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SEC Filings

S-4/A
KEY ENERGY SERVICES INC filed this Form S-4/A on 03/08/1996
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Inventories

Inventories,  which consist primarily of parts and supplies, are held for use in
the  operations of Key and are valued at the lower of cost  (first-in  first-out
method) or market.

Property and Equipment

Key provides for  depreciation  and  amortization  of non-oil and gas properties
using the straight-line  method over the following estimated useful lives of the
assets:

                                       Post-confirmation      Pre-confirmation
Description                                 Years                  Years   
- -------------------------------------------------------------------------------
Oil field service equipment                    3 - 15            5 - 10
Oil and gas well drilling equipment            3 - 15              -
Motor vehicles                                 3 - 7             3 - 10
Furniture and equipment                        3 - 7             3 - 15
Buildings and improvements                   10 - 15            15 - 25
Gas processing facilities                         10                -
- -------------------------------------------------------------------------------

Upon  disposition or retirement of property and equipment,  the cost and related
accumulated  depreciation  are removed  from the  accounts  and the gain or loss
thereon,  if any, is included in the 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.

For Key,  property and equipment  values prior to November 30, 1992 were carried
at cost less accumulated  depreciation.  Property and equipment were adjusted at
November 30, 1992 to their  estimated fair values and  accumulated  depreciation
was eliminated  (see Note 3).  Additions after November 30, 1992 are recorded at
cost.

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 (barrels) 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.

Gas Balancing

Deferred  income   associated  with  gas  balancing  is  accounted  for  on  the
entitlements  method  and  represents  amounts  received  for gas sold under gas
balancing arrangements in excess of OEI's interest in properties covered by such
agreements.  OEI had deferred  income  associated with gas balancing at June 30,
1995 and 1994 (see Note 7).


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