as previously disclosed, Key has been informed by the
Department of Justice that the Department has closed its
investigation into possible FCPA violations and that it has decided
to decline prosecution of the Company. In addition, Key has been
engaged in negotiations with the staff of the Division of
Enforcement of the SEC in an effort to reach a resolution of the
staff's investigation related to these same matters. Key has
reached an agreement in principle with the staff on the terms of a
proposed offer of settlement, which must be presented to the
Commission for approval. In connection with the offer of
settlement, Key has accrued a liability in the amount of
$5 million."
U.S. Results
First quarter 2016 U.S. Rig Services revenues of $59.0 million were down 24.2% as compared to the
fourth quarter of 2015. First quarter operating loss was
$6.4 million, or -10.8% of revenue
and includes severance of $0.6
million; excluding this loss, normalized operating loss was
$5.8 million, or -9.9% of revenue.
These results compare to fourth quarter operating loss, excluding
non-recurring items of $5.6 million,
of $0.8 million, or -1.1% of revenue.
The sequential revenue decline was driven by California as activity declined by
approximately 42% due to low oil prices.
First quarter 2016 Fluid Management Services revenues of
$22.7 million were down 18.2% as
compared to the fourth quarter of 2015. First quarter operating
loss was $6.3 million, or -27.7% of
revenue, and includes a loss on sale of assets of $2.7 million and severance of $0.2 million; excluding these losses, normalized
operating loss was $3.4 million, or
-15.1% of revenue. These results compare to fourth quarter
operating loss, excluding non-recurring items of $10.7 million, of $5.9
million, or -21.1% of revenue. Normalized operating income
improved sequentially as cost reduction measures implemented early
in the first quarter were realized.
First quarter 2016 Coiled Tubing Services revenues of
$9.5 million were down 41.8% as
compared to the fourth quarter of 2015. First quarter operating
loss was $6.1 million, or -64.5% of
revenue and includes a loss on sale of assets of $1.1 million and severance of $0.1 million; excluding these losses, normalized
operating loss was $5.0 million, or
-52.2% of revenue. These results compare to fourth quarter
operating loss, excluding non-recurring items of $7.1 million, of $3.6
million, or -22.0% of revenue. Activity declined
sequentially as new-well completion activity continued to contract
due to commodity prices.
First quarter 2016 Fishing & Rental Services revenues of
$16.3 million were down 30.5% as
compared to the fourth quarter of 2015. First quarter operating
loss was $4.0 million, or -24.6% of
revenue, and includes a gain on the sale of assets of $1.7 million and severance of $0.1 million; excluding these items, normalized
operating loss was $5.6 million, or
-34.6% of revenue. These results compare to fourth quarter
operating loss, excluding non-recurring items of $0.3 million, of $4.4
million, or -18.7% of revenue.
International Segment
First quarter 2016 International revenues were $3.6 million, down 25.0% as compared to fourth
quarter 2015 revenues of $4.8
million. First quarter operating loss was $5.1 million, or -139.9% of revenues, and
includes a loss on sale of assets of $0.1
million and severance of $0.4
million; excluding these losses, normalized operating loss
was $4.6 million, or -127.7% of
revenue. These results compare to fourth quarter operating loss,
excluding non-recurring items of $63.0
million, of $8.9 million, or
-185.1% of revenues.
General and Administrative Expenses
General and Administrative (G&A) expenses were $46.2 million for the first quarter compared to
$39.0 million in the prior quarter.
First quarter G&A expenses included a $5.0 million accrual in connection with the offer
of settlement related to the FCPA investigations, $2.4 million in costs associated with the FCPA
investigations and $5.9 million
in severance compared to fourth quarter G&A expenses that
included $2.7 million in costs
associated with the FCPA investigations and $0.7 million in severance. Excluding these items,
G&A expense in the first quarter was $32.9 million as compared to $35.6 million in the fourth quarter.
Balance Sheet and Capital Expenditures
Key's consolidated cash balance at March
31, 2016 was $155.7 million
compared to $204.4 million at
December 31, 2015; additionally, Key
had $18.6 million of restricted cash
as of March 31, 2016 as compared to
$0.0 as of December 31, 2015. Total debt at March 31, 2016 was $965.4
million compared to total debt of $964.9 million at December
31, 2015. The Company had $181.6 of total liquidity available at
March 31, 2016. Key is engaged in
discussions with certain of its lenders and noteholders regarding
alternatives to address its level of indebtedness and
liquidity. Key is also discussing with its lenders an
appraisal of Key's assets procured by certain of its term loan
lenders that, if used in determining Key's compliance with the
asset coverage ratio included in its term loan and asset-based
credit facilities, would result in Key's not being in compliance
with that covenant as of March 31,
2016. Key had previously procured an appraisal of its assets
that, if used for such purpose, results in Key being in compliance
with the asset coverage ratio. If the lenders' appraisal is
used for covenant compliance purposes, Key expects to prepay
amounts outstanding under the term loan less than $8 million and include additional term loan
collateral as permitted under the term loan facility, which Key
believes would cure this potential default. Capital expenditures
were $2.7 million during the first
quarter 2016.
Conference Call Information
As previously announced, Key management will host a conference
call to discuss its first quarter 2016 financial results on
Tuesday, May 10, 2016 at 10:00 a.m. CDT. Callers from the U.S. and
Canada should dial 888-794-4637 to
access the call. International callers should dial 660-422-4879.
All callers should ask for the "Key Energy Services Conference
Call" or provide the access code 88186374. 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, May 10, 2016, beginning
approximately two hours after the completion of the conference call
and will remain available for one week. To access the replay, call
855-859-2056 or 800-585-8367. The access code for the replay is
88186374. The replay will also be accessible at www.keyenergy.com
under "Investor Relations" for a period of at least 90 days.
Contact:
West Gotcher
713-757-5539
Consolidated
Statements of Operations (in thousands, except per share amounts,
unaudited):
|
|
|
|
Three Months
Ended
|
|
|
March 31,
2016
|
|
December 31,
2015
|
|
March 31,
2015
|
REVENUES
|
|
$
|
111,088
|
|
|
$
|
150,174
|
|
|
$
|
267,799
|
|
COSTS AND
EXPENSES:
|
|
|
|
|
|
|
Direct operating
expenses
|
|
90,598
|
|
|
176,761
|
|
|
204,530
|
|
Depreciation and
amortization expense
|
|
35,752
|
|
|
41,894
|
|
|
47,211
|
|
General and
administrative expenses
|
|
46,245
|
|
|
38,963
|
|
|
67,644
|
|
Impairment
expense
|
|
—
|
|
|
29,100
|
|
|
21,700
|
|
Operating
loss
|
|
(61,507)
|
|
|
(136,544)
|
|
|
(73,286)
|
|
Interest expense, net
of amounts capitalized
|
|
21,584
|
|
|
21,743
|
|
|
13,342
|
|
Other (income) loss,
net
|
|
(1,231)
|
|
|
(705)
|
|
|
4,432
|
|
Loss before tax
income taxes
|
|
(81,860)
|
|
|
(157,582)
|
|
|
(91,060)
|
|
Income tax
benefit
|
|
246
|
|
|
5,097
|
|
|
31,384
|
|
NET
LOSS
|
|
$
|
(81,614)
|
|
|
$
|
(152,485)
|
|
|
$
|
(59,676)
|
|
Loss per
share:
|
|
|
|
|
|
|
Basic and
diluted
|
|
$
|
(0.51)
|
|
|
$
|
(0.97)
|
|
|
$
|
(0.39)
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
Basic and
diluted
|
|
160,047
|
|
|
157,585
|
|
|
154,816
|
|
Consolidated Cash
Flow Data (in thousands, unaudited):
|
|
|
|
Three Months
Ended
|
|
|
March 31,
2016
|
|
March 31,
2015
|
Net cash used in
operating activities
|
|
$
|
(30,064)
|
|
|
$
|
(2,664)
|
|
Net cash provided by
(used in) investing activities
|
|
4,734
|
|
|
(15,705)
|
|
Net cash provided by
(used in) financing activities
|
|
(22,043)
|
|
|
26,825
|
|
Effect of exchange
rates on cash
|
|
(1,277)
|
|
|
159
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
(48,650)
|
|
|
8,615
|
|
Cash and cash
equivalents, beginning of period
|
|
204,354
|
|
|
27,304
|
|
Cash and cash
equivalents, end of period
|
|
$
|
155,704
|
|
|
$
|
35,919
|
|
Segment Revenue
and Operating Income (in thousands, except for percentages,
unaudited):
|
|
|
|
Three Months
Ended
|
|
|
March 31,
2016
|
|
December 31,
2015
|
|
March 31,
2015
|
Revenues
|
|
|
|
|
|
|
U.S. Rig
Services
|
|
$
|
58,988
|
|
|
$
|
77,856
|
|
|
$
|
120,822
|
|
Fluid Management
Services
|
|
22,670
|
|
|
27,701
|
|
|
50,755
|
|
Coiled Tubing
Services
|
|
9,531
|
|
|
16,377
|
|
|
31,017
|
|
Fishing & Rental
Services
|
|
16,283
|
|
|
23,422
|
|
|
42,690
|
|
International
|
|
3,616
|
|
|
4,818
|
|
|
22,515
|
|
Consolidated
Total
|
|
$
|
111,088
|
|
|
$
|
150,174
|
|
|
$
|
267,799
|
|
|
|
|
|
|
|
|
Operating Income
(Loss)
|
|
|
|
|
|
|
U.S. Rig
Services
|
|
$
|
(6,366)
|
|
|
$
|
(6,473)
|
|
|
$
|
8,000
|
|
Fluid Management
Services
|
|
(6,272)
|
|
|
(16,565)
|
|
|
1,476
|
|
Coiled Tubing
Services
|
|
(6,149)
|
|
|
(10,691)
|
|
|
(23,822)
|
|
Fishing & Rental
Services
|
|
(4,012)
|
|
|
(4,704)
|
|
|
(56)
|
|
International
|
|
(5,060)
|
|
|
(71,886)
|
|
|
(9,611)
|
|
Functional
Support
|
|
(33,648)
|
|
|
(26,225)
|
|
|
(49,273)
|
|
Consolidated
Total
|
|
$
|
(61,507)
|
|
|
$
|
(136,544)
|
|
|
$
|
(73,286)
|
|
|
|
|
|
|
|
|
Operating Income
(Loss) % of Revenues
|
|
|
|
|
|
|
U.S. Rig
Services
|
|
(10.8)
|
%
|
|
(8.3)
|
%
|
|
6.6
|
%
|
Fluid Management
Services
|
|
(27.7)
|
%
|
|
(59.8)
|
%
|
|
2.9
|
%
|
Coiled Tubing
Services
|
|
(64.5)
|
%
|
|
(65.3)
|
%
|
|
(76.8)
|
%
|
Fishing & Rental
Services
|
|
(24.6)
|
%
|
|
(20.1)
|
%
|
|
(0.1)
|
%
|
International
|
|
(139.9)
|
%
|
|
(1,492.0)
|
%
|
|
(42.7)
|
%
|
Consolidated
Total
|
|
(55.4)
|
%
|
|
(90.9)
|
%
|
|
(27.4)
|
%
|
Reconciliations of
normalized operating loss to operating loss (in thousands,
unaudited):
|
|
|
|
Three Months
Ended
|
|
|
March 31,
2016
|
|
December 31,
2015
|
|
March 31,
2015
|
Operating
loss
|
|
$
|
(61,507)
|
|
|
$
|
(136,544)
|
|
|
$
|
(73,286)
|
|
Severance
costs
|
|
6,843
|
|
|
1,340
|
|
|
3,286
|
|
Impairment
expense
|
|
—
|
|
|
29,100
|
|
|
21,700
|
|
Allowance for
collectibility of notes receivable
|
|
—
|
|
|
—
|
|
|
3,950
|
|
Loss on assets
destroyed in Mexico
|
|
—
|
|
|
—
|
|
|
2,160
|
|
Loss on sales of
assets
|
|
2,117
|
|
|
50,907
|
|
|
—
|
|
FCPA
settlement
|
|
5,000
|
|
|
—
|
|
|
—
|
|
FCPA investigation
expense
|
|
2,439
|
|
|
2,733
|
|
|
17,986
|
|
Other
write-offs
|
|
—
|
|
|
5,937
|
|
|
—
|
|
Normalized operating
loss
|
|
$
|
(45,108)
|
|
|
$
|
(46,527)
|
|
|
$
|
(24,204)
|
|
|
Three Months Ended
March 31, 2016
|
|
U.S. Rig
Services
|
|
Fluid
Management
Services
|
|
Coiled Tubing
Services
|
|
Fishing and
Rental
Services
|
|
International
|
|
Functional
Support
|
|
Total
|
Operating
loss
|
$
|
(6,366)
|
|
|
$
|
(6,272)
|
|
|
$
|
(6,149)
|
|
|
$
|
(4,012)
|
|
|
$
|
(5,060)
|
|
|
$
|
(33,648)
|
|
|
$
|
(61,507)
|
|
Severance
costs
|
590
|
|
|
166
|
|
|
92
|
|
|
56
|
|
|
355
|
|
|
5,584
|
|
|
6,843
|
|
(Gain) loss on sale
of certain assets
|
(59)
|
|
|
2,684
|
|
|
1,079
|
|
|
(1,674)
|
|
|
87
|
|
|
—
|
|
|
2,117
|
|
FCPA
settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
|
5,000
|
|
FCPA investigation
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,439
|
|
|
2,439
|
|
Normalized operating
loss
|
$
|
(5,835)
|
|
|
$
|
(3,422)
|
|
|
$
|
(4,978)
|
|
|
$
|
(5,630)
|
|
|
$
|
(4,618)
|
|
|
$
|
(20,625)
|
|
|
$
|
(45,108)
|
|
|
|
|
Three Months Ended
December 31, 2015
|
|
U.S. Rig
Services
|
|
Fluid
Management
Services
|
|
Coiled Tubing
Services
|
|
Fishing and
Rental
Services
|
|
International
|
|
Functional
Support
|
|
Total
|
Operating
loss
|
$
|
(6,473)
|
|
|
$
|
(16,565)
|
|
|
$
|
(10,691)
|
|
|
$
|
(4,704)
|
|
|
$
|
(71,886)
|
|
|
$
|
(26,225)
|
|
|
$
|
(136,544)
|
|
Severance
costs
|
335
|
|
|
168
|
|
|
80
|
|
|
96
|
|
|
91
|
|
|
570
|
|
|
1,340
|
|
Impairment
expense
|
—
|
|
|
—
|
|
|
6,100
|
|
|
—
|
|
|
23,000
|
|
|
—
|
|
|
29,100
|
|
(Gain) loss on sale
of certain assets
|
316
|
|
|
10,544
|
|
|
(56)
|
|
|
226
|
|
|
39,877
|
|
|
—
|
|
|
50,907
|
|
FCPA investigation
expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,733
|
|
|
2,733
|
|
Other
write-offs
|
4,977
|
|
|
—
|
|
|
960
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,937
|
|
Normalized operating
loss
|
$
|
(845)
|
|
|
$
|
(5,853)
|
|
|
$
|
(3,607)
|
|
|
$
|
(4,382)
|
|
|
$
|
(8,918)
|
|
|
$
|
(22,922)
|
|
|
$
|
(46,527)
|
|
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):
|
|
|
|
Three Months
Ended
|
|
|
March 31,
2016
|
|
December 31,
2015
|
|
March 31,
2015
|
Net loss
|
|
$
|
(81,614)
|
|
|
$
|
(152,485)
|
|
|
$
|
(59,676)
|
|
Income tax
benefit
|
|
(246)
|
|
|
(5,097)
|
|
|
(31,384)
|
|
Interest expense, net
of amounts capitalized
|
|
21,584
|
|
|
21,743
|
|
|
13,342
|
|
Interest
income
|
|
(132)
|
|
|
(58)
|
|
|
(15)
|
|
Depreciation and
amortization
|
|
35,752
|
|
|
41,894
|
|
|
47,211
|
|
EBITDA
|
|
$
|
(24,656)
|
|
|
$
|
(94,003)
|
|
|
$
|
(30,522)
|
|
%
of revenues
|
|
(22.2)
|
%
|
|
(62.6)
|
%
|
|
(11.4)
|
%
|
|
|
|
|
|
|
|
Severance
costs
|
|
6,843
|
|
|
1,340
|
|
|
3,286
|
|
Impairment
expense
|
|
—
|
|
|
29,100
|
|
|
21,700
|
|
Allowance for
collectibility of notes receivable
|
|
—
|
|
|
—
|
|
|
3,950
|
|
Loss on assets
destroyed in Mexico
|
|
—
|
|
|
—
|
|
|
2,160
|
|
Loss on sales of
assets
|
|
2,117
|
|
|
50,907
|
|
|
—
|
|
FCPA
settlement
|
|
5,000
|
|
|
—
|
|
|
—
|
|
Other
write-offs
|
|
—
|
|
|
5,937
|
|
|
—
|
|
Adjusted
EBITDA*
|
|
$
|
(10,696)
|
|
|
$
|
(6,719)
|
|
|
$
|
574
|
|
%
of revenues
|
|
(9.6)
|
%
|
|
(4.5)
|
%
|
|
0.2
|
%
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
111,088
|
|
|
$
|
150,174
|
|
|
$
|
267,799
|
|
|
* Adjusted
EBITDA does not exclude costs incurred in connection with the
Company's FCPA investigations.
|
|
Three Months Ended
March 31, 2016
|
|
U.S. Rig
Services
|
|
Fluid
Management
Services
|
|
Coiled Tubing
Services
|
|
Fishing and
Rental
Services
|
|
International
|
|
Functional
Support
|
|
Total
|
Net income
(loss)
|
$
|
(6,362)
|
|
|
$
|
(6,268)
|
|
|
$
|
(6,076)
|
|
|
$
|
(4,014)
|
|
|
$
|
(1,661)
|
|
|
$
|
(57,233)
|
|
|
$
|
(81,614)
|
|
Income tax
benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,836)
|
|
|
2,590
|
|
|
(246)
|
|
Interest expense, net
of amounts capitalized
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,584
|
|
|
21,584
|
|
Interest
income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6)
|
|
|
(126)
|
|
|
(132)
|
|
Depreciation and
amortization
|
14,905
|
|
|
5,880
|
|
|
2,986
|
|
|
7,182
|
|
|
2,237
|
|
|
2,562
|
|
|
35,752
|
|
EBITDA
|
$
|
8,543
|
|
|
$
|
(388)
|
|
|
$
|
(3,090)
|
|
|
$
|
3,168
|
|
|
$
|
(2,266)
|
|
|
$
|
(30,623)
|
|
|
$
|
(24,656)
|
|
%
of revenues
|
14.5
|
%
|
|
(1.7)
|
%
|
|
(32.4)
|
%
|
|
19.5
|
%
|
|
(62.7)
|
%
|
|
—
|
%
|
|
(22.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
costs
|
590
|
|
|
166
|
|
|
92
|
|
|
56
|
|
|
355
|
|
|
5,584
|
|
|
6,843
|
|
(Gain) loss on sales
of assets
|
(59)
|
|
|
2,684
|
|
|
1,079
|
|
|
(1,674)
|
|
|
87
|
|
|
—
|
|
|
2,117
|
|
FCPA
settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
|
5,000
|
|
Adjusted
EBITDA*
|
$
|
9,074
|
|
|
$
|
2,462
|
|
|
$
|
(1,919)
|
|
|
$
|
1,550
|
|
|
$
|
(1,824)
|
|
|
$
|
(20,039)
|
|
|
$
|
(10,696)
|
|
%
of revenues
|
15.4
|
%
|
|
10.9
|
%
|
|
(20.1)
|
%
|
|
9.5
|
%
|
|
(50.4)
|
%
|
|
—
|
%
|
|
(9.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
58,988
|
|
|
$
|
22,670
|
|
|
$
|
9,531
|
|
|
$
|
16,283
|
|
|
$
|
3,616
|
|
|
$
|
—
|
|
|
$
|
111,088
|
|
|
* Adjusted
EBITDA does not exclude costs incurred in connection with the
Company's FCPA investigations.
|
"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 risks outlined in "Item 1A. Risk Factors," in Key's
Annual Report on Form 10-K for the year ended December 31, 2015.
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; industry capacity; increased labor
costs or unavailability of skilled workers; 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; the
economic, political and social instability risks of doing business
in certain foreign countries; significant costs and potential
liabilities resulting from compliance with investigations relating
to the possible violations the U.S. Foreign Corruption Practices
Act and other applicable laws; Key's historically high employee
turnover rate and its ability to replace or add workers; Key's
ability to incur debt or long-term lease obligations; Key's ability
to implement technological developments and enhancements;
significant costs and liabilities resulting from environmental,
health and safety laws and regulations, including those relating to
hydraulic fracturing; severe weather impacts on Key's business;
Key's ability to successfully identify, make and integrate
acquisitions and its ability to finance future growth of its
operations or future acquisitions; the loss of one or more of Key's
larger customers; the impact of compliance with climate change
legislation or initiatives; 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
ability to receive shareholder approval at the 2016 annual meeting
with respect to the reverse stock split proposal; the delisting of
Key's common stock from trading on the NYSE; 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
execute its plans to withdraw from international markets outside
North America; Key's ability to
achieve the benefits expected from acquisition and disposition
transactions; 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
terms and conditions of any strategic transaction or alternative
undertaken to restructure or refinance Key's indebtedness; 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, 2015.
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 and
internationally in Mexico and
Russia.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/key-energy-services-reports-first-quarter-2016-earnings-300265523.html
SOURCE Key Energy Services, Inc.