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S-4/A
KEY ENERGY SERVICES INC filed this Form S-4/A on 03/08/1996
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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF KEY

         The  following   discussion  provides  information  to  assist  in  the
understanding of Key's financial condition and results of operations.  It should
be read in conjunction with the consolidated  financial statements and the notes
thereto of Key appearing elsewhere herein.


         Six Months  Ended  December  31,  1995  Compared  to Six  Months  Ended
December 31, 1994

         Operating  results for the six months  ended  December 31, 1995 include
Key's oil field well  service  operations  conducted by Yale E. Key, its oil and
natural  gas   exploration  and  production   operations   conducted  by  Odessa
Exploration,  and oil and natural gas well contract drilling  conducted by Clint
Hurt.


         Historically,  fluctuations in oilfield well service operations and gas
well contract  drilling  activity have been closely  linked to  fluctuations  in
crude oil and natural gas prices.  However,  Key, through customer alliances and
agreements,  and diversification of services, is seeking to minimize the effects
of such fluctuations on its results of operations and financial condition.

Results of Operations


         Key.  Revenues for the six months ended December 31, 1995 increased 13%
to $24,792,000 from $21,962,000 for the comparable 1994 period, while net income
of $1,494,000  increased 48% over the prior six month total of  $1,011,000.  The
increase in revenues was primarily due to the addition of Clint Hurt on April 1,
1995, whose operations were not included in the prior year's quarterly  results.
The  improvement  in  quarterly  net  income is  partially  attributable  to the
inclusion  of Clint Hurt,  but is also a result of an increase in net income for
Odessa  Exploration and a decrease in total  consolidated Key costs and expenses
as a percent of total revenues.

         Yale E. Key.  Oilfield service revenue declined 8% from $20,923,000 for
the prior six months to  $19,148,000  for the current  quarter.  The decline was
primarily  attributable  to  curtailed  equipment  utilization  as the result of
adverse weather conditions and a slight decline in demand.  Yale E. Key averaged
an 82% equipment utilization for the period. However, the gross margin increased
from 22% to 26% of revenues  for the current  period due to lower  expenses  and
costs and to the  continued  diversification  of  services  into  higher  margin
business  segments  such as oilfield  frac  tanks,  oilfield  fishing  tools and
trucking operations.

         Odessa Exploration.  Revenues from oil and gas activities increased 60%
from  $1,077,000  in the  prior  period to  $1,727,000  for the  period  despite
relatively  constant  crude oil and lower  natural gas prices.  The  increase in
revenues was primarily the result of increased production of oil and natural gas
as several  drilled oil and natural gas wells began  production  during the 1996
period.

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