Key Energy Services Inc. announced on Sept. 21 the sale of all its Texas and New Mexico fluid management and saltwater disposal well assets for cash to an undisclosed buyer.
Though terms of the transaction weren’t disclosed, the sale effectively completes Key’s exit from this line of business in these states as the company aims to further strengthen its liquidity position after a challenging couple of years for the Houston-based oilfield service company.
“The sale of these assets represents a significant milestone in our efforts to focus Key on our core operations,” Marshall Dodson, president and CEO of Key Energy Services, commented in a release by the company on Sept. 21.
“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,” he continued, “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.”
One of the largest well-servicing and workover companies in the U.S., Key Energy Services completed an out-of-court restructuring in March 2020 that effectively cut shareholder’s ownership in the company by 97%.
To complete the restructuring, lenders exchanged roughly $241.9 million of outstanding principal into 13.3 million newly issued shares of common stock and $20 million of term loans under a new approximately $51.2 million term loan facility. The company also effected a 50-for-1 reverse stock split.
Since the restructuring, Key’s efforts to lower its cost structure have continued, including through the rationalization of its fleet of well service rigs. According to the Sept. 21 release, roughly 350 well service rigs have been scrapped since the end of 2019 and Dodson said he expects to be at its target fleet size of around 400 rigs by first-quarter 2022.
Dodson also noted in the release that the company’s levels of activity are currently the highest Key has seen since November 2019. However, shortages of qualified employees and the impacts of COVID continue to weigh on the company’s recovery.
“Financially, with higher activity, net pricing improvements and reduced cost structure we continue to generate positive operating cash flow,” he said. “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.”
Recommended Reading
Talos Energy Sells CCS Business to TotalEnergies
2024-03-18 - TotalEnergies’ acquisition targets Talos Energy’s Bayou Bend project, and the French company plans to sell off the remainder of Talos’ carbon capture and sequestration portfolio in Texas and Louisiana.
TotalEnergies, Vanguard Renewables Form RNG JV in US
2024-04-24 - Total Energies and Vanguard Renewable’s equally owned joint venture initially aims to advance 10 RNG projects into construction during the next 12 months.
SLB to Buy Service Firm ChampionX in $7.7B All-stock Deal
2024-04-02 - SLB will acquire ChampionX for $7.74 billion in an all-stock deal that puts a 14.6% premium on ChampionX’s April 1 closing price.
CERAWeek: Exxon Mobil CEO Says Not Trying to Acquire Hess
2024-03-18 - CEO Darren Woods said Exxon Mobil is trying to secure preemption rights over Hess Corp.'s Guyana assets in its dispute with Chevron, not buy the company itself.
ConocoPhillips CEO Ryan Lance: Upstream M&A Wave ‘Not Done’ Yet
2024-03-19 - Dealmaking in the upstream oil and gas industry totaled $234 billion in 2023. The trend shows no signs of slowing, ConocoPhillips CEO Ryan Lance said at the CERAWeek by S&P Global conference.