##### Table of Contents



UNITED STATES
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, 2010
 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 1-02199
 ALLIS-CHALMERS ENERGY INC.
  DELAWARE
    
    39-0126090(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)5075 WESTHEIMER, SUITE 890, HOUSTON, TEXAS
    
    77056(Address of principal executive offices)
    
    (Zip Code)
 (713) 369-0550  Registrants telephone number, including area code
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



ALLIS-CHALMERS ENERGY INC.
 FORM 10-Q
 For the Quarterly Period Ended September 30, 2010
 TABLE OF CONTENTS
 PAGEPART I   FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Condensed Balance Sheets as of September 30, 2010 and December 31, 2009
    
    
    3Consolidated Condensed Statements of Operations for the three and nine months ended
September 30, 2010 and 2009
    
    
    4Consolidated Condensed Statements of Cash Flows for the nine months ended
September 30, 2010 and 2009
    
    
    5Notes to Unaudited Consolidated Condensed Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    40PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    41Item 1A. Risk Factors
    
    
    41Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 6. Exhibits
    
    
    44Signatures
    
    
    44EX-31.1EX-31.2EX-32.1
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 ALLIS-CHALMERS ENERGY INC.


CONSOLIDATED CONDENSED BALANCE SHEETS
 September 30,
    
    
    December 31,2010
    
    
    2009(unaudited)AssetsCash and cash equivalents
    
    $
    15,322
    
    
    $
    41,072Trade receivables, net
    
    
    140,123
    
    
    
    105,059Inventories
    
    
    38,993
    
    
    
    34,528Deferred income tax asset
    
    
    2,649
    
    
    
    3,790Prepaid expenses and other
    
    
    8,628
    
    
    
    13,799Total current assets
    
    
    205,715
    
    
    
    198,248Property and equipment, net
    
    
    732,857
    
    
    
    746,478Goodwill
    
    
    46,173
    
    
    
    40,639Other intangible assets, net
    
    
    35,138
    
    
    
    32,649Debt issuance costs, net
    
    
    8,073
    
    
    
    9,545Deferred income tax asset
    
    
    34,736
    
    
    
    22,047Other assets
    
    
    40,445
    
    
    
    31,014Total assets
    
    $
    1,103,137
    
    
    $
    1,080,620Liabilities and Stockholders EquityCurrent maturities of long-term debt
    
    $
    23,624
    
    
    $
    17,027Trade accounts payable
    
    
    43,361
    
    
    
    34,839Accrued salaries, benefits and payroll taxes
    
    
    25,319
    
    
    
    22,854Accrued interest
    
    
    6,917
    
    
    
    15,821Accrued expenses
    
    
    27,674
    
    
    
    21,918Total current liabilities
    
    
    126,895
    
    
    
    112,459Long-term debt, net of current maturities
    
    
    497,100
    
    
    
    475,206Deferred income tax liability
    
    
    8,087
    
    
    
    8,166Other long-term liabilities
    
    
    452
    
    
    
    1,142Total liabilities
    
    
    632,534
    
    
    
    596,973Commitments and contingenciesStockholders EquityPreferred stock, $0.01 par value (25,000,000 shares authorized; 36,393 shares
issued and outstanding at September 30, 2010 and at December 31, 2009)
    
    
    34,183
    
    
    
    34,183Common stock, $0.01 par value (200,000,000 shares authorized;73,430,682 shares issued and outstanding at September 30, 2010 and
71,378,529 shares issued and outstanding at December 31, 2009)
    
    
    734
    
    
    
    714Capital in excess of par value
    
    
    429,146
    
    
    
    422,823Retained earnings
    
    
    6,540
    
    
    
    25,927Total stockholders equity
    
    
    470,603
    
    
    
    483,647Total liabilities and stockholders equity
    
    $
    1,103,137
    
    
    $
    1,080,620
  3




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.


CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    174,288
    
    
    $
    120,016
    
    
    $
    473,302
    
    
    $
    377,624Operating costs and expensesDirect costs
    
    
    127,622
    
    
    
    90,763
    
    
    
    356,060
    
    
    
    281,136Depreciation
    
    
    21,094
    
    
    
    19,709
    
    
    
    61,799
    
    
    
    58,261Selling, general and administrative
    
    
    12,772
    
    
    
    11,430
    
    
    
    36,949
    
    
    
    40,595Loss on asset disposition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,916Amortization
    
    
    1,255
    
    
    
    1,184
    
    
    
    3,567
    
    
    
    3,558Total operating costs and expenses
    
    
    162,743
    
    
    
    123,086
    
    
    
    458,375
    
    
    
    385,466Income (loss) from operations
    
    
    11,545
    
    
    
    (3,070
    )
    
    
    14,927
    
    
    
    (7,842
    )Other income (expense)Interest expense
    
    
    (11,881
    )
    
    
    (10,764
    )
    
    
    (33,986
    )
    
    
    (37,492
    )Interest income
    
    
    45
    
    
    
    39
    
    
    
    499
    
    
    
    53Gain on debt extinguishment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,365Other
    
    
    (661
    )
    
    
    37
    
    
    
    (2,479
    )
    
    
    (231
    )Total other income (expense)
    
    
    (12,497
    )
    
    
    (10,688
    )
    
    
    (35,966
    )
    
    
    (11,305
    )Loss before income taxes
    
    
    (952
    )
    
    
    (13,758
    )
    
    
    (21,039
    )
    
    
    (19,147
    )Provision for income taxes
    
    
    (1,614
    )
    
    
    4,108
    
    
    
    3,563
    
    
    
    6,802Net loss
    
    
    (2,566
    )
    
    
    (9,650
    )
    
    
    (17,476
    )
    
    
    (12,345
    )Preferred stock dividend
    
    
    (637
    )
    
    
    (630
    )
    
    
    (1,911
    )
    
    
    (665
    )Net loss attributed
to common stockholders
    
    $
    (3,203
    )
    
    $
    (10,280
    )
    
    $
    (19,387
    )
    
    $
    (13,010
    )Net loss per common share:Basic
    
    $
    (0.04
    )
    
    $
    (0.14
    )
    
    $
    (0.27
    )
    
    $
    (0.27
    )Diluted
    
    $
    (0.04
    )
    
    $
    (0.14
    )
    
    $
    (0.27
    )
    
    $
    (0.27
    )Weighted average shares outstanding:Basic
    
    
    72,207
    
    
    
    70,945
    
    
    
    71,506
    
    
    
    47,834Diluted
    
    
    72,207
    
    
    
    70,945
    
    
    
    71,506
    
    
    
    47,834
  4




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.


CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 For the Nine Months EndedSeptember 30,2010
    
    
    2009Cash Flows from Operating Activities:Net loss
    
    $
    (17,476
    )
    
    $
    (12,345
    )Adjustments to reconcile net loss to net cash
provided by operating activities:Depreciation and amortization
    
    
    65,366
    
    
    
    61,819Amortization and write-off of debt issuance costs
    
    
    1,661
    
    
    
    1,691Stock-based compensation
    
    
    4,374
    
    
    
    3,580Allowance for bad debts
    
    
    43
    
    
    
    4,065Deferred income taxes
    
    
    (12,016
    )
    
    
    (11,094
    )Loss on investment
    
    
    1,466
    
    
    
    Equity in loss of unconsolidated affiliates
    
    
    409
    
    
    
    Loss (gain) on sale of property and equipment
    
    
    150
    
    
    
    (1,180
    )Loss on asset disposition
    
    
    
    
    
    
    1,916Gain on debt extinguishment
    
    
    
    
    
    
    (26,365
    )Changes in operating assets and liabilities, net of acquisition:Decrease (increase) in trade receivable
    
    
    (30,361
    )
    
    
    59,471Decrease (increase) in inventories
    
    
    (2,697
    )
    
    
    3,890Decrease in prepaid expenses and other current assets
    
    
    8,024
    
    
    
    3,290Decrease in other assets
    
    
    1,265
    
    
    
    1,535Increase (decrease) in trade accounts payable
    
    
    8,380
    
    
    
    (29,035
    )(Decrease) in accrued interest
    
    
    (8,904
    )
    
    
    (12,479
    )Increase (decrease) in accrued expenses
    
    
    5,488
    
    
    
    (11,632
    )Increase in accrued salaries, benefits and payroll taxes
    
    
    2,401
    
    
    
    1,228(Decrease) in other long-term liabilities
    
    
    (690
    )
    
    
    (836
    )Net Cash Provided By Operating Activities
    
    
    26,883
    
    
    
    37,519Cash Flows from Investing Activities:Deposits on asset commitments
    
    
    (12,967
    )
    
    
    7,054Business acquisition, net of cash acquired
    
    
    (18,237
    )
    
    
    Purchase of investment interests
    
    
    368
    
    
    
    (1,102
    )Proceeds from sale of property and equipment
    
    
    5,284
    
    
    
    7,980Proceeds from assets dispositions
    
    
    
    
    
    
    3,916Purchase of property and equipment
    
    
    (50,893
    )
    
    
    (67,266
    )Net Cash Used In Investing Activities
    
    
    (76,445
    )
    
    
    (49,418
    )Cash Flows from Financing Activities:Proceeds from issuance of stock, net
    
    
    
    
    
    
    120,337Net proceeds from stock incentive plans
    
    
    
    
    
    
    14Proceeds from long-term debt
    
    
    4,000
    
    
    
    25,000Net borrowings (repayments) under line of credit
    
    
    36,500
    
    
    
    (36,500
    )Payments on long-term debt
    
    
    (14,588
    )
    
    
    (61,539
    )Payment of preferred stock dividend
    
    
    (1,911
    )
    
    
    Debt issuance costs
    
    
    (189
    )
    
    
    (644
    )Net Cash Provided By Financing Activities
    
    
    23,812
    
    
    
    46,668Net change in cash and cash equivalents
    
    
    (25,750
    )
    
    
    34,769Cash and cash equivalents at beginning of period
    
    
    41,072
    
    
    
    6,866Cash and cash equivalents at end of period
    
    $
    15,322
    
    
    $
    41,635
  5




---



##### Table of Contents



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
   Pending Merger
   Basis of Presentation
  6




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  Financial Instruments
  Reclassification
  New Accounting Pronouncements
    7




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
  NOTE 2 ACQUISITION
  Current assets
    
    $
    7,745Property and equipment
    
    
    2,756Intangible assets, including goodwill
    
    
    11,589Other long-term assets
    
    
    2Total assets acquired
    
    
    22,092Current liabilities
    
    
    444Long-term liabilities
    
    
    181Net assets acquired
    
    $
    21,467
  NOTE 3  STOCK-BASED COMPENSATION
   For the Nine Months EndedSeptember 30,2010
    
    
    2009Expected dividend yield
    
    
    
    
    
    
    Expected price volatility
    
    
    89.81
    %
    
    
    77.32
    %Risk-free interest rate
    
    
    1.41
    %
    
    
    1.37
    %Expected life of options
    
    5 years
    
    
    5 yearsWeighted-average fair value of options granted at market value
    
    $
    2.63
    
    
    $
    0.77
 8




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 3  STOCK-BASED COMPENSATION (Continued)
   Weighted
    
    
    Weighted-Shares
    
    
    Average
    
    
    Average
    
    
    AggregateUnder
    
    
    Exercise
    
    
    Contractual
    
    
    Intrinsic ValueOption
    
    
    Price
    
    
    Life (Years)
    
    
    (millions)Balance at December 31, 2009
    
    
    701,732
    
    
    $
    6.31Granted
    
    
    1,072,253
    
    
    
    3.78Canceled
    
    
    (21,967
    )
    
    
    8.30Exercised
    
    
    Outstanding at September 30, 2010
    
    
    1,752,018
    
    
    $
    4.74
    
    
    
    7.86
    
    
    $
    0.85Exercisable at September 30, 2010
    
    
    586,432
    
    
    $
    7.08
    
    
    
    4.90
    
    
    $
    0.14
   Weighted-AverageGrant-Date FairNumber of Shares
    
    
    Value Per ShareNonvested at December 31, 2009
    
    
    837,626
    
    
    $
    15.63Granted
    
    
    2,061,750
    
    
    
    3.78Vested
    
    
    (335,787
    )
    
    
    17.48Forfeited
    
    
    (3,333
    )
    
    
    3.77Nonvested at September 30, 2010
    
    
    2,560,256
    
    
    $
    5.86
  9




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 4  INVENTORIES
  September 30,
    
    
    December 31,2010
    
    
    2009ManufacturedFinished goods
    
    $
    3,814
    
    
    $
    2,983Work in process
    
    
    2,099
    
    
    
    2,299Raw materials
    
    
    2,355
    
    
    
    884Total manufactured
    
    
    8,268
    
    
    
    6,166Rig parts and related inventory
    
    
    11,991
    
    
    
    10,654Shop supplies and related inventory
    
    
    8,621
    
    
    
    7,762Chemicals and drilling fluids
    
    
    4,919
    
    
    
    4,381Rental supplies
    
    
    1,908
    
    
    
    2,134Hammers
    
    
    2,269
    
    
    
    2,257Coiled tubing and related inventory
    
    
    847
    
    
    
    939Drive pipe
    
    
    170
    
    
    
    235Total inventories
    
    $
    38,993
    
    
    $
    34,528
 NOTE 5 GOODWILL AND INTANGIBLE ASSETS
   10




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 6  DEBT
  September 30,
    
    
    December 31,2010
    
    
    2009Senior notes
    
    $
    430,238
    
    
    $
    430,238Revolving line of credit
    
    
    36,500
    
    
    
    Term loans
    
    
    52,484
    
    
    
    60,744Insurance premium financing
    
    
    1,486
    
    
    
    997Capital lease obligations
    
    
    16
    
    
    
    254Total debt
    
    
    520,724
    
    
    
    492,233Less: current maturities
    
    
    23,624
    
    
    
    17,027Long-term debt, net of current maturities
    
    $
    497,100
    
    
    $
    475,206
 Senior notes, line of credit agreements and term loans
      11




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 6  DEBT (Continued)
    Notes payable
  Other debt
  NOTE 7  STOCKHOLDERS EQUITY
   NOTE 8  LOSS ON ASSET DISPOSITION
  12




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 9  GAIN ON DEBT EXTINGUISHMENT
  NOTE 10  INCOME (LOSS) PER COMMON SHARE
  For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net loss
    
    $
    (2,566
    )
    
    $
    (9,650
    )
    
    $
    (17,476
    )
    
    $
    (12,345
    )Preferred stock dividend
    
    
    (637
    )
    
    
    (630
    )
    
    
    (1,911
    )
    
    
    (665
    )Net loss attributed to common
stockholders
    
    $
    (3,203
    )
    
    $
    (10,280
    )
    
    $
    (19,387
    )
    
    $
    (13,010
    )Denominator:Weighted-average common shares
outstanding excluding nonvested
restricted stock
    
    
    72,207
    
    
    
    70,945
    
    
    
    71,506
    
    
    
    47,834Effect of potentially dilutive common shares:Convertible preferred stock and stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average common shares
outstanding and assumed conversions
    
    
    72,207
    
    
    
    70,945
    
    
    
    71,506
    
    
    
    47,834Net loss per common shareBasic
    
    $
    (0.04
    )
    
    $
    (0.14
    )
    
    $
    (0.27
    )
    
    $
    (0.27
    )Diluted
    
    $
    (0.04
    )
    
    $
    (0.14
    )
    
    $
    (0.27
    )
    
    $
    (0.27
    )Potentially dilutive securities excluded
as anti-dilutive
    
    
    17,126
    
    
    
    15,016
    
    
    
    15,946
    
    
    
    15,557
  13




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 11  SUPPLEMENTAL CASH FLOW INFORMATION
 For the Nine Months EndedSeptember 30,2010
    
    
    2009Cash paid for interest and income taxes:Interest
    
    $
    41,507
    
    
    $
    48,631Income taxes
    
    
    667
    
    
    
    3,963Non-cash investing and financing transactions in
connection with an acquisition:Goodwill
    
    $
    (2,000
    )
    
    $
    Value of common stock, issued
    
    
    2,000
    
    
    
    Other non-cash investing and financing activities:Insurance premium financed
    
    $
    2,579
    
    
    $
    3,204Receivable from sale of investment
    
    
    274
    
    
    
    Assets transferred to joint venture investment
    
    
    
    
    
    
    1,639Preferred stock dividend
    
    
    1,911
    
    
    
    665
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION
  14




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING BALANCE SHEETS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalAssetsCash and cash equivalents
    
    $
    
    
    
    $
    7,780
    
    
    $
    7,542
    
    
    $
    
    
    
    $
    15,322Trade receivables, net
    
    
    
    
    
    
    77,263
    
    
    
    73,454
    
    
    
    (10,594
    )
    
    
    140,123Inventories
    
    
    
    
    
    
    18,906
    
    
    
    20,087
    
    
    
    
    
    
    
    38,993Intercompany receivables
    
    
    
    
    
    
    106,193
    
    
    
    
    
    
    
    (106,193
    )
    
    
    Note receivable from affiliate
    
    
    23,551
    
    
    
    
    
    
    
    
    
    
    
    (23,551
    )
    
    
    Prepaid expenses and other
    
    
    22
    
    
    
    5,832
    
    
    
    5,423
    
    
    
    
    
    
    
    11,277Total current assets
    
    
    23,573
    
    
    
    215,974
    
    
    
    106,506
    
    
    
    (140,338
    )
    
    
    205,715Property and equipment, net
    
    
    
    
    
    
    469,640
    
    
    
    263,217
    
    
    
    
    
    
    
    732,857Goodwill
    
    
    
    
    
    
    28,784
    
    
    
    17,389
    
    
    
    
    
    
    
    46,173Other intangible assets, net
    
    
    425
    
    
    
    28,320
    
    
    
    6,393
    
    
    
    
    
    
    
    35,138Debt issuance costs, net
    
    
    7,954
    
    
    
    119
    
    
    
    
    
    
    
    
    
    
    
    8,073Note receivable from affiliates
    
    
    2,100
    
    
    
    
    
    
    
    
    
    
    
    (2,100
    )
    
    
    Investments in affiliates
    
    
    981,488
    
    
    
    
    
    
    
    
    
    
    
    (981,488
    )
    
    
    Other assets
    
    
    32,767
    
    
    
    39,099
    
    
    
    3,315
    
    
    
    
    
    
    
    75,181Total assets
    
    $
    1,048,307
    
    
    $
    781,936
    
    
    $
    396,820
    
    
    $
    (1,123,926
    )
    
    $
    1,103,137Liabilities and Stockholders EquityCurrent maturities of long-term debt
    
    $
    
    
    
    $
    5,172
    
    
    $
    18,452
    
    
    $
    
    
    
    $
    23,624Trade accounts payable
    
    
    
    
    
    
    17,033
    
    
    
    36,922
    
    
    
    (10,594
    )
    
    
    43,361Accrued salaries, benefits and
payroll taxes
    
    
    
    
    
    
    1,976
    
    
    
    23,343
    
    
    
    
    
    
    
    25,319Accrued interest
    
    
    6,356
    
    
    
    203
    
    
    
    358
    
    
    
    
    
    
    
    6,917Accrued expenses
    
    
    1,041
    
    
    
    15,275
    
    
    
    11,358
    
    
    
    
    
    
    
    27,674Intercompany payables
    
    
    103,569
    
    
    
    
    
    
    
    2,624
    
    
    
    (106,193
    )
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    23,551
    
    
    
    (23,551
    )
    
    
    Total current liabilities
    
    
    110,966
    
    
    
    39,659
    
    
    
    116,608
    
    
    
    (140,338
    )
    
    
    126,895Long-term debt, net of current
maturities
    
    
    466,738
    
    
    
    17,146
    
    
    
    13,216
    
    
    
    
    
    
    
    497,100Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    2,100
    
    
    
    (2,100
    )
    
    
    Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    8,539
    
    
    
    
    
    
    
    8,539Total liabilities
    
    
    577,704
    
    
    
    56,805
    
    
    
    140,463
    
    
    
    (142,438
    )
    
    
    632,534Commitments and contingenciesStockholders EquityPreferred Stock
    
    
    34,183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,183Common stock
    
    
    734
    
    
    
    3,527
    
    
    
    42,963
    
    
    
    (46,490
    )
    
    
    734Capital in excess of par value
    
    
    429,146
    
    
    
    591,978
    
    
    
    137,439
    
    
    
    (729,417
    )
    
    
    429,146Retained earnings
    
    
    6,540
    
    
    
    129,626
    
    
    
    75,955
    
    
    
    (205,581
    )
    
    
    6,540Total stockholders equity
    
    
    470,603
    
    
    
    725,131
    
    
    
    256,357
    
    
    
    (981,488
    )
    
    
    470,603Total liabilities and
stockholders equity
    
    $
    1,048,307
    
    
    $
    781,936
    
    
    $
    396,820
    
    
    $
    (1,123,926
    )
    
    $
    1,103,137
 15




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    78,034
    
    
    $
    96,325
    
    
    $
    (71
    )
    
    $
    174,288Operating costs and expensesDirect costs
    
    
    
    
    
    
    47,152
    
    
    
    80,541
    
    
    
    (71
    )
    
    
    127,622Selling, general and
administrative
    
    
    1,176
    
    
    
    7,677
    
    
    
    3,919
    
    
    
    
    
    
    
    12,772Depreciation and
amortization
    
    
    12
    
    
    
    15,547
    
    
    
    6,790
    
    
    
    
    
    
    
    22,349Total operating costs
and expenses
    
    
    1,188
    
    
    
    70,376
    
    
    
    91,250
    
    
    
    (71
    )
    
    
    162,743Income (loss) from
operations
    
    
    (1,188
    )
    
    
    7,658
    
    
    
    5,075
    
    
    
    
    
    
    
    11,545Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    9,376
    
    
    
    
    
    
    
    
    
    
    
    (9,376
    )
    
    
    Interest, net
    
    
    (10,769
    )
    
    
    (505
    )
    
    
    (562
    )
    
    
    
    
    
    
    (11,836
    )Other
    
    
    15
    
    
    
    (166
    )
    
    
    (510
    )
    
    
    
    
    
    
    (661
    )Total other expense
    
    
    (1,378
    )
    
    
    (671
    )
    
    
    (1,072
    )
    
    
    (9,376
    )
    
    
    (12,497
    )Net income (loss) before
income taxes
    
    
    (2,566
    )
    
    
    6,987
    
    
    
    4,003
    
    
    
    (9,376
    )
    
    
    (952
    )Provision for income taxes
    
    
    
    
    
    
    811
    
    
    
    (2,425
    )
    
    
    
    
    
    
    (1,614
    )Net income (loss)
    
    
    (2,566
    )
    
    
    7,798
    
    
    
    1,578
    
    
    
    (9,376
    )
    
    
    (2,566
    )Preferred stock dividend
    
    
    (637
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (637
    )Net income (loss)
attributed to common
stockholders
    
    $
    (3,203
    )
    
    $
    7,798
    
    
    $
    1,578
    
    
    $
    (9,376
    )
    
    $
    (3,203
    )
 16




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    192,676
    
    
    $
    282,025
    
    
    $
    (1,399
    )
    
    $
    473,302Operating costs and expensesDirect costs
    
    
    
    
    
    
    124,528
    
    
    
    232,931
    
    
    
    (1,399
    )
    
    
    356,060Selling, general and
administrative
    
    
    3,708
    
    
    
    22,033
    
    
    
    11,208
    
    
    
    
    
    
    
    36,949Depreciation and
amortization
    
    
    35
    
    
    
    45,779
    
    
    
    19,552
    
    
    
    
    
    
    
    65,366Total operating costs
and expenses
    
    
    3,743
    
    
    
    192,340
    
    
    
    263,691
    
    
    
    (1,399
    )
    
    
    458,375Income (loss) from
operations
    
    
    (3,743
    )
    
    
    336
    
    
    
    18,334
    
    
    
    
    
    
    
    14,927Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    17,643
    
    
    
    
    
    
    
    
    
    
    
    (17,643
    )
    
    
    Interest, net
    
    
    (31,421
    )
    
    
    (291
    )
    
    
    (1,775
    )
    
    
    
    
    
    
    (33,487
    )Other
    
    
    45
    
    
    
    (1,944
    )
    
    
    (580
    )
    
    
    
    
    
    
    (2,479
    )Total other expense
    
    
    (13,733
    )
    
    
    (2,235
    )
    
    
    (2,355
    )
    
    
    (17,643
    )
    
    
    (35,966
    )Net income (loss) before
income taxes
    
    
    (17,476
    )
    
    
    (1,899
    )
    
    
    15,979
    
    
    
    (17,643
    )
    
    
    (21,039
    )Provision for income taxes
    
    
    
    
    
    
    11,323
    
    
    
    (7,760
    )
    
    
    
    
    
    
    3,563Net income (loss)
    
    
    (17,476
    )
    
    
    9,424
    
    
    
    8,219
    
    
    
    (17,643
    )
    
    
    (17,476
    )Preferred stock dividend
    
    
    (1,911
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,911
    )Net income (loss)
attributed to common
stockholders
    
    $
    (19,387
    )
    
    $
    9,424
    
    
    $
    8,219
    
    
    $
    (17,643
    )
    
    $
    (19,387
    )
 17




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Operating Activities:Net income (loss)
    
    $
    (17,476
    )
    
    $
    9,424
    
    
    $
    8,219
    
    
    $
    (17,643
    )
    
    $
    (17,476
    )Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:Depreciation and amortization
    
    
    35
    
    
    
    45,779
    
    
    
    19,552
    
    
    
    
    
    
    
    65,366Amortization and write-off of
debt issuance costs
    
    
    1,643
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    1,661Stock-based compensation
    
    
    4,374
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,374Allowance for bad debts
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    43Equity earnings in affiliates
    
    
    (17,643
    )
    
    
    
    
    
    
    
    
    
    
    17,643
    
    
    
    Deferred taxes
    
    
    (11,847
    )
    
    
    (332
    )
    
    
    163
    
    
    
    
    
    
    
    (12,016
    )Loss on sale of equipment
    
    
    
    
    
    
    74
    
    
    
    76
    
    
    
    
    
    
    
    150Loss on investment
    
    
    
    
    
    
    1,466
    
    
    
    
    
    
    
    
    
    
    
    1,466Equity in losses of
unconsolidated affiliates
    
    
    
    
    
    
    409
    
    
    
    
    
    
    
    
    
    
    
    409Changes in operating assets and
liabilities, net of
acquisitions:(Increase) in trade receivables
    
    
    
    
    
    
    (15,869
    )
    
    
    (14,492
    )
    
    
    
    
    
    
    (30,361
    )(Increase) in inventories
    
    
    
    
    
    
    (867
    )
    
    
    (1,830
    )
    
    
    
    
    
    
    (2,697
    )Decrease in prepaid expenses
and other current assets
    
    
    129
    
    
    
    3,791
    
    
    
    4,104
    
    
    
    
    
    
    
    8,024Decrease in other assets
    
    
    
    
    
    
    549
    
    
    
    716
    
    
    
    
    
    
    
    1,265(Decrease) increase in trade
accounts payable
    
    
    
    
    
    
    (4,637
    )
    
    
    13,017
    
    
    
    
    
    
    
    8,380(Decrease) increase in accrued
interest
    
    
    (9,016
    )
    
    
    (25
    )
    
    
    137
    
    
    
    
    
    
    
    (8,904
    )Increase in accrued expenses
    
    
    258
    
    
    
    3,430
    
    
    
    1,800
    
    
    
    
    
    
    
    5,488(Decrease) increase in accrued
salaries, benefits and payroll
taxes
    
    
    
    
    
    
    (850
    )
    
    
    3,251
    
    
    
    
    
    
    
    2,401(Decrease) in other long-term
liabilities
    
    
    
    
    
    
    
    
    
    
    (690
    )
    
    
    
    
    
    
    (690
    )Net Cash Provided By (Used
In) Operating Activities
    
    
    (49,543
    )
    
    
    42,403
    
    
    
    34,023
    
    
    
    
    
    
    
    26,883Cash Flows from Investing Activities:Investment in affiliates
    
    
    (19,467
    )
    
    
    
    
    
    
    
    
    
    
    19,467
    
    
    
    Notes receivable from affiliates
    
    
    8,328
    
    
    
    
    
    
    
    
    
    
    
    (8,328
    )
    
    
    Deposits on asset commitments
    
    
    
    
    
    
    (12,694
    )
    
    
    (273
    )
    
    
    
    
    
    
    (12,967
    )Proceeds from sale of investments
    
    
    
    
    
    
    368
    
    
    
    
    
    
    
    
    
    
    
    368Proceeds from sale of property and
equipment
    
    
    
    
    
    
    4,911
    
    
    
    373
    
    
    
    
    
    
    
    5,284Business acquisitions
    
    
    
    
    
    
    (18,237
    )
    
    
    
    
    
    
    
    
    
    
    (18,237
    )Purchase of property and equipment
    
    
    
    
    
    
    (30,158
    )
    
    
    (20,735
    )
    
    
    
    
    
    
    (50,893
    )Net Cash Used in Investing
Activities
    
    
    (11,139
    )
    
    
    (55,810
    )
    
    
    (20,635
    )
    
    
    11,139
    
    
    
    (76,445
    )
 18




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Financing Activities:Accounts receivable from affiliates
    
    
    
    
    
    
    (25,492
    )
    
    
    (790
    )
    
    
    26,282
    
    
    
    Accounts payable to affiliates
    
    
    26,282
    
    
    
    
    
    
    
    
    
    
    
    (26,282
    )
    
    
    Notes payable to affiliates
    
    
    
    
    
    
    
    
    
    
    (8,328
    )
    
    
    8,328
    
    
    
    Proceeds from parent contributions
    
    
    
    
    
    
    19,467
    
    
    
    
    
    
    
    (19,467
    )
    
    
    Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    
    
    
    
    4,000Borrowings under line of credit
    
    
    36,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,500Payments on long-term debt
    
    
    
    
    
    
    (4,646
    )
    
    
    (9,942
    )
    
    
    
    
    
    
    (14,588
    )Payment of preferred stock dividend
    
    
    (1,911
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,911
    )Debt issuance costs
    
    
    (189
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (189
    )Net Cash Provided By (Used
In) Financing Activities
    
    
    60,682
    
    
    
    (10,671
    )
    
    
    (15,060
    )
    
    
    (11,139
    )
    
    
    23,812Net change in cash and cash
equivalents
    
    
    
    
    
    
    (24,078
    )
    
    
    (1,672
    )
    
    
    
    
    
    
    (25,750
    )Cash and cash equivalents at
beginning of period
    
    
    
    
    
    
    31,858
    
    
    
    9,214
    
    
    
    
    
    
    
    41,072Cash and cash equivalents at end
of period
    
    $
    
    
    
    $
    7,780
    
    
    $
    7,542
    
    
    $
    
    
    
    $
    15,322
 19




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING BALANCE SHEETS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalAssetsCash and cash equivalents
    
    $
    
    
    
    $
    31,858
    
    
    $
    9,214
    
    
    $
    
    
    
    $
    41,072Trade receivables, net
    
    
    
    
    
    
    47,358
    
    
    
    58,962
    
    
    
    (1,261
    )
    
    
    105,059Inventories
    
    
    
    
    
    
    16,271
    
    
    
    18,257
    
    
    
    
    
    
    
    34,528Intercompany receivables
    
    
    
    
    
    
    79,521
    
    
    
    767
    
    
    
    (80,288
    )
    
    
    Note receivable from affiliate
    
    
    28,379
    
    
    
    
    
    
    
    
    
    
    
    (28,379
    )
    
    
    Prepaid expenses and other
    
    
    891
    
    
    
    6,826
    
    
    
    9,872
    
    
    
    
    
    
    
    17,589Total current assets
    
    
    29,270
    
    
    
    181,834
    
    
    
    97,072
    
    
    
    (109,928
    )
    
    
    198,248Property and equipment, net
    
    
    
    
    
    
    489,921
    
    
    
    256,557
    
    
    
    
    
    
    
    746,478Goodwill
    
    
    
    
    
    
    23,251
    
    
    
    17,388
    
    
    
    
    
    
    
    40,639Other intangible assets, net
    
    
    460
    
    
    
    25,236
    
    
    
    6,953
    
    
    
    
    
    
    
    32,649Debt issuance costs, net
    
    
    9,408
    
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    9,545Note receivable from affiliates
    
    
    4,415
    
    
    
    
    
    
    
    
    
    
    
    (4,415
    )
    
    
    Investments in affiliates
    
    
    942,378
    
    
    
    
    
    
    
    
    
    
    
    (942,378
    )
    
    
    Other assets
    
    
    24,366
    
    
    
    25,039
    
    
    
    3,656
    
    
    
    
    
    
    
    53,061Total assets
    
    $
    1,010,297
    
    
    $
    745,418
    
    
    $
    381,626
    
    
    $
    (1,056,721
    )
    
    $
    1,080,620Liabilities and Stockholders
EquityCurrent maturities of long-term
debt
    
    $
    
    
    
    $
    4,444
    
    
    $
    12,583
    
    
    $
    
    
    
    $
    17,027Trade accounts payable
    
    
    
    
    
    
    12,195
    
    
    
    23,905
    
    
    
    (1,261
    )
    
    
    34,839Accrued salaries, benefits and
payroll taxes
    
    
    
    
    
    
    2,762
    
    
    
    20,092
    
    
    
    
    
    
    
    22,854Accrued interest
    
    
    15,372
    
    
    
    228
    
    
    
    221
    
    
    
    
    
    
    
    15,821Accrued expenses
    
    
    752
    
    
    
    11,608
    
    
    
    9,558
    
    
    
    
    
    
    
    21,918Intercompany payables
    
    
    80,288
    
    
    
    
    
    
    
    
    
    
    
    (80,288
    )
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    28,379
    
    
    
    (28,379
    )
    
    
    Total current
liabilities
    
    
    96,412
    
    
    
    31,237
    
    
    
    94,738
    
    
    
    (109,928
    )
    
    
    112,459Long-term debt, net of current
maturities
    
    
    430,238
    
    
    
    19,941
    
    
    
    25,027
    
    
    
    
    
    
    
    475,206Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    4,415
    
    
    
    (4,415
    )
    
    
    Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    9,308
    
    
    
    
    
    
    
    9,308Total liabilities
    
    
    526,650
    
    
    
    51,178
    
    
    
    133,488
    
    
    
    (114,343
    )
    
    
    596,973Commitments and ContingenciesStockholders EquityPreferred Stock
    
    
    34,183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,183Common stock
    
    
    714
    
    
    
    3,526
    
    
    
    42,963
    
    
    
    (46,489
    )
    
    
    714Capital in excess of par value
    
    
    422,823
    
    
    
    570,512
    
    
    
    137,439
    
    
    
    (707,951
    )
    
    
    422,823Retained earnings
    
    
    25,927
    
    
    
    120,202
    
    
    
    67,736
    
    
    
    (187,938
    )
    
    
    25,927Total stockholders
equity
    
    
    483,647
    
    
    
    694,240
    
    
    
    248,138
    
    
    
    (942,378
    )
    
    
    483,647Total liabilities
and stockholders
equity
    
    $
    1,010,297
    
    
    $
    745,418
    
    
    $
    381,626
    
    
    $
    (1,056,721
    )
    
    $
    1,080,620
 20




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    43,797
    
    
    $
    76,840
    
    
    $
    (621
    )
    
    $
    120,016Operating costs and expensesDirect costs
    
    
    
    
    
    
    29,041
    
    
    
    62,343
    
    
    
    (621
    )
    
    
    90,763Selling, general and
administrative
    
    
    1,043
    
    
    
    7,243
    
    
    
    3,144
    
    
    
    
    
    
    
    11,430Depreciation and
amortization
    
    
    12
    
    
    
    15,446
    
    
    
    5,435
    
    
    
    
    
    
    
    20,893Total operating costs
and expenses
    
    
    1,055
    
    
    
    51,730
    
    
    
    70,922
    
    
    
    (621
    )
    
    
    123,086Income (loss) from
operations
    
    
    (1,055
    )
    
    
    (7,933
    )
    
    
    5,918
    
    
    
    
    
    
    
    (3,070
    )Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    1,499
    
    
    
    
    
    
    
    
    
    
    
    (1,499
    )
    
    
    Interest, net
    
    
    (10,109
    )
    
    
    45
    
    
    
    (661
    )
    
    
    
    
    
    
    (10,725
    )Other
    
    
    15
    
    
    
    3
    
    
    
    19
    
    
    
    
    
    
    
    37Total other income
(expense)
    
    
    (8,595
    )
    
    
    48
    
    
    
    (642
    )
    
    
    (1,499
    )
    
    
    (10,688
    )Net income (loss) before
income taxes
    
    
    (9,650
    )
    
    
    (7,885
    )
    
    
    5,276
    
    
    
    (1,499
    )
    
    
    (13,758
    )Provision for income taxes
    
    
    
    
    
    
    6,471
    
    
    
    (2,363
    )
    
    
    
    
    
    
    4,108Net income (loss)
    
    
    (9,650
    )
    
    
    (1,414
    )
    
    
    2,913
    
    
    
    (1,499
    )
    
    
    (9,650
    )Preferred stock dividend
    
    
    (630
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (630
    )Net income (loss)
attributed to common
stockholders
    
    $
    (10,280
    )
    
    $
    (1,414
    )
    
    $
    2,913
    
    
    $
    (1,499
    )
    
    $
    (10,280
    )
 21




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    154,502
    
    
    $
    225,013
    
    
    $
    (1,891
    )
    
    $
    377,624Operating costs and expensesDirect costs
    
    
    
    
    
    
    101,284
    
    
    
    181,743
    
    
    
    (1,891
    )
    
    
    281,136Selling, general and
administrative
    
    
    3,029
    
    
    
    27,199
    
    
    
    10,367
    
    
    
    
    
    
    
    40,595Loss on asset disposition
    
    
    
    
    
    
    
    
    
    
    1,916
    
    
    
    
    
    
    
    1,916Depreciation and
amortization
    
    
    35
    
    
    
    45,629
    
    
    
    16,155
    
    
    
    
    
    
    
    61,819Total operating costs
and expenses
    
    
    3,064
    
    
    
    174,112
    
    
    
    210,181
    
    
    
    (1,891
    )
    
    
    385,466Income (loss) from
operations
    
    
    (3,064
    )
    
    
    (19,610
    )
    
    
    14,832
    
    
    
    
    
    
    
    (7,842
    )Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    (1,101
    )
    
    
    
    
    
    
    
    
    
    
    1,101
    
    
    
    Interest, net
    
    
    (34,595
    )
    
    
    24
    
    
    
    (2,868
    )
    
    
    
    
    
    
    (37,439
    )Gain on debt
extinguishment
    
    
    26,365
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,365Other
    
    
    50
    
    
    
    (103
    )
    
    
    (178
    )
    
    
    
    
    
    
    (231
    )Total other income
(expense)
    
    
    (9,281
    )
    
    
    (79
    )
    
    
    (3,046
    )
    
    
    1,101
    
    
    
    (11,305
    )Net income (loss) before
income taxes
    
    
    (12,345
    )
    
    
    (19,689
    )
    
    
    11,786
    
    
    
    1,101
    
    
    
    (19,147
    )Provision for income taxes
    
    
    
    
    
    
    10,517
    
    
    
    (3,715
    )
    
    
    
    
    
    
    6,802Net income (loss)
    
    
    (12,345
    )
    
    
    (9,172
    )
    
    
    8,071
    
    
    
    1,101
    
    
    
    (12,345
    )Preferred stock dividend
    
    
    (665
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (665
    )Net income (loss)
attributed to common
stockholders
    
    $
    (13,010
    )
    
    $
    (9,172
    )
    
    $
    8,071
    
    
    $
    1,101
    
    
    $
    (13,010
    )
 22




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Operating Activities:Net income (loss)
    
    $
    (12,345
    )
    
    $
    (9,172
    )
    
    $
    8,071
    
    
    $
    1,101
    
    
    $
    (12,345
    )Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    35
    
    
    
    45,629
    
    
    
    16,155
    
    
    
    
    
    
    
    61,819Amortization and write-off of debt
issuance costs
    
    
    1,682
    
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    1,691Stock-based compensation
    
    
    3,580
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,580Allowance for bad debts
    
    
    
    
    
    
    4,065
    
    
    
    
    
    
    
    
    
    
    
    4,065Equity earnings in affiliates
    
    
    1,101
    
    
    
    
    
    
    
    
    
    
    
    (1,101
    )
    
    
    Deferred taxes
    
    
    (11,490
    )
    
    
    
    
    
    
    396
    
    
    
    
    
    
    
    (11,094
    )(Gain) on sale of equipment
    
    
    
    
    
    
    (1,059
    )
    
    
    (121
    )
    
    
    
    
    
    
    (1,180
    )Loss on asset disposition
    
    
    
    
    
    
    
    
    
    
    1,916
    
    
    
    
    
    
    
    1,916Gain on debt extinguishment
    
    
    (26,365
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,365
    )Changes in operating assets and
liabilities, net of acquisitions:Decrease in trade receivables
    
    
    
    
    
    
    41,296
    
    
    
    18,175
    
    
    
    
    
    
    
    59,471Decrease in inventories
    
    
    
    
    
    
    2,621
    
    
    
    1,269
    
    
    
    
    
    
    
    3,890(Increase) decrease in prepaid
expenses and other current assets
    
    
    7,296
    
    
    
    2,488
    
    
    
    (6,494
    )
    
    
    
    
    
    
    3,290(Increase) decrease in other assets
    
    
    
    
    
    
    (798
    )
    
    
    2,333
    
    
    
    
    
    
    
    1,535(Decrease) in trade accounts
payable
    
    
    
    
    
    
    (16,979
    )
    
    
    (12,056
    )
    
    
    
    
    
    
    (29,035
    )(Decrease) increase in accrued
interest
    
    
    (12,248
    )
    
    
    236
    
    
    
    (467
    )
    
    
    
    
    
    
    (12,479
    )(Decrease) in accrued expenses
    
    
    (300
    )
    
    
    (4,923
    )
    
    
    (6,409
    )
    
    
    
    
    
    
    (11,632
    )(Decrease) increase in accrued
salaries, benefits and payroll
taxes
    
    
    
    
    
    
    (2,050
    )
    
    
    3,278
    
    
    
    
    
    
    
    1,228(Decrease) in other long- term
liabilities
    
    
    
    
    
    
    (57
    )
    
    
    (779
    )
    
    
    
    
    
    
    (836
    )Net Cash Provided By (Used In)
Operating Activities
    
    
    (49,054
    )
    
    
    61,306
    
    
    
    25,267
    
    
    
    
    
    
    
    37,519Cash Flows from Investing Activities:Investment in affiliates
    
    
    (4,100
    )
    
    
    
    
    
    
    
    
    
    
    4,100
    
    
    
    Notes receivable from affiliates
    
    
    693
    
    
    
    
    
    
    
    
    
    
    
    (693
    )
    
    
    Deposits on asset commitments
    
    
    
    
    
    
    7,610
    
    
    
    (556
    )
    
    
    
    
    
    
    7,054Purchase of investment interests
    
    
    (2,393
    )
    
    
    
    
    
    
    1,291
    
    
    
    
    
    
    
    (1,102
    )Proceeds from sale of property and
equipment
    
    
    
    
    
    
    7,859
    
    
    
    121
    
    
    
    
    
    
    
    7,980Proceeds from assets dispositions
    
    
    
    
    
    
    
    
    
    
    3,916
    
    
    
    
    
    
    
    3,916Purchase of property and equipment
    
    
    
    
    
    
    (53,716
    )
    
    
    (13,550
    )
    
    
    
    
    
    
    (67,266
    )Net Cash Used in Investing
Activities
    
    
    (5,800
    )
    
    
    (38,247
    )
    
    
    (8,778
    )
    
    
    3,407
    
    
    
    (49,418
    )
 23




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Financing Activities:Accounts receivable from affiliates
    
    
    
    
    
    
    (18,637
    )
    
    
    
    
    
    
    18,637
    
    
    
    Accounts payable to affiliates
    
    
    18,661
    
    
    
    
    
    
    
    (24
    )
    
    
    (18,637
    )
    
    
    Notes payable to affiliates
    
    
    
    
    
    
    
    
    
    
    (693
    )
    
    
    693
    
    
    
    Proceeds from parent contributions
    
    
    
    
    
    
    
    
    
    
    4,100
    
    
    
    (4,100
    )
    
    
    Proceeds from issuance of stock, net
    
    
    120,337
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,337Net proceeds from stock incentive
plans
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14Proceeds from long-term debt
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    25,000Net repayment under line of credit
    
    
    (36,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,500
    )Payments on long-term debt
    
    
    (47,167
    )
    
    
    (3,011
    )
    
    
    (11,361
    )
    
    
    
    
    
    
    (61,539
    )Debt issuance costs
    
    
    (491
    )
    
    
    (153
    )
    
    
    
    
    
    
    
    
    
    
    (644
    )Net Cash Provided By (Used
In) Financing Activities
    
    
    54,854
    
    
    
    3,199
    
    
    
    (7,978
    )
    
    
    (3,407
    )
    
    
    46,668Net change in cash and cash
equivalents
    
    
    
    
    
    
    26,258
    
    
    
    8,511
    
    
    
    
    
    
    
    34,769Cash and cash equivalents at
beginning of period
    
    
    
    
    
    
    2,923
    
    
    
    3,943
    
    
    
    
    
    
    
    6,866Cash and cash equivalents at end of
period
    
    $
    
    
    
    $
    29,181
    
    
    $
    12,454
    
    
    $
    
    
    
    $
    41,635
 24




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 13  SEGMENT INFORMATION
  For the Three Months Ended
    
    
    For the Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues:Oilfield Services
    
    $
    56,705
    
    
    $
    31,904
    
    
    $
    146,070
    
    
    $
    105,827Drilling and Completion
    
    
    96,295
    
    
    
    76,299
    
    
    
    280,772
    
    
    
    223,237Rental Services
    
    
    21,288
    
    
    
    11,813
    
    
    
    46,460
    
    
    
    48,560$
    174,288
    
    
    $
    120,016
    
    
    $
    473,302
    
    
    $
    377,624Operating Income (Loss):Oilfield Services
    
    $
    7,462
    
    
    $
    (4,211
    )
    
    $
    7,969
    
    
    $
    (15,701
    )Drilling and Completion
    
    
    5,125
    
    
    
    5,508
    
    
    
    17,640
    
    
    
    14,420Rental Services
    
    
    3,337
    
    
    
    (1,218
    )
    
    
    1,596
    
    
    
    3,318General corporate
    
    
    (4,379
    )
    
    
    (3,149
    )
    
    
    (12,278
    )
    
    
    (9,879
    )$
    11,545
    
    
    $
    (3,070
    )
    
    $
    14,927
    
    
    $
    (7,842
    )Depreciation and Amortization:Oilfield Services
    
    $
    7,925
    
    
    $
    8,077
    
    
    $
    23,622
    
    
    $
    22,825Drilling and Completion
    
    
    6,793
    
    
    
    5,462
    
    
    
    19,619
    
    
    
    16,182Rental Services
    
    
    7,565
    
    
    
    7,281
    
    
    
    21,929
    
    
    
    22,580General corporate
    
    
    66
    
    
    
    73
    
    
    
    196
    
    
    
    232$
    22,349
    
    
    $
    20,893
    
    
    $
    65,366
    
    
    $
    61,819Capital Expenditures:Oilfield Services
    
    $
    7,339
    
    
    $
    1,348
    
    
    $
    18,370
    
    
    $
    9,408Drilling and Completion
    
    
    8,371
    
    
    
    7,067
    
    
    
    20,212
    
    
    
    50,775Rental Services
    
    
    3,840
    
    
    
    851
    
    
    
    11,592
    
    
    
    7,042General corporate
    
    
    354
    
    
    
    7
    
    
    
    719
    
    
    
    41$
    19,904
    
    
    $
    9,273
    
    
    $
    50,893
    
    
    $
    67,266Revenues:United States
    
    $
    75,833
    
    
    $
    37,625
    
    
    $
    182,756
    
    
    $
    140,448Argentina
    
    
    77,115
    
    
    
    65,192
    
    
    
    226,140
    
    
    
    180,846Brazil
    
    
    10,031
    
    
    
    11,034
    
    
    
    30,033
    
    
    
    31,812Other international
    
    
    11,309
    
    
    
    6,165
    
    
    
    34,373
    
    
    
    24,518$
    174,288
    
    
    $
    120,016
    
    
    $
    473,302
    
    
    $
    377,624
 25




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 13  SEGMENT INFORMATION (Continued)
 As ofSeptember 30,
    
    
    December 31,2010
    
    
    2009Goodwill:Oilfield Services
    
    $
    23,250
    
    
    $
    23,250Drilling and Completion
    
    
    17,389
    
    
    
    17,389Rental Services
    
    
    5,534
    
    
    
    $
    46,173
    
    
    $
    40,639Assets:Oilfield Services
    
    $
    256,828
    
    
    $
    255,899Drilling and Completion
    
    
    472,059
    
    
    
    441,482Rental Services
    
    
    315,827
    
    
    
    307,283General corporate
    
    
    58,423
    
    
    
    75,956$
    1,103,137
    
    
    $
    1,080,620Long Lived Assets:United States
    
    $
    579,173
    
    
    $
    572,727Argentina
    
    
    165,290
    
    
    
    168,681Brazil
    
    
    89,970
    
    
    
    82,477Other international
    
    
    62,989
    
    
    
    58,487$
    897,422
    
    
    $
    882,372
 NOTE 14  LEGAL MATTERS
      26




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis should be read in conjunction with our consolidated financial
statements and the notes thereto included elsewhere in this report. This report 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.
For more information on forward-looking statements, please refer to the section entitled
Forward-Looking Statements on page 39.
 Overview of Our Business
    Merger Agreement with Seawell
   27




---



##### Table of Contents



Our Industry
  Company Outlook
      28




---



##### Table of Contents



Results of Operations
   29




---



##### Table of Contents



Comparison of Three Months Ended September 30, 2010 and 2009
       30




---



##### Table of Contents



Revenues
    
    
    Income (Loss) from OperationsThree Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change(in thousands)Oilfield Services
    
    $
    56,705
    
    
    $
    31,904
    
    
    $
    24,801
    
    
    $
    7,462
    
    
    $
    (4,211
    )
    
    $
    11,673Drilling and Completion
    
    
    96,295
    
    
    
    76,299
    
    
    
    19,996
    
    
    
    5,125
    
    
    
    5,508
    
    
    
    (383
    )Rental Services
    
    
    21,288
    
    
    
    11,813
    
    
    
    9,475
    
    
    
    3,337
    
    
    
    (1,218
    )
    
    
    4,555General corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,379
    )
    
    
    (3,149
    )
    
    
    (1,230
    )Total
    
    $
    174,288
    
    
    $
    120,016
    
    
    $
    54,272
    
    
    $
    11,545
    
    
    $
    (3,070
    )
    
    $
    14,615
 Oilfield Services
  Drilling and Completion
  31




---



##### Table of Contents



Rental Services
  General Corporate
  Comparison of Nine Months Ended September 30, 2010 and 2009
    32




---



##### Table of Contents



33




---



##### Table of Contents



Revenues
    
    
    Income (Loss) from OperationsNine Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change(in thousands)Oilfield Services
    
    $
    146,070
    
    
    $
    105,827
    
    
    $
    40,243
    
    
    $
    7,969
    
    
    $
    (15,701
    )
    
    $
    23,670Drilling and Completion
    
    
    280,772
    
    
    
    223,237
    
    
    
    57,535
    
    
    
    17,640
    
    
    
    14,420
    
    
    
    3,220Rental Services
    
    
    46,460
    
    
    
    48,560
    
    
    
    (2,100
    )
    
    
    1,596
    
    
    
    3,318
    
    
    
    (1,722
    )General corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,278
    )
    
    
    (9,879
    )
    
    
    (2,399
    )Total
    
    $
    473,302
    
    
    $
    377,624
    
    
    $
    95,678
    
    
    $
    14,927
    
    
    $
    (7,842
    )
    
    $
    22,769
 Oilfield Services
  Drilling and Completion
  34




---



##### Table of Contents



Rental Services
  General Corporate
  Liquidity
    Operating Activities
  35




---



##### Table of Contents



Investing Activities
   Financing Activities
  36




---



##### Table of Contents



37




---



##### Table of Contents



Recent Events
   Off Balance Sheet Arrangements
  38




---



##### Table of Contents



Capital Resources
  Critical Accounting Policies
  Recently Issued Accounting Standards
 Forward-Looking Statements
  
    
    our ability to consummate the merger;
    
    the possibility that the merger may involve unexpected costs;
    
    difficulties and delays in satisfying the conditions set forth in the merger agreement,
including obtaining the necessary regulatory approvals for the merger;
    
    the effect of the announcement or completion of the merger on customer and supplier
relationships, operating results and business generally;
    
    the impact of the weak economic conditions and the future impact of such conditions on
the oil and natural gas industry and demand for our services;
    
    risks that the merger disrupts current plans and operations, and the potential
difficulties for employee retention as a result of the announcement or completion of the
merger;
    
    fluctuations in the price of oil and natural gas;
    
    unexpected future capital expenditures (including the amount and nature thereof);
    
    unexpected difficulties in integrating our operations as a result of any significant
acquisitions;
    
    adverse weather conditions in certain regions;
    
    the impact of political disturbances, war, or terrorist attacks and changes in global
trade policies;
    
    the availability (or lack thereof) of capital to fund our business strategy and/or
operations;
    
    the effect of environmental liabilities that are not covered by an effective indemnity
or insurance;
    
    the impact of changes in existing, and the imposition of new, laws and governmental
regulations;
    
    the outcome of any pending or future litigation and administrative claims;
    
    the effects of competition; and
    
    the effects of our indebtedness, which could adversely restrict our ability to operate,
could make us vulnerable to general adverse economic and industry conditions, could place
us at a competitive disadvantage compared to competitors that have less debt, and could
have other adverse consequences.
 39




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  Interest Rate Risk.
  Foreign Currency Exchange Rate Risk.
  
 ITEM 4. CONTROLS AND PROCEDURES.
 (a) Evaluation of Disclosure Controls and Procedures
   (b) Change in Internal Control Over Financial Reporting.
  40




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
     
 ITEM 1A. RISK FACTORS.
  The recent Deepwater Horizon incident in the U.S. Gulf of Mexico and its consequences, including
the potential enactment of further restrictions or regulations on offshore drilling, could have a
material adverse effect on our business.
   41




---



##### Table of Contents



We may be subject to claims for personal injury and property damage, which could materially
adversely affect our financial condition and results of operations.
    
    
    General Aggregate $2,000,000;
    
    Products/Completed Operations Aggregate $2,000,000;
    
    Occurrence Limit $1,000,000;
    
    Personal/Advertising Injury Limit $1,000,000;
    
    Deductible (Bodily Injury & Property Damage Combined) Per Claim $100,000.
    42




---



##### Table of Contents



Risks Related to the Merger
 Our ability to complete the merger is subject to stockholder approval, certain closing conditions
and the receipt of consents and approvals from government entities which may impose conditions that
could adversely affect us or cause the merger to be abandoned.
  Failure to complete the merger or delays in completing the merger could negatively effect us.
   We have and will continue to incur transaction costs in connection with the merger.
  Following the merger, the combined company may be unable to successfully integrate our
business into Seawells business and realize the anticipated benefits of the merger.
  
    
    the inability to successfully integrate our business into Seawells business in a
manner that permits the combined company to achieve the cost savings and operating
synergies anticipated to result from the merger, which would result in the anticipated
benefits of the merger not being realized partly or wholly in the time frame currently
anticipated or at all;
    
    integrating personnel from the two companies while maintaining focus on providing
consistent, high quality products and customer service;
    
    potential unknown liabilities and unforeseen increased expenses, delays or
regulatory conditions associated with the merger; and
    
    performance shortfalls at one or both of the two companies as a result of the
diversion of managements attention caused by completing the merger and integrating
the companies operations.
 43




---



##### Table of Contents



We may be unable to attract or retain both current and potential key employees during the
pendency of the merger.
  Multiple lawsuits have been filed against us challenging the merger, and an adverse ruling in
any such lawsuit may prevent the merger from being completed.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  
 ITEM 6. EXHIBITS
  
 SIGNATURES
  Allis-Chalmers Energy Inc.(Registrant)/s/ Munawar H. HidayatallahMunawar H. HidayatallahChief Executive Officer and
Chairman 44




---



##### Table of Contents



EXHIBIT INDEX
 2.1
    
    Agreement and Plan of Merger, dated as of August 12, 2010, by and among Seawell Limited,
Wellco Sub Company and Allis-Chalmers Energy Inc. (incorporated by reference to Exhibit 2.1 to
the Registrants Form 8-K filed on August 13, 2010).2.2
    
    Amendment Agreement, dated as of October 1, 2010, to Agreement and Plan of Merger, dated as
of August 12, 2010, by and among Seawell Limited, Wellco Sub Company and Allis-Chalmers Energy
Inc. (incorporated by reference to Exhibit 2.1 to the Registrants Form 8-K filed on October
5, 2010).4.1
    
    Fourth Amendment to Investment Agreement, dated as of July 14, 2010, between Allis-Chalmers
Energy Inc. and Lime Rock Partners V, L.P. (incorporated by reference to Exhibit 4.1 to the
Registrants Form 8-K filed on July 14, 2010).4.2
    
    Fifth Amendment to Investment Agreement, dated as of September 27, 2010, between
Allis-Chalmers Energy Inc. and Lime Rock Partners V, L.P. (incorporated by reference to
Exhibit 4.1 to the Registrants Form 8-K filed on September 30, 2010).10.1
    
    Executive Employment Agreement, dated effective as of August 1, 2010, by and between
Allis-Chalmers Energy Inc. and Victor M. Perez (incorporated by reference to Exhibit 10.1 to
the Registrants Form 8-K filed on August 17, 2010).10.2
    
    Executive Employment Agreement, dated effective as of August 1, 2010, by and between
Allis-Chalmers Energy Inc. and Theodore F. Pound III (incorporated by reference to
Exhibit 10.2 to the Registrants Form 8-K filed on August 17, 2010).10.3
    
    Executive Employment Agreement, dated effective as of August 1, 2010, by and between
Allis-Chalmers Energy Inc. and Terrence P. Keane (incorporated by reference to Exhibit 10.3 to
the Registrants Form 8-K filed on August 17, 2010).10.4
    
    Executive Employment Agreement, dated effective as of August 1, 2010, by and between
Allis-Chalmers Energy Inc. and Mark Patterson (incorporated by reference to Exhibit 10.4 to
the Registrants Form 8-K filed on August 17, 2010).10.5
    
    Executive Employment Agreement, dated effective as of August 1, 2010, by and between
Allis-Chalmers Directional Drilling Services LLC and David K. Bryan (incorporated by reference
to Exhibit 10.5 to the Registrants Form 8-K filed on August 17, 2010).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.
 
 *
    
    Filed herewith 45