Key Energy Services has consummated the second tranche of its investment in Russian oilfield services company OOO GeoStream Services Group effective September 1, 2009. Following its initial investment of $17.6 million in October of 2008, Key made an additional capital infusion of approximately $16.2 million, increasing its ownership interest in GeoStream from 26% to 50%. Following the closing of the second tranche, Key has the right to appoint a majority of GeoStream's board, and will now consolidate GeoStream's financial results.
In conjunction with the second closing, GeoStream has agreed to purchase from Key a customized suite of equipment, including two 400 series workover rigs, two 1,000 HP drilling rigs, cementing equipment, and fishing tools for approximately $23.0 million in total, a portion of which will be seller financed. The workover and drilling rigs will include associated complimentary support equipment, all of which is highly mobile and designed for rapid rig-up, deployment and demobilization. The two 400 series workover rigs were designed and fabricated by Key specifically for operations in the Russian market, and the two 1,000 HP drilling units were engineered and upgraded to operate in Arctic conditions. Additionally, Key is planning to license its proprietary KeyView(®) system technology to GeoStream, and to provide technical services to GeoStream.
Chairman, President, and CEO Dick Alario commented, "Both Key and GeoStream have exerted the utmost in planning and teamwork to construct a model that will support the growth and financial success of our Russian investment. While Russia is a challenging market, it is clear to us that many of the indigenous operators now recognize that new, reliable equipment and proven technology add value to their projects. Key's partnership with GeoStream is designed to target these customers. We believe that our strategy is sound and our timing is right as we see the Russian market demonstrating signs of steady improvement."
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