Key Energy Services, Inc. and Patterson-UTI Energy reached an agreement whereby Key will sell its pressure pumping and wireline businesses to Patterson-UTI for total consideration of approximately $256.7 million, comprised of a cash payment at closing of $237.7 million and Key's retention of working capital associated with the businesses. At the closing of the transaction, Key will sell its pressure pumping assets (including approximately 184,400 fracturing hydraulic horsepower (HHP) and 30,000 HHP used in primary cementing, acidizing, and nitrogen stimulation), 26 electric wireline units, and certain facilities used by these businesses. Key will retain the other businesses in its Production Services reporting segment, including its coiled tubing operations. Key anticipates recording a pre-tax gain upon the closing of this transaction of approximately $160 million.

Closing of the transaction is expected in the third quarter of 2010 and is subject to customary closing conditions, including the termination of the waiting period under the Hart-Scott-Rodino Act.

Key reports the results of its pressure pumping and electric wireline businesses in its Production Services segment. These two businesses contributed $50.9 million and $123.0 million of revenues and $2.5 million operating income and $72.9 million operating loss for the three months ended March 31, 2010 and the twelve months ended December 31, 2009, respectively. The operating loss for the twelve months ended December 31, 2009 includes $64.1 million of an impairment charge recorded in the third quarter of 2009. Excluding this impairment charge, the operating loss contributed by these businesses in 2009 was $8.8 million.

Key's Chairman, President, and Chief Executive Officer, Dick Alario, stated: "In evaluating the growth and consolidation opportunities in our core well intervention services business and international expansion efforts, we determined that the capital in our pressure pumping and electric wireline businesses could be more effectively deployed in many of the other areas of potential opportunity before us today. We are not selling our coiled tubing business, as it is a primary focus area of our well intervention growth strategy. We intend to continue to evaluate growth opportunities, both organic and via acquisition, in our core businesses to enhance shareholder value. We believe that this transaction helps us to accelerate that strategy. Additionally, we believe that Patterson-UTI will be a good strategic fit for the employees and customers of the businesses being sold."

Tags: Key Energy Services Inc.