Please ensure Javascript is enabled for purposes of website accessibility

Why Key Energy Services Inc (KEG) Stock Was Down 10%

By Jason Hall - Mar 16, 2015 at 2:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key Energy Services Inc (KEG) stock is getting hit again. Here's why.

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: Shares of onshore oil driller and oilfield service company Key Energy Services Inc (KEG 0.00%) are down about 5% this afternoon, after falling as much as 10% earlier today. So far this year, the company's stock has been all over the place: 

KEG Chart

KEG data by YCharts

So what: There isn't any material news out there about Key Energy Services directly, but there's a lot of bad news in general that indicates the driller will have plenty of tough days ahead of it. As the U.S. Energy Information Administration reported last week, global production continues to exceed demand, and this has led to record levels of U.S. crude inventories. 

This is further pushing crude prices down, with West Texas Intermediate -- a common benchmark for U.S. oil prices -- falling to levels we haven't seen since the heart of the economic crisis in 2009. This is even with the oil rig count as of March 13 reporting a 40% decline in active drilling rigs versus one year ago. 

Now what: Frankly, it's that last bit that's most concerning for Key Energy Services. It takes time for reduced drilling activity to impact production, and the longer production levels stay high, the longer the downturn would impact a company like Key Energy Services, which generates a lot of its business drilling wells. There isn't anything in today's news that is specific to Key Energy Services, but its core business is going to face serious pressure the longer oil production stays up, and oil prices stay down. 

Key Energy Services' stock price may be down 85% since the 2014 high, but this isn't likely the right time to buy. There are way too many questions about the future of drilling activity for the next year or more. I'd look for signs that oil production is stabilizing and the rig count decline is over before even considering investing in a drilling company.  

Jason Hall has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Key Energy Services, Inc. Stock Quote
Key Energy Services, Inc.
KEG
$2.50 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
394%
 
S&P 500 Returns
127%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.