Code of Business Conduct

keyenergy.com

Code of Business ConductEffective: April 2006 Revised: April 2009

1301 McKinney StreetSuite 1800Houston, TX 77010www.keyenergy.com

2009 Key Energy Services. All Rights Reserved.

Key Energy Services 1301 McKinney Suite 1800 Houston, Texas 77010

Telephone: 713.651.4300 Facsimile: 713.652.4005 www.ke

ices 1301 McKinney Suite 1800 Houston, Texas 77010

Telephone: 713.651.4300 Facsimile: 713.652.4005 www.keyenergy.com

Dear Fellow Key Employees,

At Key, our number one goal is to be the premium well-site provider of production services and solutions. In order to achieve this goal, we must commit to always acting lawfully, ethically and with integrity. Just as our personal values guide us to make the right decisions in our personal lives, the Companys five Core Values Safety, Ethics, Respect for the Individual, Respect for the Community, and Performance should serve as guideposts in our professional lives at the Company.

A simple translation of this Code is, Do the right thing, without exception. All employees, without regard to position within the Company or location in the world, must read the Code and be committed to it, not just when it is convenient or expedient, not just when other people are watching, not just when it improves our financial results, but consistently and without exception. We must hold ourselves and those around us accountable for following the rules of Key, the rules of our customers, and the laws of the countries in which we work.

This Code serves as a road map for ethical issues. It provides direction related to day-to-day business dealings and relationships. It also tells you exactly how to reach out to real people within the Company who can answer your questions or address your concerns. Whether the conduct involves you, your coworkers or someone outside of the Company, it is your responsibility to find help or seek answers to your questions. The pages at the very back of the book, in the section called Where to Find Help, outline several ways that you can obtain guidance and support.

It is one thing to talk about setting high standards and it is another thing to actually live by them. We are all accountable to these high standards and nothing less. The Board of Directors and your managers very much appreciate your faithful attention to our Code of Business Conduct and I can assure you that I personally appreciate your desire to do the right thing, without exception.

With thanks,

Dick Alario Chairman, President and Chief Executive Officer Key Energy Services, Inc.

Effective: April 2006Revised: April 2009

Table of Contents

About the Code of Business Conduct .................................................11. Applicability of the Code. .......................................................................... 22. Our Core Values ........................................................................................... 23. Effective Date of the Code ........................................................................ 34. Employees Must Understand the Code and its Policies ........................ 45. Monitoring and Oversight .......................................................................... 56. Certificate of Compliance .......................................................................... 57. Waiver ............................................................................................................ 5

Your Relationship with the Company..................................................71. Protection of Company Assets Policy ...................................................... 72. Prevention of Fraud Policy ........................................................................ 83. Confidential and Proprietary Information Policy ................................... 94. Privacy Policy .............................................................................................. 105. Inside Information and Insider Trading Policy ..................................... 106. Financial Integrity Policy .......................................................................... 167. Legal Review Policy ................................................................................... 17

The Companys Relationship with Others ........................................ 191. Health, Safety and Environmental Policy .............................................. 192. Honest Communication is Required ....................................................... 19 3. Requests for Information from the Media and Public ......................... 20 4. Political Contributions .............................................................................. 205. Public Speaking and Publishing Articles ................................................ 21 6. Press Releases ............................................................................................. 21 7. Community Involvement .......................................................................... 21 8. Community Projects .................................................................................. 22

The Companys Relationship with Our Customers and the Marketplace ......................................................................................23

1. Conflicts of Interest Policy ...................................................................... 23 2. Acceptance of Gifts and Gratuities Policy ............................................ 25 3. Gifts to Customers, Suppliers and Contractors Policy ........................ 27

Competition and Antitrust Policy .....................................................29

Transacting International Business ................................................. 311. International Boycott Policy ..................................................................... 312. Foreign Corrupt Practices Policy ............................................................. 323. Export Controls ......................................................................................... 34

Code of Business Conduct

4. U.S. Embargos/Trade Sanctions ............................................................. 355. Money Laundering ..................................................................................... 35

Consequences of Violating the Code or its Policies .........................37

Where to Find Help and Report Violations. .....................................391. Asking Questions and Reporting Concerns .......................................... 392. Where and How to Report ....................................................................... 393. Investigations .............................................................................................. 404. Non-Retaliation Policy .............................................................................. 41

CERTIFICATE OF COMPLIANCE ...............................................43


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About the Code of Business Conduct

Our Code of Business Conduct (the Code) has been adopted by the Board of Directors of Key Energy Services, Inc. It establishes our high standards of ethical and legal behavior for all employees and officers. The Code is a collection of policies that reflect our core values. The policies contained in the Code are designed to equip employees and officers with the knowledge to prevent and detect violations of our policies as well as applicable laws and regulations.

The purpose of the Code is to establish general standards for:

Deterring wrongdoing;

Promoting compliance with applicable governmental laws, rules, and regulations;

Encouraging honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

Promoting full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, governmental agencies and in other public communications made;

Accountability for business conduct; and

Advancing the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code.

The Code, together with other related policies and procedures, forms our Ethics & Compliance program. The Code exceeds the requirements of the definition of a Code of Ethics contained in the regulations of the United States Securities and Exchange Commission (the SEC) issued pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 and the corporate governance rules of the New York Stock Exchange regarding codes of business conduct.

While the Code sets out in general terms our standards of integrity and business conduct, no code can address every situation that individuals may encounter. The omission of a specific act from the Code does not mean that act is acceptable or lawful. As a result, the Code is not a substitute for good judgment, accountability, and guidance on proper business

Code of Business Conduct2

conduct. Employees are encouraged to seek additional guidance and support from those designated as responsible for business conduct matters. Ultimately, we must determine the right thing to do to maintain our personal and corporate integrity.

1. Applicability of the Code

The Code applies to the Company and its subsidiaries and affiliates, (collectively, the Company, Key, we, us, its and our) including all business units in all of our offices and locations around the world. All employees and officers in all business units are expected to be familiar with the Code and to apply it in the daily performance of their work-related responsibilities.

Employees and officers who violate the Code or who knowingly permit another to do so are subject to disciplinary action up to and including termination of employment and other appropriate measures. All violations must be reported.

2. Our Core Values

In most situations, our personal values guide us to the right decision. Within our business, we believe that the Companys core values should guide our decisions, actions, and conduct. Putting our core values into practice creates lasting benefits for our associates, stockholders, customers, and the communities in which we live. These five values are meant to be our guideposts, or rules of the road, for every action we take:

Safety: Securing our Success. At the Company, we are passionate about safety. Embracing safety as a value means constantly planning ahead, not just looking at the days statistics. Safety is an absolute for employees, for contractors, and for the communities where we operate.

Ethics: Assuring our Success. In all we do, we will be ethical, honest, and forthright. We will constantly strive to do what is right. We will operate with the utmost integrity, where the law is not only upheld, but respected, and promises made are promises kept.

Rules of the Road

Use Good Judgment

Hold Others Accountable

Seek Guidance on Proper Business Conduct


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Respect for the Individual: Retaining Those Responsible for our Success. At the Company, we want to recruit, reward, and retain the best. We understand the value of diversity, provide opportunities through training and development of our people, and strive to be an employer of choice.

Respect for the Community: Sharing our Success. We are dedicated to protecting our environment and adding value to our communities by promoting volunteerism and active participation.

Performance: Measuring our Success. Measuring our success is accountability. Accountability is about doing what we say we are going to do. We expect to be judged by the successful execution of our commitments as a company, and as individuals. We expect to succeed in the long term by using our employee energy and integrity to attain our clear, achievable goals.

Employees and officers of the Company are expected to conduct their business in accordance with these values. We must not simply comply with laws, regulations, and policies; we must work according to our values and endeavor to conduct ourselves in a manner beyond reproach. We must all exercise sound judgment in the service of our reputation as a market business leader, employer of choice, and good corporate citizen.

3. Effective Date of the Code

The Code is effective as of April 5, 2006, as revised in April 2009, and supercedes any prior similar documents, including the document entitled Code of Business Conduct and Ethics.

The Code does not replace any other published policies or procedures of the Company, such as other work rules or personal conduct policies. Upon receipt of the Code, employees will be required to certify they have read and agree to abide by the Code. Periodic recertification will be required.

The Company will continue to release the Code in hard-copy form at regular intervals, and will review and revise it periodically as needed. In addition to the hard-copy version that all employees are provided, the Code also appears on the Companys Intranet, and in any conflict between the

Safety

Ethics

Respect for Individual

Respect for Community

Performance

COREVALUES


printed version and the most current Intranet version, the Intranet version will control.

The Company expressly states:

It reserves the right to unilaterally change at any time the Code or the Companys policies and procedures.

Nothing contained in the Code or the Companys policies and procedures shall be construed or applied as binding interpretation or definition of the law or industry practice.

Nothing contained in the Code or the Companys policies and procedures is intended by the Company to be, nor shall it be, construed as an employment agreement.

Any act by employees in violation of the Code or the Companys policies and procedures, as well as any U.S. or foreign law or regulation, is beyond the scope of such persons authority and is not an act by or on behalf of the Company.

4. Employees Must Understand the Code and its Policies

The Companys employees must read and understand not only the standards contained in the Code, but also the values on which they are based. Employees also have an obligation to comply with the letter and the spirit of the Code and to encourage others to do the same. Employees are personally responsible for abiding by the Code, all applicable Company policies and procedures, and all applicable laws and regulations, as well as for behaving in a highly ethical manner as they conduct business. Employees should regularly review the Code.

Employees must be alert to and promptly raise any concerns or report any violations of the Code in accordance with the Companys procedure for reporting violations of the Code, as described in the Code. Employees should cooperate fully and honestly in the Companys investigation of alleged illegal or

unethical activity when called upon.

Employees must not knowingly help another person conduct business in a manner contrary to the Companys core values or in violation of the Code, Company policies and procedures, or applicable laws and regulations.

Ethical business conduct is everyones responsibility

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Employees must honestly complete the Certificate of Compliance to the Code as requested by the Company.

5. Monitoring and Oversight

The Ethics Committee is a committee appointed by the President, consisting of representation from Internal Audit, Legal, HR, and Operations. The Ethics Committee assists in monitoring compliance with the Code, Company policies and procedures, and applicable laws and regulations. The Internal Audit Department will routinely conduct audits of issues that have regulatory or compliance implications.

The Audit Committee of the Companys Board of Directors shall have oversight of the administration of the Code and responsibility for the Ethics & Compliance program within the Company. Significant or material events related to the Companys Ethics & Compliance program shall be reported immediately to the chair of the Audit Committee. At least once a year, the Ethics Committee or Director Internal Audit shall report to the Audit Committee regarding the Companys Ethics & Compliance program activities, and of the occurrence of all significant events relating to the Code.

6. Certificate of Compliance

The Certificate of Compliance is given to all new employees and is sent to employees periodically by Internal Audit on behalf of the Ethics Committee. The Certificate of Compliance contains an acknowledgment that the signer has read the Code and is in compliance with its requirements and knows of no employee or officer who is not in compliance with its requirements. Except where expressly prohibited by written law, completing and returning a signed Certificate of Compliance is a condition of employment.

7. Waiver

No waiver of a provision of the Code may be made for executive officers except with the prior approval of the Board of Directors.


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Your Relationship with the Company

1. Protection of Company Assets Policy

Company Assets include, but are not limited to, such things as the Companys technology, telephone systems, computer systems, vehicles, credit cards, documents, equipment, facilities, information, logos and

names, materials, and supplies. Employees must use and maintain these assets with the utmost care and respect, guarding against waste and abuse, to conduct Company business. Proper use of Company Assets is the responsibility of all employees. Personal use of Company Assets on an occasional and limited basis might be acceptable, provided there are no measurable increased costs to the Company. The use of the Companys Assets or resources for personal financial gain is strictly prohibited.

Employees must:

Use Company Assets only to fulfill the Companys goals and purposes.

Use best efforts to protect all Company Assets from loss, damage, misuse, or theft and assist the Company in its efforts to control costs.

Be cost-conscious and alert to opportunities for improving performance while reducing costs.

Protect not only Company Assets, but also the assets of others with which we are entrusted, including physical property as well as intellectual property, such as confidential or proprietary information, copyrighted works of authorship, and trademarks.

Not make or use any unauthorized copies of software, tapes, books, or other legally protected work.

Rules of the Road Use Company Assets

for the Benefit of the Company

Protect Company Assets

Protect Assets of Others

Personal use of Company Assets for personal financial gain is prohibited.

STOP


2. Prevention of Fraud Policy

The Company prohibits all forms of fraud, which can include:

embezzlement;

misuse of the Company credit card;

misuse of fuel or a Company fuel card;

forgery or alteration of negotiable instruments such as Company checks and drafts;

misappropriation of Company Assets or the assets of another employee, customer, partner or supplier;

conversion to personal use of cash, securities, supplies or any other Company Asset;

unauthorized handling or reporting of transactions; or

falsification of Company records or financial statements for personal gain.

Preventing fraud is everyones responsibility. Managers must ensure that all expenditures by their subordinates are appropriately documented, and properly identified in the Companys accounting records. The Loss Prevention Hotline can be

contacted toll free any time for a report of fraud or for help in investigating at 866-902-3438. Employees must report any suspected fraud to the Legal Department, Loss Prevention, Internal Audit, or through the Ethics Line. All such reports will be investigated by Loss Prevention or the Legal Department. Fraud involving more than $50,000 of estimated loss, or involving a breach of the Companys internal controls by any level of management, will be reported to the Audit Committee of the Board of Directors, the Chief Executive Officer, and the Chief Financial Officer.

Preventing fraud is everyones responsibility.

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Loss Prevention Hotline: (866) 902-3438

Q: I am taking my brother-in-law out for a nice steak dinner to celebrate his birthday. He works in the IT department of a big customer of Key. Can I use my Company-issued credit card?

A: No. The Company-issued credit card may only be used for business-related expenses and may not be used for personal use or gain.


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3. Confidential and Proprietary Information Policy

Confidential and proprietary information includes any and all information regarding the Company and its affiliates other than publicly available information, such as information disclosed in its public filings under the Securities Exchange Act. Employees must not use confidential information for personal use or to benefit a third party. Confidential and proprietary information includes, but is not limited to, any information regarding the existence or terms of any potential acquisitions by the Company, personnel information (including information relating to any and all aspects of compensation of any and all employees of the Company), ideas, discoveries, designs, inventions, technology, improvements, trade secrets, know-how, manufacturing and services, processes, design specifications, writings and other works of authorship, computer programs, financial information, accounting information, organizational structure, Company expenditures, marketing plans, customer lists and data, business plans or methods and the like, that relate in any manner to the actual or anticipated business of the Company.

Employees must:

Carefully protect Keys confidential and proprietary information and act responsibly with the sensitive information of competitors, customers, and other stakeholders.

Not obtain information about our competitors through unlawful or unethical means, such as theft, illegal entry, electronic eavesdropping, or surveillance. We will not misrepresent ourselves, our positions, or our circumstances to persuade another to release information, nor will we commission a third party to do so.

Not transfer confidential email messages or any message intended for internal use only outside the Company.

Respect the trade secrets, copyrights, trademarks, and patent rights of others. Employees shall protect the confidentiality of Keys information and of its intellectual property interest in any works created or authored by employees in the course of their employment.

Safeguard Keys confidential and proprietary information even when they leave employment with Key.


4. Privacy Policy

Employees must respect the confidentiality and privacy of our suppliers, our contractors, our customers, our employees, and others with whom we do business. Employees must not use confidential information of our suppliers, contractors, customers, or employees for personal use, or to benefit a third party. The Company collects such information only when necessary to conduct its business and protects the information from unnecessary disclosure. The Company will disclose confidential information or personal data only when necessary and when appropriate approval to do so has been obtained and/or when it is compelled to do so by legal, regulatory, or professional requirements. Consistent with the Companys Record Retention Policy, the Company will dispose of confidential, personal data in a manner that will protect the confidentiality of the data.

5. Inside Information and Insider Trading Policy

Federal and state securities laws prohibit any person who is aware of material nonpublic information about a company from trading in securities of that company. These laws also prohibit a person from disclosing material nonpublic information to other persons who may trade on the basis of that information.

Personnel and Others Covered. This policy not only applies to employees, it also applies to family members who share the same address or are financially dependent, any unrelated person who shares the same address (other than employees or tenants), resides with the employee, or any other person or entity whose transactions in Company securities are directed by the employee or are subject to his or her influence or control. The Companys employees are responsible for making sure that these other persons and entities comply with this policy.

Transactions Covered. This policy applies to any purchase or sale of Company securities, including common stock, options to purchase our common stock, any other type of securities that the Company may issue, such as preferred stock, convertible debentures and warrants, as well as exchange-traded options, other derivative securities, and puts, calls and short sales involving Company securities.

Trading and Disclosure Restrictions. The following trading and disclosure restrictions apply to all of our employees, officers and directors:


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If you have material nonpublic information regarding the Company, you must not trade or advise anyone else to trade in our securities until such information has been publicly disclosed.

If you have material nonpublic information regarding any other company that you obtained from your employment or relationship with the Company, you must not trade or advise anyone else to trade in the securities of that other company until such information has been publicly disclosed.

Do not share material nonpublic information with people in the Company whose jobs do not require them to have the information.

Do not disclose any nonpublic information, material or otherwise, concerning the Company to anyone outside the Company unless required as part of your duties and the person receiving the information has a reason to know the information for Company business purposes.

Q: A market analyst asked me if it were true that we acquired one of our competitors. I know we are currently in the closing process. If I deny this, I am lying. What should I say?

A: Tell the analyst that as to these types of matters, he should contact the Companys Investor Relations Department.

Q: My son is beginning his career as a stock broker and is still living at home. He asked me if the rumor that we had been awarded a big contract were true, as he wanted to make an impression on his new boss by bringing up a winning stock. Is it okay for me to tell him that we closed the deal before it is made public?

A: No. The Companys policy prohibiting insider trading and unauthorized disclosure of information to others applies to your son. Further, only Senior Management or the Investor Relations Department may speak about the Companys financial status.


Definition of Material Information. Information about our Company is material if there is a substantial likelihood that a reasonable stockholder or investor would consider it important in making a decision to buy, sell or hold our securities, or if the disclosure of the information would be expected to significantly alter the total mix of the information in the marketplace about us. In simple terms, material information is any type of information that could reasonably be expected to affect the market price of our securities. Both positive and negative information may be material.

Examples include:

earnings estimates (including changes of previously announced estimates);

a significant change in our operations, projections or strategic plans;

a potential merger, acquisition or tender offer;

a potential sale of significant assets or subsidiaries;

the gain or loss of a major supplier or customer;

a new product or discovery;

a significant pricing change in our products or services;

a declaration of a stock split, a public or private securities offering by us or a change in our dividend policies or amounts;

a change in accounting policies;

a change in senior management;

impending bankruptcy or possible liquidity problems; or

an actual or threatened major lawsuit.

Definition of Nonpublic Information. Nonpublic information is information that is not generally available to the investing public. If you

Q: I know the financial results of the Company before most others in the Company do. If we beat the forecasts, it would be a perfect time to buy Company stock. Can I do this?

A: No. You have material nonpublic information regarding the Company. It is illegal for you to trade at that time.


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are aware of material nonpublic information, you may not trade until the information has been widely disclosed to the public (for example, through a press release or an SEC filing) and the market has had sufficient time to absorb the information. For purposes of this policy, information will generally be considered public after the second full trading day following the Companys public release of the information. For example, if the Company issued a press release on a Tuesday, the first day that trading could

occur would be on Friday. If you are not sure whether information is material or nonpublic, consult with the Chief Compliance Officer, Senior Vice President and General Counsel,

for guidance before engaging in any transaction in Company securities. Refer to the Companys internal website for the Chief Compliance Officers contact information.

Transactions by Directors, Officers and Certain Other Employees. The Company has adopted special trading procedures for directors and officers. In addition, from time to time, specific employees may be instructed to refrain from any trading activities as a result of their involvement with financial information, material developments, special projects, and other activities or events. If you are subject to special trading restrictions, you will be notified of these trading restrictions by your manager and/or the Chief Compliance Officer.

Twenty Twenty Hindsight. Remember, anyone scrutinizing employee transactions will be doing so after the fact, with the benefit of hindsight. As a practical matter, before engaging in any transaction, you should carefully consider how enforcement authorities and others might view the transaction in hindsight.

Unauthorized Disclosure of Information. Employees are prohibited from disclosing to anyone inside or outside the Company any nonpublic information obtained at or through the Company, except when such disclosure is part of your regular duties and is needed to enable the Company to carry out its business properly and effectively.

Responses to Inquiries. The Company is subject to laws that govern the timing of our disclosures of material information to the public and others. Our Regulation FD (Fair Disclosure) Policy provides that only certain designated employees may discuss the Company with the news media, securities analysts and investors. All inquiries from outsiders regarding

If in doubt, ask.!


material nonpublic information about the Company should be forwarded to the Chief Financial Officer or the Investor Relations Department. Accordingly, when an inquiry is made by an outsider, the following response will generally be appropriate:

As to these types of matters, please contact the Investor Relations Department.

Protecting the Confidentiality of Company Information. In order to protect the Companys information and comply with applicable regulations, employees should:

avoid discussions of confidential matters in places where they might be overheard or otherwise disseminated;

mark sensitive documents confidential and use sealed envelopes marked confidential;

provide instructions to receptionists regarding outside inquiries;

use code names for sensitive projects and passwords to restrict computer access; and

not use any Internet message boards or similar medium available to the public to post any unauthorized messages regarding the Company or our business, financial condition, employees, clients or other matters related to us.

Communicating Potential Material Information to Senior Management. If you become aware of information about the Company that is or may become material, you should promptly communicate that information to the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Accounting Officer, or the Chief Compliance Officer. This communication is very important to allow the Company to determine whether, how, and when the information should be reported to the public. It is also critical to permit the Chief Compliance Officer to determine whether to permit transactions in our securities.

Civil and Criminal Penalties. If you violate the insider trading or tipping laws, you may be required to: pay civil penalties up to three times the profit made or loss avoided;

pay a criminal penalty of up to $5 million; and

serve a jail term of up to 20 years.


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In addition, the Company and/or the supervisors of a person who violates these laws may also be subject to civil or criminal penalties if they did not take appropriate steps to prevent illegal trading. The insider trading laws prohibit not only trading on the basis of material nonpublic information, but also tipping, that is, communicating material nonpublic information to other persons who may trade or advise others to trade on the basis of that information.

Company Discipline. If you violate this policy or insider trading or tipping laws, you may be subject to disciplinary action by the Company, up to and including termination for cause. A violation of our Company policy is not necessarily the same as a violation of law and we may determine that specific conduct violates policy, whether or not the conduct also violates the law. We are not required to await the filing or conclusion of a civil or criminal action against an alleged violator before taking disciplinary action. Needless to say, a violation of law, or even an SEC Investigation that does not result in prosecution, can tarnish ones reputation and irreparably damage a career, as well as negatively impact the Company.

Reporting of Violations. Any employee or officer who violates this policy or any federal or state laws governing insider trading or tipping, or knows of any such violation by any other employee, officer or director, must report the violation immediately to the Chief Compliance Officer.

Exceptions For Stock Option Exercises. This policy does not apply to your exercise of an employee stock option. It also does not apply to your election to have the Company withhold shares subject to an option to satisfy tax withholding requirements. This policy does apply, however, to sales of shares received upon exercise of an option.

Exceptions For Trades Pursuant To Pre-Arranged Trading Plans. The trading restrictions in this policy do not apply to trading in Company securities if the trades occur pursuant to a prearranged trading plan that has been pre-cleared by our Chief Compliance Officer. An SEC rule, Rule 10b51(c), provides a defense from insider trading liability for trades that occur pursuant to a prearranged trading plan that meets certain specified conditions. You must pre-clear any such trading plan with our Chief Compliance Officer and you must enter into the trading plan at a time when you were not

Insider trading carries criminal penalties of up to $5 million and jail time of up to 20 years.

!


aware of any material nonpublic information. As a condition to the approval of any such plan, the Chief Compliance Officer may require the inclusion in the plan of any provisions deemed necessary or advisable to comply with the law and Company policy. Any changes to a trading plan that has been adopted must be approved by the Chief Compliance Officer before any further transactions can be effected pursuant to the plan.

Post-Termination Transactions. The Insider Trading Policy will continue to apply to employee transactions in Key securities even after they have terminated their employment. If you are in possession of material, nonpublic information when your employment terminates, you may not trade in Key securities until that information has become public or is no longer material.

Questions or Reporting. It is your responsibility to comply with the securities laws and this policy. If you have questions about this policy, please contact our Chief Compliance Officer at:

Chief Compliance OfficerOffice of the General CounselKey Energy Services, Inc.1301 McKinney Street, Suite 1800Houston, Texas 77010713-651-4300

6. Financial Integrity Policy

Management, stockholders, creditors, our colleagues, and government entities rely upon the accuracy of the Companys financial records. It is therefore imperative that the financial records and reports produced or derived from those records be maintained and presented in accordance with the laws and regulations in each applicable jurisdiction. Those records must accurately and fairly reflect in reasonable detail the assets, liabilities, expenses, and revenues of the Company. By demonstrating honesty in our accounting practices, we generate trust with our customers, suppliers, and stockholders and enhance our reputation.

General Policy. False and misleading accounting records, transactions, books and reports are strictly prohibited. Maintaining secret or unrecorded Company funds or bank accounts are also strictly prohibited. All Company records must be truthful and accurate. When we fail to record financial information accurately, we risk damaging our reputation, losing business,


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decreasing customer and stockholder confidence, and facing penalties.

Personnel Covered. The responsibility for ensuring that false or intentionally misleading entries are not made in the Companys accounting records resides not only with accounting, finance and audit personnel but also with all other employees.

Proper Documentation Required. No intentional misclassification of transactions as to accounts, business units, or accounting periods are permitted and accurate documentation in reasonable detail must support all transactions, large or small. Thus, the preparation of expense reports and time sheets, the posting of sales and marketing data, and the recording of significant capital improvements or investments require the utmost degree of accuracy and transparency. Proper documentation of all contracts, agreements, and arrangements concerning the Company and/or its business and operations shall be maintained on the Companys premises or at locations and facilities controlled by the Company.

Consequences of Violations of the Policy. The consequences of altering, modifying, or destroying any relevant Company documents or records are severe and may include prosecution. An employee who has any doubt about the legality or propriety of modifying or destroying any document or record

should contact his/her supervisor, the Legal Department, or the Internal Audit Department.

7. Legal Review Policy

All agreements, contracts, and other legal documents which bind the Company and/or its properties, or concern the Companys business operations shall be reviewed and approved by the Companys Legal Department prior to execution. The Legal Department from time to time may prepare standard forms of agreements and other documents for use by employees and authorize employees to use the form or model agreements and documents without further review by the Legal Department.

Financial Checklist Do your financial results

appear to be consistent with performance?

Are there any new financial reporting risks that you are aware of that have not been disclosed to management?

Are there any items you feel should be included in the financial statements that are not included or have been presented differently?

Ethical business conduct is everyones responsibility.

!


Employees are expected to promptly provide the Companys Legal Department with copies of all legal documents requested, which will be maintained in the Companys records.

From time to time, employees may be contacted by government representatives or legal counsel representing other companies, government agencies, or individuals in connection with investigations that concern the Company, its businesses, clients, employees, or suppliers. All requests for information other than what is provided on a routine basis should be reported to the Legal Department immediately. An employee who is contacted for documents or confidential information should refer the requestor to the Legal Department. Likewise, if an employee receives a subpoena or other request to testify or produce documents, a copy of the subpoena or request should be forwarded immediately to the Legal Department, and will be handled by the Legal Department.

The Legal Departments guidance should be received before responding to any request, and all responses must be coordinated through the Legal Department. All information provided should be truthful and accurate. Employees must never mislead any investigator and must never modify or destroy documents or records in response to an investigation or subpoena request.

The Legal Department periodically presents compliance programs that you may be required to attend. In addition, the Legal Department has written materials explaining in greater detail some complex laws and regulations, and the Companys commitment to complying with them. These materials are available to all employees upon request, and you may be sent copies and asked to study them. If you need more information about any law or regulation that you believe impacts the Companys business, you should contact the Legal Department for guidance.

All requests for information must be reviewed by the Legal Department. If in doubt, ask.


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The Companys Relationship with Others

1. Health, Safety and Environmental Policy

One of the Companys primary objectives is to provide a safe and secure working environment that is free of incidents, accidents, and unsafe acts. In order to achieve and maintain this safe workplace, every employee must understand and adhere to the Companys health, safety, and environmental policies and procedures; the laws, rules, and regulations of the areas in which we conduct our business; and, often, the rules of our customers. Compliance with the governing policies, laws, and regulations is the responsibility of every manager and employee and is a condition of employment. No deviations from such policies, laws, and regulations are permitted without prior approval from the appropriate Company personnel or government regulatory agency.

Every employee must take responsibility for achieving a workplace that is incident-free. This responsibility includes exercising good judgment and common sense while performing job duties. If an employee identifies an act, condition, or equipment that poses a risk to them, their fellow workers, members of the public, or the environment, the employee has the authority and responsibility to stop the operation and to immediately report such at-risk act, condition, or equipment. Employees must ensure that all at-risk acts, conditions, or equipment are corrected or repaired or adequate precautions are taken prior to commencing or resuming work. Employees must assist in identifying the root causes of incidents and helping to develop preventive measures.

It is managements responsibility to enforce the health, safety, and environmental policies, laws, and regulations. Management must establish and maintain effective safety programs applicable to their operations and must hold their employees accountable. No task is so important or must be performed so quickly that the safety of the Companys employees, those who work beside the Company, or the environment are in jeopardy. There is no compromise when it comes to health, safety, and the environment.

2. Honest Communication is Required

The Company is committed to conducting business in an open and honest manner. All communications, whether internal or external, should be accurate and forthright. These communications may include, but are not limited to, general internal reports and memoranda, advertising, media broadcasts, marketing, sales brochures, and illustrations.


The Company will provide accurate information when promoting its products and services. Misleading, false, or exaggerated claims concerning our products and services, or those of our competitors, are unacceptable. These same principles must be adhered to when responding to inquiries from customers, fellow employees, the media, regulatory agencies, and stockholders.

The publication or circulation, either internally or externally, of any oral or written statement that is false, derogatory, malicious, or defamatory of any other person, and in particular the Companys competitors, is prohibited. The use of Company letterhead, e-mail, or reference to business address or title is prohibited in expressing a private view in a public forum.

3. Requests for Information from the Media and Public

We are subject to laws that govern the timing of our disclosures of material information to the public and others. Our Regulation FD Policy provides that only certain designated employees may discuss the Company with the news media, securities analysts, and investors. All inquiries from outsiders regarding material nonpublic information about the Company should be forwarded to the Investor Relations Department. Accordingly, when an inquiry is made by an outsider, the following response will generally be appropriate:

As to these types of matters, please contact the Companys Investor Relations Department.

For more guidance on this topic, contact the Legal Department, or see the Companys Regulation FD Policy, found on the Companys Intranet.

4. Political Contributions

Only the Companys Political Action Committee or its designees are permitted to use the Companys resources to participate in political activities, and all such activities shall be conducted in strict accordance with federal and state law. Employees must not use the Companys money, credit, property, or services for political activities. Outside of Company business hours, employees may participate in any political activities of their choice, but the Company will not support or reimburse employees financially. For more guidance on this topic, contact the Legal Department.

All inquiries regarding material nonpublic information about the Company must be forwarded to the Investor Relations Department.


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5. Public Speaking and Publishing Articles

Speeches and articles offer excellent opportunities for the Company and its employees to present topics, ideas, and information of interest to business and professional audiences. These communications provide the public with a clearer understanding of our Company and its various business units. A speech or article on a professional topic written by an employee for delivery to an audience or publication represents the Company; therefore, speeches and articles must be approved by Investor Relations prior to the speaking engagement or submission for publication. For more guidance on this topic, see the Companys Regulation FD Policy, found on the Companys Intranet.

6. Press Releases

Press releases allow the Company to announce important and relevant information to the public through the media. If a business unit or department with the Company anticipates the necessity for a press release to be created, the business unit or department must contact Investor Relations to discuss the appropriateness of such a release and to provide the needed information. For more guidance on this topic, see the Companys Regulation FD Policy, found on the Companys Intranet.

7. Community Involvement

The Company directly and through its employees contributes to the general well-being and improvement of towns, cities, and regions where it has operations. The Company provides financial support to worthwhile community programs in areas such as social welfare, health, education, and arts and culture to promote the development of positive relationships in the areas where we have business interests. The Company also encourages the recruitment of qualified local personnel where practical. Community involvement and requests for corporate contributions should go through the Human Resources Department. While the Company encourages employees to participate in charitable organizations and other community activities of their choice, these outside activities should not interfere with job duties. No employee may pressure another employee to express a view that is contrary to a personal belief or to contribute to or support political, religious, or charitable causes.


8. Community Projects

When a new project or business issue affects a local community, the business unit should seek the guidance of the Human Resources Department to help facilitate communications with the affected community. The Human Resources Department will serve as a liaison with local communities as project development occurs.


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The Companys Relationship with Our Customers and the Marketplace

1. Conflicts of Interest Policy

In General. It is the objective of the Company to award business to suppliers of goods and services solely on the basis of commercial considerations such as competitive price, high quality, dependable service, timely delivery, and reputation of the supplier. Employees are expected to deal with suppliers, contractors, vendors, and all others doing business with the Company on the sole basis of these considerations without favor, preference, obligation, or other such pressure which may impair the employees objectivity.

The Company expects employees to avoid those relationships that might affect their judgment in performing their duties or be construed as a conflict of interest. There are, however, many circumstances in which a real or apparent conflict of interest may arise. A conflict of interest is deemed to exist whenever, as a result of the nature or responsibilities of his or her employment with the Company, an employee is in a position to further any personal financial interest or the financial interest of any member of the employees family.

Examples of Conflicts of Interest. The following examples are illustrative only and are not intended to be all inclusive:

An employees investment or financial interest in, or holding an employee, director, consultant, or agent position with, any supplier, customer, or competitor of the Company (except for an investment in publicly traded securities as described below).

The solicitation of gifts or services from any actual or prospective customer, supplier, or competitor of the Company, or any governmental body or official, whether or not he, she, or it has business dealings with the Company.

An employees disclosure or use of any confidential information gained by reason of employment by the Company for profit or advantage for himself or herself, or anyone else.

If ever in doubt, ask.

Q: I want to start a small business in my spare time. Will this be considered a conflict of interest?

A: Maybe. If your business interferes with your obligations to the Company or is related to the oilfield services industry, it would likely be a conflict.


An employees competition with the Company in the acquisition or disposition of rights or property.

The following situations would not be considered conflicts of interest:

Ownership of an insignificant percentage (1% or less of the outstanding shares) of publicly traded securities of a supplier, customer, or competitor of the Company.

A transaction with one of the Companys banks, which transaction is customary and conducted on standard commercially available terms, such as a home mortgage or bank loan.

A transaction or relationship disclosed in accordance with this Conflicts of Interest Policy and determined by the Chief Compliance Officer not to be a prohibited conflict of interest.

No employee, regardless of salary level, shall engage in any business or conduct, or enter into any agreement or arrangement, which would give rise to actual or potential conflicts of interest. No employee should permit himself or herself to be placed in a position which might give rise to the appearance that he or she has a conflict of interest.

No officer of the Company shall, directly or indirectly, including through any subsidiary, obtain credit for himself or herself, or another officer, arrange for the extension of such credit, or renew an extension of such credit in the form of a personal loan from the Company.

Employees must advance the legitimate interests of the Company when the opportunity to do so arises. Employees shall not (a) take for themselves personally opportunities that properly belong to the Company or are discovered through the use of Company property, information, or position; (b) use Company property, information, or position for personal gain; or (c) compete with the Company.

Questions and Reporting Requirements. Employees who seek to do business with the Company as a vendor, or who desire to enter into any commercial enterprise in the oil and gas industry, must seek prior written approval from the Ethics Committee, through their Line of Business. Employees who believe they or their family have an actual or potential

Q: My daughter owns an office cleaning business. Can I hire her to clean the Key district office?

A: No. This is a conflict of interest. You would be in a position to further the financial interest of a family member.


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conflict of interest shall report, in writing, to the Ethics Committee. Employees who have knowledge of an actual/apparent conflict involving another employee should report it to the Ethics Committee.

Requests and reports should be addressed to the Ethics Committee as follows:

Ethics Committee Key Energy Services, Inc.1301 McKinney Street, Suite 1800Houston, Texas [email protected] Dedicated fax line: 432-618-3521

The Line of Business Manager shall consult with the Ethics Committee to determine whether a conflict of interest actually exists. The Ethics Committee shall recommend measures to be taken to neutralize any adverse effect of the conflict of interest reported, if any such measures are available or appropriate under the circumstances, or will disallow the potential enterprise or relationship. This procedure shall be applied so as to minimize its effect on the personal affairs of employees consistent with the protection of the Companys interests.

2. Acceptance of Gifts and Gratuities Policy

An employee may not accept, or give permission for a member of the employees immediate family to accept, gifts of more than nominal value from an actual or prospective customer, supplier, or contractor of the Company, or any governmental official who is attempting to establish dealings with the Company by providing such gifts, without the written approval of an employees supervisor.

Limitations on Gifts Received. More specifically, one-time gifts which are valued at less than $100.00 and which contain marks or names of the vendor do not require written approval. Gifts from vendors of a value of more than $100.00 must be disclosed and approved in writing by the employees supervisor. Gifts from vendors of a value of more than $250.00 individually, or which total a value of $250.00 per vendor per year, must be disclosed and approved in writing by an executive officer. This does not preclude an employees acceptance of reasonable business entertainment, such as lunch or dinner, or events involving normal sales promotion, customarily made available to other customers of the sponsoring organization, advertising, or publicity.


The following types of items may generally be accepted by an employee:

Reciprocal meals (food and beverages).

Advertising articles (pens, paperweights, ashtrays, hats, jackets, shirts, and similar items bearing the donors logo or company name).

Holiday foods or beverages (turkeys, hams, liquor).

Sports or theater tickets (individual events only).

Pleasure trips (sports events, hunting, fishing, golfing, etc.) customarily made available to other customers of the sponsoring organization, with pre-approval by employees supervisor.

Unacceptable Gifts. The following types of items and services may not be accepted by an employee regardless of value:

Cash.

Loans or financing (except at prevailing commercial rates and terms with banks or other lending institutions).

Credit cards.

Transportation equipment (autos, trucks, boats, etc.)

Establishment of credit on behalf of the employee, unless available generally to all Key employees.

Airline or other transportation tickets and/or individual charters (except for properly authorized pleasure trips referred to above).

Discounts on personal purchases, unless available generally to all Key employees through Company-sponsored programs.

Improvements or repairs to personal or real property (except at prevailing commercial rates and terms).

Sale or purchase of personal or real property (except at prevailing commercial rates and terms).

Gift certificates.

Finders fees or fees for the referral of business.

Q: One of our vendors wants to give me season tickets to a sporting event. Can I accept?

A: Not if the season tickets are for one persons sole use. This would be over the permissible value. You would have to obtain the written permission of an executive officer to accept. If a vendor offers you a couple of tickets to one sporting event, that would likely be acceptable as long as the tickets were within the permissible value.


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3. Gifts to Customers, Suppliers and Contractors Policy

Building strong relationships with suppliers, contractors, and customers is integral to being a world-class company. That means the Companys need to continue treating them as we would like to be treated with honesty, fairness, and respect. The Company must keep our commitments of quality, reliability, and service.

We expect our suppliers, contractors, and customers and others who do business with us or on our behalf to conduct their business on behalf of the Company in compliance with all applicable laws and regulations and to adhere to the same standards of fair and ethical business conduct to which we hold ourselves. We also expect our employees to adhere to the codes of conduct of our suppliers, contractors, and customers when aware of those codes.

Limitations Given. In the U.S., an employee may not give gifts of more than nominal value ($100.00) to an actual or prospective customer, supplier, or contractor of the Company, or any governmental official, in an attempt to establish dealings with the Company by providing such gifts, without the written approval of the employees supervisor. For guidance of gifts outside the U.S., review the Foreign Corrupt Practices Policy on page 32.

The following types of items may generally be given by an employee without prior approval:

Reciprocal meals (food and beverages).

Advertising articles (pens, paperweights, ashtrays, hats, jackets, shirts, and similar items bearing the donors logo or company name).

Holiday foods or beverages (turkeys, hams, liquor).

Sports or theater tickets (individual events only).

Pleasure trips (sports events, hunting, fishing, golfing, etc.) customarily made available to other customers of the Company, may be offered only, with pre-approval by an executive officer.

Employees must:

Be fair in our choice of suppliers and contractors and honest in all business interactions with them.

Choose our suppliers and contractors based on appropriate criteria, such as value, quality, price, technical excellence, service, reputation, experience, and capacity.


Not make decisions about suppliers or contractors on the basis of personal relationships and friendships or the opportunity for personal financial gain.

Disclose when a relative or close personal friend has an ownership interest in, or significant management position with, any supplier, contractor or customer.

Not perform work for Key as a contractor, supplier, or consultant while in the employ of Key.

Not offer bribes or accept kickbacks from our suppliers, contractors, or customers for any reason.

Safeguard all information received from our suppliers, contractors, and customers and not disclose it to anyone outside of the Company without the appropriate approval to do so and/or when we are compelled to do so by legal, regulatory, or professional requirements.

Deal fairly with our suppliers, contractors, and customers. Do not take advantage of them through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair practice.

Not make false or misleading remarks to suppliers, contractors, or customers about other suppliers, contractors, customers, or Company competitors or their products or services.

Not suggest or imply that suppliers to or customers of our Company are required to purchase products or services from us.


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Competition and Antitrust Policy

The Company is committed to conducting its business in an open, vigorous, and competitive fashion. Any activity that undermines this commitment is unacceptable and may also be illegal. Therefore, all purchases and sales must be predicated strictly on considerations of efficiency, price, quality, service, and suitability.

The U.S. and many other countries regulate, and in some instances prohibit, certain types of anti-competitive behavior. For example, Canada, Japan, Mexico, and the European Union have all enacted legislation that prohibit many of the same type of activities that are prohibited under U.S. antitrust law with regard to many types of business practices. The European Union and certain other countries have imposed requirements that are more onerous than those under U.S. antitrust laws. Distribution agreements, patent, copyright and trademark licenses, territorial restrictions on resellers, rebates and discounts to customers are but a few of the subjects which may be covered by more restrictive practices of countries other than the United States.

The Companys policy is to comply with the antitrust laws and the competition laws of the countries where we operate. The Company expects every employee to comply with them fully. Violations of the law can result in severe penalties, including personal criminal liability.

No employee, officer, or agent of the Company shall enter into any understanding, agreement, plan, or scheme, express or implied, formal or informal, with any competitor in regard to prices, terms, or conditions of sale or service, production, distribution, territories, or customers; nor

Dealing with Competitors: Never discuss the details of a deal

with a competitor. Never agree to allocate markets or

territories. Never share information contained in

bids or proposals. Never agree to fix or control pricing. Never agree to compensate each

other for costs related to bidding on work without the written consent of the Legal Department. This activity must be disclosed to the client.

If you obtain any information about a competitor that is marked confidential or proprietary, call the Legal Department immediately.

If you have had a potentially problematic discussion or interaction with a competitor that could be construed as anti-competitive, call the Legal Department immediately.


exchange or discuss with a competitor prices, terms, or conditions of sale or service, or any other competitive information; nor engage in any other conduct which violates any applicable antitrust or competition laws. Normal subcontracting arrangements or joint proposals with competitors which are not in violation of applicable antitrust or competition laws, and which have been approved by the Legal Department, are not prohibited by this Policy. Any discussion with competitors in connection with a project in which the competitor is an alliance partner, joint venturer, or subcontractor must be pre-cleared and coordinated with the Legal Department.

Each employee, officer, or agent responsible for the conduct or practices of the Company which may involve the application of the antitrust or competition laws should consult with and be guided by the advice of the Legal Department. The Legal Department periodically presents antitrust compliance programs that you may be required to attend. In addition, the Legal Department has written materials explaining in greater detail the U.S. antitrust laws and the Companys commitment to complying with them. These materials are available to all employees upon request, and you may be sent copies and asked to study them. Any questions on matters having possible antitrust or competition implications will be referred to the Legal Department prior to taking any action with respect to such matters.

There shall be no exception to this policy, nor shall it be compromised or qualified by anyone acting for or on behalf of the Company.


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Transacting International Business

The Company operates in many different countries. This dimension of our business adds a certain complexity to our endeavors with regard to the way in which we conduct ourselves. It is Company policy to abide by the national and local laws of the countries where we operate, except to the extent penalized by U.S. law. This includes, but is not limited to, immigration, customs, tax, or exchange control laws or regulations. Actions taken with the intent to circumvent the application of such laws are prohibited. The observance of applicable laws, including the laws of the U.S. that have application outside of U.S. territory, is a strict requirement for all employees in the conduct of the Companys affairs.

All employees are required to be familiar with the laws affecting their business activities and assume responsibility for compliance. Company management should also have an effective and comprehensive internal control program to monitor compliance with the applicable regulations. The following policies provide guidance in five subject areas where the law must be strictly observed when conducting international business transactions by or on behalf of the Company.

1. International Boycott Policy

Certain United States federal laws and regulations, including the Export Administration Act and the Internal Revenue Code of 1986, and their respective regulations, require the Company not to participate in certain activities (even though required by the laws of another country in which the Company may operate or to which it may sell goods or services) which have the effect of boycotting or furthering another countrys boycott of United States businesses and countries friendly to the United States. In addition, these laws and regulations require that the Company not furnish certain information as to the identity or nationality of its directors, employees, stockholders, subcontractors, and suppliers or as to the presence or absence of Company operations or business dealings in or with countries subject to a boycott where such information is requested in furtherance of the boycott. These laws also require the Company to report the receipt of boycott related requests whether or not the Company complies with the requests.

Accordingly, the Company will sell its products and services only where permitted under the applicable laws of the countries in which the Company


operates. The Company will, in the conduct of its business, comply with the applicable laws of the United States regarding boycotts.

Any action which may require a report to a governmental agency in compliance with a boycott request, even though such action is not prohibited by law or applicable regulation and does not invoke any tax sanctions, must be cleared in advance with the Legal Department.

Neither the Company nor any of its directors, employees or agents shall take any action which will violate the laws or regulations dealing with participation in boycotts.

It is impossible to summarize all of the laws and regulations that impact the Companys international business. Therefore, it is imperative that employees involved in international transactions seek assistance from the Legal Department in such transactions, or whenever there are questions relating to a proposed transaction that may be affected by the U.S. antiboycott laws.

2. Foreign Corrupt Practices Policy

In general, the Foreign Corrupt Practices Act (FCPA) prohibits payments to foreign officials for the purpose of obtaining or keeping business. For purposes of the FCPA, a foreign official is any officer or employee of an instrumentality of a foreign government, including state-owned or controlled energy companies, such as Petroleos Mexicanos, SA (PEMEX), as well as political officers and candidates for political office. Further description and examples, as well as instructions for proper transaction of business outside the U.S., are found on-line in the Companys FCPA Compliance Manual. The rules are summarized briefly as follows:

Foreign Officials and Foreign Instrumentalities. In order to assist in obtaining or retaining business, or directing business to any entity, no person shall make any offer, payment, promise to pay, or the authorization of the payment of any money, offer, gift, promise to give, or the authorization of any promise to give anything of value to any foreign official, foreign instrumentality, political official, or political candidate, for the purpose of:

influencing any act or decision of such foreign official in his or her official capacity, including a decision to fail to perform his or her official functions;

For more information on the FCPA, see the Companys FCPA Compliance Manual which can be found on the Companys Intranet.

INFO


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inducing such foreign official to use his or her influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality;

influencing any act or decision of such political party, official, or candidate in its, his, or her official capacity, including a decision to fail to perform its, his, or her official functions;

inducing such political party, official, or candidate to use its, his, or her influence with a foreign government or instrumentality thereof to affect or influence any act or decision of such government or instrumentality; or

securing any improper business advantage.

Agents and Third Parties. No person shall make any offer, payment, promise to pay, or the authorization of the payment of any money, offer, gift, promise to give, or the authorization of any promise to give anything of value to any persons, while knowing that all or a portion of such money or thing of value will be offered, given, or promised, directly or indirectly, to any foreign official, to any foreign political party or official thereof, or to any candidate for foreign political office for any of the purposes listed above.

Gifts to Foreign Officials. Generally, no gifts of any value can be given to a foreign official. If the situation warrants a token gift of other than nominal value, the employee must consult with and receive written approval from the FCPA Compliance Officer prior to offering such a gift. The approval of the FCPA Compliance Officer is required to ensure that the gift is consistent with the FCPA, and that the gift is lawful, customary, and necessary to the conduct of business in the country where it is made.

Coordination with the FCPA Compliance Officer. Employment of a foreign agent, commencement of significant business operations outside the United States, gifts, or entertainment of a foreign official must be approved in advance by the FCPA Compliance Officer.

Training. Key recognizes and emphasizes the importance of anti-corruption training as an essential component of an FCPA compliance program. To that end, Key provides FCPA and anti-corruption training, both in person and through web-based programs, periodically at times to be determined by the Companys General Counsel. Certain Company employees, as well as third party representatives, will be required to attend


these training sessions and to provide the Company with certifications of attendance.

Violations of the FCPA. The penalties for FCPA violations are severe. Any employee, who violates Key policies relating to the FCPA, or the FCPA itself, will be disciplined and may be terminated. Intentional violations of the FCPA will result in termination. Further, the Company may not indemnify any employee who is convicted for violating the FCPA. Violations of the FCPA can result in criminal and civil liability for both corporations and individuals. Further, in addition to civil and criminal penalties, a person or company found in violation of the FCPA may be disqualified from U.S. government contracts, export licenses, and other government financing and insurance programs.

Additional Policy and Guidance. The Company has established further guidance in its FCPA procedures and FCPA Compliance Manual. However, given the complicated nature of the FCPA and related laws regarding foreign transactions, employees involved in international transactions should seek assistance from the FCPA Compliance Officer or the Legal Department prior to engaging in international transactions. Any employee with concerns about a current or pending contract, or a desire to report problems can call the FCPA Compliance Officer at 713-651-5491 or the EthicsLine, toll-free at 1-800-299-9565. Potential problems can only be resolved if reported.

3. Export Controls

The highly complex U.S. export control laws and regulations require particular attention. Employees involved in any export transaction must observe the following requirements:

All information furnished in connection with the export must be accurate and truthful, including information relative to the value of the exports and the technology in question. This requirement applies whether the information is furnished to the government, coworkers, or third parties that are engaged to facilitate the export on behalf of the Company.

Ensure that a regulation or specific export license covers the export in question. This rule applies to exports of goods and services, as well as exports of technology.

Be alert to instances in which inaccurate information may have been


35

furnished to us or to our agents relative to the ultimate destination or use of the products.

The definition of export is quite extensive. For example, a conversation of a technical nature with a citizen of another country may constitute an export even though the conversation takes place entirely within the U.S. If any employee has a doubt as to whether any situation involves an export or the accuracy of the information being provided to us concerning the ultimate destination or use of anything that the Company exports, guidance should be sought from the Legal Department.

4. U.S. Embargos/Trade Sanctions

From time to time the U.S. prohibits or restricts trade and other commercial dealings between U.S. citizens (which term includes U.S. person, U.S. incorporated companies, aliens resident in the U.S. and in some instances foreign-based affiliates of U.S. companies) and certain countries, including residents and citizens of those countries. Violations of the restrictions and prohibitions can result in the imposition of substantial fines or imprisonment for prosecuted violators. The Company requires that all employees adhere to the letter and the spirit of these restrictions and prohibitions.

The countries, and citizens or residents of those countries, which are the target of these prohibitions, change from time to time. Further, the regulatory controls on those countries vary both in scope and complexity. For these reasons, it is imperative that employees involved in international transactions seek assistance from the Legal Department concerning those transactions, or whenever there are questions relating to a proposed transaction that may be affected by embargos or trade sanctions.

5. Money Laundering

Consistent with federal law and regulations, the Company prohibits activities which would enable money laundering. The Companys policy prohibits the receipt of cash or cash equivalents that are the proceeds of crime. The Companys employees must exercise good judgment and common sense, and assess the integrity and ethical business practices of customers and business partners, and must promptly report suspicious transactions or activities by any customer to Keys Legal Department. The Legal Department will give prompt legal advice regarding the


transaction. In particular, Key employees should be suspicious and report to the Legal Department when payments are made in currencies other than that specified in the invoice, or by cash or cash equivalents, or they are made by someone not a party to the contract or originate from an account other than the normal business relationship account. Other items to report include the customers request or attempt to make payments for each invoice or group of invoices by multiple checks or drafts, or a customers request to make an overpayment. To avoid potential money laundering, the Company employees should always assess the integrity of potential customers, communicate with customers about our compliance expectations of them, and monitor their business practices. Do not do business with any customer or other business partner suspected of wrongdoing relating to dealings with the Company, unless those suspicious are investigated and resolved or otherwise approved by the Companys Legal Department.


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Consequences of Violating the Code or its Policies

We expect everyone to observe the letter and the spirit of the Code. Periodically, employees are required to complete and sign the Certificate of Compliance. Except where expressly prohibited by law, the completion and return of the Certificate of Compliance is a condition of employment. The Certificate of Compliance contains an acknowledgement that the employee has read the Code, is in compliance with its requirements, and knows of no other employee or officer who is not in compliance. The Certificate of Compliance is sent out periodically by the Ethics Committee on behalf of the Audit Committee of the Board of Directors.

Any employee who violates the Code, Company policies and procedures, or the law, or knowingly permits a subordinate to do so, or fails to report a violation of the Code by another employee or officer, will be subject to disciplinary action, up to and including termination, and may also be subjected to civil or criminal prosecution, or claims for damages or losses.

The Audit Committee of the Board of Directors shall have oversight of the administration of the Code and responsibility for the corporate compliance effort within the Company. The Ethics Committee and the Director Internal Audit monitor and periodically audit the Companys business conduct to ensure compliance with the Code. All employees who are asked to participate in or cooperate with those efforts are required to do so. At least once a year, the Ethics Committee or the Director Internal Audit shall inform the Audit Committee about the Companys corporate compliance activities and of the occurrence of all significant events relating to the Code.


39

Where to Find Help and Report Violations

1. Asking Questions and Reporting Concerns

You must report violations of the Code when you become aware of them. You should also ask questions about any legal issues or perceived ethical business issues. You will not be disciplined, lose your job, or be retaliated against in any way for asking questions or reporting concerns, as long as you are acting in good faith. Good faith does not mean that you have to be right but it does mean that you believe you are providing truthful information.

As a first step, talk with your supervisor or manager. If that is uncomfortable or impractical, you may contact a member of the Human Resources Department, the Legal Department, an Internal Auditor, a member of the Ethics Committee, or report or ask questions through the EthicsLine.

2. Where and How to Report

You may contact the Ethics Committee in writing at:

Key Energy Services1301 McKinney StreetSuite 1800Houston, TX [email protected] fax line: 432-618-3521

You may call toll free to the EthicsLine: United States and Canada: 1-800-299-9565 Argentina: 0-800-288-5288, at the tone, dial 888-299-9565 Mexico: 0-1-800-112-2020, at the tone, dial 888-299-9565 Russia (Moscow): 363-2400, at the tone or operator, dial 888-299-9565 Russia (outside Moscow): 8^812-363-2400, at the tone or operator,

dial 888-299-9565 Colombia: 01-800-518-1654 The Kingdom of Bahrain: 8000-0999

You may call collect to the US number: 1-770-613-6329.

You may send an online report through the EthicsLine at www.reportlineweb.com/KeyEnergy.


Although you are encouraged to identify yourself to assist the Company in effectively addressing your concern, you may choose to remain anonymous, and the Company will respect your choice. The EthicsLine is managed by an outside vendor and not equipped with caller ID, recorders, or other devices that can identify or trace the number from which you are calling. You may also call our Director of Loss Prevention, toll free, at 866-902-3438.

3. Investigations

The Company is committed to investigating promptly all reported concerns to the extent possible. Once a concern is reported, you can expect the following:

Your report will be taken seriously.

Your report will be carefully evaluated before it is referred for investigation.

Your report will be investigated by the appropriate people, which could include representatives from the Ethics Committee, the Legal Department, the Human Resources Department, or Internal Audit.

Your report will be handled promptly, discreetly, and professionally. Discussions and inquiries will be kept in confidence to the extent appropriate or permitted by law.

If appropriate, you can obtain certain follow-up information about how the Company addressed your report.

Internal Audit will coordinate any investigation and recommend needed corrective action or changes. All employees must cooperate fully with investigations of alleged violations.

Investigation Process

Issue Arises

YourSupervisor

YourManager

EthicsLine1-800-299-9565

(in US and Canada)

Issue NotResolved

Human Resources Department

Legal Department

Internal AuditDepartment

EthicsCommittee


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4. Non-Retaliation Policy

The Company will not tolerate any reprisal or retaliation against a person who in good faith reports a known or suspected violation of a law, regulation, Company policy, or the Code. Employees who believe they have been retaliated against should contact the Human Resources Department or the Ethics Committee immediately. Employees who retaliate against other employees for reporting a problem will themselves be subject to disciplinary action, up to and including termination of employment. Any employee who knowingly reports false or misleading information may be subject to disciplinary action.

1. Ethical business conduct is everyones responsibility.

2. Prevention of fraud is everyones responsibility.

3. If in doubt, ask.4. If still in doubt, ask again.5. Dont turn your back on

unethical behavior.6. Take responsibility.


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CERTIFICATE OF COMPLIANCE Please read carefully, check the appropriate boxes, and sign below.

I HAVE READ AND UNDERSTAND THE KEY ENERGY SERVICES, INC. CODE OF BUSINESS CONDUCT. I CONFIRM THAT I HAVE COMPLIED WITH AND WILL CONTINUE TO COMPLY WITH THE LETTER AND SPIRIT OF THE CODE AND ITS POLICIES DURING MY EMPLOYMENT WITH THE COMPANY.

Are you aware of any violations or suspected violations of the Code by any employee? ___ Yes ___ No

Do you or any member of your family (spouse, children, father, mother, brother, sister, aunts, uncles, nieces, nephews, grandparents, and in-laws) or household have any interest or affiliation which might conflict with the interests of the Company? (See the definition and illustrative examples under Conflicts of Interest Policy.)

___ Yes ___ No

During your employment with the Company, have you or any member of your family or household engaged in any activity that might conflict with the interests of the Company? (See the definition and illustrative examples under Conflicts of Interest Policy.)

___ Yes ___ No

If you answered Yes to any of the above questions, you must attach a separate page, explaining in writing to the Chief Compliance Officer the circumstances in which:

you have reasonable basis for belief that a violation of the Code has occurred;

you have, or any member of your family or household has, or may have, engaged in any activity which violates the letter or spirit of the Code; or

you have, or any member of you

Documents

Code of Business Conduct