Accounting & Tax

Key Energy Services to Restate Results

The company centralized a system to track and assess fixed assets after certain ''improprieties'' cropped up in one division.
Stephen TaubMarch 30, 2004

Key Energy Services Inc. announced that it will delay filing its 2003 annual report so it can restate its financials to reflect the write-down of about $78 million of assets, mostly idle equipment.

The onshore oil-well-servicing contractor said the write-down should have been recorded in one or more prior years, and it expects to restate its financials for the years in question.

The company said these assets were identified in connection with a previously announced review of idle equipment to determine proper classification, remaining depreciable lives, expected future use, and potential impairment.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

Key Energy did concede that the amount of the expected write-down exceeds the $55 million amount of assets that the company previously disclosed were subject to review for potential write-downs. The company now believes that the impairment status of certain assets was inaccurate and that the disposal values of certain assets are less than previously estimated.

Key Energy explained that the assets are being analyzed through a centralized management maintenance system developed over the past three years to allow the company to better track and assess its fixed assets. This enhanced review was prompted primarily because of certain improprieties occurring in its South Texas Division, added the company.

In connection with its internal audit process, the company discovered that certain improprieties had occurred in that division, including misappropriation of company funds and diversion of company assets. Key Energy had recorded a $730,000 charge related to these actions in the December 31, 2003 quarter.

Key Energy also announced that it has replaced the management of this division and terminated all employees found to have been involved in the improprieties. The company, which intends to pursue all available criminal and civil remedies to recover its losses, has already initiated civil litigation against the former employees and certain third parties it believes were involved in the malfeasance.