Key Energy Services (KEGX) 8-K Key Energy Services Generated Second Quarter 2012 Earnings from

Exhibit 99.1

Key Energy Services, Inc. 1301 McKinney Street Suite 1800 Houston, TX 77010 July 26, 2012   Contact: Gary Russell, Investor Relations 713-651-4434

FOR IMMEDIATE RELEASE

Key Energy Services Generated Second Quarter 2012 Earnings from

Continuing Operations of $0.21 per Diluted Share

HOUSTON, TX, July 26, 2012 – Key Energy Services, Inc. (NYSE: KEG) generated second quarter 2012 income from continuing operations of $31.5 million, or $0.21 per share, compared to first quarter 2012 income from continuing operations of $34.1 million, or $0.23 per share.

Revenue for the second quarter 2012 was $516.0 million, up 6.0% compared to the first quarter 2012 revenue of $486.8 million.

During the first quarter of 2012, Key announced its intention to sell its Argentine operations. As a result, this business has been classified as discontinued operations, and the second quarter 2012 and prior comparable periods reflect this change.

Second quarter 2012 consolidated net income was $29.0 million, or $0.19 per share, which includes a loss from discontinued operations of $2.5 million, or $0.02 per share, compared to first quarter 2012 consolidated net income of $3.2 million, or $0.02 per share, which includes a loss from discontinued operations of $30.9 million, or $0.21 per share.

The following table sets forth summary data from continuing operations for the second quarter 2012 and prior comparable quarterly periods.

	Three Months Ended (unaudited)
	June 30, 2012		March 31, 2012		June 30, 2011
	(in millions, except per share amounts)
Revenues	$	516.0	$	486.8	$	414.6
Income attributable to Key	$	31.5	$	34.1	$	40.1
Diluted earnings per share attributable to Key	$	0.21	$	0.23	$	0.28
Adjusted EBITDA	$	114.7	$	115.4	$	104.9

U.S. Segment

Second quarter 2012 U.S. revenue was $431.6 million, up 1.6% compared to $425.0 million in the first quarter. Operating income was $82.5 million, or 19.1% of revenue, compared to $91.5 million, or 21.5% of revenue, in the first quarter. Results were burdened by expansion costs ahead of anticipated activity gains in oil markets in addition to the continued decline in earnings from gas markets.

International Segment

Second quarter 2012 international revenue was $84.4 million, up 36.5% compared to first quarter 2012 revenue of $61.8 million. Operating income was $16.1 million, or 19.1% of revenue, compared to first quarter 2012 operating income of $10.4 million, or 16.8% of revenue. The revenue and margin improvement was driven primarily by higher activity in Mexico.

July 26, 2012

General and Administrative Expenses

General and Administrative (G&A) expenses were $58.1 million, or 11.3% of revenue, compared to first quarter 2012 G&A expenses of $60.9 million, or 12.5% of revenue.

Capital Expenditures and Liquidity

Key’s consolidated cash balance at June 30, 2012 was $28.3 million compared to $31.9 million at March 31, 2012. Capital expenditures were $139.9 million during the second quarter 2012 and $309.3 million through June 30, 2012. Total debt at June 30, 2012 was $874.5 million compared to total debt of $865.1 million at March 31, 2012. At the end of the quarter, there was $190.0 million utilized under the Company’s $550 million senior secured credit facility. Net debt to total capitalization at the end of the second quarter 2012 was 39.9%.

Overview and Outlook

Commenting on the results, Key’s Chairman, President and Chief Executive Officer, Dick Alario, stated, “In the U.S., customer demand in natural gas markets has continued to weaken, but recent indications suggest a stabilizing trend. Demand in oil markets remains favorable. However, activity growth has tempered as oil prices declined last quarter, and oilfield service capacity has become more concentrated in those markets.

“In our coiled tubing business, we essentially reversed half of the revenue and margin decline witnessed in the first quarter with results that improved as the quarter progressed. We believe improvement will continue as we further increase asset utilization in the coming quarters.

“Internationally, our second quarter results improved considerably driven primarily by the full deployment of assets in Mexico where demand for our services continues to grow.”

Alario continued, “For the third quarter, we anticipate continued improvement in operating efficiencies in our coiled tubing business, additional growth and fixed cost absorption as we continue to expand our Edge business into oil markets, and further activity gains in our international markets. We believe these trends will lead consolidated revenue to increase roughly 4% from the second quarter and drive a 20% to 25% increase in operating income. In the fourth quarter, we expect a continuation of these trends, offset somewhat by typical seasonal declines, leading to consolidated results roughly flat with the third quarter. We’ll have additional guidance commentary on our conference call.”

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July 26, 2012

Conference Call Information

As previously announced, Key management will host a conference call to discuss its second quarter 2012 financial results on Friday, July 27, 2012 at 10:00 a.m. CDT. To access the call in the U.S. and Canada dial 888-794-4637. International callers should dial 660-422-4879. All callers should ask for the “Key Energy Services Conference Call” or provide the access code 91746711. The conference call will also be available live via the internet. To access the webcast, go to www.keyenergy.com and select “Investor Relations.”

A telephonic replay of the conference call will be available on Friday, July 27, 2012, beginning approximately two hours after the completion of the conference call and will remain available for one week. To access the replay, call 855-859-2056 or 800-585-8367. The access code for the replay is 91746711. The replay will also be accessible at www.keyenergy.com under “Investor Relations” for a period of at least 90 days.

Re-casted Prior Period Financial Results from Continuing Operations

Key has recast certain prior period financial information to reflect its results from continuing operations, which exclude the Argentine operations. This recasted financial information is available on Key’s website atwww.keyenergy.com under “Investor Relations”.

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July 26, 2012

Consolidated Statements of Operations (in thousands, except per share amounts, unaudited):

		Three Months Ended									Six Months Ended
		June 30, 2012			March 31, 2012			June 30, 2011			June 30, 2012			June 30, 2011
REVENUES		$	515,997		$	486,751		$	414,587		$	1,002,748		$	778,951
COSTS AND EXPENSES:
Direct operating expenses			343,996			311,497			261,269			655,493			509,249
Depreciation and amortization expense			52,452			51,189			39,157			103,641			78,339
General and administrative expenses			58,081			60,918			51,149			118,999			100,798
Operating income			61,468			63,147			63,012			124,615			90,565
Loss on early extinguishment of debt			—			—			—			—			46,451
Interest expense, net of amounts capitalized			13,730			11,882			9,557			25,612			19,449
Other income, net			(1,380	)		(1,029	)		(7,708	)		(2,409	)		(10,522	)
Income from continuing operations before tax			49,118			52,294			61,163			101,412			35,187
Income tax expense			(17,419	)		(18,813	)		(20,816	)		(36,232	)		(11,629	)
Income from continuing operations			31,699			33,481			40,347			65,180			23,558
Loss from discontinued operations, net of tax			(2,454	)		(30,905	)		(3,987	)		(33,359	)		(5,910	)
Net income			29,245			2,576			36,360			31,821			17,648
Income (loss) attributable to noncontrolling interest			204			(614	)		280			(410	)		(297	)
INCOME ATTRIBUTABLE TO KEY		$	29,041		$	3,190		$	36,080		$	32,231		$	17,945
Earnings per share attributable to Key:
Basic and diluted		$	0.19		$	0.02		$	0.25		$	0.21		$	0.13
Weighted average shares outstanding:
Basic			151,087			151,132			142,833			151,110			142,521
Diluted	��		151,100			151,506			143,320			151,168			142,976
Income (loss) from continuing operations attributable to Key:
Income from continuing operations		$	31,699		$	33,481		$	40,347		$	65,180		$	23,558
Income (loss) attributable to noncontrolling interest			204			(614	)		280			(410	)		(297	)
Income from continuing operations attributable to Key		$	31,495		$	34,095		$	40,067		$	65,590		$	23,855
Earnings per share from continuing operations attributable to Key:
Basic and diluted		$	0.21		$	0.23		$	0.28		$	0.43		$	0.17
Loss from discontinued operations, net of tax:		$	(2,454	)	$	(30,905	)	$	(3,987	)	$	(33,359	)	$	(5,910	)
Loss per share from discontinued operations:
Basic and diluted		$	(0.02	)	$	(0.21	)	$	(0.03	)	$	(0.22	)	$	(0.04	)

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July 26, 2012

Condensed Consolidated Balance Sheets (in thousands, unaudited):

	June 30, 2012		December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	28,280	$	35,443
Other current assets		558,464		504,777
Current assets held for sale		30,281		60,343
Total current assets		617,025		600,563
Property and equipment, net		1,400,276		1,197,300
Goodwill		624,657		622,773
Other assets, net		137,541		155,601
Non-current assets held for sale		10,821		22,883
TOTAL ASSETS	$	2,790,320	$	2,599,120
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	82,440	$	71,736
Other current liabilities		208,674		175,877
Current liabilities associated with assets held for sale		39,677		41,890
Total current liabilities		330,791		289,503
Long-term debt, less current portion		873,401		773,975
Other non-current liabilities		337,317		321,011
Equity		1,248,811		1,214,631
TOTAL LIABILITIES AND EQUITY	$	2,790,320	$	2,599,120

Consolidated Cash Flow Data (in thousands, unaudited):

	Six Months Ended
	June 30, 2012			June 30, 2011
Net cash provided by operating activities	$	191,852		$	29,861
Net cash used in investing activities		(300,779	)		(159,343	)
Net cash provided by financing activities		104,502			91,881
Effect of exchange rates on cash		(2,738	)		(4,386	)
Decrease in cash and cash equivalents		(7,163	)		(41,987	)
Cash and cash equivalents, beginning of period		35,443			56,628
Cash and cash equivalents, end of period	$	28,280		$	14,641

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July 26, 2012

U.S. and International Revenue and Operating Income (Loss) (in thousands, except for percentages, unaudited):

	Three Months Ended
	June 30, 2012		March 31, 2012		June 30, 2011
Revenues
U.S. Operations:
Rig Services	$	208,765	$	203,382	$	177,112
Fluid Management Services		96,716		97,844		102,108
Coiled Tubing Services		56,929		52,980		57,204
Fishing & Rental Services		69,236		70,767		31,031
Total U.S. Operations		431,646		424,973		367,455
International Operations		84,351		61,778		47,132
Consolidated Total	$	515,997	$	486,751	$	414,587

	Three Months Ended
	June 30,			% of			March 31,			% of			June 30,			% of
	2012			Revenues			2012			Revenues			2011			Revenues
Operating Income (Loss)
U.S. Operations	$	82,497			19.1	%	$	91,458			21.5	%	$	86,202			23.5	%
International Operations		16,116			19.1	%		10,368			16.8	%		9,495			20.1	%
Functional Support		(37,145	)		n/a			(38,679	)		n/a			(32,685	)		n/a
Consolidated Total	$	61,468			11.9	%	$	63,147			13.0	%	$	63,012			15.2	%

	Six Months Ended
	June 30,		June 30,
	2012		2011
Revenues
U.S. Operations:
Rig Services	$	412,147	$	339,294
Fluid Management Services		194,560		188,598
Coiled Tubing Services		109,909		111,174
Fishing & Rental Services		140,003		58,293
Total U.S. Operations		856,619		697,359
International Operations		146,129		81,592
Consolidated Total	$	1,002,748	$	778,951

	Six Months Ended
	June 30,			% of			June 30,			% of
	2012			Revenues			2011			Revenues
Operating Income (Loss)
U.S. Operations	$	173,955			20.3	%	$	144,849			20.8	%
International Operations		26,484			18.1	%		12,134			14.9	%
Functional Support		(75,824	)		n/a			(66,418	)		n/a
Consolidated Total	$	124,615			12.4	%	$	90,565			11.6	%

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July 26, 2012

Following is a reconciliation of income or loss from continuing operations attributable to Key as presented in accordance with United States generally accepted accounting principles (GAAP) to EBITDA from continuing operations and Adjusted EBITDA from continuing operations (non-GAAP measures) as required under Regulation G of the Securities Exchange Act of 1934.

Reconciliations of EBITDA from continuing operations and Adjusted EBITDA from continuing operations (in thousands, except for percentages, unaudited):

	Three Months Ended
	June 30,			March 31,			June 30,
	2012			2012			2011
Income from continuing operations	$	31,699		$	33,481		$	40,347
Income tax expense		17,419			18,813			20,816
(Income) loss attributable to noncontrolling interest, excluding depreciation and amortization		(596	)		87			(170	)
Interest expense, net of amounts capitalized		13,730			11,882			9,557
Interest income		(7	)		(7	)		(2	)
Depreciation and amortization		52,452			51,189			39,157
EBITDA	$	114,697		$	115,445		$	109,705
% of revenues		22.2	%		23.7	%		26.5	%
Gain on IROC(1)sale		—			—			(4,783	)
Adjusted EBITDA	$	114,697		$	115,445		$	104,922
% of revenues		22.2	%		23.7	%		25.3	%
Revenues	$	515,997		$	486,751		$	414,587

⁽¹⁾ Key sold its shares of IROC Energy Services Corp, a Canada-based oilfield services company, in the second quarter of 2011.

“EBITDA” is defined as income or loss from continuing operations attributable to Key before interest, taxes, depreciation, and amortization.

“Adjusted EBITDA” is EBITDA as further adjusted for certain non-recurring or extraordinary items such as asset retirements and impairments, loss on debt extinguishment, certain other gains or losses, and certain non-recurring transaction or other costs.

“EBITDA” and “Adjusted EBITDA” are non-GAAP measures that are used as supplemental financial measures by the Company’s management and directors and by external users of the Company’s financial statements, such as investors, to assess:

• The financial performance of the Company’s assets without regard to financing methods, capital structure or historical cost basis;

• The ability of the Company’s assets to generate cash sufficient to pay interest on its indebtedness;

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July 26, 2012

• The Company’s operating performance and return on invested capital as compared to those of other companies in the well services industry, without regard to financing methods and capital structure; and

• The Company’s operating trends underlying the items that tend to be of a non-recurring nature.

EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered alternatives to net income, operating income, cash flow from operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income and operating income and these measures may vary among other companies. Limitations to using EBITDA and Adjusted EBITDA as analytical tools include:

• EBITDA and Adjusted EBITDA do not reflect Key’s current or future requirements for capital expenditures or capital commitments;

• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements necessary to service interest or principal payments on Key’s debt;

• EBITDA and Adjusted EBITDA do not reflect income taxes;

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;

• Other companies in Key’s industry may calculate EBITDA and Adjusted EBITDA differently than Key does, limiting its usefulness as a comparative measure; and

• EBITDA and Adjusted EBITDA are each a different calculation from earnings before interest, taxes, depreciation and amortization as defined for purposes of the financial covenants in the Company’s senior secured credit facility, and therefore should not be relied upon for assessing compliance with covenants.

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July 26, 2012

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements as to matters that are not of historic fact are forward-looking statements. These forward-looking statements are based on Key’s current expectations, estimates and projections about Key, its industry, its management’s beliefs and certain assumptions made by management, and include statements regarding estimated capital expenditures, future operational expectations, expected increases in activity, the mobilization of equipment into service, international growth, and anticipated financial performance in 2012. No assurance can be given that such expectations, estimates or projections will prove to have been correct. Whenever possible, these “forward-looking statements” are identified by words such as “expects,” “believes,” “anticipates” and similar phrases.

Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict, including, but not limited to: risks that Key will be unable to achieve its financial, capital expenditure and operational projections, including quarterly and annual projections of revenue and/or operating income margins (whether for Key as a whole or for geographic regions and/or business segments individually), which projections are based on uncertain customer activity, pricing and spending levels as well as uncertain short-term and long-term expectations of both U.S. and international market conditions, including in the oil, liquid shale and natural gas markets; risks that market fundamentals in the U.S. could further deteriorate or worsen beyond current expectations and/or that Key could experience further unexpected declines in activity and demand for its rig service, fluid management service, coiled tubing service, and fishing and rental service businesses; risks relating to changes in the demand for or the price of oil and natural gas; risks relating to increases in costs of labor, fuel, equipment and supplies employed and used in Key’s businesses; risks relating to Key’s ability to implement technological developments and enhancements; risks relating to compliance with environmental, health and safety laws and regulations, as well as actions by governmental and regulatory authorities; risks that Key may be unable to achieve the benefits expected from acquisition transactions, and risks associated with integration of the acquired operations into Key’s operations; risks affecting Key’s foreign operations, including risks related to growth in Mexico, other risks affecting Key’s operations in Russia, risks associated with expanding operations in Colombia, Oman and Bahrain, risks involving the possible sale of its Argentina business and assets, and risks that Key may not be able to achieve its overall international growth and mobilization strategy; risks that Key may not be able to execute its capital expenditure program and/or that any such capital expenditure investments, if made, will not generate adequate returns; and other risks affecting Key’s ability to maintain or improve operations, including its ability to maintain prices for services under market pricing pressures, weather risks, and the impact of potential increases in general and administrative expenses.

Because such statements involve risks and uncertainties, many of which are outside of Key’s control, Key’s actual results and performance may differ materially from the results expressed or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Other important risk factors that may affect Key’s business, results of operations and financial position are discussed in its most recently filed Annual Report on Form 10-K, recent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and in other Securities and Exchange Commission filings. Unless otherwise required by law, Key also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made here. However, readers should review carefully reports and documents that Key files periodically with the Securities and Exchange Commission.

About Key Energy Services

Key Energy Services is the largest onshore, rig-based well servicing contractor based on the number of rigs owned. Key provides a complete range of well intervention services and has operations in all major onshore oil and gas producing regions of the continental United States and internationally in Mexico, Colombia, the Middle East and Russia.

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