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Key Energy to Restructure, File For Chapter 11 Protection

Oilfield services (OFS) company Key Energy Services Inc. has reached an agreement with creditors on a restructuring plan, becoming the latest energy company to succumb to financial pressure from the oil and gas industry downturn.

The Houston-based company said last week it plans to file for Chapter 11 bankruptcy protection in Delaware by Nov. 8. The plan would see Key’s funded debt reduced by $725 million.

Los Angeles-based Platinum Equity, which holds most of Key’s senior notes, would become the largest shareholder in the reorganized company.

“By significantly reducing Key’s debt from almost $1 billion to $250 million, we believe that Key will be well positioned to take advantage of opportunities that emerge as the market recovers,” Key CEO Robert Drummond said. Key was able to “reach an agreement that we believe is in the best interest of the company and all of its stakeholders.”

“Key Energy is a market leader in North American production services and will emerge from this process as a stable, well-capitalized business with all the tools needed to thrive long term,” said Platinum Equity partner Jacob Kotzubei. “The company is an ideal platform for growth and consolidation as the oilfield services industry works through today’s challenging market conditions.”

Key provides drilling and workover rigs, coiled tubing, fracture stacks and well testing, fluid services, onshore and deepwater fishing and rental services.

The downturn has been difficult, but leading OFS operators Halliburton Co. and Schlumberger Ltd. were optimistic during recent conference calls, indicating the market may have found the bottom during the second quarter (see Shale Daily, July 25; July 20).

Exploration and production companies also are beginning to open their wallets again as they prepare for a slow recovery (see Shale Daily, Aug. 19).

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