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Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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KEY ENERGY GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Maryland 04-2648081
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OF INCORPORATION OR ORGANIZATION)
TWO TOWER CENTER, TENTH FLOOR, EAST BRUNSWICK, NEW JERSEY 08816
(908) 247-4822
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OR REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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FRANCIS D. JOHN
Key Energy Group, Inc.
Two Tower Center, Tenth Floor
East Brunswick, New Jersey 08816
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copy to:
SAMUEL N. ALLEN
Porter & Hedges, L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002
(713) 226-0600
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement, as
determined by the Selling Securityholders.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
the following box. [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT
TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE AGGREGATE OF OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, Par
Value $.10 per share 5,810,556 $14.00 $81,347,784 $24,651(2)
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</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for purposes of calculating
the registration fee.
(2) Pursuant to Rule 457(c), the registration fee is calculated on the
basis of the high and low sale prices for the Common Stock on the
American Stock Exchange on April 1, 1997.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED APRIL 3, 1997
PROSPECTUS
5,810,556 SHARES
KEY ENERGY GROUP, INC.
COMMON STOCK
Of the 5,732,558 shares of common stock, par value $.10 per share (the
"Common Stock"), of Key Energy Group, Inc., a Maryland corporation (the
"Company") offered hereby, 5,333,333 shares are being offered by the holders of
$52,000,000 aggregate principal amount of the Company's 7% Convertible
Subordinated Debentures due 2003 (the "Debentures") upon conversion of the
Debentures in accordance with the terms thereof, and 477,223 shares are being
offered for sale by certain shareholders of the Company (collectively, the
"Selling Securityholders"). The Company will not receive any of the proceeds
from the sale of the Common Stock offered hereby.
The Common Stock is listed on the American Stock Exchange (the "AMEX")
under the symbol KEG. On April 1, 1997, the closing price of the Common Stock,
as reported on the AMEX, was $13.875 per share.
The Common Stock may be offered and sold from time to time by the
Selling Securityholders named under "Selling Securityholders" or named in a
Prospectus Supplement through underwriters, dealers or agents or directly to
one or more purchasers in fixed price offerings, in negotiated transactions, at
market prices prevailing at the time of sale or at prices related to such
market prices. The terms of the offering and sale of Common Stock in respect of
which this Prospectus is being delivered, including any initial public offering
price, any discounts, commissions or concessions allowed, reallowed or paid to
underwriters, dealers or agents, the purchase price of the Common Stock and the
proceeds to the Selling Securityholders, and any other material terms shall be
as set forth in the applicable Prospectus Supplement. See "Plan of
Distribution" for indemnification arrangements, including indemnification of
agents, dealers and underwriters.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE 6.
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THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The date of this Prospectus is April , 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange
Commission (the "Commission") in Washington, D.C., a registration
statement on Form S-3 (together with all exhibits, schedules and amendments
thereto, the "Registration Statement") under the Securities Act with respect
to the Common Stock offered hereby. This Prospectus, which is a part of
the Registration Statement, does not contain all of the information set forth
in the Registration Statement. Statements in this Prospectus as to the
contents of any contract or other document are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference and the exhibits
and schedules thereto. For further information concerning the Company and
the Common Stock, reference is made to the Registration Statement. Copies of
the Registration Statement may be obtained from the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon
payment of the prescribed fee.
The Company is subject to the information requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. The Registration Statement, as well as such reports, proxy
statements and other information can be inspected and copied at the Public
Reference Facilities maintained by the Commission at its principal offices at
450 Fifth Street, N.W., Washington, D.C. 20549, and its regional offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Such
information also may be obtained on the Internet through the Commission's EDGAR
database at http://www.secgov. Copies of such materials also can be inspected
at the offices of the American Stock Exchange, 86 Trinity Place, New York, New
York 10006. With respect to each contract, agreement or other document filed
as an exhibit to the Registration Statement reference is made to such exhibit
for a more complete description of the matter involved and each such statement
shall be deemed qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission
pursuant to the Exchange Act, are hereby incorporated in this Prospectus and
specifically made a part hereof by reference: (i) the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996; (ii) the Company's Quarterly
Reports on Form 10-Q for the quarters ended September 30, 1996 and December 31,
1996; (iii) the description of the Common Stock contained in the Company's Form
8-A filed on May 21, 1981, as amended on January 27, 1986 and October 19, 1989;
and (iv) the Company's Current Reports on Form 8-K dated July 3, 1996 and
September 17, 1996; and (v) the Company's Registration Statement No. 333-369 on
Form S-4 filed on January 28, 1996, and as amended on March 1, 1996. All other
documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and before the termination of
the offering of the Common Stock covered by this Prospectus shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained herein
or in a document incorporated or deemed to be incorporated herein by reference
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein, or in any other subsequently filed
document that also is or is deemed to be incorporated herein by reference,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a
copy of any and all of the information that has been incorporated by
reference in this Prospectus (excluding exhibits unless such
exhibits are specifically incorporated by reference into the
information that this Prospectus incorporates). Requests for such copies
should be made to the Company at its principal executive offices, Two Tower
Center, Tenth Floor, East Brunswick, New Jersey 08816, telephone number (908)
247-4822, Attn: Jack D. Loftis.
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THE COMPANY
Key Energy Group, Inc. (the "Company") operates 403 well service and
workover rigs, which is the third largest fleet of well service and workover
rigs in the United States. In addition, the Company operates 10 workover rigs
in Argentina and six drilling rigs in West Texas. The Company operates in
Texas, Oklahoma, Michigan, New Mexico, the Appalachian Basin and Argentina and
is a leader in each of its domestic markets. The Company provides maintenance
and workover rigs to service producing oil and gas wells. These services
include the completion of newly drilled wells, the recompletion of existing
wells (including horizontal recompletions) and the plugging and abandonment of
wells at the end of their useful lives. Related services include hot oiling,
oil field liquid transportation, fishing tools and services, storage and
disposal services, vacuum truck services, frac tank rental and salt water
injection. The Company also is engaged in the production of oil and natural
gas in the Permian Basin of West Texas.
The Company has become a leader in its domestic markets by
establishing a reputation for high quality equipment and well-trained crews
that operate within stringent safety guidelines. The Company believes it has a
distinctive business strategy designed to take advantage of growth
opportunities within the fragmented but consolidating well service industry.
The strategy emphasizes a decentralized management philosophy that encourages
decision making at the local level. The strategy has resulted in growth
through the enhancement of services and strategic acquisitions, control of
overhead and operating expenses, and the implementation of an alliance program
designed to better serve the Company's significant customers. In addition, the
Company acquires interests in oil and gas producing properties for cash or
securities, or in exchange for providing well services and equipment. The
Company's strategy is designed to minimize the business risks associated with
unexpected downturns in one or more of its business segments. The primary
components of the Company's business strategy are as follows:
ENHANCEMENT OF SERVICES: The Company has implemented a strategy to
provide its customers with a single source of well services and
equipment. The Company's ability to provide an increasing array of
services, along with the Company's reputation for reliability and
safety, has enabled the Company to increase its market share in its
primary areas of operations.
ACQUISITION STRATEGY: The Company's acquisition strategy focuses on
companies or equipment that either expand the range of services that
the Company provides or present opportunities to expand the Company's
business into new markets. The Company attempts to acquire businesses
with strong customer relationships, a history of superior customer
service and the potential to be assimilated efficiently into the
Company's existing regional management structure with a minimal
increase in overhead costs. In the last three years, the Company has
completed the acquisition of over 20 well servicing companies, one oil
and gas production company and one drilling company.
DECENTRALIZED OPERATIONS: The Company's decentralized management
philosophy is consistent with the regional nature of the well service
business. This structure allows the Company's senior management to
establish the Company's policies, and permits the Company's regional
managers to implement those policies in each of the Company's business
segments and markets. As a result, local managers are able to deal
efficiently with local and time-sensitive issues, thereby allowing
them to be more responsive to customer needs.
LOW OPERATING COSTS: Because of its cost controls and lower corporate
overhead, among other factors, the Company has one of the lowest
general and administrative costs to revenue ratios and one of the
highest EBITDA to revenue ratios in the well service industry.
"ALLIANCE" PROGRAM: The Company has successfully implemented an
"alliance" program strategy to provide certain customers with all of
their well servicing requirements in particular markets for fixed
prices. The Company has entered into alliances with various major and
independent oil and gas producers.
The Company's principal offices are located at Two Tower Center, Tenth
Floor, East Brunswick, New Jersey 08816, and its telephone number is (908)
247-4822.
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RISK FACTORS
The following should be considered carefully with the information
provided elsewhere in this Prospectus and the documents incorporated by
reference herein in reaching a decision regarding an investment in the Common
Stock offered hereby.
DEPENDENCE ON OIL AND GAS INDUSTRY; INDUSTRY CONDITIONS. The
Company's business is substantially dependent upon conditions in the oil and
gas industry and, specifically, the production expenditures of oil and gas
companies. The demand for well servicing and workover activities is directly
influenced by oil and gas prices, expectations about future prices, the cost of
producing and delivering oil and gas, government regulation, including
environmental regulations, local and international political and economic
conditions, and governmental policies regarding exploration and development of
oil and gas reserves. The demand for well servicing and related services in
the United States was severely depressed for most of the last decade due in
large part to prolonged weakness and uncertainty in oil and gas prices. As a
consequence, diminished demand during that period led to lower day rates and
lower use of available equipment. Demand for well services has stabilized over
the last several years, and prices for such services have stabilized or
increased during that period. Nonetheless, there can be no assurance that
periods of diminished demand in the well service industry will not occur.
OPERATING RISKS; INSURANCE. The Company's operations are subject to
many hazards inherent in the maintenance, workover, drilling and operation of
oil and gas wells, the occurrence of which could result in the suspension of
operations, damage to or destruction of equipment and injury or death to field
personnel. These hazards include explosions, blow-outs, reservoir damage, loss
of well control, cratering and fires. Damage to the environment also could
result from the Company's operations. The Company maintains insurance coverage
in such amounts and against such risks as it believes to be in accordance with
normal industry practice. Such insurance does not, however, provide coverage
for all liabilities (including liabilities for certain events involving
pollution), and there can be no assurance that such insurance will be adequate
to cover all losses or liabilities that the Company may incur in its
operations. Moreover, no assurance can be given that the Company will be able
to maintain insurance at levels it deems adequate and at rates it considers
reasonable or that any particular types of coverage will be available.
The well service business also is subject to seasonal risks caused by
adverse weather conditions such as severe winter storms. The Company's
operations in Michigan and the Appalachian Basin are subject to limitations on
transporting equipment during the spring thaw.
COMPETITION. Competition is intense in all markets in which the
Company operates. The Company competes on the basis of the quality of its
equipment and service, its safety record and pricing. While management
believes that the Company's reputation for quality of equipment and service and
its safety record are among the best in the industry, several competitors have
access to greater financial and other resources than those of the Company,
which could allow those companies to price their services more aggressively
than the Company.
CERTAIN CUSTOMERS. During fiscal 1996, the Company's two largest
customers, Parker & Parsley and Texaco, accounted for approximately 20% and 11%
of net revenues, respectively. The loss of those customers, or of certain
others, could have a material adverse effect on the Company's operations and
financial condition.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS. The Company's
operations are subject to local, state and federal governmental regulations.
The Company's operations routinely involve the handling of waste materials,
some of which are classified as hazardous substances. Consequently, the
regulations applicable to the Company's operations include those with respect
to protection of the environment, including containment, disposal and
controlling the discharge of hazardous oil field waste and other non-hazardous
waste material into the environment, or requiring removal and cleanup under
certain circumstances. Laws and regulations protecting the environment have
become more stringent in recent years, and in certain circumstances impose
"strict liability," rendering a party liable for environmental damage without
regard to negligence or fault on the part of such party. Such laws and
regulations may expose the Company to liability for the conduct of, or
conditions caused by, others, or for acts of the Company which were in
compliance with all applicable laws at the time such acts were performed. The
application of these regulations or the adoption of new regulations could have
a material adverse effect on the Company. In addition, the modification of
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existing laws or regulations or the adoption of new laws or regulations
curtailing exploratory or development drilling for oil and gas for economic,
environmental or other reasons could have a material adverse effect on the
Company's operations by limiting well servicing opportunities.
ACQUISITION STRATEGY. The Company maintains an aggressive acquisition
strategy. Inherent in such strategy are certain risks, such as increasing
leverage and debt service requirements, combining disparate Company cultures
and facilities, and conducting operations in many geographically diverse
markets. Certain of these risks may be increased to the extent that the
Company's future acquisitions are in new markets or involve international
operations. Accordingly, there can be no assurance that one or more of the
Company's past or future acquisitions may not have an adverse effect on its
business. The Company's credit arrangements require approval from its lenders
to acquisitions above a certain dollar amount and, in addition, contain
borrowing limits. There can be no assurance that the lenders will consent to
any particular acquisition that the Company desires to make or to increased
borrowing levels, which could inhibit the Company's ability to implement its
acquisition strategy. Any borrowings used to finance acquisitions will
increase the Company's leverage and any offering of equity securities to
finance acquisitions will dilute the ownership of existing stockholders. The
Company competes and will continue to compete with other buyers for
acquisitions, many of which have greater financial resources than the Company.
DEPENDENCE ON KEY PERSONNEL. The Company's business is partially
dependent upon the performance of certain of its executive officers. The
Company has entered into employment agreements that contain non-compete
provisions with these executive officers. Notwithstanding such agreements,
there can be no assurance that the Company will be able to retain such officers
or that it will be able to enforce the non-compete provisions in the event of
their departure. While the Company maintains key man life insurance on the
lives of certain of such officers, including its Chief Executive Officer, the
existence of such insurance does not mean that the death or disability of one
or more of them would not have a material adverse effect upon the Company.
INTERNATIONAL INVESTMENTS. The Company has investments in Argentina.
The Company also may make investments in other foreign countries and in
companies located or with significant operations outside the United States.
Such investments are subject to risks and uncertainties relating to the
political, social and economic structures of those countries. Risks may
include fluctuations in currency valuation, expropriation, confiscatory
taxation and nationalization, currency conversion restrictions, increased
regulation and approval requirements and governmental policies limiting returns
to foreign investors.
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE
MARKET PRICES. The Company has a total of 11,894,899 shares of Common Stock
outstanding. An additional 7,703,333 shares of Common Stock are issuable upon
the conversion or exercise of outstanding convertible securities. All of such
shares have been registered for resale under the Securities Act are subject to
registration rights or are otherwise freely tradeable. Sales of a substantial
number of such shares in the public market, or the perception that such sales
could occur, could adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities.
PRINCIPAL STOCKHOLDER CONTROL. One group of affiliated entities owns
approximately 31% of the outstanding Common Stock. These stockholders have
substantial influence over the election of and may be deemed to control the
Board of Directors of the Company. Further, so long as such stockholders own
such a large percentage of the Common Stock of the Company, such ownership may
have the effect of discouraging certain types of transactions involving an
actual or potential change of control, including transactions in which holders
of Common Stock might otherwise receive a premium for their shares over the
then-current market prices.
UNAUDITED WELLTECH FINANCIAL STATEMENTS. In March 1996, the Company
completed the acquisition of WellTech, Inc. ("WellTech") through the merger of
WellTech into the Company (the "WellTech Merger"). WellTech was an established
well services company providing a broad range of workover and production
services in Texas, Oklahoma, Michigan, Pennsylvania, West Virginia and
Argentina. The WellTech Merger approximately doubled the size of the Company.
Although the Company's financial statements incorporated by reference into this
Prospectus include the combined results of the Company and WellTech after the
WellTech Merger, this Prospectus does not contain all of the financial
statements of WellTech normally required in a registration statement filed with
the Commission,
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including audited financial statements as of and for the year ending December
31, 1995. There can be no assurance that audited financial statements for
WellTech for 1995 would not differ materially from those presented therein.
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SELLING SECURITYHOLDERS
The following table sets forth information concerning (i) the
principal amount of Debentures beneficially owned by certain Selling
Securityholders; and (ii) the number of shares of Common Stock offered by each
Selling Securityholder.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRINCIPAL BEFORE OFFERING(1)
AMOUNT OF -------------------------- NUMBER OF
DEBENTURES NUMBER OF % OF SHARES
NAME OWNED SHARES(2)(3) CLASS(3) OFFERED(3)
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<S> <C> <C> <C> <C>
Merrill Lynch World Income
Fund, Inc. . . . . . . . . . . $3,757,000 385,334 2.2% 385,224
Merrill Lynch Convertible
Holdings, Inc. . . . . . . . . 3,730,000 382,565 2.2% 382,565
Lincoln National Life
Insurance . . . . . . . . . . . $3,757,000 385,334 2.2% 385,224
Chase Manhattan Bank trustee
for IBM Corp Retirement Plan . 3,730,000 382,565 2.2% 382,565
Soundshore Partners . . . . . . 2,775,000 284,616 1.7% 284,616
Pacific Horizon Capital Income
Fund . . . . . . . . . . . . . 2,425,000 248,718 1.4% 248,718
Bankers Trust Co. Trustee for
Chrysler Corp. Emp #1 Pension . 1,850,000 189,743 1.1% 189,743
Lincoln National Convertible
Securities Fund . . . . . . . . 1,700,000 174,359 1.0% 174,359
Carrigaholt Capital
(Bermuda) L.P. . . . . . . . . 1,525,000 156,411 * 156,411
JMG Convertible
Investment, L.P. . . . . . . . 1,350,000 138,462 * 138,462
The Class 1C Company Ltd. . . . 1,326,000 136,000 * 136,000
McMahan Securities Co. L.P. . . 1,200,000 123,077 * 123,077
TQA Arbitrage Fund, L.P. . . . 1,159,000 118,872 * 118,872
HBK Main Street
Investments, L.P. . . . . . . . 783,000 80,308 * 80,308
HBK Securities Ltd. . . . . . . 759,000 77,847 * 77,847
Triton Capital Holding, Ltd. 750,000 76,924 * 76,924
TQA Vantage Fund, Ltd. . . . . 750,000 76,924 * 76,924
Weiton Trust . . . . . . . . . 750,000 76,924 * 76,924
LDG Limited Fund . . . . . . . 727,000 74,565 * 74,565
GPZ Trading . . . . . . . . . . 400,000 41,026 * 41,026
Walker Art Center . . . . . . . 314,000 32,206 * 32,206
Greyhound Lines, Inc. Pension
Plan . . . . . . . . . . . . . 230,000 23,590 * 23,590
TQA Leverage Fund, L.P. . . . . 200,000 20,513 * 20,513
Bank of America Convertible
Securities Fund . . . . . . . . 125,000 12,821 * 12,821
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Bank of America Employee
Benefit Convertible Funds . . . 75,000 7,693 * 7,693
United National Life Insurance 75,000 7,693 * 7,693
Others(4) . . . . . . . . . . . 24,690,000 2,532,295 14.7% 25,532,295
Michael P. and Georgia M.
McDermett . . . . . . . . . . . -- 175,000 1.0% 175,000
Dennis and Le Wanda Hagerheide -- 77,998 * 77,998
Tri-State Wellhead & Valve,
Inc. . . . . . . . . . . . . . -- 83,700 * 83,700
James McMurphy . . . . . . . . -- 75,000 * 75,000
Elvin Brownlee, Jr. . . . . . . -- 45,802 * 45,802
Reo Brownlee . . . . . . . . . -- 12,214 * 12,214
Elvin Brownlee, III -- 3,053 * 3,053
Dale Rennels. . . . . . . . . . -- 4,386 * 4,386
</TABLE>
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* Under one percent.
(1) No information is given with respect to beneficial ownership after the
offering because the Company is unable to determine the principal
amount of Debentures that will be converted into Common Stock or the
number of shares of Common Stock that will be sold in the Offering.
(2) Assumes a conversion price of Debentures of $9.75 per share.
(3) Assumes conversion of all of the Debentures.
(4) The names, principal amounts of Debentures beneficially owned and
number of shares of Common Stock offered by the remaining holders of
Debentures will be added by an amendment to the Registration Statement
of which this Prospectus forms a part or by a supplement to this
Prospectus.
The information in the table with respect to Selling Securityholders
who are holders of Debentures has been prepared based upon information
furnished to the Company by American Stock Transfer & Trust Company (the
trustee under the Indenture pursuant to which the Debentures were issued), by
the Depository Trust Company and by or on behalf of the Selling
Securityholders.
The per share conversion price and, therefore, the number of shares of
Common Stock issuable upon conversion of the Debentures is subject to
adjustment under certain circumstances. Accordingly, the number of shares of
Common Stock issuable upon conversion of the Debentures may increase or
decrease. As of the date of this Prospectus, the aggregate principal amount of
Debentures outstanding is $52,000,000, which may be converted into 5,333,333
shares of Common Stock assuming a conversion rate of $9.75 per share.
The information concerning the Selling Securityholders may change from
time to time and will be set forth in Supplements to this Prospectus. Other
than their ownership of the Company's securities, none of the Selling
Securityholders has had any material relationship with the Company within the
past three years.
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PLAN OF DISTRIBUTION
This Prospectus relates to the resale of up to 5,333,333 shares of
Common Stock issuable upon conversion of Debentures and the resale of up to
399,225 shares of Common Stock owned by certain of the Company's shareholders.
The Debentures were issued by the Company pursuant to a Purchase Agreement
dated June 28, 1996, and were acquired by the Selling Securityholders in resale
transactions pursuant to Rule 144A, Regulation S or Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, or from other holders acquiring such Debentures
from prior holders thereof. The Registration Statement of which this
Prospectus is a part does not cover the issuance of Common Stock upon
conversion of the Debentures into shares of Common Stock.
The Company will not receive any of the proceeds from the offering of
the shares of Common Stock offered hereby. The Company has been advised by the
Selling Securityholders that the Selling Securityholders may sell all or a
portion of shares of Common Stock beneficially owned by them on any exchange or
market on which the Common Stock is listed or quoted, as applicable, on terms
to be determined at the times of such sales. The Selling Securityholders also
may make private sales directly or through a broker. Alternatively, any of the
Selling Securityholders may from time to time offer the Common Stock offered
hereby through underwriters, dealers or agents, who may receive compensation in
the form of underwriting discounts, commissions or concessions from the Selling
Securityholders.
To the extent not described herein and as otherwise required by
law, the specific amount of Common Stock being offered or sold, the names
of the Selling Securityholders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer or sale
will be set forth in an accompanying Prospectus Supplement or, if
appropriate, a post-effective amendment to the Registration Statement of
which this Prospectus is a part.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in
certain states the shares of Common Stock offered hereby may not be sold unless
they have been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available and
compliance therewith is effected.
The Selling Securityholders and any brokers, dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
commissions or discounts received by such brokers, dealers, agents or
underwriters and any profit on the resale of the Common Stock offered hereby
and purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
The Company and the Selling Securityholders have agreed to indemnify
each other against certain liabilities arising under the Securities Act. The
Company has agreed to pay all expenses incident to the offer and sale of the
Common Stock pursuant to this Prospectus other than selling commissions and
fees.
The Common Stock is listed for trading on the AMEX, and the shares of
Common Stock issuable upon conversion of the Debentures have been authorized
for listing on the AMEX upon official notice of issuance.
LEGAL MATTERS
Certain legal matters relating to the validity of the Common Stock
have been passed upon by Porter & Hedges, L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of the Company and
subsidiaries as of June 30, 1996 and 1995, and for each of the years in the
three-year period ended June 30, 1996, have been incorporated by reference in
this
9
<PAGE> 11
Prospectus in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, upon the authority of said firm as experts in
accounting and auditing.
The audited consolidated financial statements of WellTech and
subsidiaries incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein in reliance upon the authority of said
firm as experts in giving said reports.
10
<PAGE> 12
================================================================================
NO DEALER, SALES PERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING SECURITYHOLDERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AND OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY, SINCE THE DATE HEREOF.
---------------
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Selling Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
================================================================================
================================================================================
KEY ENERGY
GROUP, INC.
COMMON STOCK
5,810,556 SHARES
$.10 PAR VALUE PER SHARE
----------------
PROSPECTUS
----------------
APRIL , 1997
================================================================================
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the amount of fees and expenses
to be incurred in connection with the issuance and distribution of the
Securities registered hereby, other than underwriting discounts and
commissions.
<TABLE>
<S> <C>
Registration Fee Under Securities Act . . . . . . $ 24,651
Legal Fees . . . . . . . . . . . . . . . . . . . 15,000
Accounting Fees . . . . . . . . . . . . . . . . . 3,500
Printing and Engraving . . . . . . . . . . . . . 2,000
Miscellaneous Fees . . . . . . . . . . . . . . . 849
----------
Total . . . . . . . . . . . . . . . . . . . . . . $ 46,000
</TABLE> ==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 2-418 of the Maryland General Corporation Law (the "MGCL")
provides that a corporation may indemnify any director made a party to any
proceeding against judgments, penalties, fines, settlements and reasonable
expenses, unless it is established that (i) the act or omission of the
director was material to the matter giving rise to the proceeding and was
committed in bad faith or was a result of deliberate dishonesty, (ii) the
director actually received an improper personal benefit or (iii) in a criminal
proceeding, the director had reasonable cause to believe the act or omission
was unlawful. A director may not be indemnified in any proceeding charging
improper personal benefit if the director was adjudged to be liable and, in a
derivative action, there shall not be indemnification if a director has been
adjudged liable to the corporation. A director or officer of a corporation
who has been successful in the defense of any proceeding shall be indemnified
against reasonable costs incurred in such defense. Indemnification may not
be made unless authorized pursuant to a determination that the director
has met the requisite standard of conduct.
Article Seventh of the Key Charter provides that Key shall
indemnify (i) its directors and officers, whether serving Key or at its
request any other entity, to the full extent required or permitted by the MGCL,
including the advance of expenses under the procedures and to the full extent
permitted by law and (ii) other employees and agents to such extent as shall be
authorized by the Board of Directors or Key's By-Laws and be permitted by law.
The foregoing rights of indemnification shall not be exclusive of any other
rights to which those seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such by-laws, resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be
permitted by the MGCL. Furthermore, no director or officer of Key shall be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director or an officer, except to the
extent that exculpation from liability is not permitted under the MGCL as
in effect when such breach occurred. No amendment of the Key Charter or
repeal of any of its provisions shall limit or eliminate the limitations on
liability provided to directors and officers with respect to acts or omissions
occurring prior to such amendment or repeal.
II-1
<PAGE> 14
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------- --- -----------
<S> <C>
4.1 Indenture dated as of July 3, 1996, among Key Energy Group, Inc., Yale E.
Key, Inc., WellTech Eastern, Inc., Odessa Exploration, Inc., Key Energy
Drilling, Inc., d/b/a Clint Hurt Drilling, Servicios WellTech, S.A., and
American Stock Transfer & Trust Company, as Trustee, relating to the
Company's $52,000,000 7% Convertible Subordinated Debentures due 2003
(incorporated by reference to Exhibit 4.2 of the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996).
5.1 Opinion of Porter & Hedges, L.L.P.
23.1 Consent of Porter & Hedges, L.L.P. (included in Exhibit 5)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Arthur Andersen LLP
25 Power of Attorney (included on signature page)
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement; provided,
however, that subparagraphs (i) and (ii) do not apply
if the information required to be included in a
post-effective amendment by those paragraphs is contained in
the periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities and Exchange
Act of 1934 that are incorporated by reference in this
registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
Securities offered herein, and the offering of such Securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the Securities being registered
which remain unsold at the termination of the offering.
The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange of 1934 that is incorporated by reference
in this registration statement shall be deemed
II-2
<PAGE> 15
to be a new registration statement relating to the Securities offered
herein, and the offering of such Securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to officers, directors and controlling
persons of the Registrant pursuant to the provisions described under
Item 15 of this registration statement, or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in such Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in connection with the
Securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is public policy as expressed in such Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, Key Energy Group, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New Brunswick, State of
New Jersey on March 31, 1997.
KEY ENERGY GROUP, INC.
By: /s/ FRANCIS D. JOHN
------------------------------
Francis D. John, President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-3 has been signed below by the
following persons in the capacities and on the dates indicated; and each of the
undersigned officers and directors of Key Energy Group, Inc. hereby severally
constitutes and appoints Francis D. John and Jack D. Loftis, and each of them,
to sign for him, and in his name in the capacity indicated below, such
Registration Statement on Form S-3 and for the purpose of registering such
securities under the Securities Act of 1933, as amended, and any and all
amendments thereto, including without limitation any registration statements or
post-effective amendment thereof filed under and meeting the requirements of
Rule 462(b) under the Securities Act, hereby ratifying and confirming our
signatures as they may be signed by our attorneys to such Registration
Statement and any and all amendments thereto.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/S/ FRANCIS D. JOHN President, Chief Executive Officer, March 31, 1997
- -------------------------------- Chief Financial Officer and Director
Francis D. John
/S/ WILLIAM S. MANLEY Director March 31, 1997
- --------------------------------
William S. Manley
/S/ MORTON WOLKOWITZ Director March 31, 1997
- --------------------------------
Morton Wolkowitz
/s/ VAN D. GREENFIELD Director March 31, 1997
- --------------------------------
Van D. Greenfield
/s/ KEVIN P. COLLINS Director March 31, 1997
- --------------------------------
Kevin P. Collins
/s/ PHILLIP W. MARCUM Director March 31, 1997
- --------------------------------
Phillip W. Marcum
/s/ DANNY R. EVATT Chief Accounting Officer and Treasurer March 31, 1997
- --------------------------------
Danny R. Evatt
</TABLE>
II-4
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C>
4.1 Indenture dated as of July 3, 1996, among Key Energy Group,
Inc., Yale E. Key, Inc., WellTech Eastern, Inc., Odessa
Exploration, Inc., Key Energy Drilling, Inc., d/b/a Clint
Hurt Drilling, Servicios WellTech, S.A., and American
Stock Transfer & Trust Company, as Trustee, relating to
the Company's $52,000,000 7% Convertible Subordinated
Debentures due 2003 (incorporated by reference to Exhibit
4.2 of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996).
5.1 Opinion of Porter & Hedges, L.L.P.
23.1 Consent of Porter & Hedges, L.L.P. (included in Exhibit
5.1)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Arthur Andersen LLP
25 Power of Attorney (included on signature page)
</TABLE>
II-5
<PAGE> 1
EXHIBIT 5.1
[PORTER & HEDGES, L.L.P. LETTERHEAD]
April 3, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Key Energy Group, Inc.: Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to Key Energy Group, Inc., a Maryland
corporation (the "Company"), in connection with the registration on Form S-3
under the Securities Act of 1933, as amended, of 5,810,556 shares of the common
stock, par value $.10 per share (the "Common Stock"), of the Company. Of such
shares of Common Stock, 5,333,333 are being offered upon conversion of the
Company's 7% Convertible Subordinated Debentures due 2003 (the "Conversion
Shares") and 477,223 shares are being offered by certain of the Company's
existing stockholders (the "Additional Shares").
In rendering the opinions set forth below, we have examined the
certificate of incorporation, bylaws and corporate proceedings of the Company,
and based upon such examination and having regard for applicable legal
principles, it is our opinion that (i) the Conversion Shares, when issued in
accordance with the terms of the Debentures, will be validly issued, fully paid
and nonassessable outstanding shares of the Company's Common Stock, and (ii)
the Additional Shares are validly issued, fully paid and nonassessable
outstanding shares of the Company's Common Stock.
We consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the heading
"Legal Matters" in the Prospectus included as part of the Registration
Statement.
Very truly yours,
PORTER & HEDGES, L.L.P.
<PAGE> 1
EXHIBIT No. 23.2
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Key Energy Group, Inc.
We consent to incorporation by reference in the registration statement (No.
333-XXXXX) on Form S-3 of Key Energy Group, Inc. of our report dated September
13, 1996, relating to the consolidated balance sheets of Key Energy Group, Inc.
and subsidiaries as of June 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended June 30, 1996, which report appears in the
June 30, 1996 annual report on Form 10-K of Key Energy Group, Inc.
KPMG PEAT MARWICK LLP
Midland, Texas
April 2, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report on the consolidated
financial statements of WellTech, Inc. and subsidiaries dated August 31, 1995
included in Key Energy Group, Inc.'s previously filed registration statement on
Form S-4 (File No. 333-369), and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
April 3, 1997
