Item 1. Business. 3
Item 2.
ITEM 2. PROPERTIES.
The Company's corporate offices are located in East Brunswick, New Jersey and Midland, Texas where the Company leases office space from an independent third party.
Oil Field Services
The following table sets forth the type, number and location of the major equipment owned and operated by the Company's oil field service subsidiaries as of June 30, 1998:
(table located on next page)
Well Service/ Drilling Oilfield Company Workover Rigs Rigs Trucks - ------------------------------------------------------------------------------- Domestic:
Yale E. Key (Permian Basin of West Texas and New Mexico) 299 - 215 WellTech Mid-Continent (Mid-Continent Region) 187 - 91 Brooks (ArkLaTex Region) 80 2 105 WellTech Eastern (Michigan and Northeast) 84 5 214 Key Rocky Mountain (Rocky Mountains) 108 - - Key Four Corners (Four Corners Area) 29 17 80 Key Energy Drilling (West Texas and New Mexico) - 40 -
International:
Servicios (Argentina) 16 6 28 --- --- --- TOTALS 803 70 733 === === ===
Yale E. Key owns ten and leases six office and yard locations. WellTech Mid-Continent owns sixteen and leases seventeen office and yard locations. WellTech Eastern owns two and leases fourteen office and yard locations. Brooks owns three and leases 11 office and yard locations. Key Rocky Mountain owns four and leases eight office and yard locations. Key Four Corners owns three and leases two office and yard locations. Key Energy Drilling owns three and leases one office and yard location. In Argentina, Servicios leases two office and yard locations.
All operating facilities are metal one story office and/or shop buildings. All buildings are occupied and considered to be in satisfactory condition.
Production
Odessa Exploration's major proved producing properties are located primarily in the Permian Basin area of West Texas. Odessa Exploration leases office space in Odessa, Texas.
As of June 30, 1998, the Company owned interests in 452 gross (332 proved developed) oil properties and 60 gross (45 proved developed) gas properties. During the fiscal year ended June 30, 1998, the Company produced 223,009 barrels of oil at an average price of $16.25 per barrel and 1,396 MMcf of natural gas at an average sales price of $2.44 per Mcf. Average production (lifting) costs were $6.54 per barrel of oil equivalent (one barrel of oil equals six thousand cubic feet of natural gas). The Company's reserves had a pre-tax SEC 10 value of approximately $47.8 million as of June 30, 1998. The Company holds proved oil and gas reserves of approximately 93.5 billion cubic feet of natural gas equivalent (15.6 million barrels of oil equivalent) primarily in the Permian Basin and Panhandle of West Texas.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS AND OTHER ACTIONS.
See Item 8, Note 4 to the Consolidated Financial Statements.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is currently traded on the New York Stock Exchange, under the symbol "KEG". Prior to April 1998, the Company's common stock was traded on the American Stock Exchange. As of June 30, 1998, there were 1,143 holders of record of 18,267,813 shares of common stock outstanding.
The following table sets forth, for the periods indicated, the high and low closing prices of the Company's common stock on the New York Stock Exchange for the third and fourth quarters of fiscal 1998 and the American Stock Exchange for the remaining quarters, as derived from published sources.
High Low
Fiscal Year Ending 1998: First Quarter $ 34 1/2 $18 1/8 Second Quarter 37 3/4 17 1/4 Third Quarter 20 7/8 14 Fourth Quarter 19 1/2 13
Fiscal Year Ending 1997: First Quarter $ 8 3/4 $ 7 1/2 Second Quarter 12 1/4 8 3/8 Third Quarter 14 7/8 11 3/8 Fourth Quarter 17 13/16 12 7/8
There were no dividends paid on the Company's common stock during the fiscal years ended June 30, 1998, 1997 or 1996. The Company does not intend, for the foreseeable future, to pay dividends on its common stock. In addition, the Company is contractually restricted from paying dividends under the terms of its existing credit facilities.
Recent Sales of Unregistered Securities:
The Company effected the following unregistered sales of its securities during the twelve months ended June 30, 1998 that were not previously included in the Company's Quarterly Reports filed for such period. Each of the following issuances by the Company of the securities sold in the transactions referred to below were not registered under the Securities Act of 1933, as amended, pursuant to the exemption provided under Section 4 (2) thereof for transactions not involving a public offering:
Effective March 19, 1998, the Company issued to various employees, pursuant to the Key Energy Group, Inc. 1997 Incentive Plan, options to purchase shares of the Company's common stock.
Effective January 8, 1998, the Company issued a warrant to purchase 265,000 shares of Common Stock at an exercise price of $18.00 per share, subject to certain adjustments, as partial consideration in connection with the purchase by Key Rocky Mountain, a wholly-owned subsidiary of the Company, of substantially all the capital stock of J.W. Gibson Well Service Company.
Item 6.
Item 6. Selected Financial Data.
(1) Financial data for the year ended June 30, 1996 includes the allocated purchase price of WellTech Eastern and the results of their operations, beginning March 26, 1996.
(2) Net income before interest expense, income taxes, depreciation, depletion and amortization. EBITDA is presented because of its wide acceptance as a financial indicator of a company's ability to service or incur debt. EBITDA should not be considered as an alternative to operating net income, as defined by generally accepted accounting principals, as indicators of the Company's financial performance or to cash flow as a measure of liquidity.
(3) Book value per common share is stockholders' equity at period end divided by the number of outstanding common shares at period end.
(4) For purposes of computing the ratios of earnings to fixed charges, earnings consist of income from continuing operations before income taxes and fixed charges. Fixed charges consist of interest expenses, amortization of debt issuance expenses and the portion of rental and lease obligations representative of the interest factor.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
Special Note: Certain statements set forth below under this caption consitute "forward-looking statements" within the meaning of the Reform Act. See "Special Note Regarding Forward-Looking Statements" for additional factors relating to such statements.
The following discussion provides information to assist in the understanding of the Company's financial condition and results of operations. It should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report.
Overview
Historically, fluctuations in well servicing activity have had a strong correlation with fluctuations in oil and gas prices. During fiscal 1998, oil prices have decreased from an average of approximately $21 per barrel for West Texas Intermediate crude oil in July of 1997 to an average of approximately $12 per barrel in June of 1998. As a result, the Company experienced a decrease in demand for drilling and services. Even though the Company experienced a successful fiscal year ended June 30, 1998, in terms of earnings and earnings per share compared to previous years, continued low oil prices may continue to negatively affect the Company's operating performance. The Company seeks to minimize the effects of such low oil prices and fluctuations of pricing on its operations and financial condition through reduction of operating and capital costs, diversification of services, entry into new markets and customer alliances.
FISCAL YEAR ENDED JUNE 30, 1998 VERSUS FISCAL YEAR ENDED JUNE 30, 1997
Results of Operations
Operating Income
The Company
Revenues for the year ended June 30, 1998 increased $257,621,000, or 159%, from $162,425,000 in fiscal 1997 to $420,046,000 in fiscal 1998, while net income for fiscal 1998 increased $15,077,000, or 166% , from $9,098,000 in fiscal 1997 to $24,175,000 in fiscal 1998. The increase was primarily due to well service and oil and gas well drilling acquisitions throughout the year and increased well service and oil and gas drilling revenues from existing equipment through the third quarter of fiscal 1998.
Oilfield Services
Oilfield service revenues for the year ended June 30, 1998 increased $230,460,000, or 160%, from $144,385,000 for the year ended June 30, 1997 to $374,845,000 for the year ended June 30, 1998. The increase is primarily attributable to acquisitions throughout the year and higher equipment use through the third quarter of fiscal 1998 resulting from an increase in demand for oilfield services.
Oil and Natural Gas Well Drilling
Revenues from oil and gas well drilling activities increased $25,139,000, or 253%, from $9,956,000 during the year ended June 30, 1997 to $35,095,000 for the year ended June 30, 1998. The increase was primarily the result of acquisitions.
Oil and Natural Gas Exploration and Production
Revenues from oil and gas activities increased $55,000, or 1%, from $6,975,000 during the year ended June 30, 1997 to $7,030,000 for the current year. The increase was primarily the result of increased production in the current year which was partially offset with a decrease in the average price of oil and natural gas for fiscal 1998 as compared to fiscal 1997.
Operating Expenses
Oilfield Services Oilfield service expenses for the year ended June 30, 1998 increased $159,129,000, or 159%, from $100,366,000 for the year ended June 30, 1997 to $259,495,000 for the year ended June 30, 1998. The increase was due primarily to acquisitions made throughout the fiscal year and the increased demand for oilfield services through the third quarter of fiscal 1998.
Oil and Natural Gas Well Drilling
Expenses related to oil and gas well drilling activities increased $18,318,000, or 225%, from $8,155,000 for the year ended June 30, 1997 to $26,473,000 for the year ended June 30, 1998. The increase was primarily the result of acquisitions throughout fiscal 1998.
Oil and Natural Gas Exploration and Production
Expenses related to oil and gas activities increased $253,000, or 9%, from $2,729,000 for the year ended June 30, 1997 to $2,983,000 for the year ended June 30, 1998. The increase was primarily the result of an increase in the total number of producing oil and gas wells from fiscal 1997 to 1998.
Depreciation and Depletion Expense
Depreciation, depletion and amortization expense increased $19,925,000, or 180%, from $11,076,000 for fiscal 1997 to $31,001,000 for fiscal 1998. The increase is primarily due to oilfield service depreciation expense, which is the result of the acquisitions completed throughout fiscal 1998 and 1997.
General and Administrative Expenses
General and administrative expenses increased $22,268,000, or 127%, from $17,545,000 for the year ended June 30, 1997 to $39,813,000 for the year ended June 30, 1998. The increase was primarily attributable to oilfield service and oil and gas well drilling acquisitions throughout the fiscal year.
Interest Expense
Interest expense increased $13,597,000, or 173%, from $7,879,000 for fiscal 1997 to $21,476,000 in fiscal 1998. The increase was primarily the result of debt incurred in connection with acquisitions completed throughout fiscal 1998 and 1997.
Income Taxes
Income tax expense increased $9,057,000, or 163%, from $5,573,000 in income tax expense for fiscal 1997 to $14,630,000 for fiscal 1998. The increase in income taxes is primarily due to the increase in operating income. However, the Company does not expect to be required to remit the total amount of the $14,630,000 in total federal income taxes for fiscal year 1998 because of the availability of net operating loss carryforwards and accelerated depreciation.
Cash Flow
Net cash provided by operating activities increased $32,193,000, or 1,493%, from $2,156,000 during fiscal 1997 to $34,349,000 for fiscal 1998. The increase is attributable primarily to the increase in net income in fiscal 1998 compared to fiscal 1997 and decreases in accounts payable and accrued expenses and increases in depreciation.
Net cash used in investing activities increased $217,701,000, or 265%, from $82,062,000 for fiscal 1997 to $299,763,000 for fiscal 1998. The increase is primarily the result of increased capital expenditures for well service operations and well service and oil and gas well drilling acquisitions.
Net cash provided by financing activities increased $131,576,000 or 112% from $117,399,000 for fiscal 1997 to $248,975,000 for fiscal 1998. The increase is primarily the result of proceeds from long-term commercial paper and borrowings under the Company's existing line-of-credit during the current fiscal year.
FISCAL YEAR ENDED JUNE 30, 1997 VERSUS FISCAL YEAR ENDED JUNE 30, 1996
Operating Income
The Company
Revenues for the year ended June 30, 1997 increased $96,568,000, or 147%, from $65,857,000 in fiscal 1996 to $162,425,000 in fiscal 1997, while net income for
fiscal 1997 increased $5,512,000, or 154% , from $3,586,000 in fiscal 1996 to $9,098,000 in fiscal 1997. The increase was primarily due to well service acquisitions throughout the year, increased oil and gas revenues from Odessa Exploration, and increased oil and gas drilling revenues.
Oilfield Services
Oilfield service revenues for the year ended June 30, 1997 increased $88,452,000, or 158%, from $55,933,000 for the year ended June 30, 1996 to $144,385,000 for the year ended June 30, 1997. The increase is primarily attributable to acquisitions throughout the year and higher equipment use resulting from an increase in demand for oilfield services.
Oil and Natural Gas Exploration and Production
Revenues from oil and gas activities increased $3,421,000, or 96%, from $3,554,000 during the year ended June 30, 1996 to $6,975,000 for the current year. The increase was primarily the result of increased production of oil and natural gas from several wells that were drilled and began production during fiscal 1997, higher oil and natural gas prices for fiscal 1997, and the April 1996 purchase of $6.9 million of oil and gas properties from an unrelated third party.
Oil and Natural Gas Well Drilling
Revenues from oil and gas well drilling activities increased $3,768,000, or 61%, from $6,188,000 during the year ended June 30, 1996 to $9,956,000 for the year ended June 30, 1997. The increase was primarily the result of increased well drilling activity and an increase in the Company's pricing structure.
Operating Expenses
Oilfield Services
Oilfield service expenses for the year ended June 30, 1997 increased $59,629,000, or 146%, from $40,737,000 for the year ended June 30, 1996 to $100,366,000 for the year ended June 30, 1997. The increase was due primarily to acquisitions made throughout the fiscal year and the increased demand for oilfield services. In addition, the Company has continued to expand its services, offering fishing tools, blow-out preventers and oilwell frac tanks.
Oil and Natural Gas Exploration and Production
Expenses related to oil and gas activities increased $1,534,000, or 128%, from $1,195,000 for the year ended June 30, 1996 to $2,729,000 for the year ended June 30, 1997. The increase was primarily the result of costs associated with several oil and natural gas wells that were drilled and began producing during fiscal 1997 and the April 1996 purchase of $6.9 million in oil and gas properties.
Oil and Natural Gas Well Drilling
Expenses related to oil and gas well drilling activities increased $3,125,000, or 62%, from $5,030,000 for the year ended June 30, 1996 to $8,155,000 for the year ended June 30, 1997. The increase was primarily the result of increased revenues.
Depreciation and Depletion Expense
Depreciation, depletion and amortization expense increased $6,375,000, or 136%, from $4,701,000 for fiscal 1996 to $11,076,000 for fiscal 1997. The increase is primarily due to oilfield service depreciation expense, which is the result of increased oilfield service capital expenditures for the current period versus the prior period and the acquisitions completed throughout fiscal 1997. In addition, depletion expense increased for the period due to the increase in the production of oil and natural gas..
General and Administrative Expenses
General and administrative expenses increased $11,403,000, or 186%, from $6,142,000 for the year ended June 30, 1996 to $17,545,000 for the year ended June 30, 1997. The increase was primarily attributable to oilfield service acquisitions throughout the fiscal year.
Interest Expense
Interest expense increased $5,402,000, or 218%, from $2,477,000 for fiscal 1996 to $7,879,000 in fiscal 1997. The increase was primarily the result of debt incurred in connection with acquisitions completed throughout fiscal 1997.
Income Taxes
Income tax expense increased $3,685,000, or 195%, from $1,888,000 in income tax expense for fiscal 1996 to $5,573,000 for fiscal 1997. The increase in income taxes is primarily due to the increase in operating income. However, the Company does not expect to be required to remit a significant amount of the $5,573,000 in total federal income taxes for fiscal year 1997 because of the availability of net operating loss carryforwards, accelerated depreciation and drilling tax credits.
Cash Flow
Net cash provided by operating activities decreased $4,965,000, or 70%, from $7,121,000 during fiscal 1996 to $2,156,000 for fiscal 1997. The decrease is attributable primarily to increases in accounts receivable, decreases in accounts payable and accrued expenses, but was partially off set by increases in depreciation and net income.
Net cash used in investing activities increased $68,511,000, or 506%, from $13,551,000 for fiscal 1996 to $82,062,000 for fiscal 1997. The increase is primarily the result of increased capital expenditures for well service operations and well service acquisitions.
Net cash provided by financing activities was $117,399,000 for fiscal 1997 as compared to $9,366,000 for fiscal 1996, which represents an increase of $108,033,000, or 1,153%. The increase, which is partially offset by repayments of long-term debt, is primarily the result of proceeds from the existing Debentures and commercial paper during the current fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased by $16.4 million for the year ended June 30, 1998 from $41.7 million as of June 30, 1997 to $25.3 million as of June 30, 1998.
The Company has projected, without consideration of acquisitions subsequent to June 30, 1998, $51 million for oilfield service capital expenditures for fiscal 1999 as compared to $44.3 million and $15 million in fiscal 1998 and 1997, respectively. Odessa Exploration has projected outlays of approximately $6 million in development costs for fiscal 1999, as compared to $7.8 million and $8.2 million in fiscal 1998 and 1997, respectively. The Company's oil and gas well drilling operations have forecast approximately $5 million for capital expenditures for fiscal 1999, primarily for improvements to existing equipment and machinery, as compared to $5.4 million for fiscal 1998 and $1.5 million in fiscal 1997. The Company expects to finance these capital expenditures and development costs using cash flows from operations and available credit. The Company believes that its cash flows and, to the extent required, borrowings under the Second Amended and Restated Credit Agreement, will be sufficient to fund such expenditures.
Debt
On June 6, 1997, the Company entered into an agreement (the "Initial Credit Agreement") with PNC Bank, N.A. ("PNC"), as administrative agent, and a syndication of other lenders pursuant to which the lenders provided a $255 million credit facility, consisting of a $120 million seven-year term loan and a $135 million five-year revolver. The interest rate on the term loan was LIBOR plus 2.75 percent. The interest rate on the revolver varied based on LIBOR and the level of the Company's indebtedness. The Initial Credit Agreement contained certain restrictive covenants and required the Company to maintain certain financial ratios. On September 25, 1997, the Company repaid the term loan and a portion of the then outstanding amounts under the revolver by applying the proceeds from the initial and second closings of the Company's private placement of $216 million of 5% Convertible Subordinated Notes (discussed below).
Effective November 6, 1997, the Company entered into an Amended and Restated Credit Agreement with PNC (the "Amended PNC Credit Agreement"), as administrative agent and lender, pursuant to which PNC agreed to make revolving credit loans of up to a maximum loan commitment of $200 million. The maximum commitment decreases to $175 million on November 6, 2000 and to $125 million on November 6, 2001. The loan commitment terminates on November 6, 2002. Borrowings under the credit facility may be either (i) Eurodollar Loans with interest currently payable quarterly at LIBOR plus 1.25% subject to adjustment based on certain financial ratios, (ii) Base Rate Loans with interest payable quarterly at the greater of PNC Prime Rate or the Federal Funds Effective Rate plus 1/2%, or (iii) a combination thereof, at the Company's option. The Amended PNC Credit Agreement contains certain restrictive covenants and requires the Company to maintain certain financial ratios. A change of control of the Company, as defined in the Amended PNC Credit Agreement, is an event of default. Borrowings under the Amended PNC Credit Agreement are secured by substantially all of the assets of the Company and its domestic subsidiaries.
Effective December 3, 1997, PNC completed the syndication of the Amended PNC Credit Agreement. In connection therewith, PNC, as administrative agent, a syndication of lenders and the Company entered into a First Amendment to the Amended and Restated Credit Agreement (the "Amendment to Amended PNC Credit Agreement") providing for, among other things, an increase in the maximum commitment to $250 million from $200 million.
On September 25, 1997, the Company completed an initial closing of its private placement of $200 million of 5% Convertible Subordinated Notes due 2004 (the "Notes"). On October 7, 1997, the Company completed a second closing of its private placement of an additional $16 million of Notes pursuant to the exercise of the remaining portion of the over-allotment option granted to the initial purchasers of the Notes. The placements were made as private offerings pursuant to Rule 144A under the Securities Act of 1933. The Notes are subordinate to the Company's senior indebtedness, which, as defined in the indenture under which the Notes were issued, includes the borrowings under the Amended PNC Credit Agreement, as amended. The Notes are convertible, at the holder's option, into shares of Common Stock at a conversion price of $38.50 per share, subject to certain adjustments.
The Notes are redeemable, at the Company's option, on or after September 15, 2000, in whole or part, together with accrued and unpaid interest. The initial redemption price is 102.86% for the year beginning September 15, 2000 and declines ratably thereafter on an annual basis.
In July 1996, the Company completed a $52,000,000 private offering of 7% Convertible Subordinated Debentures due 2003 (the "Debentures") pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). The Debentures are subordinate to the Company's senior indebtedness, which as defined in the indenture pursuant to which the Debentures were issued includes the borrowings under the Amended PNC Credit Agreement, as amended.
The Debentures are convertible, at any time prior to maturity, at the holders' option, into shares of Common Stock at a conversion price of $9.75 per share, subject to certain adjustments. In addition, Debenture holders who convert prior to July 1, 1999 will be entitled to receive a payment, in cash or Common Stock (at the Company's option), generally equal to 50% of the interest otherwise payable from the date of conversion through July 1, 1999.
The Debentures are redeemable, at the option of the Company, on or after July 15, 1999, at a redemption price of 104%, decreasing 1% per year on each anniversary date thereafter. In the event of a change in control of the Company, as defined in the indenture under which the Debentures were issued, each holder of Debentures will have the right, at the holder's option, to require the Company to repurchase all or any part of the holder's Debentures within 60 days of such event at a price equal to 100% of the principal amount thereof, together with accrued and unpaid interest thereon.
As of June 30, 1998, $47,400,000 in principal amount of the Debentures had been converted into 4,861,538 shares of common stock at the option of the holders. An additional 165,423 shares of common stock were issued representing 50%
of the interest otherwise payable from the date of conversion through July 1, 1999, and an additional 35,408 shares of common stock were issued as an inducement to convert. The additional 165,423 shares of common stock, representing 50% of the interest otherwise payable from the date of conversion through July 1, 1999, are included in equity. The fair value of the additional 35,408 shares of common stock issued as inducement to convert was $710,186 and is recorded as interest expense in the consolidated statement of operations. In addition, the proportional amount of unamortized debt issuance costs associated with the converted Debentures was charged to additional paid-in capital at the time of conversion.
Impact of SFAS 121
As of July 1, 1996, the Company adopted the provisions of Statement of Financial Accounting Standards No. 121 - Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("FAS 121"). Consequently, the Company reviews its long-lived assets to be held and used, including oil and gas properties accounted for under the successful efforts method of accounting, whenever events or circumstances indicate that the carrying value of those assets may not be recoverable. Long-lived assets to be disposed of are to be accounted for at the lower of carrying amount or fair value less cost to sell when management has committed to a plan to dispose of the assets. All companies, including successful efforts oil and gas companies, are required to adopt FAS 121 for fiscal years beginning after December 15, 1995. In order to determine whether an impairment had occurred, the Company estimated the expected future cash flows of its income producing equipment and oil and gas properties and compared such future cash flows to the carrying amount of the asset to determine if the carrying amount was recoverable. Based on this process, no writedown in the carrying amount of the Company's property was necessary at June 30, 1998.
Impact of Recently Issued Accounting Standards
The Financial Accounting Standards Board has recently issued the following accounting standards which will be adopted by the Company in the future.
Statement of Financial Accounting Standards No. 130 ("SFAS 130") - Reporting Comprehensive Income, is effective for fiscal years beginning after December 15, 1997. SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Specifially, SFAS 130 requires that an enterprise (i) classify items of other comprehensive income by their nature in a financial statement and (ii) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The Company will adopt SFAS 130 in the first quarter of its fiscal year ended June 30, 1999.
Statement of Financial Accounting Standards No. 131 ("SFAS 131") - Disclosures about Segments of an Enterprise and Related Information, is effective for financial statements for periods beginning after December 15, 1997. SFAS 131 establishes standards for the way that company's report information about operating segments in annual financial statements and requires that those company's report selected information about operating segments in interim financial reports issued to shareholders. This statement also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS 131 need not be applied to interim financial statements in the initial year of its application. However, comparative information for interim periods in the initial year of application is to be reported in the financial statements for interim periods in the second year of application. The Company will adopt SFAS 131 for the fiscal year ended June 30, 1999.
Impact of Inflation on Operations
Management is of the opinion that inflation has not had a significant impact on the Company's business.
Year 2000 Issue
As a result of the acquisitions completed by the Company over the past twenty-four months, the Company utilizes several management information systems in connection with its business operations and financial reporting process. The Company made an assessment of its Year 2000 issues, and determined that many of these management information systems would be adversely impacted by the arrival of the Year 2000.
Accordingly, for operational efficiency, and to prevent any adverse impacts that may result from the arrival of the Year 2000, the Company is currently implementing a new integrated management information system along with updated hardware that will replace most of the systems currently utilized. The implementation of the new management information system, which is Year 2000 compliant, began in July of 1998 and is scheduled to be completed by June of 1999, assuming no unforeseen circumstances which are beyond the Company's control. Year 2000 issues as they relate to suppliers and customers remain to be evaluated by the Company. However, based on current available information, the Company does not anticipate that the costs associated with any necessary modifications will be material to the Company's operations or financial condition.
The cost of the new management information system, (a large part of which management expects will be capitalized) is not expected to have a material impact on the Company's business, operations or results thereof, financial condition, liquidity or capital resources.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Presented herein are the consolidated financial statements of Key Energy Group, Inc. and Subsidiaries as of June 30, 1998 and 1997 and the years ended June 30, 1998, 1997 and 1996.
Also, included is the report of KPMG Peat Marwick LLP, independent certified public accountants, on such consolidated financial statements as of June 30, 1998 and 1997 and for the years ended June 30, 1998, 1997 and 1996.
Page
Consolidated Balance Sheets 20
Consolidated Statements of Operations 21
Consolidated Statements of Cash Flows 22
Consolidated Statements of Stockholders' Equity 23
Notes to Consolidated Financial Statements 24
Independent Auditors' Report 50
Key Energy Group, Inc. and Subsidiaries Consolidated Balance Sheets
Key Energy Group, Inc. and Subsidiaries Consolidated Statements of Operations
Key Energy Group, Inc. and Subsidiaries Consolidated Statements of Cash Flows
Key Energy Group, Inc. and Subsidiaries Consolidated Statements of Stockholders' Equity
Key Energy Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1998, 1997 and 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Key Energy Group, Inc. herein after referred to as the "Company" or "Key", was organized in April 1977, and commenced operations in July 1978. Results of operations for the twelve months ended June 30, 1998, 1997 and 1996 include the Company's oilfield service operations conducted by its wholly-owned subsidiary, Yale E. Key, Inc., ("Yale E. Key"), the Company's oil and gas exploration and production wholly-owned subsidiary, Odessa Exploration Incorporated ("Odessa Exploration"), and the Company's oil and gas well drilling operations conducted by the Company's wholly-owned subsidiary, Key Energy Drilling, Inc. ("Key Energy Drilling"). Also included in the results of operations for the fiscal year ended June 30, 1998 and 1997 and approximately three months for the fiscal year ended June 30, 1996 are those operating results from the Company's wholly-owned subsidiary, WellTech Eastern, Inc. ("WellTech Eastern") which currently holds the assets acquired in the merger with WellTech, Inc. ("WellTech"), on March 26, 1996 (see Note 2). In addition, as a result of the Welltech acquisition, the Company acquired 63% ownership in Servicios WellTech, S.A. ("Servicios"), an Argentina corporation. In July 1997, the Company acquired the remaining 37% ownership in Servicios. Servicios conducts oilfield services operations in Argentina and was consolidated with a minority interest prior to July 1997. In addition, results of operations for a portion of the fiscal year ended June 30, 1998 are those operating results from the Company's wholly-owned subsidiaries, Key Rocky Mountain, Inc. ("Key Rocky Mountain") and Key Four Corners, Inc. ("Key Four Corners"), both of which were formed as the result of several acquisitions during the fiscal year ended June 30, 1998. (see Note 2)
Basis of Presentation
The Company's consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and balances have been eliminated. The accounting policies presented below have been followed in preparing the accompanying consolidated financial statements.
Estimates and Uncertainties
Preparation of the accompanying consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Inventories
Inventories, which consist primarily of well service parts and supplies and those parts and supplies held for sale at the Company's various retail supply stores, are valued at the lower of average cost or market.
Property and Equipment
The Company provides for depreciation and amortization of well service and related equipment using the straight-line method, with an overall average salvage value of approximately 10%, over the following estimated useful lives of the assets: (table follows on next page)
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Description Years ---------------------------------------- Oilfield service equipment 3 - 20 Motor vehicles 3 - 7 Furniture and equipment 3 - 10 Buildings and improvements 10 - 40 Gas processing facilities 10 ----------------------------------------
Upon disposition or retirement of property and equipment, the cost and related accumulated depreciation are removed from the accounts and the gain or loss thereon, if any, is included in the results of operations.
Odessa Exploration utilizes the successful efforts method of accounting for its oil and gas properties. Under this method, all costs associated with productive wells and nonproductive development wells are capitalized, while nonproductive exploration costs and geological and geophysical costs (if any), are expensed. Capitalized costs relating to proved properties are depleted using the unit-of-production method. Upon disposition, the carrying amounts of properties sold or otherwise disposed of and the related allowance for depletion are eliminated from the accounts and any gain/loss is included in results of operations.
As of July 1, 1997 the Company changed their method of calculating depreciation on its oil and gas well drilling rigs from the straight-line method to the units-of-production method. The new method takes into consideration the number of days the rigs are actually in service each month and depreciation is recorded for at least 15 days each month for each rig that is available for service. The Company believes the new method will more appropriately reflect its financial results by better matching of revenues with expenses and to better reflect how the assets are to be used over time. The effect of this change on net income for 1998, 1997 and 1996 was not material.
Environmental
The Company is subject to extensive federal, state and local environmental laws and regulations. These laws, which are constantly changing, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed. Liabilities for expenditures of a noncapital nature are recorded when environmental assessment and/or remediation is probable, and the costs can be reasonably estimated.
Other Assets and Goodwill
Other assets consist primarily of goodwill, capitalized debt issuance costs, investment in common stock (accounted for using the cost-method) and security and escrow deposits from Key's workers' compensation retrospective insurance program, in addition to an interest, (approximately 13%), in an insurance company (the insurance company is affiliated with Key's workers' compensation carrier).
Marketable equity securities are deemed by management to be available for sale and are classified in the consolidated balance sheet at fair value of approximately $12,307,000 as other long-term assets with net unrealized gains of approximately $2,346,000 reported within stockholders' equity.
At June 30, 1998, 1997 and 1996, the Company classified as goodwill the cost in excess of fair value of the net tangible assets acquired in purchase transactions. Goodwill of $37,122,000 was added in 1998. Goodwill is being amortized on a straight-line basis over ten to twenty-five years. Management continually evaluates whether events or circumstances have occurred that indicate the remaining useful life of goodwill may warrant revision or the remaining balance of goodwill may not be recoverable. Goodwill amortization expense totaled $1,442,000 for fiscal 1998 and $622,000 for fiscal 1997 and $100,000 for fiscal 1996. Debt issuance costs are amortized over the term of the applicable debt and such amortization is classified as interest expense. Amortization of debt issuance costs totaled $2,006,000 and $344,000 for the fiscal years ended 1998 and 1997, respectively.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Earnings per Share
The Company accounts for earnings per share upon Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). Under SFAS 128, basic earnings per common share are determined by dividing net earnings applicable to common stock by the weighted average number of common shares actually outstanding during the year. Diluted earnings per common share is based on the increased number of shares that would be outstanding assuming conversion of dilutive outstanding convertible securities using the "as if converted" method. Year Ended (thousands, except per share data) ------------------------------------ 6/30/98 6/30/97 6/30/96 ------------------------------------ Basic EPS Computation: Numerator- Net Income $ 24,175 $ 9,098 $ 3,586 Denominator- Weighted Average Common Shares Outstanding 17,153 11,216 7,789 ----------------------------------- Basic EPS $ 1.41 $ 0.81 $ 0.46 =================================== Diluted EPS Computation: Numerator- Net Income $ 24,175 $ 9,098 $ 3,586
Effect of dilutive securities, tax effected: Convertible Securities 5,331 2,578 - ------------------------------------ $ 29,506 $ 11,676 $ 3,586 ------------------------------------ Denominator- Weighted Average Common Shares Outstanding: 17,153 11,216 7,789 Warrants 141 340 - Stock options 1,266 743 152 7% Convertible Debentures 1,191 5,333 - 5% Convertible Debentures 4,273 - - ------------------------------------ 24,024 17,632 7,941 ------------------------------------ Diluted EPS $ 1.23 $ 0.66 $ 0.45 ===================================
Income Taxes
The Company accounts for income taxes based upon Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. A valuation allowance for deferred tax assets is recognized when it is "more likely than not" that the benefit of deferred tax assets will not be realized.
The Company and its eligible subsidiaries file a consolidated U. S. federal income tax return. Certain subsidiaries that are consolidated for financial reporting purposes are not eligible to be included in the consolidated U. S. federal income tax return and separate provisions for income taxes have been determined for these entities or groups of entities.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of temporary cash investments and trade receivables. The Company restricts investment of temporary cash investments to financial institutions with high credit standing and by policy limits the amount of credit exposure to any one financial institution. The Company's customer base consists primarily of multi-national, foreign national and independent oil and natural gas producers. See Note 12 for additional information regarding customers which accounted for more than 10% of consolidated revenues. The Company performs ongoing credit evaluations of its customers and generally does not require collateral on its trade receivables. Such credit risk is considered by management to be limited due to the large number of customers comprising the Company's customer base. The Company maintains reserves for potential credit losses, and such losses have been within management's expectations.
Impact of SFAS 121
On July 1, 1996, the Company adopted the provisions of Statement of Financial Accounting Standards No. 121 - Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("FAS 121"). This Statement requires that long-lived assets, goodwill and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Adoption of this Statement did not have an impact on the Company's consolidated financial position, results of operations, or liquidity.
Stock-based Compensation
The Company accounts for employee stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"). Accordingly, the company has only adopted the disclosure provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). See Note 8 for the pro forma disclosures of compensation expense determined under the fair-value provisions of SFAS 123.
Cash and Cash Equivalents
For cash flow purposes, the Company considers all unrestricted highly liquid investments with less than a three month maturity when purchased as cash equivalents.
Reclassifications
Certain reclassifications have been made to the fiscal 1997 and 1996 consolidated financial statements to conform to the fiscal 1998 presentation.
Impact of Recently Issued Accounting Standards
The Financial Accounting Standards Board has recently issued the following accounting standards which will be adopted by the Company in the future:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Statement of Financial Accounting Standards No. 130 ("SFAS 130") - Reporting Comprehensive Income, is effective for fiscal years beginning after December 15, 1997. SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. Specifially, SFAS 130 requires that an enterprise (i) classify items of other comprehensive income by their nature in a financial statement and (ii) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The Company will adopt SFAS 130 in the first quarter of its fiscal year ended June 30, 1999.
Statement of Financial Accounting Standards No. 131 ("SFAS 131") - Disclosures about Segments of an Enterprise and Related Information, is effective for financial statements for periods beginning after December 15, 1997. SFAS 131 establishes standards for the way that company's report information about operating segments in annual financial statements and requires that those company's report selected information about operating segments in interim financial reports issued to shareholders. This statement also establishes standards for related disclosures about products and services, geographic areas, and major customers. SFAS 131 need not be applied to interim financial statements in the initial year of its application. However, comparative information for interim periods in the initial year of application is to be reported in the financial statements for interim periods in the second year of application. The Company will adopt SFAS 131 for the fiscal year ended June 30, 1999.
Impact of Inflation on Operations
Although in our complex environment it is extremely difficult to make an accurate assessment of the impact of inflation on the Company's operations, management is of the opinion that inflation has not had a significant impact on its business.
2. BUSINESS AND PROPERTY ACQUISITIONS
The following acquisitions have been completed during fiscal 1998 are included in the Company's results of operations for the twelve months ended June 30, 1998. Each of the acquisitions were accounted for using the purchase method of accounting. Unless otherwise noted, the purchase prices specified below are based on cash paid and/or the fair value of the Company's common stock, par value $0.10 (the "Common Stock").
Transportes Dimopulos S.R.L.
On June 5, 1998, the Company completed the acquisition of Transportes Dimopulos S.R.L. ("Transportes") which operates in Argentina. Transportes was acquired for approximately $2.2 million in cash and future obligations and included approximately 28 oilfield service trucks and trailers, all located in Argentina. The operating results of Transportes are included in the Company's results of operations effective June 5, 1998.
Watson Truck & Supply, Inc.
On May 19, 1998, the Company completed the acquisition of certain assets of Watson Truck & Supply, Inc. ("Watson") for approximately $2.6 million in cash. The asset purchased included a repair and refurbishment facility and a supply store in Mills, Wyoming. The operating results of Watson are included in the Company's results of operations effective June 1, 1998.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Lakota Drilling Company
On May 22, 1998, the Company completed the acquisition of the assets of Lakota Drilling Company ("Lakota") for approximately $12 million in cash. Lakota operates seven drilling rigs in the Permian Basin region of West Texas. The operating results of Lakota are included in the Company's results of operations effective June 1, 1998.
Odessa Exploration Properties
On June 14, 1998, Odessa Exploration completed the purchase of approximately $8.7 million of oil and gas producing and undeveloped properties from a group of sellers unrelated to the Company.
JPF Well Service, Inc. and JPF Lease Service, Inc.
On April 20, 1998, the Company completed the acquisition of the assets of JPF Well Service, Inc. and JPF Lease Service, Inc. (collectively, "JPF") for approximately $6.2 million in cash. JPF operates nine well service rigs and oilfield construction equipment in Southeast Texas. The operating results of JPF are included in the Company's results of operations effective April 20, 1998.
Edwards Transport, Inc.
On March 27, 1998, the Company completed the acquisition of the assets of Edwards Transport, Inc. ("Edwards") for approximately $3.0 million in cash. Edwards operates fifteen vacuum and pump trucks in West Texas. The operating results of Edwards are included in the Company's results of operations effective April 1, 1998.
Lundy Vacuum Service, Inc.
On March 3, 1998, the Company completed the acquisition of the assets of Lundy Vacuum Service, Inc. ("Lundy") for approximately $1.4 million in cash. Lundy operates eight vacuum trucks, other oilfield fluid hauling trucks and an oilfield construction site buisiness in East Texas. The operating results of Lundy are included in the Company's results of operations effective March 3, 1998.
Lauffer Well Service, Inc.
On March 2, 1998, the Company completed the acquisition of the assets of Lauffer Well Service, Inc. ("Lauffer") for approximately $400,000 in cash. Lauffer operates four well service rigs in Kentucky. The operating results of Lauffer are included in the Company's results of operations effective March 2, 1998.
Updike Brothers, Inc.
On February 6, 1998, the Company completed the acquisition of Updike Brothers, Inc. ("Updike") for approximately $10.6 million in cash. Updike operates 25 well service rigs in Wyoming. The operating results of Updike are included in the Company's results of operations effective February 6, 1998.
Four Corners Drilling Company
On February 4, 1998, the Company completed the acquisition of the assets of Four Corners Drilling Company ("Four Corners") for approximately $10.0 million in cash. Four Corners owns 12 drilling rigs in the four corners region of the Southwestern United States. The operating results of Four Corners are included in the Company's results of operations effective February 4, 1998.
Kingsley Enterprises, Inc. d/b/a Legacy Drilling Co.
On January 30, 1998, the Company completed the acquisition of Kingley Enterprises, Inc. d/b/a Legacy Drilling Co. ("Legacy") for approximately $2.6 million in cash. Legacy operates four drilling rigs in the Permian Basin region
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
of West Texas. The operating results of Legacy are included in the Company's results of operations effective February 1, 1998.
Circle M Vacuum Services, Inc.
On January 30, 1998, the Company completed the acquisition of the assets of Circle M Vacuum Services, Inc. ("Circle M") for approximately $800,000 in cash. Circle M operates four vacuum trucks, trailers and a salt water disposal well in Southeast Texas. The operating results of Circle M are included in the Company's results of operations effective February 1, 1998.
Hot Oil Plus, Inc.
On January 29, 1998, the Company completed the acquisition of the assets of Hot Oil Plus, Inc. ("Hot Oil Plus") for approximately $2.2 million in cash. Hot Oil Plus operates eight hot oil trucks, a pump truck and a steam heater in Southeast Texas. The operating results of Hot Oil Plus are included in the Company's results of operations effective February 1, 1998.
J.W. Gibson Well Service Company
On January 8, 1998, the Company completed the acquisition of J.W. Gibson Well Service Company ("Gibson") for approximately $25.8 million, consisting of $23.9 million in cash, 100,000 shares of Common Stock and warrants to acquire 265,000 shares of Common Stock at an exercise price of $18.00 per share, subject to certain adjustments.
Gibson operates 74 well service rigs and related equipment in eight states. From August 1, 1997 through the closing of the acquisition, the Company managed the operations of Gibson pursuant to an interim operating agreement. Under the operating agreement, the Company received a management fee equal to the operating income from Gibson's operations less $25,000 per month and received a one-time management fee of $300,000. The total management fee earned from August 1, 1997 through September 30, 1998 of $361,000 is classified as other revenue in the consolidated statement of operations. The operating results of Gibson are included in the Company's consolidated results of operations effective January 8, 1998. The payment of the management fee was not contingent upon closing of this transaction.
Sitton Drilling Co.
On January 1, 1998, the Company completed the acquisition of Sitton Drilling Co. ("Sitton") for approximately $15.0 million, including $12.9 million in cash and 100,000 shares of Common Stock. Sitton operates five drilling rigs in the Permian Basin region of West Texas. The operating results of Sitton are included in the Company's results of operations effective January 1, 1998.
Wellcorps, L.L.C., White Rhino Drilling, Inc. and S&R Cable, Inc.
On December 2, 1997, the Company completed the acquisition of the assets of Wellcorps, L.L.C., White Rhino Drilling, Inc. and S&R Cable, Inc. (collectively the "Critchfield Assets") for approximately $8.4 million, consisting of $2.7 million in cash and 240,000 shares of Common Stock. The Critchfield Assets consist of five land drilling rigs, five well service rigs and other related equipment in Michigan. The operating results of Critchfield Assets are included in the Company's results of operations effective December 2, 1997.
Win-Tex Drilling Co., Inc. and Win-Tex Trucking Corporation
On November 24, 1997, the Company completed the acquisition of Win-Tex Drilling Co., Inc. and Win-Tex Trucking Corporation ("Win-Tex") for approximately $6.5 million in cash. Win-Tex operates six land drilling rigs, trucks, trailers and related equipment in West Texas. The operating results of Win-Tex are included in the Company's results of operations effective December 1, 1997.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Jeter Service Co.
On November 18, 1997, the Company completed the acquisition of Jeter Service Co. ("Jeter") for approximately $6.7 million in cash. Jeter operates 15 well service rigs, an oilfield supply store and an oilfield location construction/maintenance business with 15 trucks and other related equipment in Oklahoma. The operating results of Jeter are included in the Company's results of operations effective December 1, 1997.
GSI Trucking Company, Inc., Kahlden Production Services, Inc. and McCurdy Well Service, Inc.
On October 3, 1997, the Company acquired certain assets of GSI Trucking Company, Inc., Kahlden Production Services, Inc. and McCurdy Well Service, Inc. ("GSI, Kahlden and McCurdy") for approximately $1.8 million in cash. GSI, Kahlden and McCurdy operate 12 fluid and 5 equipment hauling trucks in Southeast Texas. The operating results of GSI, Kahlden and McCurdy are included in the Company's results of operations effective October 3, 1997.
Big A Well Service Co., Sunco Trucking Co. and Justis Supply Co., Inc.
On October 1, 1997, the Company completed the acquisition of substantially all of the assets of Big A Well Service Co., Sunco Trucking Co. and Justis Supply Co., Inc. (collectively "Big A/Sunco") for approximately $31.1 million, consisting of $27 million in cash and 125,000 shares of Common Stock. Big A/Sunco operates 25 well service rigs, four drilling rigs, 75 oilfield trucks, related equipment and a machine shop/supply store in the Four Corners region of the Southwestern United States. The operating results of Big A/Sunco are included in the Company's results of operations effective October 1, 1997.
Frontier Well Service, Inc.
On September 30, 1997, the Company completed the acquisition of Frontier Well Service, Inc. ("Frontier") for approximately $3.5 million in cash. Frontier operates 12 well service rigs and related equipment in Wyoming. The operating results of Frontier are included in the Company's results of operations effective October 1, 1997.
Dunbar Well Service, Inc.
On September 29, 1997, the Company completed the acquisition of Dunbar Well Service, Inc. ("Dunbar") for approximately $11.8 million in cash. Dunbar operates 38 well service rigs and related equipment in Wyoming. The operating results of Dunbar are included in the Company's results of operations effective October 1, 1997.
BRW Drilling, Inc.
On September 25, 1997, the Company completed the acquisition of BRW Drilling, Inc. ("BRW") for approximately $14.6 million in cash. BRW operates seven drilling rigs and related equipment in the Permian Basin region of West Texas and Eastern New Mexico. The operating results of BRW are included in the Company's results of operations effective October 1, 1997.
Landmark Fishing & Rental, Inc.
On September 16, 1997, the Company completed the acquisition of Landmark Fishing & Rental, Inc. ("Landmark") for approximately $3.8 million in cash. Landmark operates a rental tool business in Western Oklahoma and the Texas Panhandle. The operating results of Landmark are included in the Company's results of operations effective September 16, 1997.
Waco Oil & Gas Co., Inc.
On September 1, 1997, the Company completed the acquisition of certain assets of Waco Oil & Gas Co., Inc. ("Waco") for approximately $7.0 million in cash. The Waco assets included 12 well service rigs, three drilling rigs, 33 oilfield trucks operated in West Virginia. Following the consummation of the acquisition, the three drilling rigs acquired from Waco were sold to an independent third party for $2.3 million in cash. No gain or loss was recognized in the sale of these rigs. The operating results of Waco are included in the Company's results of operations effective September 23, 1997.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Ram Oil Well Service, Inc. and Rowland Trucking Co., Inc.
On September 1, 1997, the Company completed the acquisition of Ram Oil Well Service, Inc. and Rowland Trucking Co., Inc. ("Ram/Rowland") for $21.5 million in cash. Ram/Rowland operates 17 well service rigs, 93 oilfield trucks, 290 frac tanks, three disposal and brine wells, and dirt construction equipment in the Permian Basin region of West Texas and Southeastern New Mexico. The operating results of Ram/Rowland are included in the Company's results of operations effective September 1, 1997.
Mosley Well Service, Inc.
On August 22, 1997, the Company completed the acquisition of Mosley Well Service, Inc., ("Mosley"), which operates 36 well service rigs and related equipment in East Texas, Northern Louisiana and Arkansas, for approximately $17.2 million in cash. The operating results of Mosley are included in the Company's results of operations effective August 22, 1997.
Kenting Holdings (Argentina) S.A.
On July 30, 1997, the Company completed the acquisition of Kenting Holdings (Argentina) S.A. ("Kenting") for approximately $10.1 million in cash. Kenting is the sole shareholder of Kenting Drilling (Argentina) S.A. which operates six well service rigs, three drilling rigs and related equipment in Argentina. The operating results of Kenting are included in the Company's results of operations effective August 1, 1997.
Patrick Well Service, Inc.
On July 17, 1997, the Company completed the acquisition of Patrick Well Service, Inc. ("Patrick") for approximately $7.0 million in cash. Patrick operates 29 well service rigs and related equipment in Southwest Kansas, Oklahoma and Southeast Colorado. The operating results of Patrick are included in the Company's results of operations effective August 1, 1997.
Servicios WellTech S.A.
On July 1, 1997, the Company purchased the remaining 37% minority interest in Servicios WellTech S.A. ("Servicios") from two unrelated parties for approximately $3.4 million in cash. As a result of the purchase, the Company now owns 100% of Servicios. The operating results of the remaining minority interest in Servicios are included in the Company's results of operations effective July 1, 1997.
Acquisition Completed Prior to June 30, 1997
Well-Co Oil Service. Inc.
On June 26, 1997, the Company completed its acquisition of Well-Co Oil Service, Inc. ("Well-Co") which operates 79 well service rigs and related equipment in west Texas. Well-Co was acquired for $17.5 million in cash and 240,000 shares of the Company's common stock. The results of operations of Well-Co are included in the Company's results of operations effective June 26, 1997.
Phoenix Well Service, Inc.
On June 10, 1997, the Company completed its acquisition of Phoenix Well Service, Inc. ("Phoenix") which operates 11 well service rigs and related equipment in west Texas. Phoenix was acquired for $2.3 million in cash. The results of
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
operations of Phoenix are included in the Company's results of operations effective June 26, 1997.
Southwest Oilfield Services, Inc.
On June 10, 1997, the Company completed its acquisition of Southwest Oilfield Services, Inc. ("Southwest") which operates 3 well service rigs and related equipment in western Oklahoma. Southwest was acquired for $455,000 in cash. The results of operations of Southwest are included in the Company's results of operations effective June 10, 1997.
Wireline and Excavation Assets
On May 1, 1997, the Company completed an acquisition of ten wireline units and related equipment for approximately $600,000 in cash. On May 5, 1997, the Company completed its acquisition of several dump trucks and related excavation equipment for $410,000 in cash. The results of operations of these assets are included in the Company's results of operations effective May 1, 1997.
Shreve's Well Service
On April 18, 1997, the Company completed its acquisition of the assets of Shreve's Well Service, Inc. ("Shreve's") which operated in West Virginia. Shreve's assets were acquired for $550,000 in cash and included five well service rigs and related equipment. The results of operations of Shreve's are included in the Company's results of operations effective May 1, 1997.
Argentine Drilling Rigs
On April 16, 1997, the Company acquired three drilling rigs and related equipment in Argentina from Drillers, Inc. for $1.5 million in cash. The drilling rigs will be operated by WellTech Servicios, the Company's Argentine subsidiary.
Diamond Well Service
On April 3, 1997, the Company completed the acquisition of the assets of Diamond Well Service, Inc. ("Diamond") for $675,000 in cash. The Diamond assets included four oilwell service rigs and related equipment in Oklahoma. The results of operations of Diamond are included in the Company's results of operations effective April 1, 1997.
Kalkaska Construction Service, Inc. ,Kalkaska Oilfield Service, Inc. and Elder Well Service, Inc.
On March 31, 1997, the Company completed the acquisition of the assets of Kalkaska Construction Service, Inc., Kalkaska Oilfield Service, Inc. ("KalCon") and Elder Well Service, Inc. ("Elder"), both based in Michigan. The KalCon assets included 40 vacuum (fluid transport) trucks, 40 trucks used in oilfield equipment hauling, seven saltwater disposal wells and other oilfield related equipment, and were acquired for approximately $8.5 million in cash and 77,998 shares of the Company's common stock. The Elder assets included six well service rigs and related equipment and were acquired for $609,000 in cash. The operating results of KalCon and Elder are included in the Company's results of operations effective April 1, 1997.
T.S.T. Paraffin Service Co., Inc.
On March 27, 1997, the Company completed the acquisition of T.S.T. Paraffin Service Co., Inc. ("TST") for $8.7 million in cash. TST operates approximately 61 trucks, 22 hot oil units and other related equipment in west Texas. The operating results of TST are included in the Company's results of operations effective April 1, 1997.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Tri-State Wellhead & Valve, Inc.
The Company completed its acquisition of the assets of Tri-State Wellhead & Valve, Inc. ("Tri-State") on March 17, 1997 for $550,000 in cash and 83,770 shares of the Company's common stock. The Tri-State assets consisted of a wellhead equipment rental business and five well service rigs. The operating results from these assets are included in the Company's results of operations effective April 1, 1997.
Cobra Industries, Inc.
Effective as of January 13, 1997, the Company completed the purchase of Cobra Industries, Inc. ("Cobra") for $5 million in cash and 175,000 shares of the Company's common stock. Cobra operates 26 well service rigs in southeastern New Mexico. The operating results from Cobra are included in the Company's results of operations effective February 1, 1997.
Talon Trucking Co.
Effective as of January 7, 1997, the Company completed the acquisition of the assets of Talon Trucking Co. ("Talon") for $2.7 million in cash. Talon operated three well service rigs, 21 trucks and related fluid transportation and disposal assets in Oklahoma. The operating results from these assets are included in the Company's results of operations effective January 7, 1997.
B&L Hotshot, Inc.
Effective as of December 13, 1996, the Company completed the acquisition of B&L Hotshot, Inc. and affiliated entities ("B&L") for $4.9 million in cash. B&L provides trucking and related services for oil and natural gas wells in Michigan. The operating results from B&L are included in the Company's results of operations effective January 1, 1997.
Brooks Well Servicing, Inc.
Effective as of December 1, 1996, the Company completed the acquisition of Brooks Well Servicing, Inc. ("Brooks") for 917,500 shares of the Company's common stock. Brooks was a wholly-owned subsidiary of Hunt Oil Company and operated 32 well service rigs and ancillary equipment in east Texas. The operating results from Brooks are included in the Company's results of operations effective December 1, 1996.
Hitwell Surveys, Inc.
Effective as of December 2, 1996, the Company completed the purchase of Hitwell Surveys, Inc. ("Hitwell") for approximately $1.3 million in cash. Hitwell operates eight well logging and perforating trucks in the Appalachian Basin and Michigan. The operating results from Hitwell are included in the Company's results of operations effective December 1, 1996.
Energy Air Drilling Services Co.
Effective as of November 1, 1996, the Company completed the acquisition of certain assets of Energy Air Drilling Services Co. ("Energy Air") for $500,000 in cash and 4,386 shares of the Company's common stock. Energy Air operated four air drilling packages in west Texas.
Brownlee Well Service Inc.
Effective as of October 24, 1996, the Company completed the purchase of Brownlee Well Service, Inc. ("Brownlee") and Integrity Fishing and Rental Tools Inc., ("Integrity"). Consideration for the acquisition was $6.5 million in cash and
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
61,069 shares of the Company's common stock. Brownlee and Integrity operate 16 well service rigs with ancillary equipment and a variety of oilfield fishing tools in west Texas. The operating results from Brownlee are included in the Company's results of operations effective November 1, 1996.
Woodward Well Service, Inc
Effective as of October 1, 1996, the Company completed the acquisition of Woodward Well Service, Inc. ("Woodward") for 75,000 shares of the Company's common stock and approximately $100,000 in cash, most of which is payable over a four-year period. Woodward operated five well service units in Oklahoma. The operating results from Woodward are included in the Company's results of operations effective October 1, 1996.
Acquisitions Completed Prior to June 30, 1996
Odessa Exploration Properties
In April of 1996, Odessa Exploration purchased approximately $6.9 million in cash of oil and gas producing properties from an unrelated company using proceeds from bank borrowings, which indebtedness was subsequently repaid.
WellTech, Inc.
On March 26, 1996, the Company completed the merger of WellTech, Inc. ("WellTech") into the Company. The net consideration for the merger was 3,500,000 shares of the Company's common stock and warrants to purchase 500,000 additional shares of Common Stock at an exercise price of $6.75 per share. WellTech conducted oil and gas well servicing operations in the Mid-Continent and Northeast areas of the United States and in Argentina.
Pro Forma Results of Operations - (unaudited)
The following unaudited pro forma results of operations have been prepared as though Well-Co, Cobra and T.S.T., Ram/Rowland, Coleman, Dunbar, Gibson, Updike and Lakota had been acquired on July 1, 1996. Proforma amounts are not necessarily indicative of the results that may be reported in the future.
Year Ended ---------------------------------------- (Thousands, except per share data) June 30, 1998 June 30, 1997 ----------------------------------------------------------------------------- Revenues $ 459,764 $316,656 Net income 26,075 13,342
Basic earnings per share $ 1.52 $ 1.19
3. OTHER ASSETS
Other assets consist of the following: June 30, (Thousands) 1998 1997 --------------------------------------------------------------------------- Investment in securities $12,325 $ - Workers compensation security deposits 1,418 1,817 Debt issuance costs (net of amortization; 1998 - $2,350, 1997 - $344) 11,869 7,045 Other 1,383 458 --------------------------------------------------------------------------- $26,995 $9,320 ===========================================================================
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
4. COMMITMENTS AND CONTINGENCIES
Various suits and claims arising in the ordinary course of business are pending against the Company. Management does not believe that the disposition of any of these items will result in a material adverse impact to the consolidated financial position of the Company.
During 1995 and subsequent fiscal years, the Company entered into employment agreements with certain of its officers. These employment agreements generally run for two fiscal years, but can be automatically be extended on a yearly basis unless terminated by the Company or the applicable officer. In addition to providing a base salary for each officer, the employment agreements provide for severance payments for each officer varying from 12 to 24 months of the officers base salary. The current annual base salaries for the officers covered under such employment agreements total approximately $1,189,000.
5. LONG-TERM DEBT
The components of long-term debt are as follows: June 30, (Thousands) 1998 1997 ----------------------------------------------------------------- PNC Credit Facility (i) $172,000 $120,000 5% Subordinated Debentures (ii) 216,000 - 7% Subordinated Debentures (iii) 4,600 52,000 Other notes payable (iv) 7,179 2,167 ----------------------------------------------------------------- 399,779 174,167 Less current portion 1,848 1,404 ----------------------------------------------------------------- Long-term debt $397,931 $172,763 =================================================================
(i) PNC Credit Facility
On June 6, 1997, the Company entered into an agreement (the "Initial Credit Agreement") with PNC Bank, N.A. ("PNC"), as administrative agent, and a syndication of other lenders pursuant to which the lenders provided a $255 million credit facility, consisting of a $120 million seven-year term loan and a $135 million five-year revolver. The interest rate on the term loan was LIBOR plus 2.75 percent. The interest rate on the revolver varied based on LIBOR and the level of the Company's indebtedness. The Initial Credit Agreement contained certain restrictive covenants and required the Company to maintain certain financial ratios. On September 25, 1997, the Company repaid the term loan and a portion of the then outstanding amounts under the revolver by applying the proceeds from the initial and second closings of the Company's private placement of $216 million of 5% Convertible Subordinated Notes (discussed below).
Effective November 6, 1997, the Company entered into an Amended and Restated Credit Agreement with PNC (the "Amended PNC Credit Agreement"), as administrative agent and lender, pursuant to which PNC agreed to make revolving credit loans of up to a maximum loan commitment of $200 million. The maximum commitment decreases to $175 million on November 6, 2000 and to $125 million on November 6, 2001. The loan commitment terminates on November 6, 2002. Borrowings under the credit facility may be either (i) Eurodollar Loans with interest currently payable quarterly at LIBOR plus 1.25% subject to adjustment based on certain financial ratios, (ii) Base Rate Loans with interest payable quarterly at the greater of PNC Prime Rate or the Federal Funds Effective Rate plus 1/2%, or (iii) a combination thereof, at the Company's option. The Amended PNC Credit Agreement contains certain restrictive covenants and requires the Company to maintain certain financial ratios. A change of control of the Company, as defined in the Amended PNC Credit Agreement, is an event of default. Borrowings under the Amended PNC Credit Agreement are secured by substantially all of the assets of the Company and its domestic subsidiaries.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Effective December 3, 1997, PNC completed the syndication of the Amended PNC Credit Agreement. In connection therewith, PNC, as administrative agent, a syndication of lenders and the Company entered into a First Amendment to the Amended PNC Credit Agreement providing for, among other things, an increase in the maximum commitment to $250 million from $200 million.
In connection with the acquisition of Dawson, the total consideration paid for the Dawson Shares pursuant to the Tender Offer and the First Merger was approximately $181.7 million. The Company's source of funds to pay such amount, certain outstanding debt of Dawson and the Company and related fees and expenses was (i) a bridge loan agreement in the amount of $150,000,000, dated as of September 14, 1998, among the Company, Lehman Brothers Inc., as Arranger, and Lehman Commercial Paper Inc., as Administrative Agent, and the other lenders party thereto (the "Bridge Loan Agreement") and (ii) a $550,000,000 Second Amended and Restated Credit Agreement, dated as of June 6, 1997, as amended and restated through September 14, 1998, among the Company, PNC Bank, National Association, as Administrative Agent, Norwest Bank Texas, N.A., as Collateral Agent, PNC Capital Markets, Inc., as Arranger and the other lenders named from time to time parties thereto (the "Second Amended and Restated Credit Agreement"). In connection with the Bridge Loan Agreement, the Company entered into Registration Rights Agreements (the "Registration Rights Agreements") with Lehman Brothers Inc. and Lehman Commercial Paper Inc. pursuant to which the Company agreed to file with the Securities and Exchange Commission (the "Commission") within a certain time period a registration statement with respect to (i) an offer to exchange borrowings under the Bridge Loan Agreement for a new issue of debt securities of the Company, and (ii) the resale of warrants (and the shares of common stock of the Company to be issued upon the exercise of such warrant) to purchase shares of common stock of the Company issued to Lehman Brothers Inc. in connection with the Bridge Loan Agreement. Loans outstanding after one year pursuant to the Bridge Loan Agreement will convert into term loans which may be exchanged by the holders thereof for exchange notes issued pursuant to an Indenture dated as of September 14, 1998 (the "Indenture"), between the Company and The Bank of New York, trustee.
In addition, the Company, its subsidiaries and U.S. Trust Company of Texas, N.A., trustee ("U.S. Trust"), entered into a Supplemental Indenture dated September 21, 1998 (the "Supplemental Indenture"), pursuant to which the Company assumed the obligations of Dawson under the Indenture dated February 20, 1997 (the "Dawson Indenture") between Dawson and U.S. Trust, most of the Company's subsidiaries guarantied those obligations and the notes issued pursuant to the Dawson Indenture were equally and ratably secured with the obligations under the Second Amended and Restated Credit Agreement. Under the terms of the Dawson Indenture, the Company is required to commence a cash tender offer to purchase at 101% of the aggregate principal amount of the outstanding notes (which the outstanding amount is $140 million) by mid-October 1998, the source of funds for which will be borrowings under the Second Amended and Restated Credit Agreement.
Additionally, the Company has outstanding letters of credit of $2,612,000 as of fiscal 1998 and 1997, related to its workers compensation insurance. Also, the Company is contractually restricted from paying dividends under the terms of the Bridge Loan Agreement and the First Amendment to the Amended PNC Credit Agreement.
(ii) 5% Convertible Subordinated Notes
On September 25, 1997, the Company completed an initial closing of its private placement of $200 million of 5% Convertible Subordinated Notes due 2004 (the "Notes"). On October 7, 1997, the Company completed a second closing of its private placement of an additional $16 million of Notes pursuant to the exercise of the remaining portion of the over-allotment option granted to the initial purchasers of Notes. The placements were made as private offerings pursuant to Rule 144A and Regulation S under the Securities Act. The Notes are subordinate to the Company's senior indebtedness, which, as defined in the indenture under which the Notes were issued, includes the borrowings under the Amended PNC Credit Agreement, as amended. The Notes are convertible, at the holder's option, into shares of Common Stock at a conversion price of $38.50 per share, subject to certain adjustments.
The Notes are redeemable, at the Company's option, on or after September 15, 2000, in whole or part, together with accrued and unpaid interest. The initial redemption price is 102.86% for the year beginning September 15, 2000 and declines ratably thereafter on an annual basis.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
In the event of a change in control of the Company, as defined in the indenture under which the Notes were issued, each holder of Notes will have the right, at the holder's option, to require the Company to repurchase all or any part of the holder's Notes, within 60 days of such event, at a price equal to 100% of the principal amount thereof, together with accrued and unpaid interest thereon.
Proceeds from the placement of the Notes were used to repay balances under the Company's credit facilities (see above). At June 30, 1998, $216,000,000 principal amount of the Notes was outstanding. Interest on the Notes is payable on March 15 and September 15. Interest of approximately $5.1 million was paid on March 15, 1998.
(iii) 7% Convertible Subordinated Debentures
In July 1996, the Company completed a $52,000,000 private offering of 7% Convertible Subordinated Debentures due 2003 (the "Debentures") pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). The Debentures are subordinate to the Company's senior indebtedness, which as defined in the indenture pursuant to which the Debentures were issued includes the borrowings under the Amended PNC Credit Agreement, as amended.
The Debentures are convertible, at any time prior to maturity, at the holders' option, into shares of Common Stock at a conversion price of $9.75 per share, subject to certain adjustments. In addition, Debenture holders who convert prior to July 1, 1999 will be entitled to receive a payment, in cash or Common Stock (at the Company's option), generally equal to 50% of the interest otherwise payable from the date of conversion through July 1, 1999.
The Debentures are redeemable, at the option of the Company, on or after July 15, 1999, at a redemption price of 104%, decreasing 1% per year on each anniversary date thereafter. In the event of a change in control of the Company, as defined in the indenture under which the Debentures were issued, each holder of Debentures will have the right, at the holder's option, to require the Company to repurchase all or any part of the holder's Debentures within 60 days of such event at a price equal to 100% of the principal amount thereof, together with accrued and unpaid interest thereon.
As of June 30, 1998, $47,400,000 in principal amount of the Debentures had been converted into 4,861,538 shares of common stock at the option of the holders. An additional 165,423 shares of common stock were issued representing 50% of the interest otherwise payable from the date of conversion through July 1, 1999 and an additional 35,408 shares of common stock were issued as an inducement to convert. The additional 165,423 shares of common stock, representing 50% of the interest otherwise payable from the date of conversion through July 1, 1999, are included in equity. The fair value of the additional 35,408 shares of common stock issued as inducement to convert was $710,186 and is recorded as interest expense in the consolidated statement of operations. In addition, the proportional amount of unamortized debt issuance costs associated with the converted Debentures was charged to additional paid-in capital at the time of conversion.
At June 30, 1998, $4,600,000 principal amount of the Debentures remained outstanding. Interest on the Debentures is payable on January 1 and July 1 of each year.
(iv) Other Notes Payable
At June 30, 1998, other notes payable consist primarily of capital leases for automotive equipment and equipment leases with varying interest rates and principal and interest payments.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Presented below is a schedule of the repayment requirements of long-term debt for each of the next five years and thereafter as of June 30, 1998:
(in thousands) Fiscal year Principal Ended Amount ---------------------------------------------- 1999 $ 1,848 2000 2,194 2001 1,417 2002 991 2003 177,329 Thereafter 216,000 ---------------------------------------------- $ 399,779 ==============================================
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, other current assets and other current liabilities approximates fair value because of the short maturity of these instruments. Marketable equity securities with a total cost of approximately $9,961,000 are deemed by management to be available for sale and are classified in the consolidated balance sheet at fair value of approximately $12,307,000 as other long-term assets with net unrealized gains of approximately $2,346,000 reported within stockholders equity.
The fair value of the Company's borrowing under its PNC Credit Facility approximates the carrying amount as of June 30, 1998 and 1997, based on the borrowing rates currently estimated to be available to the Company for loans with similar terms.
The 7% subordinated convertible debentures have a carrying value of $4.6 million and $52 million and a fair value of approximately $6.7 million and $98.9 million at June 30, 1998 and 1997, respectively. In addition, the 5% Notes have a carrying value of $216 million and a fair value of approximately $164.1 million at June 30, 1998. The fair value of these debentures was estimated using quoted market prices.
7. OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of the following: June 30, (Thousands) 1998 1997 ---------------------------------------------------------------------- Accrued payroll and taxes $10,852 $ 6,674 Unvouchered accounts payable 3,428 - Group medical insurance 695 891 Workers compensation 794 1,683 State sales, use and other taxes 1,030 247 Gas imbalance - deferred income - 155 Oil and Gas revenue distribution 201 145 Acquisition and reorganization accrual 2,066 838 401(k) monies payable 405 - Other 2,768 1,874 ---------------------------------------------------------------------- Total $22,239 $ 12,507 ======================================================================
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
8. STOCKHOLDERS' EQUITY
On January 13, 1998 the Company's shareholders approved the Key Energy Group, Inc. 1997 Incentive Plan (the "1997 Incentive Plan"). The 1997 Incentive Plan is an amendment and restatement of the plans formerly known as the "Key Energy Group, Inc. 1995 Stock Option Plan" (the "1995 Option Plan") and the "Key Energy Group, Inc. 1995 Outside Directors Stock Option Plan" (the "1995 Directors Plan") (collectively, the "Prior Plans"). All outstanding options previously granted under the Prior Plans and outstanding as of November 17, 1997 (the date on which the Company's Board of Directors adopted the plan)were assumed and continued, without modification, under the 1997 Incentive Plan.
Under the 1997 Incentive Plan, the Company may grant the following awards to key employees, Directors who are not employees ("Outside Directors") and consultants of the Company, its controlled subsidiaries, and its parent corporation, if any: (i) incentive stock options ("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) "nonstatutory" stock options ("NSOs"), (iii) stock appreciation rights ("SARs"), (iv) shares of the restricted stock, (v) performance shares and performance units, (vi) other stock-based awards and (vii) supplemental tax bonuses (collectively, ("Incentive Awards"). ISOs and NSOs are sometimes referred to collectively herein as "Options".
The Company may grant Incentive Awards covering an aggregate of the greater of (i) 3,000,000 shares of the Company's Common Stock and (ii) 10% of the shares of Common Stock issued and outstanding on the last day of each calendar quarter, provided, however, that a decrease in the number of issued and outstanding shares of Common Stock from the previous calendar quarter shall not result in a decrease in Common Stock available for issuance under the 1997 Incentive Plan. Up to 3,000,000 shares of Common Stock shall be available for Incentive Stock Options.
Any shares of Common Stock that are issued and are forfeited or are subject to Incentive Awards under the 1997 Incentive Plan that expire or terminate for any reason will remain available for issuance with respect to the granting of Incentive Awards during the term of the 1997 Incentive Plan, except as may otherwise be provided by applicable law. Shares of Common Stock issued under the 1997 Incentive Plan may be either newly issued or treasury shares, including shares of Common Stock that the Company receives in connection with the exercise of an Incentive Awards. The number and kind of securities that may be issued under the 1997 Incentive Plan and pursuant to then outstanding Incentive Awards are subject to adjustments to prevent enlargement or dilution of rights resulting from stock dividends, stock splits, recapitalizations, reorganization or similar transactions.
The maximum number of shares of Common Stock subject to Incentive Awards that may be granted or that may vest, as applicable, to any one Covered Employee (defined below) during any calendar year shall be 500,000 shares, subject to adjustment under the provisions of the 1997 Incentive Plan.
The maximum aggregate cash payout subject to Incentive Awards (including SARs, performance units and performance shares payable in cash, or other stock-based awards payable in cash) that may be granted to any one Covered Employee during any calendar year is $2,500,000. For purposes of the 1997 Incentive Plan, "Covered Employees" means a named executive officer who is one of the group covered employees as defined in Section 162(m) of the Code and the regulation promulgated thereunder (ie., generally the chief executive officer and the other four most highly compensated executives for a given year.)
The 1997 Incentive Plan is administrated by the Compensation Committee appointed by the Board of Directors (the "Committee") consisting of not less than two
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
directors each of whom is (i) an "outside director" under Section 162(m) of the Code and (ii) a "non-employee director" under Rule 16b-3 of the Securities Exchange Act of 1934 .
The following table summarizes the stock option activity related to the Company's plans: Price Shares Per Share ----------------------------------------------------------------- Outstanding, July 1, 1995 - - Granted 1,075,000 $ 5.00 --------------------------------------------------------------- Outstanding, June 30, 1996 1,075,000 --------------------------------------------------------------- Granted 175,000 $ 7.50 Granted 175,000 $ 8.313 Granted 50,000 $ 8.375 Granted 25,000 $ 8.50 Granted 25,000 $11.125 Granted 535,000 $13.25 Granted 25,000 $14.50 Granted 50,000 $16.875 Canceled (27,000) $ 5.00 Exercised (28,000) $ 5.00 --------------------------------------------------------------- Outstanding, June 30, 1997 2,080,000 --------------------------------------------------------------- Granted 20,000 $18.125 Granted 250,000 $20.4375 Granted 15,000 $20.50 Granted 116,000 $15.00 Granted 15,000 $16.00 Exercised (209,000) $ 5.00 --------------------------------------------------------------- Outstanding, June 30, 1998 2,287,000 ===============================================================
The Company applies APB 25 and related Interpretations in accounting for its stock option awards. Accordingly, no compensation expense has been recognized for its stock option awards. If compensation expense for the stock option awards had been determined consistent with SFAS 123, the Company's net income and net income per share, for the years ended June 30, 1998 and 1997 would have been adjusted to the following pro forma amounts:
(unaudited) Year Ended June 30, 1998 1997 -------------------------------------------------------- Net income (in thousands) $22,452 $8,680 Basic net income per share $ 1.31 $ 0.71 Diluted net income per share $ 1.14 $ 0.61
The pro forma net income and pro forma net income per share amounts noted above are not likely to be representative of the pro forma amounts to be reported in future years. Pro forma adjustments in future years will include compensation expense associated with the options granted in fiscal year 1998 and 1997 plus compensation expense associated with any options awarded in future years. As a result, such pro forma compensation expense is likely to be higher than the levels reflected for 1998 and 1997 if any options are awarded in future years.
Under SFAS 123, the fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grant in 1998 and 1997:
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
1998 1997 --------------------------------------------------------------- Risk-free interest rate 5.79% 6.59% Expected life 5 years 5 years Expected volatility 136% 28% Expected dividend yield 0% 0%
The total fair value of options granted at June 30, 1998 and 1997 is $14,098,000 and $6,541,000, respectively.
9. INCOME TAXES
Components of income tax expense are as follows:
Fiscal Year Ended June 30, (Thousands) 1998 1997 1996 ------------------------------------------------------------------------------ Federal and State: Current $ 7,343 $ 1,664 $ 270 Deferred 7,287 3,836 1,618 ------------------------------------------------------------------------------ $14,630 $ 5,500 $ 1,888 ==============================================================================
Income tax expense differs from amounts computed by applying the statutory federal rate as follows:
Fiscal Year Ended June 30, (Thousands) 1998 1997 1996 ----------------------------------------------------------------------------- Income tax computed at Statutory rate 35.0% 35.0% 34.0% Amortization of goodwill disallowance 1.1 1.5 - Meals and entertainment disallowance 0.7 0.8 1.7 State taxes 0.7 .2 - Other 0.2 0.4 (1.8) ------------------------------------------------------------------------------ 37.7% 37.9% 33.9% ==============================================================================
Deferred tax assets (liabilities) are comprised of the following :
Fiscal Year Ended June 30, (Thousands) 1998 1997 1996 ----------------------------------------------------------------------------- Net operating loss and tax credit carry-forwards $ 5,564 $ 4,628 $ 6,293 Property and equipment (99,664) (40,410) (10,942) Other 2,363 (82) 95 ------------------------------------------------------------------------------ Net deferred tax liability $ 91,737 $ (35,864) $ (4,554) ==============================================================================
A valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. Based on expectations for the future, management has determined that taxable income of the Company will more likely than not be sufficient to fully utilize available carryforwards prior to their ultimate expiration.
The Company estimates that as of June 30, 1998, the Company will have available approximately $3,290,000 of net operating loss carryforwards (which begin to expire in 2001). The net operating loss carryforwards are subject to an annual limitation of approximately $940,000, under Sections 382 and 383 of the Internal Revenue Code.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
10. LEASING ARRANGEMENTS
Among other leases, the Company (primarily its subsidiaries) leases certain automotive equipment under non-cancelable operating leases which expire at various dates through 2002. The term of the operating leases generally run from 36 to 60 months with varying payment dates throughout each month. In addition, in the case of Yale E. Key, each lease includes an option to purchase the equipment and an excess mileage charge as defined in the leases.
As of June 30, 1998, the future minimum lease payments under non-cancelable operating leases, in thousands, are as follows:
Lease Fiscal Year Payments Ending June 30, (thousands) -------------------------------------------------- 1999 $ 7,249 2000 6,022 2001 3,492 2002 1,641 2003 660 --------------------------------------------------- $19,064 ===================================================
Operating lease expense was approximately $8,002,000, $5,299,000, and $2,897,000, for the fiscal years ended June 30, 1998, 1997 and 1996, respectively.
11. EMPLOYEE BENEFIT PLANS
Prior to January 1, 1998, the Company maintained two 401(k) plans (the "Old Plans") for its employees such that employees of WellTech Eastern were eligible for participation in one Plan (the "WellTech 401(k) Plan"), while all other employees were eligible for participation in the other Plan (the "Key 401(k) Plan"). At January 1, 1998, the Company merged the two Old Plans into one plan (the "New Plan"). Both the Old Plans and the New Plan cover substantially all employees of the Company.
After January 1, 1998, under the New Plan, the Company matches 100% of the employees' contributions up to a maximum of $1,000 per participant per year. Contributions to the New Plan after January 1, 1998 totaled $699,108. Prior to January 1, 1998, under the Old Plans, the Company matched employees' contributions up to 10% of the employees' contribution to the Key 401(k) Plan. These contributions totaled approximately $36,000, $35,000 and $19,000 for the six month period ended December 31, 1997 and the years ended June 30, 1997 and 1996, respectively. Additionally, the Company contributed $172,401 and $300,000 into the WellTech 401(k) Plan for the six month period ended December 31, 1997 and the year ended June 30, 1997, respectively . The Company matched employee contributions up to 50% (to a maximum of $1,000 per employee) of the employees' contributions to the WellTech 401(k) Plan.
12. MAJOR CUSTOMERS
Sales to customers representing 10% or more of consolidated revenues for the years ended June 30, 1997, 1996 were as follows:
Fiscal Year Ended June 30, 1997 1996 ------------------------------------------------ Customer A 13% 20% Customer B 7% 11%
The Company did not have any one customer which represented 10% or more of consolidated revenues for the fiscal year ended June 30, 1998.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
13. TRANSACTIONS WITH RELATED PARTIES
WellTech Eastern paid $108,000 and $78,000 for the years ended June 30, 1998 and 1997, respectively, for office/yard rental expense in which an officer of the Company and WellTech Eastern has an interest. In the opinion of the Board of Directors of the Company, based on the Board's review of competitive bids, this transaction was on terms at least as favorable to the Company as could have been obtained from a third party.
Odessa Exploration paid $702,000 for the year ended June 30, 1998 for certain oil and gas assets in a transaction involving a company, the president of which is an outside director of the Company. At June 30, 1998, the Company owed $300,000 to the same company.
14. CONCENTRATIONS OF CREDIT RISK
The Company has a concentration of customers in the oil and gas industry. Substantially all of the Company's customers are major integrated oil companies, major independent producers of oil and gas and smaller independent producers. This may affect the Company's overall exposure to credit risk either positively or negatively, in as much as its customers are effected by economic conditions in the oil and gas industry, which has historically been cyclical. However, accounts receivable are well diversified among many customers and a significant portion of the receivables are from major oil companies, which management believes minimizes potential credit risk. Historically, credit losses have been insignificant. Receivables are generally not collateralized, although the Company may generally secure a receivable at any time by filing a mechanic's and material-mans' lien on the well serviced.
15. BUSINESS SEGMENT INFORMATION
Information about the Company's operations by business segment is as follows:
Year Ended June 30, (Thousands) 1998 1997 1996 --------------------------------------------------------------------------- Identifiable assets: Oilfield services $513,583 $242,001 $94,962 Oil and gas well drilling services 84,579 8,365 5,583 Oil and gas 39,047 23,544 18,170 General corporate 61,431 46,185 3,007 --------------------------------------------------------------------------- $698,640 $320,095 $121,722 =========================================================================== Capital expenditures (excluding acquisitions): Oilfield services $ 44,284 $ 15,084 $ 5,188 Oil and gas well drilling services 5,385 1,483 598 Oil and gas 7,849 8,188 1,879 --------------------------------------------------------------------------- $ 57,518 $ 24,755 $ 7,665 =========================================================================== Depreciation, depletion and amortization: Oilfield services $ 26,060 $ 9,198 $ 3,862 Oil and gas well drilling services 2,450 436 221 Oil and gas 2,043 870 618 General corporate 448 572 - --------------------------------------------------------------------------- $ 31,001 $ 11,076 $ 4,701 ===========================================================================
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The Company's oilfield services subsidiaries operate a variety of oilfield service equipment including workover rigs, hot oil units, transports and various other oilfield servicing equipment. In addition, they perform a variety of other oilfield services including fishing tools, frac tanks and blow-out preventers.
Oil and gas production is conducted by Odessa Exploration. Odessa Exploration acquires and manages interests in producing oil and gas properties for its own account and for its sponsored investors. Odessa Exploration is engaged in the drilling and production of oil and natural gas in the United States. Odessa Exploration acquires producing oil and gas properties from major and independent producers. After acquisition, Odessa Exploration may either rework the acquired wells to increase production and/or form drilling partnerships for additional development wells.
Oil and gas well drilling services are conducted primarily by Key Energy Drilling. Key Energy Drilling operates forty drilling rigs which drill for oil and gas in the West Texas and New Mexico area.
16. SUBSEQUENT EVENTS.
Acquisitions Completed after June 30, 1998
The following acquisitions have been completed after June 30, 1998 and are not included in the Company's results of operations for the twelve months ended June 30, 1998.
Colorado Well Service, Inc.
On July 15, 1998, the Company closed the acquisition of the assets of Colorado Well Service, Inc. ("Colorado") for approximately $6.5 million in cash. Colorado operates seventeen well service rigs and one drilling rig in Utah and Colorado.
TransTexas Assets
On August 19, 1998, the Company completed the acquisition of certain oilfield service assets of TransTexas Gas Corporation ("TransTexas") for approximately $20.5 million in cash and future obligations. The TransTexas assets are based in Laredo, Texas and include nine well service rigs, approximately 80 oilfield service trucks and 173 frac and other tanks.
Flint Asset Purchase
On September 16, 1998, the Company closed the acquisition of certain assets of Flint Engineering & Construction Co., a subsidiary of Flint Industries, Inc. ("Flint") for approximately $11.9 million in cash. Flint operates 55 well service rigs and 25 oilfield trucks in the Rocky Mountains, Four Corners Area, MidContinent Region, Permian Basin and ArkLaTex Region.
Iceberg, S.A.
On September 24, 1998, the Company closed the acquisition of the assets of Iceberg, S.A. ("Iceberg") for approximately $4.4 million in cash. Iceberg operates four well service rigs in Comodoro Rivadavia, Argentina.
HSI Group
On September 24, 1998, the Company closed the acquisition of substantially all of the operating assets of Hellums Services II, Inc., Superior Completion Services, Inc., South Texas Disposal, Inc. and Elsik II, Inc. ("HSI Group") for $47.9 million in cash. HSI Group operates, among other assets, approximately 80 oilfield trucks and eight well service rigs in South Texas.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Dawson Production Services Inc.
On September 15, 1998, Midland Acquisition Corporation ("Midland"), a New Jersey corporation and a wholly-owned subsidiary of the Company, completed its cash tender offer (the "Tender Offer") for all outstanding shares of common stock, par value $0.01 per share (the "Dawson Shares"), including the associated common stock purchase rights, of Dawson at a price of $17.50 per share. The Tender Offer expired at 8:30 a.m., New York City Time, on Tuesday, September 15, 1998. Midland accepted for payment 10,021,601 Dawson Shares for a total purchase price of approximately $175.4 million. The acceptance of tendered Dawson Shares, together with Dawson Shares previously owned by Midland and the Company prior to the commencement of the Tender Offer resulted in Midland and the Company acquiring approximately 97.0% of the outstanding Dawson Shares. The purchase price for Dawson Shares pursuant to the Tender Offer and the merger agreement was determined pursuant to arms-length negotiations between the parties and was based on a variety of factors, including, without limitation, the anticipated earnings and cash flows of Dawson.
The Tender Offer was made pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), dated as of August 11, 1998, by and among, Midland, the Company and Dawson. On September 18, 1998, pursuant to the terms of the Merger Agreement, Midland was merged with and into Dawson (the "First Merger") under the laws of the States of New Jersey and Texas and all Dawson Shares not owned by Midland were cancelled and retired and converted into the right to receive $17.50 in cash. On September 21, 1998, Dawson was merged with and into the Company (the "Second Merger") pursuant to the laws of the States of Maryland and Texas.
The total consideration paid for the Dawson Shares pursuant to the Tender Offer and the First Merger was approximately $181.7 million.
Dawson operates approximately 527 well service rigs, 200 oilfield trucks, and 21 production testing units in South Texas and the Gulf Coast, East Texas and Louisiana, the Permian Basin of West Texas and New Mexico, the Anadarko Basin of Texas and Oklahoma, California, and in the inland waters of the Gulf of Mexico.
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
17. CASH FLOW DISCLOSURES
Supplemental cash flow disclosures for the years ended June 30, 1998, 1997 and 1996 are presented below:
Year Ended June 30, (Thousands) 1998 1997 1996 -------------------------------------------------------------------- Interest paid $ 16,441 $ 5,850 $2,205 Taxes paid 9,024 - 391
Supplemental schedule detailing the purchase price of acquisitions including non-cash consideration paid for the year ended June 30, 1996 is presented below:
(thousands) -------------------------------------------------------------------- Fair value of Common Stock issued for WellTech, Inc. $17,929 Assumption of Welltech, Inc. Working capital deficit 1,734 Assumption of Welltech, Inc. non-current liabilities and debt 27,570 Acquisition of WellTech, Inc. property and equipment 47,455
Supplemental schedule detailing the purchase price of acquisitions including non-cash consideration paid for the year ended June 30, 1997 is presented below (in thousands):
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
Supplemental schedule detailing the purchase price of acquisitions including non-cash consideration paid for the year ended June 30, 1998 is presented below (in thousands):
Key Energy Group Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
18. Unaudited Supplementary Information - Quarterly Results of Operations
Summarized quarterly financial data for 1998 and 1997 are as follows:
(in thousands, except per First Second Third Fourth share amounts Quarter Quarter Quarter Quarter --------------------------------------------------------------------------- Revenues $75,399 $109,595 $120,724 $114,328 Earnings from operations 22,780 33,960 37,281 37,074 Net earnings 4,111 7,345 7,082 5,637 Earnings per share .29 .40 .39 .31 Weighted average common shares and equivalents outstanding 14,126 18,151 18,295 18,261
Revenues $31,462 $36,197 $43,050 $52,921 Earnings from operations 2,396 3,022 3,563 5,621 Net earnings 1,554 2,043 2,365 3,136 Earnings per share .15 .19 .20 .26 Weighted average common shares and equivalents outstanding 10,425 10,850 11,612 11,979
The fourth quarter of fiscal 1997 includes an adjustment of $2 million for previously unrecorded inventory.
Amounts reported for the first quarter of 1998 differ from the amounts previously reported on Form 10-Q, filed for the quarter ended September 30, 1997, due to non-cash adjustments recorded in the fourth quarter which are associated with the 7% debentures converted in the first quarter of fiscal year 1998.
Independent Auditors' Report
To The Board of Directors and Stockholders Key Energy Group, Inc.
We have audited the accompanying consolidated balance sheets of Key Energy Group, Inc. and Subsidiaries as of June 30, 1998 and 1997, 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, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Key Energy Group, Inc. and Subsidiaries as of June 30, 1998 and 1997, and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 1998, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Midland, Texas September 1, 1998
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III.
ITEMS 10 - 13.
Pursuant to Instruction G(3) to Form 10-K, the information required in Items 10-13 is incorporated by reference from the Company's definitive proxy statement, which will be filed with the Commission pursuant to Regulation 14A within 120 days of June 30, 1998.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
(a) Index to Exhibits
The following documents are filed as part of this report:
(1) See Index to Financial Statements set forth in Item 8. (2) Financial Statements Schedules: [None] (3) Exhibits:
2.1 Agreement and Plan o f Merger dated as of November 18, 1995, between Key and WellTech, as amended. (Incorporated by reference to the Company's Registration Statement Form S-4, Registration No. 333-369).
2.2 Joint Plan of Reorganization, dated as of October 20, 1992, of the Company, ESKEY Inc. and YFC International Finance N.V. and Order, dated December 4, 1992, of the United States Bankruptcy Court for the District of New Jersey, approving the Joint Plan of Reorganization (Incorporated by reference to Exhibits 2 (a) and 28 (a) of the Company's Current Report on Form 8-K dated December 14, 1992, File No. 1-8038).
2.3 Agreement and Plan of Merger dated as of July 20, 1993, by and among the Company, OEI Acquisition Corp. and Odessa Exploration Incorporated. (Incorporated by reference to Exhibit 2(a) of the Company's Current Report on Form 8-K dated September 2, 1993, File No. 1-8038).
2.4 Asset Purchase Agreement dated as of December 10, 1993 between the Company and WellTech, Inc. (Incorporated by reference to Exhibit 2(a) of the Company's Current Report on Form 8-K dated August 17, 1984, File No. 1-8038).
3.1 Amended and Restated Articles of Incorporation of the Company (Incorporated by reference to the Company's Registration Statement on Form S-4, Registration No. 333-369).
3.2 Amended and Restated By-Laws of the Company (Incorporated by reference to the Company's Registration Statement on Form S-4 dated March 8, 1996, Registration No. 333-369).
3.3 Amendment to the Amended and Restated Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K dated February 2, 1998, File No. 000-22665, and incorporated herein by reference).
4.1 7% Convertible Subordinated Debenture of the Company due July 1, 2003. (Incorporated by reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
4.2 Indenture for the 7% Convertible Subordinated Debenture of the Company due July 1, 2003. (Incorporated by reference to Exhibit 4.2 of the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
4.3 Registration Rights Agreement among the Company, McMahan Securities Co., L.P. and Rausher Pierce Refsnes, Inc., dated as of July 3, 1996. (Incorporated by reference to Exhibit 4.3 of the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
4.4 Registration Rights Agreement between the Company and D. Kirk Edwards, dated as of July 20, 1993. (Incorporated by reference to Exhibit 10 ( c ) to the Company's Current Report on Form 8-K/A).
4.5 Registration Rights Agreement dated as of March 2, 1996 among the Company and certain of its stockholders. (Incorporated by reference to the Company's Registration Statement on Form S-4, Registration No. 353-369).
4.6 Registration Rights Agreement dated as of March 30, 1995 between the Company, Clint Hurt and Associates, Inc. and Clint Hurt. (Incorporated by reference to Exhibit 10 (d) of the Company's Annual Report on 10-KSB dated June 30, 1995, File No. 1-8038).
4.7 Form of Common Stock Purchase Warrant to Purchase Key Common Stock issued in connection with the WellTech Merger. (Incorporated by reference to the Company's Registration Statement on Form S-4, Registration No. 353-369).
4.8 Indenture dated as of September 25, 1997, among Key Energy Group, Inc. and American Stock Transfer and Trust Company. (Incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
4.9 Registration Rights Agreement among Key Energy Group, Inc., Lehman Brothers Inc., and McMahan Securities Co. L.P. dated as of September 25, 1997. (Incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.1 Employment Agreement between the Company and D. Kirk Edwards, dated as of July 1, 1996. (Incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K for the year ended June 30, 1997, File No. 1-8038)
10.2 Employment Agreement between WellTech Eastern, Inc. and Kenneth Hill, dated as of March 29, 1996. (Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.3 Employment Agreement between the Company and Kenneth Huseman, dated as of August 3, 1996. (Incorporated by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the year ended June 30, 1997, File No. 1-8038)
10.4 Letter Agreement between Van Greenfield and the Company dated May 15, 1996. (Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.5 Amendment No. 2 to the Company's Employment Agreement between Francis D. John and the Company, dated as of May 15, 1996. ( Incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.6 Letter Agreement between Morton Wolkowitz and the Company dated June 3, 1996. ( Incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.7 Asset Purchase Agreement between Hardy Oil & Gas USA, Inc. and Arch Petroleum, Inc. dated as of April 1996. (Incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.8 Asset Purchase Agreement between Arch Petroleum, Inc. and Odessa Exploration, Inc. dated as of April 18, 1996. (Incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.9 General Conveyance by Arch Petroleum, Inc. to Odessa Exploration, Inc. dated as of January 1, 1996. (Incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.10Plan and Agreement of Merger among Key Energy Group, Inc., WellTech Eastern, Inc. and Woodward Well Service, Inc. dated as of September 30, 1996. (Incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.11Stock Purchase Agreement among Key Energy Group, Inc., Reo Brownlee, Elvin Brownlee, Jr. And Elvin Brownlee III dated as of October 24, 1996. (Incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.12Asset Purchase Agreement among Yale E. Key, Inc., Key Energy Group, Inc., Energy Air Drilling Service Co. and Dale Rennels dated as of November 1, 1996. (Incorporated by reference to Exhibit 10( c ) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.13Stock Purchase Agreement among Key Energy Group, Inc., Ed Hitt, Helen Hitt, Michael E. Thompson and Edward Monroe, Jr. Dated as of December 2, 1996. (Incorporated by reference to Exhibit 10(d) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.14Plan and Agreement of Merger among Key Energy Group, Inc., WellTech Eastern, Inc., Hunt Oil Company and Brooks Well Servicing, Inc. dated as of November 22, 1996. (Incorporated by reference to Exhibit 10(e) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.15Asset Purchase Agreement among WellTech Eastern, Inc., B&L Hotshot, Inc., McDowell & Sons, Inc., 4 Star Trucking, Inc., R.B.R. Inc., Royce D. Thomas, John F. McDowell and John R. McDowell dated as of December 13, 1996. (Incorporated by reference to Exhibit 10(f) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.16Asset Purchase Agreement among WellTech Eastern, Inc., Talon Trucking company and Lomak Petroleum, Inc. dated as of December 31, 1996. (Incorporated by reference to Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.17First Supplemental Indenture dated as of November 20, 1996 by and between Key Energy Group, Inc. and American Stock Transfer & Trust Company, as Trustee. (Incorporated by reference to Exhibit 10(i) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.18Stock Purchase Agreement among Key Energy Group, Inc., Michael and Georgia McDermett dated as of January 10, 1997. (Incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.19Asset Purchase Agreement among WellTech Eastern, Inc., Key Energy Group, Inc. Tri State Wellhead & Valve, Inc. and John C. Bozeman dated as of March 14, 1997. (Incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.20Stock Purchase Agreement among Yale E. Key, Inc., Keith and Leslie Neill as of March 24, 1997. (Incorporated by reference to Exhibit 10( c ) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.21Asset Purchase Agreement among Key Energy Group, Inc., WellTech Eastern, Inc., Elder Well Service, Inc., Martha Elder, Kenneth L. Ward, Nona Faye Mugraur, Lela Gaye Biehl and Johnny Ray Johnson dated as of March 28, 1997. (Incorporated by reference to Exhibit 10(d) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.22Asset Purchase Agreement #1 among WellTech Eastern, Inc., Key Energy Group, Inc., Kalkaska Construction Service, Inc., Dennis Hogerheide, LaWenda Hogerheide, David Hogerheide and Derek Hogerheide dated March 31, 1997. (Incorporated by reference to Exhibit 10(e) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.23Asset Purchase Agreement #2 among WellTech Eastern, Inc., Key Energy Group, Inc., Kalkaska Construction Service, Inc., Dennis Hogerheide, LaWenda Hogerheide, David Hogerheide and Derek Hogerheide dated March 31, 1997. (Incorporated by reference to Exhibit 10(f) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.24Stock Purchase Agreement among WellTech Eastern, Inc., Dennis Hogerheide and LaWenda Hogerheide dated as of March 31, 1997. (Incorporated by reference to Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.25Asset Purchase Agreement among WellTech Eastern, Inc., Diamond Well Service, Inc., John Scott and Dwayne Wardwell dated as of April 3, 1997. (Incorporated by reference to Exhibit 10(h) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.26Asset Sale Agreement among WellTech Eastern, Inc. and Drillers, Inc. dated as of April 14, 1997. (Incorporated by reference to Exhibit 10(i) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.27Asset Purchase Agreement among WellTech Eastern, Inc., Shreve's Well Service, Inc. and William A. Shreve dated April 18, 1997. (Incorporated by reference to Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.28Asset Purchase Agreement among WellTech Eastern, Inc. and Petro Equipment, Inc. and Donald E. Clark dated as of May 1, 1997. (Incorporated by reference to Exhibit 10(k) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.29Asset Purchase Agreement among WellTech Eastern, Inc., Southwest Oilfield Services, Inc., David Wright and Roy Wofford dated May 29, 1997. . (Incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.30Stock Purchase Agreement among Yale E. Key, Inc. and Raleigh K. Turn and David Butts dated June 9, 1997. (Incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.31Stock Purchase Agreement among Key Energy Group, Inc. and Mark Duane Massingill and Claudia Lynn Massingill dated as of June 25, 1997. (Incorporated by reference to the Company's Current Report on Form 8-K dated July 9, 1997, File No. 1-8038).
10.32Stock Purchase Agreement among WellTech Eastern, Inc. between Monty D. Elmore dated as of July 17, 1997. (Incorporated by reference to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.33Stock Purchase Agreement between WellTech Eastern, Inc. and Kenting Energy Services, Inc. dated as of July 30, 1997. (Incorporated by reference to Exhibit 10.37 of the Company's Annual Report on Form 10-K for the year ended June 30, 1997, File No. 1-8038)
10.34Stock Purchase Agreement between WellTech Eastern, Inc. and Robert E. Mosley, Jr. et al dated as of August 22, 1997. (Incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.35Credit Agreement dated as of June 6, 1997 among Key Energy Group, Inc., several banks and other financial institutions or entities from time to time parties to the Agreement, PNC Bank, N.A., Norwest Bank of Texas, N.A., and Lehman Commercial Paper Inc. (Incorporated by reference to Exhibit 10.39 to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.36Master Guarantee and Collateral Agreement made by Key Energy Group, Inc. and certain of its Subsidiaries in favor of Norwest Bank of Texas, N.A. dated as of June 6, 1997. (Incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.37Stock Purchase Agreement by and among Nabors Acquisition Corp. IV, as Seller, Key Rocky Mountain, Inc., as Buyer, and Key Energy Group, Inc. dated as of July 31, 1997. ("Gibson Stock Purchase Agreement.") (Incorporated by reference to Exhibit 10(c) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.38Amendment One to the Gibson Stock Purchase Agreement dated as of October 10, 1997.(Incorporated by reference to Exhibit 10(d) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.39Stock Purchase Agreement (Ram Oil Well Service, Inc.) by and among, Yale E. Key, Inc. and Robert D. Calhoon dated as of September 1, 1997 (incorporated by reference to Exhibit 2.2 of the Company's Current Report on Form 8-K dated September 1, 1997, File No. 1-8038).
10.40Stock Purchase Agreement (Rowland Trucking Co.) by and among, Yale E. Key, Inc. and Robert D. Calhoon dated as of September 1, 1997 (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K dated September 1, 1997,File No. 1-8038).
10.41Asset Purchase Agreement among WellTech Eastern, Inc., Waco Oil & Gas Co., Inc. and I.L. Morris dated as of September 1, 1997. (Incorporated by reference to Exhibit 10(h) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.42Asset Purchase Agreement among Key Four Corners, Inc., Key Energy Group,Inc., Coleman Oil & Gas Co., Big A Well Service Co., Sunco Trucking Co., Justis Supply Co., Inc. and George E. Coleman dated as of September 2, 1997 (incorporated by reference to Exhibit 2.1 of the Company's Report on Form 8-K dated October 1, 1997, File No. 1-8038).
10.43Stock Purchase Agreement between WellTech Eastern, Inc. and William Gregory Wines dated as of September 16, 1997. (Incorporated by reference to Exhibit 10(j) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.44Stock Purchase Agreement among, Key Energy Drilling, Inc. and S.K. Rogers, Joe Dee Brooks, Lynn E. Waters and Donnie Roberts dated as of September 25, 1997. (Incorporated by reference to Exhibit 10(k) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.45Stock Purchase Agreement among Key Rocky Mountain, Inc., Joseph R. Dunbar and Janice N. Dunbar dated as of September 29, 1997. (Incorporated by reference to Exhibit 10(m) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.46Stock Purchase Agreement among Key Rocky Mountain, Inc., Bruce L. Bummer, Jack Hartnett, Diane Hartnett and Bruce Bummer 7/14/82 Family Trust dated as of September 30, 1997. (Incorporated by reference to Exhibit 10(n) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.47Amended and Restated Credit Agreement among Key Energy Group, Inc. and several other financial institutions dated as of June 6, 1997 as amended and restated through November 6, 1997. (Incorporated by reference to Exhibit 10(s) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.48First Amendment to the Amended and Restated Credit Agreement dated as of June 6, 1997, as amended and restated through November 6, 1997 dated December 3, 1997. (Incorporated by reference to Exhibit 10(t) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.49Asset Purchase Agreement among WellTech Eastern, Inc. and McCurdy Well Service, Inc. effective as of October 3, 1997. (Incorporated by reference to Exhibit 10(d) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.50Asset Purchase Agreement among WellTech Eastern, Inc. and GSI Trucking Company, Inc. effective as of October 3, 1997. (Incorporated by reference to Exhibit 10(e) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.51Asset Purchase Agreement among WellTech Eastern, Inc. and Kahlden Production Services, Inc. effective as of October 3, 1997. (Incorporated by reference to Exhibit 10(f) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.52Stock Purchase Agreement between WellTech Eastern, Inc. and Donald Jeter, effective as of November 11, 1997. (Incorporated by reference to Exhibit 10(g) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.53Stock Purchase Agreement between Key Energy Drilling, Inc. and Robert C. Jones and Dana Lunette Jones, effective as of November 24, 1997. (Incorporated by reference to Exhibit 10(h) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.54Asset Purchase Agreement among WellTech Eastern, Inc., Key Energy Group, Inc. and White Rhino Drilling, Inc. and Jeff Critchfield, effective as of December 2, 1997. (Incorporated by reference to Exhibit 10(i) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.55Asset Purchase Agreement among WellTech Eastern, Inc., Key Energy Group, Inc., S&R Cable, Inc., Jeff Critchfield, Royce D. Thomas, Ronnie Shaw and Donald Tinker, effective as of December 2, 1997. (Incorporated by reference to Exhibit 10(j) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.56Asset Purchase Agreement among WellTech Eastern, Inc., Wellcorps, L.L.C. and Jeff Critchfield, Terra Energy, Ltd. And Brian Fries, effective as of December 2, 1997. (Incorporated by reference to Exhibit 10(k) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038).
10.57Employment Agreement dated December 5, 1997 by and between Stephen E. McGregor and the Company. (Incorporated by reference to Exhibit 10(e) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-8038)
10.58Stock Purchase Agreement between Key Energy Group, Inc., Key Energy Drilling, Inc. and Ronald M. Sitton and Frank R. Sitton, effective as of December 12, 1997. (Incorporated by reference to Exhibit 10(l) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.59Asset Purchase Agreement between Brooks Well Servicing, Inc. and Sam F. McKee, Individually and d/b/a Circle M Vacuum Services, effective as of January 30, 1998. (Incorporated by reference to Exhibit 10(m) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.60Stock Purchase Agreement between Key Energy Drilling, Inc. and Jack B. Loveless, Jim Mayfield and J.W. Miller, effective as of January 30, 1998. (Incorporated by reference to Exhibit 10(n) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.61Asset Purchase Agreement between Key Four Corners, Inc. and Four Corners Drilling, R.L. Andes and W.E. Lang, effective as of January 30, 1998. (Incorporated by reference to Exhibit 10(o) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.62Asset Purchase Agreement among Key Rocky Mountain, Inc., Updike Brothers, Inc. Employee Stock Ownership Retirement Plan and Trust, David W. Updike Trust, Dorothy A. Updike Trust, Dorothy R. Updike Trust, Mary E. Updike, Ralph O. Updike and Daniel Updike effective February 6, 1998. (Incorporated by reference to Exhibit 10(p) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.63Asset Purchase Agreement among Brooks Well Servicing, Inc., Hot Oil Plus, Inc., Thomas N. Novosad, Jr. and Patricia Novosad effective January 29, 1998. (Incorporated by reference to Exhibit 10(q) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.64Asset Purchase Agreement among Brooks Well Servicing, Inc., Lundy Vacuum Service, Inc. and Peyton E. Lundy effective March 3, 1998. (Incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-8038)
10.65Asset Purchase Agreement among Yale E. Key, Inc., Edwards Transport, Inc. and Tom Nations effective March 26, 1998. (Incorporated by reference to Exhibit 10(b) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-8038)
10.66Asset Purchase Agreement among Brooks Well Servicing, Inc. and JPF Well Service Inc., effective April 20, 1998. (Incorporated by reference to Exhibit 10(c) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-8038)
10.67Asset Purchase Agreement among Brooks Well Servicing, Inc. and JPF Lease Service Inc., effective April 20, 1998. (Incorporated by reference to Exhibit 10(d) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-8038)
* 10.68 Asset Purchase Agreement between Watson Oilfield Service & Supply, Inc. and Watson Truck & Supply, Inc. dated May 19, 1998
* 10.69 Purchase and Sale Agreement among Burnett Corporation, B.O. Cornelius, Ann C. Fatheree, James R. Corbin, Mary Jo Mitton, Birke B. Marsh, H. Cobb, Birke B. Marsh, Trustee of the Corbin Trust, Jamie Kim Corbin, Josh Alan Corbin, Jason J. Corbin, Wilbanks Exploration, Inc. and Odessa Exploration, Inc. dated May 20, 1998.
* 10.70 Asset Purchase Agreement among Key Energy Drilling, Inc., Lakota Drilling Company and Reed Gilmore, Priscilla Gilmore, M. Reed Gilmore, Jr., Valerie G. Griess, Joan G. Lindquist, James C. Gilmore, L. E. Grimes and Larry V. Bohannon dated May 22, 1998.
10.71Key Energy Group, Inc. 1997 Incentive Plan (Incorporated by reference to Exhibit B of the Company's definitive proxy statement dated November 28, 1997.
* 23.1 Consent of KPMG Peat Marwick LLP
* 27(a) Statement - Financial Data Schedule. (Filed herewith as part of the Condensed Consolidated Financial Statements).
(b) Reports on Form 8-K
The Company did not file a report on Form 8-K during the quarter ended June 30, 1998.
*Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KEY ENERGY GROUP, INC. (Registrant)
By /s/ Francis D. John Francis D. John President, Chief Executive Officer Dated: September 28, 1998 and Director
By /s/ Stephen E. McGregor Stephen E. McGregor Dated: September 28, 1998 Chief Financial Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated
By /s/ Francis D. John Francis D. John President, Chief Executive and Chief Dated: September 28, 1998 Financial Officer and Director
By /s/ Morton Wolkowitz Morton Wolkowitz Dated: September 28, 1998 Chairman of the Board and Director
By /s/ David J. Breazzano David J. Breazzano Dated: September 28, 1998 Director
By /s/ William Manly William Manly Dated: September 28, 1998 Director
By /s/ Kevin P. Collins Kevin P. Collins Dated: September 28, 1998 Director
By /s/ W. Phillip Marcum W. Phillip Marcum Dated: September 28, 1998 Director
By /s/ Danny R. Evatt Danny R. Evatt Dated: September 28, 1998 Chief Accounting Officer
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
(a) Index to Exhibits
The following documents are filed as part of this report:
(1) See Index to Financial Statements set forth in Item 8. (2) Financial Statements Schedules: [None] (3) Exhibits:
2.1 Agreement and Plan o f Merger dated as of November 18, 1995, between Key and WellTech, as amended. (Incorporated by reference to the Company's Registration Statement Form S-4, Registration No. 333-369).
2.2 Joint Plan of Reorganization, dated as of October 20, 1992, of the Company, ESKEY Inc. and YFC International Finance N.V. and Order, dated December 4, 1992, of the United States Bankruptcy Court for the District of New Jersey, approving the Joint Plan of Reorganization (Incorporated by reference to Exhibits 2 (a) and 28 (a) of the Company's Current Report on Form 8-K dated December 14, 1992, File No. 1-8038).
2.3 Agreement and Plan of Merger dated as of July 20, 1993, by and among the Company, OEI Acquisition Corp. and Odessa Exploration Incorporated. (Incorporated by reference to Exhibit 2(a) of the Company's Current Report on Form 8-K dated September 2, 1993, File No. 1-8038).
2.4 Asset Purchase Agreement dated as of December 10, 1993 between the Company and WellTech, Inc. (Incorporated by reference to Exhibit 2(a) of the Company's Current Report on Form 8-K dated August 17, 1984, File No. 1-8038).
3.1 Amended and Restated Articles of Incorporation of the Company (Incorporated by reference to the Company's Registration Statement on Form S-4, Registration No. 333-369).
3.2 Amended and Restated By-Laws of the Company (Incorporated by reference to the Company's Registration Statement on Form S-4 dated March 8, 1996, Registration No. 333-369).
3.3 Amendment to the Amended and Restated Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K dated February 2, 1998, File No. 000-22665, and incorporated herein by reference).
4.1 7% Convertible Subordinated Debenture of the Company due July 1, 2003. (Incorporated by reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
4.2 Indenture for the 7% Convertible Subordinated Debenture of the Company due July 1, 2003. (Incorporated by reference to Exhibit 4.2 of the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
4.3 Registration Rights Agreement among the Company, McMahan Securities Co., L.P. and Rausher Pierce Refsnes, Inc., dated as of July 3, 1996. (Incorporated by reference to Exhibit 4.3 of the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
4.4 Registration Rights Agreement between the Company and D. Kirk Edwards, dated as of July 20, 1993. (Incorporated by reference to Exhibit 10 ( c ) to the Company's Current Report on Form 8-K/A).
4.5 Registration Rights Agreement dated as of March 2, 1996 among the Company and certain of its stockholders. (Incorporated by reference to the Company's Registration Statement on Form S-4, Registration No. 353-369).
4.6 Registration Rights Agreement dated as of March 30, 1995 between the Company, Clint Hurt and Associates, Inc. and Clint Hurt. (Incorporated by reference to Exhibit 10 (d) of the Company's Annual Report on 10-KSB dated June 30, 1995, File No. 1-8038).
4.7 Form of Common Stock Purchase Warrant to Purchase Key Common Stock issued in connection with the WellTech Merger. (Incorporated by reference to the Company's Registration Statement on Form S-4, Registration No. 353-369).
4.8 Indenture dated as of September 25, 1997, among Key Energy Group, Inc. and American Stock Transfer and Trust Company. (Incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
4.9 Registration Rights Agreement among Key Energy Group, Inc., Lehman Brothers Inc., and McMahan Securities Co. L.P. dated as of September 25, 1997. (Incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.1 Employment Agreement between the Company and D. Kirk Edwards, dated as of July 1, 1996. (Incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K for the year ended June 30, 1997, File No. 1-8038)
10.2 Employment Agreement between WellTech Eastern, Inc. and Kenneth Hill, dated as of March 29, 1996. (Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.3 Employment Agreement between the Company and Kenneth Huseman, dated as of August 3, 1996. (Incorporated by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the year ended June 30, 1997, File No. 1-8038)
10.4 Letter Agreement between Van Greenfield and the Company dated May 15, 1996. (Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.5 Amendment No. 2 to the Company's Employment Agreement between Francis D. John and the Company, dated as of May 15, 1996. ( Incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.6 Letter Agreement between Morton Wolkowitz and the Company dated June 3, 1996. ( Incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.7 Asset Purchase Agreement between Hardy Oil & Gas USA, Inc. and Arch Petroleum, Inc. dated as of April 1996. (Incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.8 Asset Purchase Agreement between Arch Petroleum, Inc. and Odessa Exploration, Inc. dated as of April 18, 1996. (Incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.9 General Conveyance by Arch Petroleum, Inc. to Odessa Exploration, Inc. dated as of January 1, 1996. (Incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K dated June 30, 1996, File No. 1-8038).
10.10Plan and Agreement of Merger among Key Energy Group, Inc., WellTech Eastern, Inc. and Woodward Well Service, Inc. dated as of September 30, 1996. (Incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.11Stock Purchase Agreement among Key Energy Group, Inc., Reo Brownlee, Elvin Brownlee, Jr. And Elvin Brownlee III dated as of October 24, 1996. (Incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.12Asset Purchase Agreement among Yale E. Key, Inc., Key Energy Group, Inc., Energy Air Drilling Service Co. and Dale Rennels dated as of November 1, 1996. (Incorporated by reference to Exhibit 10( c ) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.13Stock Purchase Agreement among Key Energy Group, Inc., Ed Hitt, Helen Hitt, Michael E. Thompson and Edward Monroe, Jr. Dated as of December 2, 1996. (Incorporated by reference to Exhibit 10(d) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.14Plan and Agreement of Merger among Key Energy Group, Inc., WellTech Eastern, Inc., Hunt Oil Company and Brooks Well Servicing, Inc. dated as of November 22, 1996. (Incorporated by reference to Exhibit 10(e) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.15Asset Purchase Agreement among WellTech Eastern, Inc., B&L Hotshot, Inc., McDowell & Sons, Inc., 4 Star Trucking, Inc., R.B.R. Inc., Royce D. Thomas, John F. McDowell and John R. McDowell dated as of December 13, 1996. (Incorporated by reference to Exhibit 10(f) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.16Asset Purchase Agreement among WellTech Eastern, Inc., Talon Trucking company and Lomak Petroleum, Inc. dated as of December 31, 1996. (Incorporated by reference to Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.17First Supplemental Indenture dated as of November 20, 1996 by and between Key Energy Group, Inc. and American Stock Transfer & Trust Company, as Trustee. (Incorporated by reference to Exhibit 10(i) to the Company's Quarterly Report on Form 10-Q dated December 31, 1996, File No. 1-8038).
10.18Stock Purchase Agreement among Key Energy Group, Inc., Michael and Georgia McDermett dated as of January 10, 1997. (Incorporated by reference to Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.19Asset Purchase Agreement among WellTech Eastern, Inc., Key Energy Group, Inc. Tri State Wellhead & Valve, Inc. and John C. Bozeman dated as of March 14, 1997. (Incorporated by reference to Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.20Stock Purchase Agreement among Yale E. Key, Inc., Keith and Leslie Neill as of March 24, 1997. (Incorporated by reference to Exhibit 10( c ) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.21Asset Purchase Agreement among Key Energy Group, Inc., WellTech Eastern, Inc., Elder Well Service, Inc., Martha Elder, Kenneth L. Ward, Nona Faye Mugraur, Lela Gaye Biehl and Johnny Ray Johnson dated as of March 28, 1997. (Incorporated by reference to Exhibit 10(d) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.22Asset Purchase Agreement #1 among WellTech Eastern, Inc., Key Energy Group, Inc., Kalkaska Construction Service, Inc., Dennis Hogerheide, LaWenda Hogerheide, David Hogerheide and Derek Hogerheide dated March 31, 1997. (Incorporated by reference to Exhibit 10(e) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.23Asset Purchase Agreement #2 among WellTech Eastern, Inc., Key Energy Group, Inc., Kalkaska Construction Service, Inc., Dennis Hogerheide, LaWenda Hogerheide, David Hogerheide and Derek Hogerheide dated March 31, 1997. (Incorporated by reference to Exhibit 10(f) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.24Stock Purchase Agreement among WellTech Eastern, Inc., Dennis Hogerheide and LaWenda Hogerheide dated as of March 31, 1997. (Incorporated by reference to Exhibit 10(g) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.25Asset Purchase Agreement among WellTech Eastern, Inc., Diamond Well Service, Inc., John Scott and Dwayne Wardwell dated as of April 3, 1997. (Incorporated by reference to Exhibit 10(h) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.26Asset Sale Agreement among WellTech Eastern, Inc. and Drillers, Inc. dated as of April 14, 1997. (Incorporated by reference to Exhibit 10(i) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.27Asset Purchase Agreement among WellTech Eastern, Inc., Shreve's Well Service, Inc. and William A. Shreve dated April 18, 1997. (Incorporated by reference to Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.28Asset Purchase Agreement among WellTech Eastern, Inc. and Petro Equipment, Inc. and Donald E. Clark dated as of May 1, 1997. (Incorporated by reference to Exhibit 10(k) to the Company's Quarterly Report on Form 10-Q dated March 31, 1997, File No. 1-8038).
10.29Asset Purchase Agreement among WellTech Eastern, Inc., Southwest Oilfield Services, Inc., David Wright and Roy Wofford dated May 29, 1997. . (Incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.30Stock Purchase Agreement among Yale E. Key, Inc. and Raleigh K. Turn and David Butts dated June 9, 1997. (Incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.31Stock Purchase Agreement among Key Energy Group, Inc. and Mark Duane Massingill and Claudia Lynn Massingill dated as of June 25, 1997. (Incorporated by reference to the Company's Current Report on Form 8-K dated July 9, 1997, File No. 1-8038).
10.32Stock Purchase Agreement among WellTech Eastern, Inc. between Monty D. Elmore dated as of July 17, 1997. (Incorporated by reference to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.33Stock Purchase Agreement between WellTech Eastern, Inc. and Kenting Energy Services, Inc. dated as of July 30, 1997. (Incorporated by reference to Exhibit 10.37 of the Company's Annual Report on Form 10-K for the year ended June 30, 1997, File No. 1-8038)
10.34Stock Purchase Agreement between WellTech Eastern, Inc. and Robert E. Mosley, Jr. et al dated as of August 22, 1997. (Incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.35Credit Agreement dated as of June 6, 1997 among Key Energy Group, Inc., several banks and other financial institutions or entities from time to time parties to the Agreement, PNC Bank, N.A., Norwest Bank of Texas, N.A., and Lehman Commercial Paper Inc. (Incorporated by reference to Exhibit 10.39 to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.36Master Guarantee and Collateral Agreement made by Key Energy Group, Inc. and certain of its Subsidiaries in favor of Norwest Bank of Texas, N.A. dated as of June 6, 1997. (Incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K dated June 30, 1997, File No. 1-8038).
10.37Stock Purchase Agreement by and among Nabors Acquisition Corp. IV, as Seller, Key Rocky Mountain, Inc., as Buyer, and Key Energy Group, Inc. dated as of July 31, 1997. ("Gibson Stock Purchase Agreement.") (Incorporated by reference to Exhibit 10(c) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.38Amendment One to the Gibson Stock Purchase Agreement dated as of October 10, 1997.(Incorporated by reference to Exhibit 10(d) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.39Stock Purchase Agreement (Ram Oil Well Service, Inc.) by and among, Yale E. Key, Inc. and Robert D. Calhoon dated as of September 1, 1997 (incorporated by reference to Exhibit 2.2 of the Company's Current Report on Form 8-K dated September 1, 1997, File No. 1-8038).
10.40Stock Purchase Agreement (Rowland Trucking Co.) by and among, Yale E. Key, Inc. and Robert D. Calhoon dated as of September 1, 1997 (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K dated September 1, 1997,File No. 1-8038).
10.41Asset Purchase Agreement among WellTech Eastern, Inc., Waco Oil & Gas Co., Inc. and I.L. Morris dated as of September 1, 1997. (Incorporated by reference to Exhibit 10(h) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.42Asset Purchase Agreement among Key Four Corners, Inc., Key Energy Group,Inc., Coleman Oil & Gas Co., Big A Well Service Co., Sunco Trucking Co., Justis Supply Co., Inc. and George E. Coleman dated as of September 2, 1997 (incorporated by reference to Exhibit 2.1 of the Company's Report on Form 8-K dated October 1, 1997, File No. 1-8038).
10.43Stock Purchase Agreement between WellTech Eastern, Inc. and William Gregory Wines dated as of September 16, 1997. (Incorporated by reference to Exhibit 10(j) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.44Stock Purchase Agreement among, Key Energy Drilling, Inc. and S.K. Rogers, Joe Dee Brooks, Lynn E. Waters and Donnie Roberts dated as of September 25, 1997. (Incorporated by reference to Exhibit 10(k) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.45Stock Purchase Agreement among Key Rocky Mountain, Inc., Joseph R. Dunbar and Janice N. Dunbar dated as of September 29, 1997. (Incorporated by reference to Exhibit 10(m) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.46Stock Purchase Agreement among Key Rocky Mountain, Inc., Bruce L. Bummer, Jack Hartnett, Diane Hartnett and Bruce Bummer 7/14/82 Family Trust dated as of September 30, 1997. (Incorporated by reference to Exhibit 10(n) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.47Amended and Restated Credit Agreement among Key Energy Group, Inc. and several other financial institutions dated as of June 6, 1997 as amended and restated through November 6, 1997. (Incorporated by reference to Exhibit 10(s) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.48First Amendment to the Amended and Restated Credit Agreement dated as of June 6, 1997, as amended and restated through November 6, 1997 dated December 3, 1997. (Incorporated by reference to Exhibit 10(t) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.49Asset Purchase Agreement among WellTech Eastern, Inc. and McCurdy Well Service, Inc. effective as of October 3, 1997. (Incorporated by reference to Exhibit 10(d) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.50Asset Purchase Agreement among WellTech Eastern, Inc. and GSI Trucking Company, Inc. effective as of October 3, 1997. (Incorporated by reference to Exhibit 10(e) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.51Asset Purchase Agreement among WellTech Eastern, Inc. and Kahlden Production Services, Inc. effective as of October 3, 1997. (Incorporated by reference to Exhibit 10(f) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.52Stock Purchase Agreement between WellTech Eastern, Inc. and Donald Jeter, effective as of November 11, 1997. (Incorporated by reference to Exhibit 10(g) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.53Stock Purchase Agreement between Key Energy Drilling, Inc. and Robert C. Jones and Dana Lunette Jones, effective as of November 24, 1997. (Incorporated by reference to Exhibit 10(h) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.54Asset Purchase Agreement among WellTech Eastern, Inc., Key Energy Group, Inc. and White Rhino Drilling, Inc. and Jeff Critchfield, effective as of December 2, 1997. (Incorporated by reference to Exhibit 10(i) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.55Asset Purchase Agreement among WellTech Eastern, Inc., Key Energy Group, Inc., S&R Cable, Inc., Jeff Critchfield, Royce D. Thomas, Ronnie Shaw and Donald Tinker, effective as of December 2, 1997. (Incorporated by reference to Exhibit 10(j) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, File No. 1-8038)
10.56Asset Purchase Agreement among WellTech Eastern, Inc., Wellcorps, L.L.C. and Jeff Critchfield, Terra Energy, Ltd. And Brian Fries, effective as of December 2, 1997. (Incorporated by reference to Exhibit 10(k) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038).
10.57Employment Agreement dated December 5, 1997 by and between Stephen E. McGregor and the Company. (Incorporated by reference to Exhibit 10(e) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-8038)
10.58Stock Purchase Agreement between Key Energy Group, Inc., Key Energy Drilling, Inc. and Ronald M. Sitton and Frank R. Sitton, effective as of December 12, 1997. (Incorporated by reference to Exhibit 10(l) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.59Asset Purchase Agreement between Brooks Well Servicing, Inc. and Sam F. McKee, Individually and d/b/a Circle M Vacuum Services, effective as of January 30, 1998. (Incorporated by reference to Exhibit 10(m) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.60Stock Purchase Agreement between Key Energy Drilling, Inc. and Jack B. Loveless, Jim Mayfield and J.W. Miller, effective as of January 30, 1998. (Incorporated by reference to Exhibit 10(n) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.61Asset Purchase Agreement between Key Four Corners, Inc. and Four Corners Drilling, R.L. Andes and W.E. Lang, effective as of January 30, 1998. (Incorporated by reference to Exhibit 10(o) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.62Asset Purchase Agreement among Key Rocky Mountain, Inc., Updike Brothers, Inc. Employee Stock Ownership Retirement Plan and Trust, David W. Updike Trust, Dorothy A. Updike Trust, Dorothy R. Updike Trust, Mary E. Updike, Ralph O. Updike and Daniel Updike effective February 6, 1998. (Incorporated by reference to Exhibit 10(p) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.63Asset Purchase Agreement among Brooks Well Servicing, Inc., Hot Oil Plus, Inc., Thomas N. Novosad, Jr. and Patricia Novosad effective January 29, 1998. (Incorporated by reference to Exhibit 10(q) of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1997, File No. 1-8038)
10.64Asset Purchase Agreement among Brooks Well Servicing, Inc., Lundy Vacuum Service, Inc. and Peyton E. Lundy effective March 3, 1998. (Incorporated by reference to Exhibit 10(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-8038)
10.65Asset Purchase Agreement among Yale E. Key, Inc., Edwards Transport, Inc. and Tom Nations effective March 26, 1998. (Incorporated by reference to Exhibit 10(b) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-8038)
10.66Asset Purchase Agreement among Brooks Well Servicing, Inc. and JPF Well Service Inc., effective April 20, 1998. (Incorporated by reference to Exhibit 10(c) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-8038)
10.67Asset Purchase Agreement among Brooks Well Servicing, Inc. and JPF Lease Service Inc., effective April 20, 1998. (Incorporated by reference to Exhibit 10(d) of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, File No. 1-8038)
* 10.68 Asset Purchase Agreement between Watson Oilfield Service & Supply, Inc. and Watson Truck & Supply, Inc. dated May 19, 1998
* 10.69 Purchase and Sale Agreement among Burnett Corporation, B.O. Cornelius, Ann C. Fatheree, James R. Corbin, Mary Jo Mitton, Birke B. Marsh, H. Cobb, Birke B. Marsh, Trustee of the Corbin Trust, Jamie Kim Corbin, Josh Alan Corbin, Jason J. Corbin, Wilbanks Exploration, Inc. and Odessa Exploration, Inc. dated May 20, 1998.
* 10.70 Asset Purchase Agreement among Key Energy Drilling, Inc., Lakota Drilling Company and Reed Gilmore, Priscilla Gilmore, M. Reed Gilmore, Jr., Valerie G. Griess, Joan G. Lindquist, James C. Gilmore, L. E. Grimes and Larry V. Bohannon dated May 22, 1998.
10.71Key Energy Group, Inc. 1997 Incentive Plan (Incorporated by reference to Exhibit B of the Company's definitive proxy statement dated November 28, 1997.
* 23.1 Consent of KPMG Peat Marwick LLP
* 27(a) Statement - Financial Data Schedule. (Filed herewith as part of the Condensed Consolidated Financial Statements).
(b) Reports on Form 8-K
The Company did not file a report on Form 8-K during the quarter ended June 30, 1998.
*Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KEY ENERGY GROUP, INC. (Registrant)
By /s/ Francis D. John Francis D. John President, Chief Executive Officer Dated: September 28, 1998 and Director
By /s/ Stephen E. McGregor Stephen E. McGregor Dated: September 28, 1998 Chief Financial Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated
By /s/ Francis D. John Francis D. John President, Chief Executive and Chief Dated: September 28, 1998 Financial Officer and Director
By /s/ Morton Wolkowitz Morton Wolkowitz Dated: September 28, 1998 Chairman of the Board and Director
By /s/ David J. Breazzano David J. Breazzano Dated: September 28, 1998 Director
By /s/ William Manly William Manly Dated: September 28, 1998 Director
By /s/ Kevin P. Collins Kevin P. Collins Dated: September 28, 1998 Director
By /s/ W. Phillip Marcum W. Phillip Marcum Dated: September 28, 1998 Director
By /s/ Danny R. Evatt Danny R. Evatt Dated: September 28, 1998 Chief Accounting Officer