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Key Energy Services, Inc. today announced the sale of substantially all of its Texas and New Mexico fluid management and salt water disposal well assets for cash and the assumption by the buyer of the related asset retirement obligations, or AROs. The sale effectively completes the company’s exit from this line of business in these states. The sales proceeds will be used by the company to strengthen its liquidity position and for reinvestment. Gibson, Dunn & Crutcher LLP served as legal advisor to Key.
President and CEO, Marshall Dodson, stated, “The sale of these assets represents a significant milestone in our efforts to focus Key on our core operations. While our liquidity position has already benefited from our positive operating cash flow and recovery of cash previously used to collateralize our outstanding letters of credit, the proceeds from this asset sale significantly accelerate that improvement and provide Key with additional resources to take advantage of opportunities in the market today.”
Dodson continued, “Our current levels of activity are the highest Key has seen since November of 2019. Although we continue to benefit from improving demand for our services, shortages of qualified employees and the impacts of COVID continue to weigh on our recovery.
He concluded, “Financially, with higher activity, net pricing improvements and reduced cost structure we continue to generate positive operating cash flow. We are experiencing cost pressures with labor, steel and other products, however, we expect that these higher costs will be offset by further price increases in 2021 and in 2022."
Key has scrapped roughly 350 well service rigs since the end of 2019 and expects to be at its target fleet size of around 400 rigs by the first quarter of 2022, according to Dodson.