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KEY ENERGY SERVICES INC filed this Form S-4/A on 03/08/1996
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         Each of Key (and Yale E. Key and  Clint  Hurt)  and  WellTech  recently
entered into new credit  facilities of  approximately  $17.5 million (subject to
certain advance  formulas) the proceeds of the initial  borrowings of which were
used to repay  substantially  all of the debt of Key (other  than that of Odessa
Exploration)  and  WellTech  (other  than  that  owed  to  certain  affiliates),
respectively.  Key believes that such facility will provide  sufficient funds to
finance its operating and capital  expenditure needs for the foreseeable future.
The New Indebtedness has been  cross-guaranteed  by Key, Yale E. Key, Clint Hurt
and  WellTech  and   cross-collateralized   by  their  respective  assets.  Upon
consummation of the Merger,  the New Indebtedness will be the obligation of Key,
as survivor of the Merger, and Key's  subsidiaries,  Yale E. Key and Clint Hurt.
The cross-guaranty and cross- collateralization arrangement could, if the Merger
is not consummated,  create contingent liabilities for each of Key and WellTech.
The failure to consummate  the Merger on or prior to April 30, 1996 will, at the
option of the lender,  constitute an event of default under the New Indebtedness
if WellTech  fails to refinance its credit  agreement on or before July 31, 1996
or Key fails to continue to operate WellTech pursuant to the Interim  Operations
Agreement until such refinancing.  Key and WellTech have agreed not to terminate
the  Interim  Operations  agreement  without  the  consent of the  lender.  (See
"Business and Properties of Key--New Indebtedness.")

Impact of SFAS 121

         In  March  1995,  the  Financial   Accounting  Standards  Board  issued
Statement of Financial Accounting  Standards No.  121--Accounting for Long-Lived
Assets and for  Long-Lived  Assets to be Disposed Of ("SFAS 121")  regarding the
impairment of long-lived assets,  identifiable  intangibles and goodwill related
to those assets. SFAS 121 is effective for financial statements for fiscal years
beginning after December 15, 1995, although earlier adoption is encouraged.  The
application of SFAS 121 will require periodic  determination of whether the book
value of long-lived assets exceeds the future cash flows expected to result from
the use of such assets and, if so, will require reduction of the carrying amount
of the "impaired" assets to their estimated fair values.  Key estimates that the
implementation  of SFAS 121 will not have a material  effect on Key's  financial

Impact of Inflation on Operations

         Although in our complex  environment it is extremely  difficult to make
an  accurate  assessment  of  the  impact  of  inflation  on  Key's  operations,
management is of the opinion that inflation has not had a significant  impact on
its business.