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Key Energy Services, Inc. (KEG)
Q1 2019 Earnings Conference Call
May 09, 2019 11:00 AM ET
Katherine Hargis - Senior Vice President & General Counsel
Rob Saltiel - President & Chief Executive Officer
Marshall Dodson - Chief Financial Officer
Conference Call Participants
John Daniel - Simmons
Daniel Burke - Johnson Rice
Previous Statements by KEG
» Key Energy Services, Inc. (KEG) CEO Rob Saltiel on Q4 2018 Results - Earnings Call Transcript
» Key Energy Services (KEG) Q3 2018 Results - Earnings Call Transcript
» Key Energy Services (KEG) Q2 2018 Results - Earnings Call Transcript
» Key Energy Services (KEG) Q1 2018 Results - Earnings Call Transcript
Ms. Katherine Hargis, Senior Vice President and General Counsel, you may begin your conference.
Thank you, Katherine, and thank you all for joining Key Energy Services for our First Quarter 2019 Financial Results Conference Call. This call includes forward-looking statements. A number of factors could cause actual results to differ materially from the expectations expressed in this call, including risk factors discussed in our 2018 Form 10-K and other reports most recently filed with the SEC which are available on our website at www.keyenergy.com.
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, Key's President and CEO; and Marshall Dodson, Key's CFO. I'm now going to turn the call over to Rob.
Thank you, Katherine and good morning to everyone joining today's call. We generated first quarter revenue of $109.3 million down $8 million from the fourth quarter of 2018. The sequential decline was due in large part to some particularly difficult weather in the Rockies, California and the Permian Basin that limited our working days coupled with a slow start to wells completions activity in 2019.
Our first quarter 2019 operating loss was $15.3 million with our adjusted EBITDA coming in at $0.9 million down from the $3.9 million of adjusted EBITDA generated in the fourth quarter of 2018. As we highlighted in our press release, we incurred the majority of our 2019 employment-related taxes in the first quarter in the amount of $1.7 million. We expect this line item to be de minimis in future quarters.
Before going into our segment results I want to say a few words about our team. I've been with Key for eight months now and our employees have really embraced our new core values the first of which is safety is our obligation. We're off to an excellent start in 2019 with our safety performance and this has been aided by our new work plan tools, which emphasize employee engagement to identify safety hazards and prevent injuries.
Our service quality continues to improve as our operations teams work hand-in-hand with our sales representatives to ensure that our clients' needs are fully met. We have modernized our employee training programs and we have greatly expanded our Key certified coach programs for mentoring new arrivals to Key.
Workplace morale is excellent aided in part by the reinstatement of our matching 401k program in 2019 and our field attrition levels continue to decline. Our biggest challenge remains growing our field work force in a full employment economy especially, in our Rigs and Fluid Management Services segments, a subject I will revisit in my closing comments.
Turning now to our reportable business segments. In our Rig Services segment, first quarter 2019 revenues were $65 million as compared to fourth quarter 2018 revenues of $69.1 million. Inclement weather particularly late in the quarter in the Rockies, California and the Permian impacted our operations and drove the decline quarter-on-quarter. With the weather impacts, we averaged 168 rigs working versus an average of 180 rigs working in the prior quarter with approximately 240 discrete rigs working in each quarter.
During the first quarter, our 24-hour activity averaged slightly up at about 13 average rigs as compared to about 11 average rigs in the fourth quarter of 2018. We had around 45 rigs that participated in the 24-hour market last quarter, and today are capable of building over 30 rigs with full completion packages.
Obviously, not all of these work 24 hours consistently as crew availability can be a factor along with choppiness of completion schedules. But, we continue to increase our capabilities in this growing and profitable aspect of our business by adding additional ancillary assets to complete our industry-leading -- to complement our industry-leading fleet of Class IV and V well service rigs.
We experienced a 4% quarter-on-quarter decline on revenue per rig hour, primarily as a result of the changing geographic revenue mix due to the weather impacts. However, we did benefit from price increases with some of our more significant clients.
Our Rig Services segment margins improved in the first quarter 2019 as compared to the fourth quarter of 2018 on the better pricing as well as from our continual cost management efforts. As a result, our adjusted EBITDA in the segment came in at $11.6 million or 17.8% of revenues as compared to adjusted EBITDA of $11 million or 16% of revenues in the prior quarter.