##### 



Execution
 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
  ALLIS-CHALMERS ENERGY INC.
 ROYAL BANK OF CANADA
   $62,000,000
 SENIOR CREDIT FACILITY
 RBC CAPITAL MARKETS
 Dated as of April 26, 2007




---



##### 



TABLE OF CONTENTS
 PageARTICLE I. DEFINITIONS AND ACOUNTING TERMS
    
    
    21.01
    
    Defined Terms
    
    
    21.02
    
    Other Interpretive Provisions
    
    
    241.03
    
    Accounting Terms
    
    
    241.04
    
    Rounding
    
    
    241.05
    
    References to Agreements and Laws
    
    
    24ARTICLE II. THE COMMITMENT AND BORROWINGS
    
    
    252.01
    
    Loans
    
    
    252.02
    
    Borrowings, Conversions and Continuations of Revolving Loans
    
    
    252.03
    
    Prepayments
    
    
    262.04
    
    Reduction or Termination of Commitments
    
    
    282.05
    
    Repayment of Revolving Loans
    
    
    282.06
    
    Interest
    
    
    282.07
    
    Fees
    
    
    292.08
    
    Computation of Interest and Fees
    
    
    292.09
    
    Evidence of Debt
    
    
    292.10
    
    Payments Generally
    
    
    302.11
    
    Sharing of Payments
    
    
    322.12
    
    Pari Passu Lien Securing Lender Hedging Agreements and Banking Service Obligations
    
    
    322.13
    
    Letters of Credit
    
    
    32ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY
    
    
    393.01
    
    Taxes
    
    
    393.02
    
    Illegality
    
    
    413.03
    
    Inability to Determine Rates
    
    
    413.04
    
    Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans
    
    
    413.05
    
    Funding Losses
    
    
    423.06
    
    Matters Applicable to all Requests for Compensation
    
    
    433.07
    
    Survival
    
    
    433.08
    
    Mitigation Obligations
    
    
    43ARTICLE IV. CONDITIONS PRECEDENT
    
    
    434.01
    
    Conditions Precedent
    
    
    434.02
    
    Deadline for Second Amended and Restated Closing Date
    
    
    464.03
    
    Conditions to all Revolving Loans and L/C Credit Extension
    
    
    464.04
    
    Conditions to all Revolving  Loans to Fund Permitted Acquisitions
    
    
    46ARTICLE V REPRESENTATIONS AND WARRANTIES
    
    
    475.01
    
    Existence; Qualification and Power; Compliance with Laws
    
    
    475.02
    
    Authorization; No Contravention
    
    
    475.03
    
    Governmental Authorization
    
    
    48
 
 i




---



##### 



Page5.04
    
    Binding Effect
    
    
    485.05
    
    Financial Statements; No Material Adverse Effect
    
    
    485.06
    
    Litigation
    
    
    485.07
    
    No Default
    
    
    485.08
    
    Ownership of Property; Liens
    
    
    495.09
    
    Environmental Compliance
    
    
    495.10
    
    Insurance
    
    
    495.11
    
    Taxes
    
    
    495.12
    
    ERISA Compliance
    
    
    495.13
    
    Subsidiaries and other Investments
    
    
    505.14
    
    Margin Regulations; Investment Company Act; Use of Proceeds
    
    
    505.15
    
    Disclosure
    
    
    505.16
    
    Labor Matters
    
    
    515.17
    
    Compliance with Laws
    
    
    515.18
    
    Third Party Approvals
    
    
    515.19
    
    Solvency
    
    
    515.20
    
    Collateral
    
    
    515.21
    
    Intellecutal Property; Licenses, Etc.
    
    
    515.22
    
    Leased Locations
    
    
    525.23
    
    Material Agreements
    
    
    52ARTICLE VI. AFFIRMATIVE COVENANTS
    
    
    526.01
    
    Financial Statements
    
    
    526.02
    
    Certificates; Other Information
    
    
    536.03
    
    Notices
    
    
    546.04
    
    Payment of Obligations
    
    
    546.05
    
    Preservation of Existence, Etc.
    
    
    546.06
    
    Maintenance of Assets and Business; Movement of Collateral
    
    
    556.07
    
    Maintenance of Insurance
    
    
    556.08
    
    Compliance with Laws and Contractual Obligations
    
    
    556.09
    
    Books and Records
    
    
    556.10
    
    Inspection Rights
    
    
    556.11
    
    Compliance with ERISA
    
    
    566.12
    
    Use of Proceeds
    
    
    566.13
    
    Guaranties
    
    
    566.14
    
    Further Assurances; Additional Collateral
    
    
    56ARTICLE VII NEGATIVE COVENANTS
    
    
    577.01
    
    Liens
    
    
    577.02
    
    Investments
    
    
    597.03
    
    Swap Contracts
    
    
    607.04
    
    Indebtedness
    
    
    607.05
    
    Lease Obligations
    
    
    617.06
    
    Fundamental Changes
    
    
    617.07
    
    Dispositions
    
    
    617.08
    
    Restricted Payments; Distributions and Redemptions
    
    
    627.09
    
    ERISA
    
    
    627.10
    
    Change in Nature of Business
    
    
    62
 ii




---



##### 



Page7.11
    
    Transactions with Affiliates
    
    
    627.12
    
    Burdensome Agreements
    
    
    627.13
    
    Use of Proceeds
    
    
    637.14
    
    Capital Expenditures
    
    
    637.15
    
    Prepayments
    
    
    637.16
    
    Subordinated Indebtedness; Senior Unsecured Notes
    
    
    637.17
    
    Amendments of Constitutive Documents
    
    
    637.18
    
    Accounting Changes
    
    
    637.19
    
    Financial Covenants
    
    
    64ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES
    
    
    648.01
    
    Events of Default
    
    
    648.02
    
    Remedies Upon Event of Default
    
    
    66ARTICLE IX. ADMINISTRATIVE AGENT
    
    
    679.01
    
    Appointment and Authorization of Agents; Lender Hedging Agreements
    
    
    679.02
    
    Delegation of Duties
    
    
    689.03
    
    Default; Collateral
    
    
    689.04
    
    Liability of Agents
    
    
    709.05
    
    Reliance by Administrative Agent
    
    
    709.06
    
    Notice of Default
    
    
    719.07
    
    Credit Decision; Disclosure of Information by Administrative Agent
    
    
    719.08
    
    Indemnification of Agents
    
    
    719.09
    
    Administrative Agent in its Individual Capacity
    
    
    729.10
    
    Successor Administrative Agent and Collateral Agent
    
    
    729.11
    
    Other Agents; Arranger
    
    
    729.12
    
    Administrative Agent May File Proofs of Claim
    
    
    73ARTICLE X MISCELLANEOUS
    
    
    7310.01
    
    Amendments, Release of Collateral, Etc
    
    
    7310.02
    
    Notices and Other Communications; Facsimile Copies
    
    
    7510.03
    
    No Waiver; Cumulative Remedies
    
    
    7610.04
    
    Attorney Costs; Expenses and Taxes
    
    
    7710.05
    
    Indemnification
    
    
    7710.06
    
    Payments Set Aside
    
    
    7810.07
    
    Successors and Assigns
    
    
    7810.08
    
    Confidentiality
    
    
    8110.09
    
    Set-off
    
    
    8110.10
    
    Interest Rate Limitation
    
    
    8210.11
    
    Counterparts
    
    
    8210.12
    
    Integration
    
    
    8210.13
    
    Survival of Representations and Warranties
    
    
    8210.14
    
    Severability
    
    
    8310.15
    
    Replacement of Lenders
    
    
    8310.16
    
    Governing Law
    
    
    8310.17
    
    Waiver of Right to Trial by Jury, Etc
    
    
    8410.18
    
    Termination of Commitments Under First Amended and Restated Credit Agreement
    
    
    84
 iii




---



##### 



Page10.19
    
    No Novations, Etc
    
    
    8510.20
    
    USA Patriot Act
    
    
    8510.21
    
    ENTIRE AGREEMENT
    
    
    85
 iv




---



##### 



2.01
    
    Commitments5.05
    
    Existing Indebtedness5.13
    
    Subsidiaries and other Equity Investments5.22
    
    Leased Locations5.23
    
    Material Agreements7.01
    
    Existing Liens10.02
    
    Addresses for Notices to Borrower, Guarantors and Administrative Agent
  Exhibit:
    
    Form of:A-1
    
    Borrowing NoticeA-2
    
    Conversion/Continuation NoticeA-3
    
    Payment/Prepayment NoticeB
    
    Revolver NoteC
    
    Compliance Certificate pursuant to Section 6.02(a)D
    
    Assignment and Assumption
 v




---



##### 



SECOND AMENDED AND RESTATED CREDIT AGREEMENT
 Borrower Lenders Lender
 RECITALS
 Royal
Bank CFSC Original
Credit Agreement
 Section 10.07 Commerce
  First Amended and Restated Credit Agreement
  Section 10.07
  1




---



##### 



ARTICLE I.DEFINITIONS AND ACCOUNTING TERMS
 1.01 Defined Terms
  Acquisition provided that
 Administrative Agent
 Administrative Agents Office Schedule 10.02
 Administrative Details Form
 Affiliate
 2




---



##### 



Agent/Arranger Fee Letter Section 2.07(b)
 Agent-Related Persons
 Aggregate Revolving Commitment Revolving
Commitment
 Applicable Rate Section 6.02(a)
 Letter of CreditCommitment
    
    and Eurodollar
    
    BasePricing
    
    
    
    Fee
    
    Rate
    
    RateLevel
    
    Leverage Ratio
    
    + (basis points)
    
    + (basis points)
    
    + (basis points)1
    
    Less than 2.50:1.00
    
    
    37.5
    
    
    
    150.0
    
    
    
    50.02
    
    Less than 3.00:1.00 but greater than or equal to 2.50:1.00
    
    
    37.5
    
    
    
    175.0
    
    
    
    75.03
    
    Less than 3.50:1.00 but greater than or equal to 3.00:1.00
    
    
    50.0
    
    
    
    225.0
    
    
    
    125.04
    
    Less than 4.00:1.00 but greater than or equal to 3.50:1.00
    
    
    50.0
    
    
    
    250.0
    
    
    
    150.05
    
    Greater than or  equal to 4.00:1.00
    
    
    50.0
    
    
    
    275.0
    
    
    
    175.0
 Section 6.02(a) provided,
however,
 Approved Fund
 Arranger
 3




---



##### 



Assignment and Assumption Exhibit D
 Attorney Costs
 Attributable Indebtedness
 Authorizations
 Banking Service Obligations
 Banking Services
 Base Rate 1 2 prime rate
 Base Rate Loan
 Board
 Borrower
 Borrower Affiliate
 Borrowing Section 2.01
 4




---



##### 



Borrowing Notice Section 2.02(a) Exhibit A-1 A-2
 Business Day
 Capital Expenditure
 Capital Lease
 Cash Adjusted Consolidated Funded Debt
 Cash Collateralize
 Cash Equivalents
      5




---



##### 



CERCLA Environmental Law
 Change of Control
 option right
    6




---



##### 



Change in Law Section 3.04(b)
 Code
 Collateral
 Collateral Agent
 Collateral Documents
 Commerce
 Compensation Period Section 2. 10(e)(ii)
 Compliance Certificate Exhibit C .
 Consolidated Cash Flow From Operations
 Consolidated EBITDA
 7




---



##### 



Consolidated Interest Charges
 Consolidated Funded Debt
 Consolidated Net Income provided
 Consolidated Net Worth
 Consolidated Senior Debt Section 7.04
 Contractual Obligation
 Credit Extension
 8




---



##### 



CFSC
 Debtor Relief Laws
 Default
 Default Rate provided, however,
 Deposit Account Pledge Agreement
 Disposition Dispose Disposition Dispose
 DLS
 Dollar $
 Domestic
 Eligible Assignee provided
 Employee Equity Sales
 9




---



##### 



Environmental Law CERCLA
 Equity Interests
 Equity Issuance
 ERISA
 ERISA Affiliate Section 414(b) (c) Sections 414(m) (o) Section 412
 ERISA Event Section 4063 Section 4001(a)(2) Section 4062(e)
 10




---



##### 



Sections 4041 4041A Section
4042 Title IV Section 4007
 Eurodollar Rate
    Eurodollar Rate Loan
 Event of Default Article VIII
 Evergreen Letter of Credit Section 2. 13(b)(iii)
 Existing Letters of Credit
 11




---



##### 



Federal Funds Rate provided
 First Amended and Restated Credit Agreement
 Fiscal Year st st
 Fixed Asset Coverage Ratio Section 6. 02(e) or (f)
 Foreign
 Foreign Lender
 Fund
 GAAP
 12




---



##### 



provided that
 Governmental Authority
 Guarantors
 Guaranty
 Guaranty Obligation primary obligor provided, however Guaranty Obligation
 Hazardous Substance
 13




---



##### 



Section 101 Solid
Waste Disposal Act
 Honor Date Section 2. 13(c)(i)
 Indebtedness
      plus
   14




---



##### 



Indemnified Liabilities Section 10.05.
 Indemnitees Section 10.05
 Insurance Payment
 Interest Coverage Ratio
 Interest Payment Date provided, however
 Interest Period provided
    Investment
 Involuntary Disposition
 15




---



##### 



IRS
 Laws
 L/C Advance
 L/C Borrowing
 L/C Credit Extension
 L/C Issuer
 L/C Obligations plus
 Lender
 Lender Hedging Agreement
 Lending Office
 Letter of Credit
 Letter of Credit Application
 Letter of Credit Expiration Date
 Letter of Credit Sublimit
 Leverage Ratio Section
 16




---



##### 



6. 02(a)
 Lien
 Loan Documents
 Loan Party
 Master Agreement Swap Contract
 Material Adverse Effect
 Material Agreement Schedule 5.23
 Maturity Date
 Maximum Amount Maximum Rate
 Moodys
 Multiemployer Plan Section 4001(a)(3)
 17




---



##### 



Net Cash Proceeds after
 Nonrenewal Notice Date Section 2. 13(b)(iii)
 Obligations Obligations Sections 2. 10(d) ,
2.12 10.09
 Obligor
 Organization Documents
 Original Credit Agreement
 Other Taxes Section 3. 01(b)
 Outstanding Amount Section 2. 10(d) Section 2. 10(d)
 18




---



##### 



Participant Section 10.07(d)
 PBGC
 Pension Plan employee pension benefit plan Section
3(2)(A) Title IV Section 4064(a)
 Permitted Acquisitions provided, however
 Sections 6.13 6.14
   Permitted Liens Section 7.01
 Person
 Plan employee benefit plan Section 3(3)
 Pro Rata Share
 Reduction Amount Triggering Sale
 Register Section 10.07(c)
 Reinvested
 19




---



##### 



Reinvestment Certificate Section 6. 02(d)
 Related Parties
 Release
 Reportable Event Section 4043(c) of ERISA
 Request for Credit Extension
 Required Lenders
 Responsible Officer
 Restricted Payment
 Revolver Facility Section 2.01
 Revolver Facility Committed Sum Schedule
2.01
 Revolver Note Exhibit B Revolver Notes
 20




---



##### 



Revolver Principal Debt
 Revolving Commitment Section 2.01 Section 2.13 Section 2.01 Aggregate Revolving Commitment
 Revolving Loan Section
2.01
 Rights
 Royal Bank
 S&P
 Sarbanes-Oxley
 Second Amended and Restated Closing Date Section 4.01 Section 4.03 Sections 4. 01(d) (e)
 Security Agreements Security Agreement
 Senior Leverage Ratio
 Senior Unsecured Notes
 Subordinated Indebtedness
 21




---



##### 



Subordination Agreements Subordination
Agreement
 Subsidiary Subsidiary Subsidiaries
 Swap Contract Master Agreement
 Swap Termination Value
 Synthetic Lease Obligation
 Taxes Section 3.01(a)
 Threshold Amount
 Triggering Sale Section
7.07(a) (b) (c)
 22




---



##### 



Reduction Amount
 Triggering Sale Certificate Section 6. 02(c)
 Type
 UCC
 Unfunded Pension Liability Section 4001(a)(16) Section 412
 United States U.S.
 USA Patriot Act
 Unreimbursed Amount Section 2. 13(c)(i)
 Voting Stock
 Weighted Average Life to Maturity
   23




---



##### 



Wholly-Owned except
 1.02 Other Interpretive Provisions.
  herein hereunder
  including
 documents
 from from and including to until to but
excluding through to and including
  1.03 Accounting Terms.
 1.04 Rounding
 1.05 References to Agreements and Laws
 24




---



##### 



ARTICLE II.THE REVOLVING COMMITMENT AND BORROWINGS
 2.01 Revolving Loans Revolving Loan provided that provided, however,
 2.02 Borrowings, Conversions and Continuations of Revolving Loans.
   25




---



##### 



Section 4.01 Section 4.03 Section 4.04 provided, however first second
    2.03 Prepayments.
 Optional Prepayments provided Section 3.05
 26




---



##### 



Section 2.03(b)
 Mandatory Prepayments from Net Cash Proceeds
 Section 2. 03(b)(iii) Section 2. 03(b)(iii)
 Section 6.02(c) th Section 7. 19(c)
 Application of Mandatory Prepayments Section 2. 03(b)(i)
 First
 Second
 Third
 Fourth
 Fourth
 27




---



##### 



Prepayments by Reason of Aggregate Revolving Commitment Exceeded
 Prepayments: Interest/Funding Loss Section 2.03 Section 3.05
 2.04 Reduction or Termination of Commitments provided that
 2.05 Repayment of Revolving Loans
 2.06 Interest
 plus plus
    28




---



##### 



2.07 Fees
 Commitment Fees Section 2.04 plus Article IV
 Arrangers and Administrative Agents Fees Agent/Arranger Fee Letter
 2.08 Computation of Interest and Fees provided
 2.09 Evidence of Debt
  29




---



##### 



2.10 Payments Generally
  Interest Period
  Section 2. 10(d)(ii) ratable payment
 30




---



##### 



Compensation Period
  Article II Article IV
 31




---



##### 



2.11 Sharing of Payments provided, however Section 10.09
 2.12 Pari Passu Lien Securing Lender Hedging Agreements and Banking Service Obligations pari passu
 2.13 Letters of Credit
 The Letter of Credit Commitment
 32




---



##### 



Section 2.13 provided plus
   Section 2. 13(b)(iii)
   33




---



##### 



Section 6.12
    times
 Evergreen Letter of Credit provided
 34




---



##### 



Nonrenewal Notice Date provided,
however, Section 4.03
  Drawings and Reimbursements; Funding of Participations
 Honor Date Unreimbursed Amount Section 2.02 Section 4.03 Section
2. 13(c)(i) provided
 Section 2. 13(c)(i) Section 2. 13(c)(iii)
 35




---



##### 



Section 4.03 Section 2. 13(c)(ii) Section 2.13
 Section
2. 13(c)
 Section
2.13(c)
 Section 2. 13(c) Section 2. 13(c)(ii)
 Repayment of Participations
 Section 2.13(c)
 Section 2. 13(c)(i)
 36




---



##### 



Obligations Absolute
        37




---



##### 



Role of L/C Issuer provided, however Section 2.13(e) provided, however
 Cash Collateral
 Applicability of ISP98
 Letter of Credit Fees
 38




---



##### 



Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer
 Conflict with Letter of Credit Application
 ARTICLE III.TAXES, YIELD PROTECTION AND ILLEGALITY
 3.01 Taxes.
 excluding clause (i) Section
3.01(f) Section 3.01(a Section 3.01(f) Taxes
  39




---



##### 



Other Taxes
  Section 3. 01(c)
      40




---



##### 



3.02 Illegality
 3.03 Inability to Determine Rates
 3.04 Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans.
  41




---



##### 



Section 3.01 Section 3. 04(c)
  Eurocurrency liabilities provided
 3.05 Funding Losses
   42




---



##### 



Section
3.05
 3.06 Matters Applicable to all Requests for Compensation Article III
 3.07 Survival Article III
 3.08 Mitigation Obligations. Section
3.04 Section 3.01 Section 3.01 Section 3.04
 ARTICLE IV.
CONDITIONS PRECEDENT
 4.01 Conditions Precedent
   43




---



##### 



Article V Section 6. 03(b) Section 6. 03(b)
  44




---



##### 



Section 4.01 Section 4.03
 insolvent
           45




---



##### 



Section 326 Section 326
  4.02 Deadline for Second Amended and Restated Closing Date
 4.03 Conditions to all Revolving Loans and L/C Credit Extension
 Article V Section 5. 05(b) Section 5.06
    Sections 4. 03(a) (b)
 4.04 Conditions to all Revolving Loans to Fund Permitted Acquisitions Section 4.03
 46




---



##### 



ARTICLE V.
REPRESENTATIONS AND WARRANTIES
  5.01 Existence; Qualification and Power; Compliance with Laws
 5.02 Authorization; No Contravention
 47




---



##### 



5.03 Governmental Authorization
 5.04 Binding Effect
 5.05 Financial Statements; No Material Adverse Effect.
 Section 4.04(b) Section 4.04(b) Schedule 5.05
  5.06 Litigation
 5.07 No Default
 48




---



##### 



5.08 Ownership of Property; Liens
 5.09 Environmental Compliance
 5.10 Insurance
 5.11 Taxes
 5.12 ERISA Compliance
 Section 401(a) Section 412 Section 412
  49




---



##### 



Section 4007 Section 4219 Sections 4201 4243 Sections 4069 4 212(c)
 5.13 Subsidiaries and other Investments Schedule 5.13 Schedule 5.13 Schedule 5.13 Schedule 5.13
 5.14 Margin Regulations; Investment Company Act; Use of Proceeds.
  investment
company
 Section
6.12
 5.15 Disclosure provided
 50




---



##### 



5.16 Labor Matters
 5.17 Compliance with Laws
 5.18 Third Party Approvals except
 5.19 Solvency
 5.20 Collateral
    5.21 Intellectual Property: Licenses, Etc.
 51




---



##### 



5.22 Leased Locations Schedule 5.22
 5.23 Material Agreements. Schedule 5.23
 ARTICLE VI.
AFFIRMATIVE COVENANTS
  6.01 Financial Statements
   52




---



##### 



6.02 Certificates; Other Information
 Sections 6.01(a) (b) Exhibit C
 Section
13 1 5(d)
   Section 7.19
     53




---



##### 



6.03 Notices
       Section 6. 03(a)
 6.04 Payment of Obligations except
 6.05 Preservation of Existence, Etc. Sections 7.06 7.07
 54




---



##### 



6.06 Maintenance of Assets and Business; Movement of Collateral
 except
  6.07 Maintenance of Insurance.
 6.08 Compliance with Laws and Contractual Obligations.
 6.09 Books and Records
 6.10 Inspection Rights
 55




---



##### 



provided,
however
 6.11 Compliance with ERISA Section 401(a) Section 412 except
 6.12 Use of Proceeds
 6.13 Guaranties Section 6.14
 6.14 Further Assurances; Additional Collateral
   56




---



##### 



Section 6.14 Section 7.01 Section
6.14 Section 6.14(a)
 ARTICLE VII.
NEGATIVE COVENANTS
  7.01 Liens
  Schedule 7.01 provided Section 7.04(b)
   57




---



##### 



provided Section 7.04(f)
 Section 7.04(g) provided Section 7.04(g)
 provided Section 7.04(e)
 provided Section 7.05
  Section 7.04(j)
 Section 7.04(k)
 58




---



##### 



Schedule 5.05)
 Section 7.04(m)
 7.02 Investments
 Schedule 5.13
     provided
     59




---



##### 



7.03 Swap Contracts provided
 7.04 Indebtedness.
  Schedule 5.05 provided provided further
  Section 7.03
 Section 7.01(j) provided, however $2,000,000
 Section
7.01(h) provided, however, $2,000,000
  60




---



##### 



Section 7.01(i) provided, however, $15,000,000
   provided
 provided Section 7.04
 7.05 Lease Obligations except provided $10,000,000
 7.06 Fundamental Changes
 provided provided
 provided
 7.07 Dispositions.
  61




---



##### 



by Section 7.06
 7.08 Restricted Payments; Distributions and Redemptions
    7.09 ERISA Section 4069 4212(c) prohibited transaction Section 4975 accumulated funding deficiency Section 302
 7.10 Change in Nature of Business
 7.11 Transactions with Affiliates
 7.12 Burdensome Agreements
 62




---



##### 



provided however Sections 7. 04(e) 7.05
 7.13 Use of Proceeds Section 6.12
 7.14 Capital Expenditures Sections 6. 01(a) (b) provided, however,
 7.15 Prepayments.
 7.16 Subordinated Indebtedness; Senior Unsecured Notes. provided, however,
 7.17 Amendments of Constitutive Documents.
 7.18 Accounting Changes.
 63




---



##### 



7.19 Financial Covenants.
 Interest Coverage Ratio
 Fixed Asset Coverage Ratio
 Leverage Ratio
 Senior Leverage Ratio
 Adjustments for Permitted Acquisitions Section 7. 19(a) , (c) (d)
 Section 7. 02(g)
 Section 7.02(g)
 ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES
 8.01 Events of Default
 Non-Payment
 Specific Covenants Section 6. 03(a) , 6.05 6.12, Article VII
 Other Defaults
 64




---



##### 



Representations and Warranties
 Cross-Default $5,000,000 $5,000,000
 Insolvency Proceedings, Etc
 Inability to Pay Debts; Attachment
 Judgments
 65




---



##### 



$5,000,000
 ERISA Title IV Section 4201
 Invalidity of Loan Documents
 Change of Control
 Dissolution Section 7.06
 Collateral; Impairment of Security, etc
 Proceedings by Secured Creditors
 8.02 Remedies Upon Event of Default
  66




---



##### 



provided, however Section
8.01
 ARTICLE IX.
ADMINISTRATIVE AGENT
 9.01 Appointment and Authorization of Agents; Lender Hedging Agreements Section 9.10 agent
 provided, however Article IX Article IX
 67




---



##### 



Article IX
 9.02 Delegation of Duties
 9.03 Default; Collateral unless and until
  Except Section 10.1 together with
  68




---



##### 



Section 9.03
 Section 10. 01(c) (d) Section 9.03
 Section 9.03 Section 9.03 Section 9. 03(g)
 69




---



##### 



9.04 Liability of Agents
 9.05 Reliance by Administrative Agent
 Section 4.01
 70




---



##### 



9.06 Notice of Default notice of default Article VIII provided, however
 9.07 Credit Decision; Disclosure of Information by Administrative Agent
 9.08 Indemnification of Agents provided, however provided, however
 71




---



##### 



9.09 Administrative Agent in its Individual Capacity Lender Lenders
 9.10 Successor Administrative Agent and Collateral Agent Administrative Agent Article IX Sections 10.04 10.13
 9.11 Other Agents; Arrangers
 72




---



##### 



9.12 Administrative Agent May File Proofs of Claim.
 Sections 2. 13(i) (j) 2.07 10.04 10.05
  Sections 2.07 10.04 10.05
  ARTICLE X.
MISCELLANEOUS
 10.01 Amendments, Release of Collateral, Etc.
 provided, however
 73




---



##### 



Section 8.02
  provided, however Default Rate
   Section 7.07 Section 10.01
 Section 2.11
 provided further
 Section 2.03 Section
 74




---



##### 



10.01(b)
  Section 10. 01(e)
 provided, Lender Counterparties Section 10. 01(e)
 10.02 Notices and Other Communications; Facsimile Copies.
 General
 75




---



##### 



Schedule
10.02 provided, however Article II
 Effectiveness of Facsimile Documents and Signatures provided, however
 Limited Use of Electronic Mail
 Reliance by Administrative Agent, L/C Issuer and Lenders
 10.03 No Waiver; Cumulative Remedies
 76




---



##### 



10.04 Attorney Costs; Expenses and Taxes
 10.05 Indemnification Indemnitees
 77




---



##### 



WHETHER OR NOT ARISING OUT OF THE STRICT LIABILITY OR NEGLIGENCE OF AN INDEMNITEE Indemnified Liabilities provided
 10.06 Payments Set Aside
 10.07 Successors and Assigns.
  78




---



##### 



provided
 Trade Date
   Sections 3.07, 10.04 10.05
 79




---



##### 



Register
 Participant provided provided Sections 3.01, 3.04 3.05 Section 10.09 provided Section 2.11 Section 3.08
 Section 3.01 3.04 Section 3.01 Section 3.01
 provided
  80




---



##### 



Section 10.07(b)
 provided, however Section 2.13(c)
 10.08 Confidentiality provided provided Section 10.08
 10.09 Set-off
 81




---



##### 



provided, however
 10.10 Interest Rate Limitation Maximum Rate Maximum Amount weekly ceiling 303.001 303.009
 10.11 Counterparts
 10.12 Integration provided that
 10.13 Survival of Representations and Warranties
 82




---



##### 



10.14 Severability
 10.15 Replacement of Lenders. Section 10.01 Section 3.04 Section 3.01 Section 10.07) provided
 Section 10. 07(b)(iii)
 Section 3.05
 Section
3.04 Section 3.01
   10.16 Governing Law.
 PROVIDED
 83




---



##### 



SECTION 10.16(b)
 10.17 Waiver of Right to Trial by Jury, Etc. PROVIDED SECTION 10.17(b)
 10.18 Termination of Commitments Under First Amended and Restated Credit Agreement
 84




---



##### 



10.19 No Novations, Etc $25,000,000
 10.20 USA Patriot Act
 10.21 ENTIRE AGREEMENT
 
 85




---



##### 



ALLIS-CHALMERS ENERGY INC.,
a Delaware corporation, as BorrowerBy:
    /s/ Victor M. PerezVictor M. PerezChief Financial Officer




---



##### 



ROYAL BANK OF CANADA,
as Administrative Agent and Collateral AgentBy:
    /s/ Ann HurleyName:
    Ann HurleyTitle:
    Manager, Agency




---



##### 



ROYAL BANK OF CANADA, as Lender
and L/C IssuerBy:
    /s/ Jason YorkJason YorkAuthorized Signatory




---



##### 



CATERPILLAR FINANCIAL 
SERVICES CORPORATION,
as LenderBy:
    /s/ Christopher C. PattersonName:
    Christopher C. PattersonTitle:
    Global Operations ManagerCapital Markets




---



##### 



JPMORGAN CHASE BANK, N.A.,
as LenderBy:
    /s/ Tara NarasimanName:
    Tara NarasimanTitle:
    Associate




---



##### 



WACHOVIA BANK, NATIONAL ASSOCIATION,
as LenderBy:
    /s/ Kenneth C. CoulterName:
    Kenneth C. CoulterTitle:
    Vice President




---



##### 



WELLS FARGO BANK, N.A.,
as LenderBy:
    /s/ Donald W. Herrick, Jr.Name:
    Donald W. Herrick, Jr.Title:
    Vice President




---



##### 



NATIXIS,
as LenderBy:
    /s/ Louis P. Laville, IIIName:
    Louis P. Laville, IIITitle:
    Managing DirectorBy:
    /s/ Timothy L. PolvadoName:
    Timothy L. PolvadoTitle:
    Managing Director




---



##### 



Lender
    
    Revolving CommitmentRoyal Bank of Canada
    
    $
    12,000,000.00Caterpillar Financial Services Corporation
    
    $
    10,000,000.00JPMorgan Chase Bank, N.A.
    
    $
    10,000,000.00Wachovia Bank, National Association
    
    $
    10,000,000.00Wells Fargo Bank, N.A.
    
    $
    10,000,000.00Natixis
    
    $
    10,000,000.00Total:
    
    $
    62,000,000.00




---



##### 



9.0% Senior Notes
    
    $
    255,0008.5% Senior Notes
    
    
    250,000DLS / US Bank Debt
    
    
    6,672Seller Notes
    
    
    900Obligations under non-compete agreements
    
    
    220Notes payable to former directors
    
    
    32Equipment installment notes and capital leases
    
    
    2,472Insurance premium financing
    
    
    331Total debt
    
    
    515,627




---



##### 



(a)
    
    Subsidiaries as of the Second Amendment Closing Date:
 Name
    
    Jurisdiction of Organization
    
    OwnershipAirComp L.L.C
    
    Delaware
    
    100% owned by Mountain
Compressed Air, Inc.Allis-Chalmers GP, LLC
    
    Delaware
    
    100% owned by the BorrowerAllis-Chalmers LP, LLC
    
    Delaware
    
    100% owned by the BorrowerAllis-Chalmers Management, LP
    
    Texas
    
    .01% general partner
interest owned by
Allis-Chalmers GP, LLC and
99.99% limited partner
interest owned by
Allis-Chalmers LP, LLCAllis-Chalmers Production
Services, Inc.
    
    Texas
    
    100% owned by the BorrowerAllis-Chalmers Rental
Services, Inc.
    
    Texas
    
    100 % owned by the BorrowerAllis-Chalmers Tubular
Services, Inc.
    
    Texas
    
    100% owned by the BorrowerDLS Argentina Limited
    
    British Virgin Islands
    
    100% owned by DLS
Drilling, Logistics and
Services CompanyDLS Drilling, Logistics and
Services Company
    
    British Virgin Islands
    
    100% owned by the BorrowerMountain Compressed Air, Inc.
    
    Texas
    
    100% owned by OilQuip
Rentals, Inc.Petro-Rentals, Inc.
    
    Louisiana
    
    100% owned by
Allis-Chalmers Production
Services, Inc.OilQuip Rentals, Inc.
    
    Delaware
    
    100% owned by the Borrower




---



##### 



Name
    
    Jurisdiction of Organization
    
    OwnershipStrata Directional
Technology, Inc.
    
    Texas
    
    100% owned by the BorrowerTanus Argentina S.A.
    
    Argentina
    
    100% owned by DLS Argentina
Limited
 (b)
    
    Other Equity Investments as of the Amendment Date:
      (c)
    
    Other Investments as of the Amendment Date:




---



##### 



Business Segment
    
    LocationRental Tools
    
    Houston, Texas (2 locations)Broussard, LouisianaNew Orleans, LouisianaInternational Drilling
    
    Buenos Aires, ArgentinaSanta Cruz, BoliviaDirectional Drilling Services
    
    Corpus Christi, TexasHouston, Texas (2 locations)Oklahoma City, OklahomaLafayette, LouisianaCasing and Tubing Services
    
    Corpus Christi, TexasKilgore, TexasPearsall, TexasBroussard, Louisiana (2 locations)Houma, LouisianaCompressed Air Drilling Services
    
    Fort Stockton, TexasGrandbury, TexasHouston, TexasSan Angelo, TexasSonora, TexasCarlsbad, New MexicoFarmington, New MexicoDenver, ColoradoGrand Junction, ColoradoWilburton, OklahomaProduction Services
    
    Alvin, TexasCarthage, TexasCorpus Christi, TexasKilgore, Texas (2 locations)Midland, TexasArcadia, LouisianaBroussard, LouisianaCordell, OklahomaHouma, Louisiana
 Schedule 5.22




---



##### 



1.
    
    Lease Agreement between Materiales y Equipo Petroleo, S.A. de C.V. (Matyep) and Jens Oil
Field Service, now known as Allis-Chalmers Tubular Services, Inc. dated August 4, 1997.2.
    
    Amended and Restated Credit Agreement dated as of April 26, 2007 by and among Allis-Chalmers
Energy Inc., as borrower, Royal Bank of Canada, as administrative agent and Collateral Agent,
RBC Capital Markets, as lead arranger and sole bookrunner, and the lenders party thereto.3.
    
    Guaranty Agreement (as defined in the Credit Agreement).4.
    
    Security Documents (as defined in the Credit Agreement).
 5.
    
    Indenture dated as of January 18, 2006 by and among the Registrant, the Guarantors named
therein and Wells Fargo Bank, N.A., as trustee.
 6.
    
    First Supplemental Indenture dated as of August 11, 2006 by and among Allis-Chalmers GP, LLC,
Allis-Chalmers LP, LLC, Allis-Chalmers Management, LP, Rogers Oil Tool Services, Inc., the
Registrant, the other Guarantors.
 7.
    
    Second Supplemental Indenture dated as of January 23, 2007 by and among Petro-Rentals,
Incorporated, the Registrant, the other Guarantor parties thereto and Wells Fargo Bank, N.A.,
as trustee.
 8.
    
    Indenture, dated as of January 29, 2007, by and among the Registrant, the Guarantors named
therein and Wells Fargo Bank, N.A.
 9.
    
    Strategic Agreement dated July 1, 2003 between Pan American Energy LLC Sucursal Argentina And
DLS Argentina Limited Sucursal Argentina.
 10.
    
    Amendment No. 1 dated May 18, 2005 to Strategic Agreement between Pan American Energy LLC
Sucursal Argentina and DLS Argentina Limited Sucursal Argentina.
 11.
    
    Amendment No. 2 dated January 1, 2006 between Pan American Energy LLC Sucursal Argentina and
DLS Argentina Limited Sucursal Argentina.
  Schedule 5.23




---



##### 



EXISTING LIENS
 FilingDebtor
    
    Creditor
    
    Asset Secured
    
    JurisdictionAC Tubular
    
    Jens H. Mortensen, Jr.
    
    Equipment in Mexico
    
    MexicoBorrower and AirComp, LLC
    
    Caterpillar
    
    Air compressors
    
    Delaware and Texas
 Schedule 7.01




---



##### 



ADDRESS FOR NOTICES TO BORROWER
 ADDRESS FOR NOTICES TO GUARANTORS
 ADDRESSES FOR ROYAL BANK OF CANADA
 Royal Bank of Canadas Lending Office    rd
 For matters related to letters of credit
 Schedule 10.2  Page 1




---



##### 



in each case with a copy to
 Administrative Agents Office      th
 Wiring Instructions
 Schedule 10.2  Page 2




---



##### 



FORM OF BORROWING NOTICE
 
 th
  Agreement Borrower
  I.
    
    REVOLVER FACILITY
 1.
    
    Status Information for the Revolver Facility
 (a)
    
    Amount of Revolver Facility: $62,000,000(b)
    
    Revolving Loans outstanding prior to the
Borrowing requested herein: $(c)
    
    Letters of Credit outstanding prior to the
Borrowing requested herein: $(d)
    
    Principal amount of Revolving Loans available
to be borrowed (1(a) minus the sum of 1(b) and 1(c)): $
 2.
    
    Amount of Borrowing: $3.
    
    Requested date of Borrowing: , 200_; must be
prior to Maturity Date.4.
    
    Requested interest rate Type of Revolving Loan and applicable Dollar amount:
 (a)
    
    Base Rate Revolving Loan for $(b)
    
    Eurodollar Rate Revolving Loan with Interest
Period of:
 Exhibit A-1  Page1
Form of Borrowing Notice




---



##### 



(i)
    
    one month for
    
    $(ii)
    
    two months for
    
    $(iii)
    
    three months for
    
    $(iv)
    
    six months for
    
    $
  Article V
   Sections 2.01 2.02, 4.01, 4.02 4.04
 ALLIS-CHALMERS ENERGY INC.,
a Delaware corporation, as BorrowerBy:Name:Title: Exhibit A-1  Page 2
Form of Borrowing Notice




---



##### 



FORM OF CONVERSION/CONTINUATION NOTICE
 
 th
  Agreement Borrower
  I.
    
    REVOLVER FACILITY
 1.
    
    Amount of [conversion] [continuation]:
    
    $2.
    
    Existing rate:
    
    Check applicable blank(a)
    
    Base Rate(b)
    
    Eurodollar Rate Loan with
Interest Period of:(i)
    
    one month(ii)
    
    two months(iii)
    
    three months(iv)
    
    six months
 3.
    
    If a Eurodollar Rate Loan, date of the last day of the Interest
Period for such Loan: , 200_.
  4.
    
    Requested date of [conversion] [continuation]: ,
200_.5.
    
    Requested Type of Loan and applicable Dollar amount:
 Exhibit A-2 Page 1
Form of Conversion Continuation Notice




---



##### 



(a)
    
    Base Rate Loan for $(b)
    
    Eurodollar Rate Loan with Interest Period of:
 (i)
    
    one month for
    
    $(ii)
    
    two months for
    
    $(iii)
    
    three months for
    
    $(iv)
    
    six months for
    
    $
 Sections 2.01 2.02
 ALLIS-CHALMERS ENERGY INC.,
a Delaware corporation, as BorrowerBy:Name:Title: Exhibit A-2 Page 2
Form of Conversion Continuation Notice




---



##### 



th
  
 Yours truly,
Allis-Chalmers Energy Inc.By:Title: Exhibit A-3 Page 1
Form of Repayment/Prepayment Notice




---



##### 



FORM OF REVOLVER NOTE
 $
    
    April 26, 2006
 Borrower   Lender   Credit Agreement
   Section 10.10
   ALLIS-CHALMERS ENERGY INC.,
a Delaware corporation, as BorrowerBy:Name:Title: Exhibit B Page 1
Form of Revolving Note




---



##### 



FORM OF COMPLIANCE CERTIFICATE  Section 6.02
 
 th
  Agreement Borrower
 
  Schedule 1 Section 6. 01(a)
  Schedule 1 Section 6. 01(b)
   Exhibit C  Page 1
Form of Compliance Certificate




---



##### 



except Section 6.03
  Schedule 3
 
 ALLIS-CHALMERS ENERGY INC.
a Delaware corporation, as BorrowerBy:Name:Title: Exhibit C  Page 2
Form of Compliance Certificate




---



##### 



Statement Date
 SCHEDULE 3
 I.
    
    Section 7.04 Indebtedness
 A.
    
    Indebtedness outstanding on Second Amended and Restated
Closing Date and listed on Schedule 5.05 and any
refinancings, etc. permitted by Section 7.04(b)
    
    $B.
    
    Indebtedness in connection with Swap Contracts permitted
by Section 7.04(d)
    
    $C.
    
    Outstanding Principal Amount of Purchase Money
Indebtedness for fixed or capital assets permitted by Section
7.04(e)(may not exceed $2,000,000)
    
    $D.
    
    Outstanding Principal Amount of Indebtedness associated
with Liens on acquired assets permitted by Section 7.04(f)
(may not exceed $2,000,000)
    
    $E.
    
    Outstanding Principal Amount of Indebtedness associated
with Capital Leases and obligations to make equipment
financing lease or rental payments permitted by Section
7.04(g)(may not exceed $15,000,000)
    
    $F.
    
    Indebtedness owing by DLS Argentina Branch to US Bank
National Association reflected on Schedule 5.05)(may not
exceed $7,302,000)G.
    
    Indebtedness owing by DLS or DLS Subsidiaries owing to
local Argentina lenders permitted by Section 7.04(j)(may not
exceed $10,000,000)II. Section 7.19(a) Interest Coverage RatioA.
    
    Consolidated EBITDA (subject to proforma adjustments, if
any, permitted by Section 7.19(e)of the Agreement) for four
consecutive fiscal quarters ending on the Financial Statement
Date (Subject Period)(see Credit Agreement definition of
Consolidated EBITDA):
    
    $B.
    
    Sum of (i) Consolidated Interest Charges (subject to
proforma adjustments, if any, permitted by Section 7.19(e)of
the Agreement) during Subject Period plus(ii) imputed
interest charges on Synthetic Leases during Subject Period:
    
    $
 Exhibit C  Page 3
Form of Compliance Certificate




---



##### 



C.
    
    Is ratio of II.A. to II.B. at least 2.75 to 1.0?
    
    Yes/NoIII. Section 7.19(b) Fixed Asset Coverage RatioA.
    
    Orderly liquidation value of Borrowers and its
Subsidiaries domestic fixed assets (determined as of most
recently delivered asset appraisal delivered pursuant to
Section 6.02(e)or (f)of the Credit Agreement) on which
Administrative Agent holds first priority perfected Lien:
    
    $B.
    
    Outstanding Amount of Revolver Principal Debton most
recent Financial Statement Date:
    
    $C.
    
    Is ratio of III.A. to III.B. at least 1.33 to 1.0?
    
    Yes/NoIV. Section 7.19(c) Leverage RatioA.
    
    Consolidated Funded Debt for Subject Period (see Credit
Agreement definition of Consolidated Funded Debt):
    
    $B.
    
    Unrestricted cash of the Borrower and its Subsidiaries
deposited in an account with the Administrative Agent or
Collateral Agent (or another financial institution acceptable
to the Administrative Agent) plus (i) unrestricted cash of
the Borrower and its Subsidiaries deposited with a Person
other than a Lender subject to a control agreement in favor
of the Administrative Agent or Collateral Agent plus (ii) at
the Administrative Agents discretion, unrestricted cash of
the Borrower and its Subsidiaries reflected on the Borrowers
consolidated balance sheet and otherwise subjected to a Lien
in favor of the Administrative Agent or Collateral Agent and
not otherwise pledged or subject to any claim or encumbrance
of any third party plus (iii) Cash Equivalents.C.
    
    Line IV.A minus Line IV.B
    
    $D.
    
    Consolidated EBITDA (subject to proforma adjustments, if
any, permitted by Section 7.19(e)of the Agreement) for
Subject Period:
    
    $E.
    
    Is ratio of IV.C. to IV. D. no more than 4.00 to 1.0?
    
    Yes/NoV. Section 7.19(d) Senior Leverage RatioA.
    
    Consolidated Senior Debt for Subject Period (see Credit
Agreement
 Exhibit C  Page 4
Form of Compliance Certificate




---



##### 



definition of Consolidated Senior Debt):
    
    $B.
    
    Consolidated EBITDA (subject to proforma adjustments, if
any, permitted by Section 7.19(e)of the Agreement) for
Subject Period:
    
    $C.
    
    Is ratio of V.A. to V. B. no more than 2.50 to 1.0?
    
    Yes/No
 Exhibit C  Page 5
Form of Compliance Certificate




---



##### 



FORM OF ASSIGNMENT AND ASSUMPTION
 Assignment and Assumption Insert name of Assignor Assignor Insert name of Assignee Assignee Credit Agreement
 Assigned
Interest
 1.
    
    Assignor:2.
    
    Assignee:[and is an Affiliate/Approved Fund of [identify Lender]3.
    
    Borrower(s):
    
    Allis-Chalmers Energy Inc.4.
    
    Administrative Agent:
    
    Royal Bank of Canada, as the administrative agent under
the Credit Agreement5.
    
    Credit Agreement:
    
    The $62,000,000 Second Amended and Restated Credit Agreement
dated as of April 26, 2007 among Allis-Chalmers Energy Inc., the Lenders parties
thereto, and Royal Bank of Canada, as Administrative Agent.
 Exhibit D  Page 1
Form of Assignment and Assumption




---



##### 



6.
    
    Assigned Interest:
 Aggregate Amount of
    
    
    Amount ofCommitment/Loans for
    
    
    Commitment/Loans
    
    
    Percentage Assigned ofall Lenders*
    
    
    Assigned*
    
    
    Commitment/LoansRevolving Loans:
    
    $
    
    
    
    $
    
    
    
    
    %Total:
    
    $
    
    
    
    $
    
    
    
    
    %
 
 
  ASSIGNOR
[NAME OF ASSIGNOR]By:Title:ASSIGNEE
[NAME OF ASSIGNEE]By:Title: 
 *
    
    Amount to be adjusted by the counterparties to take into account any payments or prepayments made
between the Trade Date and the Effective Date.  [NAME OF ADMINISTRATIVE AGENT], as
Administrative AgentBy:Title: Exhibit D  Page 2
Form of Assignment and Assumption




---



##### 



ALLIS-CHALMERS ENERGY INC.
a Delaware corporationBy:Name:Title: Exhibit D  Page 3
Form of Assignment and Assumption




---



##### 



Representations and Warranties
 Assignor
 Assignee Section 6.01
 Payments
 General Provisions
 Exhibit D  Page 4
Form of Assignment and Assumption




---



##### 



Exhibit D  Page 5
Form of Assignment and Assumption