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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Maryland
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04-2648081
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1301 McKinney Street, Suite 1800, Houston, Texas
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77010
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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¨
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Accelerated filer
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ý
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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•
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risks and uncertainties associated with the Chapter 11 process, including our inability to obtain confirmation of a plan under Chapter 11 of the Bankruptcy Code (as defined below) or an alternative restructuring transaction;
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•
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our inability to maintain relationships with suppliers, customers, employees and other third parties as a result of our Chapter 11 filing;
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•
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our ability to obtain the approval of the Bankruptcy Court (as defined below) with respect to motions or other requests made to the Bankruptcy Court in the Chapter 11 Cases (as defined below), including maintaining strategic control as debtor-in-possession;
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•
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the effects of the Bankruptcy Petitions on the Company and on the interests of various constituents, including holders of our common stock;
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•
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the length of time that the Company will operate under Chapter 11 protection and the continued availability of capital during the pendency of the proceedings;
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•
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the potential adverse effects of the Chapter 11 proceedings on our liquidity and results of operations;
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•
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increased advisory costs to execute a reorganization;
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•
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conditions in the oil and natural gas industry, especially oil and natural gas prices and capital expenditures by oil and natural gas companies;
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•
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volatility in oil and natural gas prices;
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•
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our ability to implement price increases or maintain pricing on our core services;
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•
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industry capacity;
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•
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increased labor costs or unavailability of skilled workers;
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•
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asset impairments or other charges;
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•
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the periodic low demand for our services and resulting operating losses and negative cash flows;
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•
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our highly competitive industry as well as operating risks, which are primarily self-insured, and the possibility that our insurance may not be adequate to cover all of our losses or liabilities;
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•
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the economic, political and social instability risks of doing business in certain foreign countries;
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•
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our historically high employee turnover rate and our ability to replace or add workers;
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•
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our ability to incur debt or long-term lease obligations;
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•
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our ability to implement technological developments and enhancements;
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•
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significant costs and liabilities resulting from environmental, health and safety laws and regulations, including those relating to hydraulic fracturing;
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•
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severe weather impacts on our business;
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•
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our ability to successfully identify, make and integrate acquisitions and our ability to finance future growth of our operations or future acquisitions;
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•
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the loss of one or more of our larger customers;
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•
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the impact of compliance with climate change legislation or initiatives;
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•
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our ability to generate sufficient cash flow to meet debt service obligations;
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•
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the amount of our debt and the limitations imposed by the covenants in the agreements governing our debt, including our ability to comply with covenants under our current debt agreements;
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•
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an increase in our debt service obligations due to variable rate indebtedness;
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•
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our inability to achieve our financial, capital expenditure and operational projections, including quarterly and annual projections of revenue and/or operating income and our inaccurate assessment of future activity levels, customer demand, and pricing stability which may not materialize (whether for Key as a whole or for geographic regions and/or business segments individually);
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•
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our ability to execute our plans to withdraw from international markets outside North America;
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•
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our ability to achieve the benefits expected from acquisition and disposition transactions;
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•
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our ability to respond to changing or declining market conditions, including our ability to reduce the costs of labor, fuel, equipment and supplies employed and used in our businesses;
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•
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our ability to maintain sufficient liquidity; and
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•
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other factors affecting our business described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, in Part II, Item 1A. Risk Factors in this Current Report on Form 10-Q and in the other reports we file with the Securities and Exchange Commission.
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ITEM 1.
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FINANCIAL STATEMENTS
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September 30,
2016 |
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December 31,
2015 |
||||
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(unaudited)
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|
||||
ASSETS
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|
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|
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Current assets:
|
|
|
|
||||
Cash and cash equivalents
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$
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57,111
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$
|
204,354
|
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Restricted cash
|
18,605
|
|
|
—
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $21,285
and $20,951, respectively
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64,542
|
|
|
115,992
|
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Inventories
|
25,813
|
|
|
29,395
|
|
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Other current assets
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59,866
|
|
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70,685
|
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Total current assets
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225,937
|
|
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420,426
|
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Property and equipment
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2,241,504
|
|
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2,376,388
|
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Accumulated depreciation
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(1,505,042
|
)
|
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(1,496,356
|
)
|
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Property and equipment, net
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736,462
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880,032
|
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Intangible assets, net
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3,547
|
|
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5,883
|
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||
Other non-current assets
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29,675
|
|
|
21,457
|
|
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TOTAL ASSETS
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$
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995,621
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|
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$
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1,327,798
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LIABILITIES AND EQUITY
|
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Current liabilities:
|
|
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|
||||
Accounts payable
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$
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7,608
|
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$
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30,740
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Current portion of long-term debt
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944,202
|
|
|
3,150
|
|
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Other current liabilities
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138,805
|
|
|
120,593
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Total current liabilities
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1,090,615
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|
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154,483
|
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Long-term debt
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—
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|
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961,700
|
|
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Workers’ compensation, vehicular and health insurance liabilities
|
25,962
|
|
|
26,327
|
|
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Deferred tax liabilities
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—
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|
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14,252
|
|
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Other non-current liabilities
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42,141
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|
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30,746
|
|
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Commitments and contingencies
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|
|
|
||||
Equity:
|
|
|
|
||||
Common st
ock, $0.10 par value; 200,000,000 shares authorized,
160,782,673
and
157,543,259
s
hares issued and outstanding
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16,078
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|
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15,754
|
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Additional paid-in capital
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966,636
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966,637
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Accumulated other comprehensive loss
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(42,282
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)
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(43,740
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)
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Retained deficit
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(1,103,529
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)
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(798,361
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)
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Total equity
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(163,097
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)
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140,290
|
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TOTAL LIABILITIES AND EQUITY
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$
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995,621
|
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$
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1,327,798
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Three Months Ended
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Nine Months Ended
|
||||||||||||
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September 30,
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September 30,
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||||||||||||
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2016
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2015
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2016
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|
2015
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||||||||
REVENUES
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$
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102,406
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$
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176,857
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$
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308,506
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$
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642,152
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COSTS AND EXPENSES:
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||||||||
Direct operating expenses
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96,071
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174,505
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276,088
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|
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537,876
|
|
||||
Depreciation and amortization expense
|
33,467
|
|
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45,270
|
|
|
105,075
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|
|
138,377
|
|
||||
General and administrative expenses
|
42,456
|
|
|
45,314
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|
|
129,604
|
|
|
163,668
|
|
||||
Impairment expense
|
40,000
|
|
|
649,944
|
|
|
40,000
|
|
|
692,996
|
|
||||
Operating loss
|
(109,588
|
)
|
|
(738,176
|
)
|
|
(242,261
|
)
|
|
(890,765
|
)
|
||||
Interest expense, net of amounts capitalized
|
21,120
|
|
|
21,704
|
|
|
64,061
|
|
|
52,104
|
|
||||
Other (income) loss, net
|
154
|
|
|
5,915
|
|
|
(665
|
)
|
|
10,099
|
|
||||
Loss before income taxes
|
(130,862
|
)
|
|
(765,795
|
)
|
|
(305,657
|
)
|
|
(952,968
|
)
|
||||
Income tax benefit
|
110
|
|
|
125,634
|
|
|
489
|
|
|
187,752
|
|
||||
NET LOSS
|
$
|
(130,752
|
)
|
|
$
|
(640,161
|
)
|
|
$
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(305,168
|
)
|
|
$
|
(765,216
|
)
|
Loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(0.81
|
)
|
|
$
|
(4.06
|
)
|
|
$
|
(1.90
|
)
|
|
$
|
(4.90
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
160,846
|
|
|
157,605
|
|
|
160,626
|
|
|
156,266
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
NET LOSS
|
$
|
(130,752
|
)
|
|
$
|
(640,161
|
)
|
|
$
|
(305,168
|
)
|
|
$
|
(765,216
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation income (loss)
|
(156
|
)
|
|
(5,266
|
)
|
|
1,458
|
|
|
(4,750
|
)
|
||||
COMPREHENSIVE LOSS
|
$
|
(130,908
|
)
|
|
$
|
(645,427
|
)
|
|
$
|
(303,710
|
)
|
|
$
|
(769,966
|
)
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
|
2016
|
|
2015
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net loss
|
$
|
(305,168
|
)
|
|
$
|
(765,216
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization expense
|
105,075
|
|
|
138,377
|
|
||
Impairment expense
|
40,000
|
|
|
692,996
|
|
||
Bad debt expense
|
1,674
|
|
|
1,832
|
|
||
Accretion of asset retirement obligations
|
431
|
|
|
468
|
|
||
Loss (income) from equity method investments
|
105
|
|
|
(6
|
)
|
||
Amortization and write-off of deferred financing costs and premium
|
3,901
|
|
|
3,335
|
|
||
Deferred income tax benefit
|
(501
|
)
|
|
(126,752
|
)
|
||
Loss on disposal of assets, net
|
5,011
|
|
|
5,713
|
|
||
Share-based compensation
|
3,652
|
|
|
8,198
|
|
||
Excess tax expense from share-based compensation
|
3,164
|
|
|
3,301
|
|
||
Changes in working capital:
|
|
|
|
||||
Accounts receivable
|
50,240
|
|
|
157,815
|
|
||
Other current assets
|
3,589
|
|
|
5,643
|
|
||
Accounts payable, accrued interest and accrued expenses
|
(3,983
|
)
|
|
(107,576
|
)
|
||
Share-based compensation liability awards
|
(227
|
)
|
|
(55
|
)
|
||
Other assets and liabilities
|
(11,772
|
)
|
|
(38,911
|
)
|
||
Net cash used in operating activities
|
(104,809
|
)
|
|
(20,838
|
)
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Capital expenditures
|
(7,420
|
)
|
|
(38,907
|
)
|
||
Proceeds from sale of fixed assets
|
13,376
|
|
|
11,500
|
|
||
Proceeds from notes receivable
|
—
|
|
|
595
|
|
||
Net cash provided by (used in) investing activities
|
5,956
|
|
|
(26,812
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Repayments of long-term debt
|
(24,548
|
)
|
|
(788
|
)
|
||
Proceeds from long-term debt
|
—
|
|
|
305,550
|
|
||
Restricted cash
|
(18,605
|
)
|
|
—
|
|
||
Proceeds from borrowings on revolving credit facility
|
—
|
|
|
130,000
|
|
||
Repayments on revolving credit facility
|
—
|
|
|
(200,000
|
)
|
||
Payment of deferred financing costs
|
—
|
|
|
(11,072
|
)
|
||
Repurchases of common stock
|
(165
|
)
|
|
(313
|
)
|
||
Excess tax expense from share-based compensation
|
(3,164
|
)
|
|
(3,301
|
)
|
||
Net cash provided by (used in) financing activities
|
(46,482
|
)
|
|
220,076
|
|
||
Effect of changes in exchange rates on cash
|
(1,908
|
)
|
|
(613
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
(147,243
|
)
|
|
171,813
|
|
||
Cash and cash equivalents, beginning of period
|
204,354
|
|
|
27,304
|
|
||
Cash and cash equivalents, end of period
|
$
|
57,111
|
|
|
$
|
199,117
|
|
|
Russia
|
|
Mexico
|
|
Total
|
||||||
|
(in thousands)
|
||||||||||
Current assets:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
1,087
|
|
|
$
|
318
|
|
|
$
|
1,405
|
|
Accounts receivable
|
3,568
|
|
|
8,927
|
|
|
12,495
|
|
|||
Inventories
|
—
|
|
|
976
|
|
|
976
|
|
|||
Other current assets
|
—
|
|
|
23,057
|
|
|
23,057
|
|
|||
Total current assets
|
4,655
|
|
|
33,278
|
|
|
37,933
|
|
|||
Property and equipment, net
|
—
|
|
|
9,500
|
|
|
9,500
|
|
|||
Other non-current assets
|
—
|
|
|
37
|
|
|
37
|
|
|||
Total assets
|
$
|
4,655
|
|
|
$
|
42,815
|
|
|
$
|
47,470
|
|
Current liabilities:
|
|
|
|
|
|
||||||
Accounts payable
|
$
|
257
|
|
|
$
|
11,314
|
|
|
$
|
11,571
|
|
Other current liabilities
|
303
|
|
|
9,989
|
|
|
10,292
|
|
|||
Total current liabilities
|
560
|
|
|
21,303
|
|
|
21,863
|
|
|||
Deferred tax liabilities
|
—
|
|
|
12,138
|
|
|
12,138
|
|
|||
Total liabilities
|
560
|
|
|
33,441
|
|
|
34,001
|
|
|||
Net Assets
|
$
|
4,095
|
|
|
$
|
9,374
|
|
|
$
|
13,469
|
|
|
COMMON STOCKHOLDERS
|
|
|
|||||||||||||||||||
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Accumulated Other Comprehensive Loss
|
|
Retained Deficit
|
|
Total
|
|||||||||||||
|
Number of Shares
|
|
Amount at Par
|
|
|
|
||||||||||||||||
|
(in thousands)
|
|||||||||||||||||||||
Balance at December 31, 2015
|
157,543
|
|
|
$
|
15,754
|
|
|
$
|
966,637
|
|
|
$
|
(43,740
|
)
|
|
$
|
(798,361
|
)
|
|
$
|
140,290
|
|
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
1,458
|
|
|
—
|
|
|
1,458
|
|
|||||
Common stock purchases
|
(552
|
)
|
|
(55
|
)
|
|
(110
|
)
|
|
—
|
|
|
—
|
|
|
(165
|
)
|
|||||
Share-based compensation
|
3,792
|
|
|
379
|
|
|
3,273
|
|
|
—
|
|
|
—
|
|
|
3,652
|
|
|||||
Tax expense from share-based compensation
|
—
|
|
|
—
|
|
|
(3,164
|
)
|
|
—
|
|
|
—
|
|
|
(3,164
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(305,168
|
)
|
|
(305,168
|
)
|
|||||
Balance at September 30, 2016
|
160,783
|
|
|
$
|
16,078
|
|
|
$
|
966,636
|
|
|
$
|
(42,282
|
)
|
|
$
|
(1,103,529
|
)
|
|
$
|
(163,097
|
)
|
|
COMMON STOCKHOLDERS
|
|
|
|||||||||||||||||||
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Accumulated Other Comprehensive Loss
|
|
Retained Earnings (Deficit)
|
|
Total
|
|||||||||||||
|
Number of Shares
|
|
Amount at Par
|
|
|
|
||||||||||||||||
|
(in thousands)
|
|||||||||||||||||||||
Balance at December 31, 2014
|
153,557
|
|
|
$
|
15,356
|
|
|
$
|
960,647
|
|
|
$
|
(37,280
|
)
|
|
$
|
119,340
|
|
|
$
|
1,058,063
|
|
Foreign currency translation
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,750
|
)
|
|
—
|
|
|
(4,750
|
)
|
|||||
Common stock purchases
|
(147
|
)
|
|
(15
|
)
|
|
(298
|
)
|
|
—
|
|
|
—
|
|
|
(313
|
)
|
|||||
Share-based compensation
|
4,288
|
|
|
429
|
|
|
7,769
|
|
|
—
|
|
|
—
|
|
|
8,198
|
|
|||||
Tax expense from share-based compensation
|
—
|
|
|
—
|
|
|
(3,301
|
)
|
|
—
|
|
|
—
|
|
|
(3,301
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(765,216
|
)
|
|
(765,216
|
)
|
|||||
Balance at September 30, 2015
|
157,698
|
|
|
$
|
15,770
|
|
|
$
|
964,817
|
|
|
$
|
(42,030
|
)
|
|
$
|
(645,876
|
)
|
|
$
|
292,681
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Other current assets:
|
|
|
|
||||
Deferred tax assets
|
$
|
2,439
|
|
|
$
|
10,131
|
|
Prepaid current assets
|
8,512
|
|
|
23,287
|
|
||
Reinsurance receivable
|
7,861
|
|
|
8,409
|
|
||
VAT asset
|
—
|
|
|
12,784
|
|
||
Current assets held for sale
|
37,934
|
|
|
4,691
|
|
||
Other
|
3,120
|
|
|
11,383
|
|
||
Total
|
$
|
59,866
|
|
|
$
|
70,685
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Other non-current assets:
|
|
|
|
||||
Deferred tax assets
|
$
|
870
|
|
|
$
|
6,260
|
|
Reinsurance receivable
|
8,324
|
|
|
8,877
|
|
||
Deposits
|
9,887
|
|
|
3,463
|
|
||
Equity method investments
|
921
|
|
|
1,026
|
|
||
Non-current assets held for sale
|
9,537
|
|
|
1,209
|
|
||
Other
|
136
|
|
|
622
|
|
||
Total
|
$
|
29,675
|
|
|
$
|
21,457
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Other current liabilities:
|
|
|
|
||||
Accrued payroll, taxes and employee benefits
|
$
|
16,667
|
|
|
$
|
19,578
|
|
Accrued operating expenditures
|
10,217
|
|
|
12,514
|
|
||
Income, sales, use and other taxes
|
13,679
|
|
|
24,833
|
|
||
Self-insurance reserve
|
29,355
|
|
|
30,029
|
|
||
Accrued interest
|
34,386
|
|
|
23,685
|
|
||
Accrued insurance premiums
|
93
|
|
|
3,588
|
|
||
Current liabilities held for sale
|
21,862
|
|
|
529
|
|
||
Other
|
12,546
|
|
|
5,837
|
|
||
Total
|
$
|
138,805
|
|
|
$
|
120,593
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Other non-current liabilities:
|
|
|
|
||||
Asset retirement obligations
|
$
|
11,954
|
|
|
$
|
12,218
|
|
Environmental liabilities
|
3,641
|
|
|
5,520
|
|
||
Accrued rent
|
3,429
|
|
|
192
|
|
||
Accrued sales, use and other taxes
|
10,822
|
|
|
11,137
|
|
||
Non-current liabilities held for sale
|
12,138
|
|
|
—
|
|
||
Other
|
157
|
|
|
1,679
|
|
||
Total
|
$
|
42,141
|
|
|
$
|
30,746
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
Noncompete agreements:
|
|
|
|
||||
Gross carrying value
|
$
|
1,535
|
|
|
$
|
1,535
|
|
Accumulated amortization
|
(1,433
|
)
|
|
(1,289
|
)
|
||
Net carrying value
|
102
|
|
|
246
|
|
||
Patents, trademarks and tradenames:
|
|
|
|
||||
Gross carrying value
|
400
|
|
|
1,329
|
|
||
Accumulated amortization
|
(333
|
)
|
|
(302
|
)
|
||
Net carrying value
|
67
|
|
|
1,027
|
|
||
Customer relationships and contracts:
|
|
|
|
||||
Gross carrying value
|
40,650
|
|
|
41,996
|
|
||
Accumulated amortization
|
(38,349
|
)
|
|
(38,705
|
)
|
||
Net carrying value
|
2,301
|
|
|
3,291
|
|
||
Developed technology:
|
|
|
|
||||
Gross carrying value
|
4,778
|
|
|
4,778
|
|
||
Accumulated amortization
|
(3,701
|
)
|
|
(3,459
|
)
|
||
Net carrying value
|
1,077
|
|
|
1,319
|
|
||
Total:
|
|
|
|
||||
Gross carrying value
|
48,139
|
|
|
50,417
|
|
||
Accumulated amortization
|
(44,592
|
)
|
|
(44,534
|
)
|
||
Net carrying value
|
$
|
3,547
|
|
|
$
|
5,883
|
|
|
Weighted
average
remaining
amortization
period (years)
|
|
Expected Amortization Expense
|
||||||||||||||||||||||
|
Remainder
of 2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
||||||||||||||
|
|
|
(in thousands)
|
||||||||||||||||||||||
Noncompete agreements
|
1.2
|
|
$
|
28
|
|
|
$
|
74
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Trademarks
|
1.7
|
|
10
|
|
|
40
|
|
|
17
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Customer relationships and contracts
|
3.1
|
|
309
|
|
|
990
|
|
|
431
|
|
|
341
|
|
|
230
|
|
|
—
|
|
||||||
Developed technology
|
3.5
|
|
78
|
|
|
315
|
|
|
315
|
|
|
242
|
|
|
127
|
|
|
—
|
|
||||||
Total expected intangible asset amortization expense
|
|
|
$
|
425
|
|
|
$
|
1,419
|
|
|
$
|
763
|
|
|
$
|
583
|
|
|
$
|
357
|
|
|
$
|
—
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
|
(in thousands)
|
||||||
6.75% Senior Notes due 2021
|
$
|
675,000
|
|
|
$
|
675,000
|
|
Term Loan Facility due 2020
|
288,876
|
|
|
313,425
|
|
||
Debt issuance costs and unamortized premium (discount) on debt, net
|
(19,674
|
)
|
|
(23,575
|
)
|
||
Total
|
$
|
944,202
|
|
|
$
|
964,850
|
|
Year
|
Percentage
|
|
2016
|
103.375
|
%
|
2017
|
102.250
|
%
|
2018
|
101.125
|
%
|
2019 and thereafter
|
100.000
|
%
|
•
|
incur additional indebtedness and issue preferred equity interests;
|
•
|
pay dividends or make other distributions or repurchase or redeem equity interests;
|
•
|
make loans and investments;
|
•
|
enter into sale and leaseback transactions;
|
•
|
sell, transfer or otherwise convey assets;
|
•
|
create liens;
|
•
|
enter into transactions with affiliates;
|
•
|
enter into agreements restricting subsidiaries’ ability to pay dividends;
|
•
|
designate future subsidiaries as unrestricted subsidiaries; and
|
•
|
consolidate, merge or sell all or substantially all of the applicable entities’ assets.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||
|
September 30, 2016
|
|
September 30, 2016
|
||
|
(in thousands)
|
||||
ABL Facility
|
—
|
%
|
|
—
|
%
|
Term Loan Facility
|
10.25
|
%
|
|
10.25
|
%
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Interest income
|
$
|
(104
|
)
|
|
$
|
(61
|
)
|
|
$
|
(371
|
)
|
|
$
|
(99
|
)
|
Foreign exchange loss
|
351
|
|
|
2,472
|
|
|
1,112
|
|
|
4,065
|
|
||||
Allowance for collectability of notes receivable
|
—
|
|
|
3,755
|
|
|
—
|
|
|
7,705
|
|
||||
Other, net
|
(93
|
)
|
|
(251
|
)
|
|
(1,406
|
)
|
|
(1,572
|
)
|
||||
Total
|
$
|
154
|
|
|
$
|
5,915
|
|
|
$
|
(665
|
)
|
|
$
|
10,099
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
Basic and Diluted EPS Calculation:
|
|
|
|
|
|
|
|
||||||||
Numerator
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(130,752
|
)
|
|
$
|
(640,161
|
)
|
|
$
|
(305,168
|
)
|
|
$
|
(765,216
|
)
|
Denominator
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding
|
160,846
|
|
|
157,605
|
|
|
160,626
|
|
|
156,266
|
|
||||
Basic and diluted loss per share
|
$
|
(0.81
|
)
|
|
$
|
(4.06
|
)
|
|
$
|
(1.90
|
)
|
|
$
|
(4.90
|
)
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
September 30,
|
|
September 30,
|
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||||||
Stock options
|
301
|
|
|
977
|
|
|
812
|
|
|
1,319
|
|
SARs
|
240
|
|
|
315
|
|
|
240
|
|
|
315
|
|
Company Placement for the Performance Period
|
|
Performance Units Earned as
a Percentage of Target
|
|
First
|
|
200
|
%
|
Second
|
|
180
|
%
|
Third
|
|
160
|
%
|
Fourth
|
|
140
|
%
|
Fifth
|
|
120
|
%
|
Sixth
|
|
100
|
%
|
Seventh
|
|
0
|
%
|
Eighth
|
|
0
|
%
|
Ninth
|
|
0
|
%
|
Tenth
|
|
0
|
%
|
Eleventh
|
|
0
|
%
|
Twelfth
|
|
0
|
%
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||||||
|
|
(in thousands)
|
||||||||||||||
Financial liabilities:
|
|
|
|
|
|
|
|
|
||||||||
6.75% Senior Notes due 2021
|
|
$
|
675,000
|
|
|
$
|
188,595
|
|
|
$
|
675,000
|
|
|
$
|
175,568
|
|
Term Loan Facility due 2020
|
|
288,876
|
|
|
288,876
|
|
|
313,425
|
|
|
313,425
|
|
As of and for the three months ended September 30, 2016
|
|||||||||||||||||||||||||||||||
|
U.S. Rig Services
|
|
Fluid Management Services
|
|
Coiled Tubing Services
|
|
Fishing and Rental Services
|
|
International
|
|
Functional
Support(2)
|
|
Reconciling
Eliminations
|
|
Total
|
||||||||||||||||
Revenues from external customers
|
$
|
59,137
|
|
|
$
|
18,969
|
|
|
$
|
7,146
|
|
|
$
|
14,078
|
|
|
$
|
3,076
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
102,406
|
|
Intersegment revenues
|
293
|
|
|
203
|
|
|
—
|
|
|
1,194
|
|
|
34
|
|
|
—
|
|
|
(1,724
|
)
|
|
—
|
|
||||||||
Depreciation and amortization
|
14,602
|
|
|
5,867
|
|
|
2,683
|
|
|
6,623
|
|
|
1,719
|
|
|
1,973
|
|
|
—
|
|
|
33,467
|
|
||||||||
Impairment expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,000
|
|
|
—
|
|
|
—
|
|
|
40,000
|
|
||||||||
Other operating expenses
|
53,539
|
|
|
26,327
|
|
|
8,835
|
|
|
14,406
|
|
|
5,746
|
|
|
29,674
|
|
|
—
|
|
|
138,527
|
|
||||||||
Operating loss
|
(9,004
|
)
|
|
(13,225
|
)
|
|
(4,372
|
)
|
|
(6,951
|
)
|
|
(44,389
|
)
|
|
(31,647
|
)
|
|
—
|
|
|
(109,588
|
)
|
||||||||
Interest expense, net of amounts capitalized
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,120
|
|
|
—
|
|
|
21,120
|
|
||||||||
Loss before income taxes
|
(8,986
|
)
|
|
(13,216
|
)
|
|
(4,372
|
)
|
|
(6,938
|
)
|
|
(44,711
|
)
|
|
(52,639
|
)
|
|
—
|
|
|
(130,862
|
)
|
||||||||
Long-lived assets(1)
|
450,384
|
|
|
111,697
|
|
|
45,705
|
|
|
106,055
|
|
|
10,334
|
|
|
160,835
|
|
|
(115,326
|
)
|
|
769,684
|
|
||||||||
Total assets
|
1,304,552
|
|
|
241,422
|
|
|
114,259
|
|
|
467,392
|
|
|
33,145
|
|
|
(840,066
|
)
|
|
(325,083
|
)
|
|
995,621
|
|
||||||||
Capital expenditures
|
521
|
|
|
865
|
|
|
—
|
|
|
954
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
2,353
|
|
(1)
|
Long-lived assets include fixed assets, intangibles and other non-current assets.
|
(2)
|
Functional Support is geographically located in the United States.
|
CONDENSED CONSOLIDATING UNAUDITED BALANCE SHEETS
|
||||||||||||||||||||
|
|
September 30, 2016
|
||||||||||||||||||
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets
|
|
$
|
66,750
|
|
|
$
|
121,388
|
|
|
$
|
37,799
|
|
|
$
|
—
|
|
|
$
|
225,937
|
|
Property and equipment, net
|
|
—
|
|
|
730,300
|
|
|
6,162
|
|
|
—
|
|
|
736,462
|
|
|||||
Intercompany notes and accounts receivable and investment in subsidiaries
|
|
1,925,670
|
|
|
1,419,901
|
|
|
(2,592
|
)
|
|
(3,342,979
|
)
|
|
—
|
|
|||||
Other assets
|
|
870
|
|
|
30,541
|
|
|
1,811
|
|
|
—
|
|
|
33,222
|
|
|||||
TOTAL ASSETS
|
|
$
|
1,993,290
|
|
|
$
|
2,302,130
|
|
|
$
|
43,180
|
|
|
$
|
(3,342,979
|
)
|
|
$
|
995,621
|
|
Liabilities and equity:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities
|
|
$
|
987,478
|
|
|
$
|
69,290
|
|
|
$
|
33,847
|
|
|
$
|
—
|
|
|
$
|
1,090,615
|
|
Intercompany notes and accounts payable
|
|
1,162,645
|
|
|
2,651,259
|
|
|
218,833
|
|
|
(4,032,737
|
)
|
|
—
|
|
|||||
Other long-term liabilities
|
|
6,279
|
|
|
61,824
|
|
|
—
|
|
|
—
|
|
|
68,103
|
|
|||||
Equity
|
|
(163,112
|
)
|
|
(480,243
|
)
|
|
(209,500
|
)
|
|
689,758
|
|
|
(163,097
|
)
|
|||||
TOTAL LIABILITIES AND EQUITY
|
|
$
|
1,993,290
|
|
|
$
|
2,302,130
|
|
|
$
|
43,180
|
|
|
$
|
(3,342,979
|
)
|
|
$
|
995,621
|
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
||||||||||||||||||||
|
|
December 31, 2015
|
||||||||||||||||||
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets
|
|
$
|
202,688
|
|
|
$
|
192,083
|
|
|
$
|
25,655
|
|
|
$
|
—
|
|
|
$
|
420,426
|
|
Property and equipment, net
|
|
—
|
|
|
869,150
|
|
|
10,882
|
|
|
—
|
|
|
880,032
|
|
|||||
Intercompany notes and accounts receivable and investment in subsidiaries
|
|
2,107,092
|
|
|
1,226,433
|
|
|
87,435
|
|
|
(3,420,960
|
)
|
|
—
|
|
|||||
Other assets
|
|
—
|
|
|
16,885
|
|
|
10,455
|
|
|
—
|
|
|
27,340
|
|
|||||
TOTAL ASSETS
|
|
$
|
2,309,780
|
|
|
$
|
2,304,551
|
|
|
$
|
134,427
|
|
|
$
|
(3,420,960
|
)
|
|
$
|
1,327,798
|
|
Liabilities and equity:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities
|
|
$
|
35,233
|
|
|
$
|
101,594
|
|
|
$
|
17,656
|
|
|
$
|
—
|
|
|
$
|
154,483
|
|
Long-term debt
|
|
961,700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
961,700
|
|
|||||
Intercompany notes and accounts payable
|
|
1,162,648
|
|
|
2,731,926
|
|
|
125,565
|
|
|
(4,020,139
|
)
|
|
—
|
|
|||||
Deferred tax liabilities
|
|
3,658
|
|
|
15,159
|
|
|
(4,565
|
)
|
|
—
|
|
|
14,252
|
|
|||||
Other long-term liabilities
|
|
6,267
|
|
|
50,229
|
|
|
577
|
|
|
—
|
|
|
57,073
|
|
|||||
Equity
|
|
140,274
|
|
|
(594,357
|
)
|
|
(4,806
|
)
|
|
599,179
|
|
|
140,290
|
|
|||||
TOTAL LIABILITIES AND EQUITY
|
|
$
|
2,309,780
|
|
|
$
|
2,304,551
|
|
|
$
|
134,427
|
|
|
$
|
(3,420,960
|
)
|
|
$
|
1,327,798
|
|
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF OPERATIONS
|
||||||||||||||||||||
|
|
Three Months Ended September 30, 2016
|
||||||||||||||||||
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Revenues
|
|
$
|
—
|
|
|
$
|
99,332
|
|
|
$
|
3,110
|
|
|
$
|
(36
|
)
|
|
$
|
102,406
|
|
Direct operating expense
|
|
—
|
|
|
92,643
|
|
|
3,456
|
|
|
(28
|
)
|
|
96,071
|
|
|||||
Depreciation and amortization expense
|
|
—
|
|
|
32,347
|
|
|
1,120
|
|
|
—
|
|
|
33,467
|
|
|||||
General and administrative expense
|
|
417
|
|
|
39,738
|
|
|
2,301
|
|
|
—
|
|
|
42,456
|
|
|||||
Impairment expense
|
|
—
|
|
|
19,597
|
|
|
20,403
|
|
|
—
|
|
|
40,000
|
|
|||||
Operating loss
|
|
(417
|
)
|
|
(84,993
|
)
|
|
(24,170
|
)
|
|
(8
|
)
|
|
(109,588
|
)
|
|||||
Interest expense, net of amounts capitalized
|
|
21,120
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,120
|
|
|||||
Other (income) loss, net
|
|
(636
|
)
|
|
375
|
|
|
325
|
|
|
90
|
|
|
154
|
|
|||||
Loss before income taxes
|
|
(20,901
|
)
|
|
(85,368
|
)
|
|
(24,495
|
)
|
|
(98
|
)
|
|
(130,862
|
)
|
|||||
Income tax benefit
|
|
—
|
|
|
—
|
|
|
110
|
|
|
—
|
|
|
110
|
|
|||||
Net loss
|
|
$
|
(20,901
|
)
|
|
$
|
(85,368
|
)
|
|
$
|
(24,385
|
)
|
|
$
|
(98
|
)
|
|
$
|
(130,752
|
)
|
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF OPERATIONS
|
||||||||||||||||||||
|
|
Three Months Ended September 30, 2015
|
||||||||||||||||||
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Revenues
|
|
$
|
—
|
|
|
$
|
170,913
|
|
|
$
|
8,876
|
|
|
$
|
(2,932
|
)
|
|
$
|
176,857
|
|
Direct operating expense
|
|
—
|
|
|
166,503
|
|
|
9,487
|
|
|
(1,485
|
)
|
|
174,505
|
|
|||||
Depreciation and amortization expense
|
|
—
|
|
|
43,001
|
|
|
2,269
|
|
|
—
|
|
|
45,270
|
|
|||||
General and administrative expense
|
|
200
|
|
|
42,664
|
|
|
3,891
|
|
|
(1,441
|
)
|
|
45,314
|
|
|||||
Impairment expense
|
|
—
|
|
|
610,384
|
|
|
39,560
|
|
|
—
|
|
|
649,944
|
|
|||||
Operating loss
|
|
(200
|
)
|
|
(691,639
|
)
|
|
(46,331
|
)
|
|
(6
|
)
|
|
(738,176
|
)
|
|||||
Interest expense, net of amounts capitalized
|
|
21,689
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
21,704
|
|
|||||
Other (income) loss, net
|
|
(756
|
)
|
|
5,164
|
|
|
1,462
|
|
|
45
|
|
|
5,915
|
|
|||||
Loss before income taxes
|
|
(21,133
|
)
|
|
(696,803
|
)
|
|
(47,808
|
)
|
|
(51
|
)
|
|
(765,795
|
)
|
|||||
Income tax (expense) benefit
|
|
146,571
|
|
|
(21,259
|
)
|
|
322
|
|
|
—
|
|
|
125,634
|
|
|||||
Net income (loss)
|
|
$
|
125,438
|
|
|
$
|
(718,062
|
)
|
|
$
|
(47,486
|
)
|
|
$
|
(51
|
)
|
|
$
|
(640,161
|
)
|
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF OPERATIONS
|
||||||||||||||||||||
|
|
Nine Months Ended September 30, 2016
|
||||||||||||||||||
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Revenues
|
|
$
|
—
|
|
|
$
|
298,926
|
|
|
$
|
9,866
|
|
|
$
|
(286
|
)
|
|
$
|
308,506
|
|
Direct operating expense
|
|
—
|
|
|
265,869
|
|
|
10,481
|
|
|
(262
|
)
|
|
276,088
|
|
|||||
Depreciation and amortization expense
|
|
—
|
|
|
101,557
|
|
|
3,518
|
|
|
—
|
|
|
105,075
|
|
|||||
General and administrative expense
|
|
815
|
|
|
121,427
|
|
|
7,362
|
|
|
—
|
|
|
129,604
|
|
|||||
Impairment expense
|
|
—
|
|
|
19,597
|
|
|
20,403
|
|
|
—
|
|
|
40,000
|
|
|||||
Operating loss
|
|
(815
|
)
|
|
(209,524
|
)
|
|
(31,898
|
)
|
|
(24
|
)
|
|
(242,261
|
)
|
|||||
Interest expense, net of amounts capitalized
|
|
64,061
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64,061
|
|
|||||
Other (income) loss, net
|
|
(1,926
|
)
|
|
281
|
|
|
657
|
|
|
323
|
|
|
(665
|
)
|
|||||
Loss before income taxes
|
|
(62,950
|
)
|
|
(209,805
|
)
|
|
(32,555
|
)
|
|
(347
|
)
|
|
(305,657
|
)
|
|||||
Income tax (expense) benefit
|
|
(12
|
)
|
|
—
|
|
|
501
|
|
|
—
|
|
|
489
|
|
|||||
Net loss
|
|
$
|
(62,962
|
)
|
|
$
|
(209,805
|
)
|
|
$
|
(32,054
|
)
|
|
$
|
(347
|
)
|
|
$
|
(305,168
|
)
|
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF OPERATIONS
|
||||||||||||||||||||
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Revenues
|
|
$
|
—
|
|
|
$
|
605,381
|
|
|
$
|
46,945
|
|
|
$
|
(10,174
|
)
|
|
$
|
642,152
|
|
Direct operating expense
|
|
—
|
|
|
504,843
|
|
|
38,107
|
|
|
(5,074
|
)
|
|
537,876
|
|
|||||
Depreciation and amortization expense
|
|
—
|
|
|
130,525
|
|
|
7,852
|
|
|
—
|
|
|
138,377
|
|
|||||
General and administrative expense
|
|
607
|
|
|
156,458
|
|
|
11,684
|
|
|
(5,081
|
)
|
|
163,668
|
|
|||||
Impairment expense
|
|
—
|
|
|
632,084
|
|
|
60,912
|
|
|
—
|
|
|
692,996
|
|
|||||
Operating loss
|
|
(607
|
)
|
|
(818,529
|
)
|
|
(71,610
|
)
|
|
(19
|
)
|
|
(890,765
|
)
|
|||||
Interest expense, net of amounts capitalized
|
|
52,089
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
52,104
|
|
|||||
Other (income) loss, net
|
|
(1,656
|
)
|
|
9,650
|
|
|
2,045
|
|
|
60
|
|
|
10,099
|
|
|||||
Loss before income taxes
|
|
(51,040
|
)
|
|
(828,179
|
)
|
|
(73,670
|
)
|
|
(79
|
)
|
|
(952,968
|
)
|
|||||
Income tax (expense) benefit
|
|
208,189
|
|
|
(21,256
|
)
|
|
819
|
|
|
—
|
|
|
187,752
|
|
|||||
Net income (loss)
|
|
$
|
157,149
|
|
|
$
|
(849,435
|
)
|
|
$
|
(72,851
|
)
|
|
$
|
(79
|
)
|
|
$
|
(765,216
|
)
|
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF CASH FLOWS
|
||||||||||||||||||||
|
|
Nine Months Ended September 30, 2016
|
||||||||||||||||||
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Net cash provided by (used in) operating activities
|
|
$
|
—
|
|
|
$
|
(108,229
|
)
|
|
$
|
3,420
|
|
|
$
|
—
|
|
|
$
|
(104,809
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures
|
|
—
|
|
|
(7,073
|
)
|
|
(347
|
)
|
|
—
|
|
|
(7,420
|
)
|
|||||
Intercompany notes and accounts
|
|
—
|
|
|
92,033
|
|
|
—
|
|
|
(92,033
|
)
|
|
—
|
|
|||||
Other investing activities, net
|
|
—
|
|
|
13,376
|
|
|
—
|
|
|
—
|
|
|
13,376
|
|
|||||
Net cash provided by (used in) investing activities
|
|
—
|
|
|
98,336
|
|
|
(347
|
)
|
|
(92,033
|
)
|
|
5,956
|
|
|||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Repayments of long-term debt
|
|
(24,548
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,548
|
)
|
|||||
Restricted cash
|
|
(18,605
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,605
|
)
|
|||||
Repurchases of common stock
|
|
(165
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(165
|
)
|
|||||
Intercompany notes and accounts
|
|
(92,033
|
)
|
|
—
|
|
|
—
|
|
|
92,033
|
|
|
—
|
|
|||||
Other financing activities, net
|
|
(3,164
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,164
|
)
|
|||||
Net cash provided by (used in) financing activities
|
|
(138,515
|
)
|
|
—
|
|
|
—
|
|
|
92,033
|
|
|
(46,482
|
)
|
|||||
Effect of changes in exchange rates on cash
|
|
—
|
|
|
—
|
|
|
(1,908
|
)
|
|
—
|
|
|
(1,908
|
)
|
|||||
Net increase (decrease) in cash and cash equivalents
|
|
(138,515
|
)
|
|
(9,893
|
)
|
|
1,165
|
|
|
—
|
|
|
(147,243
|
)
|
|||||
Cash and cash equivalents at beginning of period
|
|
191,065
|
|
|
10,024
|
|
|
3,265
|
|
|
—
|
|
|
204,354
|
|
|||||
Cash and cash equivalents at end of period
|
|
$
|
52,550
|
|
|
$
|
131
|
|
|
$
|
4,430
|
|
|
$
|
—
|
|
|
$
|
57,111
|
|
CONDENSED CONSOLIDATING UNAUDITED STATEMENTS OF CASH FLOWS
|
||||||||||||||||||||
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||
|
|
Parent
Company
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Net cash provided by (used in) operating activities
|
|
$
|
—
|
|
|
$
|
(25,358
|
)
|
|
$
|
4,520
|
|
|
$
|
—
|
|
|
$
|
(20,838
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Capital expenditures
|
|
—
|
|
|
(37,667
|
)
|
|
(1,240
|
)
|
|
—
|
|
|
(38,907
|
)
|
|||||
Intercompany notes and accounts
|
|
—
|
|
|
57,401
|
|
|
—
|
|
|
(57,401
|
)
|
|
—
|
|
|||||
Other investing activities, net
|
|
—
|
|
|
12,095
|
|
|
—
|
|
|
—
|
|
|
12,095
|
|
|||||
Net cash provided by (used in) investing activities
|
|
—
|
|
|
31,829
|
|
|
(1,240
|
)
|
|
(57,401
|
)
|
|
(26,812
|
)
|
|||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Repayments of long-term debt
|
|
(788
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(788
|
)
|
|||||
Proceeds from long-term debt
|
|
305,550
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
305,550
|
|
|||||
Proceeds from borrowings on revolving credit facility
|
|
130,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
130,000
|
|
|||||
Repayments on revolving credit facility
|
|
(200,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(200,000
|
)
|
|||||
Payment of deferred financing costs
|
|
(11,072
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,072
|
)
|
|||||
Repurchases of common stock
|
|
(313
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(313
|
)
|
|||||
Intercompany notes and accounts
|
|
(57,401
|
)
|
|
—
|
|
|
—
|
|
|
57,401
|
|
|
—
|
|
|||||
Other financing activities, net
|
|
(3,301
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,301
|
)
|
|||||
Net cash provided by financing activities
|
|
162,675
|
|
|
—
|
|
|
—
|
|
|
57,401
|
|
|
220,076
|
|
|||||
Effect of changes in exchange rates on cash
|
|
—
|
|
|
—
|
|
|
(613
|
)
|
|
—
|
|
|
(613
|
)
|
|||||
Net increase in cash and cash equivalents
|
|
162,675
|
|
|
6,471
|
|
|
2,667
|
|
|
—
|
|
|
171,813
|
|
|||||
Cash and cash equivalents at beginning of period
|
|
19,949
|
|
|
450
|
|
|
6,905
|
|
|
—
|
|
|
27,304
|
|
|||||
Cash and cash equivalents at end of period
|
|
$
|
182,624
|
|
|
$
|
6,921
|
|
|
$
|
9,572
|
|
|
$
|
—
|
|
|
$
|
199,117
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
WTI Cushing Oil(1)
|
|
NYMEX Henry
Hub Natural Gas(1)
|
|
Average Baker
Hughes U.S. Land
Drilling Rigs(2)
|
|||||
2016:
|
|
|
|
|
|
|
|||||
First Quarter
|
|
$
|
33.35
|
|
|
$
|
1.99
|
|
|
524
|
|
Second Quarter
|
|
$
|
45.46
|
|
|
$
|
2.15
|
|
|
398
|
|
Third Quarter
|
|
$
|
44.85
|
|
|
$
|
2.88
|
|
|
461
|
|
|
|
|
|
|
|
|
|||||
2015:
|
|
|
|
|
|
|
|||||
First Quarter
|
|
$
|
48.49
|
|
|
$
|
2.90
|
|
|
1,353
|
|
Second Quarter
|
|
$
|
57.85
|
|
|
$
|
2.75
|
|
|
876
|
|
Third Quarter
|
|
$
|
46.49
|
|
|
$
|
2.76
|
|
|
833
|
|
Fourth Quarter
|
|
$
|
41.94
|
|
|
$
|
2.12
|
|
|
744
|
|
(1)
|
Represents the average of the monthly average prices for each of the periods presented. Source: EIA and Bloomberg
|
(2)
|
Source: www.bakerhughes.com
|
|
|
Rig Hours
|
|
Trucking Hours
|
|
Key’s U.S.
Working Days(1)
|
|||||||||
2016:
|
|
U.S.
|
|
International
|
|
Total
|
|
|
|
|
|||||
First Quarter
|
|
153,417
|
|
|
5,715
|
|
|
159,132
|
|
|
217,429
|
|
|
63
|
|
Second Quarter
|
|
144,587
|
|
|
6,913
|
|
|
151,500
|
|
|
199,527
|
|
|
64
|
|
Third Quarter
|
|
163,206
|
|
|
6,170
|
|
|
169,376
|
|
|
198,362
|
|
|
64
|
|
Total 2016
|
|
461,210
|
|
|
18,798
|
|
|
480,008
|
|
|
615,318
|
|
|
191
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2015:
|
|
|
|
|
|
|
|
|
|
|
|||||
First Quarter
|
|
271,005
|
|
|
36,950
|
|
|
307,955
|
|
|
418,032
|
|
|
62
|
|
Second Quarter
|
|
232,169
|
|
|
25,555
|
|
|
257,724
|
|
|
342,271
|
|
|
63
|
|
Third Quarter
|
|
226,953
|
|
|
13,330
|
|
|
240,283
|
|
|
309,601
|
|
|
64
|
|
Fourth Quarter
|
|
203,252
|
|
|
8,279
|
|
|
211,531
|
|
|
247,979
|
|
|
62
|
|
Total 2015
|
|
933,379
|
|
|
84,114
|
|
|
1,017,493
|
|
|
1,317,883
|
|
|
251
|
|
(1)
|
Key’s U.S. working days are the number of weekdays during the quarter minus national holidays.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
REVENUES
|
$
|
102,406
|
|
|
$
|
176,857
|
|
|
$
|
308,506
|
|
|
$
|
642,152
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Direct operating expenses
|
96,071
|
|
|
174,505
|
|
|
276,088
|
|
|
537,876
|
|
||||
Depreciation and amortization expense
|
33,467
|
|
|
45,270
|
|
|
105,075
|
|
|
138,377
|
|
||||
General and administrative expenses
|
42,456
|
|
|
45,314
|
|
|
129,604
|
|
|
163,668
|
|
||||
Impairment expense
|
40,000
|
|
|
649,944
|
|
|
40,000
|
|
|
692,996
|
|
||||
Operating loss
|
(109,588
|
)
|
|
(738,176
|
)
|
|
(242,261
|
)
|
|
(890,765
|
)
|
||||
Interest expense, net of amounts capitalized
|
21,120
|
|
|
21,704
|
|
|
64,061
|
|
|
52,104
|
|
||||
Other (income) loss, net
|
154
|
|
|
5,915
|
|
|
(665
|
)
|
|
10,099
|
|
||||
Loss before income taxes
|
(130,862
|
)
|
|
(765,795
|
)
|
|
(305,657
|
)
|
|
(952,968
|
)
|
||||
Income tax benefit
|
110
|
|
|
125,634
|
|
|
489
|
|
|
187,752
|
|
||||
NET LOSS
|
$
|
(130,752
|
)
|
|
$
|
(640,161
|
)
|
|
$
|
(305,168
|
)
|
|
$
|
(765,216
|
)
|
|
Three Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||
Interest income
|
$
|
(104
|
)
|
|
$
|
(61
|
)
|
Foreign exchange loss
|
351
|
|
|
2,472
|
|
||
Allowance for collectability of notes receivable
|
—
|
|
|
3,755
|
|
||
Other, net
|
(93
|
)
|
|
(251
|
)
|
||
Total
|
$
|
154
|
|
|
$
|
5,915
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
|
(in thousands)
|
||||||
Interest income
|
$
|
(371
|
)
|
|
$
|
(99
|
)
|
Foreign exchange loss
|
1,112
|
|
|
4,065
|
|
||
Allowance for collectability of notes receivable
|
—
|
|
|
7,705
|
|
||
Other, net
|
(1,406
|
)
|
|
(1,572
|
)
|
||
Total
|
$
|
(665
|
)
|
|
$
|
10,099
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in thousands)
|
||||||
Net cash used in operating activities
|
|
$
|
(104,809
|
)
|
|
$
|
(20,838
|
)
|
Cash paid for capital expenditures
|
|
(7,420
|
)
|
|
(38,907
|
)
|
||
Proceeds received from sale of fixed assets
|
|
13,376
|
|
|
11,500
|
|
||
Proceeds from notes receivable
|
|
—
|
|
|
595
|
|
||
Repayments of long-term debt
|
|
(24,548
|
)
|
|
(788
|
)
|
||
Proceeds from long-term debt
|
|
—
|
|
|
305,550
|
|
||
Restricted cash
|
|
(18,605
|
)
|
|
—
|
|
||
Proceeds from borrowings on revolving credit facility
|
|
—
|
|
|
130,000
|
|
||
Repayments on revolving credit facility
|
|
—
|
|
|
(200,000
|
)
|
||
Payment of deferred financing costs
|
|
—
|
|
|
(11,072
|
)
|
||
Other financing activities, net
|
|
(3,329
|
)
|
|
(3,614
|
)
|
||
Effect of exchange rates on cash
|
|
(1,908
|
)
|
|
(613
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
|
$
|
(147,243
|
)
|
|
$
|
171,813
|
|
Year
|
Principal
Payments
|
||
|
(in thousands)
|
||
2016
|
$
|
788
|
|
2017
|
3,150
|
|
|
2018
|
3,150
|
|
|
2019
|
3,150
|
|
|
2020 and thereafter
|
953,638
|
|
|
Total principal payments
|
$
|
963,876
|
|
Year
|
Percentage
|
|
2016
|
103.375
|
%
|
2017
|
102.250
|
%
|
2018
|
101.125
|
%
|
2019 and thereafter
|
100.000
|
%
|
•
|
incur additional indebtedness and issue preferred equity interests;
|
•
|
pay dividends or make other distributions or repurchase or redeem equity interests;
|
•
|
make loans and investments;
|
•
|
enter into sale and leaseback transactions;
|
•
|
sell, transfer or otherwise convey assets;
|
•
|
create liens;
|
•
|
enter into transactions with affiliates;
|
•
|
enter into agreements restricting subsidiaries’ ability to pay dividends;
|
•
|
designate future subsidiaries as unrestricted subsidiaries; and
|
•
|
consolidate, merge or sell all or substantially all of the applicable entities’ assets.
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
our ability to prosecute, confirm and consummate the Plan or another plan of reorganization with respect to the Chapter 11 proceedings;
|
•
|
the high costs of bankruptcy proceedings and related fees;
|
•
|
our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan post-emergence;
|
•
|
our ability to maintain our relationships with our suppliers, service providers, customers, employees, and other third parties;
|
•
|
our ability to maintain contracts that are critical to our operations;
|
•
|
our ability to execute our business plan in the current depressed commodity price environment;
|
•
|
our ability to attract, motivate and retain key employees;
|
•
|
the ability of third parties to seek and obtain court approval to terminate contracts and other agreements with us;
|
•
|
the ability of third parties to seek and obtain court approval to convert the Chapter 11 proceedings to a Chapter 7 proceeding; and
|
•
|
the actions and decisions of our creditors and other third parties who have interests in our Chapter 11 proceedings that may be inconsistent with our plans.
|
Period
|
|
Number of
Shares Purchased
|
|
Average Price
Paid per Share(1)
|
|||
July 1, 2016 to July 31, 2016
|
|
353
|
|
|
$
|
0.07
|
|
August 1, 2016 to August 31, 2016
|
|
1,935
|
|
|
0.09
|
|
|
September 1, 2016 to September 30, 2016
|
|
16,287
|
|
|
0.06
|
|
|
Total
|
|
18,575
|
|
|
$
|
0.06
|
|
(1)
|
The price paid per share with respect to the tax withholding repurchases was determined using the closing prices on the applicable vesting date.
|
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
ITEM 5.
|
OTHER INFORMATION
|
ITEM 6.
|
EXHIBITS
|
Date:
|
November 14, 2016
|
|
|
By:
|
/s/ J. MARSHALL DODSON
|
|
|
|
|
|
|
J. Marshall Dodson
|
|
|
|
|
|
|
Senior Vice President and Chief Financial Officer
(As duly authorized officer and Principal Financial Officer)
|
Exhibit No.
|
|
Description
|
|
|
|
3.1
|
|
Articles of Restatement of Key Energy Services, Inc. (Incorporated by reference to Exhibit 3.1 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, File No. 001-08038).
|
|
|
|
3.2
|
|
Unanimous consent of the Board of Directors of Key Energy Services, Inc. dated January 11, 2000, limiting the designation of the additional authorized shares to common stock. (Incorporated by reference to Exhibit 3.2 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, File No. 001-08038).
|
|
|
|
3.3
|
|
Ninth Amended and Restated By-laws of Key Energy Services, Inc. as amended through August 21, 2015. (Incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on August 24, 2015, File No. 001-08038).
|
|
|
|
3.4
|
|
Amendment to Ninth Amended and Restated By-laws of Key Energy Services, Inc. (Incorporated by reference to to Exhibit 3.1 of our Current Report on Form 8-K filed on August 8, 2016, File No. 001-08038).
|
|
|
|
3.5
|
|
Amendment to Ninth Amended and Restated By-laws of Key Energy Services, Inc. (Incorporated by reference to to Exhibit 3.1 of our Current Report on Form 8-K filed on August 25, 2016, File No. 001-08038).
|
|
|
|
|
|
|
10.1
|
|
Plan Support Agreement, dated August 24, 2016, by and among Key Energy Services, Inc., certain Key Energy Services, Inc. subsidiaries, Platinum Equity and certain other Holders and Lenders party thereto. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on August 25, 2016, File No. 001-08038).
|
|
|
|
10.2
|
|
Limited Consent and Second Amendment to Loan Agreement Consent and Amendment No. 3 to Limited Consent to Loan Agreement and Forbearance Agreement, dated August 24, 2016, among Key Energy Services, Inc., Key Energy Services, LLC, certain subsidiaries of the Borrowers as Guarantors, Lenders and Co-Collateral Agents party thereto and Bank of America, N.A., as administrative agent for the Lenders. (Incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed on August 25, 2016, File No. 001-08038.)
|
|
|
|
10.3
|
|
Backstop Commitment Agreement, dated September 21, 2016, among Key Energy Services, Inc. and the Backstop Participants party thereto. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on September 22, 2016, File No. 001-08038).
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10.4
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Change of Control Agreement, dated October 20, 2016, between Key Energy Services, Inc. and Eddie Picard. (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on October 21,
2016, File No. 001-08038).
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10.5
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Form of Cash Retention Award Agreement granted January 28, 2016 (Incorporated by reference to Exhibit 99.1 of our Current Report on Form 8-K filed on February 3, 2016, File No. 001-08038)
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10.6*
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Form of Amended and Restated Cash Retention Award amended as of October 17, 2016.
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31.1*
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2*
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32**
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Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101*
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Interactive Data File.
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*
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Filed herewith
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**
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Furnished herewith
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(i)
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Commitment Payment
: If you agree to continue your employment with the Company and not resign (nor give notice of your intent to resign), and your employment with the Company is not terminated for “Cause” (as hereinafter defined), before June 30, 2017, you shall be entitled to one-third of the Retention Bonus (the “
Commitment Amount
”). Provided you return a fully executed copy of this Agreement by the Delivery Date, the Commitment Amount will be advanced to you in a lump sum cash payment on or before October 21, 2016. However, if you resign your employment, give notice of your intent to resign, or are terminated by the Company with Cause prior to June 30, 2017, you agree that, within ten (10) calendar days, you will pay to the Company the full amount of the Commitment Amount received net of taxes of the Commitment Amount. You agree that the Company may recover such payment (or any part therefrom) from you by
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(ii)
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Remaining Retention Payment:
If you agree to continue your employment with the Company and not resign (nor give notice of your intent to resign), and your employment with the Company is not terminated for “Cause” (as hereinafter defined), before June 30, 2017, upon the first payroll after June 30, 2017, you shall be entitled to a lump sum cash settlement of the remaining two-thirds of your Retention Bonus (the “
Retention Payment
”). However, if you resign your employment, give notice of your intent to resign, or are terminated with Cause prior to June 30, 2017, you will forfeit the payment of the Retention Payment and you agree that, within ten (10) calendar days, you will pay to the Company the full amount received net of taxes of the Commitment Amount. You agree that the Company may recover such payment (or any part therefrom) from you by making deductions from your salary and/or any other sums owed to you by the Company or the Company, subject to applicable law and may also pursue other means of recovery as permitted by applicable law.
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(iii)
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Impact of Payment on Benefits
. The payment of any portion of the Retention Bonus will not be taken into account for purposes of any other compensation or benefit program of the Company, except your elective deferrals under any 401(k) plan.
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(iv)
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Termination without Cause
. The payment or the retention of all or any portion of the Retention Bonus under this Agreement in connection with a termination by the Company without Cause (including a termination in connection with a Change in Control under Section 4 below) will be contingent on you executing and not revoking an agreement, in substantially the form attached hereto as Schedule A, granting a full release of all actual and potential claims that you have or may have against the Company or its affiliates.
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(v)
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The Company shall oversee all aspects of the administration of this Agreement and the Retention Bonus. The Company shall have complete control and authority to determine your rights with respect to the Retention Bonus or the rights of any other person having an interest in the Retention Bonus through you. The Company shall have complete discretion to interpret the provisions of this Agreement and to decide all matters under this Agreement, including, without limitation, the right to modify a vesting or forfeiture schedule. Such interpretations shall be final, conclusive and binding on you and any person claiming under or through you, in the absence of clear and convincing evidence that the Company acted arbitrarily or capriciously. When making a determination or calculation, the Company shall be entitled to rely on information furnished by you or any Company representative. The Company may correct any defect, supply any omission or reconcile any inconsistency in this Agreement in the manner and to the extent it deems necessary or desirable to carry out the intent of this Agreement.
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(vi)
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You may not assign your rights under this Agreement except upon your death. The Company may assign its obligations hereunder to any successor (including any acquirer of substantially all of the assets of the Company). The Company may require your legal representative, heir, legatee or distribute, as a condition precedent to any payment that is delivered to them, to execute a release and receipt in such form as it shall determine.
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(vii)
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This Agreement sets forth the entire understanding of the Company and you regarding the Retention Bonus, and may be changed only by a written agreement signed by you and the Company.
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(viii)
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As partial consideration for the granting of the Retention Bonus, you hereby agree to keep confidential all information and knowledge, except that which has been disclosed in any public filings required by law, that you have relating to the terms and conditions of this letter agreement; provided, however, that such information may be disclosed as required by law and may be given in confidence to your spouse and tax or financial advisors.
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(ix)
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This Agreement may be executed in two or more counterparts, and by the different parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement electronically (including portable document format (pdf.)), docu-sign or by facsimile shall be as effective as delivery of a manually executed counterpart of this Agreement.
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(x)
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This Agreement is governed by and to be construed in accordance with the laws of the State of Texas, without regard to conflicts of laws principles thereof.
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(xi)
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Notwithstanding any of the above, you remain an “at will” employee of the Company.
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Dated:
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November 14, 2016
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/s/ ROBERT DRUMMOND
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Robert W. Drummond
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President and Chief Executive Officer
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(Principal Executive Officer)
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Dated:
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November 14, 2016
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/s/ J. MARSHALL DODSON
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J. Marshall Dodson
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Senior Vice President and Chief Financial Officer
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(Principal Financial Officer)
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Dated:
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November 14, 2016
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/s/ ROBERT DRUMMOND
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Robert W. Drummond
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President and Chief Executive Officer
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(Principal Executive Officer)
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Dated:
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November 14, 2016
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/s/ J. MARSHALL DODSON
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J. Marshall Dodson
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Senior Vice President and Chief Financial Officer
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(Principal Financial Officer)
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