UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________

Commission file number 1-8038
------

KEY ENERGY SERVICES, INC.
(Exact name of registrant as specified in its charter)

Maryland 04-2648081
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Two Tower Center, 20th Floor, East Brunswick, NJ 08816
- --------------------------------------------------------------------------------
(Address of principal executive offices) (ZIP Code)

Registrant's telephone number including area code: (732) 247-4822
--------------

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 X No
--- ---

Common Shares outstanding at May 11, 2000 - 85,733,461

KEY ENERGY SERVICES, INC. AND SUBSIDIARIES

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets as of
March 31, 2000 (unaudited) and June 30, 1999..................... 3

Unaudited Consolidated Statements of
Operations for the Three and Nine Months Ended
March 31, 2000 and 1999.......................................... 4

Unaudited Consolidated Statements of
Cash Flows for the Three and Nine Months Ended
March 31, 2000 and 1999.......................................... 5

Unaudited Consolidated Statements of Comprehensive
Income for the Three and Nine Months Ended
March 31, 2000 and 1999.......................................... 6

Notes to Consolidated Financial Statements....................... 7

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................ 13

Item 3. Quantitative and Qualitative Disclosures about
Market Risk.......................................................... 20

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.................................................... 22

Item 2. Changes in Securities and Use of Proceeds............................ 22

Item 3. Defaults Upon Senior Securities...................................... 22

Item 4. Submission of Matters to a Vote of Security Holders.................. 22

Item 5. OtherInformation..................................................... 23

Item 6. Exhibits and Reports on Form 8-K..................................... 23

Signatures...................................................................... 24

KEY ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

MARCH 31, 2000 JUNE 30, 1999
-------------- -------------
(UNAUDITED)
(THOUSANDS)
ASSETS

Current assets:
Cash ......................................................................................... $ 22,601 $ 23,478
Accounts receivable, net of allowance for doubtful accounts ($8,548 - 2000, $6,790 - 1999) ... 114,529 91,998
Inventories .................................................................................. 14,490 12,742
Prepaid income taxes ......................................................................... - 916
Prepaid expenses and other current assets .................................................... 7,687 3,409
----------- -----------
Total current assets ........................................................................... 159,307 132,543
----------- -----------

Property and equipment:
Oilfield service equipment ................................................................... 652,706 632,854
Contract drilling equipment .................................................................. 88,799 86,225
Motor vehicles ............................................................................... 72,691 70,398
Oil and gas properties and other related equipment, successful efforts method ................ 43,249 42,925
Furniture and equipment ...................................................................... 10,617 8,452
Buildings and land ........................................................................... 31,946 31,086
----------- -----------
900,008 871,940
Accumulated depreciation & depletion ........................................................... (146,097) (102,378)
----------- -----------
Net property and equipment ..................................................................... 753,911 769,562
----------- -----------
Goodwill, net ................................................................................ 201,316 205,423
Deferred costs, net .......................................................................... 20,309 23,779
Notes receivable - related parties ........................................................... 5,150 2,835
Other assets ................................................................................. 9,234 13,996
----------- -----------
Total assets ................................................................................... $ 1,149,227 $ 1,148,138
----------- -----------
----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................................. $ 28,107 $ 18,527
Other accrued liabilities .................................................................... 22,105 25,291
Accrued interest ............................................................................. 8,534 13,079
Current portion of long-term debt ............................................................ 17,189 16,254
Current portion of deferred revenue .......................................................... 4,933 -
----------- -----------
Total current liabilities ...................................................................... 80,868 73,151
----------- -----------
Long-term debt, less current portion ........................................................... 681,692 683,724
Deferred revenue, less current portion ......................................................... 13,338 -
Non-current accrued expenses ................................................................... 1,685 1,739
Deferred tax liability ......................................................................... 93,708 101,430
Commitments and contingencies .................................................................. - -
Stockholders' equity:
Common stock, $.10 par value; 100,000,000 shares authorized, 85,401,356 and 83,155,072 shares
issued, respectively at March 31, 2000 and June 30, 1999, respectively ....................... 8,542 8,317
Additional paid-in capital ................................................................... 310,500 301,615
Treasury stock, at cost; 416,666 shares at March 31, 2000 and June 30, 1999 .................. (9,682) (9,682)
Accumulated other comprehensive income ....................................................... 35 9
Retained earnings (deficit) .................................................................. (31,459) (12,165)
----------- -----------
Total stockholders' equity ..................................................................... 277,936 288,094
----------- -----------
Total liabilities and stockholders' equity ..................................................... $ 1,149,227 $ 1,148,138
----------- -----------
----------- -----------

SEE THE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS

KEY ENERGY SERVICES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---------------------------------------------------------------------
(Thousands, except per share data)

REVENUES:
Well servicing ............................... $ 141,306 $ 96,644 $ 410,845 $ 319,583
Contract drilling ............................ 14,337 7,204 49,007 39,354
Oil and gas production ....................... 2,359 1,195 7,021 4,802
Other, net ................................... 549 (120) 959 417
----------------------------- -----------------------------
158,551 104,923 467,832 364,156
----------------------------- -----------------------------
----------------------------- -----------------------------
COSTS AND EXPENSES:
Well servicing ............................... 99,320 76,813 297,486 235,080
Contract drilling ............................ 12,285 7,338 42,322 33,357
Oil and gas production ....................... 767 929 2,703 2,567
Depreciation, depletion and amortization ..... 18,264 18,498 53,140 43,628
General and administrative ................... 14,849 15,833 43,491 40,754
Bad debt expense ............................. 160 4,865 1,426 5,720
Debt issuance costs .......................... - 6,268 - 6,268
Interest ..................................... 18,636 21,032 54,138 48,359
Corporate restructuring ...................... - 1,500 - 8,199
----------------------------- -----------------------------
164,281 153,076 494,706 423,932
----------------------------- -----------------------------
----------------------------- -----------------------------

Income (loss) before income taxes ............... (5,730) (48,153) (26,874) (59,776)
Income tax benefit .............................. 1,580 16,102 7,580 19,765
----------------------------- -----------------------------

NET INCOME/(LOSS) ............................... $ (4,150) $ (32,051) $ (19,294) $ (40,011)
----------------------------- -----------------------------
----------------------------- -----------------------------

EARNINGS/(LOSS) PER SHARE :

Basic ......................................... $ (0.05) $ (1.75) $ (0.23) $ (2.19)
Diluted ....................................... $ (0.05) $ (1.75) $ (0.23) $ (2.19)

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ......................................... 84,633 18,293 83,646 18,286
Diluted ....................................... 84,633 18,293 83,646 18,286

SEE THE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS

KEY ENERGY SERVICES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---------------------------------------------------------
(Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) ............................................. $ (4,150) $ (32,051) $ (19,294) $ (40,011)
ADJUSTMENTS TO RECONCILE INCOME FROM OPERATIONS TO
NET CASH PROVIDED BY (USED IN) OPERATIONS:
Depreciation, depletion and amortization ...................... 18,264 18,498 53,140 43,628
Bad debt expense .............................................. 160 4,865 1,426 5,720
Amortization of deferred debt costs ........................... 1,273 1,626 3,820 3,990
Deferred income taxes ......................................... (1,580) (15,773) (7,580) (19,423)
(Gain) loss on sale of assets ................................. 87 (34) 283 13
Other non-cash items .......................................... (214) 7,099 (300) 12,936
CHANGE IN ASSETS AND LIABILITIES NET OF EFFECTS
FROM THE ACQUISITIONS:
(Increase) decrease in accounts receivable .................. 734 21,241 (23,957) 17,188
(Increase) decrease in other current assets ................. 3,296 537 (5,110) 1,731
Increase (decrease) in accounts payable ..................... (5,445) 7,079 9,580 (37,097)
Increase (decrease) in other current liabilities ............ (4,038) 1,246 (7,731) 1,578
Other assets and liabilities ................................ (1,336) (6,466) (3,300) (6,605)
------------------------- -------------------------
Net cash provided (used) by operating activities .............. 7,051 7,867 1,577 (16,352)
------------------------- -------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures - oilfield service operations ............ (6,324) (5,090) (15,769) (19,617)
Capital expenditures - oil and gas well drilling operations ... (973) (593) (4,194) (2,039)
Capital expenditures - oil and gas operations ................. (202) (448) (343) (3,828)
Capital expenditures - other .................................. (740) (827) (2,567) (827)
Proceeds from sale of fixed assets ............................ 383 5,477 2,352 5,637
Notes receivable from related parties ......................... - - (2,065) -
Cash received in acquisitions ................................. - - - 27,252
Acquisitions - oilfield service operations .................... - - - (275,106)
------------------------- -------------------------
Net cash used in investing activities ......................... (7,856) (1,481) (22,586) (268,528)
------------------------- -------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on debt and capital lease obligations ...... (11,703) (1,971) (17,775) (6,176)
Repayment of long-term debt ................................... - (148,594) - (288,594)
Borrowings under line-of-credit ............................... - 20,000 12,000 458,000
Proceeds from long-term debt .................................. - 142,566 - 142,566
Proceeds paid for debt issuance costs ......................... - (5,681) - (25,317)
Proceeds from other long-term debt ............................ - 130 - 153
Proceeds from forward sale .................................... 20,000 - 20,000 -
Proceeds from stock option warrants ........................... - 7,434 - 7,434
Proceeds from warrants exercised .............................. 5,123 - 5,123 -
Proceeds from stock options exercised ......................... 784 - 784 -
------------------------- -------------------------
Net cash provided by (used in) financing activities ........... 14,204 13,884 20,132 288,066
------------------------- -------------------------
Net increase (decrease) in cash ............................... 13,399 20,270 (877) 3,186
Cash at beginning of period ................................... 9,202 8,181 23,478 25,265
------------------------- -------------------------
Cash at end of period ......................................... $ 22,601 $ 28,451 $ 22,601 $ 28,451
------------------------- -------------------------
------------------------- -------------------------

SEE THE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS

KEY ENERGY SERVICES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
------------------------- -------------------------
(Thousands)

NET INCOME (LOSS) .......................................... $ (4,150) $(32,051) $(19,294) $(40,011)

OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gains on available-for-sale securities ........ - - - 1,200
Foreign currency translation gain, net of tax of $14 ..... 26 - 26 -
------------------------- -------------------------

COMPREHENSIVE INCOME (LOSS), NET
OF TAX ................................................... $ (4,124) $(32,051) $(19,268) $(38,811)
------------------------- -------------------------
------------------------- -------------------------

SEE THE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.

KEY ENERGY SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated financial statements of Key Energy Services, Inc. (the
"Company") and its wholly-owned subsidiaries for the three and nine month
periods ended March 31, 2000 and 1999 are unaudited. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted in this Form 10-Q pursuant to the rules and regulations of the
Securities and Exchange Commission. However, in the opinion of management, these
interim financial statements include all the necessary adjustments to fairly
present the results of the interim periods presented. These unaudited interim
consolidated financial statements should be read in conjunction with the audited
financial statements included in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1999. The results of operations for the three and
nine month periods ended March 31, 2000 are not necessarily indicative of the
results of operations for the full fiscal year ending June 30, 2000.

RECENTLY ISSUED ACCOUNTING STANDARDS

The Financial Accounting Standards Board has recently issued the following
accounting standards which will be adopted by the Company in the future.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which, as amended, is effective for quarters
of fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. The Company is currently evaluating what effect, if any, this
statement will have on the Company's financial statements. The Company will
adopt this statement no later than July 1, 2000.

RECLASSIFICATIONS AND ADJUSTMENTS

Certain reclassifications have been made to the consolidated financial
statements for the three and nine month periods ended March 31, 1999 to conform
to the presentation for the three and nine month periods ended March 31, 2000.

2. EARNINGS PER SHARE

The Company accounts for earnings per share based upon Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). Under SFAS 128,
basic earnings per common share are determined by dividing net earnings
applicable to common stock by the weighted average number of common shares
actually outstanding during the period. Diluted earnings per common share is
based on the increased number of shares that would be outstanding assuming
conversion of dilutive outstanding convertible securities using the "as if
converted" method.

THREE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
------------------------- -------------------------
(THOUSANDS, EXCEPT PER (THOUSANDS, EXCEPT
SHARE DATA) PER SHARE DATA)

BASIC EPS COMPUTATION:
NUMERATOR
Net income (loss) ............................... $ (4,150) $(32,051) $(19,294) $(40,011)
DENOMINATOR
Weighted average common shares outstanding ...... 84,633 18,293 83,646 18,286
------------------------- -------------------------
BASIC EPS ......................................... $ (0.05) $ (1.75) $ (0.23) $ (2.19)
------------------------- -------------------------
------------------------- -------------------------

DILUTED EPS COMPUTATION:
NUMERATOR
Net income (loss) ............................... $ (4,150) $(32,051) $(19,294) $(40,011)
Effect of dilutive securities, tax effected:
Convertible securities .......................... - - - -
------------------------- -------------------------
$ (4,150) $(32,051) $(19,294) $(40,011)
------------------------- -------------------------
------------------------- -------------------------

DENOMINATOR
Weighted average common shares outstanding: ..... 84,633 18,293 83,646 18,286
Warrants ........................................ - - - -
Stock options ................................... - - - -
7% Convertible Debentures ....................... - - - -
5% Convertible Debentures ....................... - - - -
------------------------- -------------------------
84,633 18,293 83,646 18,286
------------------------- -------------------------

DILUTED EPS ....................................... $ (0.05) $ (1.75) $ (0.23) $ (2.19)
------------------------- -------------------------
------------------------- -------------------------

The earnings per share calculation for the three and nine month periods ended
March 31, 2000 and 1999 excludes the Company's convertible debt, outstanding
warrants and stock options, because the effects of such instruments on earnings
per share would be anti-dilutive.

3. ACQUISITIONS

There were no acquisitions by the Company during the nine months ended March 31,
2000.

DAWSON PRODUCTION SERVICES, INC.

In September 1998, the Company completed the acquisition of all of the capital
stock of Dawson Production Services, Inc. ("Dawson") for an aggregate
consideration of approximately $382.6 million, including approximately $207.1
million of cash paid for the Dawson stock and for transactional fees and
approximately $175.5 million of net liabilities assumed. The Dawson acquisition
was accounted for using the purchase method of accounting and the results of
operations from the Dawson assets are included in the Company's results of
operations effective September 14, 1998.

Expenditures for the Dawson acquisition, including acquisition costs, less cash
acquired were as follows (in thousands):

Fair value of assets acquired, including goodwill............................................ $409,722
Liabilities assumed.......................................................................... (199,439)
Liabilities for employee termination costs and lease termination costs....................... (3,162)
--------
Cash paid, including acquisition related expenditures and the cost of Dawson common stock
previously held............................................................................ 207,121
Less: Cash acquired.......................................................................... (27,008)
--------
Net cash used for the acquisition............................................................ $180,113
--------
--------

At the time of the closing, Dawson owned approximately 527 well service rigs,
200 oilfield trucks, and 21 production testing units in South Texas and the Gulf
Coast, East Texas and Louisiana, the Permian Basin of West Texas and New Mexico,
the Anadarko Basin of Texas and Oklahoma, California, and in the inland waters
of the Gulf of Mexico.

OTHER FISCAL 1999 ACQUISITIONS

In addition to its acquisition of Dawson, the Company acquired the assets and/or
capital stock of six well servicing and contract drilling businesses during the
first two quarters of fiscal 1999, increasing its rig and truck fleet by a total
of approximately 93 well service rigs, 4 drilling rigs and 185 oilfield trucks
(and related equipment) for an aggregate purchase price of approximately $93.7
million in cash. Each of the acquisitions was accounted for using the purchase
method and the results of the operations, generated from the acquired assets,
are included in the Company's results of operations as of the completion date of
each acquisition.

PRO FORMA RESULTS OF OPERATIONS - (UNAUDITED)

The following unaudited pro forma results of operations have been prepared as
though Dawson had been acquired on July 1, 1998 with adjustments to record
specifically identifiable decreases in direct costs and general and
administrative expenses related to the termination of individual employees. Pro
forma amounts are not necessarily indicative of the results that may be reported
in the future.

NINE MONTHS ENDED MARCH NINE MONTHS ENDED MARCH
31, 1999 (THOUSANDS, 31, 1998 (THOUSANDS,
EXCEPT PER SHARE DATA) EXCEPT PER SHARE DATA)
----------------------- -----------------------

Revenues................................................. $400,511 $477,226
Net income/(loss)........................................ (62,848) 10,874
Basic earnings/(loss) per share.......................... $ (3.44) $ 0.65

4. STOCKHOLDERS' EQUITY

EQUITY OFFERING

On May 7, 1999, the Company closed the public offering of 55,300,000 shares of
common stock (300,000 shares of which were sold pursuant to the underwriters'
over-allotment option discussed below) at $3.00 per share, or $165.9 million
(the "Public Offering"). In addition, the Company closed the offering of
3,508,772 shares of common stock at $2.85 per share, or $10.0 million (the
"Concurrent Offering" and together with the Public Offering, the "Equity
Offering"). In addition, on June 7, 1999, the underwriters of the Public
Offering exercised an over-allotment option to purchase an additional 5,436,000
million shares to cover over-allotments. Net proceeds from the Equity Offering
of approximately $180.4 million were used to repay a portion of the Company's
term loan borrowings under its senior credit facility.

5. COMMITMENTS AND CONTINGENCIES

Various suits and claims arising in the ordinary course of business are pending
against the Company. Management does not believe that the disposition of any of
these items will result in a material adverse impact to the consolidated
financial position, results of operations or cash flows of the Company.

6. INDUSTRY SEGMENT INFORMATION

The Company operates in three business segments: well servicing, contract
drilling and oil and gas production.

WELL SERVICING: The Company's operations provide well servicing (ongoing
maintenance of existing oil and natural gas wells), workover (major repairs or
modifications necessary to optimize the level of production from existing oil
and natural gas wells) and production services (fluid hauling, salt water
disposal and fluid storage tank rental).

CONTRACT DRILLING: The Company provides contract onshore drilling services for
major and independent oil companies in the continental United States, Argentina
and Ontario, Canada.

OIL AND GAS PRODUCTION: The Company produces crude oil and natural gas in the
Permian Basin and Panhandle areas of West Texas.

WELL CONTRACT OIL AND CORPORATE /
SERVICING DRILLING GAS PRODUCTION OTHER TOTAL
--------- -------- -------------- ----- -----

THREE MONTHS ENDED MARCH 31, 2000
Operating revenues .............................. $ 141,306 $ 14,337 $ 2,359 $ 549 $ 158,551
Operating profit ................................ 41,986 2,052 1,592 549 46,179
Depreciation, depletion and amortization ........ 14,701 2,735 537 291 18,264
Interest expense ................................ 969 - - 17,667 18,636
Net income/(loss) * ............................. 15,970 (2,253) 904 (18,771) (4,150)
Identifiable assets ............................. 735,368 109,983 59,025 43,534 947,910
Capital expenditures (excluding acquisitions) ... 6,324 973 202 740 8,239

THREE MONTHS ENDED MARCH 31, 1999
Operating revenues .............................. $ 96,644 $ 7,204 $ 1,195 $ (120) $ 104,923
Operating profit ................................ 19,831 (134) 266 (120) 19,843
Depreciation, depletion and amortization ........ 14,411 1,660 685 1,742 18,498
Interest expense ................................ 469 - - 20,563 21,032
Net income/(loss) * ............................. (10,960) (3,282) (592) (17,217) (32,051)
Identifiable assets ............................. 754,665 99,013 40,219 62,302 956,199
Capital expenditures (excluding acquisitions) ... 5,090 593 448 827 6,958

* - Net income (loss) for the contract drilling
segment includes a portion of well servicing
general and administrative expenses allocated
on a percentage of revenue basis.

Operating revenues for the Company's foreign operations for the three months
ended March 31, 2000 and 1999 were $8.2 million and $3.4 million, respectively.
Operating profits for the Company's foreign operations for the three months
ended March 31, 2000 and 1999 were $1.3 million and $90,000, respectively. The
Company's assets related to foreign operations for the period ended March 31,
2000 and 1999 were $60.9 million and $51 million, respectively.

WELL CONTRACT OIL AND CORPORATE /
SERVICING DRILLING GAS PRODUCTION OTHER TOTAL
--------- -------- -------------- ----- -----

NINE MONTHS ENDED MARCH 31, 2000
Operating revenues ............................... $ 410,845 $ 49,007 $ 7,021 $ 959 $ 467,832
Operating profit ................................. 113,359 6,685 4,318 959 125,321
Depreciation, depletion and amortization ......... 44,273 6,323 1,709 835 53,140
Interest expense ................................. 2,390 - - 51,748 54,138
Net income/(loss) * .............................. 37,930 (4,167) 1,706 (54,763) (19,294)
Identifiable assets .............................. 735,368 109,983 59,025 43,534 947,910
Capital expenditures (excluding acquisitions) .... 15,769 4,194 343 2,567 22,873

NINE MONTHS ENDED MARCH 31, 1999
Operating revenues ............................... $ 319,583 $ 39,354 $ 4,802 $ 417 $ 364,156
Operating profit ................................. 84,743 5,757 2,235 417 93,152
Depreciation, depletion and amortization ......... 34,848 4,758 1,999 2,023 43,628
Interest expense ................................. 1,116 - - 47,243 48,359
Net income/(loss) * .............................. 12,245 (3,457) (316) (48,483) (40,011)
Identifiable assets .............................. 754,665 99,013 40,219 62,302 956,199
Capital expenditures (excluding acquisitions) .... 19,617 2,039 3,828 827 26,311

* - Net income (loss) for the contract drilling
segment includes a portion of well servicing
general and administrative expenses allocated on
a percentage of revenue basis.

Operating revenues for the Company's foreign operations for the nine months
ended March 31, 2000 and 1999 were $23.8 million and $19.4 million,
respectively. Operating profits for the Company's foreign operations for the
nine months ended March 31, 2000 and 1999 were $4.6 million and $3.5 million,
respectively. The Company's assets related to foreign operations for the period
ended March 31, 2000 and 1999 were $60.9 million and $51million, respectively.

7. DEFERRED INCOME

Deferred income relates to a $20.0 million forward sale of oil and natural gas
pursuant to an agreement under which the purchaser is entitled to receive a
share of the production from certain oil and gas properties which range from
10,000 to 3,500 Barrels (Bbl) of oil and 122,100 to 58,800 Mmbtu of natural gas
per month over a six year period ending February 2006. The total volume of the
forward sale is approximately 486 million barrels of oil and 6.135 million
Mmbtus. At March 31, 2000, 10,000 Bbl's of oil and 122,100 Mmbtus of gas had
been delivered under the agreement. Revenue on the volume subject to the
agreement is recognized ratably based on production.

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

NOTE REGARDING FORWARD - LOOKING STATEMENTS

The statements in this document that relate to matters that are not historical
facts are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
When used in this document and the documents incorporated by reference, words
such as "anticipate," "believe," "expect," "plan," "intend," "estimate,"
"project," "will," "could," "may," "predict" and similar expressions are
intended to identify forward-looking statements. Further events and actual
results may differ materially from the results set forth in or implied in the
forward-looking statements. Factors that might cause such a difference include:

- fluctuations in world-wide prices and demand for oil and gas;

- fluctuations in level of oil and gas exploration and
development activities;

- fluctuations in the demand for well servicing, contract
drilling and ancillary oilfield services;

- the existence of competitors, technological changes and
developments in the industry;

- the existence of operating risks inherent in the well
servicing, contract drilling and ancillary oilfield services;

- the existence of regulatory uncertainties, the possibility of
political instability in any of the countries in which the
Company does business; and

- general economic conditions, in addition to the other matters
discussed herein.

The following discussion provides information to assist in the understanding of
the Company's financial condition and results of operations. It should be read
in conjunction with the consolidated financial statements and related notes
appearing elsewhere in this report.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2000 VERSUS THREE MONTHS ENDED MARCH 31, 1999

The Company's revenue for the third quarter of fiscal 2000 totaled $158,551,000,
representing an increase of $53,628,000, or 51% as compared to the prior year
period. The increase in the current period reflects higher activity levels and
improved rates. Profitability continued to improve, but was negatively impacted
by additional costs associated with hiring crews and reactivating equipment, and
by higher interest rates on its floating rate debt. The Company's net loss for
the third quarter of fiscal 2000 totaled $4,150,000, or $0.05 per share, versus
a net loss of $32,051,000, or $1.75 per share, for the prior year period. The
prior year period, however, included a corporate restructuring charge of
$1,500,000.

OPERATING REVENUES

WELL SERVICING. Well servicing revenues increased $44,662,000, or 46.2%, from
$96,644,000 for the three months ended March 31, 1999 to $141,306,000 for the
three months ended March 31, 2000. The increase in revenues was primarily due to
an increase in the number of hours worked and the effect of higher rig and fluid
hauling rates.

CONTRACT DRILLING. Revenues from contract drilling activities increased
$7,133,000, or 99.0%, from $7,204,000 for the three months ended March 31, 1999
to $14,337,000 for the three months ended March 31, 2000. The increase in
revenues was primarily due to an increase in equipment utilization and the
effect of higher prices.

OIL AND NATURAL GAS PRODUCTION. Revenues from oil and natural gas production
activities increased $1,164,000, or 97.4%, from $1,195,000 for the three months
ended March 31, 1999 to $2,359,000 for the three months ended March 31, 2000.
The increase in revenues was primarily due to a 88% increase in the price of oil
and gas received on a barrel of oil equivalent ("BOE") basis for the three
months ended March 31, 2000 compared to the prior year period, and a 5% increase
in the volume of oil and gas produced on a BOE basis for the three months ended
March 31, 2000 compared to the prior year period.

OPERATING EXPENSES

WELL SERVICING. Well servicing expenses increased $22,507,000, or 29.3%, from
$76,813,000 for the three months ended March 31, 1999 to $99,320,000 for the
three months ended March 31, 2000. The increase was primarily due to a higher
level of activity and the cost of bringing crews and previously idle equipment
on line and was partially offset by cost reductions effected as a result of the
Company's consolidation and restructuring efforts. Well servicing expenses, as a
percentage of well servicing revenue, decreased from 79.5% for the three months
ended March 31, 1999 to 70.3% for the three months ended March 31, 2000.

CONTRACT DRILLING. Expenses related to contract drilling activities increased
$4,947,000, or 67.4%, from $7,338,000 for the three months ended March 31, 1999
to $12,285,000 for the three months ended March 31, 2000. The increase was
primarily due to the cost of bringing crews and previously idle equipment on
line and was partially offset by cost reductions effected as a result of the
Company's consolidation and restructuring efforts as well as a shift away from
turnkey contracts to footage and dayrates. Contract drilling expenses, as a
percentage of contract drilling revenues, decreased from 101.9% for the three
months ended March 31, 1999 to 85.7% for the three months ended March 31, 2000.

OIL AND NATURAL GAS PRODUCTION. Expenses related to oil and natural gas
production activities decreased $162,000, or 17.4%, from $929,000 for the
three months ended March 31, 1999 to $767,000 for the three months ended
March 31, 2000. The decrease in production costs is primarily due to the
effects of the Company's consolidation and restructuring efforts as well as
lower water disposal charges partially offset by increased rates for
electricity and other operating services. Oil and natural gas production
costs decreased from $8.76 per BOE for the three months ended March 31, 1999
to $6.89 per BOE for the three months ended March 31, 2000.

DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE

The Company's depreciation, depletion and amortization expense decreased
$234,000, or 1.3%, from $18,498,000 for the three months ended March 31, 1999 to
$18,264,000 for the three months ended March 31, 2000.

GENERAL AND ADMINISTRATIVE EXPENSES

The Company's general and administrative expenses decreased $984,000, or 6.2%,
from $15,833,000 for the three months ended March 31, 1999 to $14,849,000 for
the three months ended March 31, 2000. The decrease was primarily due to the
cost reductions effected as a result of the Company's consolidation and
restructuring efforts. General and administrative expenses, as a percentage of
revenues, decreased from 15.1% for the three months ended March 31, 1999 to 9.4%
for the three months ended March 31, 2000.

INTEREST EXPENSE

The Company's interest expense decreased $2,396,000, or 11.4%, from $21,032,000
for the three months ended March 31, 1999 to $18,636,000 for the three months
ended March 31, 2000. The decrease was primarily due to a significant reduction
in the Company's debt using proceeds from the Equity Offering and operating cash
flow and was partially offset by higher interest rates on the Company's floating
rate debt.

BAD DEBT EXPENSE

The Company's bad debt expense decreased $4,705,000, or 96.7%, from $4,865,000
for the three months ended March 31, 1999 to $160,000 for the three months ended
March 31, 2000. The decrease was largely due to an improvement in market
conditions for its customers.

INCOME TAXES

The Company's income tax benefit decreased $14,522,000 from a benefit of
$16,102,000 for the three months ended March 31, 1999 to a benefit of $1,580,000
for the three months ended March 31, 2000. The decrease in the income tax
benefit is due to the decrease in pretax losses. The Company's effective tax
rate for the three months ended March 31, 2000 and 1999 was 28% and 33%,
respectively. The effective tax rates are different from the statutory rate of
35% because of the disallowance of certain goodwill amortization, other
non-deductible expenses and state and local taxes. The Company does not expect
to be required to remit federal income taxes for the next few fiscal years
because of the availability of net operating loss carry forwards from fiscal
1999 and previous years.

NINE MONTHS ENDED MARCH 31, 2000 VERSUS NINE MONTHS ENDED MARCH 31, 1999

The Company's revenue for the first nine months of fiscal 2000 totaled
$467,832,000 representing an increase of $103,676,000, or 28.5% as compared to
the prior year period. The results for the prior year period do not include a
full nine months of Dawson's results as well as several other fiscal 1999
acquisitions. The Company's net loss for the nine months of fiscal 2000 totaled
$19,294,000 or $0.23 per share, versus net loss of $40,011,000 or $2.19 per
share, for the prior year period.

OPERATING REVENUES

WELL SERVICING. Well servicing revenues increased $91,262,000 or 28.6%, from
$319,583,000 for the nine months ended March 31, 1999 to $410,845,000 for the
nine months ended March 31, 2000. The increase in revenues was due to the full
period effect of the acquisitions completed during the early portion of fiscal
1999, improved equipment utilization and the effect of higher rig and fluid
hauling rates.

CONTRACT DRILLING. Revenues from contract drilling activities increased
$9,653,000, or 24.5%, from $39,354,000 for the nine months ended March 31, 1999
to $49,007,000 for the nine months ended March 31, 2000. The increase in
revenues was primarily due to an increase in equipment utilization and the
effect of higher prices.

OIL AND NATURAL GAS PRODUCTION. Revenues from oil and natural gas production
activities increased $2,219,000 or 46.2%, from $4,802,000 for the nine months
ended March 31, 1999 to $7,021,000 for the nine months ended March 31, 2000. The
increase in revenues was primarily due to a 61% increase in the price of oil and
gas received on a barrel of oil equivalent ("BOE") basis for the nine months
ended March 31, 2000 compared to the prior year period, and was partially offset
by a 9% decrease in the volume of oil and gas produced on a BOE basis for the
nine months ended March 31, 2000 compared to the prior year period.

OPERATING EXPENSES

WELL SERVICING. Well servicing expenses increased $62,406,000 or 26.5%, from
$235,080,000 for the nine months ended March 31, 1999 to $297,486,000 for the
nine months ended March 31, 2000. The increase was primarily due to the full
period effect of the acquisitions completed during the early portion of fiscal
1999 and the cost of bringing crews and previously idle equipment on line and
was partially offset by cost reductions effected as a result of the Company's
consolidation and restructuring efforts. Well servicing expenses, as a
percentage of well servicing revenue, decreased from 73.6% for the nine months
ended March 31, 1999 to 72.4% for the nine months ended March 31, 2000.

CONTRACT DRILLING. Expenses related to contract drilling activities increased
$8,965,000 or 26.9%, from $33,357,000 for the nine months ended March 31, 1999
to $42,322,000 for the nine months ended March 31, 2000. The increase was
primarily due to the full period effect of the acquisition completed during the
early portion of fiscal 1999 and the cost of bringing crews and previously idle
equipment on line and was partially offset by cost reductions effected as a
result of the Company's consolidation and restructuring efforts. Contract
drilling expenses, as a percentage of contract drilling revenues, increased from
84.8% for the nine months ended March 31, 1999 to 86.4% for the nine months
ended March 31, 2000.

OIL AND NATURAL GAS PRODUCTION. Expenses related to oil and natural gas
production activities increased $136,000, or 5.3%, from $2,567,000 for the
nine months ended March 31, 1999 to $2,703,000 for the nine months ended
March 31, 2000. Oil and natural gas production costs increased from $6.05 per
BOE for the nine months ended March 31, 1999 to $7.02 per BOE for the nine
months ended March 31, 2000. The increase per BOE is primarily due to the
costs of placing wells back on production that were not producing prior to
the period and, to a lesser extent, increased rates for electricity and other
operating services partially offset by the effects of the Company's
consolidation and restructuring efforts.

DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSE

The Company's depreciation, depletion and amortization expense increased
$9,512,000, or 21.8%, from $43,628,000 for the nine months ended March 31, 1999
to $53,140,000 for the nine months ended March 31, 2000. The increase is
primarily due to an increase in oilfield service depreciation resulting from a
full period effect of the acquisitions completed during the early portion of
fiscal 1999.

GENERAL AND ADMINISTRATIVE EXPENSES

The Company's general and administrative expenses increased $2,737,000, or 6.7%,
from $40,754,000 for the nine months ended March 31, 1999 to $43,491,000 for the
nine months ended March 31, 2000. The increase was primarily due to the full
period effect of the acquisitions completed during the early portion of fiscal
1999 and was largely offset by cost reductions effected as a result of the
Company's consolidation and restructuring efforts. General and administrative
expenses, as a percentage of revenues, decreased from 11.2% for the nine months
ended March 31, 1999 to 9.3% for the nine months ended March 31, 2000.

INTEREST EXPENSE

The Company's interest expense increased $5,779,000 or 12.0%, from $48,359,000
for the nine months ended March 31, 1999 to $54,138,000 for the nine months
ended March 31, 2000. The increase was primarily due to the full period effect
of the additional debt incurred in connection with the acquisitions completed
during the early portion of fiscal 1999 and, to a lesser extent, higher interest
rates and amortization of additional debt issuance costs and was partially
offset by a significant reduction in the Company's debt using proceeds from the
Equity Offering and operating cash flow.

BAD DEBT EXPENSE

The Company's bad debt expense decreased $4,294,000, or 75.1%, from $5,720,000
for the nine months ended March 31, 1999 to $1,426,000 for the nine months ended
March 31, 2000. The decrease was largely due to an improvement in market
conditions for its customers.

INCOME TAXES

The Company's income tax benefit decreased $12,185,000 from a benefit of
$19,765,000 for the nine months ended March 31, 1999 to a benefit of $7,580,000
for the nine months ended March 31, 2000. The decrease in the income tax benefit
is due to the increase in pretax income. The Company's effective tax rate for
the nine months ended March 31, 2000 and 1999 was 28% and 33%, respectively. The
effective tax rates are different from the statutory rate of 35% because of the
disallowance of certain goodwill amortization, other non-deductible expenses and
state and local taxes. The Company does not expect to be required to remit
federal income taxes for the next few fiscal years because of the availability
of net operating loss carry forwards from fiscal 1999 and previous years.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically funded its operations, acquisitions, capital
expenditures and working capital requirements from cash flow from operations,
bank borrowings, and the issuance of long term debt and equity. We believe that
the current reserves of cash and cash equivalents, access to our existing credit
lines and internally generated cash flow from operations are sufficient to
finance the cash requirements of our current and future operations.

As of March 31, 2000, the Company had working capital (after taking into account
the current portion of long term debt) of approximately $78,439,000 and cash and
cash equivalents of approximately $22,601,000 as compared to working capital
(after taking into account the current portion of long term debt) of
approximately $59,392,000 and cash and cash equivalents of approximately
$23,478,000 as of June 30, 1999. This increase in working capital is primarily
related to the timing of cash receipts and disbursements. Receivables are higher
due to the increase in revenues caused by the increased utilization of the
Company's equipment base and payables are also higher due to the addition of
more employees and greater costs related to the increased equipment utilization.

CAPITAL EXPENDITURES

Capital expenditures for fiscal 2000 are expected to approximate fiscal 1999
levels. Expenditures will be directed toward selectively refurbishing our assets
as business conditions warrant. The Company will continue to evaluate
opportunities to acquire or divest assets or businesses to enhance the Company's
primary operations. Such capital expenditures, acquisitions and divestitures are
at the discretion of the Company and will depend on management's view of market
conditions as well as other factors.

LONG-TERM DEBT

SENIOR CREDIT FACILITY

As of March 31, 2000, the Company had an approximately $365 million senior
credit facility (the "Senior Credit Facility") with a syndicate of banks led
by PNC Bank, N.A. which consisted of a $150,000,000 revolving loan facility,
$38,601,374 in Tranche A term loans and $176,834,306 in Tranche B term loans.
In addition, up to $20,000,000 of letters of credit can be issued under the
Senior Credit Facility, but any outstanding letters of credit reduce the
borrowing availability under the revolving loan facility. As of March 31,
2000, approximately $98,000,000 was drawn under the revolving loan facility
and approximately $15,132,000 of letters of credit related to workmen's
compensation insurance was outstanding. Subsequent to March 31, 2000, the
Company repaid $14,569,536 principal amount of the Tranche A term loans,
$430,464 principal amount of the Tranche B term loans, and $5,000,000
principal amount of the revolving loan facility.

The revolving loans and Tranche A term loans bear interest based upon, at the
Company's option, the prime rate plus a variable margin of 0.75% to 2.00% or a
Eurodollar rate plus a variable margin of 2.25% to 3.50%. The Tranche B loans
bear interest based upon, at the Company's option, the prime rate plus 2.50% or
a Eurodollar rate plus 4.00%. The Credit Facility has customary affirmative and
negative covenants including a maximum debt to capitalization ratio, a minimum
interest coverage ratio, a maximum senior leverage ratio, a minimum net worth
and minimum EBITDA ratio as well as restrictions on capital expenditures,
acquisitions and dispositions.

14% SENIOR SUBORDINATED NOTES

On January 22, 1999, the Company completed the private placement of 150,000
units (the "Units") consisting of $150,000,000 of 14% Senior Subordinated Notes
due 2009 (the "14% Senior Subordinated Notes") and 150,000 warrants to purchase
2,032,565 shares of common stock at an exercise price of $4.88125 per share (the
"Unit Warrants"). The cash proceeds from the private placement, net of fees and
expenses, were used to repay substantially all of the remaining $148,600,000
principal amount (plus accrued interest) owed under the Company's bridge loan
facility arranged in connection with the acquisition of Dawson. The 14% Senior
Subordinated Notes are subordinate to the Company's senior indebtedness which
includes borrowings under the Senior Credit Facility and the Dawson 9 3/8%
Senior Notes.

5% CONVERTIBLE SUBORDINATED NOTES

On September 25, 1997, the Company completed an initial closing of its private
placement of $200,000,000 of 5% Convertible Subordinated Notes due 2004 (the "5%
Convertible Subordinated Notes"). On October 7, 1997, the Company completed a
second closing of its private placement of an additional $16,000,000 of the 5%
Convertible Subordinated Notes pursuant to the exercise of the remaining portion
of an over-allotment option. The 5% Convertible Subordinated Notes are
subordinate to the Company's senior indebtedness which includes borrowings under
the Senior Credit Facility, the 14% Senior Subordinated Notes and the Dawson
9 3/8% Senior Notes. The 5% Convertible Subordinated Notes are convertible, at
the holder's option, into shares of the Company's common stock at a
conversion price of $38.50 per share, subject to certain adjustments.

7% CONVERTIBLE SUBORDINATED DEBENTURES

In July 1996, the Company completed a $52,000,000 private placement of 7%
Convertible Subordinated Debentures due 2003 (the "7% Convertible Subordinated
Debentures"). The 7% Convertible Subordinated Debentures are subordinate to the
Company's senior indebtedness which includes borrowings under the Senior Credit
Facility, the 14% Senior Subordinated Notes and the Dawson 9 3/8% Senior Notes.
The Debentures are convertible, at any time prior to maturity, at the holders'
option, into shares of the Company's common stock at a conversion price of $9.75
per share, subject to certain adjustments. In addition, holders who converted
prior to July 1, 1999 were entitled to receive a payment, in cash or the
Company's common stock (at the Company's option) generally equal to 50% of the
interest otherwise payable from the date of conversion through July 1, 1999. As
a result of conversions, only $1,000,000 principal amount of the 7% Convertible
Subordinated Debentures remained outstanding at March 31, 2000.

DAWSON 9 3/8% SENIOR NOTES

In February 1997, Dawson issued $140,000,000 9 3/8% Senior Notes due 2007
(the "Dawson 9 3/8% Senior Notes"). As the result of the Dawson acquisition,
the Company assumed Dawson's obligations under the Dawson 9 3/8% Senior Notes
which were equally and ratably secured with the obligations under the Senior
Credit Facility. As a result of mandatory tender offer made in connection
with the Dawson acquisition, only $1,406,000 principal amount of the Dawson 9
3/8% Senior Notes remained outstanding at March 31, 2000. Subsequent to March
31, 2000, the Company purchased $300,000 of the Dawson 9 3/8% Senior Notes
and has tendered them for cancellation.

RECENTLY ISSUED ACCOUNTING STANDARDS

The Financial Accounting Standards Board has recently issued the following
accounting standards which will be adopted by the Company in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Special Note: Certain statements set forth below under this caption constitute
"forward-looking statements". See "Special Note Regarding Forward-Looking
Statements" for additional factors relating to such statements.

The primary objective of the following information is to provide forward-looking
quantitative and qualitative information about the Company's potential exposure
to market risk. The term "market risk" refers to the risk of loss arising from
adverse changes in foreign currency exchange, interest rates and oil and gas
prices. The disclosures are not meant to be precise indicators of expected
future losses, but rather indicators of reasonably possible losses. This
forward-looking information provides indicators of how the Company views and
manages its ongoing market risk exposures.

INTEREST RATE RISK

At March 31, 2000, Key had long-term debt outstanding of $698,881,000. Of this
amount $363,055,000 or 52%, bears interest at fixed rates as follows:

(000's)
Balance at
3/31/00
--------

5% Convertible Subordinated Notes Due 2004....................................... $216,000
14% Senior Subordinated Notes Due 2009........................................... 143,464
7% Convertible Subordinated Debentures Due 2003.................................. 1,000
Dawson 9 3/8% Senior Notes Due 2007.............................................. 1,406
Other (rates generally ranging from 8.0% to 8.5%)................................ 1,185
--------
$363,055
--------

The remaining $335,826,000 of debt outstanding as of March 31, 2000 bears
interest at floating rates which averaged approximately 10.01% at March 31,
2000. A 10% increase in short-term interest rates on the floating-rate debt
outstanding at March 31, 2000 would equal approximately 100 basis points. Such
an increase in interest rates would increase Key's fiscal 2000 interest expense
by approximately $3.4 million assuming borrowed amounts remain outstanding.

The above sensitivity analysis for interest rate risk excludes accounts
receivable, accounts payable and accrued liabilities because of the short-term
maturity of such instruments.

FOREIGN CURRENCY RISK

Key's net assets, net earnings and cash flows from its Argentina subsidiaries
are currently not exposed to foreign currency risk, as Argentina's currency is
tied to the U.S. dollar. Key's net assets, net earnings and cash flows from its
Canadian subsidiary is based on the U.S. dollar equivalent of such amounts
measured in Canadian dollars. Assets and liabilities of the Canadian operations
are translated to U.S. dollars using the applicable exchange rate as of the end
of a reporting period. Revenues, expenses and cash flow are translated using the
average exchange rate during the reporting period.

A 10% change in the Canadian-to-U.S. Dollar exchange rate would not be material
to the net assets, net earnings or cash flows of Key.

COMMODITY PRICE RISK

Key's major market risk exposure for its oil and gas production operations is in
the pricing applicable to its oil and gas sales. Realized pricing is primarily
driven by the prevailing worldwide price for crude oil and spot market for
natural gas. Pricing for oil and gas production has been volatile and
unpredictable for several years.

Key periodically enters into financial hedging activities with respect to a
portion of its projected oil and natural gas production through commodity option
contracts whereby Key will receive a fixed price for its production if the
market price is in excess of the contract's stated price. Key pays a premium for
its option contracts. Such premiums are amortized to oil and gas revenues over
the life of the related option contracts. These financial hedging activities are
intended to support oil and natural gas prices at targeted levels and to manage
Key's exposure to oil and gas price fluctuations. Realized gains from the
settlement of these financial hedging instruments are recognized in oil and gas
sales when the associated production occurs. The gains and losses realized as a
result of these hedging activities are substantially offset in the cash market
when the hedged commodity is delivered.

As of March 31, 2000, Key had oil and gas price hedging instruments in place
which represented 22,000 barrels of oil production per month and approximately
100,000 Mmbtu of gas production per month. The total fiscal 2000 hedged oil and
gas volumes represent the majority of expected calendar year total production. A
10% increase in the index price of oil or gas from their levels at March 31,
2000 would have no impact on the Company's net assets, net earnings or cash
flows (as derived from the commodity option contracts), as the put options
outstanding at March 31, 2000 are not "in-the-money".

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

On January 14, 2000, the Company issued a total of 1,673,684 shares of its
Common Stock to Nabors Acquisition Corp. IV ("Nabors") for an aggregate purchase
price of $4,769,999 in connection with the exercise of a certain warrant dated
January 8, 1998 ("Warrant"). No underwriters were involved in the exercise of
the Warrant. The shares were issued in a transaction exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act").

On March 17, 2000, the Company also issued a total of 369,229 shares of its
Common Stock in connection with the conversion of $3,600,000 principal amount of
7% Convertible Subordinated Debentures Due 2003 (the "Debentures"). The Holders
of the Debentures, Green-Cohn Group L.L.C., DFG Corporation, ZPG Securities
L.L.C. and Acorn Overseas Securities Ltd., received 158,974 shares, 97,435
shares, 60,205 shares, and 52,615 shares, respectively, from the conversion. No
underwriters were involved in the conversion of the Debentures. The shares were
issued in a transaction exempt from registration pursuant to Section 3(a)(9) of
the Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

On January 31, 2000, a meeting of the holders of Common Stock was held to
elect the Company's Board of Directors and to vote on certain other matters.
Only the holders of record as of the close of business on November 11, 1999 (the
"Record Date") were entitled to notice of and to vote at the meeting and at any
adjournment thereof. On the Record Date, the outstanding number of shares
entitled to vote consisted of 82,740,330 shares of Common Stock. The
stockholders took the following actions at the meeting:

1. Elected the following six Directors, with the votes indicated opposite each
director's name:

For Against
--------------------------

Francis D. John 74,075,648 1,903,017
Kevin P. Collins 74,068,425 1,910,240
William Manly 74,077,750 1,900,915
W. Phillip Marcum 74,068,425 1,910,240
David J. Breazzano 74,077,891 1,900,774

Morton Wolkowitz 74,068,421 1,910,244

2. Approved a proposal to amend the Company's Amended and Restated Articles of
Incorporation to increase the Company's authorized capital stock, par value
$.10 per share, from 100,000,000 shares to 200,000,000 shares. The vote was
72,392,594 for and 3,403,379 against, with 182,692 abstentions.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

3.1* Articles of Amendment to Amended and Restated Articles of
Incorporation of the Company.

3.2* Unanimous Consent of the Board of Directors of the Company
dated January 11, 2000 limiting the designation of the
additional authorized shares to common stock.

10.1* Sixth Amendment, dated as of July 14, 1999 to the Second
Amended and Restated Credit Agreement, among the Company, the
several lenders from time to time parties thereto, PNC Bank,
National Association, as Administrative Agent, Norwest Bank
Texas, N.A., as Collateral Agent, and PNC Capital Markets,
Inc., as Arranger.

10.2* Seventh Amendment, dated as of March 1, 2000 to the Second
Amended and Restated Credit Agreement, among the Company, the
several lenders from time to time parties thereto, PNC Bank,
National Association, as Administrative Agent, Norwest Bank
Texas, N.A., as Collateral Agent, and PNC Capital Markets,
Inc., as Arranger.

10.3* Production and Delivery Agreement dated March 31, 2000 among
Odessa Exploration Incorporated and Norwest Energy Capital,
Inc.

10.4* Closing Agreement dated March 31, 2000 among Odessa
Exploration Incorporated, Norwest Energy Capital, Inc. and the
Company.

27* Financial Data Schedule

(b) No reports on Form 8-K were filed during the quarter ended March
31, 2000.

- ------------------
* Filed herewith.

SIGNATURES

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.

KEY ENERGY SERVICES, INC.

Dated: May 15, 2000 By: /s/ Francis D. John
-------------------
President and Chief Executive Officer

Dated: May 15, 2000 By: /s/ Thomas K. Grundman
----------------------
Chief Financial Officer and
Chief Accounting Officer