Key Energy Services Generated Fourth Quarter 2012 Income from Continuing Operations of $0.09 per Diluted Share

HOUSTON, Feb. 14, 2013 /PRNewswire/ -- Key Energy Services, Inc. (NYSE: KEG) reported fourth quarter 2012 consolidated revenues of $466.5 million, generating income from continuing operations of $13.5 million, or $0.09 per share. Third quarter 2012 consolidated revenues were $490.9 million with income from continuing operations of $22.1 million, or $0.15 per share.

The following table sets forth summary data from continuing operations for the fourth quarter 2012 and prior comparable quarterly periods.














 Three Months Ended 


 December 31, 2012 


 September 30, 2012 


 December 31, 2011 



(unaudited)




(unaudited)








 (in millions, except per share amounts) 














Revenues


$      466.5




$   490.9




$481.7


Income attributable to Key


$        13.5




$     22.1




$  41.8


Diluted earnings per share attributable to Key


$        0.09




$     0.15




$  0.28


Adjusted EBITDA (unaudited)


$        92.2




$   101.3




$130.5


For the full year 2012, consolidated revenues were $1.96 billion, up 13.4% compared to $1.73 billion for the full year 2011. Full year 2012 income from continuing operations was $101.2 million, or $0.67 per share, compared to full year 2011 income from continuing operations of $112.1 million, or $0.76 per share.

Full year 2012 GAAP net income attributable to Key was $7.6 million, or $0.05 per share, which includes a net loss of $93.6 million, or $0.62 per share, associated with the sale of the Argentina business and is reflected in discontinued operations. Full year 2011 GAAP net income attributable to Key was $101.5 million, or $0.69 per share, which includes a $46.5 million loss on early retirement of debt and a net loss of $10.7 million, or $0.07 per share, from discontinued operations.

The following table sets forth summary data from continuing operations for the full year 2012 and 2011.


 Twelve Months Ended 


 December 31, 2012 


 December 31, 2011 



(unaudited)







(in millions, except per share amounts)









Revenues


$   1,960.1




$  1,729.2


Income attributable to Key


$      101.2




$     112.1


Diluted income per share attributable to Key


$        0.67




$       0.76


Adjusted EBITDA (unaudited)


$      423.7




$     431.9


U.S. Segment

Fourth quarter 2012 U.S. revenues were $372.3 million, down 6.4% compared to $397.8 million in the third quarter 2012. Fourth quarter operating income was $51.3 million, or 13.8% of revenue, compared to $60.1 million, or 15.1% of revenue, in the third quarter. The quarter-over-quarter revenue decline and margin contraction was driven primarily by seasonal factors. Additionally, Key's Rig Services business was impacted late in the quarter due to a large customer's reduction of its U.S. oilfield service activity.

International Segment

Fourth quarter 2012 international revenues were $94.1 million, up 1.2% compared to third quarter 2012 revenues of $93.0 million. Fourth quarter operating income was $17.1 million, or 18.2% of revenues, compared to third quarter operating income of $19.4 million, or 20.8% of revenues. Margins were impacted by costs associated with anticipated activity growth in Mexico that did not occur during the quarter.

General and Administrative Expenses

General and Administrative (G&A) expenses were $57.9 million, or 12.4% of revenues, for the fourth quarter compared to $53.6 million, or 10.9% of revenues, in the prior quarter. Full year G&A expenses were $230.5 million, or 11.8% of consolidated revenues.

Capital Expenditures and Liquidity

Capital expenditures were $47.4 million during the fourth quarter 2012 and $447.2 million for the full year 2012. Key's consolidated cash balance at December 31, 2012 was $45.9 million compared to $38.3 million at September 30, 2012. Total debt at December 31, 2012 was $848.5 million compared to total debt of $904.0 million at September 30, 2012. At the end of the quarter, there was $330.9 million available under the Company's $550 million senior secured credit facility. Net debt to total capitalization at the end of 2012 was 37.6%.

Overview and Outlook

Commenting on the results, Key's Chairman, President and Chief Executive Officer, Dick Alario, stated, "Our fourth quarter consolidated results were generally in line with expectations, reflective of activity declines in excess of typical seasonal factors.

"We forecast first quarter 2013 consolidated revenue to decline approximately 5% compared to the fourth quarter and project first quarter earnings of $0.02 to $0.04 per share as a result of cost inefficiencies associated with underutilized assets and labor in our U.S. Rig Services business."

Alario continued, "We believe U.S. activity will begin to recover in the second quarter, and expect activity for 2013 to approximate 2012 levels. We anticipate another good year in 2013 in our international segment following 67% revenue growth in 2012. The stalled activity growth in Mexico in the fourth quarter has already resumed, and assets delivered to Mexico and Colombia late in 2012 should fuel additional growth given a full year's contribution in 2013.

"Our capital expenditure plan for 2013 is $210 million for equipment maintenance needs, including ongoing upgrades to our Rig Services fleet."

Conference Call Information

As previously announced, Key management will host a conference call to discuss its fourth quarter 2012 financial results on Friday, February 15, 2013 at 10:00 a.m. CST. 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 89977893. 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 Friday, February 15, 2013, 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 89977893. 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):














 Three Months Ended 


 Twelve Months Ended 



 December 31, 2012 


 September 30, 2012 


 December 31, 2011 


 December 31, 2012 


 December 31, 2011 



(unaudited)


(unaudited)




(unaudited)














REVENUES

$466,471


$490,851


$481,718


$1,960,070


$1,729,211












COSTS AND EXPENSES:











Direct operating expenses

317,553


335,799


290,137


1,308,845


1,085,190


Depreciation and amortization expense

57,195


52,947


46,899


213,783


166,946


General and administrative expenses

57,930


53,567


63,438


230,496


223,299












Operating income

33,793


48,538


81,244


206,946


253,776













Loss on early extinguishment of debt

-


-


-


-


46,451


Interest expense, net of amounts capitalized

13,992


13,962


10,846


53,566


40,849


Other, net

(2,711)


(1,529)


955


(6,649)


(8,977)












Income from continuing operations before tax

22,512


36,105


69,443


160,029


175,453













Income tax expense

(8,205)


(12,915)


(27,411)


(57,352)


(64,117)












Income from continuing operations

14,307


23,190


42,032


102,677


111,336













Loss from discontinued operations, net of tax

-


(60,209)


(2,463)


(93,568)


(10,681)












Net income (loss)

14,307


(37,019)


39,569


9,109


100,655













Income (loss) attributable to noncontrolling interest

822


1,075


221


1,487


(806)












INCOME (LOSS) ATTRIBUTABLE TO KEY

$  13,485


$ (38,094)


$  39,348


$      7,622


$   101,461












Earnings (loss) per share attributable to Key:











Basic 

$     0.09


$    (0.25)


$     0.26


$        0.05


$        0.70


Diluted

$     0.09


$    (0.25)


$     0.26


$        0.05


$        0.69












Weighted average shares outstanding:











Basic

151,100


151,105


150,738


151,106


145,909


Diluted

151,104


151,110


150,804


151,125


146,217























Income from continuing operations 

attributable to Key:




















Income from continuing operations

14,307


23,190


42,032


102,677


111,336


Income (loss) attributable to noncontrolling interest

822


1,075


221


1,487


(806)













Income from continuing operations attributable to Key

$  13,485


$  22,115


$  41,811


$   101,190


$   112,142












Earnings per share from continuing operations attributable to Key:




















Basic

$     0.09


$     0.15


$     0.28


$        0.67


$        0.77


Diluted  

$     0.09


$     0.15


$     0.28


$        0.67


$        0.76























Loss from discontinued operations, net of tax:

$         -


$ (60,209)


$   (2,463)


$    (93,568)


$    (10,681)












Loss per share from discontinued operations:











Basic and diluted

$         -


$    (0.40)


$    (0.02)


$       (0.62)


$       (0.07)

 

Condensed Consolidated Balance Sheets (in thousands):



 December 31, 2012 


 December 31, 2011 



(unaudited)








ASSETS









Current assets:





Cash and cash equivalents

$     45,949


$     35,443


Other current assets

543,845


504,777


Current assets held for sale

-


60,343






Total current assets

589,794


600,563






Property and equipment, net

1,436,674


1,197,300

Goodwill

626,481


622,773

Other assets, net

108,639


155,601

Non-current assets held for sale

-


22,883






TOTAL ASSETS

$2,761,588


$2,599,120






LIABILITIES AND EQUITY









Current liabilities:





Accounts payable

$   104,073


$     71,736


Other current liabilities

201,023


175,877


Current liabilities associated with assets held for sale

-


41,890






Total current liabilities

305,096


289,503






Long-term debt, less current portion

848,110


773,975

Other non-current liabilities

321,050


321,011






Equity

1,287,332


1,214,631






TOTAL LIABILITIES AND EQUITY

$2,761,588


$2,599,120



Consolidated Cash Flow Data (in thousands):


 Twelve Months Ended 


 December 31, 2012 


 December 31, 2011 


(unaudited)







Net cash provided by operating activities

$369,660


$188,305

Net cash used in investing activities

(428,709)


(520,090)

Net cash provided by financing activities

73,946


306,084

Effect of exchange rates on cash

(4,391)


4,516





Net increase (decrease) in cash and cash equivalents

10,506


(21,185)

Cash and cash equivalents, beginning of period

35,443


56,628





Cash and cash equivalents, end of period

$  45,949


$  35,443

 

Segment Revenue and Operating Income from continuing operations (in thousands, except for percentages):



 Three Months Ended 



 December 31, 2012 


 September 30, 2012 


 December 31, 2011 

Revenues


(unaudited)


(unaudited)










U.S. Operations







Rig Services


$   174,912


$   201,453


$     194,197

Fluid Management Services


76,897


82,140


96,886

Coiled Tubing Services


53,525


52,442


60,896

Fishing & Rental Services


67,001


61,779


68,960








Total U.S. Operations


372,335


397,814


420,939








International Operations


94,136


93,037


60,779








Consolidated Total


$   466,471


$   490,851


$     481,718








Operating Income














U.S. Operations


$     51,250


$     60,136


$     106,550

International Operations


17,149


19,359


14,450

Functional Support


(34,606)


(30,957)


(39,756)








Consolidated Total


$     33,793


$     48,538


$       81,244








Operating Income % of Revenues














U.S. Operations


13.8%


15.1%


25.3%

International Operations


18.2%


20.8%


23.8%

Consolidated Total


7.2%


9.9%


16.9%

















 Twelve Months Ended 





 December 31, 2012 


 December 31, 2011 



Revenues


(unaudited)












U.S. Operations







Rig Services


$   788,512


$   725,509



Fluid Management Services


353,597


387,982



Coiled Tubing Services


215,876


232,374



Fishing & Rental Services


268,783


184,222










Total U.S. Operations


1,626,768


1,530,087










International Operations


333,302


199,124










Consolidated Total


$1,960,070


$1,729,211










Operating Income














U.S. Operations


$   285,341


$   357,606



International Operations


62,992


38,921



Functional Support


(141,387)


(142,751)










Consolidated Total


$   206,946


$   253,776










Operating Income % of Revenues














U.S. Operations


17.5%


23.4%



International Operations


18.9%


19.5%



Consolidated Total


10.6%


14.7%



Following is a reconciliation of income from continuing operations attributable to Key as presented in accordance with United States generally accepted accounting principles (GAAP) to EBITDA from continuing operations and Adjusted EBITDA from continuing operations as required under Regulation G of the Securities Exchange Act of 1934.