Key Energy focuses on horizontal drilling, international operations

By Lisa Kerner

Charlotte, N.C., July 19 - Key Energy Services, Inc. is actively making the shift to horizontal drilling from vertical drilling, expanding its international business and plans to close on a new acquisition this quarter, according to comments made by chairman, president and chief executive officer Dick Alario on Tuesday at the 2011 Global Hunter Securities Conference in San Francisco.

Alario said that unlike vertical assets, horizontal assets work 24 hours a day and, on average, generate twice the revenue upon completion.

Providing services abroad

Key Energy has been serious about building its international market since 2007, according to Alario. He said the U.S. market is a more mature, efficient market and that the business drivers outside of the United States are very different.

The company provides basic, repetitive repair services outside of the United States and some drilling in Argentina.

Alario said the goal is to grow the international portion of Key Energy's business to become 30% to 35% of the company's annual revenue.

Cash-and-stock deal

Key Energy agreed to buy Edge Oilfield Services, LLC and Summit Oilfield Services, LLC in a cash-and-stock deal valued at about $300 million.

The company will fund the $164 million cash portion of the deal using available cash and with borrowings under its credit facility. Key Energy will also increase its share count by about 4.5%.

Going forward, Alario said the company's shift to higher margin businesses will continue as it looks to acquire "little gems" that offer a good return on investment and have less labor intensive requirements.

Key Energy Services is a Houston-based onshore rig-based well servicing contractor.

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