Key Energy Services, Inc. – Value Analysis (NYSE:KEG) : August 7, 2017

Capitalcube gives Key Energy Services, Inc. a score of 31.

Our analysis is based on comparing Key Energy Services, Inc. with the following peers – Petrolera Pampa SA, PEDEVCO Corp., Occidental Petroleum Corporation and Point Loma Resources Ltd. (PETR-AR, PED-US, OXY-US and PLX-CA).

Investment Outlook

Key Energy Services, Inc. has a fundamental score of 31 and has a relative valuation of UNDERVALUED.

Fundamental Score

Access our research and ratings on Key Energy Services, Inc.

Company Overview

  • KEG-US has traded publicly for less than a year.
  • It’s current Price/Book of 1.67 is about median in its peer group.
  • KEG-US‘s earnings and EBITDA are both negative which suggest that P/E or Price/EBITDA are not meaningful to make this analysis between operating advantage (ROE) and growth expectations (as suggested by P/E or P/EBITDA).
  • KEG-US‘s median net profit margins and relatively high asset efficiency give it some operating leverage.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • KEG-US‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • KEG-US‘s earnings and EBITDA are both negative which suggest that P/E or Price/EBITDA are not meaningful for an analysis between historical growth (using annualized three-year revenue growth) and investor growth expectations (as suggested by P/E or Price/EBITDA) .
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • KEG-US seems too levered to raise additional debt.

Access our research and ratings on Key Energy Services, Inc.

Leverage & Liquidity

KEG-US would seem to have a hard time raising additional debt.

  • With debt at a relatively high 40.15% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 21.69%), and relatively tight interest coverage level of -3.88x, KEG-US would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 4 peers for the company have an outstanding debt balance.

KEG-US has maintained its Limited Flexibility profile from the recent year-end.

  • KEG-US‘s interest coverage is less than (but within one standard deviation of) its five-year average interest coverage of -0.96x.
  • Though its interest coverage has remained relatively stable at -3.88x compared to 2016, its peer median has increased to -0.43x from -2.90x during this period.
  • Interest coverage fell 2.82 points relative to peers.
  • KEG-US‘s debt-EV is its highest relative to the last five years and compares to a low of 32.00% in 2016.
  • While its debt-EV increased to 40.15% from 32.00% (in 2016), its peer median decreased during this period to 21.69% from 30.94%.
  • Relative to peers, debt-EV rose 17.40 percentage points. Unlike the peer median, it is also above the 25% leverage benchmark.

Access the detailed analysis for Key Energy Services, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Petrolera Pampa SA 21.69 0.77 2.29 69.01
PEDEVCO Corp. 92.97 0.37 -0.43 -2.58
Occidental Petroleum Corporation 18.4 1.26 0.51 37.48
Point Loma Resources Ltd. 20.65 0.45 -15.73 -43.69
Key Energy Services, Inc. 40.15 1.98 -3.88 -76.14
Peer Median 21.69 0.77 -0.43 -2.58
Best In Class 18.4 1.98 2.29 69.01

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Company Profile

Key Energy Services, Inc. engages in onshore energy production services. It operates through the following segments: U.S. Rig Services, Fluid Management Services, Coiled Tubing Services, Fishing and Rental Services, International, and Functional Support. The U.S. Rig Services segment includes the completion of newly drilled wells, workover and recompletion of existing oil and natural gas wells, well maintenance, and the plugging and abandonment of wells. The Fluid Management Services segment involves in providing transportation and well-site storage services for fluids utilized in connection with drilling, completions, workover, and maintenance activities. The Coiled Tubing Services segment offers use of a continuous metal pipe spooled onto a large reel which is then deployed into oil and natural gas wells. The Fishing and Rental Services segment includes fishing services and rental equipment designed for use in providing onshore and offshore drilling and workover services. The International segment covers operations in Mexico and Russia. The Functional Support segment comprises of unallocated overhead costs associated with sales, safety, and administrative support for each of reporting segments. The company was founded on April 1977 and is headquartered in Houston, TX.


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