New Jersey-based Key Energy Services Inc., the world's largest well service contractor, closed the $101.5 million sale of 11 million shares of its common stock, including an over-allotment of 1 million shares. That offering, managed by Lehman Brothers Holdings Inc. and Dain Rauscher Wessels Inc., was priced at $9.625/share.
Key plans to use substantially all of the proceeds to repay long-term debt and associated fees and expenses. The company is required to use 25% of the net proceeds to prepay its senior secured debt and also has the right to redeem up to 35% of its $150 million, 14% senior subordinated notes, due 2009, at 114% of par value.
That should significantly improve the company's debt-to-capitalization ratio, officials said. They figure the interest savings, combined with steadily improving cash flow from operations, will allow the firm to reduce debt more quickly and to fund its recently announced capital expansion program.
With demand for natural gas rising and its backlog of gas-related drilling, completion, and workover services growing, Key reported plans in June to refurbish 50-60 workover and completion rigs and issue about 10 million shares of common stock. (OGJ Online, June 20, 2000)
The firm has scheduled about $25 million worth of rig work for 2001. Key said the projects are expected to significantly improve the company's ability to serve customers in the onshore natural gas regions of the US, Argentina, and Canada, where a substantial backlog of orders already exists.
"The success of this offering indicates that investors understand Key's substantial market position, its strong leverage to the natural gas market, and the benefit of an improved balance sheet," said Francis D. John, chairman and CEO.
Key Energy Services owns some 1,400 well service rigs and 1,200 oilfield trucks, as well as 73 drilling rigs.