____________________________________________________________
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 September 30, 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. Yes X No
Common Shares outstanding at October 16, 1995: 6,913,510
________________________________________________________________
KEY ENERGY GROUP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page Number
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 16
Item 2. Changes in Securities. 16
Item 3. Defaults Upon Senior Securities. 16
Item 4. Submission of Matters to a Vote of Security Holders. 16
Item 6. Exhibits and Reports on Form 8-K. 16
Signatures. 17
</TABLE>
- 2 -
Key Energy Group, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(unaudited)
September 30, June 30,
(Thousands, except share and per share data) 1995 1995
- -------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 661 $ 865
Restricted cash 237 410
Restricted marketable securities 267 267
Accounts receivable, net 8,631 8,133
Inventories 1,106 1,257
Prepaid expenses and other current assets 223 358
- -------------------------------------------------------------------------
Total Current Assets 11,125 11,290
- -------------------------------------------------------------------------
Property and equipment:
Oilfield service equipment 24,622 23,726
Oil and gas well drilling equipment 2,154 2,014
Motor vehicles 516 526
Oil and gas properties and other related
equipment, successful efforts method 8,741 7,652
Furniture and equipment 339 332
Buildings and land 2,086 2,086
- ------------------------------------------------------------------------
38,458 36,336
Accumulated depreciation & depletion (5,217) (4,394)
- ------------------------------------------------------------------------
Net property and equipment 33,241 31,942
- ------------------------------------------------------------------------
Other assets 2,020 2,011
- ------------------------------------------------------------------------
TOTAL ASSETS $46,386 $45,243
========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,223 $ 3,930
Accrued interest 158 145
Other accrued liabilities 2,045 2,612
Accrued income taxes 174 174
Deferred tax liability 118 118
Current portion of long-term debt 1,745 2,249
- ------------------------------------------------------------------------
Total Current Liabilities 8,463 9,228
- ------------------------------------------------------------------------
Long-term debt, less current portion 14,539 13,700
Deferred income taxes 2,547 2,204
Commitments and contingencies
Stockholders' Equity:
Common stock, $.10 par value; 10,000,000
shares authorized, 6,913,510 shares issued
and outstanding at September 30, 1995 and
June 30, 1995, respectively 691 691
Additional paid-in capital 15,186 15,186
Retained earnings 4,960 4,234
- -------------------------------------------------------------------------
Total Stockholders' Equity 20,837 20,111
- -------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $46,386 $45,243
=========================================================================
</TABLE>
See the accompanying notes which are an integral part of these consolidated
financial statements.
- 3 -
Key Energy Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
(Thousands, except per share data) September 30, 1995 September 30, 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Oilfield services $ 9,767 $10,665
Oil and gas revenues 816 462
Oil and gas well drilling 1,602 -
Other revenues, net 213 54
- -----------------------------------------------------------------------------
12,398 11,181
- -----------------------------------------------------------------------------
COSTS AND EXPENSES:
Oilfield services direct costs 7,264 8,418
Oil and gas direct costs 265 118
Oil and gas well drilling 1,347 -
General and administrative expense 1,192 1,036
Interest expense 438 284
- -----------------------------------------------------------------------------
11,329 10,417
- -----------------------------------------------------------------------------
Income before income taxes 1,069 764
Income tax expense 343 245
- -----------------------------------------------------------------------------
NET INCOME $ 726 $ 519
=============================================================================
EARNINGS PER SHARE:
Income before income taxes $0.15 $0.13
Net income $0.11 $0.09
WEIGHTED AVERAGE SHARES OUTSTANDING: 6,914 6,091
</TABLE>
See the accompanying notes which are an integral part of these consolidated
financial statements.
- 4 -
Key Energy Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
(Thousands) September 30, 1995 September 30, 1994
- -----------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 726 $ 519
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation, depletion and amortization 823 561
Deferred income taxes 343 245
Changes in operating assets and
liabilities, net of effects from the
acquisitions:
Increase in accounts receivable (498) (840)
Increase (decrease) in other
current assets 111 (90)
Decrease in accounts payable and
accrued expenses (274) (192)
(Decrease) increase in accrued interest 13 (16)
(Increase) decrease in other assets (9) 9
- -----------------------------------------------------------------------------
Net cash provided by operating activities 1,235 196
- -----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - Oilwell service
operations (886) (1,167)
Capital expenditures - Oil and gas
operations (7) (7)
Capital expenditures - Oil and gas well
drilling operations (140) -
Expenditures for oil and gas properties (914) (226)
- -----------------------------------------------------------------------------
Net cash used in investing activities (1,947) (1,400)
- -----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt (904) (396)
Borrowings (payments) under line-of-credit (66) 588
Proceeds from long-term debt 1,305 685
- -----------------------------------------------------------------------------
Net cash provided by financing activities 335 877
- -----------------------------------------------------------------------------
Net increase (decrease) in cash and
restricted cash (377) (327)
Cash and restricted cash at beginning
of period 1,275 1,173
- -----------------------------------------------------------------------------
Cash and restricted cash at end of period $ 898 $ 846
=============================================================================
Supplemental cash flow disclosures:
Interest paid $ 425 $ 268
Supplemental schedule of non-cash
investing and financing transactions:
Fair market value of Common Stock
issued as payment for the WellTech
West Texas equipment - 8,584
</TABLE>
See the accompanying notes which are an integral part of these consolidated
financial statements.
- 5 -
Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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 utilizes the successful efforts method of accounting for its oil and gas
properties. Under this method, all costs associated with productive wells
and nonproductive development wells are capitalized, while nonproductive
exploration costs and geological and geophysical costs (if any), are
expensed. Capitalized costs relating to proved properties are depleted
using the unit-of-production method based on proved reserves expressed as
net equivalent Bbls as reviewed by independent petroleum engineers. The
carrying amounts of properties sold or otherwise disposed of and the
related allowance for depletion are eliminated from the accounts and any
gain/loss is included in results of operations.
OEI's aggregate oil and gas properties are stated at cost, not in excess
of total estimated future net revenues net of related income tax effects.
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 September 30, 1995,
the statement of cash flows for the three months ended September 30, 1995
and 1994, and the results of operations for the three month periods then
ended.
The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. Operating results for interim periods are not
necessarily indicative of the results that may be expected for the full year.
- 6 -
2. ACQUISITIONS
Key Energy Drilling, Inc. d/b/a Clint Hurt Drilling
On March 30, 1995, the Company and Clint Hurt Associates, Inc. ("CHA") entered
into an Asset Purchase Agreement pursuant to which CHA sold to the Company
all of its assets in West Texas. Such assets mainly consisted of four (4)
oil and gas drilling rigs and related equipment. As consideration for the
acquisition, the Company paid CHA $1,750,000, of which $1,000,000 was paid
in cash and the balance in the form of a $725,000 note payable to CHA and the
Company issued to CHA 5,000 shares of Common Stock of the Company and CHA
entered into consulting and noncompetition agreements with the Company.
Key Energy Drilling, Inc. a wholly-owned subsidiary of the Company, will
operate as Clint Hurt Drilling. The acquisition was accounted for using
the purchase method and the results of operations of Clint Hurt Drilling
have been included in those of the Company since April 1, 1995.
Pending Acquisition
In August 1995, the Company announced an agreement to acquire, through a
merger, WellTech. The Company will be the surviving entity in the merger.
Consideration for the merger will be 3,500,000 shares of the Company's
Common Stock and warrants to purchase 500,000 shares at $5.50 per share of
the Company's Common Stock. In addition, upon consummation of
the merger, previously issued warrants to purchase 250,000 shares of the
Company's Common Stock (issued in connection with the purchase of WellTech
West Texas, see below) at $5.00 will be cancelled and new warrants to
purchase 250,000 shares of the Company's Common Stock at $5.50 per share
will be issued. WellTech currently operates in the Southwest and Northeast
areas of the United States and in Russia and Argentina. Consummation of
the merger is subject to satisfaction of various conditions including,
without limitation, definitive documentation, completion of due diligence and
Board and shareholder approval and no assurance can be given that the merger
will be consummated. WellTech's principal line of business is oil and gas
well servicing. The transaction is expected to be completed in December
of 1995.
3. LONG-TERM DEBT
The Key C.I.T. Credit Finance ("C.I.T.") term note, ($5,747,000 approximate
principal balance at September 30, 1995), as amended, requires principal
payments of approximately $95,000, plus interest, due the first day of each
month plus a final payment of the unpaid balance of the note due December 31,
1996. The interest rate is two and one-half percent above the stated prime
rate; 9.0% at September 30, 1995. The note is collateralized by all of the
assets (including equipment and inventory) of Key.
- 7 -
The Key C.I.T. line of credit, ($3,773,000 approximate principal balance
at September 30, 1995),as amended, requires monthly payments of interest at
two and one-half percent above the stated prime rate (9.0% at September 30,
1995). The expiration of the line of credit is December 31,1996. The line
of credit is collateralized by the accounts receivable of Key. The line of
credit has a maximum limit of 85% of available accounts receivable or $7
million; whichever is less. At September 30, 1995, there was no credit line
availability.
The agreement with C.I.T. includes certain restrictive covenants, the most
restrictive of which prohibits Key from making distributions and declaring
dividends on Key's common stock.
The OEI loan agreement, as amended, with Norwest Bank Texas, N.A. ("Norwest")
provides for a $7.5 million revolving line of credit note subject to a
borrowing base limitation (approximately $5.5 million at September 30, 1995).
The borrowing base is redetermined on at least a semi-annual basis. The
borrowing base is reduced by approximately $60,000 per month through
October 1997; the maturity of the note. The note's interest rate is Norwest's
prime rate (9.0% at September 30, 1995) plus one-half percent. The note is
secured by substantially all of the oil and gas properties of OEI and the
pledge of certain collateral by current and former officers and directors of
the Company. The note is also guaranteed by the Company.
The loan agreement contains various restrictive covenants and compliance
requirements, including covenants which (a) prohibit OEI from declaring or
paying dividends on OEI's common stock, (b) limit the incurrence of additional
indebtedness by OEI and, (c) limit the disposition of assets and various
other financial covenants.
The Clint Hurt Drilling loan agreement with Norwest provided for a $1 million
term loan and a $200,000 line of credit. The $1 million term loan ($860,000
approximate principal balance at September 30, 1995), requires principal
payments of approximately $28,000 per month plus interest for 36 months with
a maturity date of April 1998. The $200,000 line of credit, ($137,000
approximate principal balance at September 30, 1995), requires principal
payments of $20,000 per month beginning July 5, 1995, plus interest, through
its maturity in April 1996. The term loan and line of credit have an
interest rate of Norwest prime rate (9.0% at September 30, 1995), plus 3/4
of one percent. The notes are secured by all of the equipment of Clint Hurt
Drilling and are guaranteed by the Company. In addition, the loan agreement
contains various restrictive covenants and compliance requirements.
- 8 -
4. COMMITMENTS AND CONTINGENCIES
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 suits or claims will result in a material adverse
impact on the consolidated financial position of the Company.
During August 1995, the Company entered into employment agreements with
certain of its officers. These employment agreements generally run to
June 30, 1998, but will automatically be extended on a yearly basis unless
terminated by the Company or the applicable officer. In addition to
providing a base salary for each officer, the employment agreements provide
for severance payments for each officer varying from 12 to 36 months of the
officers base salary. The current annual base salaries for the officer's
covered under such employment agreements total approximately $800,000.
- 9 -
KEY ENERGY GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
QUARTER ENDED SEPTEMBER 30, 1995 VERSUS QUARTER ENDED SEPTEMBER 30, 1994
Overview
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 in this report.
Operating results for the three months ended September 30, 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 Key Energy Drilling, Inc. d/b/a Clint Hurt
Drilling ("Clint Hurt Drilling") which is engaged in oil and natural gas
well contract drilling and was acquired in March 1995.
Historically, fluctuations in oilfield well service operations and oil and
gas well contract drilling activity have been closely linked to fluctuations
in crude oil and natural gas prices. However, the Company, through customer
alliances and agreements and diversification of services, is seeking to
minimize the effects of such fluctuations on the Company's results of
operations and financial condition.
Results of Operations
The Company
Revenues of the Company for the three months ended September 30, 1995
increased 11% to $12,398,000 from $11,181,000 for the comparable 1994 period,
while net income of $726,000 increased 40% over the prior year. The increase
in revenues was primarily due to the addition of Clint Hurt Drilling on
April 1, 1995, whose operations were not included in the prior year quarte
results. The improvement in quarterly net income is partially attributable
to the inclusion of Clint Hurt Drilling, but is also a result of an increase
in net income from OEI and a decrease in total consolidated Company costs and
expenses declining as a percent of total revenues.
- 10 -
Yale E. Key, Inc.
Oilfield service revenue declined 9% from $10,665,000 for the prior quarter
to $9,767,000 for the current quarter. The decline is primarily attributable
to curtailed equipment utilization as the result of adverse weather
conditions. Despite weather conditions, Key averaged an 85% equipment
utilization for the quarter; and due to lower expenses and costs, the the
gross margin increased from 21% to 25% of revenues for the current quarter
due to the continued diversification of services into higher margin business
segments such as oilfield frac tanks, oilfield fishing tools and trucking
operations.
Odessa Exploration, Inc.
Revenues from oil and gas activities increased 77% from $462,000 in the 1994
quarter to $816,000 for the current quarter despite relatively constant crude
oil and lower natural gas prices; an average of $17.50 per barrel and $1.25
per mcf during the current quarter compared to $17.42 per barrel and $1.72
per mcf during the same period last year. The increase in revenues was
primarily the result of increased production of oil and natural gas as
several oil and natural gas wells which were drilled began production during
the 1995 quarter.
Of the total $816,000 of revenues for the quarter ended September 30, 1995,
approximately $574,000 was from the sale of oil and gas - 21,494 barrels of
oil at an average price of $16.80 per barrel and 255,949 MCF of natural gas
at an average price of $1.54 per MCF. The remaining $242,000 of revenues
represented primarily administrative fee income.
Clint Hurt Drilling
Clint Hurt Drilling was acquired in March 1995 comparable numbers for the
prior year quarter are, therefore, not available. Revenues were $1.6 million
for the quarter with a gross margin of 13% or $214,000.
Depreciation, Depletion and Amortization
Depreciation and depletion expense increased 47% from $561,000 to $823,000
during the three months ended September 30, 1995 as compared with the prior
period. The increase is primarily due to oilfield service depreciation,
- 11 -
which is the result of increased capital expenditure depreciation for
the current quarter versus the prior years quarter. In addition, depletion
expense, generated by OEI increased for the quarter due to the increase in
the production of oil and natural gas.
Interest Expense
Interest expense increased 54% from $284,000 during the three months ended
September 30, 1994 to $438,000 for the current period. The increase is
primarily the result of acquisitions, 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 as well as
Key, OEI and Clint Hurt Drilling. These expenses increased 15% to $1,192,000
during the three months ended September 30, 1995 as compared to $1,036,000
for the three months ended September 30, 1994. The increase can be primarily
attributed to the acquisition and subsequent inclusion of Clint Hurt
Drilling's general and administrative expenses.
Income Tax Expense
Income tax expense for the three months ended September 30, 1995 and 1994
was $298,000 and $245,000 respectively.
Net Income
Net income before income taxes was $1,069,000 for the three months
ended September 30, 1995, which was an increase of $305,000 over the
comparable quarter of $764,000. The increase in net income before income
taxes was primarily due the addition of Clint Hurt Drilling (see Note 2) and
increased oil and gas revenues. Net income for the three months ended
September 30, 1995 was $726,000, which was an increase from $519,000 for the
three months ended September 30, 1994.
Cash Flow
Net cash provided by operations increased $1,039,000 from $196,000 during
the three months ended September 30, 1994 to $1,235,000 for the current
period. The increase is attributable primarily to lower increase in
accounts receivable and higher net income and depreciation expense over the
same period last year.
- 12 -
Net cash used in investing activities increased from $1,400,000 for the
three months ended September 30, 1994 to $1,947,000 for the current period.
The increase is primarily the result of increased expenditures for oil and
gas properties; which is partially offset by a decrease in capital
expenditures for the oilwell service operations. In addition, net cash used
in investing activities for the current quarter included $140,000 used in
the oil and gas well drilling operations.
Net cash provided by financing activities decreased to $335,000 for the three
months ended September 30, 1995 as compared to $877,000 for the comparable
quarter. The decrease is primarily the result of increased principal
payments made during the current quarter versus the prior quarter. The
increase in principal payments was partially offset by an increase in
proceeds from long-term debt during the current quarter. Such proceeds were
primarily used for the oil and natural gas drilling program conducted by OEI.
Cash decreased $377,000 for the three months ended September 30, 1995, as
compared to a net decrease in cash of $327,000 for the three months ended
September 30, 1994.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company had $898,000 in cash and restricted cash
as compared to $1,275,000 in cash and restricted cash at June 30, 1995.
Key has projected $2.5 million for oilwell service capital expenditures over
the next fiscal year as compared to $2.8 million for the fiscal year ended
June 30, 1995. 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
1995 levels due to lower capital improvements in 1995 compared with 1994
for the WellTech West Texas operations acquired in August 1994. Financing
for capital expenditures is expected to come from the operating cash flows
of Key. Capital expenditures were $886,000 for the three months ended
September 30, 1995.
OEI has forecasted approximately $3 million in oil and gas property
acquisitions for fiscal 1996 as compared to $2.8 million during fiscal 1995.
Financing of oil and gas acquisitions is expected to come from borrowings.
Oil and gas acquisitions were $914,000 for the three months ended
September 30, 1995. Financing of oil and gas acquisitions is expected to be
obtained from bank financing and/or private investors.
Acquisitions
Key Energy Drilling, Inc. d/b/a Clint Hurt Drilling
On March 30, 1995, the Company and Clint Hurt Associates, Inc. ("CHA")
entered into an Asset Purchase Agreement pursuant to which CHA sold to the
Company all of its assets in West Texas. Such assets mainly consisted of
- 13 -
four (4) oil and gas drilling rigs and related equipment. As consideration
for the acquisition, the Company paid CHA $1,750,000, of which $1,000,000 was
paid in cash, a $725,000 note payable to CHA and the Company issued to CHA
5,000 shares of Common Stock of the Company. In addition, CHA entered into
consulting and noncompetition agreements with the Company. Key Energy
Drilling, Inc., a wholly-owned subsidiary of the Company, will operate as
Clint Hurt Drilling. The acquisition was accounted for using the purchase
method and the results of operations of Clint Hurt Drilling have been
included in those of the Company since April 1, 1995.
Pending Acquisition
In August 1995, the Company announced an agreement to acquire, through a
merger, WellTech. The Company will be the surviving entity in the merger.
Consideration for the merger will be 3,500,000 shares of the Company's
Common Stock and warrants to purchase 500,000 shares at $5.50 per share of
the Company's Common Stock. In addition, upon the consummation of
the merger, previously issued warrants to purchase 250,000 shares of the
Company's Common Stock (issued in connection with the purchase of WellTech
West Texas, see below) at $5.00 per share will be cancelled and new
warrants to purchase 250,000 shares of the Company's Common Stock at $5.50
per share will be issued. WellTech currently operates in the Southwest
and Northeast areas of the United States and in Russia and Argentina.
Consummation of the merger is subject to satisfaction conditions including,
without limitation, definitive documentation, completion of due diligence
and Board and shareholder approval and no assurance can be given that the
merger will be consummated. WellTech's principal line of business is oil
and gas well servicing. The transaction is expected to be completed in
December of 1995.
Impact of SFAS 121
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 - Accounting for Long-Lived Assets
and for Long-Lived Assets to be Disposed Of ("SFAS 121") regarding the
impairment of long-lived assets, identifiable intangibles and goodwill
related to those assets. SFAS 121 is effective for financial statements for
fiscal years beginning after December 15, 1995, although earlier adoption is
encouraged. The application of SFAS 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. The Company, currently, estimates that the
implementation of SFAS 121 will not have a material effect on the Company's
financial position.
- 14 -
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.
- 15 -
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
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
September 30, 1995.
- 16 -
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_________
President, Chief Executive Officer
Dated: November 13, 1995 and Chief Financial Officer
By /s/ Danny R. Evatt _________
Dated: November 13, 1995 Vice President and Chief Accounting
Officer
- 17 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 898
<SECURITIES> 267
<RECEIVABLES> 8,631
<ALLOWANCES> 0
<INVENTORY> 1,106
<CURRENT-ASSETS> 11,125
<PP&E> 38,458
<DEPRECIATION> 5,217
<TOTAL-ASSETS> 46,386
<CURRENT-LIABILITIES> 8,463
<BONDS> 0
<COMMON> 691
0
0
<OTHER-SE> 20,146
<TOTAL-LIABILITY-AND-EQUITY> 46,386
<SALES> 0
<TOTAL-REVENUES> 12,398
<CGS> 0
<TOTAL-COSTS> 11,329
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 438
<INCOME-PRETAX> 1,069
<INCOME-TAX> 343
<INCOME-CONTINUING> 726
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 726
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
