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Actionable news in KEG: KEY ENERGY SERVICES Inc,

Key Energy Services, Inc

The following excerpt is from the company's SEC filing.

November 3, 2015

1301 McKinney Street

Suite 1800

Houston, TX 77010

Contact:

West Gotcher

713-757-5539

Key Energy Services Reports Third Quarter 2015 Earnings

- Key Energy Services, Inc. (NYSE: KEG) reported third quarter 2015 consolidated revenues of $176.9 million and a pre-tax GAAP loss of $765.8 million, or $4.06 per share. The results for the third quarter include:

pre-tax charges of $618.5 million, or $3.28 per share, related to the impairment of the Company’s U.S. goodwill and certain U.S. assets;

pre- tax charges of $63.1 million, or $0.33 per share, related to impairment of assets primarily associated with the Company’s exit from markets outside North America;

pre-tax costs of $4.0 million, or $0.02 per share, due to severance;

pre-tax costs of $2.5 million, or $0.01 per share, related to the previously disclosed Foreign Corrupt Practices Act (“FCPA”) investigations; and

a pre-tax loss of $2.5 million, or $0.01 per share, on foreign currency translation.

Excluding these items, the Company reported a pre-tax loss of $75.3 million, or $0.40 per share. Additionally, the Company incurred an after-tax charge of $23.0 million, or $0.15 per share, related to deferred tax valuation allowances in markets outside of the U.S. Excluding this tax-related charge, the Company reported an after-tax loss of $40.0 million, or $0.25 per share. Second quarter 2015 consolidated revenues were $197.5 million with a pre-tax GAAP loss of $96.1 million, or $0.42 per share. The results for the second quarter included a pre-tax loss of $21.4 million, or $0.10 per share, related to a pending sale and the associated impairment of the Company’s assets in Oman, pre-tax costs of $8.4 million, or $0.04 per share, related to the previously disclosed FCPA investigations, a pre-tax loss of $2.1 million, or $0.01 per share, on the sale of certain U.S. assets and pre-tax costs of $1.1 million, or $0.00 per share, due to severance. Excluding these items, the Company reported a second quarter 2015 pre-tax loss of $63.1 million, or $0.27 per share.

Overview and Outlook

Key’s Chief Executive Officer, Dick Alario, stated, “The third quarter continued the deterioration in what is now the worst peak-to-trough downturn in several decades. The steps we took during the quarter to improve our cost structure in the U.S. helped mitigate these pressures to yield a normalized U.S. decremental operating margin of 23% sequentially. Further, our highly-capable Class 4 rigs continued to exhibit activity improvement as hours in this rig class improved 11% sequentially.

“Consistent with our outlook entering the third quarter, Key’s management team continued to take action during the quarter to reduce the Company’s cost structure and we’ll see the full benefit from these actions moving forward. During the third quarter, we reduced U.S. headcount by 10%, outpacing the decline we saw in U.S. revenue, bringing the total U.S. headcount reduction over the last twelve months to 37%.

“We believe our liquidity burn rate will moderate in the fourth quarter given the absence of the large cash interest payment incurred in the third quarter, a reduction in capital expenditures, the savings generated from headcount reductions and cash proceeds from

our exit from markets outside of North America. We expect the impact from seasonality in the fourth quarter to be about double that of recent years, though we do expect activity to return to pre-holiday levels in the first quarter. However, it is clear that due to the current pricing environment, Key must continue to evaluate additional avenues to enhance liquidity and we will continue to do so.”

The following table sets forth summary data for the third quarter 2015 and prior comparable quarterly periods:

Three Months Ended (unaudited)

September 30,

June 30,

September 30,

(in millions, except per share amounts)

Revenues

Net loss

(640.2

Diluted loss per share

Adjusted EBITDA*

* Adjusted EBITDA does not exclude costs incurred in connection with the Company’s on-going FCPA investigations.

U.S. Results

Third quarter 2015 U.S. Rig Services revenues of $85.2 million were down 8.6% as compared to the second quarter. Third quarter operating loss excluding impairments was $3.9 million, or -4.6% of revenue, compared to second quarter operating loss of $4.1 million, or -4.4% of revenue. Third quarter results include costs associated with the relocation of rigs from outside the U.S. of $1.0 million; excluding this cost, operating loss was $2.9 million, or -3.4% of revenue. Total rig hours were down 2% sequentially and pricing declined 5% sequentially driven by competitive pressures in the back half of the quarter, though tight cost controls drove an improvement in operating income.

Third quarter 2015 Fluid Management Services revenues of $35.5 million were down 9.3% as compared to the second quarter. Third quarter operating loss excluding impairments was $3.9 million, or -10.9% of revenue, compared to second quarter operating loss of $0.1 million, or -0.2% of revenue. Pricing remained stable during the quarter as total truck hours fell 9.5% sequentially.

Third quarter 2015 Fishing & Rental Services revenues of $27.6 million were down 1.8% as compared to the second quarter. Third quarter operating loss excluding impairments was $5.1 million, or -18.5% of revenue, compared to second quarter operating loss of $6.6 million, or -23.4% of revenue.

Third quarter 2015 Coiled Tubing Services revenues of $20.8 million were down 3.7% as compared to the second quarter. Third quarter operating loss excluding impairments was $5.0 million, or -23.9% of revenue. Second quarter operating loss was $4.1 million, or -18.9% of revenue. Coiled Tubing Services activity declined approximately 10% during the quarter as activity softened late in the quarter.

International Segment

Third quarter 2015 International revenues were $7.7 million, down 49.8% as compared to second quarter 2015 revenues of $15.3 million. Third quarter operating loss excluding impairments was $12.9 million, or -167.2% of revenues, compared to second quarter operating loss of $7.5 million, or -49.1% of revenues. Third quarter results included approximately $3 million of...


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