Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Key Energy Services' (KEG) stock was down by double-digits in early morning trading Thursday. The oil-field service company is feeling pressure from a trio of data points. Not only did Key report lousy fourth-quarter results, but its outlook was rather foreboding. Adding more fuel to the stock's sell-off, the price of oil is down again today.
So what: Key Energy Services lost $80.8 million, or $0.34 per share, during the quarter. However, $31.7 million, or $0.13 per share, of that loss was due to an impairment charge. The company took two other charges roughly equating to another $0.10 per share. But even backing all that out, the company still lost $24.7 million, or $0.10 per share, on the quarter. While that was a penny less than Wall Street expected, no one is celebrating that fact.
The weak oil market has hit Key's business hard -- revenue is falling, which is squeezing its already tight margins. The company doesn't see any real improvement in business conditions on the horizon, which is why it is enacting a series of cost-cutting initiatives to mitigate these margin pressures. The company is in preservation mode as it takes steps to survive the downturn amid a string of quarterly losses.
Now what: There's no way to sugarcoat things: Key Energy Services is in a tight spot. The company has a lot of debt and its margins are weak and growing weaker. While it is taking steps to survive the downturn, no one knows how long it will last. The company needs to see sustainably higher oil prices, which would fuel an uptick in industry activity and create some more breathing room for Key.
