Key Energy Seeks Credit Facility Waiver

Key Energy Services is seeking a waiver under its $547.25 million Senior Credit Facility to increase the limit on capital expenditures allowed under the Facility.

As a result of strong customer demand, the Company is seeking an increase in the amount of capital expenditures permitted under the $547.25 million Senior Credit Facility. Under the Facility, the Company is currently limited to annual capital expenditures of $150 million. The Company is requesting an increase to $175 million for 2005 and an increase to $200 million for 2006. Although the Company's current 2005 and 2006 capital expenditure budgets are $150 million for each year, the Company is seeking flexibility to support additional investments in the Company's well service, pressure pumping, rental tool, trucking and wireline services as well as to provide flexibility for potential international projects in 2006. The Company anticipates that cash flow from operations will be sufficient to support its capital expenditure program. The Company has made a formal waiver request to the lenders under the $547.25 million Senior Credit Facility and a decision is expected in early November. The Company's request for waiver of the capital expenditure covenant is unrelated to the pending restatement process.