2. Pro Forma Entries
(a) To record the acquisition of WellTech using the purchase method of
accounting. The allocation of the purchase price to the acquired assets and
liabilities of WellTech is preliminary, and therefore, subject to change.
(b) To eliminate the investment and equity in earnings (losses) in
Dawson WellTech, LLC, ("Dawson"). WellTech's investment in Dawson will be
distributed to the shareholders and directors of WellTech prior to the proposed
merger of WellTech into Key.
Also, to eliminate the investment and equity in earnings (losses) in
Key for the common stock of Key currently owned by WellTech and the equity in
earnings of Services WellTech prior to its consolidation during the year ended
June 30, 1995.
If the expected distribution to WellTech directors of 205,038 shares of
Key Common Stock and 7,280 shares of Dawson common stock had been made on
December 31, 1995, WellTech would have recorded a related charge to earnings of
(c) To adjust the debt and accrued interest for certain debt
instruments of Key and WellTech as a result of refinancing certain debt
instruments. Key has a commitment from a banking institution to refinance
certain debt obligations of the Company and WellTech and to provide Key with
approximately $1.2 million in incremental working capital.
Also, to adjust interest expense and debt issuance costs resulting from
(i) the borrowings for the acquisition of Clint Hurt Drilling, and (ii) the
refinancing of certain debt instruments of Key and WellTech and the receipt of
(d) To adjust depreciation, depletion and amortization for the WellTech
West Texas assets.
(e) To adjust the minority interest in losses of a consolidated
subsidiary for the operations of Servicios for the nine months ended March 31,
(f) To record the estimated savings in general and administrative
expenses and operating costs due to the Acquisitions. The estimated savings in
expenses is solely a result of changed circumstances brought about by the
consummation of the Acquisitions, principally the closing of duplicate
administrative facilities and the elimination of duplicate administrative
positions, including executive positions. Duplicative administrative facilities
expected to be closed consist of the leased executive offices of WellTech
located in Houston, Texas. Approximately 18 employees are expected to be
effected. Annual general and administrative costs expected to be eliminated
include salary and related benefits costs associated with the 18 administrative
office employees discussed above of approximately $1,125,000 and additional
costs associated with maintenance of that office including rental, travel,
telephone and office supply expenses totaling approximately $375,000.