HOUSTON, Aug. 6 /PRNewswire-FirstCall/ -- Key Energy Services, Inc.
(NYSE: KEG) announced its results for the quarter ended June 30, 2008. The
Company's earnings conference call will be held tomorrow at 10:00 a.m. EDT.
Second Quarter Results
Revenue for the quarter ended June 30, 2008 totaled $502.0 million, a new
record for the Company, compared with revenue of $410.5 million for the
quarter ended June 30, 2007. The increase in total revenue in the second
quarter of 2008 versus the second quarter of 2007 was the result of strong
performance in our Pressure Pumping and Fishing and Rental Tool segments,
growth from the Company's Mexico and cased-hole wireline operations, and the
results of acquisitions made during the last nine months. Net income and
earnings per diluted share for the second quarter were $44.0 million and
$0.35, respectively, compared to $48.1 million and $0.36, respectively, in the
second quarter of 2007. The second quarter earnings per diluted share
represent a 29.6% increase over first quarter 2008 earnings per share of
$0.27.
Adjusted EBITDA for the June 2008 quarter totaled $121.5 million, compared
to $116.1 million for the June 2007 quarter and $107.1 million for the first
quarter of 2008 (see reconciliation of net income to Adjusted EBITDA below).
In addition, general and administrative costs decreased to 11.6% of revenue in
the second quarter of 2008 from 13.7% in the second quarter of 2007. The
Company anticipates that general and administrative expenses for all of 2008
will be less than 13% of revenue.
During the second quarter, the Company acquired Western Drilling, LLC and
Hydra-Walk, Inc. for total combined consideration of approximately
$61.9 million. Total capital expenditures, excluding acquisitions, were
$41.0 million for the quarter.
Commenting on the quarterly results, Dick Alario, Chairman and CEO,
stated, "Record revenues in the second quarter were driven by our success in
executing our growth strategies to acquire companies and assets, to expand
existing capacity -- domestically and internationally -- and to add new
services. We anticipate that the full effect of our acquisitions, combined
with our July acquisition of the U.S. assets of Leader Energy Services and
recently implemented price increases, position us for a strong second half.
We continue to see new opportunities to deploy capital with attractive returns
and anticipate strengthening in our markets in the second half of this year
and into 2009. At this point in the year, we are comfortable tightening the
range of our estimate of the 2008 full year earnings per diluted share to
between $1.35 to $1.45 per share."
Share Repurchase Program
During the second quarter of 2008, the Company repurchased an
approximately 1.8 million shares at an aggregate cost of approximately
$27.0 million. From the inception of the Company's share repurchase program
in November, 2007 through July 31, 2008, the Company has repurchased
approximately 10.1 million shares of its common stock, at an aggregate cost of
approximately $137.5 million. The Company is authorized to repurchase up to
$300.0 million of its common stock on or before March 31, 2009.
Conference Call
The Company will hold an investor conference call tomorrow, August 7,
2008, at 10:00 am EDT. To access the call, which is open to the public, please
call the conference call operator at the following number: (888) 794-4637 and
ask for the "Key Energy Conference Call." International callers should dial
(706) 679-7045. The conference call will also be available on the web. To
access the webcast, go to http://www.keyenergy.com and select "Investor
Relations." A replay of the conference call will be available tomorrow
afternoon beginning at 3:00 pm EDT and will be available for one week. To
access the replay, please call (800) 642-1687. The access code for the replay
is 58495085. Quarterly operational activity data is provided in the table
below:
For the quarter ending
June 30, 2008 March 31, 2008 June 30, 2007
Rig Hours 701,286 659,462 611,890
Trucking Hours 603,632 585,040 583,074
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
(In thousands, except per share data)
(Unaudited)
REVENUES:
Well Servicing $379,959 $308,825 $728,837 $619,985
Pressure Pumping 91,952 77,289 173,804 151,366
Fishing and Rental 30,092 24,397 55,761 48,079
TOTAL REVENUES 502,003 410,511 958,402 819,430
COSTS AND EXPENSES:
Well Servicing 241,634 177,304 453,385 352,832
Pressure Pumping 62,837 47,410 116,616 93,943
Fishing and Rental 18,017 13,509 34,128 26,960
Depreciation and
amortization 42,271 30,684 82,247 60,298
General and
administrative 58,249 56,154 125,981 108,217
Interest expense,
net of amounts
capitalized 10,079 8,968 20,119 18,317
Gain on sale of assets,
net (360) (703) (626) (453)
Interest income (182) (1,798) (690) (3,737)
Other (income) expense,
net (1,789) 512 (912) (112)
TOTAL COSTS AND EXPENSES,
NET 430,756 332,040 830,248 656,265
Income before income
taxes 71,247 78,471 128,154 163,165
Income tax expense (27,446) (30,335) (49,903) (62,838)
Minority interest 211 - 245 -
NET INCOME $44,012 $48,136 $78,496 $100,327
EARNINGS PER SHARE:
Basic $0.35 $0.37 $0.62 $0.76
Diluted $0.35 $0.36 $0.61 $0.75
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic 124,448 131,627 126,207 131,628
Diluted 126,521 134,140 127,914 134,028
June 30, December 31,
2008 2007
(In thousands)
(Unaudited)
Selected Balance Sheet Data:
Current assets:
Cash and cash equivalents $45,459 $58,503
Short-term investments 8 276
Accounts receivable, net of allowance for
doubtful accounts 395,079 343,408
Other current assets 74,093 85,678
TOTAL CURRENT ASSETS $514,639 $487,865
Current liabilities:
Accounts payable $19,952 $35,159
Accrued liabilities and accrued interest 230,216 187,259
Current portion of long-term debt, capital
lease obligations and notes payable -
related parties 11,083 12,379
TOTAL CURRENT LIABILITIES $261,251 $234,797
Long-term debt, less current portion $525,000 $475,000
Capital lease obligations, less current portion 13,840 16,114
Notes payable - related parties, less current
portion 20,500 20,500
Deferred tax liability 160,786 160,068
Non-current accrued expenses 64,707 63,349
Minority interest - 251
Stockholders' equity $891,677 $888,998
Six Months Ended June 30,
2008 2007
(In thousands)
(Unaudited)
Selected Cash Flow Data:
Net cash provided by operating activities $162,084 $148,640
Net cash used in investing activities (131,296) (169,266)
Net cash used in financing activities (44,462) (7,357)
Effect of changes in exchange rates on cash 630 (305)
Net decrease in cash and cash equivalents (13,044) (28,288)
Cash and cash equivalents, beginning of period 58,503 88,375
Cash and cash equivalents, end of period $45,459 $60,087
Short-term investments $8 $114,975
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES:
SUPPLEMENTAL DATA Three Months Ended Three Months Ended
Reconciliation of Net Income June 30, March 31,
to Adjusted EBITDA 2008 2007 2008
(In thousands)
(Unaudited)
Net Income $44,012 $48,136 $ 34,484
Income tax expense 27,446 30,335 22,457
Gain on sale of assets, net (360) (703) (266)
Other (income) expense, net (1,789) 512 877
Interest income (182) (1,798) (508)
Interest expense, net of
amounts capitalized 10,079 8,968 10,040
Depreciation and amortization
expense 42,271 30,684 39,976
Adjusted EBITDA $121,477 $116,134 $107,060
"Adjusted EBITDA" is defined as net income before interest, taxes,
depreciation and amortization, other expense (income), and (gain) losses on
sale of assets. Management does not include (gain) loss on sale of assets and
other expense (income), net, in its calculations of Adjusted EBITDA, as it
believes that they are either non-recurring or not representative of our core
operations. Other expense (income), net generally represents our minority
investment in IROC Energy Services, Corp. and foreign currency transaction
gains and losses. As a minority shareholder in IROC, we cannot directly
impact the performance of that investment. Further, management believes that
most investors exclude (gain) loss on sale of assets, net from customary
EBITDA calculations as that item is often viewed as non-recurring and not
reflective of ongoing financial performance.
Adjusted EBITDA is a non-GAAP measure that is used as a supplemental
financial measure by our management and directors and by external users of our
financial statements, such as investors, to assess:
* The financial performance of our assets without regard to financing
methods, capital structure or historical cost basis;
* The ability of our assets to generate cash sufficient to pay
interest on our indebtedness; and
* Our operating performance and return on invested capital as compared
to those of other companies in the well services industry, without
regard to financing methods and capital structure.
Adjusted EBITDA has limitations as an analytical tool and should not be
considered an alternative to net income, operating income, cash flow from
operating activities or any other measure of financial performance or
liquidity presented in accordance with GAAP. Adjusted EBITDA excludes some,
but not all, items that affect net income and operating income and these
measures may vary among other companies. Limitations to using Adjusted EBITDA
as an analytical tool include:
* Adjusted EBITDA does not reflect our current or future requirements
for capital expenditures or capital commitments;
* Adjusted EBITDA does not reflect changes in, or cash requirements
necessary to service interest or principal payments on our debt;
* Adjusted EBITDA does not reflect income taxes;
* Although depreciation and amortization are non-cash charges, the
assets being depreciated and amortized will often have to be
replaced in the future, and Adjusted EBITDA does not reflect any
cash requirements for such replacements; and
* Other companies in our industry may calculate Adjusted EBITDA
differently than we do, limiting its usefulness as a comparative
measure.
Certain statements contained in this news release constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on current
expectations, estimates and projections about the Company, the Company's
industry, management's beliefs and certain assumptions made by management.
Whenever possible, the Company has identified these "forward-looking
statements" by words such as "expects," "believes," "anticipates" and similar
phrases. Readers are cautioned that any such forward-looking statements are
not guarantees of future performance and are subject to certain risks,
uncertainties and assumptions that are difficult to predict, including, but
not limited to: risks that the Company will be unable to identify or complete
acquisitions and that it will be unable to integrate acquired operations;
risks affecting the ability of the Company to maintain or improve operations,
including the ability to maintain prices, or implement and maintain price
increases, the impact of new rigs coming into the market and weather risk; the
risk of changes in interest rates which could affect interest expense; and
risks that the Company will be unable to achieve financial targets or cost
reductions; factors affecting the Company's stock repurchase program,
including, among others, the market price of the company's stock prevailing
from time to time, the nature of other investment opportunities presented to
the company from time to time, the company's cash flows from operations,
availability under the Company's revolving credit facility, and general
economic conditions; and risks affecting activity levels for rig hours
including the risk that commodity prices decline or the risk that capital
budgets from the Company's customers decrease. Readers should also refer to
the section entitled "Risk Factors" in the 2007 Annual Report on Form 10-K
filed February 29, 2008 for a discussion of risks to which the Company is
subject. Because such statements involve risks and uncertainties, the actual
results and performance of the Company may differ materially from the results
expressed or implied by such forward-looking statements. Given these
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. Unless otherwise required by law, the Company also
disclaims any obligation to update its view of any such risks or uncertainties
or to announce publicly the result of any revisions to the forward-looking
statements made here; however, readers should review carefully reports or
documents the Company files periodically with the Securities and Exchange
Commission.
Contact: Bill Austin
(713) 651-4300
SOURCE Key Energy Services, Inc.
Bill Austin of Key Energy Services, Inc., +1-713-651-4300
