HOUSTON, June 14, 2021 (GLOBE NEWSWIRE) — Key Energy Services, Inc. (“Key” or the “Company”)(OTC: KEGX) today provided the following operational and financial update.
Despite the impacts of winter storm Uri, which reduced consolidated revenues in the first quarter by approximately $3 million, first quarter 2021 consolidated revenue grew 10.9% or $5.2 million to $52.4 million, as compared to $47.2 million in the 2020 fourth quarter. Rig Services segment revenue and rig hours for the first quarter of 2021 totaled $35.3 million and 89,600 respectively, up approximately 12% and 18% versus the fourth quarter of 2020. First quarter 2021 Fishing & Rental Services segment revenues were up roughly 22% to $6.4 million versus the fourth quarter of 2020, while Fluid Management Services segment revenues totaled $7.8 million in the 2021 first quarter, up roughly 4% versus the fourth quarter of 2020. Truck hours for the first quarter of 2021 were essentially flat versus the fourth quarter of 2020 at 71,400. Coiled Tubing Services segment revenues were flat at $2.9 million in the first quarter of 2021, versus $2.8 million in the 2020 fourth quarter.
At June 11, 2021, Key’s liquidity was $13.7 million, consisting of $6.2 million of unrestricted cash and $7.5 million of borrowing capacity under the Company’s ABL Credit Facility. No advances are currently outstanding under the Company’s ABL Credit Facility. As of June 11, 2021, Key’s total borrowing base under the ABL Credit Facility was $44.6 million, with collateral consisting of $33.9 million of eligible accounts receivable and $16.1 million of cash posted as additional collateral to support outstanding letters of credit.
Key’s President and Chief Executive Officer, Marshall Dodson, stated, “In spite of the February winter storm that disrupted operations, and the ongoing impact of COVID 19, we are pleased with our first quarter activity and the positive momentum that has carried through into the second quarter. Pricing increased in nearly all of our markets in the second quarter of 2021, with pricing in many markets recovering to pre-pandemic levels. Offsetting much of the pricing gains are inflationary pressures, most significantly wages due to increased competition for employees and former and potential employees moving to other industries or choosing to not yet reenter the workforce. Given continued strength in commodity prices, we expect to see further increases in activity and in the pricing of our services in the second half of 2021 as our customers seek to maximize production from their existing base of producing oil wells.”
Dodson continued, “Despite first quarter 2021 weather reducing our rig average by 8, we averaged 104 well service rigs in the first quarter of 2021, up from an average 92 well service rigs in the fourth quarter of 2020. In March, we averaged 118 rigs and continued that momentum into April, averaging 124 well service rigs. This compares favorably to Key’s 2020 lowest monthly average rig count of 47 rigs in May and our fourth quarter of 2019 average of 132 rigs. Our liquidity position is benefiting from cash flow positive operating results and, due to a corresponding increase in our accounts receivable borrowing base under our ABL Credit Facility, recovery of cash originally used to collateralize our outstanding letters of credit. This cash recovery has served to offset the typical use of cash associated with higher activity and growing working capital needs.
“Our efforts to lower our cost structure have continued into 2021, and we expect our second half 2021 G&A run rate to be more than 50% below the Q4 2019 G&A level. In addition to the continued steps to improve our cost structure, we have made significant progress rationalizing our fleet of well service rigs. We entered 2020 with approximately 850 well service rigs and over the past year have cut up and scrapped roughly 300 well service rigs. We are currently evaluating another 150 well service rigs that will likely be scrapped over the next year. Key last worked approximately 400 rigs in 2014.
“Finally, our team is extremely focused on providing our customers best in class service and equipment and doing so safely. I’m pleased to say that even with the challenges of increasing activity and a growing employee base, Key is working safer than at any time in its history with a TRIR this year of less than 1.0 through April of 2021 as well as for the twelve months then ended. I would like to thank the men and women of Key for all of their dedication and efforts through the challenges of the past year and for their focus and constant drive to make every job we do at Key incident free.”
Cautionary Statement Regarding 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 or estimates 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 and the assumptions on which they are based could prove incorrect.
Key undertakes no obligation to update or withdraw 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: public health crises, such as the COVID-19 pandemic, including its impact on economic and other conditions globally and any related actions taken by businesses and governments, among others; adverse conditions in the services and oil and natural gas industries, especially oil and natural gas prices and reduced activity and capital expenditures by oil and natural gas companies; a failure of customer activity to reach or remain at expected levels; the failure to meet requirements necessary for a release of cash collateral posted by Key under its credit facility; Key’s ability to satisfy its cash and liquidity needs, including its ability to generate sufficient liquidity or cash flow from operations or to obtain adequate financing to fund its operations or otherwise meet its obligations as they come due; Key’s ability to retain and access employees, customers or suppliers as a result of its financial condition generally or as a result of its recent restructuring; Key’s inability to achieve the potential benefits of the restructuring; Key’s ability to achieve the benefits of cost-cutting initiatives, including its plan to optimize its geographic footprint, including exiting certain locations and reducing its regional and corporate overhead costs; 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; actions by OPEC and non-OPEC oil producing countries; asset impairments or other charges; the low demand for Key’s services and resulting operating losses and negative cash flows; the highly competitive nature of Key’s 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; changes in government; 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 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 business combinations, disposition or acquisition transactions; the loss of one or more of Key’s larger customers; 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; Key’s ability to maintain sufficient liquidity and access to capital; 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 restart operations or to reduce the costs of labor, fuel, equipment and supplies employed and used in its businesses; and the adverse impact of litigation and disputes. The unprecedented nature of the COVID-19 pandemic and recent market decline may make it more difficult to identify potential risks, give rise to risks that are currently unknown, or amplify the impact of known risks.
About Key Energy Services
Key Energy Services is a leading onshore, rig-based well servicing contractor and provides a complete range of well intervention services with operations in all major onshore oil and gas producing regions of the continental United States.