<PAGE>
FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-67665
SUBJECT TO COMPLETION, DATED JUNE 21, 2000
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 16, 1999)
10,000,000 SHARES
[LOGO]
KEY ENERGY SERVICES, INC.
COMMON STOCK
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We are offering 10,000,000 shares of common stock. Our common stock is listed on
the New York Stock Exchange under the symbol "KEG." On June 20, 2000, the last
reported sale price for our common stock on the New York Stock Exchange was
$9 9/16 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE S-5 AND PAGE 7 IN THE ACCOMPANYING PROSPECTUS.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- --------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds to Key............................................. $ $
</TABLE>
We have granted the underwriters a 30-day option to purchase up to 1,500,000
additional shares of common stock to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement is accurate or complete. Any representation to the
contrary is a criminal offense.
Lehman Brothers, on behalf of the underwriters, expects to deliver the common
stock on or about June , 2000.
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LEHMAN BROTHERS
DAIN RAUSCHER WESSELS
FAC/EQUITIES
JUNE , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
About this Prospectus Supplement............................ S-2
Key Energy Services, Inc.................................... S-3
The Offering................................................ S-4
Summary Financial Data...................................... S-5
Risk Factors................................................ S-5
Use of Proceeds............................................. S-6
Underwriting................................................ S-7
Experts..................................................... S-9
Legal Matters............................................... S-9
PROSPECTUS
Where You Can Find More Information......................... 3
Key Energy Services, Inc.................................... 4
Ratio of Earnings to Fixed Charges.......................... 6
Forward-looking Statements.................................. 7
Risk Factors................................................ 7
Use of Proceeds............................................. 11
Plan of Distribution........................................ 12
Description of Debt Securities.............................. 14
Description of Capital Stock................................ 19
Description of Warrants..................................... 20
Legal Matters............................................... 20
Experts..................................................... 20
</TABLE>
Our principal executive offices are located at Two Tower Center, 20(th) Floor,
East Brunswick, New Jersey 08816. Our telephone number is (732) 247-4822.
The underwriters are offering the shares subject to various conditions and may
reject all or part of any order.
ABOUT THIS PROSPECTUS SUPPLEMENT
You should rely only on the information contained in this prospectus supplement
and the accompanying prospectus. We have not authorized anyone to provide you
with information different from that contained in this prospectus supplement and
the accompanying prospectus. This prospectus supplement and the accompanying
prospectus are not an offer to sell or a solicitation of an offer to buy common
stock in any jurisdiction where it is unlawful. The information contained in
this prospectus supplement and the accompanying prospectus is accurate only as
of the date of this prospectus supplement, regardless of the time of delivery of
this prospectus supplement or any sale of common stock.
S-2
<PAGE>
KEY ENERGY SERVICES, INC.
We are the largest onshore, rig-based well servicing contractor in the world
based on the number of rigs we own and available industry data. We provide a
complete range of well services to major and independent oil and gas companies,
including: rig-based well maintenance, workover, completion and recompletion
services (including horizontal recompletions), field fluid management and
transport oilfield trucking, and ancillary oilfield services. We currently have
approximately 1,400 well service rigs and 1,200 oilfield trucks. We conduct well
servicing operations onshore the continental United States in the Gulf Coast
(including South Texas, the Central Gulf Coast of Texas and South Louisiana),
the Permian Basin of West Texas and Eastern New Mexico, the mid-Continent region
(including the Anadarko, Hugoton and Arkoma Basins and the ArkLaTex region), the
Four Corners area (including the San Juan, Piceance, Uinta and Paradox Basins),
the Eastern Region (including the Appalachian, Michigan and Illinois Basins),
the Rocky Mountains (including the Denver-Julesberg, Powder River, Wind River,
Green River and Williston Basins), and California (the San Joaquin Basin), and
internationally in Argentina and Ontario, Canada. We believe that we have the
most comprehensive array of services of any participant in our markets and have
differentiated our company from our competitors by our position as a
single-source provider of multiple wellhead-based services and products across
multiple geographic regions.
We own 73 land drilling rigs: 63 in the United States, seven in Argentina
and three in Canada. We conduct drilling operations for major and independent
oil and gas companies onshore the continental United States in the Permian
Basin, the Four Corners area, the Eastern Region, the Gulf Coast, and the Rocky
Mountains, and internationally in Argentina and Ontario, Canada.
In addition to our rig-based services, we also offer a wide array of
ancillary services that complement our well servicing business. We also produce
and develop oil and natural gas reserves in the Permian Basin and Texas
Panhandle.
We have completed our strategy of consolidating the well service industry
through the acquisition of more than 50 regional well service and workover
companies in the past three years. We estimate that we own more than 35% of the
available domestic onshore well service rigs. Our consolidation and business
line expansion strategy has increased our rig market share and expanded our
ancillary product and service offerings, thereby improving our ability to offer
reliable and cost-effective one source solutions to our customers. According to
industry data, since 1996, we estimate that the number of available well service
rigs has fallen approximately 24% due to attrition, cannibalization and the
transfer of rigs to points outside the United States. As a result, the
percentage of available well service rigs we own has increased. In addition, the
number of available well service rigs actually in use has increased
substantially since the historical low utilization rates prevailing in 1999. We
believe we are uniquely positioned to take advantage of these market dynamics,
and we believe that improvements in both utilization and pricing will result in
increased earnings growth.
RECENT DEVELOPMENTS
On June 19, 2000 we announced that, as a result of the current strong demand
for natural gas related drilling, well completion and workover services, we
intend to undertake several strategic projects at a cost of approximately $25
million. We believe these projects will significantly enhance our ability to
serve our customers in certain natural gas markets where a substantial backlog
of orders already exists. We intend to initiate these projects during fiscal
2001 and complete them by December 31, 2001. These projects will be focused in
the onshore natural gas regions of the United States, Argentina and Canada.
Specifically, we plan to:
- refurbish approximately 50 to 60 deep gas workover/completion rigs and
related equipment to keep up with current and anticipated demand;
S-3
<PAGE>
- expand the number and increase the capacity of our drilling and well
service rig refurbishment facilities;
- open at least two additional employee training and safety centers; and
- reallocate existing equipment to areas with higher demand and pricing
levels.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Key................................. 10,000,000 shares
Common stock to be outstanding after the offering........... 95,782,128 shares
Use of proceeds............................................. Repayment of debt
New York Stock Exchange symbol.............................. KEG
</TABLE>
The common stock to be outstanding after the offering is based on shares
outstanding as of June 16, 2000 and excludes 16,632,853 shares of common stock
issuable upon exercise of outstanding options, warrants and convertible
securities.
The underwriters have an option to purchase up to an additional 1,500,000 shares
of common stock from us to cover over-allotments, if any. Except as otherwise
noted, information in this prospectus supplement assumes that the underwriters
will not exercise their over-allotment option.
S-4
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------ NINE MONTHS ENDED
1997 1998 1999 MARCH 31, 2000
-------- -------- -------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................. $162,425 $420,046 $488,569 $467,832
Costs and expenses........................ 147,750 381,241 567,502 494,706
Interest expense.......................... 7,879 21,476 67,401 54,138
Pre-tax income (loss)..................... 14,675 38,805 (78,933) (26,874)
Net income (loss)......................... 9,098 24,175 (53,258) (19,294)
Basic earnings per share.................. 0.81 1.41 (1.94) (0.23)
OTHER FINANCIAL DATA:
EBITDA.................................... $ 33,630 $ 91,282 $ 50,542 $ 80,404
Capital expenditures...................... 24,755 59,266 31,307 22,873
Depreciation, depletion and
amortization............................ 11,076 31,001 62,074 53,140
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 2000
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(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Property and equipment, net............................... $ 753,911
Total assets.............................................. 1,149,227
Long-term debt, including current maturities.............. 698,881
Stockholders' equity...................................... 277,936
</TABLE>
EBITDA represents earnings before interest, taxes, depreciation and
amortization. Although EBITDA is not a measure of performance calculated in
accordance with GAAP, we believe that EBITDA is accepted as a generally
recognized measure of performance in our industry. Nevertheless, this measure
should not be considered in isolation or as a substitute for operating income,
net income, net cash provided by operating activities or any other measure for
determining our operating performance or liquidity that is calculated in
accordance with GAAP.
RISK FACTORS
RISKS ASSOCIATED WITH OIL AND GAS INDUSTRY--OUR BUSINESS IS DEPENDENT ON
CONDITIONS IN THE OIL AND GAS INDUSTRY, ESPECIALLY THE PRODUCTION EXPENDITURES
OF OIL AND GAS COMPANIES.
The demand for our services is directly influenced by current and anticipated
oil and gas prices, oil and gas production costs, government regulation,
conditions in the worldwide oil and gas industry, and particularly on the level
of development, exploration and production activity of, and corresponding
spending by, oil and gas companies. Most of our operations are in the United
States where the demand for well servicing and related services has been subject
to significant historical fluctuations. When oil or gas prices are weak, fewer
wells are drilled, resulting in less drilling and less maintenance work for us.
Oil and gas prices have increased recently, and as a result, demand for our
services also has increased. However, periods of diminished oil and gas prices
can be expected in the future, and demand for our services may decrease during
those or other periods. In light of these and other factors relating to the oil
and gas industry, our historical operating results may not be indicative of
future performance. In addition, reductions in oil or gas prices can result in a
reduction in the trading price of our common stock, even if the reduction in oil
or gas prices does not affect our business generally.
S-5
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE--THE MARKET PRICE OF OUR COMMON STOCK COULD BE
ADVERSELY AFFECTED BY SALES OF SUBSTANTIAL AMOUNTS OF COMMON STOCK IN THE PUBLIC
MARKET OR THE PERCEPTION THAT SUCH SALES COULD OCCUR.
As of June 16, 2000, we had 85,782,128 shares of common stock outstanding and
approximately 16,632,853 million additional shares of common stock were issuable
upon the exercise of outstanding options, warrants and convertible securities.
We are issuing 10,000,000 shares of our common stock in this offering. The
market price of our common stock could be adversely affected by sales of
substantial amounts of common stock in the public market or the perception that
such sales could occur.
USE OF PROCEEDS
Our net proceeds from the sale of our common stock in this offering are
estimated to be approximately $91,022,000. We will use 25% of such net proceeds
to prepay a pro rata portion of the outstanding principal amount of the Tranche
A term loan and Tranche B term loan under our senior credit facility. We also
must pay accrued interest on the prepayment amounts out of the remaining 75% of
such net proceeds. The Tranche B loan holders have the right to refuse
prepayments. To the extent any Tranche B loan prepayments are refused, we will
pay down the Tranche A term loan. The Tranche A term loan currently bears
interest at the annual rate of LIBOR plus 3.5% and matures on September 14,
2003. The Tranche B term loan currently bears interest at the annual rate of
LIBOR plus 4.0% and matures on June 14, 2004.
Substantially all of the remaining net proceeds will be used for repayment of
additional debt, which may include:
- additional prepayments of outstanding principal and interest on the
Tranche A term loan and the Tranche B term loan;
- repurchases of outstanding principal and interest on our 14% senior
subordinated notes due 2009 pursuant to our right to redeem up to 35% of
the principal amount of these notes with the proceeds from this offering;
- repurchases of our 9 3/8% senior notes due 2007;
- repurchases of our 7% convertible subordinated notes due 2003;
- repurchases of our 5% convertible notes due 2004; and
- prepayments of principal and interest on the revolving credit facility
under our senior credit facility, which currently bears interest at an
annual rate ranging from the prime rate plus .75% to 2.0% or LIBOR plus
2.25% to 3.5% and matures on September 14, 2003.
S-6
<PAGE>
UNDERWRITING
Under the underwriting agreement, which is filed as an exhibit to the
registration statement relating to this prospectus supplement, Lehman Brothers
Inc., Dain Rauscher Incorporated, and FAC/Equities, a division of First Albany
Corporation each have agreed to purchase from us the respective number of shares
of common stock shown opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Lehman Brothers Inc.........................................
Dain Rauscher Incorporated..................................
FAC/Equities, a division of First Albany Corporation........
----------
Total..................................................... 10,000,000
==========
</TABLE>
The underwriting agreement provides that the underwriters' obligations to
purchase shares of common stock depend on the satisfaction of the conditions
contained in the underwriting agreement. It also provides that if any of the
shares of common stock are purchased by the underwriters under the underwriting
agreement, all of the shares of common stock that the underwriters have agreed
to purchase under the underwriting agreement must be purchased. The conditions
contained in the underwriting agreement include the requirements that:
- the representations and warranties made by us to the underwriters are
true;
- there is no material change in the financial markets; and
- we deliver to the underwriters customary closing documents.
The representative has advised us that the underwriters propose to offer the
shares of common stock directly to the public at the public offering price set
forth on the cover page of this prospectus supplement, and to dealers, who may
include the underwriters, at the public offering price less a selling concession
not in excess of $ per share. The underwriters may allow, and the dealers
may reallow, a concession not in excess of $ per share to brokers and
dealers. After completion of the offering, the underwriters may change the
offering price and other selling terms.
We have granted the underwriters an option to purchase up to 1,500,000
additional shares of common stock, exercisable solely to cover over-allotments,
if any, at the public offering price less the underwriting discount shown on the
cover page of this prospectus supplement. The underwriters may exercise this
option at any time until 30 days after the date of the underwriting agreement.
If this option is exercised, each underwriter will be committed, so long as the
conditions of the underwriting agreement are satisfied, to purchase a number of
additional shares of common stock proportionate to the underwriter's initial
commitment as indicated in the table above, and we will be obligated, under the
over-allotment option, to sell the shares of common stock to the underwriters.
Subject to certain exceptions, we have agreed not to, without the prior
consent of Lehman Brothers Inc., directly or indirectly, offer, sell or
otherwise dispose of any shares of common stock or any securities which may be
converted into or exchanged for any such shares of common stock for a period of
60 days from the date of this prospectus supplement. All of our executive
officers and directors have agreed under lock-up agreements that, without the
prior written consent of Lehman Brothers Inc., they will not, directly or
indirectly, offer, sell or otherwise dispose of any shares of common stock or
any securities which may be converted into or exchanged for any such shares for
the period ending 60 days after the date of this prospectus supplement.
The underwriting discount is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting discount is % of the
S-7
<PAGE>
public offering price. We have agreed to pay the underwriters the following
total amount, assuming either no exercise or full exercise by the underwriters
of their over-allotment option:
<TABLE>
<CAPTION>
TOTAL FEES
--------------------------------------
WITHOUT EXERCISE WITH FULL EXERCISE
FEE PER OF OVER-ALLOTMENT OF OVER-ALLOTMENT
SHARE OPTION OPTIONS
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<S> <C> <C> <C>
Underwriting discount paid by Key.................. $ $ $
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding the underwriting discount, will be approximately $300,000.
Our common stock is listed on the New York Stock Exchange under the symbol
"KEG."
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the underwriters may be required to make for these liabilities.
Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
selling group members to bid for and purchase shares of common stock. As an
exception to these rules, the representative of the underwriters is permitted to
engage in transactions that stabilize the price of the common stock. These
transactions may consist of bids or purchases for the purposes of pegging,
fixing or maintaining the price of the common stock.
The underwriters may create a short position in the common stock in
connection with the offering, which means that they may sell more shares than
are set forth on the cover page of this prospectus supplement. If the
underwriters create a short position, then the representative may reduce that
short position by:
- purchasing common stock in the open market; or
- exercising all or part of the over-allotment option.
The representative also may impose a penalty bid on underwriters and selling
group members. This means that, if the representative purchases shares of common
stock in the open market to reduce the underwriters' short position or to
stabilize the price of the common stock, it may reclaim the amount of the
selling concession from the underwriters and selling group members who sold
those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of these purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it may discourage resales of the security by purchasers in an
offering.
Neither we nor any of the underwriters make any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the common stock. In addition, neither we nor any
of the underwriters make any representation that the representative will engage
in these transactions or that these transactions, once commenced, will not be
discontinued without notice.
Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
the sale is made.
Purchasers of the shares of common stock offered in this prospectus
supplement may be required to pay stamp taxes and other charges under the laws
and practices of the country of purchase, in addition to the offering price
listed on the cover of this prospectus supplement.
S-8
<PAGE>
EXPERTS
The consolidated financial statements of Key and its subsidiaries as of
June 30, 1999 and 1998, and for each of the years in the three-year period ended
June 30, 1999, have been incorporated by reference in this prospectus in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon
for us by Porter & Hedges, L.L.P., Houston, Texas, and for the underwriters by
Latham & Watkins, New York, New York.
S-9
<PAGE>
10,000,000 SHARES
[LOGO]
KEY ENERGY SERVICES, INC.
COMMON STOCK
----------------
PROSPECTUS SUPPLEMENT
June , 2000
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LEHMAN BROTHERS
DAIN RAUSCHER WESSELS
FAC/EQUITIES
