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

KEY ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)

Maryland		001-08038		04-2648081
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

1301 McKinney Street, Suite 1800 Houston, Texas		77010
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 713/651-4300

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:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02. Results of Operations and Financial Condition

On July 28, 2010, Key Energy Services, Inc., a Maryland corporation (the “Company”) announced in a press release (the “Release”) its results for the quarter ended June 30, 2010. A copy of the Release is attached as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on July 29, 2010 and is incorporated by reference.

As stated in the Release, the reported results, financial statements and tables included in the Release did not reflect the presentation of the Company’s pressure pumping and wireline businesses as assets held for sale or discontinued operations. However, in light of the previously-announced agreement to sell these businesses, the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010, filed with the Commission on August 5, 2010 (the “Form 10-Q”) presents the pressure pumping and wireline businesses as assets held for sale on the Company’s consolidated balance sheet and as discontinued operations on the Company’s consolidated statement of operations. Set forth below in this Current Report on Form 8-K are the financial statements that were included in the Release, revised to reflect the presentation of the Company’s pressure pumping and wireline businesses as assets held for sale and as discontinued operations, consistent with the presentation in the Form 10-Q.

The information contained in this Item 2.02 (including the Release incorporated by reference) 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. 

Condensed Consolidated Statements of Operations, (in thousands, except per share amounts):

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
		(unaudited)								(unaudited)
REVENUES		$	267,785			$	219,061			$	519,744			$	502,710
COSTS AND EXPENSES:
Direct operating expenses			196,171				155,118				385,373				340,647
Depreciation and amortization expense			32,478				37,181				65,802				76,005
General and administrative expense			44,866				44,039				83,893				90,465
Interest expense, net of amounts capitalized			10,729				10,173				20,988				20,103
Other, net			467				(2,061	)			(776	)			(2,222	)
Total costs and expenses, net			284,711				244,450				555,280				524,998
Loss from continuing operations before tax			(16,926	)			(25,389	)			(35,536	)			(22,288	)
Income tax benefit			5,888				9,365				13,596				8,477
Loss from continuing operations			(11,038	)			(16,024	)			(21,940	)			(13,811	)
Discontinued operations, net of tax (expense) benefit of $(4,312), $1,293, $(5,529) and $1,956, respectively			8,182				(2,449	)			10,077				(3,758	)
Net loss			(2,856	)			(18,473	)			(11,863	)			(17,569	)
Loss attributable to noncontrolling interest			620				—				2,047				—
LOSS ATTRIBUTABLE TO KEY		$	(2,236	)		$	(18,473	)		$	(9,816	)		$	(17,569	)
Loss per share from continuing operations attributable to Key:
Basic		$	(0.08	)		$	(0.13	)		$	(0.16	)		$	(0.12	)
Diluted		$	(0.08	)		$	(0.13	)		$	(0.16	)		$	(0.12	)
Earnings (loss) per share from discontinued operations:
Basic		$	0.06			$	(0.02	)		$	0.08			$	(0.03	)
Diluted		$	0.06			$	(0.02	)		$	0.08			$	(0.03	)
Loss per share attributable to Key:
Basic		$	(0.02	)		$	(0.15	)		$	(0.08	)		$	(0.15	)
Diluted		$	(0.02	)		$	(0.15	)		$	(0.08	)		$	(0.15	)
Loss from continuining operations attributable to Key:
Loss from continuing operations		$	(11,038	)		$	(16,024	)		$	(21,940	)		$	(13,811	)
Loss attributable to noncontrolling interest			620				—				2,047				—
Loss from continuing operations attributable to Key		$	(10,418	)		$	(16,024	)		$	(19,893	)		$	(13,811	)
Weighted average shares outstanding:
Basic			125,412				120,963				125,183				120,815
Diluted			125,412				120,963				125,183				120,815

Condensed Consolidated Balance Sheets (in thousands):

		June 30, 2010				December 31, 2009
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	47,040			$	37,394
Other current assets			364,275				342,764
Current assets held for sale			7,631				3,974
Total current assets			418,946				384,132
Property and equipment, net			781,977				794,269
Goodwill			349,107				346,102
Other assets, net			64,542				69,568
Noncurrent assets held for sale			67,264				70,339
TOTAL ASSETS		$	1,681,836			$	1,664,410
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	50,488			$	46,086
Other current liabilities			175,157				143,683
Total current liabilities			225,645				189,769
Long-term debt, less current portion			517,464				523,949
Other non-current liabilities			200,502				207,552
Equity			738,225				743,140
TOTAL LIABILITIES AND EQUITY		$	1,681,836			$	1,664,410

Consolidated Cash Flow Data (in thousands):

		Six Months Ended June 30,
		2010				2009
		(unaudited)
Net cash provided by operating activities		$	64,695			$	157,299
Net cash used in investing activities			(47,685	)			(63,392	)
Net cash used in financing activities			(9,064	)			(106,069	)
Effect of changes in exchange rates on cash			1,700				(890	)
Increase (decrease) in cash and cash equivalents			9,646				(13,052	)
Cash and cash equivalents, beginning of period			37,394				92,691
Cash and cash equivalents, end of period		$	47,040			$	79,639

Results of Operations by Reportable Segment (in thousands, except for percentages, unaudited):

		Well				Production				Functional
		Servicing				Services				Support
For the three months ended June 30, 2010:
Revenues from external customers		$	232,746			$	35,039			$	—
Operating income (loss)			16,523				6,338				(28,591	)
Operating income as a percentage of revenue			7.1	%			18.1	%			n/a

		Well				Production				Functional
		Servicing				Services				Support
For the three months ended March 31, 2010:
Revenues from external customers		$	223,991			$	27,968			$	—
Operating income (loss)			15,011				(504	)			(24,101	)
Operating income (loss) as a percentage of revenue			6.7	%			(2	)%			n/a

		Well				Production				Functional
		Servicing				Services				Support
For the three months ended June 30, 2009:
Revenues from external customers		$	197,945			$	21,116			$	—
Operating income (loss)			15,522				(5,166	)			(27,633	)
Operating income (loss) as a percentage of revenue			7.8	%			(24.5	)%			n/a

		Well				Production				Functional
		Servicing				Services				Support
For the six months ended June 30, 2010:
Revenues from external customers		$	456,737			$	63,007			$	—
Operating income (loss)			31,534				5,834				(52,692	)
Operating income as a percentage of revenue			6.9	%			9.3	%			n/a

		Well				Production				Functional
		Servicing				Services				Support
For the six months ended June 30, 2009:
Revenues from external customers		$	454,206			$	48,504			$	—
Operating income (loss)			56,537				(7,156	)			(53,788	)
Operating income (loss) as a percentage of revenue			12.4	%			(14.8	)%			n/a

U.S. and International Revenue (in thousands, unaudited):

		Three Months Ended
		June 30, 2010				March 31, 2010				June 30, 2009
U.S.		$	224,221			$	196,308			$	174,877
International			43,564				55,651				44,184
Total revenue from external customers		$	267,785			$	251,959			$	219,061

		Six Months Ended
		June 30, 2010				June 30, 2009
U.S.		$	420,529			$	411,280
International			99,215				91,430
Total revenue from external customers		$	519,744			$	502,710

The following table sets forth the sequential percentage revenue changes and incremental operating income margins from the first quarter 2010 to the second quarter 2010 (unaudited):

						Sequential Quarter
						Incremental
		Sequential Quarter %				Operating Income
		Revenue Change				Margins
Well Servicing Segment			4	%			17	%
Operations within Well Servicing Segment:
U.S. Rig Services			11	%			74	%
Fluid Management Services			18	%			79	%
Mexico			(42	)%			(82	)%
Argentina			8	%			(232	)%
Russia			0	%			n/a
Production Services Segment			25	%			97	%
Operations within Production Services Segment:
Coiled Tubing Services			35	%			92	%
Fishing and Rental Services			15	%			116	%
Other (1)			60	%			110	%

Reconciliations to Adjusted EBITDA (in thousands, except for percentages):

		Three Months								Three Months								Three Months
		Ended June 30,				% of				Ended March 31,				% of				Ended June 30,				% of
		2010				Revenue				2010				Revenue				2009				Revenue
Loss attributable to Key		$	(2,236	)			(0.7	)%			(7,580	)			(2.5	)%			(18,473	)			(7.7	)%
Income tax benefit			(1,576	)			(0.5	)%			(6,491	)			(2.1	)%			(10,658	)			(4.4	)%
Interest expense, net of amounts capitalized			10,623				3.1	%			10,247				3.4	%			10,181				4.2	%
Interest income			(21	)			0.0	%			(15	)			(0.0	)%			(169	)			(1.0	)%
Depreciation and amortization			35,857				10.6	%			36,703				12.2	%			43,191				17.9	%
Adjusted EBITDA		$	42,647				12.6	%		$	32,864				10.9	%		$	24,072				10.0	%

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.