Key Energy Services Inc. (NYSE:KEG) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 11:00 am ET

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Key Energy Services Inc. (NYSE:KEG) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning. My name is Holly, and I'll be your conference operator today. At this time, we'd like to welcome everyone to the Key Energy Services Quarter Three 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions)

I'll now turn today's conference over to Katherine Hargis, SVP and General Counsel. Please go ahead, ma'am.

Executive
Katherine Hargis

Thank you, Holly, and thank you all for joining Key Energy Services for our third quarter 2018 financial results conference call.

(Forward-Looking Cautionary Statements)

This call may also include references to non-GAAP financial measures. Please refer to our previously posted earnings release, which can be found on our website, for a reconciliation of any non-GAAP financial measures provided in this call to the comparable GAAP financial measures. For reference, our general investor presentation is available on Key's website at keyenergy.com under the Investor Relations tab.

On the call this morning is Rob Saltiel, Chief President and CEO; and Marshall Dodson, Chief CFO. I'm now going to turn the call over to Rob.

Executive
Robert Saltiel

Thank you, Katherine, and good morning to everyone joining today's call. During my first three months in Key, I've spent a lot of time in the field, visiting our facilities, meeting our clients and getting to know our people. I've been very impressed with the Key employees I've met. Despite our company's challenges over the past few years, we have retained a very capable and dedicated base that will lead us into better times.

I've also been impressed with the scale and quality of our equipment, the rigor of our training programs and our strong safety culture. Each of these elements differentiates us from our competitors, and I've heard our clients site these advantages as reasons why they select Key for their well services. With our distinctive capabilities and supported market fundamentals, I'm excited about the opportunities ahead for our company.

Turning now to our financials. Our revenues for the third quarter were $134.7 million or $9.7 million lower than the second quarter. This decline is largely attributable to the loss of market share in our California Rig Services business and lower utilization of our large diameter coiled tubing units. This lower activity drove a decline in our adjusted EBITDA, which came in at $5.6 million for the quarter.

I will now address the performance of each of our four business segments. In our Rig Services segment, our quarterly revenue came in at $77.2 million, down about 4% from second quarter as the lost business in California was not offset with growth elsewhere. Despite the quarterly dip, Rig Services revenue for the company is up more than 24% from year ago levels. We expect this general upward trend to continue into 2019 for both production-related and completions-related work in our other basins.

Quarter-on-quarter, our completion rig hours increased 15%, led by activity in the Permian and the Bakken, as we averaged around 17 rigs due in