KEY ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial information in this report includes Yale E. Key which
is involved in oilwell service operations, OEI which is involved in the
production and exploration of oil and natural gas and Clint Hurt Drilling which
is involved in the drilling for oil and natural gas.
OEI utilizes the successful efforts method of accounting for its oil and gas
properties. Under this method, all costs associated with productive wells and
nonproductive development wells are capitalized, while nonproductive exploration
costs and geological and geophysical costs (if any), are expensed. Capitalized
costs relating to proved properties are depleted using the unit-of-production
method based on proved reserves expressed as net equivalent Bbls as reviewed by
independent petroleum engineers. The carrying amounts of properties sold or
otherwise disposed of and the related allowance for depletion are eliminated
from the accounts and any gain/loss is included in results of operations.
OEI's aggregate oil and gas properties are stated at cost, not in excess of
total estimated future net revenues net of related income tax effects.
In the opinion of Key Energy Group, Inc. ("Key"), the accompanying unaudited
condensed consolidated financial statements contain all normal recurring
adjustments necessary to present fairly the financial position as of December
31, 1995, the statement of cash flows for the six months ended December 31, 1995
and 1994, and the results of operations for the six month periods then ended.
These unaudited consolidated financial statements should be read in conjunction
with consolidated financial statements and notes thereto included herein for the
year ended June 30, 1995.
The consolidated financial statements of Key have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
Operating results for interim periods are not necessarily indicative of the
results that may be expected for the full year.