**Exhibit 10.4****EXECUTIVE EMPLOYMENT AGREEMENT**     This Executive Employment Agreement effective April 3, 2007, is between Allis-Chalmers EnergyInc. and Victor M. Perez. Certain capitalized terms used herein are defined in Section 1 below.**R E C I T A L S**:     A. Executive is employed by the Company pursuant to an Employment Agreement (“2004 EmploymentAgreement”) dated July 26, 2004 which terminated July 26, 2007;     B. Company wishes to employ Executive, and Executive desires to accept employment withCompany, by entering into a written agreement to specify the terms and conditions of Executive’scontinued employment with Company;     C. Executive is employed as Chief Financial Officer and is an integral member of itsmanagement team and Company considers the maintenance of a sound management team, includingExecutive, essential to protecting and enhancing its best interests and those of its stockholders;     D. Company recognizes that the possibility of a change in control of Company may result in thedeparture or distraction of management to the detriment of Company and its stockholders; and     E. Company has determined that appropriate steps should be taken to obtain and retain thecontinued attention and dedication of selected members of Company’s management team to theirassigned duties without the distraction arising from the possibility of a change in control ofCompany.     NOW, THEREFORE, in consideration of Executive’s past and future employment with Company andother good and valuable consideration, the parties agree as follows:     **Section 1.***Definitions*. As used in this Agreement, the following terms will have thefollowing meanings:          (a) *Agreement*refers to the Executive Employment Agreement represented by thisdocument.          (b) *Cause*has the meaning ascribed to it in Section 7(a)(ii).          (c) *Change In Control*means:
 

 
               (i) The acquisition after the date hereof by any individual, entity or group,or a Person (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)other than an Excluded Person, of ownership of more than 50% of either: (i) the thenoutstanding shares of Common Stock (“Outstanding Common Stock”); or (ii) thecombined voting power of the then outstanding voting securities of the Companyentitled to vote generally in the election of directors (“Outstanding VotingSecurities”);               (ii) Individuals who, as of the date hereof, constitute the Board of Directorsof the Company (“Incumbent Board”) cease for any reason to constitute at least amajority of the Board; provided, however, that any individual becoming a directorsubsequent to the date hereof whose election, or nomination for election by theCompany’s stockholders, was approved by a vote of at least a majority of thedirectors then comprising the Incumbent Board shall be considered as though suchindividual were a member of the Incumbent Board, but excluding, as a member of theIncumbent Board, any such individual whose initial assumption of office occurs as aresult of either an actual or threatened election contest (as such terms are used inRule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934)or other actual or threatened solicitation of proxies or consents by or on behalf ofa Person other than the Board;               (iii) Approval by the stockholders of the Company of a reorganization, mergeror consolidation, in each case, unless, following such reorganization, merger orconsolidation, (i) more than 50% of, respectively, the then outstanding shares ofcommon stock of the corporation resulting from such reorganization, merger orconsolidation and the combined voting power of the then outstanding votingsecurities of such corporation entitled to vote generally in the election ofdirectors is then beneficially owned, directly or indirectly, by all orsubstantially all of the individuals and entities who were the beneficial owners,respectively, of the Outstanding Common Stock and Outstanding Voting Securitiesimmediately prior to such reorganization, merger or consolidation, in substantiallythe same proportions as their ownership, immediately prior to such reorganization,merger or consolidation of the Outstanding Common Stock and Outstanding VotingSecurities, as the case may be, or at least a majority of the members of the boardof directors of the corporation resulting from such reorganization, merger orconsolidation were members of the Incumbent Board at the time of the execution ofthe initial agreement providing for such reorganization, merger or consolidation; or               (iv) Approval by the stockholders of the Company of (i) a complete liquidationor dissolution of the Company or (ii) the sale or other disposition of all orsubstantially all of the assets of the Company, other than to a corporation, withrespect to which following such sale or other disposition, (1) more than 50% of,respectively, the then outstanding shares of common stock of such corporation andthe combined voting power of the then outstanding voting securities of suchcorporation entitled to vote generally in the election for directors is thenbeneficially owned, directly or indirectly, by all or substantially all of the
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individuals and entities who were the beneficial owners, respectively, of theOutstanding Common Stock and Outstanding Voting Securities immediately prior to suchsale or other disposition in substantially the same proportion as their ownership,immediately prior to such sale or other disposition, of the Outstanding Common Stockand Outstanding Voting Securities, as the case may be; or (2) at least a majority ofthe members of the board of directors of such corporation were members of theIncumbent Board at the time of the execution of the initial agreement or action ofthe Board providing for such sale or other disposition of assets of the Company.          (d) *Code*means the Internal Revenue Code of 1986, as amended.          (e) *Commencement Date*has the meaning ascribed to it in Section 4.          (f) *Company*means Allis-Chalmers Energy Inc.          (g) *Confidential Information*has the meaning ascribed to it in Section 9(b).          (h) *Constructively Terminated*with respect to an Executive’s employment with Companywill be deemed to have occurred if Executive terminates his employment within six monthsfollowing the date on which Company:                    (i) demotes Executive to a lesser position, either in title or responsibility,than the highest position held by Executive with Company at any time duringExecutive’s employment with Company after the date hereof unless the Companyreverses such demotion within 30 days after receiving written notice of suchdemotion from Executive;                    (ii) decreases Executive’s salary below the highest level in effect at any timeduring Executive’s employment with Company or reduces Executive’s benefits andperquisites below the highest levels in effect at any time during Executive’semployment with Company (other than as a result of any amendment or termination ofany Executive or group or other executive benefit plan, which amendment ortermination is applicable to all executives of Company or any reduction in benefitsthat Company cures within 30 days after receiving written notice of such reductionfrom Executive);                    (iii) requires Executive to relocate to a principal place of business more than50 miles from the principal place of business occupied by Company on the datehereof, unless the Company reverses such relocation within 30 days after receivingwritten notice of Executive’s intention to terminate his employment in reliance onthis Section;                    (iv) is subject to a Change In Control, unless Executive accepts employmentwith a successor to Company; or                    (v) breaches any other material term of this Agreement which is not cured byCompany within 30 days after receiving notice of such breach from Executive.
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               (i) *Designated Industry*has the meaning ascribed to it in Section 10(a)(i)(1).               (j) *Determination*has the meaning ascribed to such term in Section 1313(a) of the Code.               (k) *Disability*with respect to Executive shall be deemed to exist if he meets thedefinition of disability under the terms of the Company’s current long-term disabilitypolicy (or any replacement long-term disability policy). Any refusal by Executive to submitto a reasonable medical examination to determine whether Executive is so disabled shall bedeemed conclusively to constitute evidence of Executive’s disability.               (l) *Executive*refers to Victor M. Perez.               (m) *Excluded Person*means any Person who beneficially owns more than 10% of theoutstanding shares of the Company’s Common Stock at any time prior to the date hereof.               (n) *Company*refers collectively to the Company and its subsidiaries and otheraffiliates.               (o) *Incentive Plan*means the Allis-Chalmers Energy Inc. 2006 Incentive Plan, as amendedfrom time to time.               (p) *Inventions*has the meaning ascribed to it in Section 8(a).               (q) *Salary*has the meaning ascribed to it in Section 5(a).               (r) *Separation Payment Period*has the meaning ascribed to it in Section 7(b)(ii).               (s) *Separation Payments*has the meaning ascribed to it in Section 7(b)(ii).     **Section 2.***Employment*. Company hereby employs Executive, and Executive hereby acceptsemployment by Company, upon the terms and subject to the conditions hereinafter set forth.     **Section 3.***Duties*. Executive shall be employed as the Chief Financial Officer of the Company.Executive agrees to devote substantially all of his business time as is necessary to perform hisduties attendant to his executive position with Company. Executive shall be allowed to engage inother activities as an investor as well as participate in activities of charitable organizations ofhis choice so long as they do not materially interfere with his duties for Company.     **Section 4.***Term*. The term of employment of Executive hereunder shall commence on the date ofthis Agreement and terminate three years hence.     **Section 5.***Compensation and Benefits*. In consideration for the services of Executivehereunder, Company shall compensate Executive as follows (except as set forth herein,
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Executive acknowledges payment in full ofall amounts due to him for services rendered prior to the date hereof):          (a) *Salary*. Company shall pay Executive, semi-monthly in arrears with its normalpayroll procedures, a salary which is equivalent to an annual rate of $286,000 (the“Salary”). The Salary may not be decreased at any time during the term of Executive’semployment hereunder and shall be reviewed no less than annually by Company. Any increasein the Salary shall be in the sole discretion of the Compensation Committee of the Board ofDirectors of the Company.          (b) *Management Incentive Bonus*. Executive shall be entitled to receive a bonus equalto a maximum of 50% of his Salary based upon the achievement of goals set forth in ScheduleA attached hereto (which shall be amended each year in the discretion of the Company). Suchbonus shall be paid annually within 30 days after the completion of the Company’s auditedfinancial statements for each year. Executive shall also be eligible to receive fromCompany such annual management incentive bonuses as may be provided in management incentivebonus plans adopted from time to time by Company.          (c) *Stock Options*In addition, the Board of Directors and the Compensation Committeeof the Company has approved the grant to Executive of options to purchase 15,000 shares ofthe Company’s Common Stock pursuant to the Incentive Plan. The exercise price for theoptions shall be equal to the fair market value of the Company’s Common Stock on the datethe options are approved by the Board of Directors, and the options shall vest and becomeexercisable as follows: twenty percent (20%) shall vest on the first anniversary of the dateof grant and twenty percent (20%) shall vest on the second anniversary of the date of grantand sixty percent (60%) shall vest on the third anniversary of the date of grant. Theoptions will have retention of employment and certain performance objectives that must bemet in order to vest as described in that certain Stock Option Agreement between Executiveand the Company.          (d) *Restricted Stock Performance Awards.*The Compensation Committee and Board ofDirectors has approved and awarded Executive performance awards of restricted stock in theamount of 25,000 shares of Common Stock. The performance awards will vest in accordancewith the terms of the Performance Award Agreement and certain performance objectives asdescribed therein.          (e) *Vacation*. Executive shall be entitled to four (4) weeks paid vacation per year.Unless otherwise approved by the Compensation Committee of the Board of Directors of theCompany, a maximum of ten days accrued vacation not taken in any calendar year shall becarried forward and may be used in the next subsequent calendar year. Executive shallschedule his paid vacation to be taken at times which are reasonably and mutually convenientto both Company and Executive.          (f) *Insurance Benefits*. Company shall provide accident, health, dental, disability andlife insurance for Executive under thegroup accident, health, dental, disability and life insurance plans as may bemaintained by Company for its full-time, salaried Executives from time to time.
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          (g) *Office Space and Expenses*. Company shall provide and pay the expenses ofmaintaining an office for Executive during the term of this Agreement.          (h) *Assistant Expenses*. Company shall assume and pay all salary and benefits of anAssistant to Executive.     **Section 6.***Expenses*. The parties anticipate that in connection with the services to beperformed by Executive pursuant to the terms of this Agreement, Executive will be required to makepayments for travel, entertainment of business associates and similar expenses. Company shallreimburse Executive for all reasonable expenses of types authorized by Company and incurred byExecutive in the performance of his duties hereunder, consistent with past practices. Executiveshall comply with such reporting requirements with respect to expenses as Company may establishfrom time to time.     **Section 7.***Termination*.          (a) *General*. Executive’s employment hereunder shall commence on the Commencement Dateand continue until the end of the term specified in Section 4, except that the employment ofExecutive hereunder shall terminate prior to such time in accordance with the following:               (i) *Death or Disability*. Upon the death of Executive during the term of hisemployment hereunder or, at the option of Company, in the event of Executive’sDisability, upon 30 days’ notice to Executive.               (ii) *For Cause*. For “Cause” immediately upon written notice by Company toExecutive. A termination shall be for Cause if:                    (1) Executive commits a criminal act involving dishonesty or moralturpitude; or                    (2) Executive commits a material breach of any of the covenants, termsand provisions hereof or fails to obey written directions delivered toExecutive by the Company’s President or Chief Executive Officer which arenot inconsistent with Executive’s rights under this Agreement.               (iii) *Without Cause*. Without Cause upon notice by the Board of Directors toExecutive or upon notice by Executive to the Board if Executive has beenConstructively Terminated.          (b) *Severance Pay*.               (i) *Termination Upon Death or Disability or For Cause*. Executive shall not beentitled to any severance pay or other compensation upon termination of hisemployment pursuant to Section 7(a)(i) or (ii) except for his Salary earned butunpaid as of the date of termination, unpaid expense reimbursements under Section 6for expenses incurred in accordance with the terms hereof prior to termination, andcompensation for accrued, unused vacation as of the date of termination.
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               (ii) *Termination Without Cause*. In the event Executive’s employment hereunderis terminated pursuant to Section 7(a)(iii), Company shall pay Executive SeparationPayments as Executive’s sole remedy in connection with such termination.“Separation Payments” are payments made at the semi-monthly rate of Executive’s thencurrent salary in effect immediately preceding the date of termination. SeparationPayments shall be made for the lesser of one year following termination ofemployment or the remaining term of this Agreement (the “Separation PaymentPeriod”), and shall be paid by Company in equal semi-monthly payments in arrears orin accordance with its then-current normal payroll procedure, provided thatCompany’s obligation to make Separation Payments shall be reduced by any amountsearned by Executive for services during the Separation Payment Period. Companyshall also pay Executive his Salary earned but unpaid as of the date of termination,unpaid expense reimbursements under Section 6 for expenses incurred in accordancewith the terms hereof prior to termination, and compensation for accrued, unusedvacation as of the date of termination.     **Section 8.***Inventions; Assignment*.          (a) *Inventions Defined*. All rights to discoveries, inventions, improvements, designsand innovations (including all data and records pertaining thereto) that relate to thebusiness of Company, whether or not patentable, copyrightable or reduced to writing, thatExecutive may discover, invent or originate during the term of his employment hereunder, andfor a period of six months thereafter, either alone or with others and whether or not duringworking hours or by the use of the facilities of Company (“Inventions”), shall be theexclusive property of Company. Executive shall promptly disclose all Inventions to Company,shall execute at the request of Company any assignments or other documents Company may deemnecessary to protect or perfect its rights therein, and shall assist Company, at Company’sexpense, in obtaining, defending and enforcing Company’s rights therein. Executive herebyappoints Company as his attorney-in-fact to execute on his behalf any assignments or otherdocuments deemed necessary by Company to protect or perfect its rights to any Inventions.          (b) *Covenant to Assign and Cooperate*. Without limiting the generality of theforegoing, Executive hereby assigns and transfers to Company the world-wide right, title andinterest of Executive in the Inventions. Executive agrees that Company may apply for andreceive patent rights (including Letters Patent in the United States) for the Inventions inCompany’s name in such countries as may be determined solely by Company. Executive shallcommunicate to Company all facts known to Executive relating to the Inventions and shallcooperatewith Company’s reasonable requests in connection with vesting title to the Inventionsand related patents exclusively in Company and in connection with obtaining, maintaining andprotecting Company’s exclusive patent rights in the Inventions.          (c) *Successors and Assigns*. Executive’s obligations under this Section 8 shall inureto the benefit of Company and its successors and assigns and shall survive the expiration ofthe term of this Agreement for such time as may be necessary to protect the proprietaryrights of Company in the Inventions.
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     **Section 9.***Confidential Information*.          (a) *Acknowledgment of Proprietary Interest*. Executive acknowledges the proprietaryinterest of Company in all Confidential Information. Executive agrees that all ConfidentialInformation learned by Executive during his employment with Company or otherwise, whetherdeveloped by Executive alone or in conjunction with others or otherwise, is and shall remainthe exclusive property of Company. Executive further acknowledges and agrees that hisdisclosure of any Confidential Information will result in irreparable injury and damage toCompany.          (b) *Confidential Information Defined*. “Confidential Information” means allconfidential and proprietary information of Company, including without limitation (i)information derived from reports, investigations, experiments, research and work inprogress, (ii) methods of operation, (iii) market data, (iv) proprietary computer programsand codes, (v) drawings, designs, plans and proposals, (vi) marketing and sales programs,(vii) client lists, (viii) historical financial information and financial projections, (ix)pricing formulae and policies, (x) all other concepts, ideas, materials and informationprepared or performed for or by Company and (xi) all information related to the business,products, purchases or sales of Company or any of its suppliers and customers, other thaninformation that is publicly available.          (c) *Covenant Not To Divulge Confidential Information*. Company is entitled to preventthe disclosure of Confidential Information. As a portion of the consideration for theemployment of Executive and for the compensation being paid to Executive by Company,Executive agrees at all times during the term of his employment hereunder and thereafter tohold in strict confidence and not to disclose or allow to be disclosed to any person, firmor corporation, other than to his professional advisors (who have the obligation to maintainthe confidentiality of such information) and to persons engaged by Company to further thebusiness of Company, and not to use except in the pursuit of the business of Company, theConfidential Information, without the prior written consent of Company.          (d) *Return of Materials at Termination*. In the event of any termination or cessationof his employment with Company for any reason, Executive shall promptly deliver to Companyall documents,data and other information derived from or otherwise pertaining to ConfidentialInformation. Executive shall not take or retain any documents or other information, or anyreproduction or excerpt thereof, containing or pertaining to any Confidential Information.     **Section 10.***Noncompetition*.          (a) Until termination of Executive’s employment hereunder, Executive shall not do anyof the following:               (i) engage directly or indirectly, alone or as a shareholder, partner,director, officer, Executive of or consultant to any other business organization, inany business activities that:
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               (1) relate to the oil and gas drilling services industry (the“Designated Industry”); or               (2) were either conducted by Company prior to the termination ofExecutive’s employment hereunder or proposed to be conducted by Company atthe time of such termination;               (ii) approach any customer or supplier of Company in an attempt to divert it toany competitor of Company in the Designated Industry; or               (iii) solicit or encourage any employee or Executive of Company to end hisrelationship with Company or commence any such relationship with any competitor ofCompany.          (b) Executive’s noncompetition obligations hereunder shall not preclude Executive fromowning less than five percent of the common stock of any publicly traded corporationconducting business activities in the Designated Industry. If at any time the provisions ofthis Section 10 are determined to be invalid or unenforceable by reason of being vague orunreasonable as to area, duration or scope of activity, this Section 10 shall be considereddivisible and shall be immediately amended to only such area, duration and scope of activityas shall be determined to be reasonable and enforceable by the court or other body havingjurisdiction over the matter, and Executive agrees that this Section 10 as so amended shallbe valid and binding as though any invalid or unenforceable provision had not been includedherein.     **Section 11.***General*.          (a) *Notices*.   All notices and other communications hereunder shall be in writing or bywritten telecommunication, and shall be deemed to have been duly given upon delivery ifdelivered personally or via written telecommunication, or five days after mailing if mailedby certified mail, return receipt requested or by written telecommunication, to the relevantaddress set forth below, or to such other address as the recipient of such notice orcommunication shall have specified to the other party in accordance with this Section 11(a):   If to Company, to: If to Executive:   Allis-Chalmers Energy Inc. Victor M. Perez5075 Westheimer, Suite 890 5477 Coshatte Rd.Houston, Texas 77056 Bellville, Texas 77418Attn: Theodore F. Pound IIIGeneral Counsel       If to Executive, to the last address for Executive appearing on the Company’s records          (b) *Withholding*.   All payments required to be made to Executive by Company under thisAgreement shall be subject to the withholding of such amounts, if any, relating to federal,state and local taxes as may be required by law.
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          (c) *Equitable Remedies*. Each of the parties hereto acknowledges and agrees that uponany breach by Executive or Company of his or its obligations hereunder, Company andExecutive shall have no adequate remedy at law and accordingly shall be entitled to specificperformance and other appropriate injunctive and equitable relief.          (d) *Severability*.   If any provision of this Agreement is held to be illegal, invalidor unenforceable, such provision shall be fully severable, and this Agreement shall beconstrued and enforced as if such illegal, invalid or unenforceable provision nevercomprised a part hereof, and the remaining provisions hereof shall remain in full force andeffect and shall not be affected by the illegal, invalid or unenforceable provision or byits severance herefrom. Furthermore, in lieu of such illegal, invalid or unenforceableprovision, there shall be added automatically as part of this Agreement a provision assimilar in its terms to such illegal, invalid or unenforceable provision as may be possibleand be legal, valid and enforceable.          (e) *Waivers*.   No delay or omission by either party in exercising any right, power orprivilege hereunder shall impair such right, power or privilege, nor shall any single orpartial exercise of any such right, power or privilege preclude any further exercise thereofor the exercise of any other right, power or privilege.          (f) *Counterparts*.   This Agreement may be executed in multiple counterparts, each ofwhich shall be deemed an original, and all of which together shall constitute one and thesame instrument.          (g) *Captions*.   The captions in this Agreement are for convenience of reference onlyand shall not limit or otherwise affect any of the terms or provisions hereof.          (h) *Reference to Agreement*.  Use of the words “herein,” “hereof,” “hereto,” “hereunder”and the like in this Agreement refer to this Agreement only as a whole and not to anyparticular section or subsection of this Agreement, unless otherwise noted.          (i) *Binding Agreement*.   This Agreement shall be binding upon and inure to the benefitof the parties and shall be enforceable by the personal representatives and heirs ofExecutive and the successors and assigns of Company. This Agreement may be assigned by theCompany or any Company to any Company or, subject to Section 7(b)(iii), to any successor toall or substantially all of the Company’s business as a result of a merger, consolidation,sale of stock or assets, or similar transaction; provided that in the event of any suchassignment, the Company shall remain liable for all of its obligations hereunder and shallbe liable for all obligations of all such assignees hereunder. If Executive dies while anyamounts would still be payable to him hereunder, such amounts shall be paid to Executive’sestate. This Agreement is not otherwise assignable by Executive.          (j) *Entire Agreement*.   This Agreement contains the entire understanding of theparties, supersedes all prior agreements and understandings relating to the subject matterhereof and may not be amended except by a written instrument hereafter signed by each of theparties hereto.
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          (k) *Governing Law*.  This Agreement and the performance hereof shall be construed andgoverned in accordance with the laws of the State of Texas, without regard to its choice oflaw principles.          (l) *Gender and Number*. The masculine gender shall be deemed to denote the feminine orneuter genders, the singular to denote the plural, and the plural to denote the singular,where the context so permits.     **Section 12.*****Section 409A.***          (a) *Section 409A Compliance.*Executive and Company agree that this Agreement isintended to comply with Section 409A of the Internal Revenue Code of 1986, as amended(“Section 409A”) and that any ambiguous provision will be construed in a manner that willresult in treatment of the relevant portions of this Agreement as a nonqualified deferredcompensation plan that complies with or is exempt from Section 409A.          (b) *Specified Employees.*If Executive is a “specified employee,” as such term isdefined in Section 409A and determined as described below in this Section 13(b), anypayments of amounts which are deferred compensation subject to the provisions of Section409A that are payable as a result of Executive’s termination (other than death) shall not bepayable before the earliest of (i) the date that is six months after Executive’stermination, (ii) the date of Executive’s death, or (iii) the earliest date that otherwisecomplies with the requirements of Section 409A. This Section 13(b) shall be applied byaccumulating all payments that otherwise would have been paid within six months ofExecutive’s termination and paying such accumulated amounts at the earliest date whichcomplies with or is exempt from the application of the requirements of Section 409A.Executive shall be a “specified employee” for the twelve-month period beginning on April 1of a year if Executive is a “key employee” as defined in Section 416(i) of the InternalRevenue Code (without regard to Section 416(i)(5)) as of December 31 of the preceding yearor using such specified employee identification dates as designated by the CompensationCommittee in accordance with Section 409A and in a manner that is consistent with respect toall of Company’snonqualified deferred compensation plans. For purposes of determining the identity ofspecified employees, the Compensation Committee may establish procedures as it deemsappropriate in accordance with Section 409A.     EXECUTED effective as of August 3, 2007.      ALLIS-CHALMERS ENERGY INC.