ACQUISITIONS (Tables)

9 Months Ended

Sep. 30, 2011

Acquisition-Date Fair Value of the Consideration Transferred

The acquisition-date fair value of the consideration transferred totaled $307.6 million which consisted of the following (in thousands):

Cash	$	189,696
Key common stock		117,919
Total	$	307,615

Proforma Consolidated Income Statement

The following represents the pro forma consolidated income statement as if the Edge acquisition had been included in our consolidated results as of January 1, 2010 for the three- and nine-month periods ended September 30, 2011 and 2010:

	Three Months  Ended September 30,						Nine Months  Ended September 30,
	2011			2010			2011			2010
	(unaudited)
	(in thousands, except per share amounts)
REVENUES	$	547,375		$	299,722		$	1,443,455		$	847,524
COSTS AND EXPENSES:
Direct operating expenses		336,173			204,107			922,324			600,751
Depreciation and amortization expense [1]		47,141			37,365			136,516			112,767
General and administrative expenses [2]		67,448			52,271			181,693			140,119
Operating income (loss)		96,613			5,979			202,922			(6,113	)
Loss on early extinguishment of debt		0			0			46,451			0
Interest expense, net of amounts capitalized		12,008			11,307			33,649			33,367
Other, net		2,406			56			(6,157	)		163
Income (loss) from continuing operations before tax		82,199			(5,384	)		128,979			(39,643	)
Income tax (expense) benefit [3]		(30,348	)		1,992			(48,444	)		15,149
Income (loss) from continuing operations		51,851			(3,392	)		80,535			(24,494	)
Income from discontinued operations, net of tax		0			8,283			0			18,360
Net income (loss)		51,851			4,891			80,535			(6,134	)
Loss attributable to noncontrolling interest		(730	)		(769	)		(1,027	)		(2,816	)
INCOME (LOSS) ATTRIBUTABLE TO KEY	$	52,581		$	5,660		$	81,562		$	(3,318	)
Earnings (loss) per share attributable to Key:
Basic and diluted	$	0.35		$	0.04		$	0.54		$	(0.02	)
Weighted average shares outstanding:
Basic		150,676			133,186			150,274			132,885
Diluted		151,044			133,186			150,713			132,885

Pro Forma Adjustments

[1] Depreciation and amortization expense for all periods has been adjusted to reflect the additional expense that would have been charged assuming the fair value adjustments to property and equipment and intangible assets had been applied on January 1, 2010.

[2] General and administrative expenses for the three- and nine-month periods ended September 30, 2010, have been adjusted to include $3.3 million and $3.4 million, respectively, of transaction costs.

[3] Income tax (expense) benefit for all periods has been adjusted to reflect applicable corporate tax as if Edge had been acquired and converted from its LLC status on January 1, 2010.

Edge Oilfield Services, LLC and Summit Oilfield Services, LLC

Changes in the estimated fair values of the assets acquired and liabilities assumed

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed. We are still in the process of obtaining third-party valuations of the tangible and intangible assets; thus, the provisional measurements below are preliminary and subject to change. Valuations are not complete as we continue to assess the fair values of the assets acquired and liabilities assumed.

	(in thousands)
At August 5, 2011:
Cash and cash equivalents	$	1,067
Accounts receivable		21,590
Inventory		3,471
Other current assets		234
Property and equipment		90,000
Intangible assets		45,000
Other long term assets		3,579
Total identifiable assets acquired		164,941
Current liabilities		19,640
Total liabilities assumed		19,640
Net identifiable assets acquired		145,301
Goodwill		162,314
Net assets acquired	$	307,615

Enhanced Oilfield Technologies, LLC

Changes in the estimated fair values of the assets acquired and liabilities assumed

The following table summarizes the changes in the estimated fair values of the assets acquired between December 31, 2010 and September 30, 2011. We are in the process of finalizing third-party valuations of the intangible assets acquired; thus, the provisional measurements of intangible assets and goodwill are preliminary and subject to change.

	September 30, 2011		December 31, 2010
	(in thousands)
At December 15, 2010:
Intangible assets	$	4,420	$	7,000
Total identifiable assets acquired		4,420		7,000
Contingent consideration		2,800		0
Total liabilities assumed		2,800		0
Net identifiable assets acquired		1,620		7,000
Goodwill		10,080		4,700
Net assets acquired	$	11,700	$	11,700