Investors Deserve Better from KEG
Investors in Key Energy Services Inc. (NYSE;KEG) deserve better. As reported in the FCPA Blog and elsewhere, in June:
Key Energy Services Inc. said it is investigating allegation of possible bribery involving its Mexico operations. The Houston-based firm said in an SEC filing last week that it learned about the allegations in April and has conducted an initial investigation into potential violations of the FCPA and other laws. In May, the SEC is investigating potential violations of the FCPA involving its Russian business.
Key Energy made a voluntary disclosure about the Mexico allegations and its investigation to the SEC and the Justice Department on May 30, it said, and is fully cooperating with both agencies.
Of course they are cooperating. It appears someone spilled the beans to the SEC and to their Mexican customer.
On January 6, 2014, the Company disclosed that it was being audited by Petroleos Mexicanos ("Pemex"), a customer with aggregate billings of $372 million under contract. As a result, the Company disclosed that it expected to take a charge of between $2 million and $3 million in the fourth quarter 2013. On this news, Key Energy Services securities declined $0.28 per share or nearly 3.6%, to close at $7.554 per share on January 7, 2014.
In a May 6, 2014 Form 10-Q, Key Energy Services disclosed that "[t]he U.S. Securities and Exchange Commission has advised us that it is investigating possible violations of the U.S. Foreign Corrupt Practices Act involving business activities of Key's operations in Russia." On this news, the Company's shares fell $0.54, or more than 6%, to close at $8.40 on May 8, 2014 on heavy trading volume.
On July 17, 2014, the Company announced that it expects to report a second quarter loss in the range of 35 cents to 38 cents per share based on a $30 million to $35 million pre-tax charge for goodwill and other asset impairments related to its operations in Russia, and that pre-tax expenses of $5 million were incurred in connection with the Foreign Corrupt Practices Act investigations. On this news, the Company's shares fell $1.34, or more than 16%, to close at $7.03 on July 18, 2014 on heavy trading volume.
On July 17, 2014, Key Energy announced that the Company expects to report a second quarter 2014 loss in the range of $0.35 to $0.38 per share, and will record a $30-$35 million pre-tax charge for goodwill and other asset impairments related to the Company’s operations in Russia. The Company also reported that pre-tax expenses of approximately $5 million were incurred in connection with Foreign Corrupt Practices Act investigations disclosed in a previous regulatory filing. Following this news, Key Energy shares dropped more than 16 percent below the previous day’s closing price, or $1.34 per share.
With this cascade or revelations there appears to be a clear indications Something is rotten within Key Energy's management and its shares have suffered as a result.
Investors who purchased Key Energy shares between July 25, 2013 and July 17, 2014 (the “Class Period”) should contact Hagens Berman Partner Reed Kathrein, who is leading the firm’s investigation, by calling 510-725-3000
510-725-3000, emailing [email protected].
