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SEC Filings

10-K
KEY ENERGY SERVICES INC filed this Form 10-K on 02/28/2018
Entire Document
 

References to “Successor” or “Successor Company” relate to the financial position and results of operations of the reorganized Company subsequent to December 15, 2016. References to “Predecessor” or “Predecessor Company” refer to the financial position and results of operations of the Company prior to December 15, 2016.
Business and Growth Strategies
Focus on Production Related Services
Over the life of an oil and gas well, regular maintenance of well bore and artificial lift systems is required to maintain production and offset natural production declines. In most of these interventions, a well service rig is required to remove and replace items needing repair, or to perform activities that would increase the oil and gas production from current levels. In many instances these interventions require additional assets or services to perform. With the decline in oil prices beginning in 2014, we believe that a number of oil and gas producers in the United States significantly curtailed their recurring well maintenance activities. We believe that a recovery in oil prices will result in oil and gas producers making the decision to resume regular well maintenance activities. Additionally, we believe that in many instances since the oil price decline began in 2014, oil and gas producers have foregone regular maintenance activities, and that additional demand for our services will be provided by oil and gas producers seeking to improve their production by repairing their wells. Key is well positioned to capitalize on these trends through its fleet of active and warm stacked well service rigs and the additional fishing and rental service offerings it provides and we will continue to invest, either in equipment or through acquisition to grow and take advantage of this dynamic.
Growth in Population of Horizontal Oil and Gas Wells
Since the revolution of horizontal well drilling and hydraulic fracturing began in the United States, thousands of new horizontal oil wells have been added, many in the period from 2012 to 2014. As the initial production from these wells decline over their first several years of production, and these wells are placed on artificial lift systems to maintain production, we believe that these wells will require periodic maintenance similar to a conventional oil well. In many instances due to the depth and long lateral sections of these wells, a larger well service rig with a higher rated derrick capacity will be needed to do this maintenance. We intend to invest in this portion of our well service rig fleet, and the needed rental equipment and services, either through organic capital deployment or acquisition to capitalize on this trend and the growing population of horizontal wells that have entered or will enter the phase of their life where regular maintenance is required.
PERFORMANCE MEASURES
The Baker Hughes U.S. rig count data, which is publicly available on a weekly basis, is often used as a coincident indicator of overall Exploration and Production (“E&P) company spending and broader oilfield activity. In assessing overall activity in the U.S. onshore oilfield service industry in which we operate, we believe that the Baker Hughes U.S. land drilling rig count is the best barometer of E&P companies' capital spending and resulting activity levels. Historically, our activity levels have been highly correlated to U.S. onshore capital spending by our E&P company customers as a group.
Year
WTI Cushing  Crude
Oil(1)
 
NYMEX Henry Hub
Natural Gas(1)
 
Average Baker  Hughes
U.S. Land Drilling  Rigs(2)
 
Average AESC Well Service Active Rig Count(3)
2013
$
97.98

 
$
3.73

 
1,705

 
2,064

2014
$
93.17

 
$
4.37

 
1,804

 
2,024

2015
$
48.66

 
$
2.62

 
943

 
1,481

2016
$
43.29

 
$
2.52

 
486

 
1,061

2017
$
50.80

 
$
2.99

 
856

 
1,187

(1)
Represents the average of the monthly average prices for each of the years presented. Source: U.S. Energy Information Administration, Bloomberg.
(2)
Source: www.bakerhughes.com
(3)
Source: www.aesc.net

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