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Key Energy Services Generated Fourth Quarter 2012 Income from Continuing Operations of $0.09 per Diluted Share

   Key Energy Services Generated Fourth Quarter 2012 Income from Continuing
                    Operations of $0.09 per Diluted Share

PR Newswire

HOUSTON, Feb. 14, 2013

HOUSTON, Feb. 14, 2013 /PRNewswire/ --Key Energy Services, Inc. (NYSE: KEG)
reported fourth quarter 2012 consolidated revenues of $466.5 million,
generating income from continuing operations of $13.5 million, or $0.09 per
share. Third quarter 2012 consolidated revenues were $490.9 million with
income from continuing operations of $22.1 million, or $0.15 per share.

The following table sets forth summary data from continuing operations for the
fourth quarter 2012 and prior comparable quarterly periods.

                            Three Months Ended
                            December 31, 2012  September 30,  December 31,
                                                 2012           2011
                               (unaudited)         (unaudited)
                               (in millions, except per share amounts)
Revenues                       $   466.5        $  490.9        $481.7
Income attributable to Key     $    13.5       $   22.1       $ 41.8
Diluted earnings per share     $    0.09       $   0.15       $ 0.28
attributable to Key
Adjusted EBITDA (unaudited)    $    92.2       $  101.3        $130.5

For the full year 2012, consolidated revenues were $1.96 billion, up 13.4%
compared to $1.73 billion for the full year 2011. Full year 2012 income from
continuing operations was $101.2 million, or $0.67 per share, compared to full
year 2011 income from continuing operations of $112.1 million, or $0.76 per
share.

Full year 2012 GAAP net income attributable to Key was $7.6 million, or $0.05
per share, which includes a net loss of $93.6 million, or $0.62 per share,
associated with the sale of the Argentina business and is reflected in
discontinued operations. Full year 2011 GAAP net income attributable to Key
was $101.5 million, or $0.69 per share, which includes a $46.5 million loss on
early retirement of debt and a net loss of $10.7 million, or $0.07 per share,
from discontinued operations.

The following table sets forth summary data from continuing operations for the
full year 2012 and 2011.

                                      Twelve Months Ended
                                      December 31, 2012  December 31, 2011
                                         (unaudited)
                                      (in millions, except per share amounts)
Revenues                                 $  1,960.1          $ 1,729.2
Income attributable to Key               $   101.2         $   112.1
Diluted income per share attributable    $    0.67        $    0.76
to Key
Adjusted EBITDA (unaudited)              $   423.7         $   431.9

U.S. Segment

Fourth quarter 2012 U.S. revenues were $372.3 million, down 6.4% compared to
$397.8 million in the third quarter 2012. Fourth quarter operating income was
$51.3 million, or 13.8% of revenue, compared to $60.1 million, or 15.1% of
revenue, in the third quarter. The quarter-over-quarter revenue decline and
margin contraction was driven primarily by seasonal factors. Additionally,
Key's Rig Services business was impacted late in the quarter due to a large
customer's reduction of its U.S. oilfield service activity.

International Segment

Fourth quarter 2012 international revenues were $94.1 million, up 1.2%
compared to third quarter 2012 revenues of $93.0 million. Fourth quarter
operating income was $17.1 million, or 18.2% of revenues, compared to third
quarteroperating income of $19.4 million, or 20.8% of revenues. Margins were
impacted by costs associated with anticipated activity growth in Mexico that
did not occur during the quarter.

General and Administrative Expenses

General and Administrative (G&A) expenses were $57.9 million, or 12.4% of
revenues, for the fourth quarter compared to $53.6 million, or 10.9% of
revenues, in the prior quarter. Full year G&A expenses were $230.5 million, or
11.8% of consolidated revenues.

Capital Expenditures and Liquidity

Capital expenditures were $47.4 million during the fourth quarter 2012 and
$447.2 million for the full year 2012. Key's consolidated cash balance at
December 31, 2012 was $45.9 million compared to $38.3 million at September 30,
2012. Total debt at December 31, 2012 was $848.5 million compared to total
debt of $904.0 million at September 30, 2012. At the end of the quarter, there
was $330.9 million available under the Company's $550 million senior secured
credit facility. Net debt to total capitalization at the end of 2012 was
37.6%.

Overview and Outlook

Commenting on the results, Key's Chairman, President and Chief Executive
Officer, Dick Alario, stated, "Our fourth quarter consolidated results were
generally in line with expectations, reflective of activity declines in excess
of typical seasonal factors.

"We forecast first quarter 2013 consolidated revenue to decline approximately
5% compared to the fourth quarter and project first quarter earnings of $0.02
to $0.04 per share as a result of cost inefficiencies associated with
underutilized assets and labor in our U.S. Rig Services business."

Alario continued, "We believe U.S. activity will begin to recover in the
second quarter, and expect activity for 2013 to approximate 2012 levels. We
anticipate another good year in 2013 in our international segment following
67% revenue growth in 2012. The stalled activity growth in Mexico in the
fourth quarter has already resumed, and assets delivered toMexico and
Colombialate in 2012should fuel additional growth given a full year's
contribution in 2013.

"Our capital expenditure plan for 2013 is $210 million for equipment
maintenance needs, including ongoing upgrades to our Rig Services fleet."

Conference Call Information

As previously announced, Key management will host a conference call to discuss
its fourth quarter 2012 financial results on Friday, February 15, 2013 at
10:00 a.m. CST. Callers from the U.S. and Canada should dial 888-794-4637 to
access the call. International callers should dial 660-422-4879. All callers
should ask for the "Key Energy Services Conference Call" or provide the access
code 89977893. The conference call will also be available live via the
internet. To access the webcast, go to www.keyenergy.com and select "Investor
Relations."

A telephonic replay of the conference call will be available on Friday,
February 15, 2013, beginning approximately two hours after the completion of
the conference call and will remain available for one week. To access the
replay, call 855-859-2056 or 800-585-8367. The access code for the replay is
89977893. The replay will also be accessible at www.keyenergy.com under
"Investor Relations" for a period of at least 90 days.

Consolidated Statements of Operations (in thousands, except per share
amounts):

                  Three Months Ended                 Twelve Months Ended
                  December    September   December  December    December
                  31, 2012    30, 2012    31, 2011  31, 2012    31, 2011
                  (unaudited)  (unaudited)             (unaudited)
REVENUES          $466,471     $490,851     $481,718   $1,960,070   $1,729,211
COSTS AND
EXPENSES:
  Direct
  operating       317,553      335,799      290,137    1,308,845    1,085,190
  expenses
  Depreciation
  and             57,195       52,947       46,899     213,783      166,946
  amortization
  expense
  General and
  administrative  57,930       53,567       63,438     230,496      223,299
  expenses
Operating income  33,793       48,538       81,244     206,946      253,776
  Loss on early
  extinguishment  -            -            -          -            46,451
  of debt
  Interest
  expense, net of 13,992       13,962       10,846     53,566       40,849
  amounts
  capitalized
  Other, net      (2,711)      (1,529)      955        (6,649)      (8,977)
Income from
continuing        22,512       36,105       69,443     160,029      175,453
operations before
tax
  Income tax      (8,205)      (12,915)     (27,411)   (57,352)     (64,117)
  expense
Income from
continuing        14,307       23,190       42,032     102,677      111,336
operations
  Loss from
  discontinued    -            (60,209)     (2,463)    (93,568)     (10,681)
  operations, net
  of tax
Net income (loss) 14,307       (37,019)     39,569     9,109        100,655
  Income (loss)
  attributable to 822          1,075        221        1,487        (806)
  noncontrolling
  interest
INCOME (LOSS)                                          $          $ 
ATTRIBUTABLE TO   $ 13,485    $ (38,094)   $ 39,348  7,622       101,461
KEY
Earnings (loss)
per share
attributable to
Key:
  Basic          $   0.09   $  (0.25)  $        $         $   
                                            0.26       0.05        0.70
  Diluted         $   0.09   $  (0.25)  $        $         $   
                                            0.26       0.05        0.69
Weighted average
shares
outstanding:
  Basic           151,100      151,105      150,738    151,106      145,909
  Diluted         151,104      151,110      150,804    151,125      146,217
Income from
continuing
operations

attributable to
Key:
  Income from
  continuing      14,307       23,190       42,032     102,677      111,336
  operations
  Income (loss)
  attributable to 822          1,075        221        1,487        (806)
  noncontrolling
  interest
  Income from
  continuing                                                        $ 
  operations      $ 13,485    $ 22,115    $ 41,811  $  101,190  112,142
  attributable to
  Key
Earnings per
share from
continuing
operations
attributable to
Key:
  Basic           $   0.09   $   0.15   $        $         $   
                                            0.28       0.67        0.77
  Diluted       $   0.09   $   0.15   $        $         $   
                                            0.28       0.67        0.76
Loss from
discontinued      $     -  $ (60,209)   $         $           $ 
operations, net                             (2,463)    (93,568)    (10,681)
of tax:
Loss per share
from discontinued
operations:
  Basic and       $     -  $  (0.40)  $         $         $   
  diluted                                   (0.02)    (0.62)       (0.07)



Condensed Consolidated Balance Sheets (in thousands):

                                      December 31, 2012  December 31, 2011
                                      (unaudited)
ASSETS
Current assets:
 Cash and cash equivalents            $   45,949         $   35,443
 Other current assets                 543,845              504,777
 Current assets held for sale         -                    60,343
Total current assets                  589,794              600,563
Property and equipment, net           1,436,674            1,197,300
Goodwill                              626,481              622,773
Other assets, net                     108,639              155,601
Non-current assets held for sale      -                    22,883
TOTAL ASSETS                          $2,761,588           $2,599,120
LIABILITIES AND EQUITY
Current liabilities:
 Accounts payable                     $  104,073          $   71,736
 Other current liabilities            201,023              175,877
 Current liabilities associated with  -                    41,890
 assets held for sale
Total current liabilities             305,096              289,503
Long-term debt, less current portion  848,110              773,975
Other non-current liabilities         321,050              321,011
Equity                                1,287,332            1,214,631
TOTAL LIABILITIES AND EQUITY          $2,761,588           $2,599,120

Consolidated Cash Flow Data (in thousands):

                                      Twelve Months Ended
                                      December 31, 2012  December 31, 2011
                                      (unaudited)
Net cash provided by operating        $369,660             $188,305
activities
Net cash used in investing activities (428,709)            (520,090)
Net cash provided by financing        73,946               306,084
activities
Effect of exchange rates on cash      (4,391)              4,516
Net increase (decrease) in cash and   10,506               (21,185)
cash equivalents
Cash and cash equivalents, beginning  35,443               56,628
of period
Cash and cash equivalents, end of     $ 45,949            $ 35,443
period



Segment Revenue and Operating Income from continuing operations (in thousands,
except for percentages):

                        Three Months Ended
                        December 31,       September 30,     December 31,
                        2012               2012              2011
Revenues                (unaudited)         (unaudited)
U.S. Operations
Rig Services            $  174,912         $  201,453        $   194,197
Fluid Management        76,897              82,140             96,886
Services
Coiled Tubing Services  53,525              52,442             60,896
Fishing & Rental        67,001              61,779             68,960
Services
Total U.S. Operations   372,335             397,814            420,939
International           94,136              93,037             60,779
Operations
Consolidated Total      $  466,471         $  490,851        $   481,718
Operating Income
U.S. Operations         $   51,250        $   60,136       $   106,550
International           17,149              19,359             14,450
Operations
Functional Support      (34,606)            (30,957)           (39,756)
Consolidated Total      $   33,793        $   48,538       $    81,244
Operating Income % of
Revenues
U.S. Operations         13.8%               15.1%              25.3%
International           18.2%               20.8%              23.8%
Operations
Consolidated Total      7.2%                9.9%               16.9%
                        Twelve Months Ended
                        December 31,       December 31,
                        2012               2011
Revenues                (unaudited)
U.S. Operations
Rig Services            $  788,512         $  725,509
Fluid Management        353,597             387,982
Services
Coiled Tubing Services  215,876             232,374
Fishing & Rental        268,783             184,222
Services
Total U.S. Operations   1,626,768           1,530,087
International           333,302             199,124
Operations
Consolidated Total      $1,960,070          $1,729,211
Operating Income
U.S. Operations         $  285,341         $  357,606
International           62,992              38,921
Operations
Functional Support      (141,387)           (142,751)
Consolidated Total      $  206,946         $  253,776
Operating Income % of
Revenues
U.S. Operations         17.5%               23.4%
International           18.9%               19.5%
Operations
Consolidated Total      10.6%               14.7%

Following is a reconciliation of income from continuing operations
attributable to Key as presented in accordance with United States generally
accepted accounting principles (GAAP) to EBITDA from continuing operations and
Adjusted EBITDA from continuing operations as required under Regulation G of
the Securities Exchange Act of 1934.



Reconciliations of EBITDA from continuing operations and Adjusted EBITDA from
continuing operations to income from continuing operations (in thousands,
except for percentages, unaudited):

                            Three Months Ended
                            December 31,  September 30,  December 31,
                            2012          2012           2011
Income from continuing      $   14,307   $   23,190    $   42,032
operations
Income tax expense          8,205          12,915          27,411
Income attributable to
noncontrolling interest,    (1,456)        (1,683)         (769)
excluding depreciation and
amortization
Interest expense, net of    13,992         13,962          10,846
amounts capitalized
Interest income             (20)           (12)            (3)
Depreciation and            57,195         52,947          46,899
amortization
EBITDA                      $   92,223   $  101,319     $  126,416
 % of revenues           19.8%          20.6%           26.2%
G&A restructuring costs     -              -               4,120
Adjusted EBITDA             $   92,223   $  101,319     $  130,536
 % of revenues           19.8%          20.6%           27.1%
Revenues                    $  466,471    $  490,851     $  481,718
                            Twelve Months Ended
                            December 31,  December 31,
                            2012          2011
Income from continuing      $  102,677    $  111,336
operations
Income tax expense         57,352         64,117
Income attributable to
noncontrolling interest,    (3,648)        (437)
excluding depreciation and
amortization
Interest expense, net of    53,566         40,849
amounts capitalized
Interest income             (46)           (26)
Depreciation and            213,783        166,946
amortization
EBITDA                     $  423,684    $  382,785
 % of revenues           21.6%          22.1%
Loss on debt extinguishment -              46,451
Gain on IROC sale           -              (4,783)
Edge transaction costs      -              3,307
G&A restructuring costs     -              4,120
Adjusted EBITDA             $  423,684    $  431,880
 % of revenues           21.6%          25.0%
Revenues                    $1,960,070     $1,729,211

"EBITDA" is defined as income or loss from continuing operations attributable
to Key before interest, taxes, depreciation, and amortization.

"Adjusted EBITDA" is EBITDA as further adjusted for certain non-recurring or
extraordinary items such as loss on debt extinguishment, certain other gains
or losses, asset retirements and impairments, and certain non-recurring
transaction or other costs.

EBITDA and Adjusted EBITDA are non-GAAP measures that are used as supplemental
financial measures by the Company's management and directors and by external
users of the Company's financial statements, such as investors, to assess:

  oThe financial performance of the Company's assets without regard to
    financing methods, capital structure or historical cost basis;
  oThe ability of the Company's assets to generate cash sufficient to pay
    interest on its indebtedness;
  oThe Company's operating performance and return on invested capital as
    compared to those of other companies in the well services industry,
    without regard to financing methods and capital structure; and
  oThe Company's operating trends underlying the items that tend to be of a
    non-recurring nature.

EBITDA and Adjusted EBITDA have limitations as analytical tools and should not
be considered an alternative to net income, operating income, cash flow from
operating activities, or any other measure of financial performance or
liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA
exclude some, but not all, items that affect net income and operating income
and these measures may vary among other companies. Limitations to using EBITDA
and Adjusted EBITDA as an analytical tool include:

  oEBITDA and Adjusted EBITDA do not reflect Key's current or future
    requirements for capital expenditures or capital commitments;
  oEBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements
    necessary to service, interest or principal payments on Key's debt;
  oEBITDA and Adjusted EBITDA do not reflect income taxes;
  oAlthough depreciation and amortization are non-cash charges, the assets
    being depreciated and amortized will often have to be replaced in the
    future, and EBITDA and Adjusted EBITDA do not reflect any cash
    requirements for such replacements;
  oOther companies in Key's industry may calculate EBITDA and Adjusted EBITDA
    differently than Key does, limiting their usefulness as a comparative
    measure; and
  oEBITDA and Adjusted EBITDA are a different calculation from earnings
    before interest, taxes, depreciation and amortization as defined for
    purposes of the financial covenants in the Company's senior secured credit
    facility, and therefore should not be relied upon for assessing compliance
    with covenants.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Any statements as to
matters that are not of historic fact are forward-looking statements. These
forward-looking statements are based on Key's current expectations, estimates
and projections about Key, its industry, its management's beliefs and certain
assumptions made by management, and include statements regarding estimated
capital expenditures, future operational and activity expectations,
international growth, and anticipated financial performance in the first
quarter of 2013. No assurance can be given that such expectations, estimates
or projections will prove to have been correct. Whenever possible, these
"forward-looking statements" are identified by words such as "expects,"
"believes," "anticipates" and similar phrases.

Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and are subject to certain risks,
uncertainties and assumptions that are difficult topredict, including, but
not limited to: risks that Key will be unable to achieve its financial,
capital expenditure and operational projections, including quarterly and
annual projections ofrevenue and/or operating income and risks that Key's
expectations regarding future activity levels, customer demand, and pricing
stability may not materialize (whether for Key as a whole or for geographic
regions and/or business segments individually); risks that fundamentals in the
U.S. oil and gas markets may not yield anticipated future growth in Key's
businesses, or could further deteriorate or worsen from the recent market
declines, and/or that Key could experience further unexpected declines in
activity and demand for itsrig service, fluid management service, coiled
tubing service, and fishing and rental service businesses;risks relating to
Key's ability to implement technological developments and enhancements; risks
relating to compliance with environmental, health and safety laws and
regulations, as well as actions by governmental and regulatory authorities;
risks affecting Key's international operations, including risks that Key may
not be able to achieveits international growth and mobilization strategy in
the foreign countries in which Key operates;risks that Key may be unable to
achieve the benefits expected from acquisition and disposition transactions,
and risks associated with integration of the acquired operations into Key's
operations; risks, in responding to changing or declining market conditions,
that Key may not be able to reduce, and could even experience increases in,
the costs of labor, fuel, equipment and supplies employed and used in Key's
businesses;risks relating to changes in the demand for or the priceof oil
and natural gas; risks that Key may not be able to execute its capital
expenditure program and/or that any such capital expenditure investments,
ifmade, will not generate adequate returns; and other risks affecting Key's
ability to maintain or improve operations, including its ability to maintain
prices for services under market pricingpressures, weather risks, and the
impact of potential increases in general and administrative expenses.

Because such statements involve risks and uncertainties, many of which are
outside of Key's control, Key's actual results and performance may differ
materially from the results expressed or implied by such forward-looking
statements. Given these risks and uncertainties, readers are cautioned not to
place undue reliance on such forward-looking statements. Other important risk
factors that may affect Key's business, results of operations and financial
position are discussed in its most recently filed Annual Report on Form 10-K,
recent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and
in other Securities and Exchange Commission filings. Unless otherwise required
by law, Key also disclaims any obligation to update its view of any such risks
or uncertainties or to announce publicly the result of any revisions to the
forward-looking statements made here. However, readers should review carefully
reports and documents that Key files periodically with the Securities and
Exchange Commission.

About Key Energy Services
Key Energy Services is the largest onshore, rig-based well servicing
contractor based on the number of rigs owned. Key provides a complete range of
well intervention services and has operations in all major onshore oil and gas
producing regions of the continental United States and internationally in
Mexico, Colombia, the Middle East and Russia.

Contact:
Gary Russell, Investor Relations
713-651-4434

SOURCE Key Energy Services, Inc.

Website: http://www.keyenergy.com
 
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