Print Page  Close Window

SEC Filings

10-Q
KEY ENERGY SERVICES INC filed this Form 10-Q on 05/11/1995
Entire Document
 




                         					UNITED STATES
                 			SECURITIES AND EXCHANGE COMMISSION

                    				Washington, D. C.  20549

                           					FORM 10-Q

      (Mark One)
	[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934

                     For the quarterly period ended   
                             March 31, 1995         

                               				or

	[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934

                    For the transition period from       
                                              to               

                			Commission file number   1-8038  

                     				KEY ENERGY GROUP, INC.
        		(Exact name of registrant as specified in its charter)


                Maryland                          04-2648081        
      (State or other jurisdiction of         (I.R.S. Employer   
       incorporation or organization)          Identification No.)              

          			255 Livingston Ave., New Brunswick, NJ      08901   
        			(Address of Principal executive offices)    (ZIP Code)

		Registrant's telephone number including area code:  (908)247-4822

 	Indicate by check mark whether the registrant (1) has filed all
  reports required to be filed 	by Section 13 or 15(d) of the
  Securities Exchange Act of 1934 during the preceding 12 		months
  (or for such shorter period that the registrant was required to
  file such reports), 		and (2) has been subject to such filing
  requirements for the past 90 days. Yes   X   No        

 	Indicate by check mark whether the registrant has filed
  documents and reports required 		to be filed by Section 12, 13
  or 15(d) of  the Securities Exchange Act of 1934 subsequent 	to
  the distribution of securities under a plan confirmed by a court
  since there was a 		distribution of securities under a plan
  confirmed by a court.  Yes   X    No      

 	Common Shares outstanding at April 15, 1995: 6,914,513





               			KEY ENERGY GROUP, INC. AND SUBSIDIARIES

                             						INDEX
                                      										          Page
                                                         Number


	PART  I.  FINANCIAL INFORMATION
		

		Item 1.   Financial Statements                       					3


		Item 2.   Management's Discussion and Analysis of 
      			   Financial Condition and Results of Operations		11


	PART  II. OTHER INFORMATION


		Item 1.   Legal Proceedings.			                       			21


		Item 2.   Changes in Securities.                    					21


		Item 3.   Defaults Upon Senior Securities.           				21


		Item 4.   Submission of Matters to a Vote of Security
            Holders.                                      	21


		Item 6.   Exhibits and Reports on Form 8-K.          				21

		Signatures.			                                      					22



                            Key Energy Group, Inc. and
                                   Subsidiaries                   		    
                            Consolidated Balance Sheets
                  			
							                                         (unaudited)
                                                  March 31,     June 30,
 (Thousands, except share and per share data)       1995          1994
  ASSETS  																		   
   Current Assets:
    Cash                						                     	$148       			$717		    	 
    Restricted cash                                  672           456
    Restricted marketable securities		           		  251		      	  251		   
    Accounts receivable, net				                   7,782		       6,674
    Prepaid expenses		                        				    76			        105		    
    Wells in progress					                        	  660	  	  	      -  		   
    Inventories			                             				1,058	      		  964	

  Total Current Assets				              	         10,647      			9,167  

  Property and Equipment:  
    Oilfield service equipment				                23,375	       12,412
    Oil and gas drilling equipment			              1,903         	   -         
    Motor vehicles						                             429     			   422 		   
    Oil and gas properties and other related
     equipment, successful efforts method          5,718     			 4,430    
    Furniture and equipment                          268		    	    157
				Buildings and land                             2,211         1,514 

  Total Property and Equipment                    33,904        18,935 
  Accumulated depreciation and depletion          (3,663)       (1,776)

  Net Property and Equipment                      30,241        17,159

  Other assets                                       983         1,769

  Total Assets	                   					          $41,871       $28,095

  LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities:  
    Accounts payable		                      	    	$2,628      		$3,117
    Accrued interest		                             		100          		89 
    Other accrued liabilities                      2,008         2,726 
    Accrued income taxes                         				447	         	447
    Current portion oflong-term debt	           			2,013	       	2,004 

  Total Current Liabilities                    				7,196       		8,383	

  Long-term debt, less current portion        				13,465       		9,497
  Deferred income taxes	                        			1,694         		952

  Commitments and contingencies		                    		-           		-

  Stockholders' equity:
	  Common stock, $.10 par value; 10,000,000
   shares authorized, 6,914,513 and 5,273,513 shares
   issued and outstanding at March 31, 1995 and
   June 30, 1994, respectively                       691           527 
   Additional paid-in capital	                 			15,127       		6,680
   Retained earnings                           				3,698       		2,056

  Total Stockholders'Equity                   				19,516       		9,263	

  Total Liabilities and Stockholders'Equity	  			$41,871     		$28,095

	 See the accompanying notes which are an integral part of
  these consolidated financial statements.



                     Key Energy Group, Inc. and Subsidiaries                  
                      Consolidated Statements of Operations
						
                             	       Three Months Ended		    Nine Months Ended
                           	              March 31,				           March 31,
(Thousands,except per share data)	    1994       	1995     		 1994	     	1995

  REVENUES:
   Oilfield services and drilling	 	$9,673   		$10,145   		$23,407  		$31,068 
   Oil and gas revenues              		645       		695      	1,552    		1,772
   Other revenues, net               		(29)        209        	(11)      	171

                                   	10,289	    	11,049    		24,948   		33,011
 COSTS AND EXPENSES:
   Oilfield services and drilling
    direct costs	                   	8,450     		8,287    		20,221   		26,285
  Oil and gas direct costs	           	354       		686       		677    		1,009  
  Depreciation and depletion expense 		432       		642     		1,018    		1,887
  General and administrative expense 		153       		167       		431      		449
  Interest expense                    	219       		370       		554      		997

                                    	9,608	    	10,152    		22,901   		30,627

 Income before income taxes          		681       		897     		2,047    		2,384
 Income tax expense                  		232       		266       		697      		742

 NET INCOME                         		$449      		$631    		$1,350   		$1,642

 EARNINGS PER COMMON SHARE

 Primary:
  Income before income taxes        	$0.13      	$0.14      	$0.39     	$0.36 
  Net income	                        $0.09      	$0.10      	$0.26     	$0.25

 Assuming full dilution:
  Income before income taxes	        $0.13      	$0.14      	$0.39     	$0.36
  Net income	                        $0.09      	$0.10      	$0.26     	$0.25

AVERAGE COMMON SHARES OUTSTANDING
  Primary	                          	5,274	     	6,637     		5,274    		6,637
  Assuming full dilution	           	5,288	     	6,637     		5,288    		6,637

  See the accompanying notes which are an integral part of these
  consolidated financial statements.



                          Key Energy Group, Inc. and Subsidiaries              
                           Consolidated Statements of Operations

                          		         Three Months Ended	     Nine Months Ended
                        	                 March 31,				           March 31,
(Thousands)                          	1994      		1995	      	1994	     	1995

 CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                        		$449      		$631    		$1,350   		$1,642
  Adjustments to reconcile income from
  operations to net cash provided by
  operations:
   Depreciation and depletion        		432       		642     		1,046    		1,887 
   Change in assets and liabilities
   net of effects from the acquisition
   of the operations of WellTech West
   Texas and Clint Hurt Drilling:
    (Increase) decrease in accounts
     receivable	                      	509	      	(148)     		(218)  		(1,108)
    (Increase) decrease in other
     current assets                  		(53)     		(654)	     	(220)    		(725)
    (Increase) decrease in accounts
     payable and accrued expenses    		(12)      		107	    	(1,053)  		(1,457)
    (Decrease) increase in
     accrued interest                  		-	        	27        		10       		11
    (Decrease) increase in
     accrued taxes	                   	232         		-       		697        		-
    (Decrease) increase in
     non-current deferred taxes        		-       		266         		-	      	742
    (Increase) decrease in other assets		-	        	(1)        		-       		(1) 

     Net cash (used in) provided
      by operating activities	      	1,557       		870     		1,612      		991
   
    CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures - Oilwell
      service operations	          	(1,435)     		(385)   		(2,067)	  	(2,284)
     Capital expenditures - Oil
      and gas operations               		-	       	(16)        		-	      	(23) 
     Investment in other assets        		-         		-      		(306)       		-
     Purchase of water disposal
      well and mud plant	               	-	         	-	      	(325)       		- 
     Expenditures for oil and
      gas properties                		(663)      		(78)   		(1,311)  		(1,289)
		 
     Net cash used in investing
      activities	                  	(2,098)	     	(479)    	(4,009)  		(3,596)

    CASH FLOWS FROM FINANCING ACTIVITIES:
     Principal payments	             	(649)	     	(471)	   	(1,429)	  	(1,518)
     Borrowings under line-of-credit		 381	    	(1,377)    		1,611     		(406)
     Proceeds from long-term debt	    	850     		1,310     		2,947    		4,176
     Cash acquired from
      WellTech aquisition	              	-	         	-	        	42        		- 

    Net cash provided by (used in)
     financing activities	            	582	      	(538)    		3,171    		2,252

   Net increase (decrease) in
    cash and restricted cash          		41	      	(147)      		774     		(353) 
   Cash and restricted cash at
    beginning of period	            	1,356       		967       		623    		1,173
   Cash and restricted cash at
    end of period                 		$1,397      		$820    		$1,397     		$820

   Supplemental cash flow disclosures: 
    Interest paid	                   	$219	      	$343	      	$554     		$986
  
   Supplemental schedule of non-cash
   investing and financing transactions: 
    Fair market value ofCommon Stock
    issued as payment for Odessa
    Exploration,Inc.                   	$-        		$-	      	$638       		$- 
    Assumption of Odessa Exploration,
    Inc. liabilities	                  	$-	        	$-	    	$2,752	       	$-
    Acquisition of Odessa Exploration,
    Inc. property and equipment	       	$-        		$-	    	$3,196	       	$-
    Fair market value of Common Stock
    issued as payment for the WellTech
    equipment                         		$-        		$-        		$-   		$8,423 
    Fair market value of Common Stock
    issued as partial payment for the
    Clint Hurt drilling equipment      	$-	       	$24        		$-      		$24

  See the accompanying notes which are an integral part of these
  consolidated financial statements.



                       Key Energy Group, Inc. and Subsidiaries

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  March 31, 1995


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

The consolidated financial information in this report includes the accounts
of Key Energy Group, Inc. (the "Company") and its wholly-owned subsidiaries
and was prepared in conformity with accounting policies used in the
Annual Report on Form 10-KSB furnished for the preceding fiscal year. 

The consolidated financial information in this report includes the three
operating subsidiaries of the Company; Yale E. Key, Inc. ("Key") which is
involved in oilwell service operations, Odessa Exploration Inc. ("OEI")
which is involved in the production and exploration of oil and natural gas
and Key Energy Drilling, Inc. d/b/a Clint Hurt Drilling ("Clint Hurt
Drilling") which is involved in the drilling for oil and natural gas. 

OEI follows successful efforts method of accounting.  Lease acquisition
and development costs (tangible and intangible) for expenditures relating
to proved oil and gas properties are capitalized. Delay and surface
rentals are charged to expense in the year incurred. Dry hole costs
incurred on exploratory operations are expensed.  Dry hole costs
associated with developing proved fields are capitalized. Expenditures for
additions, betterments and renewals are capitalized. Geological
and geophysical costs are expensed when incurred.

In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all normal
recurring adjustments necessary to present fairly the financial
position as of  March 31, 1995, the statement of cash flows for the three
and nine  months ended March 31, 1995 and 1994, and the results of
operations for the three and nine month periods then ended.

2.  ACQUISITIONS

Clint Hurt Drilling

On March 30, 1995, the Company and Mr. Clint Hurt (acting in behalf of
Clint Hurt and Associates) entered into an Asset Purchase Agreement pursuant
to which Clint Hurt transferred to the Company all of its oil and gas
drilling equipment of its West Texas region.  Such equipment consisted
of four drilling rigs, carriers, rig equipment, vehicles and other
miscellaneous equipment.  Total consideration for the acquisition was
$1,725,000 and 5,000 shares of the Company's Common Stock.
Key Energy Drilling, Inc. d/b/a Clint Hurt Drilling, will 
operate as a wholly-owned subsidiary of the Company.  The acquisition 
was accounted for using the purchase method. 

WellTech West Texas

On December 10, 1993, the Company and WellTech, Inc. entered
into an Asset Purchase Agreement pursuant to which WellTech
transferred to the Company all of its assets and liabilities of
its West Texas region.  The acquisition was dependent on
shareholder approval which occurred in August of 1994.  As
consideration for the acquisition, the Company issued to
WellTech 1,635,000 shares of Common Stock of the Company and a
warrant to acquire 250,000 additional shares of Common Stock,
(at $5.00 per share which expire on February 5, 1997) .  The
closing of the transaction occurred on August 11, 1994, and
therefore, the acquisition is recorded subsequent to June 30,
1994.

Prior to the closing, the Company (through its wholly-owned
subsidiary; Yale E. Key, Inc.) operated and managed the
operations of the WellTech West Texas region in connection with
an interim operating agreement (the "Interim Operations
Agreement").  In addition, as part of the Interim Operations
Agreement, the Company assumed ownership of WellTech West Texas
current assets and current liabilities. The working capital
items assumed were immaterial.  The Company's statement of
operations since December 10, 1993 includes the direct revenue
and expenses from the West Texas operations of WellTech.

Odessa Exploration Incorporated

On August 5, 1993, the Company completed its acquisition of OEI.
The effective date of the OEI acquisition is July 1, 1993, when
the Company took effective control.  OEI was acquired in
consideration of the issuance of 150,000 shares of the Company's
Common Stock (which had a closing market value of approximately
$638,000 at July 1, 1993) to Mr. D. Kirk Edward's, the former
owner and the now current President of OEI, the assumption of
approximately $1,811,000 in bank debt and the assumption of
certain other liabilities.   The Company has guaranteed all of
the assumed OEI bank debt.  The acquisition was accounted for
using the purchase method. 

On November 1, 1994, OEI completed the acquisition of 24
producing oil and gas wells located in West Texas.  OEI paid
$750,000 for the acquisition which is being accounted for as a
purchase.

In addition, on March 1, 1995, OEI began a program of in-field drilling
on the properties acquired in November of 1994.  It is anticipated that
OEI will drill approximately 20 wells at a total cost of approximately
$3 million.

3.  LONG-TERM DEBT

The Key C.I.T. Credit Finance (C.I.T.) term note, ($6,320,000
approximate principal balance at March 31, 1995), requires
principal payments of approximately $53,000 (amortized over 60
months), plus interest, due the first day of each month plus a
final payment of the unpaid balance of the note due July 1,1999.
The interest rate is two and one half percent above the stated
prime rate; 9.0% at March 31, 1995. The note is collateralized
by all of the assets (including equipment and  inventory) of
Key.  A portion of the note has been classified as current in
the accompanying balance sheet.

The Key C.I.T. line of credit, ($4,050,000 approximate balance
at March 31, 1995), requires monthly payments of interest at two
and one-half percent above the stated prime rate (an aggregate
of  9.0% at March 31, 1995).  The expiration of the credit line
is July 1, 1999.  The credit line is collateralized by the
accounts receivable of Key.  The credit line has a maximum limit
of 85% of available accounts receivable or $7 million; whichever
is less. At March 31, 1995, there was $1 million of availability
on the line of credit.

The agreement with C.I.T. includes certain restrictive
covenants, the most restrictive of which prohibits Key from
declaring or paying dividends on Key's common stock.

In January 1995, Key received $1.5 million in term note proceeds
from C.I.T.   The term note is collateralized by the additional
equipment Key received from the WellTech West Texas acquisition
(see Note 2).  $1.5 million was used for working capital purposes.
The term note, requires principal payments 
of approximately $42,000 (amortized over 60 months), plus interest, 
due the first day of each month plus a final payment of the unpaid 
balance of the note due July 1,1999.  The interest rate is two 
and one half percent above the stated prime rate; 9.0% at March 31, 1995.  
A portion of the note has been classified as current in the
accompanying balance sheet.

During March 1995, OEI refinanced its debt (approximately $2.8
million at March 31, 1995) with Norwest Bank Texas, Midland,
N.A. ("Norwest").  The refinanced debt consist of a $7.5 million
reducing revolver with an initial borrowing base of $4.8
million.  The revolver requires principal payments of
approximately $54,000 per month plus interest beginning May 5, 1995.
The revolver has an interest rate of Norwest Bank prime rate
(7.5% at March 31,1995), plus 1/2 of one percent.
The note matures on October 15, 1997.  The revolver is secured by
substantially all of the oil and gas properties of OEI
and is guarantied by the Company.  In addition, the revolver has
cross-default provisions and cross-collaterization provisions
with Clint Hurt Drilling.

The note agreement contains various restrictive covenants and
compliance requirements, which include (a) prohibits OEI from
declaring or paying dividends on OEI's common stock, (b)
limiting the incurring of additional indebtedness by OEI, and
(c) various financial covenants.

As consideration for the purchase of the Clint Hurt drilling
equipment, (see Note 2), Key Energy Drilling, Inc. d/b/a Clint
Hurt Drilling signed a note with Norwest for the principal sum
of one million dollars.   The note requires principal payments
of approximately $28,000 per month plus interest with the first
payment due May 5th, 1995 and monthly thereafter for 36 months. 
The note has an interest rate of  Norwest prime rate (7.5% at
March 31, 1995), plus 3/4 of one percent.  The note matures in
May of 1997.  The note is secured by all of the equipment of 
Clint Hurt Drilling and is guaranteed by the Company.  In
addition, Clint Hurt Drilling obtained a working capital Line of
Credit with Norwest in the amount of $200,000.  The Line of
Credit requires two interest only payments due May 5, 1995 and
June 5, 1995, respectively and ten $20,0000 monthly principal
and interest payments thereafter.  The Line of Credit has an
interest rate of  Norwest prime rate (7.5% at March 31, 1995),
plus 3/4 of one percent. The Line of Credit is secured by all of
the equipment of  Clint Hurt Drilling and is guaranteed by the
Company.  There was $200,000 available on the Line of Credit at
March 31, 1995. 

4.  LITIGATION

Various suits and claims arising in the ordinary course of
business are pending against the Company.  Management does not
believe that the disposition of any of these items will result
in a material adverse impact to the consolidated financial
position of the Company.

5.  ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 
    109

On November 30, 1992, as part of the Company's "Fresh-start
Reporting", the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), Accounting for Income
Taxes.  The adoption of SFAS 109 changes the Company's method of
accounting for income taxes from the deferred method (APB 11) to
an asset and liability approach. Previously, the Company
deferred the past tax effects of timing differences between
financial reporting and taxable income.  The asset and liability
approach requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of
other assets and liabilities.

Adoption of SFAS 109 resulted in the recording of a net deferred
tax credit of $50,000 as of November 30, 1992 as part of
"Fresh-start reporting".  The cumulative effect of SFAS 109 at
July 1, 1992 was not material.  Financial statements of the
Company prior to November 30, 1992 do not reflect the adoption
of SFAS 109.

6.  INCOME TAXES

As discussed in Note 5, the Company adopted SFAS 109 effective
November 30, 1992 by recording a net deferred tax liability of
$50,000 as part of the Company's "fresh-start reporting".  The
cumulative effect of SFAS 109 at July 1,1992 was not material. 
Financial statements of the Company prior to November 30, 1992
do not reflect the adoption of SFAS 109.

Income tax expense for the three months ended March 31, 1995 and
1994 was $266,000 and $232,000 respectively.  Income tax expense
for the nine months ended March 31, 1995 and 1994 was $742,000
and $697,000, respectively.



KEY ENERGY GROUP, INC.


I
TEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF     
OPERATIONS AND FINANCIAL CONDITION.

QUARTER ENDED MARCH 31, 1995 VERSUS QUARTER ENDED MARCH 31, 1994

RESULTS OF OPERATIONS

Overview

Results of operations for the three months ended March 31, 1995
include the Company's oilfield well service operations conducted
by its wholly owned subsidiary, Yale E. Key, Inc. ("Key"), its
oil and natural gas exploration and production operations
conducted by its wholly-owned subsidiary, Odessa Exploration
Inc. ("OEI") and its oil and gas drilling operation conducted by
its wholly-owned subsidiary Key Energy Drilling, Inc. d/b/a
Clint Hurt Drilling ("Clint Hurt Drilling").  Also included are
income and expenses of the Company's corporate operations.

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

Operating Income

Oilfield service revenues of $10,145,000 (which includes
approximately $300,000 of revenues from the drilling operation)
for the three months ended March 31, 1995 increased $472,000
over the prior period revenues of $9,673,000. Oilfield service
revenues increased due to the acquisition of the WellTech West
Texas assets (see Note 2), the expansion of Key's oilfield
service fishing tool operations and the addition of the Clint
Hurt assets (see Note 2).  

Revenues from oil and gas activities totaled $695,000 for the
three months ended March 31, 1995 as compared to $645,000 for
the prior period.  Approximately $431,000 was from the sale of
oil and gas - 9,484 barrels of oil at an average price of $16.50
per barrel and 193,500 MCF of natural gas at an average price of
$1.41 per MCF.  The remaining $264,000 of revenues represented
primarily administrative fee income.

Direct Costs

Oilfield service direct costs for the three months ended March
31, 1994 decreased $163,000 to $8,287,000 (which includes
approximately $200,000 from the drilling operation) over the
prior period costs and expenses of $8,450,000.  Costs and
expenses decreased due to lower workers compensation expenses
and greater operating efficiencies due to the acquisition of the
WellTech West Texas assets, (see Note 2).

Oil and gas direct costs totaled $686,000 for the three months
ended March 31, 1995 compared to $354,000 for the same
comparable period.  The increase is attributable to increased
production costs and a greater number of producing oil and gas
properties.  

Depreciation and Depletion

Depreciation and depletion expense increased to $642,000 during
the three months ended March 31, 1995 as compared to $432,000
for the prior period.  The increase is primarily due to
increased oilfield service depreciation expense as the result of
acquisitions and capital expenditures during the fiscal year and increased
depletion expense due to the addition of oil and gas properties
by OEI throughout the fiscal year.

Interest Expense

Interest expense increased from $219,000 during the three months
ended March 31, 1994  to $370,000 for the current period.  The
increase is primarily the result of acquisitions, the addition of  capital
expenditures by Key (see Note 3), the addition of certain oil
and gas properties by OEI and a higher rate of interest due to
prime rate increases.  

General and Administrative Expenses

General and administrative expenses include those of the
Company. These expenses increased to $167,000 during the three
months ended March 31, 1995 as compared to $153,000 for the
three months ended March 31, 1994.  The increase can be
attributed to increased professional fees and travel expense due to
acquisitions by the Company and OEI's drilling program.   

Income Tax Expense

Income tax expense for the three months ended March 31, 1995 and
1994 was $266,000 and $232,000 respectively.

Net Income

Net income before income taxes was $897,000 for the three months
ended March 31, 1995, which was an increase of $216,000 over the
comparable quarter of $681,000.  The increase in net income
before income taxes was due to the increase in oilfield service
revenues which was the result of the acquisition of the
operations of WellTech West Texas as compared to the same
quarter last year, the addition of Clint Hurt Drilling (see Note
2) and increased oil and gas revenues.  Net income for the three
months ended March 31, 1995 was $631,000, which was an increase
from $449,000 for the three months ended March 31, 1994.

Cash Flow

Net cash provided by operations decreased $687,000 from
$1,557,000 during the three months ended March 31, 1994 to
$870,000 for the current period.  The decrease is attributable
primarily to an increase in accounts receivable and other
current assets over the same period last year.  

Net cash used in investing activities decreased from $2,098,000
for the three months ended March 31, 1994 to $479,000 for the
current period.  The decrease is primarily the result of
decreased capital expenditures for oil and gas properties and
capital expenditures for the oilwell service operations.

Net cash used in financing activities was $538,000 for the three
months ended March 31, 1995 as compared to $582,000 in net cash
provided by financing activities for the three months ended
March 31, 1994. The decrease is primarily the result of
principal payments made during the current quarter versus the
prior quarter.

Cash decreased $147,000 for the three months ended March 31,
1995, as compared to a net increase in cash of $41,000 for the
three months ended March 31, 1994.



KEY ENERGY GROUP, INC.
NINE MONTHS ENDED MARCH 31, 1995 VERSUS NINE MONTHS ENDED MARCH 31, 1994

RESULTS OF OPERATIONS

Overview

Results of operations for the nine months ended March 31, 1995
include the Company's oilfield well service operations conducted
by its wholly owned subsidiary, Yale E. Key, Inc. ("Key"), its
oil and natural gas exploration and production operations
conducted by its wholly-owned subsidiary, Odessa Exploration
Inc. ("OEI") and its oil and gas drilling operation conducted by
its wholly-owned subsidiary Key Energy Drilling, Inc. d/b/a
Clint Hurt Drilling ("Clint Hurt Drilling").  Also included are
income and expenses of the Company's corporate operations.

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

Operating Income

Oilfield service revenues of $31,068,000 for the nine months
ended March 31, 1995 increased $7,661,000 over the prior period
revenues of $23,407,000. Oilfield service revenues increased due
to the acquisition of the WellTech West Texas assets (see Note
2), and the expansion of Key's oilfield service fishing tool
operations and approximately $300,000 in oil and gas drilling
revenues.  

Revenues from oil and gas activities totaled $1,772,000 for the
nine months ended March 31, 1995 as compared to $1,552,000 for
the prior period.  Approximately $1,267,000 was from the sale of
oil and gas - 24,914 barrels of oil at an average price of
$16.82 per barrel and 536,201 MCF of natural gas at an average
price of $1.59 per MCF.  The remaining $505,000 of revenues
represented primarily administrative fee income.

Direct Costs

Oilfield service direct costs for the six months ended March 31,
1995 increased $6,064,000 to $26,285,000 over the prior period
costs and expenses of $20,221,000.  Costs and expenses increased
due to higher oilfield services direct costs (which were a
result of  the acquisition of the WellTech West Texas assets,
see Note 2), the expansion of Key's oilfield service fishing
tool operations and $200,000 of costs relating to the newly
acquired drillling operations.

Oil and gas direct costs totaled $1,009,000 for the nine months
ended March 31, 1995 compared to $677,000 for the same
comparable period.   The increase is attributable to increased
production costs and a greater number of producing oil and gas
properties.    

Depreciation and Depletion

Depreciation and depletion expense increased to $1,887,000
during the nine months ended March 31, 1995 as compared to
$1,018,000 for the prior period.  The increase is primarily due
to increased oilfield service depreciation expense as the result
of acquisitions, capital expenditures during the fiscal year and increased
depletion expense due to the addition of oil and gas properties
by OEI throughout the fiscal year.

Interest Expense

Interest expense increased from $554,000 during the nine months
ended March 31, 19934  to $997,000 for the current period.  The
increase is primarily the result of acquisitions, the addition of  capital
expenditures by Key, the addition of certain oil and gas
properties by OEI and a higher rate of interest due to prime
rate increases.  

General and Administrative Expenses

General and administrative expenses include those of the
Company. These expenses increased $18,000 to $449,000 during the
nine months ended March 31, 1995 from $431,000 for the nine
months ended March 31, 1994.  The increase is primarily due to
professional fees and increased travel expense due o acquisions by the
Company and OEI's drilling program. 

Income Tax Expense

Income tax expense for the nine months ended March 31, 1995 and
1994 was $742,000 and $697,000, respectively.

Net Income

Net income before income taxes was $2,384,000 for the nine
months ended March 31, 1995, which was an increase of $337,000
over the comparable period of $2,047,000.  The increase in net
income before income taxes was due to the increase in oilfield
service revenues which was the result of the acquisition of the
operations of WellTech West Texas as compared to the same period
last year, increased oil and gas revenues and the addition of
the drilling operation (see Note 2).  Net income for the nine
months ended March 31, 1995 was $1,642,000, which was an
increase from $1,350,000 for the nine months ended March 31,
1994.

Cash Flow

Net cash provided by operations decreased $621,000 from
$1,612,000 during the nine months ended March 31, 1994 to
$991,000 for the current period.  The decrease is attributable
primarily to a decrease in accounts payable and accrued expenses
over the same period last year and an increase in accounts
receivable.  

Net cash used in investing activities decreased from $4,009,000
for the nine months ended March 31, 1994 to $3,596,000 for the
current period.  The decrease is primarily the result of
decreased capital expenditures for the acquired WellTech West
Texas equipment as well as expenditures for oil and gas
properties and the addition of other assets and the purchase of
a water disposal well and mud plant during the prior period.

Net cash provided by financing activities was $2,252,000 for the
nine months ended March 31, 1995 as compared to $3,171,000 in
net cash provided by financing activities for the nine months
ended March 31, 1994. The decrease is primarily the result of
the proceeds from long-term debt and additional borrowings under
Key's line-of-credit during the prior period and an increase in
principal payments.

Cash decreased $353,000 for the nine months ended March 31,
1995, as compared to a net increase in cash of $774,000 for the
nine months ended March 31, 1994.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1995, the Company had $820,000 in cash and
restricted cash as compared to $1,173,000 in cash and restricted
cash at June 30, 1994.

Key has projected $2.9 million for oilwell service capital
expenditures over the next fiscal year as compared to $4.4
million for the fiscal year ended June 30, 1994.  Capital
expenditures are expected to be primarily capitalized
improvement costs (totaling over $5,000) to existing equipment
and machinery.  Capital expenditures are expected to decrease
from fiscal 1994 levels due to less capital improvements for the
newly acquired WellTech operations.  In addition, fiscal 1994
capital expenditures included over $500,000 for oilwell service
fishing tools, $300,000 for a salt water disposal well and
approximately $50,000 for an oilwell mud mixing operation. 
Financing of capital expenditures is expected to come from the
operating cash flows of Key.  Capital expenditures were
$2,284,000 for the nine months ended March 31, 1995.  

OEI has forecasted approximately $4 million in oil and gas
property acquisitions for fiscal 1995 as compared to $850,000
during fiscal 1994.  Financing of oil and gas acquisitions is
expected to come from borrowings.  Oil and gas acquisitions were
$1,289,000 for the nine months ended 

March 31, 1995.  In addition, OEI is forecasting the drilling of
approximately 5 to 7 wells during the forth quarter of  fiscal
1995.  The approximate cost of the drilling program is expected
to be approximately $3 million; which will be obtained from bank
financing and/or private investors.

Acquisitions

Clint Hurt Drilling

On March 30, 1995, the Company and Mr. Clint Hurt (acting in
behalf of Clint Hurt and Associates) entered into an Asset
Purchase Agreement pursuant to which Clint Hurt transferred to
the Company all of its oil and gas drilling equipment of its
West Texas region.  Such equipment consisted of four drilling
rigs, carriers, rig equipment, vehicles and other miscellaneous
equipment.  Total consideration for the acquisition was
$1,725,000 and 5,000 shares of the Company's Common Stock. 
Key Energy Drilling, Inc. d/b/a Clint Hurt 

WellTech West Texas Operations

On December 1, 1993, the Company, through its wholly-owned
subsidiary, Key, entered into an Interim Operations Agreement
(the "Operations Agreement") with WellTech, Inc. pursuant to
which the Company has agreed to operate, and is currently
operating, WellTech's oil and gas 
well servicing business in West Texas.  Under the Operations
Agreement, the Company assumed certain liabilities of WellTech
in exchange for the assignment by WellTech to the Company 
of an approximately equal amount of accounts receivable of WellTech.
In August 1994, the Company issued to WellTech 1,635,000 shares
of Common Stock of the Company, and warrants to purchase an
additional  250,000 shares of the Common Stock exercisable at $5 
per share (the "Warrants"), for a term of 2 1/2 years to acquire
substantially all of WellTech's assets used in its oil and gas
well servicing business in West Texas, including oilwell 
servicing units, rolling stock, equipment, tools, supplies,
furniture and fixtures and certain parcels of real property,
consisting primarily of approximately seven equipment yards.  
The shares issued to WellTech were not registered pursuant to
the federal securities laws; however, WellTech has have the
right to require the Company to so register the shares under
certain circumstances.  

As noted above, as of December 1, 1993, Key operated the West
Texas division of WellTech.  Working capital requirements are
being met through the additional cash flows generated from the
additional equipment, the assumed WellTech West Texas accounts
receivable and the additional funding from CIT.  The acquisition
was dependent on shareholder approval which occurred in August
of 1994.  As of December 1, 1993, the additional equipment and
property operated through the Operations Agreement was added to
Key's current insurance policies, (unlike WellTech, Key does not
self-insure).  The additional costs associated with the
increased insurance coverage was not material.

Odessa Exploration, Inc.

On August 5, 1993, the Company completed its acquisition of OEI.
The effective date of the OEI acquisition is July 1, 1993, when
the Company took effective control.  OEI is engaged in the
operation of oil and natural gas wells, acquisition of oil and
gas properties and the exploration for oil and natural gas in
the Permian Basin area of West Texas.  OEI was acquired in
consideration of the issuance of 150,000 shares of the Company's
Common Stock (which had a closing market value of approximately
$638,000 at July 1, 1993) to Mr.  D. Kirk Edward's, the former
owner and the now current President of OEI and the assumption of
approximately $1,811,000 in bank debt (which includes the
$1,622,000 of Oryx debt below).  The Company has guaranteed all
of the assumed OEI bank debt.  The acquisition was accounted for
under the purchase method.   Prior to the Company's acquisition
of OEI, OEI purchased a 50% working interest in five natural gas
wells from Oryx Energy.  OEI is the operator of the wells as of
April 1, 1993.  OEI paid $1,622,000 (such funds were obtained
through bank financing) for the working interest in the Oryx gas
wells.

In addition, on November 1, 1994, OEI completed the acquisition
of 24 producing oil and gas wells located in West Texas.  OEI
paid $750,000 for the acquisition which is being accounted for
as a purchase. In addition, OEI is forecasting the drilling of 
approximately 5 to 7 wells during the forth quarter of fiscal 1995
on these properties with a remaining 13 to 15 wells during fiscal
1996.  The approximate cost of the drilling program is expected
to be approximately $3 million; which will be obtained from bank
financing and/or private investors.

Oilwell Service Fishing Tool and Rental Operation

On March 25, 1994, Key purchased $375,000 of oilwell fishing
tools and equipment from an unrelated third party.   The
purchase allowed Key to offer this service to its customers as
well as diversifying Key's revenue stream.

Debt

On September 30, 1993, Key increased the principal amount on the
term note to $3,200,000, which resulted in net proceeds to Key
of approximately $1.6 million.  These proceeds were used for
working capital purposes.  In addition, C.I.T. lowered the
interest rate on both the note and line of Credit to 2.5% above
the stated prime rate (an aggregate of 9.00% at December 31,
1994). As a result of the WellTech West Texas Operations
Agreement (see Note 2 of the notes to consolidated financial
statements), Key obtained, on December 27, 1993, approximately
$1.2 million from CIT on its existing line of credit with CIT
(see Note 3 of the notes to consolidated financial statements)
using and pledged as collateral the WellTech West Texas
operations accounts receivable.  In addition, in April 1994 and
September 1994, Key borrowed an additional $1.5 million and
$500,000, respectively, from CIT for capital expenditure
requirements to upgrade the newly acquired WellTech West Texas
assets and expand its existing services.  As a result of the
modifications to the original note and line of credit agreements
and the additional funding as described above, the CIT note now
requires principal payments of 
approximately $54,000 (amortized over 60 months), plus interest,
due the first of each month beginning July 1, 1994, plus a final
payment of the unpaid balance of the note due July 1, 1999.  The
line of credit continues to require monthly payments of interest.
The expiration date of the line of credit is July of 1999. At
March 31, 1995, there was $1 million of availability on the
line of credit.

In January 1995, Key received $1.5 million in term note proceeds
from C.I.T.   The term note is collateralized by the additional
equipment Key received from the WellTech West Texas acquisition
(see Note 2).  The $1.5 million was used for working capital purposes.
The term note, requires principal payments of approximately $42,000
(amortized over 60 months), plus interest, due the first day of
each month plus a final payment of the unpaid balance of the
note due July 1,1999.  The interest rate is two and one half
percent above the stated prime rate; 9.0% at December 31, 1994. 

During March 1995, OEI refinanced its debt (approximately $2.8
million at March 31, 1995) with Norwest Bank Texas, Midland,
N.A. ("Norwest").  The refinanced debt consist of a $7.5 million
reducing revolver with an initial borrowing base of $4.8
million.  The revolver requires principal payments of
approximately $54,000 per month plus interest.  The revolver has
an interest rate of Norwest Bank prime rate (7.5% at March 31,
1995), plus 1/2 of one percent.  The note matures on October 15,
1997.  The revolver is secured by substantially all of the oil
and gas properties of OEI  and is guarantied by the Company.  In
addition, the revolver has cross-default provisions and
cross-collaterization provisions with Clint Hurt Drilling.

The note agreement contains various restrictive covenants and
compliance requirements, which include (a) prohibits OEI from
declaring or paying dividends on OEI's common stock, (b)
limiting the incurring of additional indebtedness by OEI, and
(c) various financial covenants.

As consideration for the purchase of the Clint Hurt drilling
equipment, (see Note 2), Key Energy Drilling, Inc. d/b/a Clint
Hurt Drilling signed a note with Norwest for the principal sum
of one million dollars.   The note requires principal payments
of approximately $28,000 per month plus interest with the first
payment due May 5th, 1995 and monthly thereafter for 36 months. 
The note has an interest rate of  Norwest prime rate (7.5% at
March 31, 1995), plus 3/4 of one percent.  The note matures in
May of 1997.  The note is secured by all of the equipment of 
Clint Hurt Drilling and is guaranteed by the Company.  In
addition, Clint Hurt Drilling obtained a working capital Line of
Credit with Norwest in the amount of $200,000.  The Line of
Credit requires two interest only payments due May 5, 1995 and
June 5, 1995, respectively and ten $20,0000 monthly principal
and interest payments thereafter.  The Line of Credit has an
interest rate of  Norwest prime rate (7.5% at March 31, 1995),
plus 3/4 of one percent. The Line of Credit is secured by all of
the equipment of  Clint Hurt Drilling and is guaranteed by the
Company.  There was $200,000 available on the Line of Credit at
March 31, 1995. 

In February 1992, the Financial Accounting Standards Board ("the
Board") issued Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes ("SFAS 109").  SFAS 
109 requires the use of the liability method of accounting for
income taxes.  Under this method, deferred income taxes are
recognized by applying enacted statutory tax rates to the
difference between the financial statement value and tax basis
of existing assets and liabilities as adjusted for valuation of
deferred tax assets.  As part of the Company's "fresh-start
reporting" SFAS 109 was adopted on November 30, 1992.  The
adoption of SFAS 109 resulted in the recording of a net deferred
tax credit of approximately $50,000.  The cumulative effect of
SFAS 109 at July 1, 1992 was not material.  The financial
statements prior to November 30, 1992 of the Company, do not
reflect the adoption of SFAS 109.

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 the
Company's operations, management is of the opinion that
inflation has not had a significant impact on it business.

Accounting Standard on Impairment of Long-lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 - Accounting for Impairment
of Long-lived Assets and for Long-lived Assets to be Disposed of 
("FAS 121") regarding the impairment of long-lived assets, identifiable 
intangibles and goodwill related to those assets.  FAS 121 is effective 
for financial statements for fiscal years beginning after December
15, 1995, although earlier adoption is encouraged.  The application
of FAS 121 to oil and gas companies utilizing the successful efforts
method (such as OEI) 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.  There is currently a great
deal of uncertainty as to how FAS 121 will apply to oil and
gas companies using the successful efforts method, including
uncertainty regarding the determination of expected future cash
flows from relevant assets and, if the impairment is determined to
exist, their estimated fair value.  There is also uncertainty
regarding the level at which the test might be applied.  Given this
uncertainty, the Company is currently unable to estimate the
effect that FAS 121 will have on the Company's results of
operations for the period in which it is adopted.



 
 	PART II - OTHER INFORMATION



  	Item 1. Legal Proceedings

       			 None.


	 	Item 2. Changes in Securities

        		 None.


 		Item 3. Defaults Upon Senior Securities.

        		 None.


 		Item 4. Submission of Matters to a Vote of Security Holders.

       			 None


 		Item 6. Exhibits and Reports on Form 8-K.

         		(a) The following exhibit is filed as a part of the Form 10-Q:

		               Number                    Description

           		    11 (a)     		Statement - Computation of per share earnings.
                       							(Filed herewith as part of the Condensed
                       							Consolidated Financial Statements).
                 
           	     27 (a)       Statement - Financial Data Schedule. (Filed
                              herewith as part of the Condensed Consolidated
                              Financial Statements).      

        			(b) There were no reports filed on form 8-K during the
               quarter ended March 31, 1995. 





                              					SIGNATURE


  	Pursuant to the requirements of the Securities Exchange Act of
   1934, the registrant has	duly caused this report to be
   signed on its behalf by the undersigned thereunto duly	authorized.

						

                                							KEY ENERGY GROUP, INC.     
                                   						   (Registrant)
 


                                   				By /s/ Francis D. John   
                                        	 Francis D. John
                                          President, Chief Executive Officer 
   Dated: May 10, 1995             			    and Chief Financial Officer


                                   				By /s/ Danny R. Evatt    
                                          Danny R. Evatt
 		Dated: May 10, 1995   		          	    Chief Accounting Officer







[ARTICLE] 5
[CIK] 0000318996
[NAME] KEY ENERGY GROUP, INC.
[MULTIPLIER] 1,000

<TABLE>
<S>                             <C>
[PERIOD-TYPE]                   9-MOS
[FISCAL-YEAR-END]                          JUN-30-1995
[PERIOD-END]                               MAR-31-1995
[CASH]                                             820
[SECURITIES]                                       251
[RECEIVABLES]                                    7,782
[ALLOWANCES]                                         0
[INVENTORY]                                      1,058
[CURRENT-ASSETS]                                10,647
[PP&E]                                          33,904
[DEPRECIATION]                                 (3,663)
[TOTAL-ASSETS]                                  41,871
[CURRENT-LIABILITIES]                            7,196
[BONDS]                                              0
[COMMON]                                           691
[PREFERRED-MANDATORY]                                0
[PREFERRED]                                          0
[OTHER-SE]                                      18,825
[TOTAL-LIABILITY-AND-EQUITY]                    41,871
[SALES]                                          1,772
[TOTAL-REVENUES]                                33,011
[CGS]                                            1,009
[TOTAL-COSTS]                                   26,285
[OTHER-EXPENSES]                                  2336
[LOSS-PROVISION]                                     0
[INTEREST-EXPENSE]                                 997
[INCOME-PRETAX]                                  2,384
[INCOME-TAX]                                       742
[INCOME-CONTINUING]                              1,642
[DISCONTINUED]                                       0
[EXTRAORDINARY]                                      0
[CHANGES]                                            0
[NET-INCOME]                                     1,642
[EPS-PRIMARY]                                     0.25
[EPS-DILUTED]                                     0.25
</TABLE>





[ARTICLE] 5
[CIK] 0000318996
[NAME] KEY ENERGY GROUP, INC.



KEY ENERGY GROUP, INC.
COMPUTATION OF PER SHARE EARNINGS				                         			EXIBIT 11(a)
NINE AND THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994				Page 1 of 1

                                    		 Nine Months Ended				 Nine Months Ended
		                                       March 31, 1994				    March 31, 1995
	                                
                                             		 		Fully            	 			Fully
(Thousands, except per share amounts)  	Primary		Diluted   		Primary 		Diluted

Net Income                             		$1,350	 	$1,350    		$1,642  		$1,642

Shares outstanding at beginning of period	5,124  		5,124     		5,274	   	5,274

Other dilutive securities:								
  Common shares issued for acquisition
    of OEI	                                	150	     	150        		- 	      	-
  Common shares issued for acquisition
    of WellTech	                                                	 		
    West Texas operations (weighted average) 		-	      	- 	    1,363     1,363  
  Warrants to purchase Common Stock          		-     		14         	-       		-

Average common shares outstanding        		5,274   	5,288 	   	6,637   		6,637
		
Earnings per Share:
		
Net Income                               		$0.39  		$0.39    		$0.36   		$0.36


                                  		 Three Months Ended				 Three Months Ended
		                                     March 31, 1994	 			    March 31, 1995
		
        		                                    		Fully	              			Fully
(Thousands, except per share amounts)	Primary 	Diluted     		Primary		Diluted

Net Income	                             	$449	   	$449        		$631   		$631

Shares outstanding at 
 beginning of period	                  	5,274  		5,274       		6,500  		6,500

Other dilutive securities:								
  Common shares issued for
    acquisition of OEI                     		-     	 	-           		-     		-
  Common shares issued for
    acquisition of WellTech	 					                                
    West Texas operations (weighted average)	-      		-		         137     137
  Warrants to purchase Common Stock        		-	     	14           		-     		-

Average common shares
 outstanding	      	5,274	  	5,288	       	6,637 		6,637

Earnings per Share:		
		
Net Income                             		$0.09  		$0.09       		$0.10 		$0.10