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NATIONAL ENVIRONMENTAL GROUP ANNOUNCES THIRD QUARTER EARNINGS AND REORGANIZATION PLAN

 NATIONAL ENVIRONMENTAL GROUP ANNOUNCES
 THIRD QUARTER EARNINGS AND REORGANIZATION PLAN
 NEW BRUNSWICK, N.J., May 14 /PRNewswire/ -- National Environmental Group Inc. (AMEX: NEG) today announced the financial results for the fiscal quarter ended March 31, 1992.
 The results include the company's oilwell services subsidiary ESKEY, which includes the eight additional workover units and related equipment purchased in December of 1991.
 The decline in revenues and income from continuing operations for the three and nine months ended March 31, 1992, is a result of a nationwide decline in oil and gas production. Major oil companies and certain large independent oil producers have reduced workover and well service activities in West Texas. Despite this decline in well service activities, the company has maintained equipment utilization rates above many of its competitors, which has allowed the company to remain profitable.
 The company said it expects that the decline in drilling activity in the United States and the uncertainty of future energy prices will continue for the foreseeable future, which will result in decreased revenues and income from FY '91 levels.
 As a result of the uncertainty in the energy industry combined with the company's $12 million of debt, complex capital structure and related high debt service cost, the company announced a major reorganization plan as reported on May 5, 1992. As announced, the company will form a new subsidiary, Key Energy Group, Inc. (KEG). KEG will be capitalized with approximately 5 million shares of common stock. The company said it plans to merge National Environmental Group Inc. and certain wholly owned subsidiaries into KEG.
 In addition, the company has reached an agreement with certain of its major debt holders to support a comprehensive exchange of debt for common stock of KEG subject to consummation of the merger.
 The existing 14 percent Convertible Preferred and common stockholders of the company will be able to purchase new common shares of KEG through a rights offering of approximately 1 million shares.
 Pursuant to the merger of the company into KEG, the shares of 14 percent Convertible Preferred Stock of the company, including accrued and unpaid dividends thereon, will be converted into approximately 1.2 million shares (30 percent of the issued and outstanding shares) of post-merger stock. The


current common stock will be converted into approximately 320,000 shares (8 percent of the issued and outstanding shares) of post-merger stock.
 Under the terms of the proposed exchange offer, the company said it intends to offer approximately 2,480,000 (49.6 percent) shares of new KEG common stock to holders of: the 7 percent Convertible Subordinated Bonds due 1998 of YFC International N.V. (the "Eurobonds"); the 12 percent Senior Secured Subordinated Convertible Debentures due 1999 (the "ESKEY Senior Debentures") and the 10-3/4 percent Subordinated Convertible Debentures due 2003. The ESKEY Debentures and the Eurobonds are considered the "Exchangeable Debt" of the company.
 The exchange offers and merger will be conditioned upon acceptance by a minimum of 90 percent of the debt to be converted. If such minimum is not achieved, the company said it intends to file a prepackaged plan of reorganization under Chapter 11 of Title 11 of the U.S. Bankruptcy Code. Under the prepackaged plan, the equity holders and debt holders of the exchangeable debt would receive the same consideration in exchange of their claims as they would receive in the exchange offers, except that under the Bankruptcy Code all equity holders and holders of exchangeable debt would be required to accept the consideration offered in the exchange offers if the prepackaged plan is approved.
 The merger and exchange offers will be on the following terms, before giving effect to the rights offering:
 For each $1,000 principal
 amount (and accrued interest): Recapitalization Plan
 Eurobonds 229 shares of Common Stock
 ESKEY Senior Debentures 379 shares of Common Stock
 ESKEY Debentures 269 shares of Common Stock
 For each share of NEG 1.04 shares of
 14 percent Convertible Preferred Common Stock and right
 to purchase .695 shares
 Common Stock .0178 shares of Common
 Stock and right to
 purchase .011 shares
 NATIONAL ENVIRONMENTAL GROUP INC.
 (In thousands, except per-share data)
 Periods ended Three months Nine months
 March 31 1992 1991 1992 1991
 Revenues $5,703 $6,007 $16,248 $17,582
 Costs and expenses 5,480 5,330 15,555 15,687
 Income from continuing
 operations before income taxes
 and extraordinary credit 223 677 693 1,895
 Income tax expense 76 243 236 657
 Income from continuing
 operations before
 extraordinary credit 147 434 457 1,238
 Discontinued operations:
 Loss from operations,
 net of applicable taxes --- (545) --- (1,289)
 Income (loss) before
 extraordinary credit 147 (111) 457 (51)
 Extraordinary credit 67 207 211 580
 Net income 214 96 668 529
 Preferred stock dividends 50 75 201 287
 Net income applicable
 to common stock 164 21 467 242
 Earnings per common share:
 Primary:
 Income from continuing
 operations before
 extraordinary credit $.01 $.03 $.02 $.08
 Income (loss) before
 extraordinary credit .01 (.01) .02 (.03)
 Net income .01 .00(A) .03 .02
 Assuming full dilution:
 Income from continuing
 operations before
 extraordinary credit .00(A) .01 .01 .03
 Income (loss) before
 extraordinary credit .00(A) .00(A) .01 (.01)
 Net income .00(A) .00(A) .01 .01
 Average common shares outstanding:
 Primary 16,330 13,082 15,524 12,418
 Assuming full dilution 36,816 38,556 36,010 37,892
 (A) Earnings per common share less than $.01.
 -0- 5/14/92
 /CONTACT: Diane Mack of National Environmental Group, 908-247-4822/
 (NEG) CO: National Environmental Group Inc.; Key Energy Group Inc. ST: New Jersey IN: SU: ERN


MK-MP -- PH012 -- 0180 05/14/92 11:31 EDT
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Date:May 14, 1992
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