Key Energy Services, Inc. has proposed to combine with Basic Energy Services, Inc. in an all-stock merger. On September 20, 2018 and again on September 23, 2018, Key sent letters to management and the Board of Directors of Basic outlining its merger proposal and its strong desire to negotiate a transaction.

Key believes that the proposed combination is attractive strategically and financially for both companies given the highly complementary nature of their respective businesses and significant cost synergies that could be realized in the combination. Under the terms of the proposal, Key shareholders would own approximately 51% of the combined company and Basic shareholders would own 49%, representing a 15% premium to the 10-day VWAP before consideration of synergies. Including the estimated annual run rate synergies of $65 million, Key believes that the estimated total value to Basic shareholders is equivalent to an approximate 89% premium to Basic’s unaffected 10-day VWAP.

Robert J. Saltiel, Key’s President and Chief Executive Officer, stated,
“We are ready to move ahead swiftly to finalize a combination with Basic. We believe such a combination will create significant value for both shareholder groups and result in the combined company being a leader in the production services segment."

“We believe the proposed financing announced by Basic could be detrimental to both the structure of a combination and its value to shareholders. Basic’s proposed financing would likely cause meaningful additional cost to a combined company, reducing the significant synergies shareholders would otherwise realize through a merger. As a result, the proposed financing might effectively preclude a combination between Key and Basic and prevent the substantial value creation for all shareholders enabled under our proposal.”

Saltiel concluded, “We have tremendous respect for the Board, management and employees of Basic. We believe that we will be able to capitalize on the strengths of each organization to create a stronger combined company better able to invest in people and assets to serve the needs of our customers.”

Key is making this proposal public to inform both Basic’s and Key’s shareholders of the compelling value creation potential of the combination and to encourage Basic’s board to move towards a negotiated transaction and the postponement of the financing as currently contemplated.