##### Table of Contents



UNITED STATE SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM                 TO
 Commission file number 1-2199
 ALLIS-CHALMERS ENERGY INC.
  DELAWARE
    
    39-0126090(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 5075 WESTHEIMER, SUITE 890, HOUSTON, TEXAS 77056
 (713) 369-0550
 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 Title of Security:
    
    Name of Exchange:Common Stock, par value $0.01 per share
    
    American Stock Exchange
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
 þ o
 þ o
 o o




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ALLIS-CHALMERS ENERGY INC.
 FORM 10-Q
 For the Quarterly Period Ended September 30, 2005
  
 TABLE OF CONTENTS
 ITEM
    
    
    
    PAGEPART I1.
    
    Financial StatementsConsolidated Condensed Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    3Consolidated Condensed Income Statements for the three months and nine months ended
September 30, 2005 and 2004
    
    
    4Consolidated Condensed Statements of Cash Flows for the nine months ended
September 30, 2005 and 2004
    
    
    5Notes to Consolidated Condensed Financial Statements
    
    
    62.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    213.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    304.
    
    Controls and Procedures
    
    
    31PART II1.
    
    Legal Proceedings
    
    
    322.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    324.
    
    Submission of Matters to a Vote of Security Holders
    
    
    326.
    
    Exhibits
    
    
    33Signatures and Certifications
    
    
    33Certification of CEO pursuant to Section 302Certification of CFO pursuant to Section 302Certification of CEO and CFO pursuant to Section 906
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 CONSOLIDATED CONDENSED BALANCE SHEETS ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
 September 30,
    
    
    December 31,2005
    
    
    2004(unaudited)AssetsCash and cash equivalents
    
    $
    3,909
    
    
    $
    7,344Trade receivables, net
    
    
    23,777
    
    
    
    12,986Inventory
    
    
    5,217
    
    
    
    2,373Lease receivable, current
    
    
    
    
    
    
    180Prepaid expenses and other
    
    
    1,014
    
    
    
    1,495Total current assets
    
    
    33,917
    
    
    
    24,378Property and equipment, net
    
    
    75,516
    
    
    
    37,679Goodwill
    
    
    12,042
    
    
    
    11,776Other intangible assets, net
    
    
    7,264
    
    
    
    5,057Debt issuance costs, net
    
    
    783
    
    
    
    685Lease receivable, less current portion
    
    
    
    
    
    
    558Other assets
    
    
    40
    
    
    
    59Total assets
    
    $
    129,562
    
    
    $
    80,192Liabilities and Stockholders EquityCurrent maturities of long-term debt
    
    $
    4,636
    
    
    $
    5,541Trade accounts payable
    
    
    8,703
    
    
    
    5,694Accrued salaries, benefits and payroll taxes
    
    
    701
    
    
    
    615Accrued interest
    
    
    462
    
    
    
    470Accrued expenses
    
    
    4,688
    
    
    
    1,852Accounts payable, related parties
    
    
    78
    
    
    
    740Total current liabilities
    
    
    19,268
    
    
    
    14,912Accrued postretirement benefit obligations
    
    
    335
    
    
    
    687Long-term debt, net of current maturities
    
    
    51,491
    
    
    
    24,932Deferred income taxes
    
    
    750
    
    
    
    Other long-term liabilities
    
    
    342
    
    
    
    129Total liabilities
    
    
    72,186
    
    
    
    40,660Commitments and contingenciesMinority interests
    
    
    
    
    
    
    4,423Stockholders EquityPreferred stock, $0.01 par value (25,000,000 shares authorized, no shares issued)
    
    
    
    
    
    
    Common stock, $0.01 par value (100,000,000 shares authorized;
16,453,714 issued and outstanding at September 30, 2005 and
20,000,000 shares authorized and 13,611,525 issued and
outstanding at December 31, 2004)
    
    
    165
    
    
    
    136Capital in excess of par value
    
    
    57,940
    
    
    
    40,331Accumulated deficit
    
    
    (729
    )
    
    
    (5,358
    )Total stockholders equity
    
    
    57,376
    
    
    
    35,109Total liabilities and stockholders equity
    
    $
    129,562
    
    
    $
    80,192
  3




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##### Table of Contents



CONSOLIDATED CONDENSED INCOME STATEMENTS ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED INCOME STATEMENTS
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)Revenues
    
    $
    28,908
    
    
    $
    11,888
    
    
    $
    71,830
    
    
    $
    32,989Cost of revenuesDirect costs
    
    
    19,280
    
    
    
    7,633
    
    
    
    47,756
    
    
    
    22,395Depreciation
    
    
    1,391
    
    
    
    591
    
    
    
    3,397
    
    
    
    1,796Total cost of revenues
    
    
    20,671
    
    
    
    8,224
    
    
    
    51,153
    
    
    
    24,191Gross margin
    
    
    8,237
    
    
    
    3,664
    
    
    
    20,677
    
    
    
    8,798General and administrative
    
    
    4,261
    
    
    
    2,227
    
    
    
    10,720
    
    
    
    4,781Amortization
    
    
    452
    
    
    
    198
    
    
    
    1,272
    
    
    
    600Income from operations
    
    
    3,524
    
    
    
    1,239
    
    
    
    8,685
    
    
    
    3,417Other income (expense):Interest
    
    
    (977
    )
    
    
    (566
    )
    
    
    (2,143
    )
    
    
    (1,634
    )Debt retirement
    
    
    (1,087
    )
    
    
    
    
    
    
    (1,087
    )
    
    
    Other
    
    
    63
    
    
    
    19
    
    
    
    221
    
    
    
    224Total other income (expense)
    
    
    (2,001
    )
    
    
    (547
    )
    
    
    (3,009
    )
    
    
    (1,410
    )Net income before minority interest
and income taxes
    
    
    1,523
    
    
    
    692
    
    
    
    5,676
    
    
    
    2,007Minority interest in income of subsidiaries
    
    
    
    
    
    
    (34
    )
    
    
    (488
    )
    
    
    (248
    )Provision for income taxes
    
    
    (230
    )
    
    
    (139
    )
    
    
    (559
    )
    
    
    (359
    )Net income
    
    
    1,293
    
    
    
    519
    
    
    
    4,629
    
    
    
    1,400Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124
    )Net income attributed to common
shareholders
    
    $
    1,293
    
    
    $
    519
    
    
    $
    4,629
    
    
    $
    1,276Net income per common share:Basic
    
    $
    0.09
    
    
    $
    0.06
    
    
    $
    0.33
    
    
    $
    0.21Diluted
    
    $
    0.08
    
    
    $
    0.05
    
    
    $
    0.30
    
    
    $
    0.18Weighted average shares outstanding:Basic
    
    
    14,985
    
    
    
    8,298
    
    
    
    14,197
    
    
    
    6,168Diluted
    
    
    16,601
    
    
    
    9,828
    
    
    
    15,589
    
    
    
    7,890
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 For the Nine Months EndedSeptember 30,2005
    
    
    2004(Restated)Cash Flows from Operating Activities:Net income
    
    $
    4,629
    
    
    $
    1,400Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    3,397
    
    
    
    1,796Amortization
    
    
    1,272
    
    
    
    600Amortization of note discount
    
    
    9
    
    
    
    143Fair value of warrant issued to consultant
    
    
    
    
    
    
    14Write-off of deferred financing due to refinancing
    
    
    653
    
    
    
    Minority interest in income of subsidiaries
    
    
    488
    
    
    
    248Changes in operating assets and liabilities, net of acquisitions:(Increase) in trade receivable
    
    
    (7,250
    )
    
    
    (1,417
    )(Increase) in other current assets
    
    
    (1,522
    )
    
    
    (412
    )(Increase) in other assets
    
    
    (171
    )
    
    
    (39
    )Increase (decrease) in accounts payable
    
    
    1,058
    
    
    
    (725
    )Increase in accrued interest
    
    
    497
    
    
    
    131Increase (decrease) in accrued expenses
    
    
    1,269
    
    
    
    (471
    )(Decrease) in accrued salaries, benefits and payroll taxes
    
    
    (287
    )
    
    
    (557
    )(Decrease) in other long-term liabilities
    
    
    (160
    )
    
    
    (141
    )Net Cash Provided By Operating Activities
    
    
    3,882
    
    
    
    570Cash Flows from Investing Activities:Acquisition of businesses, net of cash received
    
    
    (15,416
    )
    
    
    (959
    )Acquisition of assets
    
    
    (21,249
    )
    
    
    Purchase of equipment
    
    
    (9,585
    )
    
    
    (2,120
    )Net Cash Used In Investing Activities
    
    
    (46,250
    )
    
    
    (3,079
    )Cash Flows from Financing Activities:Proceeds from issuance of common stock, net
    
    
    15,888
    
    
    
    16,946Proceeds from long-term debt
    
    
    45,700
    
    
    
    Repayments on long-term debt
    
    
    (21,438
    )
    
    
    (2,427
    )Debt issuance costs
    
    
    (1,217
    )
    
    
    (317
    )Net Cash Provided By Financing Activities
    
    
    38,933
    
    
    
    14,202Net change in cash and cash equivalents
    
    
    (3,435
    )
    
    
    11,693Cash and cash equivalents at beginning of period
    
    
    7,344
    
    
    
    1,299Cash and cash equivalents at end of period
    
    $
    3,909
    
    
    $
    12,992Supplemental information:Interest paid
    
    $
    2,151
    
    
    $
    1,491Foreign taxes paid
    
    $
    459
    
    
    $
    Non-cash transactions in connection with the
acquisition of TargetSettlement of lease receivable
    
    $
    592
    
    
    $
    Deferred taxes
    
    $
    750
    
    
    $
    
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NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations
   Basis of Presentation
    Accounting for Income Taxes
 Share-Based Payment Accounting for Stock-Based Compensation
 6




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ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Accounting Changes and Error Corrections
 NOTE 2  ACQUISITIONS
        For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues
    
    $
    29,016
    
    
    $
    17,566
    
    
    $
    76,869
    
    
    $
    43,122Operating income
    
    
    3,558
    
    
    
    1,887
    
    
    
    9,667
    
    
    
    4,717Net income
    
    
    1,321
    
    
    
    892
    
    
    
    5,692
    
    
    
    2,037Net income per common share:Basic
    
    $
    0.10
    
    
    $
    0.10
    
    
    $
    0.40
    
    
    $
    0.31Diluted
    
    $
    0.07
    
    
    $
    0.09
    
    
    $
    0.36
    
    
    $
    0.25
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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 3  STOCK-BASED COMPENSATION
 Accounting For Stock-Based Compensation
  For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income as reported
    
    $
    1,293
    
    
    $
    519
    
    
    $
    4,629
    
    
    $
    1,276Less: stock based employee
compensation expense determined
under fair value based method for
all awards, net of tax
    
    
    (863
    )
    
    
    
    
    
    
    (2,368
    )
    
    
    Pro forma net income
    
    $
    430
    
    
    $
    519
    
    
    $
    2,261
    
    
    $
    1,276
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Basic net income per common share:As reported
    
    $
    0.09
    
    
    $
    0.06
    
    
    $
    0.33
    
    
    $
    0.21Pro forma
    
    $
    0.03
    
    
    $
    0.06
    
    
    $
    0.16
    
    
    $
    0.21Diluted net income per common share:As reported
    
    $
    0.08
    
    
    $
    0.05
    
    
    $
    0.30
    
    
    $
    0.18Pro forma
    
    $
    0.03
    
    
    $
    0.05
    
    
    $
    0.15
    
    
    $
    0.18
  For the NineMonths EndedSeptember 30, 2005Expected dividend yield
    
    
    Expected price volatility
    
    
    98.65
    %Risk-free interest rate
    
    
    6.63
    %Expected life of options
    
    7 yearsWeighted average fair value of options
granted at market value
    
    $
    3.12
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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 4  INCOME PER COMMON SHARE
 Earnings Per
Share
  For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(restated)
    
    
    
    
    
    
    (restated)Numerator:Net income available for common
stockholders
    
    $
    1,293
    
    
    $
    519
    
    
    $
    4,629
    
    
    $
    1,276Plus income impact of assumed conversions:Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124Net income applicable to common
stockholders plus assumed conversions
    
    $
    1,293
    
    
    $
    519
    
    
    $
    4,629
    
    
    $
    1,400Denominator:Basic earnings per share  weighted
average shares outstanding
    
    
    14,985
    
    
    
    8,298
    
    
    
    14,197
    
    
    
    6,168Effect of potentially dilutive common shares:Convertible preferred stock and
employee and director stock
options and warrants
    
    
    1,616
    
    
    
    1,530
    
    
    
    1,392
    
    
    
    1,722Diluted earnings per share 
weighted average shares
outstanding and assumed
conversions
    
    
    16,601
    
    
    
    9,828
    
    
    
    15,589
    
    
    
    7,890Net income per share  basic
    
    $
    0.09
    
    
    $
    0.06
    
    
    $
    0.33
    
    
    $
    0.21Net income per share  diluted
    
    $
    0.08
    
    
    $
    0.05
    
    
    $
    0.30
    
    
    $
    0.18
 NOTE 5  GOODWILL AND INTANGIBLE ASSETS
 Goodwill and Other Intangible Assets
  9




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ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 6  RESTATEMENT
 Earnings Per Share.
  Three Months Ended September 30, 2004As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedIncome per common share  basic
    
    $
    0.04
    
    
    $
    0.02
    
    
    $
    0.06Income per common share- diluted
    
    $
    0.04
    
    
    $
    0.01
    
    
    $
    0.05Weighted average number of common shares outstanding:Basic
    
    
    11,599
    
    
    
    (3,301
    )
    
    
    8,298Diluted
    
    
    14,407
    
    
    
    (4,579
    )
    
    
    9,828
 Nine Months Ended September 30, 2004As
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedIncome per common share  basic
    
    $
    0.18
    
    
    $
    0.03
    
    
    $
    0.21Income per common share- diluted
    
    $
    0.13
    
    
    $
    0.05
    
    
    $
    0.18Weighted average number of common shares outstanding:Basic
    
    
    7,285
    
    
    
    (1,117
    )
    
    
    6,168Diluted
    
    
    9,980
    
    
    
    (2,090
    )
    
    
    7,890
 AirComp Acquisition.  Business Combinations Accounting for Sales of Stock by a Subsidiary.
 Increase in Book Value of Fixed Assets.
 Increase in Minority Interest and Capital in Excess of Par Value.
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ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 6  RESTATEMENT (Continued)
  At September 30, 2004AsPreviously
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedAssetsCash and cash equivalents
    
    $
    12,992
    
    
    $
    
    
    
    $
    12,992Trade receivables, net
    
    
    10,419
    
    
    
    
    
    
    
    10,419Lease receivable, current
    
    
    180
    
    
    
    
    
    
    
    180Prepaid expenses and other
    
    
    1,496
    
    
    
    
    
    
    
    1,496Total current assets
    
    
    25,087
    
    
    
    
    
    
    
    25,087Property and equipment, net
    
    
    28,818
    
    
    
    4,491
    
    
    
    33,309Goodwill
    
    
    10,331
    
    
    
    
    
    
    
    10,331Other intangible assets, net
    
    
    3,089
    
    
    
    
    
    
    
    3,089Debt issuance costs, net
    
    
    635
    
    
    
    
    
    
    
    635Lease receivable, less current portion
    
    
    590
    
    
    
    
    
    
    
    590Other
    
    
    79
    
    
    
    
    
    
    
    79Total Assets
    
    $
    68,629
    
    
    $
    4,491
    
    
    $
    73,120Liabilities and Stockholders EquityCurrent maturities of long-term debt
    
    $
    4,858
    
    
    $
    
    
    
    $
    4,858Trade accounts payable
    
    
    2,566
    
    
    
    
    
    
    
    2,566Accrued salaries, benefits and payroll taxes
    
    
    481
    
    
    
    
    
    
    
    481Accrued interest
    
    
    283
    
    
    
    
    
    
    
    283Accrued expenses
    
    
    1,331
    
    
    
    
    
    
    
    1,331Accounts payable, related parties
    
    
    406
    
    
    
    
    
    
    
    406Total current liabilities
    
    
    9,925
    
    
    
    
    
    
    
    9,925Accrued postretirement benefit obligations
    
    
    510
    
    
    
    
    
    
    
    510Long-term debt, net of current maturities
    
    
    25,241
    
    
    
    
    
    
    
    25,241Other long-term liabilities
    
    
    129
    
    
    
    
    
    
    
    129Redeemable warrants
    
    
    1,500
    
    
    
    
    
    
    
    1,500Total Liabilities
    
    
    37,305
    
    
    
    
    
    
    
    37,305Commitments and contingenciesMinority interests
    
    
    886
    
    
    
    1,388
    
    
    
    2,274Stockholders EquityCommon stock
    
    
    130
    
    
    
    
    
    
    
    130Capital in excess of par value
    
    
    37,425
    
    
    
    955
    
    
    
    38,380Accumulated (deficit)
    
    
    (7,117
    )
    
    
    2,148
    
    
    
    (4,969
    )Total Stockholders Equity
    
    
    30,438
    
    
    
    3,103
    
    
    
    33,541Total Liabilities and Stockholders Equity
    
    $
    68,629
    
    
    $
    4,491
    
    
    $
    73,120
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ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 6  RESTATEMENT (Continued)
 Increase in Net Income.
  Three Months Ended September 30, 2004AsPreviously
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedRevenue
    
    $
    11,888
    
    
    $
    
    
    
    $
    11,888Cost of revenuesDirect costs
    
    
    7,633
    
    
    
    
    
    
    
    7,633Depreciation
    
    
    512
    
    
    
    79
    
    
    
    591Total cost of revenues
    
    
    8,145
    
    
    
    79
    
    
    
    8,224Gross margin
    
    
    3,743
    
    
    
    (79
    )
    
    
    3,664General and administrative expense
    
    
    2,227
    
    
    
    
    
    
    
    2,227Amortization
    
    
    198
    
    
    
    
    
    
    
    198Income (loss) from operations
    
    
    1,318
    
    
    
    (79
    )
    
    
    1,239Other income (expense):Interest
    
    
    (566
    )
    
    
    
    
    
    
    (566
    )Minority interests in income of subsidiaries
    
    
    (56
    )
    
    
    22
    
    
    
    (34
    )Other
    
    
    19
    
    
    
    
    
    
    
    19Total other income (expense)
    
    
    (603
    )
    
    
    22
    
    
    
    (581
    )Net income (loss) before income taxes
    
    
    715
    
    
    
    (57
    )
    
    
    658Provision for foreign income tax
    
    
    (139
    )
    
    
    
    
    
    
    (139
    )Net income (loss)
    
    
    576
    
    
    
    (57
    )
    
    
    519Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    Net income (loss) attributed to common stockholders
    
    $
    576
    
    
    $
    (57
    )
    
    $
    519Net income per common share  basic
    
    $
    0.05
    
    
    $
    (0.01
    )
    
    $
    0.04Net income per common share  diluted
    
    $
    0.04
    
    
    $
    
    
    
    $
    0.04Weighted average number of common shares outstanding:Basic
    
    
    11,599
    
    
    
    
    
    
    
    11,599Diluted
    
    
    14,407
    
    
    
    
    
    
    
    14,407
 12




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##### Table of Contents



NOTE 6  RESTATEMENT (Continued)
 Increase in Net Income.
  Nine Months Ended September 30, 2004AsPreviously
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedRevenue
    
    $
    32,989
    
    
    $
    
    
    
    $
    32,989Cost of revenuesDirect costs
    
    
    22,395
    
    
    
    
    
    
    
    22,395Depreciation
    
    
    1,498
    
    
    
    298
    
    
    
    1,796Total cost of revenues
    
    
    23,893
    
    
    
    298
    
    
    
    24,191Gross margin
    
    
    9,096
    
    
    
    (298
    )
    
    
    8,798General and administrative expense
    
    
    4,781
    
    
    
    
    
    
    
    4,781Amortization
    
    
    600
    
    
    
    
    
    
    
    600Income (loss) from operations
    
    
    3,715
    
    
    
    (298
    )
    
    
    3,417Other income (expense):Interest
    
    
    (1,634
    )
    
    
    
    
    
    
    (1,634
    )Minority interests in income of subsidiaries
    
    
    (315
    )
    
    
    67
    
    
    
    (248
    )Other
    
    
    224
    
    
    
    
    
    
    
    224Total other income (expense)
    
    
    (1,725
    )
    
    
    67
    
    
    
    (1,658
    )Net income (loss) before income taxes
    
    
    1,990
    
    
    
    (231
    )
    
    
    1,759Provision for foreign income tax
    
    
    (359
    )
    
    
    
    
    
    
    (359
    )Net income (loss)
    
    
    1,631
    
    
    
    (231
    )
    
    
    1,400Preferred stock dividend
    
    
    (124
    )
    
    
    
    
    
    
    (124
    )Net income (loss) attributed to common stockholders
    
    $
    1,507
    
    
    $
    (231
    )
    
    $
    1,276Net income per common share  basic
    
    $
    0.21
    
    
    $
    (0.03
    )
    
    $
    0.18Net income per common share  diluted
    
    $
    0.15
    
    
    $
    (0.02
    )
    
    $
    0.13Weighted average number of common shares outstanding:Basic
    
    
    7,285
    
    
    
    
    
    
    
    7,285Diluted
    
    
    9,980
    
    
    
    
    
    
    
    9,980
 13




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 6  RESTATEMENT (Continued)
  Nine Months Ended September 30, 2004AsPreviously
    
    
    
    
    
    
    AsReported
    
    
    Adjustments
    
    
    RestatedCash Flows From Operating Activities:Net income (loss)
    
    $
    1,631
    
    
    $
    (231
    )
    
    $
    1,400Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation and amortization expense
    
    
    2,098
    
    
    
    298
    
    
    
    2,396Fair value of warrant issued to consultant
    
    
    14
    
    
    
    
    
    
    
    14Amortization of discount on debt
    
    
    143
    
    
    
    
    
    
    
    143Minority interest in income of subsidiaries
    
    
    315
    
    
    
    (67
    )
    
    
    248Changes in operating assets and liabilities:(Increase) in accounts receivable
    
    
    (1,417
    )
    
    
    
    
    
    
    (1,417
    )(Increase) in other current assets
    
    
    (609
    )
    
    
    
    
    
    
    (609
    )Decrease in other assets
    
    
    158
    
    
    
    
    
    
    
    158Increase in accounts payable
    
    
    (725
    )
    
    
    
    
    
    
    (725
    )Increase in accrued interest
    
    
    131
    
    
    
    
    
    
    
    131(Decrease) in accrued expenses
    
    
    (471
    )
    
    
    
    
    
    
    (471
    )(Decrease) in other long-term liabilities
    
    
    (141
    )
    
    
    
    
    
    
    (141
    )(Decrease) in accrued employee benefits and payroll taxes
    
    
    (557
    )
    
    
    
    
    
    
    (557
    )Net Cash Provided by Operating Activities
    
    
    570
    
    
    
    
    
    
    
    570Cash Flows From Investing Activities:Purchase of equipment
    
    
    (2,120
    )
    
    
    
    
    
    
    (2,120
    )Acquisition of Safco, net of cash acquired
    
    
    (959
    )
    
    
    
    
    
    
    (959
    )Net Cash Used by Investing Activities
    
    
    (3,079
    )
    
    
    
    
    
    
    (3,079
    )Cash Flows From Financing Activities:Proceeds from issuance of common stock, net
    
    
    16,946
    
    
    
    
    
    
    
    16,946Repayments of long-term debt
    
    
    (2,427
    )
    
    
    
    
    
    
    (2,427
    )Debt issuance costs
    
    
    (317
    )
    
    
    
    
    
    
    (317
    )Net Cash Provided by Financing Activities
    
    
    14,202
    
    
    
    
    
    
    
    14,202Net decrease in cash and cash equivalents
    
    
    11,693
    
    
    
    
    
    
    
    11,693Cash and cash equivalents at beginning of the year
    
    
    1,299
    
    
    
    
    
    
    
    1,299Cash and cash equivalents at end of the period
    
    $
    12,992
    
    
    $
    
    
    
    $
    12,992Supplemental information:Interest paid
    
    $
    1,491
    
    
    $
    
    
    
    $
    1,491
 14




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 7  INVENTORIES
  September 30,
    
    
    December 31,2005
    
    
    2004Hammer bitsFinished goods
    
    $
    952
    
    
    $
    857Work in process
    
    
    713
    
    
    
    385Raw materials
    
    
    90
    
    
    
    151Total hammer bits
    
    
    1,755
    
    
    
    1,393Hammers
    
    
    524
    
    
    
    417Drive pipe
    
    
    651
    
    
    
    Rental supplies
    
    
    234
    
    
    
    Chemicals
    
    
    191
    
    
    
    254Coiled tubing and related inventory
    
    
    1,096
    
    
    
    309Shop supplies and related inventory
    
    
    766
    
    
    
    Total inventory
    
    $
    5,217
    
    
    $
    2,373
 NOTE 8  DEBT
  September 30,
    
    
    December 31,2005
    
    
    2004Allis-Chalmers Energy IncRevolving line of credit
    
    $
    3,700
    
    
    $
    2,353Bank term loan
    
    
    42,000
    
    
    
    6,335Notes payable to former directors
    
    
    96
    
    
    
    402Allis-Chalmers Tubular Service, Inc.Subordinated seller note
    
    
    3,031
    
    
    
    4,000Note payable under non-compete agreement
    
    
    329
    
    
    
    514Bank term loans
    
    
    958
    
    
    
    584Strata Directional Technology, Inc.Vendor financing
    
    
    420
    
    
    
    1,164Safco Oil Field Products, Inc. and DeltaNote payable under non-compete agreement
    
    
    125
    
    
    
    150Note payable to former owners of Delta
    
    
    350
    
    
    
    Downhole Injection Services, LLC and CapcoilVehicle and equipment installment notes
    
    
    128
    
    
    
    60Note payable under non-compete agreements
    
    
    330
    
    
    
    Mountain Compressed Air Inc.Term loan
    
    
    160
    
    
    
    198Seller note
    
    
    500
    
    
    
    1,600AirCompRevolving line of credit
    
    
    
    
    
    
    1,520Bank term loan
    
    
    
    
    
    
    6,775Subordinated note payable to M-I
    
    
    4,000
    
    
    
    4,818Total debt
    
    
    56,127
    
    
    
    30,473Less: short-term debt and current maturities
    
    
    4,636
    
    
    
    5,541Long-term debt obligations
    
    $
    51,491
    
    
    $
    24,932
 15




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  DEBT (Continued)
  
    
    A $13.0 million revolving line of credit. Borrowings are limited to 85% of eligible
accounts receivable and 50% of eligible inventory (up to a maximum of $2.0 million of
borrowings based on inventory). This facility is used to finance working capital
requirements and other general corporate purposes, including the issuance of standby
letters of credit. Outstanding borrowings under this line of credit were $3.7 million at
prime as of September 30, 2005.
    
    Two term loans totaling $42.0 million. Outstanding borrowings under these term loans
were $42.0 million as of September 30, 2005. These loans are at LIBOR rates approximating
7.2%
    
    
    A $10.0 million revolving line of credit. Borrowings were limited to 85% of eligible
accounts receivables, as defined.
    
    A term loan with a principal balance payable in monthly payments of principal of
$105,583. We were also required to prepay this term loan by an amount equal to 20% of
receipts from our largest customer in Mexico.
    
    A $6.0 million capital expenditure and acquisition line of credit. Borrowings under
this facility were payable monthly over four years beginning in January 2006.
    16




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  DEBT (Continued)
      
    
    A $3.5 million bank line of credit. Interest accrued at an adjustable rate based on the
prime rate. We paid a 0.5% per annum fee on the undrawn portion. Borrowings under the line
of credit were subject to a borrowing base consisting of 80% of eligible accounts
receivable.
    
    A term loan that accrued interest at an adjustable rate based on either LIBOR or the
prime rate. Principal payments of $286,000 plus interest were due quarterly, with a final
maturity date of June 27, 2007.
    
    A delayed draw term loan facility in the amount of $1.5 million to be used for
capital expenditures. Interest accrued at an adjustable rate based on either the LIBOR or
the prime rate. Quarterly principal payments were to commence on March 31, 2006 in an
amount equal to 5.0% of the outstanding balance as of December 31, 2005, with a final
maturity of June 27, 2007.
     17




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  DEBT (Continued)
  NOTE 9  STOCKHOLDERS EQUITY
      NOTE 10- SEGMENT INFORMATION
  For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)RevenuesDirectional drilling services
    
    $
    11,383
    
    
    $
    6,677
    
    
    $
    32,218
    
    
    $
    18,352Casing and tubing services
    
    
    5,103
    
    
    
    2,831
    
    
    
    12,596
    
    
    
    7,218Compressed air drilling services
    
    
    7,637
    
    
    
    2,380
    
    
    
    16,684
    
    
    
    7,419Production services
    
    
    3,226
    
    
    
    
    
    
    
    6,833
    
    
    
    Rental tools
    
    
    1,559
    
    
    
    
    
    
    
    3,499
    
    
    
    $
    28,908
    
    
    $
    11,888
    
    
    $
    71,830
    
    
    $
    32,989Operating Income (Loss):Directional drilling services
    
    $
    1,696
    
    
    $
    1,048
    
    
    $
    5,069
    
    
    $
    2,435Casing and tubing services
    
    
    1,336
    
    
    
    949
    
    
    
    4,015
    
    
    
    2,174Compressed air drilling services
    
    
    1,802
    
    
    
    130
    
    
    
    3,331
    
    
    
    723Production services
    
    
    (128
    )
    
    
    
    
    
    
    (130
    )
    
    
    Rental tools
    
    
    454
    
    
    
    
    
    
    
    780
    
    
    
    General corporate
    
    
    (1,636
    )
    
    
    (888
    )
    
    
    (4,380
    )
    
    
    (1,915
    )$
    3,524
    
    
    $
    1,239
    
    
    $
    8,685
    
    
    $
    3,417
 18




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 10  SEGMENT INFORMATION (Continued)
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)Depreciation and Amortization:Directional drilling services
    
    $
    295
    
    
    $
    117
    
    
    $
    652
    
    
    $
    331Casing and Tubing services
    
    
    510
    
    
    
    358
    
    
    
    1,418
    
    
    
    1,075Compressed air drilling services
    
    
    536
    
    
    
    288
    
    
    
    1,406
    
    
    
    914Production services
    
    
    279
    
    
    
    
    
    
    
    604
    
    
    
    Rental tools
    
    
    121
    
    
    
    
    
    
    
    386
    
    
    
    General corporate
    
    
    102
    
    
    
    26
    
    
    
    203
    
    
    
    76$
    1,843
    
    
    $
    789
    
    
    $
    4,669
    
    
    $
    2,396Capital Expenditures:Directional drilling services
    
    $
    945
    
    
    $
    94
    
    
    $
    2,145
    
    
    $
    882Casing and tubing services
    
    
    1,373
    
    
    
    32
    
    
    
    3,230
    
    
    
    457Compressed air drilling services
    
    
    915
    
    
    
    107
    
    
    
    2,841
    
    
    
    771Production services
    
    
    606
    
    
    
    
    
    
    
    896
    
    
    
    Rental tools
    
    
    271
    
    
    
    
    
    
    
    278
    
    
    
    General corporate
    
    
    12
    
    
    
    8
    
    
    
    195
    
    
    
    10$
    4,122
    
    
    $
    241
    
    
    $
    9,585
    
    
    $
    2,120
 As ofSeptember 30,
    
    
    December 31,2005
    
    
    2004Goodwill:Directional drilling services
    
    $
    4,168
    
    
    $
    4,168Casing and tubing services
    
    
    3,673
    
    
    
    3,673Compressed air drilling services
    
    
    3,592
    
    
    
    3,510Production services
    
    
    609
    
    
    
    425Rental tools
    
    
    
    
    
    
    General corporate
    
    
    
    
    
    
    $
    12,042
    
    
    $
    11,776Assets:Directional drilling services
    
    $
    21,437
    
    
    $
    14,166Casing and tubing services
    
    
    41,482
    
    
    
    21,197Compressed air drilling services
    
    
    41,011
    
    
    
    29,147Production services
    
    
    11,949
    
    
    
    5,472Rental tools
    
    
    8,084
    
    
    
    1,625General corporate
    
    
    5,599
    
    
    
    8,585$
    129,562
    
    
    $
    80,192
 19




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 10  SEGMENT INFORMATION (Continued)
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004(Restated)
    
    
    
    
    
    
    (Restated)Revenues:United States
    
    $
    27,486
    
    
    $
    10,493
    
    
    $
    66,879
    
    
    $
    29,402International
    
    
    1,422
    
    
    
    1,395
    
    
    
    4,951
    
    
    
    3,587$
    28,908
    
    
    $
    11,888
    
    
    $
    71,830
    
    
    $
    32,989
 NOTE 11  LEGAL MATTERS
    NOTE 12  SUBSEQUENT EVENTS
   20




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS  OF OPERATION
 This document contains forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from the results discussed in such forward-looking statements.
Factors that might cause such differences include, but are not limited to, the general condition of
the oil and natural gas drilling industry, demand for our oil and natural gas service and rental
products, and competition. Other factors are identified in our Securities and Exchange Commission
filings in our Form 10-K under the heading Risk Factors located at the end of Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations.
 The following discussion and analysis should be read in conjunction with our selected historical
financial data and our accompanying financial statements and the notes to those financial
statements included elsewhere in this document. The following discussion contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect
our plans, estimates and beliefs. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of risks and uncertainties, including, but not
limited to, those discussed above under Risk Factors.
 Overview of Our Business
     Restatement
  21




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##### Table of Contents



Comparison of Three Months Ended September 30, 2005 and September 30, 2004
     22




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##### Table of Contents



Revenues
    
    
    Income (Loss) from OperationsThree Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    Change(in thousands)Directional drilling services
    
    $
    11,383
    
    
    $
    6,677
    
    
    $
    4,706
    
    
    $
    1,696
    
    
    $
    1,048
    
    
    $
    648Casing and tubing services
    
    
    5,103
    
    
    
    2,831
    
    
    
    2,272
    
    
    
    1,336
    
    
    
    949
    
    
    
    387Compressed air drilling services
    
    
    7,637
    
    
    
    2,380
    
    
    
    5,257
    
    
    
    1,802
    
    
    
    130
    
    
    
    1,672Production services
    
    
    3,226
    
    
    
    
    
    
    
    3,226
    
    
    
    (128
    )
    
    
    
    
    
    
    (128
    )Rental tools
    
    
    1,559
    
    
    
    
    
    
    
    1,559
    
    
    
    454
    
    
    
    
    
    
    
    454General corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,636
    )
    
    
    (888
    )
    
    
    (748
    )Total
    
    $
    28,908
    
    
    $
    11,888
    
    
    $
    17,020
    
    
    $
    3,524
    
    
    $
    1,239
    
    
    $
    2,285
 Directional Drilling Services Segment
  23




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##### Table of Contents



Casing and Tubing Services Segment
  Compressed Air Drilling Services Segment
  Production Services Segment
  Rental Tools Segment
  Comparison of Nine Months Ended September 30, 2005 and September 30, 2004
    24




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##### Table of Contents



Revenues
    
    
    Income (Loss) from OperationsNine Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    Change
    
    
    2005
    
    
    2004
    
    
    Change(in thousands)Directional drilling services
    
    $
    32,218
    
    
    $
    18,352
    
    
    $
    13,866
    
    
    $
    5,069
    
    
    $
    2,435
    
    
    $
    2,634Casing and tubing services
    
    
    12,596
    
    
    
    7,218
    
    
    
    5,378
    
    
    
    4,015
    
    
    
    2,174
    
    
    
    1,841Compressed air drilling services
    
    
    16,684
    
    
    
    7,419
    
    
    
    9,265
    
    
    
    3,331
    
    
    
    723
    
    
    
    2,608Production services
    
    
    6,833
    
    
    
    
    
    
    
    6,833
    
    
    
    (130
    )
    
    
    
    
    
    
    (130
    )Rental tools
    
    
    3,499
    
    
    
    
    
    
    
    3,499
    
    
    
    780
    
    
    
    
    
    
    
    780General corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,380
    )
    
    
    (1,915
    )
    
    
    (2,465
    )Total
    
    $
    71,830
    
    
    $
    32,989
    
    
    $
    38,841
    
    
    $
    8,685
    
    
    $
    3,417
    
    
    $
    5,268
 25




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##### Table of Contents



Directional Drilling Services Segment
  Casing and Tubing Services Segment
  Compressed Air Drilling Services Segment
  Production Services Segment
  Rental Tools Segment
  Liquidity and Capital Resources
  Operating Activities
  26




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##### Table of Contents



Investing Activities
  Financing Activities
    
    
    A $13.0 million revolving line of credit. Borrowings are limited to 85% of eligible
accounts receivable and 50% of eligible inventory (up to a maximum of $2.0 million of
borrowings based on inventory). This facility is used to finance working capital
requirements and other general corporate purposes, including the issuance of standby
letters of credit. Outstanding borrowings under this line of credit were $3.7 million as
of September 30, 2005.
    
    Two term loans totaling $42.0 million. Outstanding borrowings under these term loans
were $42.0 million as of September 30, 2005.
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##### Table of Contents




    
    A $10.0 million revolving line of credit. Borrowings were limited to 85% of eligible
accounts receivables, as defined.
    
    A term loan with a principal balance payable in monthly payments of principal of
$105,583. We were also required to prepay this term loan by an amount equal to 20% of
receipts from our largest customer in Mexico.
    
    A $6.0 million capital expenditure and acquisition line of credit. Borrowings under
this facility were payable monthly over four years beginning in January 2006.
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##### Table of Contents




    
    A $3.5 million bank line of credit. Interest accrued at an adjustable rate based on the
prime rate. We paid a 0.5% per annum fee on the undrawn portion. Borrowings under the line
of credit were subject to a borrowing base consisting of 80% of eligible accounts
receivable.
    
    A term loan that accrued interest at an adjustable rate based on either LIBOR or the
prime rate. Principal payments of $286,000 plus interest were due quarterly, with a final
maturity date of June 27, 2007.
    
    A delayed draw term loan facility in the amount of $1.5 million to be used for
capital expenditures. Interest accrued at an adjustable rate based on either the LIBOR or
the prime rate. Quarterly principal payments were to commence on March 31, 2006 in an
amount equal to 5.0% of the outstanding balance as of December 31, 2005, with a final
maturity of June 27, 2007.
       Capital Requirements
   29




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##### Table of Contents



Recent Developments
   Critical Accounting Policies
  Accounting for Income Taxes
 Share-Based Payment Accounting for Stock-Based Compensation
 Accounting Changes and Error Corrections
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
  Interest Rate Risk.
   30




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##### Table of Contents



Foreign Currency Exchange Rate Risk.
  
 ITEM 4. CONTROLS AND PROCEDURES.
    
    
    The addition of experienced accounting personnel with appropriate experience and
qualifications to perform quality review procedures and to satisfy our financial reporting
obligation. During August 2004, we hired a new chief financial officer and in October of
2004 we hired a full-time general counsel. In March 2005, we hired a certified public
accountant as our financial reporting manager and in July 2005 we hired as chief accounting
officer a certified public accountant who has significant prior experience as a chief
accounting officer of a publicly traded company.
    
    In the fourth quarter of 2004, we engaged an independent internal controls consulting
firm which is in the process of documenting, analyzing, identifying and correcting
weaknesses and testing our internal controls and procedures, including our controls over
internal financial reporting.
    
    Our audit committee dismissed our prior independent auditors in October 2004 and engaged
new independent auditors who we believe have greater experience with publicly traded
companies.
    
    We are in the process of implementing new accounting software to facilitate timely and
accurate reporting.
  Change in Internal Control Over Financial Reporting.
  
    
    We continued the engagement of an independent internal controls consulting firm which is
in the process of documenting, analyzing, identifying and testing internal control.
    
    In July 2005, we reassigned our chief accounting officer to oversee our corporate
systems and hired a certified public accountant who has prior experience as a chief
accounting officer of a publicly traded company to be our chief accounting officer.
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##### Table of Contents




    
    During the quarter we started the implementation of new accounting software and as of
September 30, 2005, two of our segments were utilizing the software.
 
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    The election of ten persons to serve as our directors2.
    
    The approval of an amendment to our Certificate of Incorporation to increase the
authorized number of shares of our common stock from twenty million shares to a one hundred
million shares and to increase our preferred stock from ten million shares to twenty-five
million shares.3.
    
    The approval of an amendment to our 2003 Incentive Stock Plan to increase the number of
            shares of our common stock that may be issued under the plan from 2.4 million to the lesser
of 3.0 million or 15% of our outstanding common stock calculated on a fully-diluted basis.4.
    
    The ratification of the appointment of UHY Mann Frankfort Stein & Lipp CPAs, LLP as our
accountants for the fiscal year ending December 31, 2005.
  For
    
    
    Against or Withheld
    
    
    Abstentions1.
    
    
    Election of DirectorsJeffrey R. Freedman
    
    
    12,468,700
    
    
    
    120Victor F. Germack
    
    
    12,468,655
    
    
    
    165David A. Groshoff
    
    
    12,467,745
    
    
    
    1,075Munawar H. Hidayatallah
    
    
    12,468,751
    
    
    
    69Thomas E. Kelly
    
    
    12,468,758
    
    
    
    62John E. McConnaughy, Jr.
    
    
    12,468,759
    
    
    
    61Jens H. Mortensen, Jr.
    
    
    12,468,754
    
    
    
    66Robert E. Nederlander
    
    
    12,468,754
    
    
    
    66Leonard Toboroff
    
    
    12,468,754
    
    
    
    66Thomas O. Whitener, Jr.
    
    
    12,468,758
    
    
    
    622.
    
    
    Approval of Amendment to
Certificate of Incorporation
    
    
    11,580,145
    
    
    
    15,437
    
    
    
    273.
    
    
    Approval of Amendment to
2003 Incentive Stock Plan
    
    
    11,559,466
    
    
    
    19,962
    
    
    
    16,1814.
    
    
    Ratification of UHY Mann Frankfort
Stein & Lipp CPAs, LLP as our
independent accountants
    
    
    12,468,783
    
    
    
    21
    
    
    
    15
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##### Table of Contents



ITEM 6. EXHIBITS
  
 SIGNATURES
  Allis-Chalmers Energy Inc.(Registrant)/S/ MUNAWAR H. HIDAYATALLAHMunawar H. Hidayatallah
Chief Executive Officer and
Chairman
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##### Table of Contents



EXHIBIT INDEX
 3.5
    
    Certificate of Amendment to Certificate of incorporation of Allis-Chalmers Energy Inc.
(incorporated by reference to Current Report on Form 8-K filed August 17, 2005).4.12
    
    Amendment to 2003 Stock Option Plan (incorporated by reference to Current Report on Form 8-K
filed August 17, 2005).10.41
    
    Credit Agreement dated July 11, 2005 with Royal bank of Canada, as administrative agent ,
with the notes attached thereto as exhibits and form of Pledge and Security Agreement
(incorporated by reference to Current Report on Form 8-K filed on July 15, 2005).10.42
    
    Purchase Agreement dated July 11, 2005 among Allis-Chalmers Energy Inc., Mountain Compressed
Air, Inc. and M-I L.L.C. (incorporated by reference to Current Report on Form 8-K filed on
July 15, 2005).10.43
    
    Asset Purchase Agreement dated July 11, 2005 between AirComp L.L.C., W.T. Enterprises, Inc.
and William M. Watts (incorporated by reference to Current Report on Form 8-K filed on July
15, 2005).10.44
    
    First Amendment to Stockholder Agreement by and among Allis-Chalmers Energy Inc. and the
Stockholders named therein (incorporated by reference to Current Report on Form 8-K filed
August 5, 2005).10.45
    
    Asset Purchase Agreement by and between Patterson Services, Inc. and Allis-Chalmers Tubular
Services, Inc (incorporated by reference to Current Report on Form 8-K filed September 8,
2005).31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    
    Underwriting Agreement (incorporated by reference to Amendment No.1 to Registration Statement
on Form S-1 filed on July 22, 2005 (Registration Statement No. 333-126-110))
 34