Key Energy to Sell Non-Core Oil & Gas Properties

Key Energy Services has entered into an agreement to sell all of its oil and gas properties for approximately $19.7 million in cash. The sale is expected to close on or before August 28, 2003 and is subject to certain closing conditions. The Company currently expects to use approximately $12.4 million of the proceeds from the sale to pay off its volumetric production payment and to unwind related hedges, resulting in net cash proceeds to the Company of approximately $7.3 million. In connection with the sale, the Company currently expects to record an after-tax charge of approximately $7.8 million. For the six months ending June 30, 2003, the Company's oil and gas properties contributed revenue of approximately $2.9 million and a net loss of $0.5 million. For the three and nine months ended September 30, 2003 and the year ended December 31, 2003, the Company's oil and gas operations will be treated as a discontinued operation.

Mr. Francis D. John, Chairman and CEO, commented, "As we stated on our earnings conference call in July, the Company is focused on developing and enhancing its production services capabilities and will seek to exit those businesses that do not meet these objectives. Our oil and gas operations are not core to our business and, in fact, compete with some of our customers. Therefore, we have elected to exit this business. In addition, the sale of these properties will provide Key with additional cash that will be used for debt reduction and/or expansion of our rental tool operations."
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