Key Energy Services Inc (OTCMKTS:KEGX) Hits The OTC

Shares of Key Energy Services Inc (OTCMKTS:KEGX) have hit the OTC Markets after getting de-listed by the NYSE. Shares traded under the symbol KEG and now trade as KEGX. The stock sold off hard on the news and registered new 52 week lows as institutions that can only own Big Board stocks dumped their positions. While things aren't looking too good for KEGX over the long term, the good news is that penny stock investors love former Big Board names and we usually get a nice bounce once the institutions have exited their entire positions. KEGX Daily ChartLike most oil drilling service companies, Key Energy Services has been hit hard by the oil price crash. The company is the largest onshore, rig-based well servicing contractor based on the number of rigs owned. Key provides a complete range of well intervention services and has operations in all major onshore oil and gas producing regions of the continental United States and internationally in Mexico and Russia.Unfortunately, the de-listing is just the start of what looks to be a bad result in the end for shareholders. Key has said that it is engaged in negotiations with lenders and bondholders about a potential restructuring. This is code for BANKRUPTCY, unless creditors agree to stock and massively dilute Key's current shareholder base. In this case, current shareholders won't be wiped out, but they'll own far less of the company. This would be the best case scenario. The worst case is that Key declares bankruptcy and creditors seize the company and common shareholders get nothing.In looking at Key's Q1 results, you can see how bad things have gotten for the company. Key reported first quarter 2016 consolidated revenues of $111.1 million and a pre-tax GAAP loss of $81.9 million, or $0.51 per share. This followed a bad fourth quarter where consolidated revenues were $150.2 million with a pre-tax GAAP loss of $157.6 million, or $0.97 per share.The one positive was that Key had been informed by the Department of Justice that the Department has closed its investigation into possible FCPA violations and that it decided to decline prosecution of the Company. In addition, Key engaged in negotiations with the SEC in an effort to reach a resolution of the staff's investigation related to these same matters to the tune of $5 million. This ended what could have been a fatal blow to the company had the DOJ gone forward with prosecution.Key's consolidated cash balance at March 31, 2016 was $155.7 million compared to $204.4 million at December 31, 2015; additionally, Key had $18.6 million of restricted cash as of March 31, 2016 as compared to $0.0 as of December 31, 2015. Total debt at March 31, 2016 was $965.4 million compared to total debt of $964.9 million at December 31, 2015. The Company had $181.6 of total liquidity available at March 31, 2016.The best bet for Key was if oil prices were to keep rising. However, they've fallen back down. When oil was at $50 a barrel, we forecast that we'd see $40 before we saw $60 and our prediction looks to being fulfilled, which is bad news for Key. Unfortunately, the bump in oil prices wasn't enough to get oil companies off the sidelines as many did not believe in the spring rally. CEO Robert Drummond explained Key's predicament.

"While we believe the recent increase in oil prices is a positive signal relative to the demand for our services by our customers, we've not seen an uptick in activity commensurate with that of oil prices. We do expect, however, that as our customers gain more confidence in the sustainability of oil prices, our production-driven services will benefit as our customers look for capital-efficient avenues to increase production and cash flows."

Currently trading with a market cap of $26 million, KEGX will be restructured sooner or later. The question no one knows is what will happen to common shareholders. However, we will say that KEGX is a good short-term bounce play. We've seen it with a number of Big Boards after they hit the OTC. We will be updating our subscribers as soon as we see the bounce taking place. For the latest updates on KEGX, sign up for our free small cap newsletter today!Disclosure: We have no position in KEGX and have not been compensated for this article.