AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 2002
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------
KEY ENERGY SERVICES, INC.
Co-registrants are listed on the following pages.
(Exact name of registrant as specified in its charter)
MARYLAND 1381 04-2648081
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
6 DESTA DRIVE
MIDLAND, TEXAS 79705
(915) 620-0300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
FRANCIS D. JOHN
400 SOUTH RIVER ROAD
NEW HOPE, PENNSYLVANIA 18938
(215) 862-7900
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
---------------
COPIES TO:
JACK D. LOFTIS, JR. SAMUEL N. ALLEN
KEY ENERGY SERVICES, INC. PORTER & HEDGES, L.L.P.
400 SOUTH RIVER ROAD 700 LOUISIANA, 35TH FLOOR
NEW HOPE, PENNSYLVANIA 18938 HOUSTON, TEXAS 77002
(215) 862-7900 (713) 226-0600
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. / / ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________________
CALCULATION OF REGISTRATION FEE
====================================== ======================================= ===============================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE(3)
-------------------------------------- -------------------------------------- -------------------------------
Debt Securities(2)..................
Common Stock, par value $.10 per
share...............................
Preferred Stock(2)..................
Warrants(2).........................
Guarantees of Debt Securities (4)...
====================================== ======================================= ===============================
Total.......................... $500,000,000 $46,000
====================================== ======================================= ===============================
---------------
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o). The aggregate initial offering price of all
securities issued from time to time pursuant to this registration statement
will not exceed $500,000,000 or the equivalent thereof in foreign
currencies, foreign currency units or composite currencies.
(2) There are being registered hereunder an indeterminate principal amount of
Debt Securities, an indeterminate number of shares of Common Stock and
Preferred Stock and an indeterminate number of Warrants, including Debt
Securities, Common Stock, Preferred Stock and Warrants issuable on
conversion, redemption, repurchase, exchange or exercise of the Debt
Securities, Preferred Stock or Warrants registered hereunder or pursuant to
any applicable antidilution provisions. If any Debt Securities are issued
at an original issue discount, then the principal amount of such Debt
Securities being registered hereunder shall be such principal amount as
shall result in an aggregate initial offering price of up to $500,000,000.
(3) Pursuant to Rule 429, this registration statement contains a combined
prospectus that relates to the Registrant's Common Stock, Debt Securities,
Preferred Stock and Warrants registered on Registration Statement No.
333-67667 on Form S-4 filed by the Registrant on November 20, 1998 (the
"Earlier Registration Statement") pursuant to which $21,351,186 remains to
be issued. Fees totaling $5,935.00 covering the previously registered
securities were paid by the Registrant upon filing the Earlier Registration
Statement and, pursuant to Rule 457(p), will be used to offset the
registration fees for this registration statement.
(4) Pursuant to Rule 457(n), no separate fee for the guarantees is payable.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
TABLE OF ADDITIONAL REGISTRANTS
UNDER REGISTRATION STATEMENT ON FORM S-4
The following subsidiaries of Key Energy Services, Inc. are
co-registrants under this Registration Statement for the purpose of providing
guarantees, if any, of payments on debt securities registered hereunder:
JURISDICTION OF I.R.S.
NAME INCORPORATION IDENTIFICATION
---- --------------- --------------
Brooks Well Servicing, Inc. Delaware 75-2739749
Dawson Production Acquisition Corp. Delaware 52-2022906
Dawson Production Management, Inc. Delaware 76-0525388
Dawson Production Partners, L.P. Delaware 76-0525389
Dawson Production Taylor, Inc. Delaware 52-2045563
Kalkaska Oilfield Services, Inc. Michigan 38-3083604
Key Energy Drilling, Inc. Delaware 22-3363468
Key Energy Services -- California, Inc. Delaware 22-3617958
Key Energy Services -- South Texas, Inc. Delaware 22-3594553
Key Four Corners, Inc. Delaware 22-3530274
Key Rocky Mountain, Inc. Delaware 22-3530272
Odessa Exploration Incorporated Delaware 06-1377021
Watson Oilfield Service & Supply, Inc. Delaware 22-3582713
Well-Co Oil Service, Inc. Nevada 75-2513771
WellTech Eastern, Inc. Delaware 38-3283245
WellTech Mid-Continent, Inc. Delaware 73-1532154
Yale E. Key, Inc. Texas 75-1074929
SUBJECT TO COMPLETION, DATED MARCH 6, 2002
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The information in this prospectus is not complete and may be changed. We may
not offer these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
--------------------------------------------------------------------------------
PROSPECTUS
KEY LOGO
$500,000,000
KEY ENERGY SERVICES, INC.
Common Stock
Debt Securities
Preferred Stock
Warrants
-----------
This prospectus is part of a registration statement that we filed with
the SEC using a "shelf" registration process. This means we may offer and sell,
from time to time, the common stock, debt securities, preferred stock and
warrants covered by this prospectus, in one or more offerings, to people from
whom we acquire assets, businesses or securities.
We will provide a prospectus supplement each time we issue securities,
if necessary. The prospectus supplement will provide specific information about
the terms of that offering and also may add, update or change information
contained in this prospectus.
Our common stock is listed and traded on the New York Stock Exchange
under the symbol "KEG."
PLEASE READ AND CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON
PAGE 3 IN THIS PROSPECTUS.
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Neither the SEC nor any state securities commission has approved these
securities or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
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This prospectus is dated ____________, 2002.
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED
ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN
OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
TABLE OF CONTENTS
SECTION PAGE
------- ----
About This Prospectus..............................................1
Key Energy Services, Inc...........................................1
Ratio of Earnings to Fixed Charges.................................2
Risk Factors.......................................................3
Forward-Looking Statements.........................................8
Where You Can Find More Information................................9
Selling Security Holders And Plan Of Distribution.................10
Description of Debt Securities....................................10
Description of Capital Stock......................................17
Description of Warrants...........................................18
Legal Matters.....................................................18
Experts...........................................................19
ii
ABOUT THIS PROSPECTUS
This prospectus covers up to $500.0 million of our common stock, debt
securities, preferred stock and warrants that we may issue from time to time in
connection with any asset acquisition, stock acquisition, merger, consolidation
or securities exchange offer. Persons receiving securities in distributions
pursuant to exchange offers, mergers or consolidations may be required to
complete and submit letters of transmittal and other documentation customary in
those types of transactions, all of which will be described in the applicable
prospectus supplement. This prospectus may also be used by those people to
resell the securities we issue to them. We expect to determine the terms of any
acquisitions by direct negotiations with the persons from whom the assets,
businesses or securities are acquired. The securities we issue in each
transaction will be valued at prices reasonably related to market prices, either
when an agreement for the acquisition is entered into, or when we deliver the
securities.
The terms of each acquisition and the amount and specific terms of the
particular securities to be issued will be set forth in a prospectus supplement
that will be delivered together with this prospectus. We expect that any shares
of our common stock that we issue to the owners of companies, businesses or
assets that we acquire will be valued at a price reasonably related to the
current market value of our common stock either at the time an agreement is
reached or when we deliver the shares. Other types of securities will be valued
on the basis of applicable factors, which may include our credit rating,
prevailing interest rates and the extent to which the securities can be
converted into our common stock or otherwise may reflect our equity value. Any
debt securities, preferred stock or warrants may, but are not expected to be,
listed on any securities exchange.
KEY ENERGY SERVICES, INC.
Based on available industry data, we are the largest onshore, rig-based
well servicing contractor in the world. We provide a complete range of well
services to major oil companies and independent oil and natural gas production
companies, including:
o rig-based well maintenance, workover, completion, and
recompletion services (including horizontal recompletions);
o oilfield trucking services; and
o ancillary oilfield services.
We conduct well servicing operations onshore internationally in
Argentina and in Ontario, Canada and in the following regions of the continental
United States:
o Gulf Coast (including South Texas, Central Gulf Coast of Texas
and South Louisiana);
o Permian Basin of West Texas and Eastern New Mexico;
o Mid-Continent (including the Anadarko, Hugoton and Arkoma
Basins and the ArkLaTex region);
o Four Corners (including the San Juan, Piceance, Uinta and
Paradox Basins);
o Eastern (including the Appalachian, Michigan and Illinois
Basins);
o Rocky Mountains (including the Denver-Julesberg, Powder River,
Wind River, Green River and Williston Basins); and
o California (the San Joaquin Basin).
We are also a leading onshore drilling contractor and we conduct land
drilling operations in a number of major domestic producing basins, as well as
in Argentina and in Ontario, Canada. In addition to our other businesses, we
also produce and develop oil and natural gas reserves in the Permian Basin
region and Texas Panhandle.
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We have built our leadership position in part through the acquisition
of small, regional well service companies. We have also implemented a strategy,
which has also contributed to our position within the industry, to:
o improve our balance sheet and reduce our level of debt;
o build strong customer relationships by offering a broad range
of equipment and services that will meet most of our customer's
needs at the wellsite;
o maximize utilization of our rig fleet by actively refurbishing
our rigs and related equipment; and
o train and professionally develop our employees, with an
emphasis on safety.
Our principal executive offices are located at 6 Desta Drive, Midland,
Texas 79705, and our phone number is (915) 620-0300.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of our earnings to fixed charges for each of the periods
indicated is as follows:
SIX MONTHS
ENDED
DECEMBER 31,
FISCAL YEAR ENDED JUNE 30, 2001
----------------------------------------------------------------------- --------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
2.52 2.61 ____ ____ 2.67 3.97
For these ratios, earnings consist of income from continuing
operations before income taxes and fixed charges. Fixed charges consist of
interest expenses, amortization of debt issuance expenses and the portions of
rentals and lease obligations representative of the interest factor. For the
years ended June 30, 1999 and 2000, earnings were insufficient to cover fixed
charges by $78.9 million and $28.0 million, respectively. There was no
preferred stock outstanding for any of the periods shown above.
2
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS DESCRIBED BELOW AND
OTHER INFORMATION IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN OUR
SECURITIES. OTHER RISKS FACING OUR COMPANY OR RELATED TO EACH OFFERING MAY ALSO
BE INCLUDED IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT AND WE URGE YOU TO READ
CAREFULLY ANY ACCOMPANYING PROSPECTUS SUPPLEMENT BEFORE YOU MAKE YOUR DECISION
TO INVEST IN OUR SECURITIES.
OUR BUSINESS IS DEPENDENT ON CONDITIONS IN THE OIL AND NATURAL GAS INDUSTRY,
ESPECIALLY THE CAPITAL EXPENDITURES OF OIL AND NATURAL GAS COMPANIES.
The demand for our services is primarily influenced by current and
anticipated oil and natural gas prices. Prices for oil and natural gas
historically have been extremely volatile and have reacted to changes in the
supply of and demand for oil and natural gas (including changes resulting from
the ability of the Organization of Petroleum Exporting Countries to establish
and maintain production quotas for oil prices), domestic and worldwide economic
conditions and political instability in oil producing countries. Weakness in oil
and natural gas prices may cause lower rates and lower utilization of available
well service equipment. In addition, when oil and natural gas prices are weak,
fewer wells are drilled, resulting in less drilling and less maintenance work
for us. Additional factors that affect demand for our services include:
o the level of development, exploration and production activity
of, and corresponding spending by, oil and natural gas companies;
o oil and natural gas production costs;
o government regulation; and
o conditions in the worldwide oil and natural gas industry.
In addition, we anticipate prices for oil and natural gas will continue
to be volatile and affect the demand for and pricing of our services. Reductions
in oil and natural gas prices can result in a reduction in the trading prices
and value of our securities, even if the reduction in oil and natural gas prices
does not affect our business generally. However, a material decline in oil or
natural gas prices or activities over a sustained period of time could
materially adversely affect the demand for our services and, therefore, our
results of operations and financial condition.
Periods of diminished or weakened demand for our services have occurred
in the past. Since the end of the first quarter of fiscal 2002 and continuing
through the third quarter, we have experienced a decrease in the demand for our
services. We believe this trend is due to an overall weakening of demand for
onshore well services, which is attributable to lower prices for oil and natural
gas and general economic uncertainty. If these conditions continue, or worsen,
they could have a material adverse effect on our financial condition and results
of operations. In light of these and other factors relating to the oil and
natural gas industry, our historical operating results may not be indicative of
future performance.
AN ECONOMIC DOWNTURN MAY ADVERSELY AFFECT OUR BUSINESS
The United States economy is currently believed to be in a recession.
An economic downturn may cause reduced demand for petroleum-based products and
natural gas. In addition, many oil and natural gas production companies often
reduce or delay expenditures to reduce costs, which in turn may cause a
reduction in the demand for our services during these periods. According to
industry data, in July 2001, there were approximately 1,293 active drilling rigs
in North America. As of December 2001, the number of active drilling rigs had
been reduced to 928. The number of active drilling rigs may be indicative of
demands for services such as those we provide. If the economic environment
worsens, our business may be further adversely impacted.
OUR BUSINESS INVOLVES CERTAIN OPERATING RISKS, WHICH ARE PARTIALLY SELF-INSURED,
AND OUR INSURANCE MAY NOT BE ADEQUATE TO COVER ALL LOSSES OR LIABILITIES WE
MIGHT INCUR IN OUR OPERATIONS.
Our operations are subject to many hazards and risks, including the
following:
o blow-outs;
3
o reservoir damage;
o loss of well control;
o cratering;
o fires;
o accidents resulting in serious bodily injury and the loss of
life or property;
o pollution and other damage to the environment; and
o liabilities from accident or damage by our fleet of trucks.
If these hazards occur they could result in suspension of operations,
damage to or destruction of our equipment and the property of others and injury
or death to personnel.
We self insure a significant portion of these liabilities. For losses
in excess of our self-insurance limits, we maintain insurance from unrelated
commercial carriers. However, our insurance may not be adequate to cover all
losses or liabilities that we might incur in our operations. There can be no
assurance that our insurance will adequately protect us against liability from
all of the hazards of our business. Moreover, we also are subject to the risk
that we may not be able to maintain or obtain insurance of the type and amount
we desire at a reasonable cost. If we were to incur a significant liability for
which we were not fully insured it could have a material adverse effect on our
financial position and results of operations.
WE ARE SUBJECT TO THE ECONOMIC, POLITICAL AND SOCIAL INSTABILITY RISKS OF DOING
BUSINESS IN CERTAIN FOREIGN COUNTRIES.
We have investments and may make additional investments in Argentina and other
foreign countries. As a result, we are exposed to currency exchange rate
fluctuations. We are also exposed to other risks of international operations,
including:
o increased governmental ownership and regulation of the economy
in the markets where we operate;
o inflation and adverse economic conditions stemming from
governmental attempts to reduce inflation, such as imposition
of higher interest rates and wage and price controls;
o increased trade barriers, such as higher tariffs and taxes on
imports of agricultural commodities and commodity products;
o exchange controls or other currency restrictions;
o civil unrest or significant political instability;
o expropriation, confiscatory taxation and nationalization of
our assets located in the markets where we operate; and
o governmental policies limiting returns to foreign investors.
In fiscal 2001, our foreign operations accounted for less than 7% of
our revenues. A substantial portion of these revenues were derived from our
operations in Argentina. For fiscal 2001, revenues from operations in Argentina
were $48.5 million, which accounted for 5.6% of our total revenues for such
period. For fiscal 2001, net income from operations in Argentina was $4.5
million. For the six months ended December 31, 2001, revenues from operations in
Argentina were $21.3 million, which accounted for 4.6% of our total revenue for
such period. Recently, Argentina has been negatively affected by volatile
economic and political conditions. In December 2001, the Argentine government
announced that it would restrict bank account withdrawals and would not service
its public sector debt. Furthermore, in
4
early January 2002, the Argentine government abandoned its decade-old fixed
peso-dollar exchange rate and created a dual exchange rate system. As a
result of this abandonment of the fixed peso-dollar exchange rate system, the
book value of our accounts receivables from our Argentine operations, at
December 31, 2001, we recorded a $1.8 million foreign currency transaction
loss on our dollar-denominated accounts receivable and reduced our
stockholders' equity by an additional $24.2 million due to foreign currency
translation related to our net investment in our Argentine subsidiary. The
Argentine government has also recently announced its intent to impose a 20%
tax on oil exports effective March 1, 2002 or other taxes on production that
would produce comparable tax revenues.
We believe that all of these events will negatively affect oil
production in Argentina, and accordingly will have a negative effect on demand
for our services. The economic conditions in Argentina continue to be unstable
and further devaluation of the Argentine peso may occur. We continue to evaluate
the structure of our operations in Argentina, but we are currently unable to
predict the effects that further instability in Argentina will have on our
financial position.
WE HISTORICALLY HAVE EXPERIENCED A HIGH EMPLOYEE TURNOVER RATE. ANY DIFFICULTY
WE EXPERIENCE REPLACING OR ADDING WORKERS COULD ADVERSELY AFFECT OUR BUSINESS.
We historically have experienced an annual employee turnover rate of
over 50%. The high turnover rate is caused by the nature of the work, which is
physically demanding and performed outdoors. As a result, workers may choose to
pursue employment in fields that offer a more desirable work environment at wage
rates that are competitive with ours. We cannot assure that at times of high
demand we will be able to retain, recruit and train an adequate number of
workers. Potential inability or lack of desire by workers to commute to our
facilities and job sites and competition for workers from other industries are
factors that could affect our ability to attract and retain workers. We believe
that our wage rates are competitive with the wage rates of our competitors and
other potential employers. A significant increase in the wages other employers
pay could result in a reduction in our workforce, increases in our wage rates,
or both. Either of these events could diminish our profitability and growth
potential.
WE ARE SUBJECT TO ENVIRONMENTAL, HEALTH AND SAFETY LAWS AND REGULATIONS THAT
EXPOSE US TO POTENTIAL LIABILITY.
Our operations are regulated under a number of foreign, federal, state
and local laws that govern, among other things, the handling, storage and
disposal of waste materials, some of which are classified as hazardous
substances, and the discharge of hazardous materials into the environment. Our
operations are subject to stringent regulations relating to protection of the
environment and waste handling. In addition to liability for our own
noncompliance, these regulations may expose us to liability for noncompliance of
other parties, without regard to whether we were negligent. Sanctions for
noncompliance with applicable environmental laws and regulations may include
administrative, civil and criminal penalties, revocation of permits and
corrective action orders. Furthermore, we may be liable for costs for
environmental clean-up at currently or previously owned or operated properties
or off-site locations where we sent, disposed of, or arranged for disposal of
hazardous materials. Compliance with existing laws or regulations, the adoption
of new laws or regulations or the more vigorous enforcement of environmental
laws or regulations could have a material adverse effect on our operations by
increasing our expenses and limiting our future business opportunities.
WE HAVE A SIGNIFICANT AMOUNT OF INDEBTEDNESS AND COULD INCUR ADDITIONAL
INDEBTEDNESS, WHICH COULD MATERIALLY ADVERSELY AFFECT OUR FINANCIAL CONDITION,
RESULTS OF OPERATIONS AND BUSINESS PROSPECTS AND PREVENT US FROM FULFILLING OUR
OBLIGATIONS UNDER OUR OUTSTANDING INDEBTEDNESS.
We had approximately $403.7 million of long-term indebtedness
outstanding at December 31, 2001. We are permitted under the indentures
governing our public debt securities to incur additional debt, subject to
certain limitations. If we incur additional debt, our increased leverage
could, for example:
o make it more difficult for us to satisfy our obligations under
our public debt securities or other indebtedness and, if we
fail to comply with the requirements of the other indebtedness,
that failure could result in an event of default on our public
debt securities or such other indebtedness;
o require us to dedicate a substantial portion of our cash flow
from operations to required payments on indebtedness, thereby
reducing the availability of cash flow for working capital,
capital expenditures and other general business activities;
5
o limit our ability to obtain additional financing in the future
for working capital, capital expenditures and other general
corporate activities;
o limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;
o detract from our ability to successfully withstand a downturn
in our business or the economy generally; and
o place us at a competitive disadvantage against less leveraged
competitors.
If new debt is added to our and our subsidiaries' current debt levels,
the related risks that we and they now face could increase.
WE MAY NOT BE ABLE TO GENERATE SIGNIFICANT CASH FLOW TO MEET OUR DEBT SERVICE
OBLIGATIONS.
Our ability to make payments on and to refinance our indebtedness, and
to fund planned capital expenditures, will depend on our ability to generate
cash in the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control.
We cannot assure you that our business will generate sufficient cash
flow from operations to service our outstanding indebtedness, that future
borrowings will be available to us under our credit facility in an amount
sufficient to enable us to pay our indebtedness or to fund our other liquidity
needs. We may need to refinance all or a portion of our existing indebtedness on
or before maturity. We cannot assure you that we will be able to refinance any
of our indebtedness, including our credit facility, on commercially reasonable
terms or at all.
OUR DEBT INSTRUMENTS IMPOSE RESTRICTIONS ON US THAT MAY AFFECT OUR ABILITY TO
SUCCESSFULLY OPERATE OUR BUSINESS.
Our credit facility and the terms of the indentures for our public debt
securities limit our ability to take various actions, such as:
o incurring additional indebtedness;
o paying dividends;
o repurchasing junior indebtedness;
o making investments;
o entering into transactions with affiliates;
o merging or consolidating with other entities; and
o selling all or substantially all of our assets.
In addition, our credit facility requires us to maintain certain
financial covenant ratios and satisfy certain financial condition tests, several
of which become more restrictive over time and may require us to take action to
reduce our debt or take some other action in order to comply with them. These
restrictions also could limit our ability to obtain future financings, make
needed capital expenditures, withstand a downturn in our business or the economy
in general, or otherwise conduct necessary corporate activities. We also may be
prevented from taking advantage of business opportunities that arise because of
the limitations imposed on us by the restrictive covenants under our credit
facility and the indentures.
6
WE HAVE PURSUED, AND CONTINUE TO PURSUE STRATEGIC ACQUISITIONS. OUR
BUSINESS MAY BE ADVERSELY AFFECTED IF WE CANNOT EFFECTIVELY INTEGRATE ACQUIRED
OPERATIONS.
A component of our strategy may include acquiring complementary
businesses. Acquisitions involve a number of risks and challenges including:
o our ability to integrate acquired operations;
o potential loss of key employees and customers of the acquired
companies; and
o an increase in our expenses and working capital requirements.
Any of these factors could adversely affect our ability to achieve
anticipated levels of earnings and cash flow from acquisitions or realize other
anticipated benefits. Furthermore, competition from other potential buyers could
reduce our acquisition opportunities or cause us to pay a higher price than we
otherwise might pay.
THE TRADING PRICE OF OUR SECURITIES COULD BE SUBJECT TO SIGNIFICANT
FLUCTUATIONS.
The trading price of our common stock has been volatile. Factors such
as announcements of fluctuations in our or our competitors' operating results
and market conditions for oil and gas related stocks in general could have a
significant impact on the future trading prices of our securities. In
particular, the trading price of the common stock of many oil and gas companies
has experienced extreme price and volume fluctuations, which have at times been
unrelated to the operating performance of such companies whose stocks were
affected. In addition, the trading prices of our securities could be subject to
significant fluctuations in response to variations in our prospects and
operating results, which may in turn be affected by weakness in oil prices,
changes in interest rates and other factors. There can be no assurance that
these factors will not have an adverse effect on the trading prices of our
securities.
7
FORWARD-LOOKING STATEMENTS
The statements made in this prospectus or in the documents we have
incorporated by reference that are not statements of historical fact are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act. Forward-looking statements
generally can be identified by the use of words such as "may," "will," "expect,"
"intend," "estimate," "anticipate," "believe," or similar expressions.
Although we believe that the expectations in our forward-looking
statements are reasonable, we cannot give any assurance that those expectations
will be correct. Our operations are subject to numerous uncertainties, risks and
other influences, many of which are outside our control and any of which could
materially affect our results of operations and ultimately prove the statements
we make to be inaccurate. We caution you not to place undue reliance on these
forward-looking statements, which speak only as of the date of this prospectus.
Future events and actual results may differ materially from the results
set forth in or implied in the forward-looking statements. Factors that might
cause such a difference include:
o fluctuations in world-wide prices and demand for oil and
natural gas;
o fluctuations in level of oil and natural gas exploration and
development activities;
o fluctuations in the demand for well servicing, contract drilling
and ancillary oilfield services;
o the existence of competitors, technological changes and
developments in the industry;
o the existence of operating risks inherent in the well servicing,
contract drilling and ancillary oilfield services industries; and
o general economic conditions, the existence of regulatory
uncertainties, and the possibility of political instability in
any of the countries in which we do business, in addition to
other matters discussed herein.
Other factors that could cause actual results to differ materially from
our expectations are discussed under the heading "Risk Factors."
8
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-4 (registration no.
333-_____) with the SEC with respect to the securities we are offering. This
prospectus is a part of that registration statement, however it does not
contain all the information contained in the registration statement,
including its exhibits and schedules. You should refer to the registration
statement, including the exhibits and schedules, for further information
about us and the securities we are offering. Statements we make in this
prospectus about certain contracts or other documents are not necessarily
complete. When we make those statements, we refer you to the copies of the
contracts or documents that are filed as exhibits to the registration
statement, because those statements are qualified in all respects by
reference to those exhibits. The registration statement, including exhibits
and schedules, is on file at the offices of the SEC and may be inspected
without charge.
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. Our filings, including the registration
statement, are available to the public over the Internet at the SEC's web site
at HTTP://WWW.SEC.GOV. You also may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C. and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms.
SEC rules allow us to "incorporate by reference" in this prospectus the
information we file with it, which means we can disclose important information
to you by referring you to those documents. The information incorporated by
reference is considered part of this prospectus from the date we file that
document. Any reports filed by us with the SEC after the date of this prospectus
and before we sell all of the securities offered through this prospectus will
automatically update and, where applicable, supersede any information contained
in this prospectus or incorporated by reference in this prospectus. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act until we sell all of the securities covered by this prospectus:
o Annual Report on Form 10-K for the year ended June 30, 2001, as
amended;
o Quarterly Reports on Form 10-Q for the quarters ended September 30,
2001 and December 31, 2001;
o Current Reports on Form 8-K filed with the SEC on November 26, 2001,
December 19, 2001, February 20, 2002, February 27, 2002 and March 1,
2002; and
o The description of our common stock contained in the registration
statement on Form 8-A dated March 27, 1998, including any amendments
or reports that have been filed to update the description.
You may request a copy of these filings, which we will provide to you
at no cost, by writing or telephoning us at the following address and telephone
number:
Key Energy Services, Inc.
400 South River Road
New Hope, Pennsylvania 18938
Attn: General Counsel
(215) 862-7900
9
SELLING SECURITY HOLDERS AND PLAN OF DISTRIBUTION
In general, the persons to whom we issue securities under this
prospectus will be able to resell those securities in the public markets without
further registration and without being required to deliver a prospectus.
However, certain persons who receive large blocks of our securities may want to
resell those securities in distributions that would require the delivery of a
prospectus. This prospectus may be used for those resales. However, no person
who receives the securities covered by this prospectus will be authorized to use
this prospectus for an offer of those securities without first obtaining our
consent. We may limit our consent to a specified time period and subject our
consent to certain limitations and conditions, which may vary by agreement. We
will provide the information identifying any people reselling securities
acquired under this prospectus and will disclose information about them and the
securities they are reselling in a supplement to this prospectus as may then be
required by the Securities Act and the rules of the SEC.
We will not receive any of the proceeds from the resale of the
securities by selling security holders. The selling security holders may resell
all or a portion of the securities beneficially owned by them on any exchange or
market on which the purchased securities are listed or quoted, on terms to be
determined at the times of the sales. The selling security holders also may make
private sales directly or through a broker. Alternatively, any of the selling
security holders may offer securities purchased under this prospectus through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts, commissions or concessions from the selling security
holders.
The specific amount of the securities being offered or sold, the names
of the selling security holders, the purchase prices and public offering prices,
the name of any agent, dealer or underwriter, and any applicable commissions or
discounts with respect to a particular offer or sale will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement.
To comply with state securities laws, the securities covered by this
prospectus will be sold in certain jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the securities may
not be sold at all unless they have been offered or qualified for sale in those
states or an exemption from the registration or qualification requirement is
available.
The selling security holders and any brokers, dealers, agents or
underwriters that participate with the selling security holders in the
distribution of the securities offered hereby may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commissions or discounts
received by them and any profit on the resale of the securities sold under this
prospectus and purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
We and the selling security holders may agree to indemnify each other
against certain liabilities arising under the Securities Act. We may pay all
expenses related to the offer and sale of the securities they sell under this
prospectus, other than selling commissions and fees.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be:
o our direct unsecured or secured general obligations;
o either senior debt securities or subordinated debt securities; and
o issued under one or more separate indentures.
Senior debt securities will be issued under a senior indenture and
subordinated debt securities will be issued under a subordinated indenture.
Senior debt securities and subordinated debt securities may be guaranteed by
certain of our subsidiaries. The debt securities issued may be convertible into
shares of our common stock, preferred stock or warrants.
We have summarized selected provisions of the Indentures below. The
summary is not complete. The forms of the Indentures have been filed as exhibits
to the registration statement, and you should read the Indentures for provisions
10
that may be important to you. In the summary, we have included references to
section numbers of the Indentures so that you can easily locate those
provisions. Capitalized terms used in this summary have the meanings used in the
Indentures.
GENERAL
We are a holding company that conducts substantially all operations
through our subsidiaries. Holders of debt securities generally will have a
junior position to claims of creditors of our subsidiaries including trade
creditors, debt holders, secured creditors, taxing authorities, guaranty holders
and any preferred stockholders. At December 31, 2001, we did not have any
outstanding preferred stock and we and our subsidiaries had approximately
$403.7 million of outstanding long-term debt.
o The Indentures do not limit the aggregate principal amount of
debt securities that can be issued thereunder. (Section 301)
o Debt securities may be issued in one or more series, each in
an aggregate principal amount we authorize before issuance,
and may be in any currency or currency unit that we may
designate. (Section 301)
o Debt securities of a series may be issued in registered or
global form. (Sections 201 and 203)
o The Indentures do not limit the amount of other unsecured debt
or securities that we can issue.
o The senior debt securities will rank equally with all of our
other senior debt.
o The subordinated debt securities will have a junior position
to all of our senior debt. (Section 1301)
A prospectus supplement and a supplemental indenture relating to any
series of debt securities being offered will include specific terms relating to
the offering. These terms will include some or all of the following:
o the title and type of debt securities being offered;
o the total principal amount of debt securities being offered;
o the dates on which the principal of, and premium, if any, on
the offered debt securities is payable;
o the interest rate;
o the date from which interest will accrue;
o the interest payment dates;
o any optional redemption periods;
o any sinking fund or other provisions that would obligate us to
repurchase or otherwise redeem the debt securities;
o whether the debt securities will be convertible into shares of
common stock or exchangeable for other of our securities, and
if so, the terms of conversion or exchange;
o events causing acceleration of maturity;
o any provisions granting special rights to holders when
specified events occur;
o any changes to or additional events of default or covenants;
11
o any special tax implications of the debt securities; and
o any other terms of the debt securities. (Section 301)
GUARANTEES
o Debt securities may be guaranteed by some, but not all, of our
subsidiaries. In the event of a bankruptcy, liquidation or
reorganization of any of the non-guarantor subsidiaries, the
non-guarantor subsidiaries will pay the holders of their debt
and their trade creditors before they will be able to
distribute any of their assets to us.
o The guarantees will be general obligations of each guarantor.
o The guarantors will jointly and severally guarantee any of our
guaranteed debt securities.
o The obligations of each guarantor under any guarantee will be
limited as necessary to prevent that guarantee from
constituting a fraudulent conveyance under applicable law.
o A guarantor may not consolidate with or merge into another
company unless the surviving company assumes all of the
obligations of that guarantor pursuant to a supplemental
indenture satisfactory to the trustee, and only if immediately
after giving effect to the transaction, no default or event of
default would exist.
DENOMINATIONS
The debt securities will be issued in denominations of $1,000 or
multiples thereof. (Section 302)
SUBORDINATION
Under the subordinated indenture, payment of the principal, interest
and any premium on the subordinated debt securities generally will be
subordinated and junior in right of payment to the prior payment in full of all
senior debt. The subordinated indenture provides that no payment of principal,
interest and or premium on the subordinated debt securities may be made in the
event:
o of any insolvency, bankruptcy or similar proceeding involving
us or our property; or
o we fail to pay the principal, interest, any premium or any
other amounts on any senior debt when due. (Sections 1301 and
1303)
The subordinated indenture will not limit the amount of senior debt
that we may incur.
Senior Indebtedness is defined to include all our secured and unsecured
direct or contingent liabilities and obligations, including our guarantees for
money we borrow, which is not expressed to be subordinate to or junior in right
of, payment to any of our other indebtedness, but does not include our
intercompany indebtedness, our trade payables and our tax liabilities.
EVENTS OF DEFAULT
The following are Events of Default under each Indenture:
o failure to pay principal or any premium on any debt security
when due;
o failure to pay any interest on any debt security when due,
continued for 30 days;
o failure to deposit any mandatory sinking fund payment when
due, continued for 30 days;
12
o failure to perform any other covenant in the Indenture that
continues for 90 days after written notice;
o certain events of bankruptcy, insolvency or reorganization;
and
o any other event of default as may be specified in the
supplemental indenture with respect to debt securities of such
series. (Section 501)
An Event of Default for a particular series of debt securities does not
necessarily constitute an Event of Default for any other series of debt
securities. The Trustee may withhold notice to the holders of debt securities of
any default (except in the payment of principal or interest) if the Trustee
considers the withholding of notice to be in the best interest of the holders.
(Section 602)
ACCELERATION OF DEBT UPON AN EVENT OF DEFAULT
If an Event of Default occurs either the Trustee or the holders of at
least 25% in principal amount of the outstanding debt securities may declare the
principal amount of all the debt securities of the applicable series to be due
and payable immediately. (Section 502) If this happens, subject to certain
conditions, the holders of a majority of the outstanding principal amount of a
series of debt securities can void the declaration. These conditions include the
requirement that we have paid or deposited with the Trustee a sum sufficient to
pay all overdue principal and interest payments on the series of debt securities
subject to the default. (Section 502)
If an Event of Default occurs due to certain events of bankruptcy,
insolvency or reorganization, the principal amount of the outstanding debt
securities of all series will become immediately due and payable without any
declaration or other act on the part of either Trustee or any holder. (Section
502)
Depending on the terms of our indebtedness, an Event of Default under
an Indenture may cause a cross default on our other indebtedness.
DUTIES OF TRUSTEE
Other than its duties in the case of default, the Trustee is not
obligated to exercise any of its rights or powers under either Indenture at the
request, order or direction of any holders unless the holders offer the Trustee
reasonable indemnity. (Section 603)
If the holders provide reasonable indemnification, the holders of a
majority of principal amount of any series of debt securities may direct the
time, method and place of conducting any proceeding or any remedy available to
the Trustee, or exercising any power conferred upon the Trustee for any series
of debt securities. (Section 512)
COVENANTS
Under the Indentures, we will:
o pay the principal, interest and premium, if any, on the debt
securities when due;
o maintain a place of payment;
o deliver a report to the Trustee at the end of each fiscal year
reviewing our obligations under the Indentures; and
o deposit sufficient funds with any payment agent on or before
the due date for the payment of any principal, interest or
premium, if any. (Sections 1001, 1002, 1003 and 1005)
MODIFICATION OF INDENTURES
Each Indenture provides that we and the Trustee may, without the
consent of any holders of debt securities, enter into supplemental debt
indentures for the purposes, among other things, of:
13
o adding to our covenants;
o adding additional events of default;
o changing or eliminating any provisions of the indentures so
long as there are no holders entitled to the benefit of the
provisions;
o establishing the form or terms of any series of debt
securities; or
o curing ambiguities, defects or inconsistencies in the
Indentures or making any other provisions with respect to
matters or questions arising under the Indentures.
With specific exceptions, the Indentures or the rights of the holders
of the debt securities may be modified by us and the Trustee with the consent of
the holders of a majority of the outstanding principal amount of the debt
securities of each series affected by the modification, but no modification may
be made without the consent of the holders of each outstanding debt security
affected which would:
o change the maturity of any payment of principal of, or any premium on,
or any installment of interest on any debt security;
o change the terms of any sinking fund with respect to any debt security;
o reduce the principal amount of, or the interest or any premium on, any
debt security upon redemption or repayment at the option of the holder;
o change any place of payment where, or the currency in which, any debt
security or any premium or interest is payable;
o impair the right to sue for the enforcement of any payment on or with
respect to any debt security; or
o reduce the percentage in principal amount of outstanding debt
securities of any series required to consent to any supplemental debt
indenture, any waiver of compliance with provisions the Indenture or
specific defaults and their consequences provided for in the
Indentures, or otherwise modify the sections in the Indentures relating
to these consents.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Each Indenture generally permits a consolidation or merger between us
and another company. They also permit us to sell all or substantially all of our
property and assets. If this happens, the remaining or acquiring company will
assume all of our responsibilities and liabilities under the Indentures,
including the payment of all amounts due on the debt securities and performance
of the covenants in the Indentures. (Sections 801 and 802)
We will only consolidate or merge with or into another company or sell
all or substantially all of our assets according to the terms and conditions of
the Indentures. The remaining or acquiring company will assume our obligations
under the Indentures with the same effect as if it had been an original party to
the Indentures and we shall be released from all our liabilities and obligations
under either Indenture and any debt securities. (Sections 801 and 802)
Thereafter, the successor company may exercise our rights and powers under
either Indenture, in our name or in its own name. Any act or proceeding required
or permitted to be done by our board of directors or any of our officers may be
done by the board or officers of the successor company.
DISCHARGE AND DEFEASANCE
We will be discharged from all obligations under the applicable
indenture with respect to any series of debt securities, except for surviving
obligations to register the transfer or exchange of the debt securities, if:
14
o all debt securities of the series previously authenticated and
delivered under the relevant indenture have been delivered to
the indenture trustee for cancellation; or
o all debt securities of that series have become due and payable or will
become due and payable, at maturity or by redemption, and we deposit
with the applicable trustee funds or government securities sufficient
to make payments on the debt securities of that series on the dates
those payments are due.
To exercise our right to be discharged, we must deliver the following
to the applicable trustee:
o an opinion of counsel to the effect that the holders will not recognize
income, gain or loss for federal income tax purposes as a result of the
exercise of such option and will be subject to U.S. federal income tax
on the same; and
o an officers' certificate stating that all conditions precedent to the
satisfaction and discharge of the applicable indenture have been
complied with.
In addition to our right of discharge described above, we may deposit
with the applicable trustee funds or government securities sufficient to make
payments on the debt securities of a series on the dates those payments are due
and payable, then, at our option, either of the following will occur:
o we will be discharged from our obligations with respect to the debt
securities of that series ("legal defeasance"); or
o we will no longer have any obligation to comply with the restrictive
covenants under the applicable indenture, and the related events of
default will no longer apply to us, but some of our other obligations
under the indenture and the debt securities of that series, including
our obligation to make payments on those debt securities, will survive
("covenant defeasance").
If we defease a series of debt securities, the holders of the debt
securities of the series affected will not be entitled to the benefits of the
applicable indenture, except for our obligations to:
o register the transfer or exchange of debt securities;
o replace stolen, lost or mutilated debt securities; and
o maintain paying agencies and hold moneys for payment in trust.
Unless we inform you otherwise in the prospectus supplement, we will be
required to deliver to the applicable trustee an opinion of counsel that the
deposit and related defeasance would not cause the holders of the debt
securities to recognize income, gain or loss for U.S. federal income tax
purposes. If we elect legal defeasance, that opinion of counsel must be based on
a ruling from the U.S. Internal Revenue Service or a change in law to that
effect.
PAYMENT AND PAYING AGENTS
Principal, interest and premium, if any, on fully registered securities
will be paid at designated places. Payment will be made by check mailed to the
person in whose name the debt securities are registered on the day specified in
the Indentures or any prospectus supplement. Payments in other forms will be
paid at a place designated by us and specified in a prospectus supplement.
(Section 307)
Fully registered securities may be transferred or exchanged at the
corporate trust office of the Trustee or at any other office or agency
maintained by us for such purposes without the payment of any service charge
except for any tax or governmental charge. (Section 1002)
GLOBAL SECURITIES
The debt securities of a series may be issued in the form of one or
more global certificates that will be deposited with a depositary or its nominee
identified in a prospectus supplement. We may issue global debt securities in
15
either temporary or permanent form. We will describe in the prospectus
supplement the terms of any depositary arrangement and the rights and
limitations of owners of beneficial interests in any global debt security.
16
DESCRIPTION OF CAPITAL STOCK
As of December 31, 2001, our authorized capital stock was
200,000,000 shares, which may be issued as either shares of common stock or
up to 15,169,320 of which may be issued as shares of preferred stock. As of
that date, we had 107,955,279 shares of common stock outstanding and no
shares of preferred stock outstanding.
COMMON STOCK
LISTING. Our common stock is listed on the New York Stock Exchange
under the symbol "KEG."
DIVIDENDS. Common stockholders may receive dividends when declared by
the board of directors. Dividends may be paid in cash, stock or another form.
However, certain of our existing debt agreements contain covenants that
currently restrict us from paying dividends. Additionally, in certain cases,
common stockholders may not receive dividends until we have satisfied our
obligations to any preferred stockholders.
FULLY PAID. All outstanding shares of common stock are fully paid and
non-assessable. Any additional common stock we issue will also be fully paid and
non-assessable.
VOTING RIGHTS. Common stockholders are entitled to one vote in the
election of directors and other matters for each share of common stock owned.
Common stockholders are not entitled to preemptive or cumulative voting rights.
OTHER RIGHTS. We will notify common stockholders of any stockholders'
meetings in accordance with applicable law. If we liquidate, dissolve or wind-up
our business, either voluntarily or not, common stockholders will share equally
in the assets remaining after we pay our creditors and preferred stockholders.
TRANSFER AGENT AND REGISTRAR. Our transfer agent and registrar is
American Stock Transfer & Trust Company, New York, New York.
PREFERRED STOCK
Our board of directors can, without approval of our stockholders, issue
one or more series of preferred stock. The board can also determine the number
of shares of each series and the rights, preferences and limitations of each
series including the dividend rights, voting rights, conversion rights,
redemption rights and any liquidation preferences of any series of preferred
stock and the terms and conditions of issue.
If we offer preferred stock, the specific terms will be described in a
prospectus supplement, including:
o the specific designation, number of shares, seniority and purchase
price;
o any liquidation preference per share;
o any date of maturity;
o any redemption, repayment or sinking fund provisions;
o any dividend rate or rates and the dates on which any such dividends
will be payable (or the method by which such rates or dates will be
determined);
o any voting rights;
o if other than the currency of the United States, the currency or
currencies including composite currencies in which such preferred
stock is denominated and/or in which payments will or may be payable;
o the method by which amounts in respect of such preferred stock may be
calculated and any commodities, currencies or indices, or value, rate
or price, relevant to such calculation;
17
o whether such preferred stock is convertible or exchangeable and, if so,
the securities or rights into which such preferred stock is convertible
or exchangeable, and the terms and conditions upon which such
conversions or exchanges will be effected including conversion or
exchange prices or rates, the conversion or exchange period and any
other related provisions;
o the place or places where dividends and other payments on the preferred
stock will be payable; and
o any additional voting, dividend, liquidation, redemption and other
rights, preferences, privileges, limitations and restrictions.
All shares of preferred stock offered will, when issued, be fully paid
and non-assessable.
The transfer agent, registrar, and dividend disbursement agent for a
series of preferred stock will be named in a prospectus supplement. The
registrar for shares of preferred stock will send notices to stockholders of any
meetings at which holders of the preferred stock have the right to elect
directors or to vote on any other matter.
In some cases, the issuance of preferred stock could delay a change in
control of us and make it harder to remove present management. Under certain
circumstances, preferred stock could also restrict dividend payments to common
stockholders.
DESCRIPTION OF WARRANTS
We may issue warrants, including warrants to purchase debt securities,
preferred stock, common stock or other securities. We may issue warrants
independently or together with other securities that may be attached to or
separate from the warrants.
If we issue warrants, we may do so under one or more warrant agreements
between us and a warrant agent that we will name in the prospectus supplement.
The prospectus supplement relating to any warrants being offered will
include specific terms relating to the offering. These terms will include some
or all of the following:
o the title of the warrants;
o the securities into which the warrants are exercisable;
o the exercise price;
o the aggregate number of warrants to be issued;
o the principal amount of securities purchasable upon exercise
of each warrant;
o the price or prices at which each warrant will be issued;
o the procedures for exercising the warrants;
o the date upon which the exercise of warrants will commence;
and
o the expiration date, and any other material terms of the
warrants.
LEGAL MATTERS
Certain legal matters relating to the validity of the common stock,
debt securities, preferred stock and warrants will be passed upon by Porter &
Hedges, L.L.P., Houston, Texas.
18
EXPERTS
The consolidated financial statements and schedule of Key Energy
Services, Inc. and subsidiaries as of June 30, 2001 and 2000, and for each of
the years in the three-year period ended June 30, 2001, have been
incorporated by reference herein in reliance upon the report of KPMG LLP,
independent accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 2-418 of the
Maryland General Corporation Law provides that a corporation may indemnify any
director made a party to any proceeding against judgments, penalties, fines,
settlements and reasonable expenses, unless it is established that (i) the act
or omission of the director was material to the matter giving rise to the
proceeding and was committed in bad faith or was a result of deliberate
dishonesty, (ii) the director actually received an improper personal benefit or
(iii) in a criminal proceeding, the director had reasonable cause to believe the
act or omission was unlawful. A director may not be indemnified in any
proceeding charging improper personal benefit was improperly received and, in a
derivative action, there shall not be indemnification if a director has been
adjudged liable to the corporation. A director or officer of a corporation who
has been successful in the defense of any proceeding shall be indemnified
against reasonable costs incurred in such defense. Indemnification may not be
made unless authorized for a specific proceeding after determination by the
board of directors, special legal counsel or the stockholders that
indemnification is permissible because the director has met the requisite
standard of conduct.
Article Seventh of the Company's Amended and Restated Articles of
Incorporation, as amended (the "Charter"), provides that the Company shall
indemnify (i) its directors and officers, whether serving the Company or at its
request any other entity, to the full extent required or permitted by the
Maryland law, including the advance of expenses under the procedures and to the
full extent permitted by law and (ii) other employees and agents to such extent
permitted by law. The foregoing rights of indemnification are not exclusive of
any other rights to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt, approve and
amend from time to time such By-laws, resolutions or contracts implementing such
provisions or such further indemnification arrangements as may be permitted by
the Maryland law. Furthermore, no director or officer of the Company shall be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director or an officer, except to the extent that
exculpation from liability is not permitted under the Maryland law as in effect
when such breach occurred. No amendment of the Charter or repeal of any of its
provisions shall limit or eliminate the limitations on liability provided to
directors and officers with respect to acts or omissions occurring prior to such
amendment or repeal.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT NO. DESCRIPTION
-------------------- ------------------------------------------------------------------------
*4.1 -- Form of Senior Indenture
*4.2 -- Form of Subordinated Indenture
*5.1 -- Opinion of Porter & Hedges, L.L.P.
*12.1 -- Statement Regarding Computation of Ratio of Earnings to Fixed Charges
23.1 -- Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1)
*23.2 -- Consent of KPMG LLP
24.1 -- Power of Attorney (included on signature page)
24.2 -- Power of Attorney for Guarantors (included on signature page)
+25.1 -- Statement of Eligibility of Trustee on Form T-1
---------------
* Filed herewith.
+ The Company will file as an exhibit to a current report on Form 8-K any
Statement of Eligibility and Qualification under the Trust Indenture Act of
1939, as amended, of the applicable trustee.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers
or sales are being made of the securities
registered hereby, a post-effective
amendment to this registration statement:
(i) to include any prospectus required
by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any
facts or events arising after the
effective date of this
registration statement (or the
most recent post-effective
amendment thereof) which,
individually or in the aggregate,
represent a fundamental change in
the information set forth in the
registration statement; provided,
however, that notwithstanding the
foregoing, any increase or
decrease in volume of securities
offered (if the total dollar value
of securities offered would not
exceed that which was registered)
and any deviation from the low or
high end of the estimated maximum
offering range may be reflected in
the form of prospectus filed with
the Securities and Exchange
Commission pursuant to Rule 424(b)
if, in the aggregate, the changes
in volume and price represent no
more than a 20% change in the
maximum aggregate offering price
set forth in the "Calculation of
Registration Fee" table in the
effective registration statement;
and
(iii) to include any material information
with respect to the plan of
distribution not previously
disclosed in the registration
statement or any material change
to such information in the
registration statement;
provided, however, that the undertakings set
forth in clauses (i) and (ii) above do not
apply if the information required to be
included in a post-effective amendment by
those clauses is contained in periodic
reports filed by the registrant pursuant to
Section 13 or 15(d) of the Securities and
Exchange Act of 1934 that are incorporated
by reference in this registration statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933,
each such post-effective amendment shall be
deemed to be a new registration statement
relating to the securities offered therein,
and the offering of such securities at that
time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the
securities being registered which remain
unsold at the termination of the offering.
(4) That, for the purposes of determining any
liability under the Securities Act of 1933,
each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d)
of the Securities and Exchange Act of 1934
(and, where applicable, each filing of an
employee benefit plan's annual report
pursuant to Section 15(a) of the Securities
Exchange Act of 1934) that is incorporated
by reference in this registration statement
shall be deemed to be a new registration
statement relating to the securities
offered therein, and the offering of such
securities at that time shall be deemed to
be the initial bona fide offering thereof.
(5) To respond to requests for information that
is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11,
or 13 of this Form, within one business day
of receipt of such request, and to send the
incorporated documents by first class mail
or other equally prompt means. This
includes information contained in documents
filed subsequent to the effective date of
the registration statement through the date
of responding to the request.
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(6) To supply by means of a post-effective
amendment all required information
concerning a transaction, and the company
being acquired involved therein, that was
not the subject of and included in the
registration statement when it became
effective; provided, however, that where
the transaction in which the securities are
being offered pursuant to the registration
statement under the Securities Act of 1933
would itself qualify for an exemption from
Section 5 of the Securities Act of 1933,
absent the existence of other similar
(prior or subsequent) transactions, a
prospectus supplement could be used to
furnish the information necessary in
connection with such transaction.
(7) To file an application for the purpose of
determining the eligibility of the trustee
to act under subsection (a) of Section 310
of the Trust Indenture Act in accordance
with the rules and regulations prescribed
by the Commission under Section 305(b)(2)
of the Trust Indenture Act.
(8) That prior to any public reoffering of the
securities registered hereunder through use
of a prospectus which is a part of this
registration statement, by any person or
party who is deemed to be an underwriter
within the meaning of Rule 145(c), the
issuer undertakes that such reoffering
prospectus will contain the information
called for by the applicable registration
form with respect to reoffering by persons
who may be deemed underwriters, in addition
to the information called for by the other
items of the applicable form.
(9) That every prospectus: (i) that is filed
pursuant to paragraph (7) immediately
preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the
Securities Act of 1933 and is used in
connection with an offering of securities
subject to Rule 415, will be filed as a
part of an amendment to the registration
statement and will not be used until such
amendment is effective, and that, for
purposes if determining any liability under
the Securities Act of 1933, each such
post-effective amendment shall be deemed to
be a new registration statement relating to
the securities offered therein, and the
offering of such securities at that time
shall be deemed to be the initial bona fide
offering thereof.
(10) To supply means of a post-effective
amendment all information concerning a
transaction, and the company being acquired
involved therein, that was not the subject
of and included in the registration
statement when it became effective, except
to the extent the staff of the Commission
has stated it is not necessary that the
information be supplied by means of a
post-effective amendment.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by our director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, we will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act, Key Energy
Services, Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New Hope, State of Pennsylvania on
March 6, 2002.
KEY ENERGY SERVICES, INC.
By: /s/ FRANCIS D. JOHN
-------------------------------------
Francis D. John,
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), this registration statement on Form S-4 has been signed
below by the following persons in the capacities and on the dates indicated; and
each of the undersigned officers and directors of Key Energy Services, Inc.
hereby severally constitutes and appoints Francis D. John and Jack D. Loftis,
Jr., and each of them, as true and lawful attorneys-in-fact and agents for the
undersigned, with full power of substitution, to do any and all acts and things
in our name and on our behalf in our capacities as directors and officers, and
to execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys-in-fact and agents, or either of them, may
deem necessary or advisable to enable said corporation to comply with the
Securities Act, and any rules, regulations and requirements of the Commission,
in connection with the filing of this registration statement, including
specifically without limitation, power and authority to sign for any of us, in
our names in the capacities indicated below, and any and all amendments thereto,
including without limitation any registration statements or post-effective
amendment thereof filed under and meeting the requirements of Rule 462(b) under
the Securities Act, hereby ratifying and confirming our signatures as they may
be signed by our attorneys to such Registration Statement and any and all
amendments thereto.
SIGNATURES TITLE DATE
---------------------------- -------------------------------- --------------
/s/ FRANCIS D. JOHN
---------------------------- Chairman of the Board, President March 6, 2002
Francis D. John and Chief Executive Officer
(Principal Executive Officer)
/s/ DAVID J. BREAZZANO
---------------------------- Director March 6, 2002
David J. Breazzano
/s/ KEVIN P. COLLINS
---------------------------- Director March 6, 2002
Kevin P. Collins
/s/ WILLIAM D. FERTIG
---------------------------- Director March 6, 2002
William D. Fertig
/s/ W. PHILLIP MARCUM
---------------------------- Director March 6, 2002
W. Phillip Marcum
/s/ J. ROBINSON WEST
---------------------------- Director March 6, 2002
J. Robinson West
/s/ MORTON WOLKOWITZ
---------------------------- Director March 6, 2002
Morton Wolkowitz
/s/ ROYCE W. MITCHELL
---------------------------- Chief Financial Officer and March 6, 2002
Royce W. Mitchell Chief Accounting Officer
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SIGNATURES
Pursuant to the requirements of the Securities Act, each Guarantor
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New Hope, State of Pennsylvania on March 6, 2002.
BROOKS WELL SERVICING, INC., DAWSON
PRODUCTION ACQUISITION CORP., DAWSON
PRODUCTION MANAGEMENT, INC., DAWSON
PRODUCTION TAYLOR, INC., KALKASKA OILFIELD
SERVICES, INC., KEY ENERGY DRILLING, INC.,
KEY ENERGY SERVICES -- CALIFORNIA, INC., KEY
ENERGY SERVICES -- SOUTH TEXAS, INC., KEY
FOUR CORNERS, INC., KEY ROCKY MOUNTAIN,
INC., ODESSA EXPLORATION INCORPORATED,
WATSON OILFIELD SERVICE & SUPPLY, INC.,
WELL-CO OIL SERVICE, INC., WELLTECH
EASTERN, INC., WELLTECH MID-CONTINENT, INC.,
AND YALE E. KEY, INC.
By: /s/ JACK D. LOFTIS, JR.
------------------------------------------------
Jack D. Loftis, Jr., Vice President
DAWSON PRODUCTION PARTNERS, L.P.
By: DAWSON PRODUCTION MANAGEMENT, INC.
------------------------------------------------
AS SOLE GENERAL PARTNER
By: /s/ JACK D. LOFTIS, JR.
------------------------------------------------
Jack D. Loftis, Jr., Vice President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), this registration statement on Form S-4 has been signed
below by the following persons in the capacities and on the dates indicated; and
each of the undersigned officers and directors of the Guarantors hereby
severally constitutes and appoints Francis D. John and Jack D. Loftis, Jr., and
each of them, as true and lawful attorneys-in-fact and agents for the
undersigned, with full power of substitution, to do any and all acts and things
in our name and on our behalf in our capacities as directors and officers, and
to execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys-in-fact and agents, or either of them, may
deem necessary or advisable to enable said corporation to comply with the
Securities Act, and any rules, regulations and requirements of the Commission,
in connection with the filing of this registration statement, including
specifically without limitation, power and authority to sign for any of us, in
our names in the capacities indicated below, and any and all amendments thereto,
including without limitation any registration statements or post-effective
amendment thereof filed under and meeting the requirements of Rule 462(b) under
the Securities Act, hereby ratifying and confirming our signatures as they may
be signed by our attorneys to such Registration Statement and any and all
amendments thereto.
II-5
BROOKS WELL SERVICING, INC.
/s/ JOE EUSTACE
---------------------------- President (Principal Executive March 6, 2002
Joe Eustace Officer)
/s/ FRANCIS D. JOHN
---------------------------- Director March 6, 2002
Francis D. John
/s/ ROYCE W. MITCHELL
---------------------------- Vice President (Principal March 6, 2002
Royce W. Mitchell Financial Officer)
/s/ PHILLIP M. BURCH
---------------------------- Vice President and Treasurer March 6, 2002
Phillip M. Burch (Principal Accounting Officer)
II-6
DAWSON PRODUCTION ACQUISITION CORP.
/s/ JOAN L. DOBRZYNSKI President and Director (Principal March 6, 2002
---------------------------- Executive Officer)
Joan L. Dobrzynski
/s/ VICTORIA L. GARRETT
---------------------------- Director March 6, 2002
Victoria L. Garrett
/s/ FRANCIS B. JACOBS, II
---------------------------- Vice President, Treasurer and March 6, 2002
Francis B. Jacobs, II Director (Principal Accounting
Officer)
/s/ ROYCE W. MITCHELL
---------------------------- Vice President (Principal March 6, 2002
Royce W. Mitchell Financial Officer)
II-7
DAWSON PRODUCTION MANAGEMENT, INC.
/s/ FRANCIS D. JOHN
---------------------------- President and Director (Principal March 6, 2002
Francis D. John Executive Officer)
/s/ ROYCE W. MITCHELL
---------------------------- Vice President and Treasurer March 6, 2002
Royce W. Mitchell (Principal Financial Officer and
Principal Accounting Officer)
II-8
DAWSON PRODUCTION PARTNERS, L.P.
BY: DAWSON PRODUCTION MANAGEMENT, INC. AS SOLE GENERAL PARTNER
/s/ FRANCIS D. JOHN
---------------------------- President and Director (Principal March 6, 2002
Francis D. John Executive Officer)
/s/ ROYCE W. MITCHELL
---------------------------- Vice President and Treasurer March 6, 2002
Royce W. Mitchell (Principal Financial Officer and
Principal Accounting Officer)
II-9
DAWSON PRODUCTION TAYLOR, INC.
/s/ JOAN L. DOBRZYNSKI President and Director (Principal March 6, 2002
---------------------------- Executive Officer)
Joan L. Dobrzynski
/s/ VICTORIA L. GARRETT
---------------------------- Director March 6, 2002
Victoria L. Garrett
/s/ FRANCIS B. JACOBS, II
---------------------------- Vice President, Treasurer and March 6, 2002
Francis B. Jacobs, II Director (Principal Accounting
Officer)
/s/ ROYCE W. MITCHELL
---------------------------- Vice President (Principal March 6, 2002
Royce W. Mitchell Financial Officer)
II-10
KALKASKA OILFIELD SERVICES, INC.
/s/ PHIL ALTMAN
---------------------------- President (Principal Executive March 6, 2002
Phil Altman Officer)
/s/ FRANCIS D. JOHN
---------------------------- Director March 6, 2002
Francis D. John
/s/ ROYCE W. MITCHELL
---------------------------- Vice President (Principal March 6, 2002
Royce W. Mitchell Financial Officer)
/s/ Phillip M. Burch
---------------------------- Vice President and Treasurer March 6, 2002
Phillip M. Burch (Principal Accounting Officer)
II-11
KEY ENERGY DRILLING, INC.
/s/ STEVEN A. RICHARDS President (Principal Executive March 6, 2002
------------------------------ Officer)
Steven A. Richards
/s/ FRANCIS D. JOHN Director March 6, 2002
------------------------------
Francis D. John
/s/ ROYCE W. MITCHELL Vice President (Principal March 6, 2002
------------------------------ Financial Officer)
Royce W. Mitchell
/s/ PHILLIP M. BURCH Vice President and Treasurer March 6, 2002
------------------------------ (Principal Accounting Officer)
Phillip M. Burch
II-12
KEY ENERGY SERVICES -- CALIFORNIA, INC.
/s/ JAMES D. FLYNT (President (Principal March 6, 2002
------------------------------ Executive Officer)
James D. Flynt
/s/ FRANCIS D. JOHN Director March 6, 2002
------------------------------
Francis D. John
/s/ ROYCE W. MITCHELL Vice President March 6, 2002
------------------------------ (Principal Financial Officer)
Royce W. Mitchell
/s/ PHILLIP M. BURCH Vice President and Treasurer March 6, 2002
------------------------------ (Principal Accounting Officer)
Phillip M. Burch
II-13
KEY ENERGY SERVICES -- SOUTH TEXAS, INC.
/s/ JOE EUSTACE President (Principal Executive March 6, 2002
------------------------------ Officer)
Joe Eustace
/s/ FRANCIS D. JOHN Director March 6, 2002
------------------------------
Francis D. John
/s/ ROYCE W. MITCHELL Vice President March 6, 2002
------------------------------ (Principal Financial Officer)
Royce W. Mitchell
/s/ PHILLIP M. BURCH Vice President and Treasurer March 6, 2002
------------------------------ (Principal Accounting Officer)
Phillip M. Burch
II-14
KEY FOUR CORNERS, INC.
/s/ RON FELLABAUM President (Principal March 6, 2002
------------------------------ Executive Officer)
Ron Fellabaum
/s/ FRANCIS D. JOHN Director March 6, 2002
------------------------------
Francis D. John
/s/ ROYCE W. MITCHELL Vice President (Principal March 6, 2002
------------------------------ Financial Officer)
Royce W. Mitchell
/s/ PHILLIP M. BURCH Vice President and Treasurer March 6, 2002
------------------------------ (Principal Accounting Officer)
Phillip M. Burch
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KEY ROCKY MOUNTAIN, INC.
/s/ JACK HARTNETT President (Principal Executive March 6, 2002
------------------------------ Officer)
Jack Hartnett
/s/ FRANCIS D. JOHN Director March 6, 2002
------------------------------
Francis D. John
/s/ ROYCE W. MITCHELL Vice President (Principal March 6, 2002
------------------------------ Financial Officer)
Royce W. Mitchell
/s/ PHILLIP M. BURCH Vice President and Treasurer March 6, 2002
------------------------------ (Principal Accounting Officer)
Phillip M. Burch
II-16
ODESSA EXPLORATION INCORPORATED
/s/ BRUCE LOWE President March 6, 2002
------------------------------ and Treasurer (Principal
Bruce Lowe Executive Officer and Principal
Accounting Officer)
/s/ FRANCIS D. JOHN Director March 6, 2002
------------------------------
Francis D. John
/s/ ROYCE W. MITCHELL Vice President (Principal March 6, 2002
------------------------------ Financial Officer)
Royce W. Mitchell
II-17
WATSON OILFIELD SERVICE & SUPPLY, INC.
/s/ JACK HARTNETT President (Principal Executive March 6, 2002
------------------------------ Officer)
Jack Hartnett
/s/ FRANCIS D. JOHN Director March 6, 2002
------------------------------
Francis D. John
/s/ ROYCE W. MITCHELL Vice President (Principal March 6, 2002
------------------------------ Financial Officer) and Director
Royce W. Mitchell
/s/ PHILLIP M. BURCH Vice President and Treasurer March 6, 2002
------------------------------ (Principal Accounting Officer)
Phillip M. Burch
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WELL-CO OIL SERVICE, INC.
/s/ JAMES J. BYERLOTZER President (Principal Executive March 6, 2002
------------------------------ Officer)
James J. Byerlotzer
/s/ FRANCIS D. JOHN Director March 6, 2002
------------------------------
Francis D. John
/s/ ROYCE W. MITCHELL Vice President (Principal March 6, 2002
------------------------------ Financial Officer)
Royce W. Mitchell
/s/ MATT SIMMONS Treasurer (Principal Accounting March 6, 2002
------------------------------ Officer)
Matt Simmons
II-19
WELLTECH EASTERN, INC.
/s/ MICHAEL R. FURROW President (Principal Executive March 6, 2002
------------------------------ Officer)
Michael R. Furrow
/s/ FRANCIS D. JOHN Director March 6, 2002
------------------------------
Francis D. John
/s/ ROYCE W. MITCHELL Vice President (Principal March 6, 2002
------------------------------ Financial Officer)
Royce W. Mitchell
/s/ PHILLIP M. BURCH Vice President and Treasurer March 6, 2002
------------------------------ (Principal Accounting Officer)
Phillip M. Burch
II-20
WELLTECH MID-CONTINENT, INC.
/s/ MICHAEL R. FURROW President (Principal Executive March 6, 2002
------------------------------ Officer)
Michael R. Furrow
/s/ FRANCIS D. JOHN Director March 6, 2002
------------------------------
Francis D. John
/s/ ROYCE W. MITCHELL Vice President (Principal March 6, 2002
------------------------------ Financial Officer)
Royce W. Mitchell
/s/ JAMES BURGE Treasurer (Principal Accounting March 6, 2002
------------------------------ Officer)
James Burge
II-21
EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- --------------------------------------------------------------------------
*4.1 -- Form of Senior Indenture
*4.2 -- Form of Subordinated Indenture
*5.1 -- Opinion of Porter & Hedges, L.L.P.
*12.1 -- Statement Regarding Computation of Ratio of Earnings to Fixed Charges
23.1 -- Consent of Porter & Hedges, L.L.P. (included in Exhibit 5.1)
*23.2 -- Consent of KPMG LLP
24.1 -- Power of Attorney (included on signature page)
24.2 -- Power of Attorney for Guarantors (included on signature page)
+25.1 -- Statement of Eligibility of Trustee on Form T-1
-------------------------
* Filed herewith.
+ The Company will file as an exhibit to a current report on Form 8-K any
Statement of Eligibility and Qualification under the Trust Indenture Act of
1939, as amended, of the applicable trustee.
II-22