Key Energy Purchases Several New Well Service Rigs

Key Energy Services has entered into an agreement to purchase 30 new-generation, foreign manufactured well service rigs. The Company anticipates that it will receive 5 well service rigs during 2005 with the balance of the rigs to be delivered in 2006. The purchase will include eighteen 400-horsepower well service rigs and twelve 500-horsepower well service rigs which are designed with enhanced safety features and technology to reduce downtime. This purchase will be in addition to the 60 well service rigs that the Company expects to remanufacture during 2006. The Company anticipates that the majority of both the new rigs and the remanufactured rigs will be used to replace existing capacity, although a portion of the rigs will be used to meet the increasing demand for the Company's services.

Commenting on the new well service rig purchases, Dick Alario, Chairman and CEO, stated, "We continue to be very pleased with industry conditions and are excited about the opportunity to enhance our well service rig fleet. Recently, we have received requests from customers seeking long-term contracts for our well service rigs. We are currently evaluating these opportunities and anticipate that we may secure contracts for a portion of our new well service rigs before year-end."


Overall activity levels remain strong. The Company's operations in South Louisiana and the Gulf Coast of Texas did see some short-term disruptions due to Hurricane Rita. The Company incurred no major damage to any of its well service rigs; however, several company facilities, including those located in High Island, Texas and Lake Charles, Louisiana, did incur wind and flood damage, which the Company estimates the repair cost to be less than $100,000. The Company estimates that lost revenue associated with Hurricanes Rita and Katrina will be less than $2.5 million for the month of September. Additionally, the Company also incurred costs and expenses associated with non-productive time as a result of the storms.

Mr. Alario commented, "We were very fortunate to have not incurred any material damage to our equipment or facilities as a result of Hurricanes Rita and Katrina. Certain locations did incur short-term activity disruptions which affected our September monthly financial results; however, all of our impacted facilities are now operational."