ASSET PURCHASE AGREEMENT

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Exhibit 2.5

         ASSET PURCHASE AGREEMENT

among

Key Energy Drilling, Inc.

Key Energy Drilling Beneficial, L.P.

Key Rocky Mountain, Inc.

Key Four Corners, Inc.

and

Key Energy Services, Inc.

and

Patterson-UTI Drilling Company LP, LLLP

and

Patterson-UTI Energy, Inc.

Dated as of December 7, 2004

TABLE OF CONTENTS

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ASSET PURCHASE AGREEMENT

        THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of December 7, 2004, among Key Energy Drilling, Inc., a Delaware corporation ("Key Drilling"), Key Energy Drilling Beneficial, L.P., a Texas limited partnership ("Key Drilling L.P."), Key Four Corners, Inc., a Delaware corporation ("Key Four Corners") and Key Rocky Mountain, Inc., a Delaware corporation ("Key Rocky Mountain", and together with Key Drilling, Key Four Corners and Key Rocky Mountain, the "Sellers"), Key Energy Services, Inc., a Maryland corporation ("Parent") and Patterson-UTI Drilling Company LP, LLLP, a Delaware limited liability limited partnership ("Buyer") and Patterson-UTI Energy, Inc., a Delaware corporation ("Patterson").

        WHEREAS, Key Drilling, Key Four Corners and Key Rocky Mountain are the record owners of the Assets (defined below) being sold to the Buyer pursuant to this Agreement; and

        WHEREAS, Key Drilling L.P. is the beneficial owner of the Assets owned by Key Drilling being sold to the Buyer pursuant to this Agreement; and

        WHEREAS, Parent directly or indirectly owns all of the equity of the Sellers; and

        WHEREAS, Patterson directly or indirectly owns all of the equity of Buyer; and

        WHEREAS, the Sellers desire to sell to Buyer, and Buyer desires to purchase from the Sellers, the Assets.

        NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:

ARTICLE 1

PURCHASE AND SALE OF ASSETS

        1.1     Purchase and Sale of the Assets.     Subject to the terms and conditions set forth in this Agreement, the Sellers agree to sell, convey, transfer, assign and deliver to the Buyer the following assets of the Sellers (all of such assets being sold hereunder are referred to collectively herein as the "Assets"):

(a)

the real property and real property leases described on Schedule 1.1(a) hereto (the "Real Property");

(b)

the tangible personal property of the Sellers (such as land drilling rigs, drilling components, engines, machinery, spare parts, trucks, transport trailers and equipment associated with any of the foregoing) described on Schedule 1.1(b) hereto;

(c)

all supplies and other inventory of the Sellers used or held for use in connection with the operation of the property described in Section 1.1(b) ;

(d)

those contracts, contract rights, obligations and agreements of the Sellers relating to the Assets listed on Schedule 1.1(d) hereto (collectively, the "Purchased Contracts");

        1.2     Purchase Price.     As consideration for the sale of the Assets and for the other covenants and agreements of the Sellers contained herein, the Buyer agrees to pay to the Sellers, on the Closing Date (defined below), an aggregate purchase price of $62,000,000, subject to adjustment as provided in Section 1.8 (the "Purchase Price"), in immediately available funds to accounts designated by the Sellers.

        1.3     Liabilities.     Effective on the Closing Date, the Buyer shall assume (i) those, and only those, liabilities and obligations of the Sellers to be performed by Sellers under the Purchased Contracts after the Closing Date; (ii) any liabilities or obligations asserted by any person relating to the condition or the operation of the Assets after the Closing Date; (iii) any liabilities or obligations asserted by any

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person after the Closing Date relating to the condition of the Real Property (the "Assumed Liabilities"); provided, however , that the Assumed Liabilities shall not include any liability or obligations of Sellers required to be performed after the Closing date arising out of any breach by Sellers of the terms of the Purchased Contracts or any defect, breach of warranty, negligence or other deficiency with respect to matters performed or required to be performed under the Purchased Contracts on or prior to the Closing Date. The Sellers shall be responsible for any and all liabilities and obligations of the Sellers other than the Assumed Liabilities. All of the Sellers' liabilities other than the Assumed Liabilities are referred to herein as the "Retained Liabilities" and include, without limitation, (i) any obligations arising on or before Closing Date from the Sellers' employment of any employee, independent contractor, consultant, agent or advisor, and any bonus (other than the Retention Bonuses referred to below), retirement, severance, job security or similar benefit related thereto; (ii) any failure to pay any Taxes (as defined in Section 2.1.3 ) owed by the Sellers that are applicable to the period ending with the Closing Date; and (iii) any liabilities or obligations relating to the condition or the operation of the Assets on or before the Closing Date (other than liabilities or obligations included in Assumed Liabilities pursuant to clause (iii) above). Notwithstanding clause (i) of the preceding sentence, the Buyer shall pay the retention bonuses (the "Retention Bonuses") to those persons named on Schedule 1.3 who are hired by the Buyer in the amount set forth opposite such individual's name.

        1.4     Assumption of Risk by Buyer/Dayrates.     Buyer specifically assumes all risk of death, injury, loss or damage to Buyer or any other party arising from or relating to the use, condition or operation of the Assets after the Closing Date. Dayrates and other benefits earned as well as costs incurred on the Purchased Contracts on or before the Closing Date (whether or not invoiced or billed as of the Closing Date) shall be for the benefit and account of Sellers and dayrates and other benefits earned as well as costs incurred on the Purchased Contracts after the Closing Date shall be for the benefit and account of the Buyer; any payments or other consideration received on the Purchased Contracts by Sellers or Buyer shall be divided between Seller and Buyer according to these principles.

        1.5     Closing.     Consummation of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Porter & Hedges, L.L.P., 700 Louisiana Street, Houston, Texas 77002, within three business days after all of the conditions at closing set forth in Article 4 have been satisfied or waived in accordance with Section 5.4 (the "Closing Date").

        1.6     Closing Deliveries.     

        1.6.1     Deliveries of the Seller.     At the Closing, in addition to the conveyance of the Assets from the Sellers to the Buyer in exchange for the Purchase Price, the Sellers will deliver or cause to be delivered to the Buyer:

        1.6.1.1    Any assignment and bill of sale or deed necessary to effectively transfer record and beneficial ownership of the Assets to the Buyer;

        1.6.1.2    All required certificates and documents of title (other than the Undelivered Certificates of Title (defined below)) relating to the Assets being purchased by the Buyer duly executed and endorsed for transfer to the Buyer;

        1.6.1.3    Releases of all liens to which any of the Assets were subject before the Closing;

        1.6.1.4    All written consents required to be delivered pursuant to Section 2.1.9 or otherwise;

        1.6.1.5    All other deliveries required to be delivered by the Sellers to the Buyer pursuant to Article 4 here;

        1.6.1.6    Evidence reasonably satisfactory to Buyer as to the termination of the leases as required by Section 6.8 ; and

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        1.6.1.7    All other deliveries reasonably requested by the Buyer to be delivered by the Sellers.

        1.6.2     Deliveries of the Buyer.     At the Closing the Buyer will deliver or cause to be delivered to the Seller:

        1.6.2.1    The Purchase Price;

        1.6.2.2    All deliveries required to be delivered by the Buyer to the Sellers pursuant to Article 4 of this Agreement; and

        1.6.2.3    All other deliveries reasonably requested by the Sellers to be delivered by the Buyer.

        1.7     Undelivered Certificates of Title.     The Buyer and the Sellers acknowledge that the Sellers may be unable to deliver to the Buyer those certificates of title (the "Undelivered Certificates of Title") identified on Schedule 1.7 hereto. The Sellers hereby agree to deliver, or cause to be delivered, to the Buyer, within 120 days from the Closing Date, the Undelivered Certificates of Title, and all lien releases, if any, in connection therewith.

        1.8     Purchase Price Adjustment.     All amounts paid or payable for real estate and ad valorem taxes shall be prorated as of the Closing Date, Sellers being charged and credited for all of same up to and including the Closing Date and Buyer being charged and credited for all of same after such date. If the actual amounts to be prorated are not known as of the Closing Date, the prorations shall be made on the basis of the best evidence then available, and thereafter, when actual figures are received.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES

        2.1     Representations and Warranties of Parent and the Sellers.     Each of the Parent and the Sellers, jointly and severally, as of the date hereof and as of the Closing Date, represents and warrants to Buyer and Patterson as follows:

        2.1.1     Organization and Standing     

        2.1.1.1     Key Drilling.     Key Drilling is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has full requisite corporate power and authority to carry on its business as it is currently conducted, and to own and operate the properties currently owned and operated by it, and is duly qualified or licensed to do business and is in good standing as a foreign corporation authorized to do business in all jurisdictions in which the character of the properties owned or the nature of the business conducted by it would make such qualification or licensing necessary, except where the failure to be so qualified or licensed would not have a Material Adverse Effect (as defined in Section 8.1 ) on the Assets.

        2.1.1.2     Key Drilling L.P.     Key Drilling L.P. is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Texas, has full requisite limited partnership power and authority to carry on its business as it is currently conducted, and to own and operate the properties currently owned and operated by it, and is dully qualified or licensed to do business and is in good standing as a foreign limited partnership authorized to do business in all jurisdictions in which the character of the properties owned or the nature of the business conducted by it would make such qualification or licensing necessary, except where the failure to be so qualified or licensed would not have a Material Adverse Effect on the Assets.

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        2.1.1.3     Key Four Corners.     Key Four Corners is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has full requisite corporate power and authority to carry on its business as it is currently conducted, and to own and operate the properties currently owned and operated by it, and is duly qualified or licensed to do business and is in good standing as a foreign corporation authorized to do business in all jurisdictions in which the character of the properties owned or the nature of the business conducted by it would make such qualification or licensing necessary, except where the failure to be so qualified or licensed would not have a Material Adverse Effect on the Assets.

        2.1.1.4     Key Rocky Mountain.     Key Rocky Mountain is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has full requisite corporate power and authority to carry on its business as it is currently conducted, and to own and operate the properties currently owned and operated by it, and is duly qualified or licensed to do business and is in good standing as a foreign corporation authorized to do business in all jurisdictions in which the character of the properties owned or the nature of the business conducted by it would make such qualification or licensing necessary, except where the failure to be so qualified or licensed would not have a Material Adverse Effect on the Assets.

        2.1.2     Agreement Authorized and its Effect on Other Obligations.     Each of the Parent and the Sellers has the legal capacity and requisite power and authority to enter into, and perform its obligations under this Agreement. The consummation of the transactions, contemplated by this Agreement have been duly and validly authorized by all necessary corporate action on the part of each of the Parent and the Sellers, and this Agreement is the valid and binding obligation of each of the Parent and the Sellers, enforceable against each of the Parent and the Sellers in accordance with its terms, except as enforceability may be limited by (a) equitable principles of general applicability, or (b) bankruptcy, insolvency, reorganization, fraudulent conveyance or similar laws affecting the rights of creditors generally. The execution, delivery and performance of this Agreement by the Parent and the Sellers will not conflict with or result in a violation or breach of any term or provision of, nor constitute a default under (i) the organizational documents of any of the Parent and the Sellers; (ii) any obligation, indenture, mortgage, deed of trust, lease, contract or other agreement to which any of them is a party or by which any of them or their properties are bound or (iii) any requirement of statute, law, regulation, judgment, decree or order of any governmental authority or judicial body.

        2.1.3     Taxes.     All federal, state and local income, sales, use, franchise, gross, revenue, payroll, excise, property, customs, duties and all other taxes (collectively, the "Taxes") that apply to the ownership, use and operation of the Assets or that could in any way create a lien, charge or encumbrance on the Assets have been paid in full (other than liens, charges or encumbrances on the Assets as set forth on Schedule 2.1.3 , which are being contested in good faith by Sellers) and all tax returns or reports related thereto have been filed with appropriate governmental agencies, domestic and foreign, by each of the Sellers for each period for which any such returns, reports, or estimates were due (taking into account any extensions of time to file before the date hereof). Except as disclosed on Schedule 2.1.3 , no waivers of any statute of limitations executed by any of the Sellers with respect to federal income or other Taxes are in effect. Except as disclosed on Schedule 2.1.3 , no income or franchise tax return of any of the Sellers have been examined by the IRS or the taxing authorities of any other jurisdiction. There are no Tax liens on any assets of any of the Sellers except for Taxes not yet currently due and at the time of Closing all Taxes shall have been paid in full except for Taxes being contested in good faith by Sellers or Taxes not yet due and payable.

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        2.1.4     Title to Assets.      Schedule 2.1.4 sets forth all Encumbrances on the Assets. As of the Closing Date, Sellers, collectively, will have good, indefeasible and marketable title to the Assets, free and clear of any Encumbrance. The Sellers have the absolute right to sell the Assets to the Buyer and upon consummation of the transactions contemplated hereby the Buyer will have good and marketable title to the Assets free and clear of any Encumbrances. For purposes of this Agreement the term "Encumbrances" means all liens, including tax liens, security interests, pledges, mortgages, deeds of trust, claims, rights of first refusal, options, charges, restrictions or conditions to transfer or assignment, liabilities, obligations, privileges, equities, easements, rights of way, limitations, reservations, restrictions and other encumbrances of any kind or nature.

        2.1.5     Inspection; Limitation on Warranty.     Buyer has advised Sellers that Buyer inspected the Assets to Buyer's satisfaction during November 2004. As of the date of this Agreement and as of the Closing Date, the Assets are, and will be, in the same locations as inspected (or within 50 miles thereof) and in substantially the same condition as when inspected by Buyer, subject only to reasonable wear and tear. As a material part of the consideration for this Agreement, Sellers and Buyer agree that Buyer is taking the Assets "AS IS" with any and all faults, latent and patent defects and that there is no warranty by Sellers that the Assets are fit for a particular purpose. Buyer acknowledges that it is not relying upon any representation, statement or other assertion with respect to the condition of the Assets, but is relying upon its examination of the Assets. Buyer takes the Assets under the express understanding there are no express warranties or implied warranties (except as provided in this Article 2 ). Except as provided in this Article 2 , neither Parent nor Sellers make any guaranty, warranty or representation, express or implied, by operation of law or otherwise, as to the quality, serviceability, merchantability or condition of the Assets, or their fitness for any use or purpose.

        2.1.6     Contracts.     Sellers have delivered to Buyer true, correct and complete copies of the Purchased Contracts. All of the Purchased Contracts are in full force and effect, and constitute valid and binding obligations of the Sellers. Sellers are not in default under any Purchased Contracts and to Sellers knowledge no other parties thereto are in default.

        2.1.7     Litigation.     There is no claim, suit, action, or legal, administrative, arbitration, or other proceeding or governmental investigation pending, or to the knowledge of either Seller threatened, to which either of the Sellers is a party or, to the knowledge of either of the Sellers, might become a party, which affects the Assets or the transactions contemplated by this Agreement.

        2.1.8     Investigations; Litigation.     Except as required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1978 and the rules and regulations promulgated thereunder ("HSR"), no investigation or review by any governmental entity with respect to any of the Parent or Sellers or any of the transactions contemplated by this Agreement is pending or, to the knowledge of any of the Parent or Sellers, threatened, nor has any governmental entity indicated to any of the Parent or Sellers an intention to conduct the same.

        2.1.9     Consents and Approvals.     Except as required by HSR and set forth on Schedule 2.1.9 , and subject to Section 8.6 , no consent, approval or authorization of, or filing or registration with, any governmental or regulatory authority, or any other person or entity is required to be made or obtained by any of Parent or the Sellers in connection with the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby.

        2.1.10     Finder's Fee.     Other than as set forth in Schedule 2.1.10 , all negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by the Sellers and their counsel directly with Buyer and its counsel, without the intervention of any other person in such manner as to give rise to any valid claim against any of the parties hereto for a brokerage commission, finder's fee or any similar payments.

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        2.1.11     Compliance With Laws.     Sellers are in compliance in all material respects with all applicable laws and regulations relating to its ownership or operation of the Assets, and have not received notice of any violation (that is uncured or outstanding) of any law or regulation relating to its operation of the Assets.

        2.1.12     Solvency.     Each of Parent and the Sellers are now solvent, and neither the Parent nor Sellers will be rendered insolvent by the occurrence of the transactions contemplated by this Agreement. In addition, immediately after giving effect to the consummation of the transactions contemplated by this Agreement, (i) each of the Parent and Sellers will be able to pay its debts as they become due, (ii) the property of the Parent and Sellers does not and will not constitute unreasonably small capital, and neither the Parent nor Sellers will have unreasonably small capital, and Parent and Sellers will have sufficient capital with which to conduct its business and/or to wind up its affairs and dissolve, and (iii) there will be no pending or threatened litigation or final judgments against Parent or Sellers in any action for money damages that is reasonably anticipated to be rendered at a time when, or in amounts such that, Parent or Sellers will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum probable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered). The cash available to Parent and Sellers, after taking into account all other anticipated uses of the cash of Parent and Sellers, will be sufficient to pay all such judgments promptly in accordance with their terms to the extent such judgments, if any, are in excess of available insurance proceeds. As used in this Section, (x) "insolvent" means, for any person or entity, that the sum of the present fair saleable value of its assets does not and/or will not exceed its debts and other probable liabilities, and (y) the term "debts" includes any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent, disputed or undisputed or secured or unsecured.

        2.1.13     Environmental Matters.     (a) To the knowledge of any of Parent or Sellers:

        2.1.13.1    There are no currently pending or threatened written notices of violations, noncompliance, or similar notifications relating to environmental or health or safety matters affecting the Real Property;

        2.1.13.2    There are no underground storage tanks or other underground containers of any kind on the Real Property;

        2.1.13.3    There are no claims, pending or threatened, by any person relating to or arising out of the environmental conditions of the Real Property and no such claims have been made or threatened in the last five years;

        2.1.13.4    There are no judgments, decrees, orders, arrangements or other agreements in any way related to the investigation, cleanup, remediation or removal of any hazardous material related to the Real Property.

        (b)   Parent and Sellers have provided to Buyer copies of all environmental audits, assessments or other evaluations, if any, known to (and in the possession of) Parent or one or more Sellers and related to the Real Property.

        2.1.14     All Material Contracts.     To the knowledge of Parent and Sellers, the Purchased Contracts are all of the contracts material to the ownership, operation and use of the Assets except for the contracts listed on Schedule 4.1.6 .

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        2.2     Representations and Warranties of Buyer and Patterson.     Buyer and Patterson, jointly and severally as of the date hereof and as of the Closing Date, represent and warrant to each of the Parent and Sellers as follows:

        2.2.1     Organization and Good Standing.     Buyer is a limited liability limited partnership duly organized, validly existing under the laws of the State of Delaware, has full requisite corporate power and authority to carry on its business as it is currently conducted, and to own and operate the properties currently owned and operated by it, and is duly qualified or licensed to do business and is in good standing as a foreign corporation authorized to do business in all jurisdictions in which the character of the properties owned or the nature of the business conducted by it would make such qualification or licensing necessary except where the failure to be so qualified or licensed would not have a Material Adverse Effect.

        2.2.2     Agreement Authorized and its Effect on Other Obligations.     Each of the Buyer and Patterson has the legal capacity and requisite power and authority to enter into and perform its obligations under this Agreement. The consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of each of the Buyer and Patterson, and this Agreement is a valid and binding obligation of each o