Print Page  Close Window

SEC Filings

10-Q
KEY ENERGY SERVICES INC filed this Form 10-Q on 11/09/2017
Entire Document
 

In the U.S., our rig activity occurs primarily on weekdays during daylight hours. Accordingly, we track U.S. rig activity on a “per U.S. working day” basis. Key’s U.S. working days per quarter, which exclude national holidays, are indicated in the table below. Our domestic trucking activity tends to occur on a 24/7 basis, as did our international rig activity prior to the sale of our international operations. Accordingly, we track our international rig activity and our domestic trucking activity on a “per calendar day” basis. The following table presents our quarterly rig and trucking hours from 2016 through the third quarter of 2017:
 
 
Rig Hours
 
Trucking Hours
 
Key’s U.S. 
Working Days(1)
2017:
 
U.S.
 
International
 
Total
 
 
 
 
First Quarter
 
165,968

 
2,462

 
168,430

 
179,215

 
64

Second Quarter
 
163,966

 
1,701

 
165,667

 
185,398

 
63

Third Quarter
 
161,725

 
2,937

 
164,662

 
197,319

 
63

Total 2017
 
491,659

 
7,100

 
498,759

 
561,932

 
190

 
 
 
 
 
 
 
 
 
 
 
2016:
 
 
 
 
 
 
 
 
 
 
First Quarter
 
153,417

 
5,715

 
159,132

 
217,429

 
63

Second Quarter
 
144,587

 
6,913

 
151,500

 
199,527

 
64

Third Quarter
 
163,206

 
6,170

 
169,376

 
198,362

 
64

Fourth Quarter
 
169,087

 
4,341

 
173,428

 
192,049

 
61

Total 2016
 
630,297

 
23,139

 
653,436

 
807,367

 
252

(1)
Key’s U.S. working days are the number of weekdays during the quarter minus national holidays.
MARKET AND BUSINESS CONDITIONS AND OUTLOOK
Our core businesses depend on our customers’ willingness to make expenditures to produce, develop and explore for oil and natural gas. Industry conditions are influenced by numerous factors, such as oil and natural gas prices, the supply of and demand for oil and natural gas, domestic and worldwide economic conditions, and political instability in oil producing countries and available supply of and demand for the services we provide. Oil and natural gas prices began a rapid and substantial decline in the fourth quarter of 2014. Depressed commodity price conditions persisted and worsened during 2015 and into 2016. As a result, the Baker Hughes U.S. rig count and the AESC well service rig count, along with demand for our products and services declined substantially, and the prices we are able to charge our customers for our products and services also declined substantially. While we sought to anticipate activity declines and reshaped our organizational and cost structure to mitigate the negative impact of these declines, we have continued to experience negative operating results and cash flows from operations. In 2017, oil prices recovered off the lows of 2016 and spurred an increase in the Baker Hughes U.S. rig count and related well completion activity, however, the same magnitude of activity increase did not occur in our principal Rig Services business, as measured by the AESC well service rig count, as oil and gas producer’s production maintenance spending has not recovered to the same extent as new well drilling and completion spending.
While we saw continued improvement in demand and pricing for our services, particularly those driven by the completion of oil and natural gas wells, through the first nine months of 2017, continued uncertainty around the stability of oil prices dampened the pace of improvement in well services activity particularly as it relates to our customers spending for the maintenance of existing oil and gas wells. We believe that a stabilization of oil prices at a price attractive to our customers will be necessary for the demand and associated pricing of our services related to conventional well maintenance work to improve significantly. Additionally, we believe that continued aging of horizontal wells and customers choosing to increase production through return accretive regular well maintenance in these horizontal wells will strengthen demand for and increase the price of our services over the next several years. With increased demand for oilfield services broadly, however, the demand for qualified employees will also increase, which may impact our ability to meet the needs of our customers or offset price increases realized due to inflation in labor costs.
RESULTS OF OPERATIONS
The following tables set forth consolidated results of operations and financial information by operating segment and other selected information of the Successor Company and the Predecessor Company for the periods ending September 30, 2017 and 2016, respectively. Upon emergence on the Effective Date, the Company adopted fresh start accounting which resulted in the creation of a new entity for financial reporting purposes. As a result of the application of fresh start accounting, as well as the effects of the implementation of the Plan, the Consolidated Financial Statements on or after December 16, 2016 are not comparable with the Consolidated Financial Statements prior to that date. While the comparison of these periods is not presented according

23