Simmons Remains Neutral on Key Energy Services (KEG) Following Conference Call

Simmons maintained a Neutral rating on Key Energy Services (NYSE: KEG), and cut the price target to $0.25 (from $0.50), following the company's 1Q conference call.

Analyst John Daniel commented, "The risk for a debt restructuring is rising, thus we reiterate our cautious view of KEG. Presently, KEG has total liquidity of ~$182M, but per covenant stipulations, KEG must maintain a minimum threshold liquidity of $100M. With no imminent activity rebound likely and limited asset sale opportunities in the near-term, we believe that liquidity challenges will rise. Therefore, it seems increasingly likely that KEG needs to follow the steps of other industry players and seek some form of debt restructuring. How precisely that plays out, we simply don't know, but that risk leads us to maintain our Neutral rating. The downside is a scenario where KEG equity value gets wiped out and debt holders own the company. Best near-term case, in our view, is a sharp rally in oil prices that takes the stock higher, but that wouldn't address the balance sheet challenges."

For an analyst ratings summary and ratings history on Key Energy Services click here. For more ratings news on Key Energy Services click here.

Shares of Key Energy Services closed at $0.36 yesterday.

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