<PAGE> 1
Filed Pursuant To Rule Number 424(b)(1)
Registration No. 333-43115
PROSPECTUS
240,000 SHARES
KEY ENERGY GROUP, INC.
COMMON STOCK
All of the 240,000 shares of common stock, par value $.10 per share
(the "Common Stock"), of Key Energy Group, Inc., a Maryland corporation (the
"Company") offered hereby are being offered for sale by shareholders of the
Company. See "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 December 17, 1997, the closing price of the Common
Stock, as reported on the AMEX, was $20.375 per share.
The Common Stock may be offered and sold from time to time by the
Selling Securityholders 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 a 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 4.
------------------
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.
------------------
The date of this Prospectus is December 31, 1997.
<PAGE> 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (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, 1997, as amended; (ii) the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997; (iii) the
Company's Proxy Statement dated November 28, 1997; (iv) the Company's Current
Reports on Form 8-K dated June 25, 1997, as amended, September 1, 1997, as
amended, September 25, 1997, as amended, October 1, 1997, as amended, and
October 9, 1997; (v) 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 (vi) the description of the Company's 7% Convertible
Subordinated Debentures due 2003 contained in the Company's Form 8-A filed on
June 6, 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, 20th Floor, East Brunswick, New Jersey 08816, telephone number (732)
247-4822, Attn: Jack D. Loftis.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Prospectus and the documents that are incorporated in this
Prospectus by reference contain certain statements that are "Forward Looking
Statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Exchange Act. Those
statements include, among other things, the discussions of the Company's
business strategy and expectations concerning market position, future
operations, margins, profitability, liquidity and capital resources, and
statements concerning the integration of the operations acquired and
achievement of certain benefits in connection therewith. Forward Looking
Statements are included in the sections captioned "Risk Factors," "The
Company," and elsewhere in this Prospectus and in documents that are
incorporated in this Prospectus by reference. Although the Company believes
that the expectations reflected in such Forward Looking Statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. Generally, these statements relate to business plans or strategies,
projected or anticipated benefits or other consequences of such plans or
strategies, projected or anticipated benefits from acquisitions made by or to
be made by the Company, or projections involving anticipated revenues,
expenses, earnings, levels of capital expenditures or other aspects of
operating results. The Company's operations are subject to uncertainties,
risks and other influences, many of which are outside of the Company's control
and any one of which, or a combination of which, could materially adversely
affect the results of the Company's operations and whether the Forward Looking
Statements prove to be accurate. Important factors that could cause actual
results to differ materially from the Company's expectations are disclosed in
"Risk Factors" and elsewhere in this Prospectus.
2
<PAGE> 3
THE COMPANY
Key Energy Group, Inc. (the "Company") operates approximately 795 well
service rigs, 623 fluid hauling and other trucks and 38 drilling rigs in the
Permian Basin, the Mid-Continent region, the Ark La Tex region, Michigan, the
Appalachian Basin, the Rocky Mountain region, the Four Corners area of the
Southwest and Argentina. The Company believes it operates the largest combined
fleet of active well service rigs and fluid hauling and other trucks onshore
the continental United States and the second largest fleet in Argentina. The
Company provides a full range of maintenance and workover services to major and
independent oil and gas companies in all of its operating regions. In addition
to maintenance and workover services, the Company provides services that
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. Other services include oilfield fluid
and equipment transportation, storage and disposal services, frac tank rentals,
fishing and rental tools, wireline services, air drilling and hot oiling. In
addition, the Company is engaged in contract drilling in West Texas, the Ark La
Tex region, the Four Corners area, Michigan and Argentina and owns and produces
oil and natural gas in the Permian Basin.
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 and control of overhead and operating expenses. The
Company's strategy also is designed to minimize the business risks associated
with unexpected downturns in one or more of its business segments. As a result,
the Company has become a leader in its domestic markets by establishing a
reputation for competitive and comprehensive services, including high quality
equipment and well-trained crews that operate within stringent safety
guidelines.
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
its 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 two years, the Company has
acquired 32 well servicing operations, several oil and gas properties
and three drilling operations. In addition, an agreement for the
acquisition of one well service company and three drilling companies
are pending.
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 better 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 low
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.
The Company's principal offices are located at Two Tower Center, 20th
Floor, East Brunswick, New Jersey 08816, and its telephone number is (732)
247-4822.
3
<PAGE> 4
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 of 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 two 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.
RISKS ASSOCIATED WITH ACQUISITIONS
One of the Company's business strategies is to pursue acquisitions of
businesses that are complementary to those of the Company. In the last 20
months, the Company has acquired 29 well servicing operations, several oil and
gas properties and one drilling operation. Integrating the acquired businesses
and personnel requires significant management time and skill. Management of the
Company's growth will require continued expansion of the Company's operational
and financial control systems, which could place a significant strain on the
Company's resources. Acquisitions of companies involve financial, operational
and legal risks, including the difficulty of assimilating operations and
personnel of the acquired companies and of maintaining uniform standards,
controls, procedures and policies. There can be no assurance that the Company
will be successful in making additional acquisitions or be effective in
integrating such acquisitions. Any failure to effectively integrate future
acquisitions could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company
competes and will continue to compete with other buyers for acquisitions. As a
result, if the prices sellers seek were to rise, the Company could find fewer
acceptable acquisition opportunities.
POTENTIAL LABOR SHORTAGE
The Company's ability to maintain its productivity and profitability
depends on its ability to attract and retain skilled workers. Although the
Company's size has increased substantially over the last two years, the Company
historically has experienced a high employee turnover rate, and the Company
continues to need replacement and additional workers, and devotes significant
management time and effort to attracting and retaining workers. The Company
believes that many skilled or trainable workers reside in reasonable proximity
to its facilities; however, there can be no assurance that the Company will be
successful in recruiting and training such workers due to a variety of factors.
Such factors include the potential inability or lack of desire by such workers
to commute to the Company's facilities and job sites or relocate to areas
closer to the Company's areas of operation, and competition for workers from
other industries. Although the Company believes that its wage rates are
competitive and that its relationship with its workforce is good, a significant
increase in the wages other employers pay could result in a reduction in the
Company's
4
<PAGE> 5
workforce, increases in the Company's wage rates, or both. If either of these
events occurs, the Company's profitability could be diminished and the
Company's growth potential could be impaired.
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 might incur in its operations. Moreover,
no assurance can be given that the Company will, in the future, 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. In addition, the
Company's operations in Northern regions are subject to limitations on
transporting equipment during the spring thaw.
COMPETITION
Competition is intense in all of the Company's markets. 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, certain competitors have access to greater financial and other
resources than the Company, which could allow those companies to price their
services more aggressively than the Company.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local laws
and regulations including those relating to protection of the environment,
natural resources, health and safety, waste management, and transportation of
hydrocarbons and chemicals. Various operations conducted by the Company,
including waste disposal and the handling of materials which are classified as
wastes, pollutants or hazardous substances, may require permits or other
authorizations. Sanctions for noncompliance with these laws and regulations may
include administrative, civil and criminal penalties, as well as revocation of
permits, and corrective action orders. These laws may impose retroactive
liability and may render a party liable for environmental damage or threats to
human health or the environment without regard to that party's negligence or
fault. Consequently, the Company could be exposed to liability for the conduct
of, or conditions caused by, others, or for acts of the Company that were in
compliance with all applicable laws at the time such acts were performed. Laws
and regulations protecting the environment have been expanded, modified and
reinterpreted over the years, resulting in increasingly stringent requirements.
The application or interpretation of these regulations or the adoption of new
regulations could have a material adverse effect on the Company. In addition,
the modification or interpretation of 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.
5
<PAGE> 6
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 with these executive officers that contain non-compete provisions.
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. Although 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 and may make additional 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.
SUBSTANTIAL LEVERAGE
The Company has substantial indebtedness and is highly leveraged. The
degree to which the Company is leveraged could adversely affect the Company's
ability to obtain additional financing for working capital, acquisitions or
other purposes and could make it more vulnerable to industry downturns and
competitive pressures. At December 17, 1997, the Company's outstanding
long-term debt totaled approximately $292.6 million, consisting of (i) $4.6
million of outstanding 7% Convertible Subordinated Debentures due 2003 (the
"Debentures"), (ii) $216.0 million of outstanding 5% Convertible Subordinated
Notes due 2004 (the "Notes") and (iii) $72.0 million borrowed under the
Company's $250 million revolving credit facility (the "Revolving Credit
Facility"). At October 31, 1997, the Company's ratio of total debt to total
capitalization was approximately 67%. If the Company borrows the entire amount
available under the Revolving Credit Facility (and assuming no conversion of the
Debentures or the Notes), its total long-term debt would be $477.4 million and
its ratio of total debt to total capitalization would be approximately 78%
(based on the Company's stockholders' equity at October 31, 1997).
In recent years, cash generated from the Company's operating
activities in conjunction with borrowings and proceeds from private equity
issuances has been sufficient to meet its debt service, acquisition and capital
expenditure requirements. There can be no assurance that cash generated from
such sources will be sufficient to meet its future debt service requirements
and to make anticipated acquisitions, investments and capital expenditures.
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET
PRICES
As of December 17, 1997, the Company had a total of 18,355,296 shares
of Common Stock outstanding, including 416,666 shares recently purchased by the
company which the Company intends to convert to treasury shares promptly after
the settlement date for the latest purchase. Of the outstanding shares,
approximately 1,141,451 are "restricted securities" as that term is defined in
Rule 144 under the Securities Act, and as such, are subject to restrictions on
resale in the public markets. However, all but 125,000 shares of such restricted
securities are either registered under registration statements under the
Securities Act or are subject to registration under registration rights
agreements. The Company has reserved 532,760 shares (265,000 of which are
underlying warrants) for issuance in connection with pending and completed
acquisitions which the Company expects to issue in January 1998, all of which
shares are subject
6
<PAGE> 7
to registration under registration rights agreements. In addition,
approximately 8,378,465 shares of Common Stock are issuable upon the exercise
of existing options and warrants and the conversion of convertible securities,
including 471,795 shares currently issuable upon conversion of the Debentures
and 5,610,390 shares issuable upon conversion of the Notes. All of such shares
will be issued in registered transactions, or have been or will be registered
for resale pursuant to a registration rights agreement. Sales of a substantial
number of any of such shares in the public markets, 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.
SELLING SECURITYHOLDERS
The following table sets forth information concerning the number of
shares of Common Stock offered by the Selling Securityholders (the "Shares").
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
BEFORE OFFERING(1)
------------------------------ NUMBER OF
NUMBER OF PERCENT OF SHARES
NAME SHARES CLASS OFFERED
---- ------------------------------ ---------
<S> <C> <C> <C>
Lynn Massingill(2) . . . . . . . . 95,600 * 95,600
Mark Massingill(2) . . . . . . . . 95,600 * 95,600
Billy Massingill . . . . . . . . . 20,000 * 20,000
Maureen McCutchin . . . . . . . . 20,000 * 20,000
Massingill Development, Inc. . . . 8,800 * 8,800
</TABLE>
- ----------------
* Less than one percent.
(1) No information is given with respect to beneficial ownership after the
Offering because the Company is unable to determine the number of
shares of Common Stock that will be sold in the Offering.
(2) Lynn Massingill and Mark Massingill were previously the owners of all
of the issued and outstanding shares of capital stock of Well-Co
Oil Services, Inc., a Nevada corporation, which, effective June 25,
1997, was acquired by the Company.
PLAN OF DISTRIBUTION
This Prospectus relates to the resale of up to 240,000 shares of
Common Stock owned by the Selling Securityholders. 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 Shares may be sold or distributed from time to time by the Selling
Securityholders directly to one or more purchasers (including pledgees) or
through brokers, dealers or underwriters who may act solely as agents or may
acquire Shares as principals, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices negotiated prices, or at
fixed prices, which may be changed. The distribution of the Shares may be
effected in one or more of the following methods: (i) ordinary brokers'
transactions, which may include long or short sales; (ii) transactions
involving cross or block trades or otherwise in any market or markets where the
Company's Common Stock is traded; (iii) purchases by brokers, dealers
7
<PAGE> 8
or underwriters as principal and resale by such purchasers for their own
accounts; (iv) "at the market" to or through market makers or into an existing
market for the Common Stock; (v) in other ways not involving market makers or
established trading markets, including direct sales to purchasers or sales
effected through agents; (vi) through transactions in options, swaps or other
derivatives (whether exchange-listed or otherwise), or (vii) any combination of
the foregoing, or by any other legally available means.
To the extent not described herein and as otherwise required by law,
the Company will file, during any period in which offers or sales are being
made, a supplement to this Prospectus or a post-effective amendment to the
Registration Statement of which this Prospectus is a part, which sets forth,
with respect to a particular offering, the specific number of Shares to be
sold, the name of the Selling Securityholder, the sale price, the name of any
participating broker, dealer, underwriter or agent, any applicable commission
or discount and any other material information with respect to the plan of
distribution.
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.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is currently authorized to issue 25,000,000 shares of
Common Stock, and the Board of Directors has approved, subject to stockholder
approval, an increase in the authorized capital stock to 100,000,000 shares of
Common Stock. Of the 25,000,000 shares currently authorized, an aggregate of
18,355,296 shares were outstanding including 416,666 shares recently purchased
by the Company which the Company intends to convert to treasury shares
promptly after the settlement date for the latest purchase. All of the issued
and outstanding shares of Common Stock are fully paid and nonassessable. Each
share is entitled to one vote in the election of directors and other corporate
matters. The holders of Common Stock do not have cumulative voting rights,
which means that the holders of a majority of the votes entitled to be cast by
holders of the outstanding Common Stock are able to elect all of the Company's
directors. The Common Stock has no redemption provisions and the holders
thereof have no preemptive rights. The holders of Common Stock are entitled to
receive dividends in such amounts as may be declared by the Board of Directors,
as permitted by applicable law, and upon liquidation, dissolution, or winding
up of the Company subject to the rights of any preferred stock then
outstanding, the holders of Common Stock are
8
<PAGE> 9
entitled to share ratably in the Company's assets, according to the number of
shares they hold. The Common Stock is listed on the AMEX. The transfer agent
and registrar for the Common Stock is American Stock Transfer & Trust Company,
New York, New York.
The Board of Directors has the power under the Company's Articles of
Incorporation, without the need of any stockholder action, to redesignate all
or any of the authorized and unissued shares of Common Stock into one or more
series of preferred or preference stock and to establish the rights and
preferences (including, without limitation, dividend and liquidity preferences,
voting rights and conversion provisions), except that the Company charter
provides that no such class or series of shares (i) may have more than one vote
per share, (ii) may be issued in connection with any shareholder rights plan,
"poison pill" or other anti-takeover measure, or (iii) may be issued for less
than fair consideration, as determined in good faith by the Board of Directors.
7% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2003
In July 1996, the Company issued $52 million principal amount of the
Debentures. The Debentures are convertible into shares of Common Stock at a
conversion price of $9 3/4 per share (subject to adjustment in certain events)
and, if such conversion occurs before July 1, 1999, holders of the Debentures
are entitled to a payment generally equal to 50% of the interest otherwise
payable on the Debentures converted from the date of conversion through July 1,
1999, payable in cash or Common Stock, at the Company's option. The Company's
obligation to repay principal and interest on the Debentures is guaranteed by
its principal subsidiaries. The Debentures are redeemable, at the Company's
option, on or after July 15, 1999 at a redemption price of 104% of principal
amount in the first 12 months, and 103%, 102% and 101% of principal amount in
the three years thereafter, respectively. Additionally, holders of the
Debentures have the right to require the Company to repurchase such Notes at
100% of the principal amount thereof, together with accrued interest, in the
event of a Change in Control (as defined in the Indenture relating to the
Debentures). As of December 12, 1997, $4,600,000 of Debentures remained
outstanding.
5% CONVERTIBLE SUBORDINATED NOTES DUE 2004
In September 1997, the Company issued $216.0 million principal amount
of the Notes. The Notes are convertible into shares of Common Stock at a
conversion price of $38.50 per share (subject to adjustment in certain events)
at any time on and after the earlier of (i) the date that a shelf registration
statement to cover the Notes and the Common Stock issuable upon conversion of
the Notes is declared effective and (ii) 270 days following the date of
original issuance of the Notes. The Company currently does not have a
sufficient number of shares of Common Stock authorized for issuance upon
conversion of the Notes. However, the Board of Directors has approved an
increase, subject to stockholder approval, in the number of authorized shares
of Common Stock and such increase, if approved, would be sufficient to reserve
a sufficient number of shares for issuance upon conversion of the Notes. Until
such time as the Company's authorized Common Stock has been increased to a
number of shares sufficient to reserve for the conversion of all of the Notes,
the Company may pay cash in lieu, in whole or in part, of delivering Common
Stock. The Notes are redeemable, at the Company's option, on or after September
15, 2000 at a redemption price of 102.86% of principal amount in the first
twelve months, and 102.14%, 101.43%, 100.71% and 100% of principal amount in
the four years thereafter, respectively. Additionally, holders of the Notes
have the right to require the Company to repurchase such Notes at 100% of the
principal amount thereof, together with accrued and unpaid interest, in the
event of a Change in Control (as defined in the Indenture relating to the
Notes).
9
<PAGE> 10
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, 1997 and 1996, and for each of the years in the
three-year period ended June 30, 1997, have been incorporated by reference in
this 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 financial statements of Well-Co Oil Service, Inc. as of June 25,
1997 and for the period from July 1, 1996 to June 25, 1997, have been
incorporated by reference into this Prospectus in reliance upon the report of
Robinson Burdette Martin & Cowan, L.L.P. independent certified public
accountants, upon the authority of said firm as experts in accounting and
auditing.
The financial statements of Ram Oil Well Service, Inc. and Rowland
Trucking Co., Inc. as of December 31, 1996 and 1995, have been incorporated by
reference into this Prospectus in reliance upon the report of Johnson, Miller &
Co., independent certified public accountants, upon the authority of said firm
as experts in accounting and auditing.
The consolidated financial statements of Coleman Oil & Gas, Inc. and
Subsidiaries as of October 31, 1996 and 1995, have been incorporated by
reference into this Prospectus in reliance upon the report of Chandler &
Company LLP, independent certified public accountants, upon the authority of
said firm as experts in accounting and auditing.
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 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.sec.gov. 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,
10
<PAGE> 11
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.
11
<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>
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Disclosure Regarding Forward Looking
Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Selling Securityholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
================================================================================
================================================================================
KEY ENERGY
GROUP, INC.
COMMON STOCK
240,000 SHARES
$.10 PAR VALUE PER SHARE
--------------------------
PROSPECTUS
--------------------------
DECEMBER 31, 1997
================================================================================
