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SEC Filings

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

Internally, we measure activity levels for our well servicing operations primarily through our rig and trucking hours. Generally, as capital by E&P companies increases, demand for our services also rises, resulting in increased rig and trucking services and more hours worked. Conversely, when activity levels decline due to lower spending by E&P companies, we generally provide fewer rig and trucking services, which results in lower hours worked. The following table presents our quarterly rig and trucking hours from 2015 through 2017.
 
Rig Hours
 
Trucking Hours
 
Key’s U.S.
Working Days(1)
 
U.S.
 
International
 
Total
 
 
 
 
2017:
 
 
 
 
 
 
 
 
 
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

Fourth Quarter
164,480

 

 
164,480

 
223,478

 
61

Total 2017
656,139

 
7,100

 
663,239

 
785,410

 
251

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

2015:
 
 
 
 
 
 
 
 
 
First Quarter
271,005

 
36,950

 
307,955

 
418,032

 
62

Second Quarter
232,169

 
25,555

 
257,724

 
342,271

 
63

Third Quarter
226,953

 
13,330

 
240,283

 
309,601

 
64

Fourth Quarter
203,252

 
8,279

 
211,531

 
247,979

 
62

Total 2015
933,379

 
84,114

 
1,017,493

 
1,317,883

 
251

(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 producers’ production maintenance spending has not recovered to the same extent as new well drilling and completion spending.
During 2017, we saw some continued improvement in demand and pricing for our services, particularly those driven by the completion of oil and natural gas wells, continued uncertainty around the stability of oil prices dampened the pace of improvement in well services activity particularly as it relates to our customer 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 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.

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