10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 _____________________________________________

Form 10-Q

 _____________________________________________ 

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2019

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-08038

  _____________________________________________

KEY ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)

  _____________________________________________

Delaware	04-2648081
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1301 McKinney Street, Suite 1800, Houston, Texas	77010
(Address of principal executive offices)	(Zip Code)

(713) 651-4300

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

  ____________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	ý
Non-accelerated filer	¨	Smaller reporting company	ý
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨ No  ý

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ý No ¨

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.01 par value	KEG	New York Stock Exchange
(Title of each class)	(Trading symbol)	(Name of each exchange on which registered)

As of November 1, 2019, the number of outstanding shares of common stock of the registrant was 20,498,674.

KEY ENERGY SERVICES, INC.

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended September 30, 2019

Part I — Financial Information
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
Part II — Other Information
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	35

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature or that relate to future events and conditions are, or may be deemed to be, forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections and management’s beliefs and assumptions concerning future events and financial trends affecting our financial condition and results of operations. In some cases, you can identify these statements by terminology such as “may,” “will,” “should,” “predicts,” “expects,” “believes,” “anticipates,” “projects,” “potential” or “continue” or the negative of such terms and other comparable terminology. These statements are only predictions and are subject to substantial risks and uncertainties and are not guarantees of performance. Future actions, events and conditions and future results of operations may differ materially from those expressed in these statements. In evaluating those statements, you should carefully consider the information above as well as the risks outlined in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 and in the other reports we file with the Securities and Exchange Commission.

We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of this report except as required by law. All of our written and oral forward-looking statements are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements.

Important factors that may affect our expectations, estimates or projections include, but are not limited to, the following:

• conditions in the oil and natural gas industry, especially oil and natural gas prices and capital expenditures by oil and natural gas companies;

• volatility in oil and natural gas prices;

• our ability to implement price increases or maintain pricing on our core services;

• risks that we may not be able to reduce, and could even experience increases in, the costs of labor, fuel, equipment and supplies employed in our businesses;

• industry capacity;

• asset impairments or other charges;

• the periodic low demand for our services and resulting operating losses and negative cash flows;

• our highly competitive industry as well as operating risks, which are primarily self-insured, and the possibility that our insurance may not be adequate to cover all of our losses or liabilities;

• significant costs and potential liabilities resulting from compliance with applicable laws, including those resulting from environmental, health and safety laws and regulations, specifically those relating to hydraulic fracturing, as well as climate change legislation or initiatives;

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• our historically high employee turnover rate and our ability to replace or add workers, including executive officers and skilled workers;

• our ability to implement technological developments and enhancements;

• severe weather impacts on our business, including from hurricane activity;

• our ability to successfully identify, make and integrate acquisitions and our ability to finance future growth of our operations or future acquisitions;

• our ability to achieve the benefits expected from disposition transactions;

• the loss of one or more of our larger customers;

• our ability to generate sufficient cash flow and liquidity to meet debt service obligations, meet contractual payment obligations and fund our operations;

• the amount of our debt and the limitations imposed by the covenants in the agreements governing our debt, including our ability to comply with covenants under our debt agreements;

• an increase in our debt service obligations due to variable rate indebtedness;

• our ability to restructure our debt agreements with our lenders on acceptable terms, if at all, and adjust our debt levels;

• the structure and timing of any financial, transactional, or other strategic alternative that we may pursue to address our capital structure and whether any such financial, transactional, or other strategic alternative will be completed;

• our ability to achieve the benefits of our cost efficiency and cash flow growth initiatives;

• our inability to achieve our financial, capital expenditure and operational projections, including quarterly and annual projections of revenue, operating income and/or loss margin and our inaccurate assessment of future activity levels, customer demand, and pricing stability which may not materialize (whether for Key as a whole or for geographic regions and/or business segments individually);

• our ability to respond to changing or declining market conditions;

• our ability to maintain sufficient liquidity;

• adverse impact of litigation;

• our ability to regain compliance with the listing requirements of, and maintain the listing of our common stock on, the New York Stock Exchange; and

• other factors affecting our business described in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 and in the other reports we file with the Securities and Exchange Commission.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Key Energy Services, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

	September 30, 2019			December 31, 2018
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	22,606		$	50,311
Accounts receivable, net of allowance for doubtful accounts of $476and $1,056, respectively	67,246			74,253
Inventories	15,214			15,861
Other current assets	13,496			18,073
Total current assets	118,562			158,498
Property and equipment	443,774			439,043
Accumulated depreciation	(199,892		)	(163,333		)
Property and equipment, net	243,882			275,710
Intangible assets, net	361			404
Other non-current assets	11,341			8,562
TOTAL ASSETS	$	374,146		$	443,174
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	18,360		$	13,587
Current portion of long-term debt	2,914			2,500
Other current liabilities	73,533			87,377
Total current liabilities	94,807			103,464
Long-term debt	240,009			241,079
Workers’ compensation, vehicular and health insurance liabilities	25,880			24,775
Other non-current liabilities	31,701			28,336
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value; 10,000,000 authorized and one share issued and outstanding	—			—
Common stock, $0.01 par value; 100,000,000 shares authorized, 20,498,674 and 20,363,198 outstanding	205			204
Additional paid-in capital	268,406			264,945
Retained deficit	(286,862		)	(219,629		)
Total equity	(18,251		)	45,520
TOTAL LIABILITIES AND EQUITY	$	374,146		$	443,174

See the accompanying notes which are an integral part of these condensed consolidated financial statements.

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Key Energy Services, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
REVENUES	$	106,523		$	134,721		$	328,739		$	404,442
COSTS AND EXPENSES:
Direct operating expenses	87,956			106,103			266,714			314,061
Depreciation and amortization expense	14,584			21,808			43,142			62,881
General and administrative expenses	21,375			23,925			66,014			71,353
Operating loss	(17,392		)	(17,115		)	(47,131		)	(43,853		)
Interest expense, net of amounts capitalized	8,411			8,708			26,164			25,425
Other income, net	(351		)	(213		)	(1,732		)	(1,972		)
Loss before income taxes	(25,452		)	(25,610		)	(71,563		)	(67,306		)
Income tax benefit (expense)	(37		)	1,750			4,330			1,588
NET LOSS	$	(25,489	)	$	(23,860	)	$	(67,233	)	$	(65,718	)
Loss per share:
Basic and diluted	$	(1.25	)	$	(1.18	)	$	(3.30	)	$	(3.25	)
Weighted average shares outstanding:
Basic and diluted	20,443			20,252			20,398			20,234

See the accompanying notes which are an integral part of these condensed consolidated financial statements.

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Key Energy Services, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended
	September 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(67,233	)	$	(65,718	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	43,142			62,881
Bad debt expense	538			387
Accretion of asset retirement obligations	126			121
Amortization of deferred financing costs	346			357
Gain on disposal of assets, net	(3,785		)	(7,402		)
Share-based compensation	3,499			4,582
Changes in working capital:
Accounts receivable	6,469			(20,994		)
Other current assets	5,224			8,365
Accounts payable, accrued interest and accrued expenses	(9,077		)	(4,392		)
Share-based compensation liability awards	5			835
Other assets and liabilities	3,961			5,916
Net cash used in operating activities	(16,785		)	(15,062		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(16,483		)	(28,521		)
Proceeds from sale of assets	8,362			11,955
Net cash used in investing activities	(8,121		)	(16,566		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt	(1,875		)	(1,875		)
Repayments of finance lease obligations	(59		)	—
Payment of deferred financing costs	(828		)	—
Repurchases of common stock	(37		)	(271		)
Proceeds from exercise of warrants	—			3
Net cash used in financing activities	(2,799		)	(2,143		)
Net decrease in cash, cash equivalents and restricted cash	(27,705		)	(33,771		)
Cash, cash equivalents, and restricted cash, beginning of period	50,311			77,065
Cash, cash equivalents, and restricted cash, end of period	$	22,606		$	43,294

See the accompanying notes which are an integral part of these condensed consolidated financial statements.

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Key Energy Services, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

NOTE 1. GENERAL

Key Energy Services, Inc., and its wholly owned subsidiaries (collectively, “Key,” the “Company,” “we,” “us,” “its,” and “our”) provide a full range of well services to major oil companies and independent oil and natural gas production companies. Our services include rig-based and coiled tubing-based well maintenance and workover services, well completion and recompletion services, fluid management services, fishing and rental services, and other ancillary oilfield services. Additionally, certain of our rigs are capable of specialty drilling applications. We operate in most major oil and natural gas producing regions of the continental United States. An important component of the Company’s growth strategy is to make acquisitions that will strengthen its core services or presence in selected markets, and the Company also makes strategic divestitures from time to time. The Company expects that the industry in which it operates will experience consolidation, and the Company expects to explore opportunities and engage in discussions regarding these opportunities, which could include mergers, consolidations or acquisitions or further dispositions or other transactions, although there can be no assurance that any such activities will be consummated.

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). The condensed December 31, 2018 balance sheet was prepared from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”). Certain information relating to our organization and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in this Quarterly Report on Form 10-Q. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2018 Form 10-K.

The unaudited condensed consolidated financial statements contained in this report include all normal and recurring material adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented herein. The results of operations for the nine months endedSeptember 30, 2019 are not necessarily indicative of the results expected for the full year or any other interim period, due to fluctuations in demand for our services, timing of maintenance and other expenditures, and other factors.

We have evaluated events occurring after the balance sheet date included in this Quarterly Report on Form 10-Q and through the date on which the unaudited condensed consolidated financial statements were issued, for possible disclosure of a subsequent event.

Forbearance Agreements and Going Concern

The Company is party to two credit facilities: an ABL Facility with the financial institutions party thereto from time to time as lenders (the “ABL Lenders”), and a Term Loan Facility among the Company, as borrower, and the financial institutions party thereto from time to time as lenders (the “Term Loan Lenders,” and together with the ABL Lenders, the “Lenders”) and Cortland Capital Market Services LLC and Cortland Products Corp., as agent for the lenders. See “Note 7. Debt.”

As announced on October 31, 2019, the Company has engaged external advisers to assist the Company in analyzing various strategic financial alternatives to address its capital structure. In connection with this strategic review, the Company elected not to make a scheduled interest payment due October 18, 2019 under the Term Loan Facility. The Company’s failure to make the October interest payment resulted in a default under the Term Loan Facility and a cross default under the ABL Facility (such defaults, the “Specified Defaults”).

On October 29, 2019, the Company entered into forbearance agreements with the Term Loan Lenders collectively holding over 99.5% of the principal amount of the outstanding term loans (the “Term Loan Forbearance Agreement”) and all of the ABL Lenders (the “ABL Forbearance Agreement” and, collectively, the “Forbearance Agreements”). Pursuant to the Forbearance Agreements, the Lenders party thereto have agreed that, until the earlier of December 6, 2019 or the occurrence of certain specified early termination events, such Lenders will forbear from exercising any default-related rights and remedies with respect to the Specified Defaults. The failure to comply with such covenants, among other things, would result in the early termination of the forbearance period. See “Note 7. Debt.”

The Specified Defaults and related matters including the Company’s level of debt raise substantial doubt as to the ability of the Company to continue as a going concern. The Company is in active discussions with the Lenders regarding the Company’s capital structure and the potential to reduce its debt level, however an agreement with the Lenders has not been reached as of the date of these financial statements. The Company believes that it is probable that if such an agreement is reached, it will alleviate the substantial doubt as to the Company’s ability to continue as a going concern.

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The accompanying unaudited condensed consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern, which contemplates the continuity of operations and the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

The preparation of these unaudited condensed consolidated financial statements requires us to develop estimates and to make assumptions that affect our financial position, results of operations and cash flows. These estimates may also impact the nature and extent of our disclosure, if any, of our contingent liabilities. Among other things, we use estimates to (i) analyze assets for possible impairment, (ii) determine depreciable lives for our assets, (iii) assess future tax exposure and realization of deferred tax assets, (iv) determine amounts to accrue for contingencies, (v) value tangible and intangible assets, (vi) assess workers’ compensation, vehicular liability, self-insured risk accruals and other insurance reserves, (vii) provide allowances for our uncollectible accounts receivable, (viii) value our asset retirement obligations, and (ix) value our equity-based compensation. We review all significant estimates on a recurring basis and record the effect of any necessary adjustments prior to publication of our financial statements. Adjustments made with respect to the use of estimates relate to improved information not previously available. Because of the limitations inherent in this process, our actual results may differ materially from these estimates. We believe that the estimates used in the preparation of these interim financial statements are reasonable.

There have been no material changes or developments in our evaluation of accounting estimates and underlying assumptions or methodologies that we believe to be a “Critical Accounting Policy or Estimate” as disclosed in our 2018 Form 10-K.

Recent Accounting Developments

ASU 2016-13. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326),Measurement of Credit Losses on Financial Instruments that will change how companies measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount. The amendments in this update will be effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018. The Company is evaluating the effect of this standard on our consolidated financial statements.

ASU 2016-02. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which replaced the existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Additional disclosure requirements include qualitative disclosures along with specific quantitative disclosures with the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for the Company for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. As part of our assessment, we have created additional internal controls over financial reporting and made changes in business practices and processes related to the ASU. Key has elected the new prospective “Comparatives Under 840” transition method as defined in ASU 2018-11 and adopted the new standard as of January 1, 2019. As part of the adoption, the Company elected several practical expedients which, for contracts that existed at the time of the adoption, allowed the Company to not reassess whether existing contracts are or contained leases, classification of a lease (i.e., operating leases will remain operating leases), initial direct costs and land easement arrangements. As part of the adoption, the Company also made several accounting policy elections which allow the Company to not apply the standard to short term leases as well as to choose not to separate non-lease components from lease components and instead account for all components as a single lease component. The adoption of this standard did not have an impact on our consolidated statement of operations or consolidated statement of cash flows and had an immaterial impact on our consolidated balance sheet. Right of use assets obtained in exchange for operating leases liabilities was $4.1 million at the time of the adoption of the standard.

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NOTE 3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The following table presents our revenues disaggregated by revenue source (in thousands). Sales taxes are excluded from revenues.

	Nine Months Ended
	September 30,
	2019		2018
Rig Services	$	197,375	$	227,913
Fishing and Rental Services	43,534		47,801
Coiled Tubing Services	32,134		60,513
Fluid Management Services	55,696		68,215
Total	$	328,739	$	404,442

Disaggregation of Revenue

We have disaggregated our revenues by our reportable segments including Rig Services, Fishing & Rental Services, Coiled Tubing Services and Fluid Management Services.

Rig Services

Our Rig Services include 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 at the end of their useful lives. We also provide specialty drilling services to oil and natural gas producers with certain of our larger rigs that are capable of providing conventional and horizontal drilling services. Our rigs encompass various sizes and capabilities, allowing us to service all types of oil and gas wells.

We recognize revenue within the Rig Services segment by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The control over services is transferred as the services are rendered to the customer. Specifically, we recognize revenue as the services are provided, typically daily, as we have the right to invoice the customer for the services performed. Rig Services are billed monthly, and payment terms are usually 30 days from invoice receipt.

Fishing and Rental Services

We offer a full line of services and rental equipment designed for use in providing drilling and workover services. Fishing services involve recovering lost or stuck equipment in the wellbore utilizing a broad array of “fishing tools.” Our rental tool inventory consists of drill pipe, tubulars, handling tools (including our patented Hydra-Walk® pipe-handling units and services), pressure-control equipment, pumps, power swivels, reversing units, foam air units.

We recognize revenue within the Fishing and Rental Services segment by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The control over services is transferred as the services are rendered to the customer. Specifically, we recognize revenue as the services are provided, typically daily, as we have the right to invoice the customer for the services performed. Fishing and Rental Services are billed and paid monthly. Payment terms for Fishing and Rental Services are usually 30 days from invoice receipt.

Coiled Tubing Services

Coiled Tubing Services involve the use of a continuous metal pipe spooled onto a large reel, which is then deployed into oil and natural gas wells to perform various applications, such as wellbore clean-outs, nitrogen jet lifts, through-tubing fishing, and formation stimulations utilizing acid and chemical treatments. Coiled tubing is also used for a number of horizontal well applications such as milling temporary isolation plugs that separate frac zones, and various other pre- and post-hydraulic fracturing well preparation services.

We recognize revenue within the Coiled Tubing Services segment by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The control over services is transferred as the services are rendered to the customer. Specifically, we recognize revenue, typically daily, as the services are provided as we have the right to invoice the customer for the services performed. Coiled Tubing Services are billed and paid monthly. Payment terms for Coiled Tubing Services are usually 30 days from invoice receipt.

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Fluid Management Services

We provide transportation and well-site storage services for various fluids utilized in connection with drilling, completions, workover and maintenance activities. We also provide disposal services for fluids produced subsequent to well completion. These fluids are removed from the well site and transported for disposal in saltwater disposal wells owned by us or a third party.

We recognize revenue within the Fluid Management Services segment by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The control over services is transferred as the services are rendered to the customer. Specifically, we recognize revenue as the services are provided, typically daily, as we have the right to invoice the customer for the services performed. Fluid Management Services are billed and paid monthly. Payment terms for Fluid Management Services are usually 30 days from invoice receipt.

Arrangements with Multiple Performance Obligations

While not typical for our business, our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost-plus margin. For combined products and services within a contract, we account for individual products and services separately if they are distinct –- i.e. if a product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate products and services within a contract based on the prices at which we separately sell our services. For items that are not sold separately, we estimate the standalone selling prices using the expected cost-plus margin approach.

Contract Balances

Under our revenue contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our revenue contracts do not give rise to contract assets or liabilities under ASC 606.

Practical Expedients and Exemptions

We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within general and administrative expenses.

The majority of our services are short-term in nature, with a contract term of one year or less. For those contracts, we have utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

Additionally, our payment terms are short-term in nature with settlements of one year or less. We have, therefore, utilized the practical expedient in ASC 606-10-32-18 exempting the Company from adjusting the promised amount of consideration for the effects of a significant financing component given that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Further, in many of our service contracts we have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date (for example, a service contract in which an entity bills a fixed amount for each hour of service provided). For those contracts, we have utilized the practical expedient in ASC 606-10-55-18 exempting the Company from disclosure of the recognition of revenue in the amount that the Company has a right to invoice.

Accordingly, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

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NOTE 4. EQUITY

A reconciliation of the total carrying amount of our equity accounts for the nine months ended September 30, 2019 is as follows (in thousands):

	COMMON STOCKHOLDERS
	Common Stock				Additional Paid-in Capital			Retained Deficit			Total
	Number of Shares		Amount at Par
Balance at December 31, 2018	20,363		$	204	$	264,945		$	(219,629	)	$	45,520
Share-based compensation	11		—		816			—			816
Net loss	—		—		—			(23,441		)	(23,441		)
Balance at March 31, 2019	20,374		$	204	$	265,761		$	(243,070	)	$	22,895
Common stock purchases	(1	)	—		(4		)	—			(4		)
Share-based compensation	35		—		1,414			—			1,414
Net loss	—		—		—			(18,303		)	(18,303		)
Balance at June 30, 2019	20,408		$	204	$	267,171		$	(261,373	)	$	6,002
Common stock purchases	(23	)	—		(33		)	—			(33		)
Share-based compensation	114		1		1,268			—			1,269
Net loss	—		—		—			(25,489		)	(25,489		)
Balance at September 30, 2019	20,499		$	205	$	268,406		$	(286,862	)	$	(18,251	)

A reconciliation of the total carrying amount of our equity accounts for the nine months ended September 30, 2018 is as follows (in thousands):

	COMMON STOCKHOLDERS
	Common Stock			Additional Paid-in Capital			Retained Deficit			Total
	Number of Shares	Amount at Par
Balance at December 31, 2017	20,217	$	202	$	259,314		$	(130,833	)	$	128,683
Exercise of warrants	—	—		1			—			1
Share-based compensation	14	—		2,400			—			2,400
Net loss	—	—		—			(24,963		)	(24,963		)
Balance at March 31, 2018	20,231	$	202	$	261,715		$	(155,796	)	$	106,121
Exercise of warrants	—	—		2			—			2
Share-based compensation	14	—		502			—			502
Net loss	—	—		—			(16,895		)	(16,895		)
Balance at June 30, 2018	20,245	$	202	$	262,219		$	(172,691	)	$	89,730
Common stock purchases	—	—		(271		)	—			(271		)
Share-based compensation	52	1		1,679			—			1,680
Net loss	—	—		—			(23,860		)	(23,860		)
Balance at September 30, 2018	20,297	$	203	$	263,627		$	(196,551	)	$	67,279

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NOTE 5. OTHER BALANCE SHEET INFORMATION

The table below presents comparative detailed information about other current assets at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other current assets:
Prepaid current assets	$	4,057	$	11,207
Reinsurance receivable	6,617		6,365
Operating lease right-of-use assets	2,517		—
Other	305		501
Total	$	13,496	$	18,073

The table below presents comparative detailed information about other non-current assets at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other non-current assets:
Reinsurance receivable	$	6,980	$	6,743
Deposits	1,121		1,309
Operating lease right-of-use assets	2,853		—
Other	387		510
Total	$	11,341	$	8,562

The table below presents comparative detailed information about other current liabilities at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other current liabilities:
Accrued payroll, taxes and employee benefits	$	15,760	$	19,346
Accrued operating expenditures	14,423		15,861
Income, sales, use and other taxes	4,993		8,911
Self-insurance reserve	25,819		25,358
Accrued interest	6,672		7,105
Accrued insurance premiums	4		5,651
Unsettled legal claims	2,545		4,356
Accrued severance	40		83
Operating leases	2,448		—
Other	829		706
Total	$	73,533	$	87,377

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The table below presents comparative detailed information about other non-current liabilities at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other non-current liabilities:
Asset retirement obligations	$	9,115	$	9,018
Environmental liabilities	2,395		2,227
Accrued sales, use and other taxes	17,005		17,024
Operating leases	3,120		—
Other	66		67
Total	$	31,701	$	28,336

NOTE 6. INTANGIBLE ASSETS

The components of our other intangible assets as of September 30, 2019 and December 31, 2018 are as follows (in thousands):

	September 30, 2019			December 31, 2018
Trademark:
Gross carrying value	$	520		$	520
Accumulated amortization	(159		)	(116		)
Net carrying value	$	361		$	404

The weighted average remaining amortization periods and expected amortization expense for the next five years for our definite lived intangible assets are as follows:

	Weighted average remaining amortization period (years)	Expected amortization expense (in thousands)
		Remainder of 2019		2020		2021		2022		2023
Trademarks	6.3	$	14	$	58	$	58	$	58	$	58

Amortization expense for our intangible assets was less than $0.1 millionfor the three and nine months endedSeptember 30, 2019 and 2018.

NOTE 7. DEBT

As of September 30, 2019 and December 31, 2018, the components of our debt were as follows (in thousands):

	September 30, 2019			December 31, 2018
Term Loan Facility due 2021	$	243,125		$	245,000
Unamortized debt issuance costs	(1,903		)	(1,421		)
Finance lease obligation	1,701			—
Total	242,923			243,579
Less current portion	(2,914		)	(2,500		)
Long-term debt	$	240,009		$	241,079

Forbearance Agreements

The Company is party to two credit facilities. The Company and Key Energy Services, LLC, are borrowers (the “ABL Borrowers”) under an ABL Facility with the financial institutions party thereto from time to time as lenders (the “ABL Lenders”), Bank of America, N.A., as administrative agent for the lenders (the “Administrative Agent”) and Bank of America, N.A., as sole collateral agent for the lenders, providing for aggregate commitments from the ABL Lenders of $100 million. In addition, on December 15, 2016, the Company entered into a Term Loan Facility among the Company, as borrower, certain subsidiaries of the

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Company named as guarantors therein, the financial institutions party thereto from time to time as Lenders (collectively, the “Term Loan Lenders”) and Cortland Capital Market Services LLC and Cortland Products Corp., as agent for the Lenders.

As announced on October 31, 2019, the Company has engaged external advisers to assist the Company in analyzing various strategic financial alternatives to address its capital structure and to position the Company for future success. In connection with this strategic review, the Company elected not to make a scheduled interest payment due October 18, 2019 under the Term Loan Facility. The Company’s failure to make the October interest payment resulted in a default under the Term Loan Facility and a cross default under the ABL Facility (such defaults, the “Specified Defaults”).

On October 29, 2019, the Company entered into forbearance agreements with Term Loan Lenders collectively holding over 99.5% of the principal amount of the outstanding term loans (the “Term Loan Forbearance Agreement”) and all of the ABL Lenders (the “ABL Forbearance Agreement” and, collectively, the “Forbearance Agreements”). Pursuant to the Forbearance Agreements, the Lenders party thereto have agreed that, until the earlier of December 6, 2019 or the occurrence of certain specified early termination events, such Lenders will forbear from exercising any default-related rights and remedies with respect to the Specified Defaults. The Forbearance Agreements contain certain representations and warranties of the Company and covenants with which the Company must comply during the forbearance period, including a requirement to maintain aggregate bank and book cash balances of at least $10,000,000 as measured on a weekly basis. The failure to comply with such covenants, among other things, would result in the early termination of the forbearance period.

ABL Facility

As described above, the Company and Key Energy Services, LLC are borrowers under the ABL Facility that provides for aggregate commitments from the ABL Lenders of $100 million, and matures on the earlier of (a) April 5, 2024 and (b) 6 months prior to the maturity date of the Term Loan Facility (as defined below) and other material debts, if any, as identified under the ABL Facility.

On April 5, 2019, the ABL Borrowers, as borrowers, the financial institutions party thereto as lenders and Bank of America, N.A. (the “ABL Agent”), as administrative agent for the lenders, entered into Amendment No. 1 (“Amendment No. 1”) to the ABL Facility, among the ABL Borrowers, the financial institutions party thereto from time to time as lenders, the ABL Agent and the co-collateral agents for the lenders, Bank of America, N.A. and Wells Fargo Bank, National Association. The amendment makes changes to, among other things, lower (i) the applicable margin for borrowings to (x) from between 2.50% and 4.50% to between 2.00% and 2.50% for LIBOR borrowings and (y) from 1.50% and 3.50% to between 1.00% and 1.50% for base rate borrowings, in each case depending on the ABL Borrowers’ fixed charge coverage ratio at such time, (ii) appoint the Bank of America, N.A. as sole collateral agent under the ABL Facility, (iii) extend the maturity of the credit facility from June 15, 2021 to the earlier of (x) April 5, 2024 and (y) 6 months prior to the maturity date of the ABL Borrowers’ term loan credit agreement and other material debts, as identified under the ABL Facility, (iv) increase the maximum amount of revolving loan commitment increases from $30 million to $50 million and (v) revise certain triggers applicable to the covenants under the ABL Facility.

The ABL Facility provides the ABL Borrowers with a borrowing facility up to an aggregate principal amount equal to the lesser of (i) the aggregate revolving commitments then in effect and (ii) the sum of (a) 85% of the value of eligible accounts receivable plus (b) 80% of the value of eligible unbilled accounts receivable, subject to a limit equal to the greater of (x) $35 million and (y) 25% of the commitments. The amount that may be borrowed under the ABL Facility is subject to increase or reduction based on certain segregated cash or reserves provided for by the ABL Facility. In addition, the percentages of accounts receivable and unbilled accounts receivable included in the calculation described above is subject to reduction to the extent of certain bad debt write-downs and other dilutive items provided in the ABL Facility.

Borrowings under the ABL Facility will bear interest, at the ABL Borrowers’ option, at a per annum rate equal to (i) LIBOR for 30, 60, 90, 180, or, with the consent of the ABL Lenders, 360 days, plus an applicable margin that varies from 2.0% to 2.5% depending on the Borrowers’ fixed charge coverage ratio at such time or (ii) a base rate equal to the sum of (a) the greatest of (x) the prime rate, (y) the federal funds rate, plus 0.50% or (z) 30-day LIBOR, plus 1.0% plus (b) an applicable margin that varies from 1.0% to 1.5% depending on the Borrowers’ fixed charge coverage ratio at such time. In addition, the ABL Facility provides for unused line fees of 1.00% to 1.25% per year, depending on utilization, letter of credit fees and certain other factors.

The ABL Facility may in the future be guaranteed by certain of the Company’s existing and future subsidiaries (the “ABL Guarantors,” and together with the ABL Borrowers, the “ABL Loan Parties”). To secure their obligations under the ABL Facility, each of the ABL Loan Parties has granted or will grant, as applicable, to the Administrative Agent a first-priority security interest for the benefit of the ABL Lenders in its present and future accounts receivable, inventory and related assets and proceeds of the foregoing (the “ABL Priority Collateral”). In addition, the obligations of the ABL Loan Parties under the ABL Facility are secured by second-priority liens on the Term Priority Collateral (as described below under “Term Loan Facility”).

The revolving loans under the ABL Facility may be voluntarily prepaid, in whole or in part, without premium or penalty, subject to breakage or similar costs.

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The ABL Facility contains certain affirmative and negative covenants, including covenants that restrict the ability of the ABL Loan Parties to take certain actions including, among other things and subject to certain significant exceptions, the incurrence of debt, the granting of liens, the making of investments, entering into transactions with affiliates, the payment of dividends and the sale of assets. The ABL Facility also contains a requirement that the ABL Borrowers comply, during certain periods, with a fixed charge coverage ratio of 1.00 to 1.00.

As of September 30, 2019, we have no borrowings outstanding and $34.6 million of letters of credit outstanding under our ABL Facility. Due to the Specified Defaults, the Company is currently unable to borrow any amounts under the ABL Facility.

Term Loan Facility

As described above, the Company and certain subsidiaries are parties to the Term Loan Facility, which had an initial outstanding principal amount of $250 million.

The Term Loan Facility will mature on December 15, 2021, although such maturity date may, at the Company’s request, be extended by one or more of the Term Loan Lenders pursuant to the terms of the Term Loan Facility. Borrowings under the Term Loan Facility will bear interest, at the Company’s option, at a per annum rate equal to (i) LIBOR for one, two, three, six, or, with the consent of the Term Loan Lenders, 12 months, plus 10.25% or (ii) a base rate equal to the sum of (a) the greatest of (x) the prime rate, (y) the Federal Funds rate, plus 0.50% and (z) 30-day LIBOR, plus 1.0% plus (b) 9.25%.

The Term Loan Facility is guaranteed by certain of the Company’s existing and future subsidiaries (the “Term Loan Guarantors,” and together with the Company, the “Term Loan Parties”). To secure their obligations under the Term Loan Facility, each of the Term Loan Parties has granted or will grant, as applicable, to the agent a first-priority security interest for the benefit of the Term Loan Lenders in substantially all of each Term Loan Party’s assets other than certain excluded assets and the ABL Priority Collateral (the “Term Priority Collateral”). In addition, the obligations of the Term Loan Parties under the Term Loan Facility are secured by second-priority liens on the ABL Priority Collateral (as described above under “ABL Facility”).

The loans under the Term Loan Facility may be prepaid at the Company’s option, subject to the payment of a prepayment premium in certain circumstances as provided in the Term Loan Facility. A prepayment prior to the first anniversary of the loan would have been required to have been made with a make-whole amount with the calculation of the make-whole amount as specified in the Term Loan Facility. If a prepayment is made after the first anniversary of the loan but prior to the second anniversary, such prepayment must be made at 106% of the principle amount, if a prepayment is made after the second anniversary but prior to the third anniversary, such prepayment must be made at 103% of the principle amount. After the third anniversary, if a prepayment is made, no prepayment premium is due. The Company is required to make principal payments in the amount of $625,000 per quarter. In addition, pursuant to the Term Loan Facility, the Company must prepay or offer to prepay, as applicable, term loans with the net cash proceeds of certain debt incurrences and asset sales, excess cash flow, and upon certain change of control transactions, subject in each case to certain exceptions.

The Term Loan Facility contains certain affirmative and negative covenants, including covenants that restrict the ability of the Term Loan Parties to take certain actions including, among other things and subject to certain significant exceptions, the incurrence of debt, the granting of liens, the making of investments, entering into transactions with affiliates, the payment of dividends and the sale of assets. The Term Loan Facility also contains financial covenants requiring that the Company maintain an asset coverage ratio of at least 1.35 to 1.0 and that Liquidity (as defined in the Term Loan Facility) must not be less than $37.5 million (of which at least $20.0 million must be in cash or cash equivalents held in deposit accounts) as of the last day of any fiscal quarter, subject to certain exceptions and cure rights.

The weighted average interest rates on the outstanding borrowings under the Term Loan Facility for the three and nine month periods ended September 30, 2019 were as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Term Loan Facility	12.61	%	12.82	%

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NOTE 8. OTHER INCOME

The table below presents comparative detailed information about our other income and expense, shown on the condensed consolidated statements of operations as “other income, net” for the periods indicated (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Interest income	$	(122	)	$	(201	)	$	(639	)	$	(580	)
Other	(229		)	(12		)	(1,093		)	(1,392		)
Total	$	(351	)	$	(213	)	$	(1,732	)	$	(1,972	)

NOTE 9. INCOME TAXES

The U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted on December 22, 2017. The 2017 Tax Act is comprehensive tax reform legislation that contains significant changes to corporate taxation. Provisions on the enacted law include a permanent reduction of the corporate income tax rate from 35% to 21%, imposing a mandatory one-time tax on un-repatriated accumulated earnings of foreign subsidiaries, a partial limitation on the deductibility of business interest expense, a limitation on net operating losses to 80% of taxable income each year, a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a partial territorial system (along with rules that create a new U.S. minimum tax on earnings of foreign subsidiaries), and other related provisions to maintain the U.S. tax base.

We recognized the income tax effects of the 2017 Tax Act in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”) during 2017. SAB 118 provided SEC staff guidance for the application of ASC Topic 740, Income Taxes, and allowed for a measurement period of up to one year after the enactment date to finalize the recording of the related tax impacts. As such, our 2017 financial results reflected the provisional income tax effects of the 2017 Tax Act for which the accounting under ASC Topic 740 was incomplete but a reasonable estimate could be determined. We did not identify any items for which the income tax effects of the 2017 Tax Act could not be reasonably estimated as of December 31, 2017. Additional clarifying guidance and law corrections were issued by the U.S. government during 2018 related to the 2017 Tax Act, which provided further insight into properly accounting for the impacts of U.S. tax reform. During 2018, we finalized our accounting for this matter and concluded that no adjustments were required from our provisionally recorded amounts from 2017. We no longer have any provisionally recorded items related to the enactment of the 2017 Tax Act as of December 31, 2018. In addition, there were no material 2017 Tax Act changes or clarifications that affected our accounting for the nine-month period ended September 30, 2019.

We are subject to U.S. federal income tax as well as income taxes in multiple state and foreign jurisdictions. Our effective tax rates for the three months endedSeptember 30, 2019 and 2018 were (0.1)% and 6.8%, respectively, and 6.1% and 2.4% for the nine months endedSeptember 30, 2019 and 2018, respectively. The variance between our effective rate and the U.S. statutory rate is due to the impact of permanent differences, and other tax adjustments, such as valuation allowances against deferred tax assets, and tax expense or benefit recognized for uncertain tax positions.    

We continued recording income taxes using a year-to-date effective tax rate method for the three and nine months ended September 30, 2019 and 2018. The use of this method was based on our expectations that a small change in our estimated ordinary income could result in a large change in the estimated annual effective tax rate. We will re-evaluate our use of this method each quarter until such time as a return to the annualized effective tax rate method is deemed appropriate.

The Company assesses the realizability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. Due to the history of losses in recent years and the continued challenges affecting the oil and gas industry, management continues to believe it is more likely than not that we will not be able to realize our net deferred tax assets. No release of our deferred tax asset valuation allowance was made during the nine months ended September 30, 2019.

As of September 30, 2019, we had no unrecognized tax benefits, net of federal tax benefit. All remaining unrecognized tax positions were recognized as of December 31, 2018 as a result of the statute of limitations lapse, and there are no unrecognized tax positions as of September 30, 2019.

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NOTE 10. COMMITMENTS AND CONTINGENCIES

Litigation

Various suits and claims arising in the ordinary course of business are pending against us. We conduct business throughout the continental United States and may be subject to jury verdicts or arbitrations that result in outcomes in favor of the plaintiffs. We continually assess our contingent liabilities, including potential litigation liabilities, as well as the adequacy of our accruals and our need for the disclosure of these items, if any. We establish a provision for a contingent liability when it is probable that a liability has been incurred and the amount is reasonably estimable. We have $2.5 million of other liabilities related to litigation that is deemed probable and reasonably estimable as of September 30, 2019. We do not believe that the disposition of any of these matters will result in an additional loss materially in excess of amounts that have been recorded.

Self-Insurance Reserves

We maintain reserves for workers’ compensation and vehicle liability on our balance sheet based on our judgment and estimates using an actuarial method based on claims incurred. We estimate general liability claims on a case-by-case basis. We maintain insurance policies for workers’ compensation, vehicle liability and general liability claims. These insurance policies carry self-insured retention limits or deductibles on a per occurrence basis. The retention limits or deductibles are accounted for in our accrual process for all workers’ compensation, vehicular liability and general liability claims. The deductibles have a $5 million maximum per vehicular liability claim, and a $2 million maximum per general liability claim and a $1 million maximum per workers’ compensation claim. As of September 30, 2019 and December 31, 2018, we have recorded $51.7 million and $50.1 million, respectively, of self-insurance reserves related to workers’ compensation, vehicular liabilities and general liability claims. Partially offsetting these liabilities, we had $13.6 million and $13.1 million of insurance receivables as of September 30, 2019 and December 31, 2018, respectively. We believe that the liabilities we have recorded are appropriate based on the known facts and circumstances and do not expect further losses materially in excess of the amounts already accrued for existing claims.

Environmental Remediation Liabilities

For environmental reserve matters, including remediation efforts for current locations and those relating to previously disposed properties, we record liabilities when our remediation efforts are probable and the costs to conduct such remediation efforts can be reasonably estimated. As of each of September 30, 2019 and December 31, 2018, we have recorded $2.4 million and $2.2 million, respectively, for our environmental remediation liabilities. We believe that the liabilities we have recorded are appropriate based on the known facts and circumstances and do not expect further losses materially in excess of the amounts already accrued.

NOTE 11. LOSS PER SHARE

Basic loss per share is determined by dividing net loss attributable to Key by the weighted average number of common shares actually outstanding during the period. Diluted loss per common share is based on the increased number of shares that would be outstanding assuming conversion of potentially dilutive outstanding securities using the treasury stock and “as if converted” methods.

The components of our loss per share are as follows (in thousands, except per share amounts):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Basic and Diluted EPS Calculation:
Numerator
Net loss	$	(25,489	)	$	(23,860	)	$	(67,233	)	$	(65,718	)
Denominator
Weighted average shares outstanding	20,443			20,252			20,398			20,234
Basic and diluted loss per share	$	(1.25	)	$	(1.18	)	$	(3.30	)	$	(3.25	)

Restricted stock units (“RSUs”), stock options, and warrants are included in the computation of diluted earnings per share using the treasury stock method. Restricted stock awards are legally considered issued and outstanding when granted and are included in basic weighted average shares outstanding.

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The company has issued potentially dilutive instruments such asRSUs, stock options, and warrants. However, the company did not include these instruments in its calculation of diluted loss per share during the periods presented, because to include them would be anti-dilutive. The following table shows potentially dilutive instruments (in thousands):

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
RSUs	1,882	1,078	1,994	1,367
Stock options	54	159	74	163
Warrants	1,838	1,838	1,838	1,838
Total	3,774	3,075	3,906	3,368

No events occurred after September 30, 2019 that would materially affect the number of weighted average shares outstanding.

NOTE 12. SHARE-BASED COMPENSATION

Common Stock Awards

We recognized employee share-based compensation expense of $1.2 million and $1.6 million during the three months endedSeptember 30, 2019 and 2018, respectively. We recognized employee share-based compensation expense of $3.3 million and $4.0 million during the nine months endedSeptember 30, 2019 and 2018, respectively. Our employee share-based awards, including common stock awards, stock option awards and phantom shares, vest in equal installments over a three-year period or which vest in a 40%-60% split respectively over a two-year period. Additionally, we recognized share-based compensation expense related to our outside directors of less than $0.1 million and $0.1 million during the three months endedSeptember 30, 2019 and 2018, respectively. We recognized share-based compensation expense related to our outside directors of $0.2 million and $0.6 million during the nine months endedSeptember 30, 2019 and 2018, respectively. The unrecognized compensation cost related to our unvested share-based awards as of September 30, 2019 is estimated to be $4.1 million and is expected to be recognized over a weighted-average period of 1.2 years.

Stock Option Awards

As of September 30, 2019, all outstanding stock options are vested and there are no unrecognized costs related to our stock options.

Phantom Share Plan

We recognized compensation expense related to our phantom shares of less than negative $0.1 million during the three months endedSeptember 30, 2019 and 2018. We recognized compensation expense related to our phantom shares of less than $0.1 million and $0.8 million during the nine months endedSeptember 30, 2019 and 2018, respectively. The unrecognized compensation cost related to our unvested phantom shares as of September 30, 2019 is estimated to be less than $0.1 million and is expected to be recognized over a weighted-average period of 0.8 years.

NOTE 13. TRANSACTIONS WITH RELATED PARTIES

The Company has purchased or sold equipment or services from a few affiliates of certain directors. Additionally, the Company has a corporate advisory services agreement between with Platinum Equity Advisors, LLC (“Platinum”) pursuant to which Platinum provides certain business advisory services to the Company. The dollar amounts related to these related party activities are not material to the Company’s condensed consolidated financial statements.

NOTE 14. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities. These carrying amounts approximate fair value because of the short maturity of the instruments or because the carrying value is equal to the fair value of those instruments on the balance sheet date.

Term Loan Facility due 2021. Because the variable interest rates of these loans approximate current market rates, the fair values of the loans borrowed under this facility approximate their carrying values.

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NOTE 15. LEASES

We have operating leases for certain corporate offices and operating locations and finance leases for certain vehicles. We determine if a contract is a lease or contains an embedded lease at the inception of the contract. Operating lease right-of-use (“ROU”) assets are included in other current and other non-current assets, operating lease liabilities are included in other current and other non-current liabilities in our consolidated balance sheets. Finance lease ROU assets are included in property and equipment, net, and finance lease liabilities are included in our current portion of long-term debt, and long-term debt on our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating and finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our risk adjusted incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease. Our leases have remaining lease terms of less than one year to five years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. Lease expense for lease payments is recognized on a straight-line basis over the non-cancelable term of the lease.

We recognized $0.8 million and $2.2 million of costs related to our operating leases during the three and nine months ended September 30, 2019, respectively. As of September 30, 2019, our operating leases have a weighted average remaining lease term of 2.7 years and a weighted average discount rate of 5.97%. We recognized less than 0.1 million of costs related to our finance leases during the three and nine months ended September 30, 2019. As of September 30, 2019, our finance leases have a weighted average remaining lease term of 3.9 years and a weighted average discount rate of 4.77%.

Supplemental balance sheet information related to leases as of September 30, 2019 are as follows (in thousands):

	September 30, 2019
Right-of-Use Assets under Operating Leases
Operating lease right-of-use assets, current portion	$	2,517
Operating lease right-of-use assets, non-current portion	2,853
Total operating lease assets	$	5,370
Operating lease liabilities, current portion	$	2,448
Operating lease liabilities, non-current portion	3,120
Total operating lease liabilities	$	5,568
Right-of-Use Assets under Finance Leases
Property and equipment, at cost	$	1,760
Less accumulated depreciation	73
Property and equipment, net	$	1,687
Current portion of long-term debt	$	414
Long-term debt	1,287
Total finance lease liabilities	$	1,701

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The maturities of our operating and finance lease liabilities as of September 30, 2019 are as follows (in thousands):

	September 30, 2019
	Operating Leases			Finance Leases
Remainder of 2019	$	659		$	119
2020	2,676			485
2021	1,508			485
2022	493			485
2023	493			283
Thereafter	188			—
Total lease payments	6,017			1,857
Less imputed interest	(449		)	(156		)
Total	$	5,568		$	1,701

NOTE 16. SEGMENT INFORMATION

Our reportable business segments are Rig Services, Fishing and Rental Services, Coiled Tubing Services and Fluid Management Services. We also have a “Functional Support” segment associated with overhead and other costs in support of our reportable segments. We evaluate the performance of our segments based on gross margin measures. All inter-segment sales pricing is based on current market conditions.

Rig Services

Our Rig Services include 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 at the end of their useful lives. We also provide specialty drilling services to oil and natural gas producers with certain of our larger rigs that are capable of providing conventional and horizontal drilling services. Our rigs encompass various sizes and capabilities, allowing us to service all types of wells. Many of our rigs are outfitted with our proprietary KeyView® technology, which captures and reports well site operating data and provides safety control systems. We believe that this technology allows our customers and our crews to better monitor well site operations, improves efficiency and safety, and adds value to the services that we offer.

The completion and recompletion services provided by our rigs prepare wells for production, whether newly drilled, or recently extended through a workover operation. The completion process may involve selectively perforating the well casing to access production zones, stimulating and testing these zones, and installing tubular and downhole equipment. We typically provide a well service rig and may also provide other equipment to assist in the completion process. Completion services vary by well and our work may take a few days to several weeks to perform, depending on the nature of the completion.

The workover services that we provide are designed to enhance the production of existing wells and generally are more complex and time consuming than normal maintenance services. Workover services can include deepening or extending wellbores into new formations by drilling horizontal or lateral wellbores, sealing off depleted production zones and accessing previously bypassed production zones, converting former production wells into injection wells for enhanced recovery operations and conducting major subsurface repairs due to equipment failures. Workover services may last from a few days to several weeks, depending on the complexity of the workover.

Maintenance services provided with our rig fleet are generally required throughout the life cycle of an oil or natural gas well. Examples of these maintenance services include routine mechanical repairs to the pumps, tubing and other equipment, removing debris and formation material from wellbores, and pulling rods and other downhole equipment from wellbores to identify and resolve production problems. Maintenance services are generally less complicated than completion and workover related services and require less time to perform.

Our rig fleet is also used in the process of permanently shutting-in oil or natural gas wells that are at the end of their productive lives. These plugging and abandonment services generally require auxiliary equipment in addition to a well servicing rig. The demand for plugging and abandonment services is not significantly impacted by the demand for oil and natural gas because well operators are required by state regulations to plug wells that are no longer productive.

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Fishing and Rental Services

We offer a full line of fishing services and rental equipment designed for use in providing drilling and workover services. Fishing services involve recovering lost or stuck equipment in the wellbore utilizing a broad array of “fishing tools.” Our rental tool inventory consists of drill pipe, tubulars, handling tools (including our patented Hydra-Walk^® pipe-handling units and services), pressure-control equipment, pumps, power swivels, reversing units and foam air units. We sold our well testing assets and our frac stack equipment used to support hydraulic fracturing operations and the associated flowback of frac fluids in the second quarter of 2017.

Demand for our fishing and rental services is closely related to capital spending by oil and natural gas producers, which is generally a function of oil and natural gas prices.

Coiled Tubing Services

Coiled Tubing Services involve the use of a continuous metal pipe spooled onto a large reel which is then deployed into oil and natural gas wells to perform various applications, such as wellbore clean-outs, nitrogen jet lifts, through-tubing fishing, and formation stimulations utilizing acid and chemical treatments. Coiled tubing is also used for a number of horizontal well applications such as milling temporary isolation plugs that separate frac zones, and various other pre- and post-hydraulic fracturing well preparation services.

Fluid Management Services

We provide transportation and well-site storage services for various fluids utilized in connection with drilling, completions, workover and maintenance activities. We also provide disposal services for fluids produced subsequent to well completion. These fluids are removed from the well site and transported for disposal in saltwater disposal wells owned by us or a third party. In addition, we operate a fleet of hot oilers capable of pumping heated fluids used to clear soluble restrictions in a wellbore. Demand and pricing for these services generally correspond to demand for our well service rigs.

Functional Support

Our Functional Support segment includes unallocated overhead costs associated with administrative support for our reporting segments.

Financial Summary

The following tables set forth our unaudited segment information as of and for the three and nine months ended September 30, 2019 and 2018 (in thousands):

As of and for the three months ended September 30, 2019
	Rig Services		Fishing and Rental Services			Coiled Tubing Services			Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	64,465	$	14,135		$	9,714		$	18,209		$	—		$	—		$	106,523
Intersegment revenues	87		241			—			58			—			(386		)	—
Depreciation and amortization	6,289		4,139			1,397			2,294			465			—			14,584
Other operating expenses	55,424		11,713			9,862			16,338			15,994			—			109,331
Operating income (loss)	2,752		(1,717		)	(1,545		)	(423		)	(16,459		)	—			(17,392		)
Interest expense, net of amounts capitalized	33		7			13			12			8,346			—			8,411
Income (loss) before income taxes	2,734		(1,724		)	(1,558		)	(424		)	(24,480		)	—			(25,452		)
Long-lived assets(1)	124,078		41,897			17,165			47,980			24,464			—			255,584
Total assets	173,079		55,625			26,174			59,827			50,000			9,441			374,146
Capital expenditures	932		418			1,246			33			1,492			—			4,121

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As of and for the three months ended September 30, 2018
	Rig Services		Fishing and Rental Services			Coiled Tubing Services		Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	77,153	$	17,477		$	18,220	$	21,871		$	—		$	—		$	134,721
Intersegment revenues	183		621			—		328			—			(1,132		)	—
Depreciation and amortization	8,212		6,012			1,403		5,262			919			—			21,808
Other operating expenses	64,471		12,855			16,404		19,441			16,857			—			130,028
Operating income (loss)	4,470		(1,390		)	413		(2,832		)	(17,776		)	—			(17,115		)
Interest expense, net of amounts capitalized	—		—			—		—			8,708			—			8,708
Income (loss) before income taxes	4,488		(1,378		)	413		(2,827		)	(26,306		)	—			(25,610		)
Long-lived assets(1)	147,050		49,436			18,083		60,360			22,109			421			297,459
Total assets	204,823		65,798			36,493		75,811			70,927			8,881			462,733
Capital expenditures	5,602		1,891			563		433			2,859			—			11,348

As of and for the nine months ended September 30, 2019
	Rig Services		Fishing and Rental Services			Coiled Tubing Services			Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	197,375	$	43,534		$	32,134		$	55,696		$	—		$	—		$	328,739
Intersegment revenues	341		1,436			—			133			—			(1,910		)	—
Depreciation and amortization	18,419		12,493			3,923			6,917			1,390			—			43,142
Other operating expenses	165,866		35,703			33,343			48,894			48,922			—			332,728
Operating income (loss)	13,090		(4,662		)	(5,132		)	(115		)	(50,312		)	—			(47,131		)
Interest expense, net of amounts capitalized	69		20			43			33			25,999			—			26,164
Income (loss) before income taxes	13,070		(4,671		)	(5,172		)	(133		)	(74,657		)	—			(71,563		)
Long-lived assets(1)	124,078		41,897			17,165			47,980			24,464			—			255,584
Total assets	173,079		55,625			26,174			59,827			50,000			9,441			374,146
Capital expenditures	3,745		2,491			3,163			2,088			4,996			—			16,483

As of and for the nine months ended September 30, 2018
	Rig Services		Fishing and Rental Services			Coiled Tubing Services		Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	227,913	$	47,801		$	60,513	$	68,215		$	—		$	—		$	404,442
Intersegment revenues	439		1,692			19		1,025			—			(3,175		)	—
Depreciation and amortization	23,869		17,657			3,887		15,581			1,887			—			62,881
Other operating expenses	188,570		37,627			49,128		60,136			49,953			—			385,414
Operating income (loss)	15,474		(7,483		)	7,498		(7,502		)	(51,840		)	—			(43,853		)
Interest expense, net of amounts capitalized	—		—			—		—			25,425			—			25,425
Income (loss) before income taxes	15,584		(7,458		)	7,501		(7,432		)	(75,501		)	—			(67,306		)
Long-lived assets(1)	147,050		49,436			18,083		60,360			22,109			421			297,459
Total assets	204,823		65,798			36,493		75,811			70,927			8,881			462,733
Capital expenditures	13,350		2,671			4,461		2,569			5,470			—			28,521

(1) Long-lived assets include fixed assets, intangibles and other non-current assets.

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NOTE 17. SUBSEQUENT EVENTS

As announced on October 31, 2019, the Company has engaged external advisers to assist the Company in analyzing various strategic financial alternatives to address its capital structure and to position the Company for future success. In connection with this strategic review, the Company elected not to make a scheduled interest payment due October 18, 2019 under the Term Loan Facility. The Company’s failure to make the October interest payment resulted in a default under the Term Loan Facility and a cross default under the ABL Facility (such defaults, the “Specified Defaults”).

On October 29, 2019, the Company entered into forbearance agreements with Term Loan Lenders collectively holding over 99.5% of the principal amount of the outstanding term loans (the “Term Loan Forbearance Agreement”) and all of the ABL Lenders (the “ABL Forbearance Agreement” and, collectively, the “Forbearance Agreements”). Pursuant to the Forbearance Agreements, the Lenders party thereto have agreed that, until the earlier of December 6, 2019 or the occurrence of certain specified early termination events, such Lenders will forbear from exercising any default-related rights and remedies with respect to the Specified Defaults. The Forbearance Agreements contain certain representations and warranties of the Company and covenants with which the Company must comply during the forbearance period, including a requirement to maintain aggregate bank and book cash balances of at least $10,000,000 as measured on a weekly basis. The failure to comply with such covenants, among other things, would result in the early termination of the forbearance period.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Key Energy Services, Inc., and its wholly owned subsidiaries provide a full range of well services to major oil companies and independent oil and natural gas production companies. Our services include rig-based and coiled tubing-based well maintenance and workover services, well completion and recompletion services, fluid management services, fishing and rental services, and other ancillary oilfield services. Additionally, certain of our rigs are capable of specialty drilling applications. We operate in most major oil and natural gas producing regions of the continental United States. An important component of the Company’s growth strategy is to make acquisitions that will strengthen its core services or presence in selected markets, and the Company also makes strategic divestitures from time to time. The Company expects that the industry in which it operates will experience consolidation, and the Company expects to explore opportunities and engage in discussions regarding these opportunities, which could include mergers, consolidations or acquisitions or further dispositions or other transactions, although there can be no assurance that any such activities will be consummated.

The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes as of and for the three and nine months ended September 30, 2019 and 2018, included elsewhere herein, and the audited consolidated financial statements and notes thereto included in our 2018 Form 10-K and Part I, Item 1A. Risk Factors of our 2018 Form 10-K.

We provide information regarding four business segments: Rig Services, Fishing and Rental Services, Coiled Tubing Services and Fluid Management Services. We also have a “Functional Support” segment associated with overhead and other costs in support of our reportable segments. See “Note 16. Segment Information” in “Item 1. Financial Statements” of Part I of this report for a summary of our business segments.

PERFORMANCE MEASURES

The Baker Hughes U.S. rig count data, which is publicly available on a weekly basis, is often used as an indicator of overall Exploration and Production (“E&P”) company spending and broader oilfield activity. In assessing overall activity in the U.S. onshore oilfield service industry in which we operate, we believe that the Baker Hughes U.S. land drilling rig count is the best available barometer of E&P companies’ capital spending and resulting activity levels. Historically, our activity levels have been highly correlated with U.S. onshore capital spending by our E&P company customers as a group.

	WTI Cushing Oil(1)		NYMEX Henry Hub Natural Gas(1)		Average Baker Hughes U.S. Land Drilling Rigs(2)	Average AESC Well Service Active Rig Count(3)
2019:
First Quarter	$	54.82	$	2.92	1,023	1,295
Second Quarter	$	59.88	$	2.57	967	1,311
Third Quarter	$	56.34	$	2.38	894	1,263
2018:
First Quarter	$	62.91	$	3.08	951	1,220
Second Quarter	$	68.07	$	2.85	1,021	1,297
Third Quarter	$	69.69	$	2.93	1,032	1,337
Fourth Quarter	$	59.97	$	3.77	1,050	1,316

(1) Represents the average of the monthly average prices for each of the periods presented. Source: EIA and Bloomberg

(2) Source: www.bakerhughes.com

(3) Source: www.aesc.net

Internally, we measure activity levels for our well servicing operations primarily through our rig and trucking hours. Generally, as capital spending by E&P companies increases, demand for our services also rises, resulting in increased rig and trucking services and more hours worked. Conversely, when activity levels decline due to lower spending by E&P companies, we generally provide fewer rig and trucking services, which results in fewer hours worked.

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Rig activity occurs primarily on weekdays during daylight hours. Accordingly, we track rig activity on a “per working day” basis. Key’s working days per quarter, which exclude national holidays, are indicated in the table below. Our trucking activity tends to occur on a 24/7 basis. Accordingly, we track our trucking activity on a “per calendar day” basis. The following table presents our quarterly rig and trucking hours from 2018 through the third quarter of 2019:

	Rig Hours	Trucking Hours	Key’s  Working Days(1)
2019:
First Quarter	151,309	150,740	63
Second Quarter	154,017	144,996	63
Third Quarter	142,151	150,518	64
Total 2019	447,477	446,254	190
2018:
First Quarter	175,232	214,194	63
Second Quarter	187,578	201,427	64
Third Quarter	180,943	184,310	63
Fourth Quarter	156,456	179,405	62
Total 2018	700,209	779,336	252

(1) Key’s working days are the number of weekdays during the quarter minus national holidays.

MARKET AND BUSINESS CONDITIONS AND OUTLOOK

Our core businesses depend on our customers’ willingness and ability to make expenditures to produce, develop and explore for oil and natural gas in onshore U.S. basins. Industry conditions are influenced by numerous factors, such as oil and natural gas prices, the supply of and demand for oil and natural gas, domestic and worldwide economic conditions, political instability in oil producing countries, and available supply of and demand for the services we provide. Higher oil prices have historically spurred additional demand for our services as oil and gas producers increase spending on production, maintenance and drilling and completion of new wells.

During 2018, strengthening oil prices led to improvement in demand for our services particularly services associated with the completion of oil and natural gas wells, and we were able to increase prices for most of our service offerings. We did not, however, experience as substantial a change in demand for our services related to the maintenance of existing oil and gas wells, particularly conventional wells. Since the fourth quarter of 2018 when oil prices fell from the highs of 2018, we began to experience reductions in demand for our services, particularly our completion related services.

In 2019, oil prices began to recover from the lows experienced in late 2018. However, in the first quarter of 2019, we experienced a decline in revenues compared to the prior quarter and the corresponding period in 2018 due to seasonal effects and lower demand for completion-driven services as our activity declined despite the improvement in oil prices.

Activity did improve in the second quarter of 2019 as compared to the first quarter of 2019 due to seasonality and the improved oil prices, however, many of our clients did not react as favorably as expected to improved oil prices with higher spending or increases in planned expenditures that would have increased demand for our services further. Lower spending by our customers and increased competition, primarily in completion activities, also resulted in lower activity than in the corresponding period in 2018. During the third quarter of 2019, we continued to experience weak or softening demand for our services, particularly completion related services, and experienced a decline in our well service rig activity as compared to the preceding quarter and the third quarter of 2018. In many instances, we believe this is a result of our customers’ managing their activity to achieve cash flow targets and a prioritization of their maintenance activities to the highest return opportunities due to continued uncertainty around future commodity prices and their access to capital. We expect this trend to continue into the fourth quarter, where we have also historically experienced reduced activity and demand for our services as compared to the third quarter due to seasonal effects as well as the impact of our customers’ completing their budgeted activities ahead of year-end.

In the fourth quarter of 2019, we have taken steps to reduce our labor costs and exit certain operations and areas to focus on certain markets. Additionally, we have taken steps to reduce our overhead, given the reduced operating footprint, which we believe will improve our operating cash flows and reduce our operating losses. Given the uncertainty surrounding future commodity prices and our customers’ spending and thus demand for our services, visibility into near to mid-term future periods is limited.

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Longer term however, we believe that over the next several years the continued aging of horizontal wells will increase demand for well maintenance services as customers seek to maintain or increase production through accretive regular well maintenance at economically supportive oil prices.

RESULTS OF OPERATIONS

The following table shows our consolidated results of operations for the three and nine months ended September 30, 2019 and 2018, respectively (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
REVENUES	$	106,523		$	134,721		$	328,739		$	404,442
COSTS AND EXPENSES:
Direct operating expenses	87,956			106,103			266,714			314,061
Depreciation and amortization expense	14,584			21,808			43,142			62,881
General and administrative expenses	21,375			23,925			66,014			71,353
Operating loss	(17,392		)	(17,115		)	(47,131		)	(43,853		)
Interest expense, net of amounts capitalized	8,411			8,708			26,164			25,425
Other income, net	(351		)	(213		)	(1,732		)	(1,972		)
Loss before income taxes	(25,452		)	(25,610		)	(71,563		)	(67,306		)
Income tax benefit (expense)	(37		)	1,750			4,330			1,588
NET LOSS	$	(25,489	)	$	(23,860	)	$	(67,233	)	$	(65,718	)

Consolidated Results of Operations — Three Months Ended September 30, 2019 and 2018

Revenues

Our revenues for the three months ended September 30, 2019 decreased $28.2 million, or 20.9%, to $106.5 million from $134.7 million for the three months ended September 30, 2018, due to lower spending from our customers as a result of lower oil prices. These market conditions resulted in reduced customer activity. See “Segment Operating Results — Three Months Ended September 30, 2019 and 2018” below for a more detailed discussion of the change in our revenues.

Direct Operating Expenses

Our direct operating expenses decreased $18.1 million, to $88.0 million (82.6% of revenues), for the three months ended September 30, 2019, compared to $106.1 million (78.8% of revenues) for the three months ended September 30, 2018. This decrease is primarily a result of a decrease in employee compensation costs, fuel expense and repair and maintenance expense due to a decrease in activity levels.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased $7.2 million, or 33.1%, to $14.6 million during the three months ended September 30, 2019, compared to $21.8 million for the three months ended September 30, 2018. This decrease is primarily due to certain assets becoming fully depreciated.

General and Administrative Expenses

General and administrative expenses decreased $2.6 million, to $21.4 million (20.1% of revenues), for the three months ended September 30, 2019, compared to $23.9 million (17.8% of revenues) for the three months ended September 30, 2018. The decrease is primarily due to lower employee compensation costs due to reduced staffing levels and a decrease in facilities costs.

Interest Expense, Net of Amounts Capitalized

Interest expense decreased $0.3 million, or 3.4%, to $8.4 million for the three months ended September 30, 2019, compared to $8.7 million for the same period in 2018.

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Other Income, Net

During the quarter ended September 30, 2019, we recognized other income, net, of $0.4 million, compared to other income, net, of $0.2 million for the quarter ended September 30, 2018.

The following table summarizes the components of other income, net for the periods indicated (in thousands):

	Three Months Ended
	September 30,
	2019			2018
Interest income	$	(122	)	$	(201	)
Other	(229		)	(12		)
Total	$	(351	)	$	(213	)

Income Tax Benefit (Expense)

We recorded an income tax expense of less than $0.1 million on a pre-tax loss of $25.5 million in the three months ended September 30, 2019, compared to an income tax benefit of $1.8 million on a pre-tax loss of $25.6 million in the three months ended September 30, 2018. Our effective tax rate was (0.1)% for the three months ended September 30, 2019, compared to 6.8% for the three months ended September 30, 2018. Our effective tax rates differ from the applicable U.S. statutory rates due to a number of factors, including the impact of permanent differences, and other tax adjustments, such as valuation allowances against deferred tax assets, and tax expense or benefit recognized for uncertain tax positions.

Segment Operating Results — Three Months Ended September 30, 2019 and 2018

The following table shows operating results for each of our segments for the three months ended September 30, 2019 and 2018 (in thousands):

For the three months ended September 30, 2019
	Rig Services		Fishing and Rental Services			Coiled Tubing Services			Fluid Management Services			Functional Support			Total
Revenues from external customers	$	64,465	$	14,135		$	9,714		$	18,209		$	—		$	106,523
Operating expenses	61,713		15,852			11,259			18,632			16,459			123,915
Operating income (loss)	2,752		(1,717		)	(1,545		)	(423		)	(16,459		)	(17,392		)

For the three months ended September 30, 2018
	Rig Services		Fishing and Rental Services			Coiled Tubing Services		Fluid Management Services			Functional Support			Total
Revenues from external customers	$	77,153	$	17,477		$	18,220	$	21,871		$	—		$	134,721
Operating expenses	72,683		18,867			17,807		24,703			17,776			151,836
Operating income (loss)	4,470		(1,390		)	413		(2,832		)	(17,776		)	(17,115		)

Rig Services

Revenues for our Rig Services segment decreased $12.7 million, or 16.4%, to $64.5 million for the three months ended September 30, 2019, compared to $77.2 million for the three months ended September 30, 2018. The decrease for this segment is primarily due to lower spending from our customers as a result of lower oil prices. These market conditions resulted in reduced customer activity.

Operating expenses for our Rig Services segment were $61.7 million during the three months ended September 30, 2019, which represented a decrease of $11.0 million, or 15.1%, compared to $72.7 million for the same period in 2018. This decrease is primarily a result of a decrease in employee compensation costs, fuel expense and repair and maintenance expense due to a decrease in activity levels and a decrease in depreciation expense.

Fishing and Rental Services

Revenues for our Fishing and Rental Services segment decreased $3.3 million, or 19.1%, to $14.1 million for the three months ended September 30, 2019, compared to $17.5 million for the three months ended September 30, 2018. The decrease for this segment is primarily due to lower spending from our customers on oil and gas well drilling and completion, as a result of lower oil prices. These market conditions resulted in reduced customer activity.

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Operating expenses for our Fishing and Rental Services segment were $15.9 million during the three months ended September 30, 2019, which represented a decrease of $3.0 million, or 16.0%, compared to $18.9 million for the same period in 2018. The decrease for this segment is primarily due to a decrease in depreciation expense and repair and maintenance expense.

Coiled Tubing Services

Revenues for our Coiled Tubing Services segment decreased $8.5 million, or 46.7%, to $9.7 million for the three months ended September 30, 2019, compared to $18.2 million for the three months ended September 30, 2018. The decrease for this segment is primarily due to lower spending from our customers on oil and gas well drilling and completion, as a result of lower oil prices. These market conditions resulted in reduced customer activity and a reduction in the price received for our services.

Operating expenses for our Coiled Tubing Services segment were $11.3 million during the three months ended September 30, 2019, which represented a decrease of $6.5 million, or 36.8%, compared to $17.8 million for the same period in 2018. This decrease is primarily a result of a decrease in employee compensation costs and repair and maintenance expense due to a decrease in activity levels.

Fluid Management Services

Revenues for our Fluid Management Services segment decreased $3.7 million, or 16.7%, to $18.2 million for the three months ended September 30, 2019, compared to $21.9 million for the three months ended September 30, 2018. The decrease for this segment is primarily due to lower spending from our customers on oil and gas well drilling and completion, as a result of lower oil prices. These market conditions resulted in reduced customer activity.

Operating expenses for our Fluid Management Services segment were $18.6 million during the three months ended September 30, 2019, which represented a decrease of $6.1 million, or 24.6%, compared to $24.7 million for the same period in 2018. This decrease is primarily a result of a decrease in employee compensation costs, fuel expense and repair and maintenance expense due to a decrease in activity levels and a decrease in depreciation expense.

Functional Support

Operating expenses for Functional Support, which represent expenses associated with managing our reporting segments, decreased $1.3 million, or 7.4%, to $16.5 million (15.5% of consolidated revenues) for the three months ended September 30, 2019 compared to $17.8 million (13.2% of consolidated revenues) for the same period in 2018. The decrease is primarily due to lower employee compensation costs due to reduced staffing levels and a decrease in facilities costs.

Consolidated Results of Operations — Nine Months EndedSeptember 30, 2019 and 2018

Revenues

Our revenues for the nine months endedSeptember 30, 2019 decreased $75.7 million, or 18.7%, to $328.7 million from $404.4 millionfor the nine months endedSeptember 30, 2018, due to lower spending from our customers primarily as a result of lower oil prices. These market conditions resulted in reduced customer activity. See “Segment Operating Results — Nine Months EndedSeptember 30, 2019 and 2018” below for a more detailed discussion of the change in our revenues.

Direct Operating Expenses

Our direct operating expenses decreased $47.3 million, to $266.7 million (81.1% of revenues), for the nine months endedSeptember 30, 2019, compared to $314.1 million (77.7% of revenues) for the nine months endedSeptember 30, 2018. This decrease is primarily a result of a decrease in employee compensation costs, fuel expense and repair and maintenance expense due to a decrease in activity levels.

Depreciation and Amortization Expense

Depreciation and amortization expense decreased $19.7 million, or 31.4%, to $43.1 million during the nine months endedSeptember 30, 2019, compared to $62.9 millionfor the nine months endedSeptember 30, 2018. This decrease is primarily due to certain assets becoming fully depreciated.

General and Administrative Expenses

General and administrative expenses decreased $5.3 million, to $66.0 million (20.1% of revenues), for the nine months endedSeptember 30, 2019, compared to $71.4 million (17.6% of revenues) for the nine months endedSeptember 30, 2018. The decrease is primarily due to lower employee compensation costs due to reduced staffing levels and a decrease in facilities costs.

Interest Expense, Net of Amounts Capitalized

Interest expense increased $0.7 million, or 2.9%, to $26.2 millionfor the nine months endedSeptember 30, 2019, compared to $25.4 million for the same period in 2018. This increase is primarily related to the increase in the variable interest rate on our long-term debt.

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Other Income, Net

During the nine months endedSeptember 30, 2019, we recognized other income, net, of $1.7 million, compared to other income, net, of $2.0 millionfor the nine months endedSeptember 30, 2018.

The following table summarizes the components of other income, net for the periods indicated (in thousands):

	Nine Months Ended
	September 30,
	2019			2018
Interest income	$	(639	)	$	(580	)
Other	(1,093		)	(1,392		)
Total	$	(1,732	)	$	(1,972	)

Income Tax Benefit

We recorded an income tax benefit of $4.3 million on a pre-tax loss of $71.6 millionfor the nine months endedSeptember 30, 2019, compared to an income tax benefit of $1.6 million on a pre-tax loss of $67.3 million for the same period in 2018. Our effective tax rate was 6.1%for the nine months endedSeptember 30, 2019, compared to 2.4%for the nine months endedSeptember 30, 2018. Our effective tax rates differ from the applicable U.S. statutory rates due to a number of factors, including the impact of permanent differences, and other tax adjustments, such as valuation allowances against deferred tax assets, and tax expense or benefit recognized for uncertain tax positions. 

Segment Operating Results — Nine Months EndedSeptember 30, 2019 and 2018

The following table shows operating results for each of our segments for the nine months endedSeptember 30, 2019 and 2018 (in thousands):

For the nine months ended September 30, 2019
	Rig Services		Fishing and Rental Services			Coiled Tubing Services			Fluid Management Services			Functional Support			Total
Revenues from external customers	$	197,375	$	43,534		$	32,134		$	55,696		$	—		$	328,739
Operating expenses	184,285		48,196			37,266			55,811			50,312			375,870
Operating income (loss)	13,090		(4,662		)	(5,132		)	(115		)	(50,312		)	(47,131		)

For the nine months ended September 30, 2018
	Rig Services		Fishing and Rental Services			Coiled Tubing Services		Fluid Management Services			Functional Support			Total
Revenues from external customers	$	227,913	$	47,801		$	60,513	$	68,215		$	—		$	404,442
Operating expenses	212,439		55,284			53,015		75,717			51,840			448,295
Operating income (loss)	15,474		(7,483		)	7,498		(7,502		)	(51,840		)	(43,853		)

Rig Services

Revenues for our Rig Services segment decreased $30.5 million, or 13.4%, to $197.4 millionfor the nine months endedSeptember 30, 2019, compared to $227.9 millionfor the nine months endedSeptember 30, 2018. The decrease for this segment is primarily due to lower spending from our customers as a result of lower oil prices and unfavorable weather. These market conditions resulted in reduced customer activity.

Operating expenses for our Rig Services segment were $184.3 millionfor the nine months endedSeptember 30, 2019, which represented a decrease of $28.2 million, or 13.3%, compared to $212.4 million for the same period in 2018. This decrease is primarily a result of a decrease in employee compensation costs, fuel expense and repair and maintenance expense due to a decrease in activity levels and a decrease in depreciation expense.

Fishing and Rental Services

Revenues for our Fishing and Rental Services segment decreased $4.3 million, or 8.9%, to $43.5 millionfor the nine months endedSeptember 30, 2019, compared to $47.8 millionfor the nine months endedSeptember 30, 2018. The decrease for this segment is primarily due to lower spending from our customers on oil and gas well drilling and completion, as a result of lower oil prices. These market conditions resulted in reduced customer activity.

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Operating expenses for our Fishing and Rental Services segment were $48.2 millionfor the nine months endedSeptember 30, 2019, which represented a decrease of $7.1 million, or 12.8% compared to $55.3 million for the same period in 2018. The decrease for this segment is primarily due to the decrease in depreciation expense and repair and maintenance expense.

Coiled Tubing Services

Revenues for our Coiled Tubing Services segment decreased $28.4 million, or 46.9%, to $32.1 millionfor the nine months endedSeptember 30, 2019, compared to $60.5 millionfor the nine months endedSeptember 30, 2018. The decrease for this segment is primarily due to lower spending from our customers on oil and gas well drilling and completion, as a result of lower oil prices. These market conditions resulted in reduced customer activity and a reduction in the price received for our services.

Operating expenses for our Coiled Tubing Services segment were $37.3 millionfor the nine months endedSeptember 30, 2019, which represented a decrease of $15.7 million, or 29.7%, compared to $53.0 million for the same period in 2018. This decrease is primarily a result of a decrease in employee compensation costs and repair and maintenance expense due to a decrease in activity levels.

Fluid Management Services

Revenues for our Fluid Management Services segment decreased $12.5 million, or 18.4%, to $55.7 millionfor the nine months endedSeptember 30, 2019, compared to $68.2 millionfor the nine months endedSeptember 30, 2018. The decrease for this segment is primarily due to lower spending from our customers on oil and gas well drilling and completion, as a result of lower oil prices. These market conditions resulted in reduced customer activity.

Operating expenses for our Fluid Management Services segment were $55.8 millionfor the nine months endedSeptember 30, 2019, which represented a decrease of $19.9 million, or 26.3%, compared to $75.7 million for the same period in 2018. This decrease is primarily a result of a decrease in employee compensation costs, fuel expense and repair and maintenance expense due to a decrease in activity levels and a decrease in depreciation expense.

Functional Support

Operating expenses for Functional Support, which represent expenses associated with managing our reporting segments, decreased $1.5 million, or 2.9%, to $50.3 million (15.3% of consolidated revenues) for the nine months endedSeptember 30, 2019 compared to $51.8 million (12.8% of consolidated revenues) for the same period in 2018. The decrease is primarily due to lower employee compensation costs due to reduced staffing levels, a decrease in facilities costs and legal settlements.

LIQUIDITY AND CAPITAL RESOURCES

Forbearance Agreements

The Company is party to two credit facilities. The Company and Key Energy Services, LLC, are borrowers (the “ABL Borrowers”) under an ABL Facility with the financial institutions party thereto from time to time as lenders (the “ABL Lenders”), Bank of America, N.A., as administrative agent for the lenders (the “Administrative Agent”) and Bank of America, N.A., as sole collateral agent for the lenders, providing for aggregate commitments from the ABL Lenders of $100 million. In addition, on December 15, 2016, the Company entered into a Term Loan Facility among the Company, as borrower, certain subsidiaries of the Company named as guarantors therein, the financial institutions party thereto from time to time as Lenders (collectively, the “Term Loan Lenders”) and Cortland Capital Market Services LLC and Cortland Products Corp., as agent for the Lenders.

As announced on October 31, 2019, the Company has engaged external advisers to assist the Company in analyzing various strategic financial alternatives to address its capital structure and to position the Company for future success. In connection with this strategic review, the Company elected not to make a scheduled interest payment due October 18, 2019 under the Term Loan Facility. The Company’s failure to make the October interest payment resulted in a default under the Term Loan Facility and a cross default under the ABL Facility (such defaults, the “Specified Defaults”).

On October 29, 2019, the Company entered into forbearance agreements with Term Loan Lenders collectively holding over 99.5% of the principal amount of the outstanding term loans (the “Term Loan Forbearance Agreement”) and all of the ABL Lenders (the “ABL Forbearance Agreement” and, collectively, the “Forbearance Agreements”). Pursuant to the Forbearance Agreements, the Lenders party thereto have agreed that, until the earlier of December 6, 2019 or the occurrence of certain specified early termination events, such Lenders will forbear from exercising any default-related rights and remedies with respect to the Specified Defaults. The Forbearance Agreements contain certain representations and warranties of the Company and covenants with which the Company must comply during the forbearance period, including a requirement to maintain aggregate bank and book cash balances of at least $10,000,000 as measured on a weekly basis. The failure to comply with such covenants, among other things, would result in the early termination of the forbearance period.

30

The Specified Defaults and related matters including the Company’s level of debt raise substantial doubt as to the ability of the Company to continue as a going concern. The Company is in active discussions with the Lenders regarding the Company’s capital structure and the potential to reduce its debt level, however an agreement with the Lenders has not been reached as of the date of these financial statements. The Company believes that it is probable that if such an agreement is reached, it will alleviate the substantial doubt as to the Company’s ability to continue as a going concern.

Current Financial Condition and Liquidity

As of September 30, 2019, we had $22.6 million cash and cash equivalents. Due to the Specified Defaults, we are currently unable to borrow any amounts under the ABL Facility. As of December 31, 2018, we had total liquidity of $74.3 million which consisted of $50.3 million cash and cash equivalents and $24 million of borrowing capacity available under our ABL Facility. Our working capital was $23.8 million as of September 30, 2019, compared to $55.0 million as of December 31, 2018. Our working capital decreased from the prior year end primarily as a result of a decrease in cash and cash equivalents and accounts receivable, which was partially offset by a decrease in other accrued liabilities. As of September 30, 2019, we had no borrowings outstanding and $34.6 million in committed letters of credit outstanding under our ABL Facility.

The following table summarizes our cash flows for the nine months ended September 30, 2019 and 2018 (in thousands):

	Nine Months Ended
	September 30,
	2019			2018
Net cash used in operating activities	$	(16,785	)	$	(15,062	)
Cash paid for capital expenditures	(16,483		)	(28,521		)
Proceeds received from sale of fixed assets	8,362			11,955
Repayments of long-term debt	(1,875		)	(1,875		)
Repayments of finance lease obligations	(59		)	—
Payment of deferred financing costs	(828		)	—
Other financing activities, net	(37		)	(268		)
Net decrease in cash, cash equivalents and restricted cash	$	(27,705	)	$	(33,771	)

Cash used in operating activities was $16.8 million for the nine months ended September 30, 2019 compared to cash used in operating activities of $15.1 million for the nine months ended September 30, 2018. Cash used in operating activities for the nine months ended September 30, 2019 was primarily related to net losses adjusted for noncash items. Cash used in operating activities for the nine months ended September 30, 2018 was primarily related to changes in working capital.

Cash used in investing activities was $8.1 million for the nine months endedSeptember 30, 2019 compared to cash used in investing activities of $16.6 million for the nine months endedSeptember 30, 2018. Cash outflows during these periods consisted of capital expenditures. Our capital expenditures are primarily related to the addition of new equipment and the ongoing maintenance of our equipment. Cash inflows during these periods consisted of proceeds from sales of fixed assets.

Cash used in financing activities was $2.8 million for the nine months endedSeptember 30, 2019 compared to cash used in financing activities of $2.1 million for the nine months endedSeptember 30, 2018. Financing cash outflows for the nine months ended September 30, 2019 and September 30, 2018 primarily relate to the repayment of long-term debt. Financing cash outflows for the nine months ended September 30, 2019 also include payment of deferred financing costs.

Sources of Liquidity and Capital Resources

Historically, we have relied on cash reserves and availability under our ABL Facility to finance our cash requirements for current and future operations, budgeted capital expenditures, debt service and other obligations. Due to the Specified Defaults, we are currently unable to borrow any amounts under the ABL Facility. As such, management has been focused on the preservation of our liquidity. In addition, as described elsewhere, as part of its strategic review, the Company has determined to focus its operations on the Company’s core areas of operations and exit certain low margin markets in an effort to reduce its cost structure and improve its operating cash flows, in addition to generating future capital expenditure savings.

31

At September 30, 2019, our annual debt maturities for our 2021 Term Loan Facility were as follows (in thousands):

Year	Principal Payments
2019	$	625
2020	2,500
2021	240,000
Total principal payments	$	243,125

ABL Facility

As described above, the Company and Key Energy Services, LLC are borrowers under the ABL Facility that provides for aggregate commitments from the ABL Lenders of $100 million, and matures on the earlier of (a) April 5, 2024 and (b) 6 months prior to the maturity date of the Term Loan Facility and other material debts, if any, as identified under the ABL Facility.

On April 5, 2019, the ABL Borrowers, as borrowers, the financial institutions party thereto as lenders and Bank of America, N.A. (the “ABL Agent”), as administrative agent for the lenders, entered into Amendment No. 1 (“Amendment No. 1”) to the ABL Facility, among the ABL Borrowers, the financial institutions party thereto from time to time as lenders, the ABL Agent and the co-collateral agents for the lenders, Bank of America, N.A. and Wells Fargo Bank, National Association. The amendment makes changes to, among other things, lower (i) the applicable margin for borrowings to (x) from between 2.50% and 4.50% to between 2.00% and 2.50% for LIBOR borrowings and (y) from 1.50% and 3.50% to between 1.00% and 1.50% for base rate borrowings, in each case depending on the ABL Borrowers’ fixed charge coverage ratio at such time, (ii) appoint the Bank of America, N.A. as sole collateral agent under the ABL Facility, (iii) extend the maturity of the credit facility from June 15, 2021 to the earlier of (x) April 5, 2024 and (y) 6 months prior to the maturity date of the ABL Borrowers’ term loan credit agreement and other material debts, as identified under the ABL Facility, (iv) increase the maximum amount of revolving loan commitment increases from $30 million to $50 million and (v) revise certain triggers applicable to the covenants under the ABL Facility.

The ABL Facility provides the ABL Borrowers with a borrowing facility up to an aggregate principal amount equal to the lesser of (i) the aggregate revolving commitments then in effect and (ii) the sum of (a) 85% of the value of eligible accounts receivable plus (b) 80% of the value of eligible unbilled accounts receivable, subject to a limit equal to the greater of (x) $35 million and (y) 25% of the commitments. The amount that may be borrowed under the ABL Facility is subject to increase or reduction based on certain segregated cash or reserves provided for by the ABL Facility. In addition, the percentages of accounts receivable and unbilled accounts receivable included in the calculation described above is subject to reduction to the extent of certain bad debt write-downs and other dilutive items provided in the ABL Facility.

Borrowings under the ABL Facility will bear interest, at the ABL Borrowers’ option, at a per annum rate equal to (i) LIBOR for 30, 60, 90, 180, or, with the consent of the ABL Lenders, 360 days, plus an applicable margin that varies from 2.0% to 2.5% depending on the Borrowers’ fixed charge coverage ratio at such time or (ii) a base rate equal to the sum of (a) the greatest of (x) the prime rate, (y) the federal funds rate, plus 0.50% or (z) 30-day LIBOR, plus 1.0% plus (b) an applicable margin that varies from 1.0% to 1.5% depending on the Borrowers’ fixed charge coverage ratio at such time. In addition, the ABL Facility provides for unused line fees of 1.00% to 1.25% per year, depending on utilization, letter of credit fees and certain other factors.

The ABL Facility may in the future be guaranteed by certain of the Company’s existing and future subsidiaries (the “ABL Guarantors,” and together with the ABL Borrowers, the “ABL Loan Parties”). To secure their obligations under the ABL Facility, each of the ABL Loan Parties has granted or will grant, as applicable, to the Administrative Agent a first-priority security interest for the benefit of the ABL Lenders in its present and future accounts receivable, inventory and related assets and proceeds of the foregoing (the “ABL Priority Collateral”). In addition, the obligations of the ABL Loan Parties under the ABL Facility are secured by second-priority liens on the Term Priority Collateral (as described below under “Term Loan Facility”).

The revolving loans under the ABL Facility may be voluntarily prepaid, in whole or in part, without premium or penalty, subject to breakage or similar costs.

The ABL Facility contains certain affirmative and negative covenants, including covenants that restrict the ability of the ABL Loan Parties to take certain actions including, among other things and subject to certain significant exceptions, the incurrence of debt, the granting of liens, the making of investments, entering into transactions with affiliates, the payment of dividends and the sale of assets. The ABL Facility also contains a requirement that the ABL Borrowers comply, during certain periods with a fixed charge coverage ratio of 1.00 to 1.00.

As of September 30, 2019, we have no borrowings outstanding under the ABL Facility and $34.6 million of letters of credit outstanding. Due to the Specified Defaults, we are currently unable to borrow any amounts under the ABL Facility.

32

Term Loan Facility

As described above, the Company and certain subsidiaries are parties to the Term Loan Facility, which had an initial outstanding principal amount of $250 million.

The Term Loan Facility will mature on December 15, 2021, although such maturity date may, at the Company’s request, be extended by one or more of the Term Loan Lenders pursuant to the terms of the Term Loan Facility. Borrowings under the Term Loan Facility bear interest, at the Company’s option, at a per annum rate equal to (i) LIBOR for one, two, three, six, or, with the consent of the Term Loan Lenders, 12 months, plus10.25% or (ii) a base rate equal to the sum of (a) the greatest of (x) the prime rate, (y) the Federal Funds rate, plus 0.50% and (z) 30-day LIBOR, plus 1.0% plus (b) 9.25%.

The Term Loan Facility is guaranteed by certain of the Company’s existing and future subsidiaries (the “Term Loan Guarantors,” and together with the Company, the “Term Loan Parties”). To secure their obligations under the Term Loan Facility, each of the Term Loan Parties has granted or will grant, as applicable, to the Agent a first-priority security interest for the benefit of the Term Loan Lenders in substantially all of each Term Loan Party’s assets other than certain excluded assets and the ABL Priority Collateral (the “Term Priority Collateral”). In addition, the obligations of the Term Loan Parties under the Term Loan Facility are secured by second-priority liens on the ABL Priority Collateral (as described above under “ABL Facility”).

The loans under the Term Loan Facility may be prepaid at the Company’s option, subject to the payment of a prepayment premium in certain circumstances as provided in the Term Loan Facility. A prepayment prior to the first anniversary of the loan would have been required to have been made with a make-whole amount with the calculation of the make-whole amount as specified in the Term Loan Facility. If a prepayment is made after the first anniversary of the loan but prior to the second anniversary, such prepayment must be made at 106% of the principle amount, if a prepayment is made after the second anniversary but prior to the third anniversary, such prepayment must be made at 103% of the principle amount. After the third anniversary, if a prepayment is made, no prepayment premium is due. The Company is required to make principal payments in the amount of $625,000 per quarter. In addition, pursuant to the Term Loan Facility, the Company must prepay or offer to prepay, as applicable, term loans with the net cash proceeds of certain debt incurrences and asset sales, excess cash flow, and upon certain change of control transactions, subject in each case to certain exceptions.

The Term Loan Facility contains certain affirmative and negative covenants, including covenants that restrict the ability of the Term Loan Parties to take certain actions including, among other things and subject to certain significant exceptions, the incurrence of debt, the granting of liens, the making of investments, entering into transactions with affiliates, the payment of dividends and the sale of assets. The Term Loan Facility also contains financial covenants requiring that the Company maintain an asset coverage ratio of at least 1.35 to 1.0 and that Liquidity (as defined in the Term Loan Facility) must not be less than $37.5 million (of which at least $20.0 million must be in cash or cash equivalents held in deposit accounts) as of the last day of any fiscal quarter, subject to certain exceptions and cure rights.

Capital Expenditures

During the nine months ended September 30, 2019, our capital expenditures totaled $16.5 million. Our current capital expenditure plan for 2019 contemplates spending of approximately $20 million for the full year, subject to market conditions. This is primarily related to the addition of new equipment needed and the ongoing maintenance of our equipment. Our capital expenditure program for 2019 is subject to market conditions, including activity levels, commodity prices, industry capacity and specific customer needs as well as cash flows, including cash generated from asset sales. We currently anticipate funding our 2019 capital expenditures through a combination of cash on hand, operating cash flow and proceeds from sales of assets. Should our operating cash flows or activity levels prove to be insufficient to fund our currently planned capital spending levels, management expects that it will adjust our capital spending plans accordingly. We may also incur capital expenditures for strategic investments and acquisitions.

Off-Balance Sheet Arrangements

At September 30, 2019 we did not, and we currently do not, have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our quantitative and qualitative disclosures about market risk from those disclosed in our 2018 Form 10-K. More detailed information concerning market risk can be found in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our 2018 Form 10-K.

33

ITEM 4.     CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, management performed, with the participation of our Chief Executive Officer and our Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on this evaluation, management concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the third quarter of 2019 that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

34

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject to various suits and claims that have arisen in the ordinary course of business. We do not believe that the disposition of any of our ordinary course litigation will result in a material adverse effect on our consolidated financial position, results of operations or cash flows. For additional information on legal proceedings, see “Note 10. Commitments and Contingencies” in “Item 1. Financial Statements” of Part I of this report, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

As of the date of this filing, there have been no material changes in the risk factors previously disclosed in Part I, “Item 1A. Risk Factors” of our 2018 Form 10-K and Part II, “Item 1A. Risk Factors” of our Form 10-Q for the quarter ended June 30, 2019.

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

During the three months ended September 30, 2019, we repurchased the shares shown in the table below to satisfy tax withholding obligations upon the vesting of restricted stock awarded to certain of our employees:

Period	Number of Shares Purchased	Average Price Paid per Share(1)
July 1, 2019 to July 31, 2019	2,215	$	2.55
August 1, 2019 to August 31, 2019	20,387	1.30
September 1, 2019 to September 30, 2019	—	—
Total	22,602	$	1.42

(1) The price paid per share with respect to the tax withholding repurchases was determined using the closing prices on the applicable vesting date.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The Exhibit Index, which follows the signature pages to this report and is incorporated by reference herein, sets forth a list of exhibits to this report.

35

EXHIBIT INDEX

Exhibit No.	Description
10.1	Forbearance Agreement dated October 29, 2019, by and among Key Energy Services, Inc, as borrower, the Lenders party thereto, and Cortland Products Corp., as agent (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 31, 2019).
10.2	Forbearance Agreement dated October 29, 2019, by and among Key Energy Services, Inc. Key Energy Services, LLC, the Lenders party thereto, and Bank of America, N.A., as administrative agent (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 31, 2019).
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith
**	Furnished herewith

36

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:	November 8, 2019	By:	/s/ J. MARSHALL DODSON
			J. Marshall Dodson
			Senior Vice President and Chief Financial Officer (As duly authorized officer and Principal Financial Officer)

37

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Rob Saltiel, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Key Energy Services, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated:	November 8, 2019	/s/ ROB SALTIEL
		Rob Saltiel
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT

I, J. Marshall Dodson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Key Energy Services;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated:	November 8, 2019	/s/ J. MARSHALL DODSON
		J. Marshall Dodson
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned officers of Key Energy Services, Inc. (the "Company") hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002, to such officer's knowledge that:

(1) the accompanying Quarterly Report on Form 10-Q for the period ended September 30, 2019 as filed with the U.S. Securities and Exchange Commission (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods expressed in the Report.

Dated:	November 8, 2019	/s/ ROB SALTIEL
		Rob Saltiel
		President and Chief Executive Officer
		(Principal Executive Officer)

Dated:	November 8, 2019	/s/ J. MARSHALL DODSON
		J. Marshall Dodson
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)

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Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
REVENUES	$ 106,523	$ 134,721	$ 328,739	$ 404,442
COSTS AND EXPENSES:
Direct operating expenses	87,956	106,103	266,714	314,061
Depreciation and amortization expense	14,584	21,808	43,142	62,881
General and administrative expenses	21,375	23,925	66,014	71,353
Operating loss	(17,392)	(17,115)	(47,131)	(43,853)
Interest expense, net of amounts capitalized	8,411	8,708	26,164	25,425
Other income, net	(351)	(213)	(1,732)	(1,972)
Loss before income taxes	(25,452)	(25,610)	(71,563)	(67,306)
Income tax benefit (expense)	(37)	1,750	4,330	1,588
NET LOSS	$ (25,489)	$ (23,860)	$ (67,233)	$ (65,718)
Loss per share:
Basic and diluted (per share)	$ (1.25)	$ (1.18)	$ (3.30)	$ (3.25)
Weighted average shares outstanding:
Basic and diluted	20,443	20,252	20,398	20,234

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REVENUE FROM CONTRACTS WITH CUSTOMERS

9 Months Ended

Sep. 30, 2019

ADOPTION OF ASC 606, REVENUE FROM CONTRACTS WITH CUSTOMERS [Abstract]

REVENUES ADOPTION OF ASC 606

REVENUE FROM CONTRACTS WITH CUSTOMERS

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The following table presents our revenues disaggregated by revenue source (in thousands). Sales taxes are excluded from revenues.

	Nine Months Ended
	September 30,
	2019		2018
Rig Services	$	197,375	$	227,913
Fishing and Rental Services	43,534		47,801
Coiled Tubing Services	32,134		60,513
Fluid Management Services	55,696		68,215
Total	$	328,739	$	404,442

Disaggregation of Revenue

We have disaggregated our revenues by our reportable segments including Rig Services, Fishing & Rental Services, Coiled Tubing Services and Fluid Management Services.

Rig Services

Our Rig Services include 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 at the end of their useful lives. We also provide specialty drilling services to oil and natural gas producers with certain of our larger rigs that are capable of providing conventional and horizontal drilling services. Our rigs encompass various sizes and capabilities, allowing us to service all types of oil and gas wells.

We recognize revenue within the Rig Services segment by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The control over services is transferred as the services are rendered to the customer. Specifically, we recognize revenue as the services are provided, typically daily, as we have the right to invoice the customer for the services performed. Rig Services are billed monthly, and payment terms are usually 30 days from invoice receipt.

Fishing and Rental Services

We offer a full line of services and rental equipment designed for use in providing drilling and workover services. Fishing services involve recovering lost or stuck equipment in the wellbore utilizing a broad array of “fishing tools.” Our rental tool inventory consists of drill pipe, tubulars, handling tools (including our patented Hydra-Walk® pipe-handling units and services), pressure-control equipment, pumps, power swivels, reversing units, foam air units.

We recognize revenue within the Fishing and Rental Services segment by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The control over services is transferred as the services are rendered to the customer. Specifically, we recognize revenue as the services are provided, typically daily, as we have the right to invoice the customer for the services performed. Fishing and Rental Services are billed and paid monthly. Payment terms for Fishing and Rental Services are usually 30 days from invoice receipt.

Coiled Tubing Services

Coiled Tubing Services involve the use of a continuous metal pipe spooled onto a large reel, which is then deployed into oil and natural gas wells to perform various applications, such as wellbore clean-outs, nitrogen jet lifts, through-tubing fishing, and formation stimulations utilizing acid and chemical treatments. Coiled tubing is also used for a number of horizontal well applications such as milling temporary isolation plugs that separate frac zones, and various other pre- and post-hydraulic fracturing well preparation services.

We recognize revenue within the Coiled Tubing Services segment by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The control over services is transferred as the services are rendered to the customer. Specifically, we recognize revenue, typically daily, as the services are provided as we have the right to invoice the customer for the services performed. Coiled Tubing Services are billed and paid monthly. Payment terms for Coiled Tubing Services are usually 30 days from invoice receipt.

Fluid Management Services

We provide transportation and well-site storage services for various fluids utilized in connection with drilling, completions, workover and maintenance activities. We also provide disposal services for fluids produced subsequent to well completion. These fluids are removed from the well site and transported for disposal in saltwater disposal wells owned by us or a third party.

We recognize revenue within the Fluid Management Services segment by measuring progress toward satisfying the performance obligation in a manner that best depicts the transfer of goods or services to the customer. The control over services is transferred as the services are rendered to the customer. Specifically, we recognize revenue as the services are provided, typically daily, as we have the right to invoice the customer for the services performed. Fluid Management Services are billed and paid monthly. Payment terms for Fluid Management Services are usually 30 days from invoice receipt.

Arrangements with Multiple Performance Obligations

While not typical for our business, our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers or using expected cost-plus margin. For combined products and services within a contract, we account for individual products and services separately if they are distinct –- i.e. if a product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate products and services within a contract based on the prices at which we separately sell our services. For items that are not sold separately, we estimate the standalone selling prices using the expected cost-plus margin approach.

Contract Balances

Under our revenue contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our revenue contracts do not give rise to contract assets or liabilities under ASC 606.

Practical Expedients and Exemptions

We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within general and administrative expenses.

The majority of our services are short-term in nature, with a contract term of one year or less. For those contracts, we have utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

Additionally, our payment terms are short-term in nature with settlements of one year or less. We have, therefore, utilized the practical expedient in ASC 606-10-32-18 exempting the Company from adjusting the promised amount of consideration for the effects of a significant financing component given that the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Further, in many of our service contracts we have a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date (for example, a service contract in which an entity bills a fixed amount for each hour of service provided). For those contracts, we have utilized the practical expedient in ASC 606-10-55-18 exempting the Company from disclosure of the recognition of revenue in the amount that the Company has a right to invoice.

Accordingly, we do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

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INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

INTANGIBLE ASSETS

The components of our other intangible assets as of September 30, 2019 and December 31, 2018 are as follows (in thousands):

	September 30, 2019			December 31, 2018
Trademark:
Gross carrying value	$	520		$	520
Accumulated amortization	(159		)	(116		)
Net carrying value	$	361		$	404

The weighted average remaining amortization periods and expected amortization expense for the next five years for our definite lived intangible assets are as follows:

	Weighted average remaining amortization period (years)	Expected amortization expense (in thousands)
		Remainder of 2019		2020		2021		2022		2023
Trademarks	6.3	$	14	$	58	$	58	$	58	$	58

Amortization expense for our intangible assets was less than $0.1 millionfor the three and nine months endedSeptember 30, 2019 and 2018.

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Litigation

Various suits and claims arising in the ordinary course of business are pending against us. We conduct business throughout the continental United States and may be subject to jury verdicts or arbitrations that result in outcomes in favor of the plaintiffs. We continually assess our contingent liabilities, including potential litigation liabilities, as well as the adequacy of our accruals and our need for the disclosure of these items, if any. We establish a provision for a contingent liability when it is probable that a liability has been incurred and the amount is reasonably estimable. We have $2.5 million of other liabilities related to litigation that is deemed probable and reasonably estimable as of September 30, 2019. We do not believe that the disposition of any of these matters will result in an additional loss materially in excess of amounts that have been recorded.

Self-Insurance Reserves

We maintain reserves for workers’ compensation and vehicle liability on our balance sheet based on our judgment and estimates using an actuarial method based on claims incurred. We estimate general liability claims on a case-by-case basis. We maintain insurance policies for workers’ compensation, vehicle liability and general liability claims. These insurance policies carry self-insured retention limits or deductibles on a per occurrence basis. The retention limits or deductibles are accounted for in our accrual process for all workers’ compensation, vehicular liability and general liability claims. The deductibles have a $5 million maximum per vehicular liability claim, and a $2 million maximum per general liability claim and a $1 million maximum per workers’ compensation claim. As of September 30, 2019 and December 31, 2018, we have recorded $51.7 million and $50.1 million, respectively, of self-insurance reserves related to workers’ compensation, vehicular liabilities and general liability claims. Partially offsetting these liabilities, we had $13.6 million and $13.1 million of insurance receivables as of September 30, 2019 and December 31, 2018, respectively. We believe that the liabilities we have recorded are appropriate based on the known facts and circumstances and do not expect further losses materially in excess of the amounts already accrued for existing claims.

Environmental Remediation Liabilities

For environmental reserve matters, including remediation efforts for current locations and those relating to previously disposed properties, we record liabilities when our remediation efforts are probable and the costs to conduct such remediation efforts can be reasonably estimated. As of each of September 30, 2019 and December 31, 2018, we have recorded $2.4 million and $2.2 million, respectively, for our environmental remediation liabilities. We believe that the liabilities we have recorded are appropriate based on the known facts and circumstances and do not expect further losses materially in excess of the amounts already accrued.

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ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities. These carrying amounts approximate fair value because of the short maturity of the instruments or because the carrying value is equal to the fair value of those instruments on the balance sheet date.

Term Loan Facility due 2021. Because the variable interest rates of these loans approximate current market rates, the fair values of the loans borrowed under this facility approximate their carrying values.

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OTHER BALANCE SHEET INFORMATION - Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other current assets:
Prepaid current assets	$ 4,057	$ 11,207
Reinsurance receivable	6,617	6,365
Operating lease right-of-use assets	2,517	0
Other	305	501
Total	$ 13,496	$ 18,073

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SEGMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segment Information

The following tables set forth our unaudited segment information as of and for the three and nine months ended September 30, 2019 and 2018 (in thousands):

As of and for the three months ended September 30, 2019
	Rig Services		Fishing and Rental Services			Coiled Tubing Services			Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	64,465	$	14,135		$	9,714		$	18,209		$	—		$	—		$	106,523
Intersegment revenues	87		241			—			58			—			(386		)	—
Depreciation and amortization	6,289		4,139			1,397			2,294			465			—			14,584
Other operating expenses	55,424		11,713			9,862			16,338			15,994			—			109,331
Operating income (loss)	2,752		(1,717		)	(1,545		)	(423		)	(16,459		)	—			(17,392		)
Interest expense, net of amounts capitalized	33		7			13			12			8,346			—			8,411
Income (loss) before income taxes	2,734		(1,724		)	(1,558		)	(424		)	(24,480		)	—			(25,452		)
Long-lived assets(1)	124,078		41,897			17,165			47,980			24,464			—			255,584
Total assets	173,079		55,625			26,174			59,827			50,000			9,441			374,146
Capital expenditures	932		418			1,246			33			1,492			—			4,121

As of and for the three months ended September 30, 2018
	Rig Services		Fishing and Rental Services			Coiled Tubing Services		Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	77,153	$	17,477		$	18,220	$	21,871		$	—		$	—		$	134,721
Intersegment revenues	183		621			—		328			—			(1,132		)	—
Depreciation and amortization	8,212		6,012			1,403		5,262			919			—			21,808
Other operating expenses	64,471		12,855			16,404		19,441			16,857			—			130,028
Operating income (loss)	4,470		(1,390		)	413		(2,832		)	(17,776		)	—			(17,115		)
Interest expense, net of amounts capitalized	—		—			—		—			8,708			—			8,708
Income (loss) before income taxes	4,488		(1,378		)	413		(2,827		)	(26,306		)	—			(25,610		)
Long-lived assets(1)	147,050		49,436			18,083		60,360			22,109			421			297,459
Total assets	204,823		65,798			36,493		75,811			70,927			8,881			462,733
Capital expenditures	5,602		1,891			563		433			2,859			—			11,348

As of and for the nine months ended September 30, 2019
	Rig Services		Fishing and Rental Services			Coiled Tubing Services			Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	197,375	$	43,534		$	32,134		$	55,696		$	—		$	—		$	328,739
Intersegment revenues	341		1,436			—			133			—			(1,910		)	—
Depreciation and amortization	18,419		12,493			3,923			6,917			1,390			—			43,142
Other operating expenses	165,866		35,703			33,343			48,894			48,922			—			332,728
Operating income (loss)	13,090		(4,662		)	(5,132		)	(115		)	(50,312		)	—			(47,131		)
Interest expense, net of amounts capitalized	69		20			43			33			25,999			—			26,164
Income (loss) before income taxes	13,070		(4,671		)	(5,172		)	(133		)	(74,657		)	—			(71,563		)
Long-lived assets(1)	124,078		41,897			17,165			47,980			24,464			—			255,584
Total assets	173,079		55,625			26,174			59,827			50,000			9,441			374,146
Capital expenditures	3,745		2,491			3,163			2,088			4,996			—			16,483

As of and for the nine months ended September 30, 2018
	Rig Services		Fishing and Rental Services			Coiled Tubing Services		Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	227,913	$	47,801		$	60,513	$	68,215		$	—		$	—		$	404,442
Intersegment revenues	439		1,692			19		1,025			—			(3,175		)	—
Depreciation and amortization	23,869		17,657			3,887		15,581			1,887			—			62,881
Other operating expenses	188,570		37,627			49,128		60,136			49,953			—			385,414
Operating income (loss)	15,474		(7,483		)	7,498		(7,502		)	(51,840		)	—			(43,853		)
Interest expense, net of amounts capitalized	—		—			—		—			25,425			—			25,425
Income (loss) before income taxes	15,584		(7,458		)	7,501		(7,432		)	(75,501		)	—			(67,306		)
Long-lived assets(1)	147,050		49,436			18,083		60,360			22,109			421			297,459
Total assets	204,823		65,798			36,493		75,811			70,927			8,881			462,733
Capital expenditures	13,350		2,671			4,461		2,569			5,470			—			28,521

(1) Long-lived assets include fixed assets, intangibles and other non-current assets.

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SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Accounting Standards Not Yet Adopted in this Report

Recent Accounting Developments

ASU 2016-13. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326),Measurement of Credit Losses on Financial Instruments that will change how companies measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount. The amendments in this update will be effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018. The Company is evaluating the effect of this standard on our consolidated financial statements.

ASU 2016-02. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which replaced the existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Additional disclosure requirements include qualitative disclosures along with specific quantitative disclosures with the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for the Company for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. As part of our assessment, we have created additional internal controls over financial reporting and made changes in business practices and processes related to the ASU. Key has elected the new prospective “Comparatives Under 840” transition method as defined in ASU 2018-11 and adopted the new standard as of January 1, 2019. As part of the adoption, the Company elected several practical expedients which, for contracts that existed at the time of the adoption, allowed the Company to not reassess whether existing contracts are or contained leases, classification of a lease (i.e., operating leases will remain operating leases), initial direct costs and land easement arrangements. As part of the adoption, the Company also made several accounting policy elections which allow the Company to not apply the standard to short term leases as well as to choose not to separate non-lease components from lease components and instead account for all components as a single lease component. The adoption of this standard did not have an impact on our consolidated statement of operations or consolidated statement of cash flows and had an immaterial impact on our consolidated balance sheet. Right of use assets obtained in exchange for operating leases liabilities was $4.1 million at the time of the adoption of the standard.

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INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Other Intangible Assets

The components of our other intangible assets as of September 30, 2019 and December 31, 2018 are as follows (in thousands):

	September 30, 2019			December 31, 2018
Trademark:
Gross carrying value	$	520		$	520
Accumulated amortization	(159		)	(116		)
Net carrying value	$	361		$	404

Weighted Average Remaining Amortization Periods and Expected Amortization Expense for the Next Five Years for Intangible

The weighted average remaining amortization periods and expected amortization expense for the next five years for our definite lived intangible assets are as follows:

	Weighted average remaining amortization period (years)	Expected amortization expense (in thousands)
		Remainder of 2019		2020		2021		2022		2023
Trademarks	6.3	$	14	$	58	$	58	$	58	$	58

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INCOME TAXES (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Effective tax rate	(0.10%)	6.80%	6.10%	2.40%

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LONG-TERM DEBT - Schedule of Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Term Loan Facility due 2021	$ 243,125	$ 245,000
Unamortized debt issuance costs	(1,903)	(1,421)
Finance lease obligation	1,701	0
Total debt	242,923	243,579
Current portion of long-term debt	2,914	2,500
Long-term debt	$ 240,009	$ 241,079

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2019

Subsequent Event [Line Items]

Subsequent Events [Text Block]

SUBSEQUENT EVENTS

As announced on October 31, 2019, the Company has engaged external advisers to assist the Company in analyzing various strategic financial alternatives to address its capital structure and to position the Company for future success. In connection with this strategic review, the Company elected not to make a scheduled interest payment due October 18, 2019 under the Term Loan Facility. The Company’s failure to make the October interest payment resulted in a default under the Term Loan Facility and a cross default under the ABL Facility (such defaults, the “Specified Defaults”).

On October 29, 2019, the Company entered into forbearance agreements with Term Loan Lenders collectively holding over 99.5% of the principal amount of the outstanding term loans (the “Term Loan Forbearance Agreement”) and all of the ABL Lenders (the “ABL Forbearance Agreement” and, collectively, the “Forbearance Agreements”). Pursuant to the Forbearance Agreements, the Lenders party thereto have agreed that, until the earlier of December 6, 2019 or the occurrence of certain specified early termination events, such Lenders will forbear from exercising any default-related rights and remedies with respect to the Specified Defaults. The Forbearance Agreements contain certain representations and warranties of the Company and covenants with which the Company must comply during the forbearance period, including a requirement to maintain aggregate bank and book cash balances of at least $10,000,000 as measured on a weekly basis. The failure to comply with such covenants, among other things, would result in the early termination of the forbearance period.

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OTHER BALANCE SHEET INFORMATION (Tables)

9 Months Ended

Sep. 30, 2019

Supplemental Balance Sheet Disclosures [Abstract]

Other Current Assets

The table below presents comparative detailed information about other current assets at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other current assets:
Prepaid current assets	$	4,057	$	11,207
Reinsurance receivable	6,617		6,365
Operating lease right-of-use assets	2,517		—
Other	305		501
Total	$	13,496	$	18,073

Other Noncurrent Assets

The table below presents comparative detailed information about other non-current assets at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other non-current assets:
Reinsurance receivable	$	6,980	$	6,743
Deposits	1,121		1,309
Operating lease right-of-use assets	2,853		—
Other	387		510
Total	$	11,341	$	8,562

Other Current Liabilities

The table below presents comparative detailed information about other current liabilities at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other current liabilities:
Accrued payroll, taxes and employee benefits	$	15,760	$	19,346
Accrued operating expenditures	14,423		15,861
Income, sales, use and other taxes	4,993		8,911
Self-insurance reserve	25,819		25,358
Accrued interest	6,672		7,105
Accrued insurance premiums	4		5,651
Unsettled legal claims	2,545		4,356
Accrued severance	40		83
Operating leases	2,448		—
Other	829		706
Total	$	73,533	$	87,377

Other Noncurrent Liabilities

The table below presents comparative detailed information about other non-current liabilities at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other non-current liabilities:
Asset retirement obligations	$	9,115	$	9,018
Environmental liabilities	2,395		2,227
Accrued sales, use and other taxes	17,005		17,024
Operating leases	3,120		—
Other	66		67
Total	$	31,701	$	28,336

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Loss Contingencies [Line Items]
Unsettled legal claims	$ 2,545	$ 4,356
Maximum Vehicular Liability Claim Deductible	5,000
Maximum General Liability Claim Deductible	2,000
Maximum Workers Compensation Claim Deductible	1,000
Self-insurance liabilities related to workers' compensation, vehicular liabilities, and general liability claims recorded	51,700	50,100
Insurance receivables which partially offset self-insurance liabilities	13,600	13,100
Environmental remediation liabilities recorded	$ 2,400	$ 2,200

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LONG-TERM DEBT LONG-TERM DEBT - ABL Facility (Details)	9 Months Ended
	Sep. 30, 2019 USD ($)
Line of Credit Facility [Line Items]
Aggregate Bank and Book Cash Balances Minimum	$ 10,000,000
ABL Facility [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 100,000,000
Eligible Accounts Receivable for ABL Facility Borrowings	85.00%
Eligible Unbilled Accounts Receivable For ABL Facility Borrowings	80.00%
Maximum Eligible Unbilled Accounts Receivable For ABL Facility Borrowings	$ 35,000,000
Maximum Percent Of Commitment For ABL Facility Borrowings	25.00%
Line of Credit Facility, Borrowing Capacity, Description	The ABL Facility provides the ABL Borrowers with the ability to borrow up to an aggregate principal amount equal to the lesser of (i) the aggregate revolving commitments then in effect and (ii) the sum of  85% of the value of eligible accounts receivable plus (b) 80% of the value of eligible unbilled accounts receivable, subject to a limit equal to the greater of (x) $35 million and (y) 25% of the Commitments.
Credit Facility revolving loans, carrying value	$ 0
Letters of Credit Outstanding, Amount	$ 34,600,000
Debt Instrument, Description of Variable Rate Basis	Borrowings under the ABL Facility will bear interest, at the ABL Borrowers’ option, at a per annum rate equal to (i) LIBOR for 30, 60, 90, 180, or, with the consent of the ABL Lenders, 360 days, plus an applicable margin that varies from 2.0% to 2.5% depending on the Borrowers’ fixed charge coverage ratio at such time or (ii) a base rate equal to the sum of (a) the greatest of (x) the prime rate, (y) the federal funds rate, plus 0.50% or (z) 30-day LIBOR, plus 1.0% plus (b) an applicable margin that varies from 1.0% to 1.5% depending on the Borrowers’ fixed charge coverage ratio at such time. In addition, the ABL Facility provides for unused line fees of 1.00% to 1.25% per year, depending on utilization, letter of credit fees and certain other factors.
Amendment Description	On April 5, 2019, the ABL Borrowers, as borrowers, the financial institutions party thereto as lenders and Bank of America, N.A. (the “ABL Agent”), as administrative agent for the lenders, entered into Amendment No. 1 (“Amendment No. 1”) to the ABL Facility, among the ABL Borrowers, the financial institutions party thereto from time to time as lenders, the ABL Agent and the co-collateral agents for the lenders, Bank of America, N.A. and Wells Fargo Bank, National Association. The amendment makes changes to, among other things, lower (i) the applicable margin for borrowings to (x) from between 2.50% and 4.50% to between 2.00% and 2.50% for LIBOR borrowings and (y) from 1.50% and 3.50% to between 1.00% and 1.50% for base rate borrowings, in each case depending on the ABL Borrowers’ fixed charge coverage ratio at such time, (ii) appoint the Bank of America, N.A. as sole collateral agent under the ABL Facility, (iii) extend the maturity of the credit facility from June 15, 2021 to the earlier of (x) April 5, 2024 and (y) 6 months prior to the maturity date of the ABL Borrowers’ term loan credit agreement and other material debts, as identified under the ABL Facility, (iv) increase the maximum amount of revolving loan commitment increases from $30 million to $50 million and (v) revise certain triggers applicable to the covenants under the ABL Facility.
Federal Funds Purchased [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.50%
30-day LIBOR [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.00%
Maximum [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Commitment Fee Minimum	1.25%
Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	2.50%
Maximum [Member] | Prime Rate [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.50%
Maximum [Member] | Federal Funds rate, plus 0.50% [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.50%
Maximum [Member] | 30-day LIBOR, plus 1.0% [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.50%
Minimum [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Commitment Fee Minimum	1.00%
Fixed charge coverage ratio	1.00
Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	2.00%
Minimum [Member] | Prime Rate [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.00%
Minimum [Member] | Federal Funds rate, plus 0.50% [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.00%
Minimum [Member] | 30-day LIBOR, plus 1.0% [Member] | ABL Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.00%

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EQUITY

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

EQUITY

EQUITY

A reconciliation of the total carrying amount of our equity accounts for the nine months ended September 30, 2019 is as follows (in thousands):

	COMMON STOCKHOLDERS
	Common Stock				Additional Paid-in Capital			Retained Deficit			Total
	Number of Shares		Amount at Par
Balance at December 31, 2018	20,363		$	204	$	264,945		$	(219,629	)	$	45,520
Share-based compensation	11		—		816			—			816
Net loss	—		—		—			(23,441		)	(23,441		)
Balance at March 31, 2019	20,374		$	204	$	265,761		$	(243,070	)	$	22,895
Common stock purchases	(1	)	—		(4		)	—			(4		)
Share-based compensation	35		—		1,414			—			1,414
Net loss	—		—		—			(18,303		)	(18,303		)
Balance at June 30, 2019	20,408		$	204	$	267,171		$	(261,373	)	$	6,002
Common stock purchases	(23	)	—		(33		)	—			(33		)
Share-based compensation	114		1		1,268			—			1,269
Net loss	—		—		—			(25,489		)	(25,489		)
Balance at September 30, 2019	20,499		$	205	$	268,406		$	(286,862	)	$	(18,251	)

A reconciliation of the total carrying amount of our equity accounts for the nine months ended September 30, 2018 is as follows (in thousands):

	COMMON STOCKHOLDERS
	Common Stock			Additional Paid-in Capital			Retained Deficit			Total
	Number of Shares	Amount at Par
Balance at December 31, 2017	20,217	$	202	$	259,314		$	(130,833	)	$	128,683
Exercise of warrants	—	—		1			—			1
Share-based compensation	14	—		2,400			—			2,400
Net loss	—	—		—			(24,963		)	(24,963		)
Balance at March 31, 2018	20,231	$	202	$	261,715		$	(155,796	)	$	106,121
Exercise of warrants	—	—		2			—			2
Share-based compensation	14	—		502			—			502
Net loss	—	—		—			(16,895		)	(16,895		)
Balance at June 30, 2018	20,245	$	202	$	262,219		$	(172,691	)	$	89,730
Common stock purchases	—	—		(271		)	—			(271		)
Share-based compensation	52	1		1,679			—			1,680
Net loss	—	—		—			(23,860		)	(23,860		)
Balance at September 30, 2018	20,297	$	203	$	263,627		$	(196,551	)	$	67,279

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 01, 2019
Document Documentand Entity Information [Abstract]
Entity Registrant Name	KEY ENERGY SERVICES INC
Entity Central Index Key	0000318996
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		20,498,674
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Statement of Cash Flows [Abstract]
Net loss	$ (67,233)	$ (65,718)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	43,142	62,881
Bad debt expense	538	387
Accretion of asset retirement obligations	126	121
Amortization of deferred financing costs	346	357
Gain on disposal of assets, net	(3,785)	(7,402)
Share-based compensation	3,499	4,582
Changes in working capital:
Accounts receivable	6,469	(20,994)
Other current assets	5,224	8,365
Accounts payable, accrued interest and accrued expenses	(9,077)	(4,392)
Share-based compensation liability awards	5	835
Other assets and liabilities	3,961	5,916
Net cash used in operating activities	(16,785)	(15,062)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(16,483)	(28,521)
Proceeds from sale of assets	8,362	11,955
Net cash used in investing activities	(8,121)	(16,566)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt	(1,875)	(1,875)
Repayments of finance lease obligations	(59)	0
Payment of deferred financing costs	828	0
Repurchases of common stock	37	271
Proceeds from exercise of warrants	0	3
Net cash used in financing activities	(2,799)	(2,143)
Net decrease in cash, cash equivalents and restricted cash	(27,705)	(33,771)
Cash, cash equivalents, and restricted cash, beginning of period	50,311	77,065
Cash, cash equivalents, and restricted cash, end of period	$ 22,606	$ 43,294

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TRANSACTIONS WITH RELATED PARTIES

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

TRANSACTIONS WITH RELATED PARTIES

TRANSACTIONS WITH RELATED PARTIES

The Company has purchased or sold equipment or services from a few affiliates of certain directors. Additionally, the Company has a corporate advisory services agreement between with Platinum Equity Advisors, LLC (“Platinum”) pursuant to which Platinum provides certain business advisory services to the Company. The dollar amounts related to these related party activities are not material to the Company’s condensed consolidated financial statements.

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OTHER BALANCE SHEET INFORMATION

9 Months Ended

Sep. 30, 2019

Supplemental Balance Sheet Disclosures [Abstract]

OTHER BALANCE SHEET INFORMATION

OTHER BALANCE SHEET INFORMATION

The table below presents comparative detailed information about other current assets at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other current assets:
Prepaid current assets	$	4,057	$	11,207
Reinsurance receivable	6,617		6,365
Operating lease right-of-use assets	2,517		—
Other	305		501
Total	$	13,496	$	18,073

The table below presents comparative detailed information about other non-current assets at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other non-current assets:
Reinsurance receivable	$	6,980	$	6,743
Deposits	1,121		1,309
Operating lease right-of-use assets	2,853		—
Other	387		510
Total	$	11,341	$	8,562

The table below presents comparative detailed information about other current liabilities at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other current liabilities:
Accrued payroll, taxes and employee benefits	$	15,760	$	19,346
Accrued operating expenditures	14,423		15,861
Income, sales, use and other taxes	4,993		8,911
Self-insurance reserve	25,819		25,358
Accrued interest	6,672		7,105
Accrued insurance premiums	4		5,651
Unsettled legal claims	2,545		4,356
Accrued severance	40		83
Operating leases	2,448		—
Other	829		706
Total	$	73,533	$	87,377

The table below presents comparative detailed information about other non-current liabilities at September 30, 2019 and December 31, 2018 (in thousands):

	September 30, 2019		December 31, 2018
Other non-current liabilities:
Asset retirement obligations	$	9,115	$	9,018
Environmental liabilities	2,395		2,227
Accrued sales, use and other taxes	17,005		17,024
Operating leases	3,120		—
Other	66		67
Total	$	31,701	$	28,336

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INCOME TAXES

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted on December 22, 2017. The 2017 Tax Act is comprehensive tax reform legislation that contains significant changes to corporate taxation. Provisions on the enacted law include a permanent reduction of the corporate income tax rate from 35% to 21%, imposing a mandatory one-time tax on un-repatriated accumulated earnings of foreign subsidiaries, a partial limitation on the deductibility of business interest expense, a limitation on net operating losses to 80% of taxable income each year, a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a partial territorial system (along with rules that create a new U.S. minimum tax on earnings of foreign subsidiaries), and other related provisions to maintain the U.S. tax base.

We recognized the income tax effects of the 2017 Tax Act in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”) during 2017. SAB 118 provided SEC staff guidance for the application of ASC Topic 740, Income Taxes, and allowed for a measurement period of up to one year after the enactment date to finalize the recording of the related tax impacts. As such, our 2017 financial results reflected the provisional income tax effects of the 2017 Tax Act for which the accounting under ASC Topic 740 was incomplete but a reasonable estimate could be determined. We did not identify any items for which the income tax effects of the 2017 Tax Act could not be reasonably estimated as of December 31, 2017. Additional clarifying guidance and law corrections were issued by the U.S. government during 2018 related to the 2017 Tax Act, which provided further insight into properly accounting for the impacts of U.S. tax reform. During 2018, we finalized our accounting for this matter and concluded that no adjustments were required from our provisionally recorded amounts from 2017. We no longer have any provisionally recorded items related to the enactment of the 2017 Tax Act as of December 31, 2018. In addition, there were no material 2017 Tax Act changes or clarifications that affected our accounting for the nine-month period ended September 30, 2019.

We are subject to U.S. federal income tax as well as income taxes in multiple state and foreign jurisdictions. Our effective tax rates for the three months endedSeptember 30, 2019 and 2018 were (0.1)% and 6.8%, respectively, and 6.1% and 2.4% for the nine months endedSeptember 30, 2019 and 2018, respectively. The variance between our effective rate and the U.S. statutory rate is due to the impact of permanent differences, and other tax adjustments, such as valuation allowances against deferred tax assets, and tax expense or benefit recognized for uncertain tax positions.    

We continued recording income taxes using a year-to-date effective tax rate method for the three and nine months ended September 30, 2019 and 2018. The use of this method was based on our expectations that a small change in our estimated ordinary income could result in a large change in the estimated annual effective tax rate. We will re-evaluate our use of this method each quarter until such time as a return to the annualized effective tax rate method is deemed appropriate.

The Company assesses the realizability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. Due to the history of losses in recent years and the continued challenges affecting the oil and gas industry, management continues to believe it is more likely than not that we will not be able to realize our net deferred tax assets. No release of our deferred tax asset valuation allowance was made during the nine months ended September 30, 2019.

As of September 30, 2019, we had no unrecognized tax benefits, net of federal tax benefit. All remaining unrecognized tax positions were recognized as of December 31, 2018 as a result of the statute of limitations lapse, and there are no unrecognized tax positions as of September 30, 2019.

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OTHER BALANCE SHEET INFORMATION - Other Noncurrent Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other non-current assets:
Reinsurance receivable	$ 6,980	$ 6,743
Deposits	1,121	1,309
Operating Lease Right of Use Asset Non-Current	2,853	0
Other	387	510
Total	$ 11,341	$ 8,562

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SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES Additional Information (Details) $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($)
SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES [Abstract]
Right of use assets obtained at adoption of new accounting standard	$ 4.1

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LEASES

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

We have operating leases for certain corporate offices and operating locations and finance leases for certain vehicles. We determine if a contract is a lease or contains an embedded lease at the inception of the contract. Operating lease right-of-use (“ROU”) assets are included in other current and other non-current assets, operating lease liabilities are included in other current and other non-current liabilities in our consolidated balance sheets. Finance lease ROU assets are included in property and equipment, net, and finance lease liabilities are included in our current portion of long-term debt, and long-term debt on our consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating and finance lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our risk adjusted incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease. Our leases have remaining lease terms of less than one year to five years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year. Lease expense for lease payments is recognized on a straight-line basis over the non-cancelable term of the lease.

We recognized $0.8 million and $2.2 million of costs related to our operating leases during the three and nine months ended September 30, 2019, respectively. As of September 30, 2019, our operating leases have a weighted average remaining lease term of 2.7 years and a weighted average discount rate of 5.97%. We recognized less than 0.1 million of costs related to our finance leases during the three and nine months ended September 30, 2019. As of September 30, 2019, our finance leases have a weighted average remaining lease term of 3.9 years and a weighted average discount rate of 4.77%.

Supplemental balance sheet information related to leases as of September 30, 2019 are as follows (in thousands):

	September 30, 2019
Right-of-Use Assets under Operating Leases
Operating lease right-of-use assets, current portion	$	2,517
Operating lease right-of-use assets, non-current portion	2,853
Total operating lease assets	$	5,370
Operating lease liabilities, current portion	$	2,448
Operating lease liabilities, non-current portion	3,120
Total operating lease liabilities	$	5,568
Right-of-Use Assets under Finance Leases
Property and equipment, at cost	$	1,760
Less accumulated depreciation	73
Property and equipment, net	$	1,687
Current portion of long-term debt	$	414
Long-term debt	1,287
Total finance lease liabilities	$	1,701

The maturities of our operating and finance lease liabilities as of September 30, 2019 are as follows (in thousands):

	September 30, 2019
	Operating Leases			Finance Leases
Remainder of 2019	$	659		$	119
2020	2,676			485
2021	1,508			485
2022	493			485
2023	493			283
Thereafter	188			—
Total lease payments	6,017			1,857
Less imputed interest	(449		)	(156		)
Total	$	5,568		$	1,701

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REVENUE FROM CONTRACTS WITH CUSTOMERS (Tables)

9 Months Ended

Sep. 30, 2019

ADOPTION OF ASC 606, REVENUE FROM CONTRACTS WITH CUSTOMERS [Abstract]

REVENUES ADOPTION OF ASC 606 [Table Text Block]

Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The following table presents our revenues disaggregated by revenue source (in thousands). Sales taxes are excluded from revenues.

	Nine Months Ended
	September 30,
	2019		2018
Rig Services	$	197,375	$	227,913
Fishing and Rental Services	43,534		47,801
Coiled Tubing Services	32,134		60,513
Fluid Management Services	55,696		68,215
Total	$	328,739	$	404,442

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LONG-TERM DEBT (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Long-Term Debt

As of September 30, 2019 and December 31, 2018, the components of our debt were as follows (in thousands):

	September 30, 2019			December 31, 2018
Term Loan Facility due 2021	$	243,125		$	245,000
Unamortized debt issuance costs	(1,903		)	(1,421		)
Finance lease obligation	1,701			—
Total	242,923			243,579
Less current portion	(2,914		)	(2,500		)
Long-term debt	$	240,009		$	241,079

Weighted Average Interest Rates

The weighted average interest rates on the outstanding borrowings under the Term Loan Facility for the three and nine month periods ended September 30, 2019 were as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Term Loan Facility	12.61	%	12.82	%

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SHARE-BASED COMPENSATION (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense recognized	$ 1.2	$ 1.6	$ 3.3	$ 4.0
Compensation expense expected to be recognized	4.1		$ 4.1
Compensation expense expected to be recognized, weighted average remaining vesting period			1 year 2 months 12 days
Phantom Share Units (PSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense recognized	0.1		$ 0.1	0.8
Compensation expense expected to be recognized	0.1		$ 0.1
Compensation expense expected to be recognized, weighted average remaining vesting period			9 months 18 days
Outside directors | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense recognized	$ 0.1	$ 0.1	$ 0.2	$ 0.6

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OTHER INCOME, NET (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Other Income and Expenses [Abstract]
Interest income	$ (122)	$ (201)	$ (639)	$ (580)
Other	(229)	(12)	(1,093)	(1,392)
Total	$ 351	$ 213	$ 1,732	$ 1,972

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INTANGIBLE ASSETS - Weighted Average Remaining Amortization Periods and Expected Amortization Expense for Next Five Years for Intangible Assets (Details) - Patents, trademarks and tradename $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	6 years 3 months
Expected Amortization Expense-Remainder of 2019	$ 14
Expected Amortization Expense-2020	58
Expected Amortization Expense-2021	58
Expected Amortization Expense-2022	58
Expected Amortization Expense-2023	$ 58

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LEASES (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Dec. 31, 2018
Operating Lease, Cost	$ 800	$ 2,200
Operating Lease, Weighted Average Remaining Lease Term	2 years 8 months	2 years 8 months
Operating Lease, Weighted Average Discount Rate, Percent	6.00%	6.00%
Finance Lease, Interest Expense	$ 100
Finance Lease, Weighted Average Discount Rate, Percent	4.80%	4.80%
Finance Lease, Weighted Average Remaining Lease Term	3 years 11 months	3 years 11 months
Operating Lease, Right-of-Use Asset, Current	$ 2,517	$ 2,517	$ 0
Operating Lease Right of Use Asset Non-Current	2,853	2,853	0
Operating Lease, Right-of-Use Asset	5,370	5,370
Operating Lease, Liability, Current	2,448	2,448	0
Operating Lease, Liability, Noncurrent	3,120	3,120	0
Operating Lease, Liability	5,568	5,568
Capital Leased Assets, Gross	1,760	1,760
Capital Leases, Lessee Balance Sheet, Assets by Major Class, Flight Equipment, Accumulated Depreciation	73	73
Finance Lease, Right-of-Use Asset	1,687	1,687
Finance Lease, Liability, Current	414	414
Finance Lease, Liability, Noncurrent	1,287	1,287
Finance Lease, Liability	1,701	1,701	$ 0
Lessee, Operating Lease, Liability, Payments, Remainder of Fiscal Year	659	659
Lessee, Operating Lease, Liability, Payments, Due Year Two	2,676	2,676
Lessee, Operating Lease, Liability, Payments, Due Year Three	1,508	1,508
Lessee, Operating Lease, Liability, Payments, Due Year Four	493	493
Lessee, Operating Lease, Liability, Payments, Due Year Five	493	493
Lessee, Operating Lease, Liability, Payments, Due after Year Five	188	188
Lessee, Operating Lease, Liability, Payments, Due	6,017	6,017
Lessee, Operating Lease, Liability, Undiscounted Excess Amount	(449)	(449)
Finance Lease, Liability, Payments, Remainder of Fiscal Year	119	119
Finance Lease, Liability, Payments, Due Year Two	485	485
Finance Lease, Liability, Payments, Due Year Three	485	485
Finance Lease, Liability, Payments, Due Year Four	485	485
Finance Lease, Liability, Payments, Due Year Five	283	283
Finance Lease, Liability, Payments, Due after Year Five	0	0
Finance Lease, Liability, Payments, Due	1,857	1,857
Finance Lease, Liability, Undiscounted Excess Amount	$ 156	$ 156
Maximum [Member]
Lessee, Operating Lease, Term of Contract	5 years	5 years
Lessee, Operating Lease, Renewal Term	5 years	5 years
Minimum [Member]
Lessee, Operating Lease, Term of Contract	1 year	1 year
Lessee, Operating Lease, Renewal Term	1 year	1 year

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 476	$ 1,056
Preferred stock, par value (in usd per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	1	1
Preferred stock, shares outstanding	1	1
Common stock, par value (in usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	20,498,674	20,363,198
Common stock, shares outstanding	20,498,674	20,363,198

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SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

The preparation of these unaudited condensed consolidated financial statements requires us to develop estimates and to make assumptions that affect our financial position, results of operations and cash flows. These estimates may also impact the nature and extent of our disclosure, if any, of our contingent liabilities. Among other things, we use estimates to (i) analyze assets for possible impairment, (ii) determine depreciable lives for our assets, (iii) assess future tax exposure and realization of deferred tax assets, (iv) determine amounts to accrue for contingencies, (v) value tangible and intangible assets, (vi) assess workers’ compensation, vehicular liability, self-insured risk accruals and other insurance reserves, (vii) provide allowances for our uncollectible accounts receivable, (viii) value our asset retirement obligations, and (ix) value our equity-based compensation. We review all significant estimates on a recurring basis and record the effect of any necessary adjustments prior to publication of our financial statements. Adjustments made with respect to the use of estimates relate to improved information not previously available. Because of the limitations inherent in this process, our actual results may differ materially from these estimates. We believe that the estimates used in the preparation of these interim financial statements are reasonable.

There have been no material changes or developments in our evaluation of accounting estimates and underlying assumptions or methodologies that we believe to be a “Critical Accounting Policy or Estimate” as disclosed in our 2018 Form 10-K.

Recent Accounting Developments

ASU 2016-13. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326),Measurement of Credit Losses on Financial Instruments that will change how companies measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount. The amendments in this update will be effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018. The Company is evaluating the effect of this standard on our consolidated financial statements.

ASU 2016-02. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which replaced the existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Additional disclosure requirements include qualitative disclosures along with specific quantitative disclosures with the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for the Company for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. As part of our assessment, we have created additional internal controls over financial reporting and made changes in business practices and processes related to the ASU. Key has elected the new prospective “Comparatives Under 840” transition method as defined in ASU 2018-11 and adopted the new standard as of January 1, 2019. As part of the adoption, the Company elected several practical expedients which, for contracts that existed at the time of the adoption, allowed the Company to not reassess whether existing contracts are or contained leases, classification of a lease (i.e., operating leases will remain operating leases), initial direct costs and land easement arrangements. As part of the adoption, the Company also made several accounting policy elections which allow the Company to not apply the standard to short term leases as well as to choose not to separate non-lease components from lease components and instead account for all components as a single lease component. The adoption of this standard did not have an impact on our consolidated statement of operations or consolidated statement of cash flows and had an immaterial impact on our consolidated balance sheet. Right of use assets obtained in exchange for operating leases liabilities was $4.1 million at the time of the adoption of the standard.

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OTHER BALANCE SHEET INFORMATION - Other Noncurrent Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other non-current liabilities:
Asset retirement obligations	$ 9,115	$ 9,018
Environmental liabilities	2,395	2,227
Accrued sales, use and other taxes	17,005	17,024
Operating leases	3,120	0
Other	66	67
Total	$ 31,701	$ 28,336

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EQUITY (Details) - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)			20,363,198				20,363,198
Balance at end of period (in shares)	20,498,674						20,498,674
Balance at beginning of period	$ 6,002	$ 22,895	$ 45,520	$ 89,730	$ 106,121	$ 128,683	$ 45,520	$ 128,683
Common stock purchases	(33)	(4)		(271)
Proceeds from exercise of warrants					2	1	0	3
Share-based compensation	1,269	1,414	816	1,680	502	2,400
Net loss	(25,489)	(18,303)	(23,441)	(23,860)	(16,895)	(24,963)	(67,233)	(65,718)
Balance at end of period	$ (18,251)	$ 6,002	$ 22,895	$ 67,279	$ 89,730	$ 106,121	$ (18,251)	$ 67,279
Common Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period (in shares)	20,408,000	20,374,000	20,363,000	20,245,000	20,231,000	20,217,000	20,363,000	20,217,000
Common stock purchases (in shares)	(23,000)	(1,000)		0
Share-based compensation (in shares)	114,000	35,000	11,000	52,000	14,000	14,000
Balance at end of period (in shares)	20,499,000	20,408,000	20,374,000	20,297,000	20,245,000	20,231,000	20,499,000	20,297,000
Balance at beginning of period	$ 204	$ 204	$ 204	$ 202	$ 202	$ 202	$ 204	$ 202
Common stock purchases	0	0		0
Share-based compensation	1	0	0	1	0	0
Balance at end of period	205	204	204	203	202	202	205	203
Additional Paid-in Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period	267,171	265,761	264,945	262,219	261,715	259,314	264,945	259,314
Common stock purchases	(33)	(4)		(271)
Proceeds from exercise of warrants					2	1
Share-based compensation	1,268	1,414	816	1,679	502	2,400
Balance at end of period	268,406	267,171	265,761	263,627	262,219	261,715	268,406	263,627
Retained Earnings
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at beginning of period	(261,373)	(243,070)	(219,629)	(172,691)	(155,796)	(130,833)	(219,629)	(130,833)
Net loss	(25,489)	(18,303)	(23,441)	(23,860)	(16,895)	(24,963)
Balance at end of period	$ (286,862)	$ (261,373)	$ (243,070)	$ (196,551)	$ (172,691)	$ (155,796)	$ (286,862)	$ (196,551)

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LEASES (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Operating Lease, Lease Income [Table Text Block]

Supplemental balance sheet information related to leases as of September 30, 2019 are as follows (in thousands):

	September 30, 2019
Right-of-Use Assets under Operating Leases
Operating lease right-of-use assets, current portion	$	2,517
Operating lease right-of-use assets, non-current portion	2,853
Total operating lease assets	$	5,370
Operating lease liabilities, current portion	$	2,448
Operating lease liabilities, non-current portion	3,120
Total operating lease liabilities	$	5,568
Right-of-Use Assets under Finance Leases
Property and equipment, at cost	$	1,760
Less accumulated depreciation	73
Property and equipment, net	$	1,687
Current portion of long-term debt	$	414
Long-term debt	1,287
Total finance lease liabilities	$	1,701

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

The maturities of our operating and finance lease liabilities as of September 30, 2019 are as follows (in thousands):

	September 30, 2019
	Operating Leases			Finance Leases
Remainder of 2019	$	659		$	119
2020	2,676			485
2021	1,508			485
2022	493			485
2023	493			283
Thereafter	188			—
Total lease payments	6,017			1,857
Less imputed interest	(449		)	(156		)
Total	$	5,568		$	1,701

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LONG-TERM DEBT

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

LONG-TERM DEBT

DEBT

As of September 30, 2019 and December 31, 2018, the components of our debt were as follows (in thousands):

	September 30, 2019			December 31, 2018
Term Loan Facility due 2021	$	243,125		$	245,000
Unamortized debt issuance costs	(1,903		)	(1,421		)
Finance lease obligation	1,701			—
Total	242,923			243,579
Less current portion	(2,914		)	(2,500		)
Long-term debt	$	240,009		$	241,079

Forbearance Agreements

The Company is party to two credit facilities. The Company and Key Energy Services, LLC, are borrowers (the “ABL Borrowers”) under an ABL Facility with the financial institutions party thereto from time to time as lenders (the “ABL Lenders”), Bank of America, N.A., as administrative agent for the lenders (the “Administrative Agent”) and Bank of America, N.A., as sole collateral agent for the lenders, providing for aggregate commitments from the ABL Lenders of $100 million. In addition, on December 15, 2016, the Company entered into a Term Loan Facility among the Company, as borrower, certain subsidiaries of the Company named as guarantors therein, the financial institutions party thereto from time to time as Lenders (collectively, the “Term Loan Lenders”) and Cortland Capital Market Services LLC and Cortland Products Corp., as agent for the Lenders.

As announced on October 31, 2019, the Company has engaged external advisers to assist the Company in analyzing various strategic financial alternatives to address its capital structure and to position the Company for future success. In connection with this strategic review, the Company elected not to make a scheduled interest payment due October 18, 2019 under the Term Loan Facility. The Company’s failure to make the October interest payment resulted in a default under the Term Loan Facility and a cross default under the ABL Facility (such defaults, the “Specified Defaults”).

On October 29, 2019, the Company entered into forbearance agreements with Term Loan Lenders collectively holding over 99.5% of the principal amount of the outstanding term loans (the “Term Loan Forbearance Agreement”) and all of the ABL Lenders (the “ABL Forbearance Agreement” and, collectively, the “Forbearance Agreements”). Pursuant to the Forbearance Agreements, the Lenders party thereto have agreed that, until the earlier of December 6, 2019 or the occurrence of certain specified early termination events, such Lenders will forbear from exercising any default-related rights and remedies with respect to the Specified Defaults. The Forbearance Agreements contain certain representations and warranties of the Company and covenants with which the Company must comply during the forbearance period, including a requirement to maintain aggregate bank and book cash balances of at least $10,000,000 as measured on a weekly basis. The failure to comply with such covenants, among other things, would result in the early termination of the forbearance period.

ABL Facility

As described above, the Company and Key Energy Services, LLC are borrowers under the ABL Facility that provides for aggregate commitments from the ABL Lenders of $100 million, and matures on the earlier of (a) April 5, 2024 and (b) 6 months prior to the maturity date of the Term Loan Facility (as defined below) and other material debts, if any, as identified under the ABL Facility.

On April 5, 2019, the ABL Borrowers, as borrowers, the financial institutions party thereto as lenders and Bank of America, N.A. (the “ABL Agent”), as administrative agent for the lenders, entered into Amendment No. 1 (“Amendment No. 1”) to the ABL Facility, among the ABL Borrowers, the financial institutions party thereto from time to time as lenders, the ABL Agent and the co-collateral agents for the lenders, Bank of America, N.A. and Wells Fargo Bank, National Association. The amendment makes changes to, among other things, lower (i) the applicable margin for borrowings to (x) from between 2.50% and 4.50% to between 2.00% and 2.50% for LIBOR borrowings and (y) from 1.50% and 3.50% to between 1.00% and 1.50% for base rate borrowings, in each case depending on the ABL Borrowers’ fixed charge coverage ratio at such time, (ii) appoint the Bank of America, N.A. as sole collateral agent under the ABL Facility, (iii) extend the maturity of the credit facility from June 15, 2021 to the earlier of (x) April 5, 2024 and (y) 6 months prior to the maturity date of the ABL Borrowers’ term loan credit agreement and other material debts, as identified under the ABL Facility, (iv) increase the maximum amount of revolving loan commitment increases from $30 million to $50 million and (v) revise certain triggers applicable to the covenants under the ABL Facility.

The ABL Facility provides the ABL Borrowers with a borrowing facility up to an aggregate principal amount equal to the lesser of (i) the aggregate revolving commitments then in effect and (ii) the sum of (a) 85% of the value of eligible accounts receivable plus (b) 80% of the value of eligible unbilled accounts receivable, subject to a limit equal to the greater of (x) $35 million and (y) 25% of the commitments. The amount that may be borrowed under the ABL Facility is subject to increase or reduction based on certain segregated cash or reserves provided for by the ABL Facility. In addition, the percentages of accounts receivable and unbilled accounts receivable included in the calculation described above is subject to reduction to the extent of certain bad debt write-downs and other dilutive items provided in the ABL Facility.

Borrowings under the ABL Facility will bear interest, at the ABL Borrowers’ option, at a per annum rate equal to (i) LIBOR for 30, 60, 90, 180, or, with the consent of the ABL Lenders, 360 days, plus an applicable margin that varies from 2.0% to 2.5% depending on the Borrowers’ fixed charge coverage ratio at such time or (ii) a base rate equal to the sum of (a) the greatest of (x) the prime rate, (y) the federal funds rate, plus 0.50% or (z) 30-day LIBOR, plus 1.0% plus (b) an applicable margin that varies from 1.0% to 1.5% depending on the Borrowers’ fixed charge coverage ratio at such time. In addition, the ABL Facility provides for unused line fees of 1.00% to 1.25% per year, depending on utilization, letter of credit fees and certain other factors.

The ABL Facility may in the future be guaranteed by certain of the Company’s existing and future subsidiaries (the “ABL Guarantors,” and together with the ABL Borrowers, the “ABL Loan Parties”). To secure their obligations under the ABL Facility, each of the ABL Loan Parties has granted or will grant, as applicable, to the Administrative Agent a first-priority security interest for the benefit of the ABL Lenders in its present and future accounts receivable, inventory and related assets and proceeds of the foregoing (the “ABL Priority Collateral”). In addition, the obligations of the ABL Loan Parties under the ABL Facility are secured by second-priority liens on the Term Priority Collateral (as described below under “Term Loan Facility”).

The revolving loans under the ABL Facility may be voluntarily prepaid, in whole or in part, without premium or penalty, subject to breakage or similar costs.

The ABL Facility contains certain affirmative and negative covenants, including covenants that restrict the ability of the ABL Loan Parties to take certain actions including, among other things and subject to certain significant exceptions, the incurrence of debt, the granting of liens, the making of investments, entering into transactions with affiliates, the payment of dividends and the sale of assets. The ABL Facility also contains a requirement that the ABL Borrowers comply, during certain periods, with a fixed charge coverage ratio of 1.00 to 1.00.

As of September 30, 2019, we have no borrowings outstanding and $34.6 million of letters of credit outstanding under our ABL Facility. Due to the Specified Defaults, the Company is currently unable to borrow any amounts under the ABL Facility.

Term Loan Facility

As described above, the Company and certain subsidiaries are parties to the Term Loan Facility, which had an initial outstanding principal amount of $250 million.

The Term Loan Facility will mature on December 15, 2021, although such maturity date may, at the Company’s request, be extended by one or more of the Term Loan Lenders pursuant to the terms of the Term Loan Facility. Borrowings under the Term Loan Facility will bear interest, at the Company’s option, at a per annum rate equal to (i) LIBOR for one, two, three, six, or, with the consent of the Term Loan Lenders, 12 months, plus 10.25% or (ii) a base rate equal to the sum of (a) the greatest of (x) the prime rate, (y) the Federal Funds rate, plus 0.50% and (z) 30-day LIBOR, plus 1.0% plus (b) 9.25%.

The Term Loan Facility is guaranteed by certain of the Company’s existing and future subsidiaries (the “Term Loan Guarantors,” and together with the Company, the “Term Loan Parties”). To secure their obligations under the Term Loan Facility, each of the Term Loan Parties has granted or will grant, as applicable, to the agent a first-priority security interest for the benefit of the Term Loan Lenders in substantially all of each Term Loan Party’s assets other than certain excluded assets and the ABL Priority Collateral (the “Term Priority Collateral”). In addition, the obligations of the Term Loan Parties under the Term Loan Facility are secured by second-priority liens on the ABL Priority Collateral (as described above under “ABL Facility”).

The loans under the Term Loan Facility may be prepaid at the Company’s option, subject to the payment of a prepayment premium in certain circumstances as provided in the Term Loan Facility. A prepayment prior to the first anniversary of the loan would have been required to have been made with a make-whole amount with the calculation of the make-whole amount as specified in the Term Loan Facility. If a prepayment is made after the first anniversary of the loan but prior to the second anniversary, such prepayment must be made at 106% of the principle amount, if a prepayment is made after the second anniversary but prior to the third anniversary, such prepayment must be made at 103% of the principle amount. After the third anniversary, if a prepayment is made, no prepayment premium is due. The Company is required to make principal payments in the amount of $625,000 per quarter. In addition, pursuant to the Term Loan Facility, the Company must prepay or offer to prepay, as applicable, term loans with the net cash proceeds of certain debt incurrences and asset sales, excess cash flow, and upon certain change of control transactions, subject in each case to certain exceptions.

The Term Loan Facility contains certain affirmative and negative covenants, including covenants that restrict the ability of the Term Loan Parties to take certain actions including, among other things and subject to certain significant exceptions, the incurrence of debt, the granting of liens, the making of investments, entering into transactions with affiliates, the payment of dividends and the sale of assets. The Term Loan Facility also contains financial covenants requiring that the Company maintain an asset coverage ratio of at least 1.35 to 1.0 and that Liquidity (as defined in the Term Loan Facility) must not be less than $37.5 million (of which at least $20.0 million must be in cash or cash equivalents held in deposit accounts) as of the last day of any fiscal quarter, subject to certain exceptions and cure rights.

The weighted average interest rates on the outstanding borrowings under the Term Loan Facility for the three and nine month periods ended September 30, 2019 were as follows:

	Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019
Term Loan Facility	12.61	%	12.82	%

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EARNINGS (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

LOSS PER SHARE

Basic loss per share is determined by dividing net loss attributable to Key by the weighted average number of common shares actually outstanding during the period. Diluted loss per common share is based on the increased number of shares that would be outstanding assuming conversion of potentially dilutive outstanding securities using the treasury stock and “as if converted” methods.

The components of our loss per share are as follows (in thousands, except per share amounts):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Basic and Diluted EPS Calculation:
Numerator
Net loss	$	(25,489	)	$	(23,860	)	$	(67,233	)	$	(65,718	)
Denominator
Weighted average shares outstanding	20,443			20,252			20,398			20,234
Basic and diluted loss per share	$	(1.25	)	$	(1.18	)	$	(3.30	)	$	(3.25	)

Restricted stock units (“RSUs”), stock options, and warrants are included in the computation of diluted earnings per share using the treasury stock method. Restricted stock awards are legally considered issued and outstanding when granted and are included in basic weighted average shares outstanding.

The company has issued potentially dilutive instruments such asRSUs, stock options, and warrants. However, the company did not include these instruments in its calculation of diluted loss per share during the periods presented, because to include them would be anti-dilutive. The following table shows potentially dilutive instruments (in thousands):

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
RSUs	1,882	1,078	1,994	1,367
Stock options	54	159	74	163
Warrants	1,838	1,838	1,838	1,838
Total	3,774	3,075	3,906	3,368

No events occurred after September 30, 2019 that would materially affect the number of weighted average shares outstanding.

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 22,606	$ 50,311
Accounts receivable, net of allowance for doubtful accounts of $476 and $1,056, respectively	67,246	74,253
Inventories	15,214	15,861
Other current assets	13,496	18,073
Total current assets	118,562	158,498
Property and equipment	443,774	439,043
Accumulated depreciation	(199,892)	(163,333)
Property and equipment, net	243,882	275,710
Intangible assets, net	361	404
Other non-current assets	11,341	8,562
TOTAL ASSETS	374,146	443,174
Current liabilities:
Accounts payable	18,360	13,587
Current portion of long-term debt	2,914	2,500
Other current liabilities	73,533	87,377
Total current liabilities	94,807	103,464
Long-term debt	240,009	241,079
Workers’ compensation, vehicular and health insurance liabilities	25,880	24,775
Other non-current liabilities	31,701	28,336
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value; 10,000,000 authorized and one share issued and outstanding	0	0
Common stock, $0.01 par value; 100,000,000 shares authorized, 20,498,674 and 20,363,198 outstanding	205	204
Additional paid-in capital	268,406	264,945
Retained deficit	(286,862)	(219,629)
Total equity	(18,251)	45,520
TOTAL LIABILITIES AND EQUITY	$ 374,146	$ 443,174

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GENERAL

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

GENERAL

GENERAL

Key Energy Services, Inc., and its wholly owned subsidiaries (collectively, “Key,” the “Company,” “we,” “us,” “its,” and “our”) provide a full range of well services to major oil companies and independent oil and natural gas production companies. Our services include rig-based and coiled tubing-based well maintenance and workover services, well completion and recompletion services, fluid management services, fishing and rental services, and other ancillary oilfield services. Additionally, certain of our rigs are capable of specialty drilling applications. We operate in most major oil and natural gas producing regions of the continental United States. An important component of the Company’s growth strategy is to make acquisitions that will strengthen its core services or presence in selected markets, and the Company also makes strategic divestitures from time to time. The Company expects that the industry in which it operates will experience consolidation, and the Company expects to explore opportunities and engage in discussions regarding these opportunities, which could include mergers, consolidations or acquisitions or further dispositions or other transactions, although there can be no assurance that any such activities will be consummated.

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). The condensed December 31, 2018 balance sheet was prepared from audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”). Certain information relating to our organization and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in this Quarterly Report on Form 10-Q. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2018 Form 10-K.

The unaudited condensed consolidated financial statements contained in this report include all normal and recurring material adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented herein. The results of operations for the nine months endedSeptember 30, 2019 are not necessarily indicative of the results expected for the full year or any other interim period, due to fluctuations in demand for our services, timing of maintenance and other expenditures, and other factors.

We have evaluated events occurring after the balance sheet date included in this Quarterly Report on Form 10-Q and through the date on which the unaudited condensed consolidated financial statements were issued, for possible disclosure of a subsequent event.

Forbearance Agreements and Going Concern

The Company is party to two credit facilities: an ABL Facility with the financial institutions party thereto from time to time as lenders (the “ABL Lenders”), and a Term Loan Facility among the Company, as borrower, and the financial institutions party thereto from time to time as lenders (the “Term Loan Lenders,” and together with the ABL Lenders, the “Lenders”) and Cortland Capital Market Services LLC and Cortland Products Corp., as agent for the lenders. See “Note 7. Debt.”

As announced on October 31, 2019, the Company has engaged external advisers to assist the Company in analyzing various strategic financial alternatives to address its capital structure. In connection with this strategic review, the Company elected not to make a scheduled interest payment due October 18, 2019 under the Term Loan Facility. The Company’s failure to make the October interest payment resulted in a default under the Term Loan Facility and a cross default under the ABL Facility (such defaults, the “Specified Defaults”).

On October 29, 2019, the Company entered into forbearance agreements with the Term Loan Lenders collectively holding over 99.5% of the principal amount of the outstanding term loans (the “Term Loan Forbearance Agreement”) and all of the ABL Lenders (the “ABL Forbearance Agreement” and, collectively, the “Forbearance Agreements”). Pursuant to the Forbearance Agreements, the Lenders party thereto have agreed that, until the earlier of December 6, 2019 or the occurrence of certain specified early termination events, such Lenders will forbear from exercising any default-related rights and remedies with respect to the Specified Defaults. The failure to comply with such covenants, among other things, would result in the early termination of the forbearance period. See “Note 7. Debt.”

The Specified Defaults and related matters including the Company’s level of debt raise substantial doubt as to the ability of the Company to continue as a going concern. The Company is in active discussions with the Lenders regarding the Company’s capital structure and the potential to reduce its debt level, however an agreement with the Lenders has not been reached as of the date of these financial statements. The Company believes that it is probable that if such an agreement is reached, it will alleviate the substantial doubt as to the Company’s ability to continue as a going concern.

The accompanying unaudited condensed consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern, which contemplates the continuity of operations and the realization of assets and the satisfaction of liabilities as they come due in the normal course of business. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

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SEGMENT INFORMATION (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Segment Reporting Information [Line Items]
Revenues from external customers		$ 106,523	$ 134,721	$ 328,739	$ 404,442
Intersegment revenues		0	0	0	0
Depreciation and amortization		14,584	21,808	43,142	62,881
Other operating expenses		109,331	130,028	332,728	385,414
Operating income (loss)		(17,392)	(17,115)	(47,131)	(43,853)
Interest expense, net of amounts capitalized		8,411	8,708	26,164	25,425
Income (loss) before income taxes		(25,452)	(25,610)	(71,563)	(67,306)
Long-lived assets	[1]	255,584	297,459	255,584	297,459
Total assets		374,146	462,733	374,146	462,733	$ 443,174
Capital expenditures		4,121	11,348	16,483	28,521
Rig Services
Segment Reporting Information [Line Items]
Revenues from external customers		64,465	77,153	197,375	227,913
Intersegment revenues		87	183	341	439
Depreciation and amortization		6,289	8,212	18,419	23,869
Other operating expenses		55,424	64,471	165,866	188,570
Operating income (loss)		2,752	4,470	13,090	15,474
Interest expense, net of amounts capitalized		33	0	69	0
Income (loss) before income taxes		2,734	4,488	13,070	15,584
Long-lived assets	[1]	124,078	147,050	124,078	147,050
Total assets		173,079	204,823	173,079	204,823
Capital expenditures		932	5,602	3,745	13,350
Fluid Management Services
Segment Reporting Information [Line Items]
Revenues from external customers		14,135	17,477	43,534	47,801
Intersegment revenues		241	621	1,436	1,692
Depreciation and amortization		4,139	6,012	12,493	17,657
Other operating expenses		11,713	12,855	35,703	37,627
Operating income (loss)		(1,717)	(1,390)	(4,662)	(7,483)
Interest expense, net of amounts capitalized		7	0	20	0
Income (loss) before income taxes		(1,724)	(1,378)	(4,671)	(7,458)
Long-lived assets	[1]	41,897	49,436	41,897	49,436
Total assets		55,625	65,798	55,625	65,798
Capital expenditures		418	1,891	2,491	2,671
Coiled Tubing Services
Segment Reporting Information [Line Items]
Revenues from external customers		9,714	18,220	32,134	60,513
Intersegment revenues		0	0	0	19
Depreciation and amortization		1,397	1,403	3,923	3,887
Other operating expenses		9,862	16,404	33,343	49,128
Operating income (loss)		(1,545)	413	(5,132)	7,498
Interest expense, net of amounts capitalized		13	0	43	0
Income (loss) before income taxes		(1,558)	413	(5,172)	7,501
Long-lived assets	[1]	17,165	18,083	17,165	18,083
Total assets		26,174	36,493	26,174	36,493
Capital expenditures		1,246	563	3,163	4,461
Fishing and Rental Services
Segment Reporting Information [Line Items]
Revenues from external customers		18,209	21,871	55,696	68,215
Intersegment revenues		58	328	133	1,025
Depreciation and amortization		2,294	5,262	6,917	15,581
Other operating expenses		16,338	19,441	48,894	60,136
Operating income (loss)		(423)	(2,832)	(115)	(7,502)
Interest expense, net of amounts capitalized		12	0	33	0
Income (loss) before income taxes		(424)	(2,827)	(133)	(7,432)
Long-lived assets	[1]	47,980	60,360	47,980	60,360
Total assets		59,827	75,811	59,827	75,811
Capital expenditures		33	433	2,088	2,569
Functional Support
Segment Reporting Information [Line Items]
Revenues from external customers		0	0	0	0
Intersegment revenues		0	0	0	0
Depreciation and amortization		465	919	1,390	1,887
Other operating expenses		15,994	16,857	48,922	49,953
Operating income (loss)		(16,459)	(17,776)	(50,312)	(51,840)
Interest expense, net of amounts capitalized		8,346	8,708	25,999	25,425
Income (loss) before income taxes		(24,480)	(26,306)	(74,657)	(75,501)
Long-lived assets	[1]	24,464	22,109	24,464	22,109
Total assets		50,000	70,927	50,000	70,927
Capital expenditures		1,492	2,859	4,996	5,470
Reconciling Eliminations
Segment Reporting Information [Line Items]
Revenues from external customers		0	0	0	0
Intersegment revenues		(386)	(1,132)	(1,910)	(3,175)
Depreciation and amortization		0	0	0	0
Other operating expenses		0	0	0	0
Operating income (loss)		0	0	0	0
Interest expense, net of amounts capitalized		0	0	0	0
Income (loss) before income taxes		0	0	0	0
Long-lived assets	[1]	0	421	0	421
Total assets		9,441	8,881	9,441	8,881
Capital expenditures		$ 0	$ 0	$ 0	$ 0

[1] Long-lived assets include fixed assets, intangibles and other non-current assets

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REVENUE FROM CONTRACTS WITH CUSTOMERS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
REVENUES ADOPTION OF ASC 606 [Line Items]
REVENUES	$ 106,523	$ 134,721	$ 328,739	$ 404,442
Rig Services
REVENUES ADOPTION OF ASC 606 [Line Items]
REVENUES	64,465	77,153	197,375	227,913
Fluid Management Services
REVENUES ADOPTION OF ASC 606 [Line Items]
REVENUES	14,135	17,477	43,534	47,801
Coiled Tubing Services
REVENUES ADOPTION OF ASC 606 [Line Items]
REVENUES	9,714	18,220	32,134	60,513
Fishing and Rental Services
REVENUES ADOPTION OF ASC 606 [Line Items]
REVENUES	$ 18,209	$ 21,871	$ 55,696	$ 68,215

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EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The components of our loss per share are as follows (in thousands, except per share amounts):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Basic and Diluted EPS Calculation:
Numerator
Net loss	$	(25,489	)	$	(23,860	)	$	(67,233	)	$	(65,718	)
Denominator
Weighted average shares outstanding	20,443			20,252			20,398			20,234
Basic and diluted loss per share	$	(1.25	)	$	(1.18	)	$	(3.30	)	$	(3.25	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019	2018	2019	2018
RSUs	1,882	1,078	1,994	1,367
Stock options	54	159	74	163
Warrants	1,838	1,838	1,838	1,838
Total	3,774	3,075	3,906	3,368

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OTHER BALANCE SHEET INFORMATION - Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other current liabilities:
Accrued payroll, taxes and employee benefits	$ 15,760	$ 19,346
Accrued operating expenditures	14,423	15,861
Income, sales, use and other taxes	4,993	8,911
Self-insurance reserve	25,819	25,358
Accrued interest	6,672	7,105
Accrued insurance premiums	4	5,651
Unsettled legal claims	2,545	4,356
Accrued severance	40	83
Operating leases	2,448	0
Other	829	706
Total	$ 73,533	$ 87,377

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OTHER INCOME, NET

9 Months Ended

Sep. 30, 2019

Other Income and Expenses [Abstract]

OTHER INOME, NET

OTHER INCOME

The table below presents comparative detailed information about our other income and expense, shown on the condensed consolidated statements of operations as “other income, net” for the periods indicated (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Interest income	$	(122	)	$	(201	)	$	(639	)	$	(580	)
Other	(229		)	(12		)	(1,093		)	(1,392		)
Total	$	(351	)	$	(213	)	$	(1,732	)	$	(1,972	)

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SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

Common Stock Awards

We recognized employee share-based compensation expense of $1.2 million and $1.6 million during the three months endedSeptember 30, 2019 and 2018, respectively. We recognized employee share-based compensation expense of $3.3 million and $4.0 million during the nine months endedSeptember 30, 2019 and 2018, respectively. Our employee share-based awards, including common stock awards, stock option awards and phantom shares, vest in equal installments over a three-year period or which vest in a 40%-60% split respectively over a two-year period. Additionally, we recognized share-based compensation expense related to our outside directors of less than $0.1 million and $0.1 million during the three months endedSeptember 30, 2019 and 2018, respectively. We recognized share-based compensation expense related to our outside directors of $0.2 million and $0.6 million during the nine months endedSeptember 30, 2019 and 2018, respectively. The unrecognized compensation cost related to our unvested share-based awards as of September 30, 2019 is estimated to be $4.1 million and is expected to be recognized over a weighted-average period of 1.2 years.

Stock Option Awards

As of September 30, 2019, all outstanding stock options are vested and there are no unrecognized costs related to our stock options.

Phantom Share Plan

We recognized compensation expense related to our phantom shares of less than negative $0.1 million during the three months endedSeptember 30, 2019 and 2018. We recognized compensation expense related to our phantom shares of less than $0.1 million and $0.8 million during the nine months endedSeptember 30, 2019 and 2018, respectively. The unrecognized compensation cost related to our unvested phantom shares as of September 30, 2019 is estimated to be less than $0.1 million and is expected to be recognized over a weighted-average period of 0.8 years.

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OTHER INCOME, NET (Tables)

9 Months Ended

Sep. 30, 2019

Other Income and Expenses [Abstract]

Other Income and Expense

The table below presents comparative detailed information about our other income and expense, shown on the condensed consolidated statements of operations as “other income, net” for the periods indicated (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Interest income	$	(122	)	$	(201	)	$	(639	)	$	(580	)
Other	(229		)	(12		)	(1,093		)	(1,392		)
Total	$	(351	)	$	(213	)	$	(1,732	)	$	(1,972	)

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SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

Our reportable business segments are Rig Services, Fishing and Rental Services, Coiled Tubing Services and Fluid Management Services. We also have a “Functional Support” segment associated with overhead and other costs in support of our reportable segments. We evaluate the performance of our segments based on gross margin measures. All inter-segment sales pricing is based on current market conditions.

Rig Services

Our Rig Services include 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 at the end of their useful lives. We also provide specialty drilling services to oil and natural gas producers with certain of our larger rigs that are capable of providing conventional and horizontal drilling services. Our rigs encompass various sizes and capabilities, allowing us to service all types of wells. Many of our rigs are outfitted with our proprietary KeyView® technology, which captures and reports well site operating data and provides safety control systems. We believe that this technology allows our customers and our crews to better monitor well site operations, improves efficiency and safety, and adds value to the services that we offer.

The completion and recompletion services provided by our rigs prepare wells for production, whether newly drilled, or recently extended through a workover operation. The completion process may involve selectively perforating the well casing to access production zones, stimulating and testing these zones, and installing tubular and downhole equipment. We typically provide a well service rig and may also provide other equipment to assist in the completion process. Completion services vary by well and our work may take a few days to several weeks to perform, depending on the nature of the completion.

The workover services that we provide are designed to enhance the production of existing wells and generally are more complex and time consuming than normal maintenance services. Workover services can include deepening or extending wellbores into new formations by drilling horizontal or lateral wellbores, sealing off depleted production zones and accessing previously bypassed production zones, converting former production wells into injection wells for enhanced recovery operations and conducting major subsurface repairs due to equipment failures. Workover services may last from a few days to several weeks, depending on the complexity of the workover.

Maintenance services provided with our rig fleet are generally required throughout the life cycle of an oil or natural gas well. Examples of these maintenance services include routine mechanical repairs to the pumps, tubing and other equipment, removing debris and formation material from wellbores, and pulling rods and other downhole equipment from wellbores to identify and resolve production problems. Maintenance services are generally less complicated than completion and workover related services and require less time to perform.

Our rig fleet is also used in the process of permanently shutting-in oil or natural gas wells that are at the end of their productive lives. These plugging and abandonment services generally require auxiliary equipment in addition to a well servicing rig. The demand for plugging and abandonment services is not significantly impacted by the demand for oil and natural gas because well operators are required by state regulations to plug wells that are no longer productive.

Fishing and Rental Services

We offer a full line of fishing services and rental equipment designed for use in providing drilling and workover services. Fishing services involve recovering lost or stuck equipment in the wellbore utilizing a broad array of “fishing tools.” Our rental tool inventory consists of drill pipe, tubulars, handling tools (including our patented Hydra-Walk^® pipe-handling units and services), pressure-control equipment, pumps, power swivels, reversing units and foam air units. We sold our well testing assets and our frac stack equipment used to support hydraulic fracturing operations and the associated flowback of frac fluids in the second quarter of 2017.

Demand for our fishing and rental services is closely related to capital spending by oil and natural gas producers, which is generally a function of oil and natural gas prices.

Coiled Tubing Services

Coiled Tubing Services involve the use of a continuous metal pipe spooled onto a large reel which is then deployed into oil and natural gas wells to perform various applications, such as wellbore clean-outs, nitrogen jet lifts, through-tubing fishing, and formation stimulations utilizing acid and chemical treatments. Coiled tubing is also used for a number of horizontal well applications such as milling temporary isolation plugs that separate frac zones, and various other pre- and post-hydraulic fracturing well preparation services.

Fluid Management Services

We provide transportation and well-site storage services for various fluids utilized in connection with drilling, completions, workover and maintenance activities. We also provide disposal services for fluids produced subsequent to well completion. These fluids are removed from the well site and transported for disposal in saltwater disposal wells owned by us or a third party. In addition, we operate a fleet of hot oilers capable of pumping heated fluids used to clear soluble restrictions in a wellbore. Demand and pricing for these services generally correspond to demand for our well service rigs.

Functional Support

Our Functional Support segment includes unallocated overhead costs associated with administrative support for our reporting segments.

Financial Summary

The following tables set forth our unaudited segment information as of and for the three and nine months ended September 30, 2019 and 2018 (in thousands):

As of and for the three months ended September 30, 2019
	Rig Services		Fishing and Rental Services			Coiled Tubing Services			Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	64,465	$	14,135		$	9,714		$	18,209		$	—		$	—		$	106,523
Intersegment revenues	87		241			—			58			—			(386		)	—
Depreciation and amortization	6,289		4,139			1,397			2,294			465			—			14,584
Other operating expenses	55,424		11,713			9,862			16,338			15,994			—			109,331
Operating income (loss)	2,752		(1,717		)	(1,545		)	(423		)	(16,459		)	—			(17,392		)
Interest expense, net of amounts capitalized	33		7			13			12			8,346			—			8,411
Income (loss) before income taxes	2,734		(1,724		)	(1,558		)	(424		)	(24,480		)	—			(25,452		)
Long-lived assets(1)	124,078		41,897			17,165			47,980			24,464			—			255,584
Total assets	173,079		55,625			26,174			59,827			50,000			9,441			374,146
Capital expenditures	932		418			1,246			33			1,492			—			4,121

As of and for the three months ended September 30, 2018
	Rig Services		Fishing and Rental Services			Coiled Tubing Services		Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	77,153	$	17,477		$	18,220	$	21,871		$	—		$	—		$	134,721
Intersegment revenues	183		621			—		328			—			(1,132		)	—
Depreciation and amortization	8,212		6,012			1,403		5,262			919			—			21,808
Other operating expenses	64,471		12,855			16,404		19,441			16,857			—			130,028
Operating income (loss)	4,470		(1,390		)	413		(2,832		)	(17,776		)	—			(17,115		)
Interest expense, net of amounts capitalized	—		—			—		—			8,708			—			8,708
Income (loss) before income taxes	4,488		(1,378		)	413		(2,827		)	(26,306		)	—			(25,610		)
Long-lived assets(1)	147,050		49,436			18,083		60,360			22,109			421			297,459
Total assets	204,823		65,798			36,493		75,811			70,927			8,881			462,733
Capital expenditures	5,602		1,891			563		433			2,859			—			11,348

As of and for the nine months ended September 30, 2019
	Rig Services		Fishing and Rental Services			Coiled Tubing Services			Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	197,375	$	43,534		$	32,134		$	55,696		$	—		$	—		$	328,739
Intersegment revenues	341		1,436			—			133			—			(1,910		)	—
Depreciation and amortization	18,419		12,493			3,923			6,917			1,390			—			43,142
Other operating expenses	165,866		35,703			33,343			48,894			48,922			—			332,728
Operating income (loss)	13,090		(4,662		)	(5,132		)	(115		)	(50,312		)	—			(47,131		)
Interest expense, net of amounts capitalized	69		20			43			33			25,999			—			26,164
Income (loss) before income taxes	13,070		(4,671		)	(5,172		)	(133		)	(74,657		)	—			(71,563		)
Long-lived assets(1)	124,078		41,897			17,165			47,980			24,464			—			255,584
Total assets	173,079		55,625			26,174			59,827			50,000			9,441			374,146
Capital expenditures	3,745		2,491			3,163			2,088			4,996			—			16,483

As of and for the nine months ended September 30, 2018
	Rig Services		Fishing and Rental Services			Coiled Tubing Services		Fluid Management Services			Functional Support			Reconciling Eliminations			Total
Revenues from external customers	$	227,913	$	47,801		$	60,513	$	68,215		$	—		$	—		$	404,442
Intersegment revenues	439		1,692			19		1,025			—			(3,175		)	—
Depreciation and amortization	23,869		17,657			3,887		15,581			1,887			—			62,881
Other operating expenses	188,570		37,627			49,128		60,136			49,953			—			385,414
Operating income (loss)	15,474		(7,483		)	7,498		(7,502		)	(51,840		)	—			(43,853		)
Interest expense, net of amounts capitalized	—		—			—		—			25,425			—			25,425
Income (loss) before income taxes	15,584		(7,458		)	7,501		(7,432		)	(75,501		)	—			(67,306		)
Long-lived assets(1)	147,050		49,436			18,083		60,360			22,109			421			297,459
Total assets	204,823		65,798			36,493		75,811			70,927			8,881			462,733
Capital expenditures	13,350		2,671			4,461		2,569			5,470			—			28,521

(1) Long-lived assets include fixed assets, intangibles and other non-current assets.

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EQUITY (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Schedule of Stockholders Equity

A reconciliation of the total carrying amount of our equity accounts for the nine months ended September 30, 2019 is as follows (in thousands):

	COMMON STOCKHOLDERS
	Common Stock				Additional Paid-in Capital			Retained Deficit			Total
	Number of Shares		Amount at Par
Balance at December 31, 2018	20,363		$	204	$	264,945		$	(219,629	)	$	45,520
Share-based compensation	11		—		816			—			816
Net loss	—		—		—			(23,441		)	(23,441		)
Balance at March 31, 2019	20,374		$	204	$	265,761		$	(243,070	)	$	22,895
Common stock purchases	(1	)	—		(4		)	—			(4		)
Share-based compensation	35		—		1,414			—			1,414
Net loss	—		—		—			(18,303		)	(18,303		)
Balance at June 30, 2019	20,408		$	204	$	267,171		$	(261,373	)	$	6,002
Common stock purchases	(23	)	—		(33		)	—			(33		)
Share-based compensation	114		1		1,268			—			1,269
Net loss	—		—		—			(25,489		)	(25,489		)
Balance at September 30, 2019	20,499		$	205	$	268,406		$	(286,862	)	$	(18,251	)

A reconciliation of the total carrying amount of our equity accounts for the nine months ended September 30, 2018 is as follows (in thousands):

	COMMON STOCKHOLDERS
	Common Stock			Additional Paid-in Capital			Retained Deficit			Total
	Number of Shares	Amount at Par
Balance at December 31, 2017	20,217	$	202	$	259,314		$	(130,833	)	$	128,683
Exercise of warrants	—	—		1			—			1
Share-based compensation	14	—		2,400			—			2,400
Net loss	—	—		—			(24,963		)	(24,963		)
Balance at March 31, 2018	20,231	$	202	$	261,715		$	(155,796	)	$	106,121
Exercise of warrants	—	—		2			—			2
Share-based compensation	14	—		502			—			502
Net loss	—	—		—			(16,895		)	(16,895		)
Balance at June 30, 2018	20,245	$	202	$	262,219		$	(172,691	)	$	89,730
Common stock purchases	—	—		(271		)	—			(271		)
Share-based compensation	52	1		1,679			—			1,680
Net loss	—	—		—			(23,860		)	(23,860		)
Balance at September 30, 2018	20,297	$	203	$	263,627		$	(196,551	)	$	67,279

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LONG-TERM DEBT LONG-TERM DEBT - Term Loan Facility (Details)	3 Months Ended	9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 15, 2016 USD ($)
Debt Instrument [Line Items]
Term Loan Facility due 2021	$ 243,125,000	$ 243,125,000	$ 245,000,000
Term Loan Facility [Member]
Debt Instrument [Line Items]
Term Loan Facility due 2021				$ 250,000,000
Senior notes, maturity date		Dec. 15, 2021
Debt Instrument, Description of Variable Rate Basis		Borrowings under the Term Loan Facility will bear interest, at the Company’s option, at a per annum rate equal to (i) LIBOR for one, two, three, six, or, with the consent of the Term Loan Lenders, 12 months, plus 10.25% or (ii) a base rate equal to the sum of (a) the greatest of (x) the prime rate, (y) the Federal Funds rate, plus 0.50% and (z) 30-day LIBOR, plus 1.0%  plus (b) 9.25%.
Debt Instrument, Periodic Payment, Principal		$ 625,000
Minimum liquidity requirement	37,500,000	37,500,000
Minimum Liquidity Requirement - Cash	$ 20,000,000	$ 20,000,000
Loan Facility Weighted Average Interest Rate During Period	12.61%	12.82%
Term Loan Facility [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate		10.25%
Term Loan Facility [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate		9.25%
Term Loan Facility [Member] | Federal Funds Purchased [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate		0.50%
Term Loan Facility [Member] | Federal Funds rate, plus 0.50% [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate		9.25%
Term Loan Facility [Member] | 30-day LIBOR [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate		1.00%
Term Loan Facility [Member] | 30-day LIBOR, plus 1.0% [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate		9.25%
Minimum [Member] | Term Loan Facility [Member]
Debt Instrument [Line Items]
Asset Coverage Ratio	1.35	1.35
First Prepayment Period [Member]
Debt Instrument [Line Items]
Debt redemption price percent of principal amount	106.00%	106.00%
Second Prepayment Period [Member]
Debt Instrument [Line Items]
Debt redemption price percent of principal amount	103.00%	103.00%

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INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Intangible Assets [Line Items]
Amortization of Intangible Assets	$ 100	$ 100	$ 100	$ 100
Patents, trademarks and tradename
Intangible Assets [Line Items]
Gross carrying value	520		520		$ 520
Accumulated amortization	159		159		116
Net carrying value	$ 361		$ 361		$ 404

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EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3,774			3,075			3,906	3,368
Numerator
Net loss	$ (25,489)	$ (18,303)	$ (23,441)	$ (23,860)	$ (16,895)	$ (24,963)	$ (67,233)	$ (65,718)
Denominator
Basic and diluted	20,443			20,252			20,398	20,234
Basic and diluted (per share)	$ (1.25)			$ (1.18)			$ (3.30)	$ (3.25)
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,882			1,078			1,994	1,367
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	54			159			74	163
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	1,838			1,838			1,838	1,838