##### 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 JUNE 30, 2007 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________ TO _______________
 Commission file number 1-2199
 ALLIS-CHALMERS ENERGY INC.
  DELAWARE
    
    39-0126090(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 5075 WESTHEIMER, SUITE 890, HOUSTON, TEXAS 77056
 (713) 369-0550
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
 o þ




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
 FORM 10-Q
 For the Quarterly Period Ended June 30, 2007
  
 TABLE OF CONTENTS
 PART I
 ITEM
    
    
    
    PAGE1.
    
    Financial StatementsConsolidated Condensed Balance Sheets as of June 30, 2007 and December 31, 2006
    
    
    3Consolidated Condensed Income Statements for the three and six months ended
June 30, 2007 and 2006
    
    
    4Consolidated Condensed Statements of Cash Flows for the six months ended
June 30, 2007 and 2006
    
    
    5Notes to Consolidated Condensed Financial Statements
    
    
    62.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    203.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    314.
    
    Controls and Procedures
    
    
    31PART II4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    326.
    
    Exhibits
    
    
    32Signatures
    
    
    32Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO and CFO Pursuant to Section 906
 2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006(unaudited)AssetsCash and cash equivalents
    
    $
    106,762
    
    
    $
    39,745Trade receivables, net
    
    
    120,591
    
    
    
    95,766Inventories
    
    
    30,683
    
    
    
    28,615Prepaid expenses and other
    
    
    10,291
    
    
    
    16,636Total current assets
    
    
    268,327
    
    
    
    180,762Property and equipment, net
    
    
    569,753
    
    
    
    554,258Goodwill
    
    
    127,651
    
    
    
    125,835Other intangible assets, net
    
    
    31,918
    
    
    
    32,840Debt issuance costs, net
    
    
    15,033
    
    
    
    9,633Other assets
    
    
    5,060
    
    
    
    4,998Total assets
    
    $
    1,017,742
    
    
    $
    908,326Liabilities and Stockholders EquityCurrent maturities of long-term debt
    
    $
    7,222
    
    
    $
    6,999Trade accounts payable
    
    
    29,657
    
    
    
    25,666Accrued salaries, benefits and payroll taxes
    
    
    13,016
    
    
    
    10,888Accrued interest
    
    
    19,723
    
    
    
    11,867Accrued expenses
    
    
    19,958
    
    
    
    16,951Total current liabilities
    
    
    89,576
    
    
    
    72,371Long-term debt, net of current maturities
    
    
    509,524
    
    
    
    561,446Deferred income taxes
    
    
    26,699
    
    
    
    19,953Other long-term liabilities
    
    
    580
    
    
    
    623Total liabilities
    
    
    626,379
    
    
    
    654,393Commitments and contingenciesStockholders EquityPreferred stock, $0.01 par value (25,000,000 shares authorized, no shares issued)
    
    
    
    
    
    
    Common stock, $0.01 par value (100,000,000 shares authorized;
34,767,465 issued and outstanding at June 30, 2007 and
28,233,411 issued and outstanding at December 31, 2006)
    
    
    348
    
    
    
    282Capital in excess of par value
    
    
    321,903
    
    
    
    216,208Retained earnings
    
    
    69,112
    
    
    
    37,443Total stockholders equity
    
    
    391,363
    
    
    
    253,933Total liabilities and stockholders equity
    
    $
    1,017,742
    
    
    $
    908,326
  3




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED INCOME STATEMENTS
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues
    
    $
    143,362
    
    
    $
    61,383
    
    
    $
    279,262
    
    
    $
    109,294Cost of revenuesDirect costs
    
    
    83,218
    
    
    
    32,879
    
    
    
    160,823
    
    
    
    60,877Depreciation
    
    
    12,248
    
    
    
    3,828
    
    
    
    24,064
    
    
    
    7,158Total cost of revenues
    
    
    95,466
    
    
    
    36,707
    
    
    
    184,887
    
    
    
    68,035Gross margin
    
    
    47,896
    
    
    
    24,676
    
    
    
    94,375
    
    
    
    41,259General and administrative
    
    
    14,302
    
    
    
    8,139
    
    
    
    28,273
    
    
    
    15,482Gain on capillary asset sale
    
    
    (8,868
    )
    
    
    
    
    
    
    (8,868
    )
    
    
    Amortization
    
    
    1,495
    
    
    
    666
    
    
    
    2,983
    
    
    
    1,273Income from operations
    
    
    40,967
    
    
    
    15,871
    
    
    
    71,987
    
    
    
    24,504Other income (expense):Interest expense
    
    
    (11,338
    )
    
    
    (3,847
    )
    
    
    (24,909
    )
    
    
    (7,552
    )Interest income
    
    
    1,108
    
    
    
    50
    
    
    
    1,867
    
    
    
    127Other
    
    
    92
    
    
    
    (6
    )
    
    
    276
    
    
    
    20Total other income (expense)
    
    
    (10,138
    )
    
    
    (3,803
    )
    
    
    (22,766
    )
    
    
    (7,405
    )Income before income taxes
    
    
    30,829
    
    
    
    12,068
    
    
    
    49,221
    
    
    
    17,099Provision for taxes
    
    
    (11,325
    )
    
    
    (2,474
    )
    
    
    (17,552
    )
    
    
    (3,081
    )Net income
    
    $
    19,504
    
    
    $
    9,594
    
    
    $
    31,669
    
    
    $
    14,018Net income per common share:Basic
    
    $
    0.56
    
    
    $
    0.53
    
    
    $
    0.95
    
    
    $
    0.80Diluted
    
    $
    0.55
    
    
    $
    0.50
    
    
    $
    0.93
    
    
    $
    0.74Weighted average shares outstanding:Basic
    
    
    34,662
    
    
    
    18,050
    
    
    
    33,502
    
    
    
    17,578Diluted
    
    
    35,193
    
    
    
    19,140
    
    
    
    34,116
    
    
    
    19,000
  4




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ALLIS-CHALMERS ENERGY INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 For the Six Months EndedJune 30,2007
    
    
    2006Cash Flows from Operating Activities:Net income
    
    $
    31,669
    
    
    $
    14,018Adjustments to reconcile net income to net cash
used in operating activities:Depreciation
    
    
    24,064
    
    
    
    7,158Amortization
    
    
    2,983
    
    
    
    1,273Write-off of deferred financing fees due to refinancing
    
    
    1,225
    
    
    
    Imputed interest
    
    
    
    
    
    
    355Stock option expense
    
    
    1,104
    
    
    
    1,778Allowance for bad debts
    
    
    279
    
    
    
    279Deferred income taxes
    
    
    6,746
    
    
    
    (Gain) loss on sale of property and equipment
    
    
    (37
    )
    
    
    119Gain on capillary asset sale
    
    
    (8,868
    )
    
    
    Changes in operating assets and liabilities, net of acquisitions:(Increase) in trade receivable
    
    
    (25,472
    )
    
    
    (13,581
    )(Increase) in inventories
    
    
    (3,849
    )
    
    
    (1,499
    )Decrease in other current assets
    
    
    9,495
    
    
    
    278(Increase) in other assets
    
    
    109
    
    
    
    (663
    )Increase (decrease) in accounts payable
    
    
    3,991
    
    
    
    (1,517
    )Increase in accrued interest
    
    
    7,856
    
    
    
    6,365Increase in accrued expenses
    
    
    3,002
    
    
    
    1,818Increase in accrued salaries, benefits and payroll taxes
    
    
    2,128
    
    
    
    657Increase (decrease) in other long-term liabilities
    
    
    (43
    )
    
    
    145Net Cash Provided By Operating Activities
    
    
    56,382
    
    
    
    16,983Cash Flows from Investing Activities:Acquisition of businesses, net of cash received
    
    
    (3,550
    )
    
    
    (106,564
    )Purchase of investment interests
    
    
    (440
    )
    
    
    Proceeds from sale of capillary assets
    
    
    16,250
    
    
    
    Proceeds from sale of property and equipment
    
    
    3,679
    
    
    
    1,814Purchase of property and equipment
    
    
    (47,181
    )
    
    
    (14,246
    )Net Cash Used In Investing Activities
    
    
    (31,242
    )
    
    
    (118,996
    )Cash Flows from Financing Activities:Proceeds from issuance of stock, net
    
    
    100,055
    
    
    
    Proceeds from exercises of options and warrants
    
    
    3,138
    
    
    
    4,960Proceeds from long-term debt
    
    
    250,000
    
    
    
    161,412Proceeds from line of credit
    
    
    
    
    
    
    5,000Repayments on long-term debt
    
    
    (305,199
    )
    
    
    (45,291
    )Repayments on related party debt
    
    
    
    
    
    
    (3,031
    )Repayments on line of credit
    
    
    
    
    
    
    (11,400
    )Tax benefits on stock plans
    
    
    1,464
    
    
    
    Debt issuance costs
    
    
    (7,581
    )
    
    
    (5,349
    )Net Cash Provided By Financing Activities
    
    
    41,877
    
    
    
    106,301Net change in cash and cash equivalents
    
    
    67,017
    
    
    
    4,288Cash and cash equivalents at beginning of year
    
    
    39,745
    
    
    
    1,920Cash and cash equivalents at end of period
    
    $
    106,762
    
    
    $
    6,208
  5




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ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations
    Basis of Presentation
    6




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ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109 Accounting for Income Taxes
  Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 NOTE 2  ACQUISITIONS
  NOTE 3  SALE OF CAPILLARY ASSETS
  NOTE 4  STOCK-BASED COMPENSATION
 Share-Based Payment
 7




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ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 4  STOCK-BASED COMPENSATION (Continued)
    Weighted
    
    
    WeightedShares
    
    
    Average
    
    
    Average
    
    
    AggregateUnder
    
    
    Exercise
    
    
    Contractual
    
    
    Intrinsic ValueOption
    
    
    Price
    
    
    Life (Years)
    
    
    (millions)Balance at beginning of period
    
    
    1,350,365
    
    
    $
    6.88Granted
    
    
    5,000
    
    
    
    16.50Canceled
    
    
    (5,832
    )
    
    
    4.53Exercised
    
    
    (530,901
    )
    
    
    5.91Outstanding at end of period
    
    
    818,632
    
    
    
    7.58
    
    
    
    7.99
    
    
    $
    12.61Exercisable at end of period
    
    
    644,963
    
    
    $
    6.60
    
    
    
    7.84
    
    
    $
    10.57
   For the Three Months EndedJune 30,2007Expected dividend yield
    
    Expected price volatility
    
    
    68.06
    %Risk free interest rate
    
    
    4.48
    %Expected life of options
    
    7 yearsWeighted average fair value of options granted
at market value
    
    $
    11.33
 8




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ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 4  STOCK-BASED COMPENSATION (Continued)
  Weighted AverageGrant-Date FairNumber of shares
    
    
    Value per ShareNonvested at December 31, 2006
    
    
    27,000
    
    
    $
    18.30Granted
    
    
    106,200
    
    
    
    21.00Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Nonvested at June 30, 2007
    
    
    133,200
    
    
    $
    20.45
  NOTE 5  INCOME PER COMMON SHARE
 Earnings Per
Share
  For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerator:Net income
    
    $
    19,504
    
    
    $
    9,594
    
    
    $
    31,669
    
    
    $
    14,018Denominator:Basic earnings per share  weighted
average shares outstanding
    
    
    34,662
    
    
    
    18,050
    
    
    
    33,502
    
    
    
    17,578Effect of potentially dilutive common shares:Warrants and employee and director
stock options
    
    
    531
    
    
    
    1,090
    
    
    
    614
    
    
    
    1,422Diluted earnings per share 
weighted average shares
outstanding and assumed
conversions
    
    
    35,193
    
    
    
    19,140
    
    
    
    34,116
    
    
    
    19,000Net income per share  basic
    
    $
    0.56
    
    
    $
    0.53
    
    
    $
    0.95
    
    
    $
    0.80Net income per share  diluted
    
    $
    0.55
    
    
    $
    0.50
    
    
    $
    0.93
    
    
    $
    0.74
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ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 6  GOODWILL AND INTANGIBLE ASSETS
 Goodwill and Other Intangible Assets
  NOTE 7  INVENTORIES
  June 30,
    
    
    December 31,2007
    
    
    2006Chemicals and drilling fluids
    
    $
    2,787
    
    
    $
    2,673Coiled tubing and related inventory
    
    
    701
    
    
    
    1,627Drive pipe
    
    
    582
    
    
    
    716Finished goods
    
    
    1,837
    
    
    
    1,476Hammers
    
    
    1,239
    
    
    
    1,016Raw materials
    
    
    3,559
    
    
    
    2,638Rental supplies
    
    
    1,886
    
    
    
    1,845Rig parts and related inventory
    
    
    11,350
    
    
    
    9,762Shop supplies and related inventory
    
    
    4,884
    
    
    
    4,596Work in process
    
    
    1,858
    
    
    
    2,266Total inventory
    
    $
    30,683
    
    
    $
    28,615
 NOTE 8  DEBT
  June 30,
    
    
    December 31,2007
    
    
    2006Senior notes
    
    $
    505,000
    
    
    $
    255,000Bridge loan
    
    
    
    
    
    
    300,000Bank term loans
    
    
    6,114
    
    
    
    7,302Revolving line of credit
    
    
    
    
    
    
    Seller notes
    
    
    1,100
    
    
    
    900Obligations under non-compete agreements
    
    
    160
    
    
    
    270Notes payable to former directors
    
    
    32
    
    
    
    32Equipment and vehicle installment notes
    
    
    1,519
    
    
    
    3,502Insurance premium financing
    
    
    2,674
    
    
    
    1,025Capital lease obligations
    
    
    147
    
    
    
    414Total debt
    
    
    516,746
    
    
    
    568,445Less: current maturities
    
    
    7,222
    
    
    
    6,999Long-term debt obligations
    
    $
    509,524
    
    
    $
    561,446
 10




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ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  DEBT (continued)
 Senior notes, bank loans and line of credit agreements
       Notes payable
    11




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ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  DEBT (continued)
  Other debt
  NOTE 9  STOCKHOLDERS EQUITY
   NOTE 10  CONDENSED CONSOLIDATING FINANCIAL INFORMATION
  12




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ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 10  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING BALANCE SHEETS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalAssetsCash and cash equivalents
    
    $
    
    
    
    $
    99,380
    
    
    $
    7,382
    
    
    $
    
    
    
    $
    106,762Trade receivables, net
    
    
    
    
    
    
    80,658
    
    
    
    40,573
    
    
    
    (640
    )
    
    
    120,591Inventory
    
    
    
    
    
    
    13,583
    
    
    
    17,100
    
    
    
    
    
    
    
    30,683Intercompany receivables
    
    
    108,581
    
    
    
    
    
    
    
    
    
    
    
    (108,581
    )
    
    
    Note receivable from affiliate
    
    
    6,663
    
    
    
    
    
    
    
    
    
    
    
    (6,663
    )
    
    
    Prepaid expenses and other
    
    
    5,974
    
    
    
    3,933
    
    
    
    384
    
    
    
    
    
    
    
    10,291Total current assets
    
    
    121,218
    
    
    
    197,554
    
    
    
    65,439
    
    
    
    (115,884
    )
    
    
    268,327Property and equipment, net
    
    
    
    
    
    
    437,357
    
    
    
    132,396
    
    
    
    
    
    
    
    569,753Goodwill
    
    
    
    
    
    
    126,128
    
    
    
    1,523
    
    
    
    
    
    
    
    127,651Other intangible assets, net
    
    
    575
    
    
    
    31,271
    
    
    
    72
    
    
    
    
    
    
    
    31,918Debt issuance costs, net
    
    
    15,033
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,033Note receivable from affiliates
    
    
    9,410
    
    
    
    
    
    
    
    
    
    
    
    (9,410
    )
    
    
    Investments in affiliates
    
    
    779,831
    
    
    
    
    
    
    
    
    
    
    
    (779,831
    )
    
    
    Other assets
    
    
    20
    
    
    
    5,007
    
    
    
    33
    
    
    
    
    
    
    
    5,060Total Assets
    
    $
    926,087
    
    
    $
    797,317
    
    
    $
    199,463
    
    
    $
    (905,125
    )
    
    $
    1,017,742Liabilities and Stockholders EquityCurrent maturities of long-term debt
    
    $
    32
    
    
    $
    4,814
    
    
    $
    2,376
    
    
    $
    
    
    
    $
    7,222Trade accounts payable
    
    
    34
    
    
    
    15,602
    
    
    
    14,024
    
    
    
    (3
    )
    
    
    29,657Accrued salaries, benefits and payroll taxes
    
    
    
    
    
    
    2,995
    
    
    
    10,021
    
    
    
    
    
    
    
    13,016Accrued interest
    
    
    19,628
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    19,723Accrued expenses
    
    
    89
    
    
    
    11,902
    
    
    
    8,604
    
    
    
    (637
    )
    
    
    19,958Intercompany payables
    
    
    
    
    
    
    466,299
    
    
    
    
    
    
    
    (466,299
    )
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    6,663
    
    
    
    (6,663
    )
    
    
    Total current liabilities
    
    
    19,783
    
    
    
    501,612
    
    
    
    41,783
    
    
    
    (473,602
    )
    
    
    89,576Long-term debt, net of current maturities
    
    
    505,750
    
    
    
    36
    
    
    
    3,738
    
    
    
    
    
    
    
    509,524Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    9,410
    
    
    
    (9,410
    )
    
    
    Deferred income taxes
    
    
    8,902
    
    
    
    10,715
    
    
    
    7,082
    
    
    
    
    
    
    
    26,699Other long-term liabilities
    
    
    289
    
    
    
    291
    
    
    
    
    
    
    
    
    
    
    
    580Total liabilities
    
    
    534,724
    
    
    
    512,654
    
    
    
    62,013
    
    
    
    (483,012
    )
    
    
    626,379Commitments and contingenciesStockholders EquityCommon stock
    
    
    348
    
    
    
    3,526
    
    
    
    42,963
    
    
    
    (46,489
    )
    
    
    348Capital in excess of par value
    
    
    321,903
    
    
    
    167,508
    
    
    
    74,969
    
    
    
    (242,477
    )
    
    
    321,903Retained earnings
    
    
    69,112
    
    
    
    113,629
    
    
    
    19,518
    
    
    
    (133,147
    )
    
    
    69,112Total stockholders equity
    
    
    391,363
    
    
    
    284,663
    
    
    
    137,450
    
    
    
    (422,113
    )
    
    
    391,363Total liabilities and
stockholders equity
    
    $
    926,087
    
    
    $
    797,317
    
    
    $
    199,463
    
    
    $
    (905,125
    )
    
    $
    1,017,742
 13




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 10  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING INCOME STATEMENTS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    177,540
    
    
    $
    101,749
    
    
    $
    (27
    )
    
    $
    279,262Cost of revenuesDirect costs
    
    
    
    
    
    
    88,549
    
    
    
    72,301
    
    
    
    (27
    )
    
    
    160,823Depreciation
    
    
    
    
    
    
    18,633
    
    
    
    5,431
    
    
    
    
    
    
    
    24,064Total cost of revenues
    
    
    
    
    
    
    107,182
    
    
    
    77,732
    
    
    
    (27
    )
    
    
    184,887Gross margin
    
    
    
    
    
    
    70,358
    
    
    
    24,017
    
    
    
    
    
    
    
    94,375General and administrative
    
    
    1,017
    
    
    
    23,088
    
    
    
    4,168
    
    
    
    
    
    
    
    28,273Gain on capillary asset sale
    
    
    
    
    
    
    (8,868
    )
    
    
    
    
    
    
    
    
    
    
    (8,868
    )Amortization
    
    
    980
    
    
    
    1,986
    
    
    
    17
    
    
    
    
    
    
    
    2,983Income from operations
    
    
    (1,997
    )
    
    
    54,152
    
    
    
    19,832
    
    
    
    
    
    
    
    71,987Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    57,629
    
    
    
    
    
    
    
    
    
    
    
    (57,629
    )
    
    
    Interest, net
    
    
    (23,988
    )
    
    
    1,628
    
    
    
    (682
    )
    
    
    
    
    
    
    (23,042
    )Other
    
    
    25
    
    
    
    115
    
    
    
    136
    
    
    
    
    
    
    
    276Total other income
(expense)
    
    
    33,666
    
    
    
    1,743
    
    
    
    (546
    )
    
    
    (57,629
    )
    
    
    (22,766
    )Net income before income
taxes
    
    
    31,669
    
    
    
    55,895
    
    
    
    19,286
    
    
    
    (57,629
    )
    
    
    49,221Provision for income taxes
    
    
    
    
    
    
    (11,012
    )
    
    
    (6,540
    )
    
    
    
    
    
    
    (17,552
    )Net income
    
    $
    31,669
    
    
    $
    44,883
    
    
    $
    12,746
    
    
    $
    (57,629
    )
    
    $
    31,669
 14




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 10  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING INCOME STATEMENTS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    90,511
    
    
    $
    52,861
    
    
    $
    (10
    )
    
    $
    143,362Cost of revenuesDirect costs
    
    
    
    
    
    
    45,514
    
    
    
    37,714
    
    
    
    (10
    )
    
    
    83,218Depreciation
    
    
    
    
    
    
    9,516
    
    
    
    2,732
    
    
    
    
    
    
    
    12,248Total cost of revenues
    
    
    
    
    
    
    55,030
    
    
    
    40,446
    
    
    
    (10
    )
    
    
    95,466Gross margin
    
    
    
    
    
    
    35,481
    
    
    
    12,415
    
    
    
    
    
    
    
    47,896General and administrative
    
    
    599
    
    
    
    11,515
    
    
    
    2,188
    
    
    
    
    
    
    
    14,302Gain on capillary asset sale
    
    
    
    
    
    
    (8,868
    )
    
    
    
    
    
    
    
    
    
    
    (8,868
    )Amortization
    
    
    518
    
    
    
    968
    
    
    
    9
    
    
    
    
    
    
    
    1,495Income from operations
    
    
    (1,117
    )
    
    
    31,866
    
    
    
    10,218
    
    
    
    
    
    
    
    40,967Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    31,507
    
    
    
    
    
    
    
    
    
    
    
    (31,507
    )
    
    
    Interest, net
    
    
    (10,899
    )
    
    
    976
    
    
    
    (307
    )
    
    
    
    
    
    
    (10,230
    )Other
    
    
    13
    
    
    
    68
    
    
    
    11
    
    
    
    
    
    
    
    92Total other income
(expense)
    
    
    20,621
    
    
    
    1,044
    
    
    
    (296
    )
    
    
    (31,507
    )
    
    
    (10,138
    )Net income before income
taxes
    
    
    19,504
    
    
    
    32,910
    
    
    
    9,922
    
    
    
    (31,507
    )
    
    
    30,829Provision for income taxes
    
    
    
    
    
    
    (7,817
    )
    
    
    (3,508
    )
    
    
    
    
    
    
    (11,325
    )Net income
    
    $
    19,504
    
    
    $
    25,093
    
    
    $
    6,414
    
    
    $
    (31,507
    )
    
    $
    19,504
 15




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 10  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
    
    $
    31,669
    
    
    $
    44,883
    
    
    $
    12,746
    
    
    $
    (57,629
    )
    
    $
    31,669Adjustments to reconcile net income to
net cash provided by operating
activities:Depreciation
    
    
    
    
    
    
    18,633
    
    
    
    5,431
    
    
    
    
    
    
    
    24,064Amortization
    
    
    979
    
    
    
    1,987
    
    
    
    17
    
    
    
    
    
    
    
    2,983Bridge Fees
    
    
    1,225
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,225Stock option expense
    
    
    1,104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,104Provision for bad debts
    
    
    
    
    
    
    279
    
    
    
    
    
    
    
    
    
    
    
    279Equity earnings in affiliates
    
    
    (57,629
    )
    
    
    
    
    
    
    
    
    
    
    57,629
    
    
    
    Deferred income taxes
    
    
    6,699
    
    
    
    1
    
    
    
    46
    
    
    
    
    
    
    
    6,746(Gain) on sale of equipment
    
    
    
    
    
    
    (34
    )
    
    
    (3
    )
    
    
    
    
    
    
    (37
    )Gain on capillary asset sale
    
    
    
    
    
    
    (8,868
    )
    
    
    
    
    
    
    
    
    
    
    (8,868
    )Changes in operating assets and
liabilities, net of acquisitions:(Increase) in trade receivables
    
    
    
    
    
    
    (19,084
    )
    
    
    (6,388
    )
    
    
    
    
    
    
    (25,472
    )(Increase) in inventories
    
    
    
    
    
    
    (2,170
    )
    
    
    (1,679
    )
    
    
    
    
    
    
    (3,849
    )(Increase) decrease in other
current assets
    
    
    (271
    )
    
    
    9,631
    
    
    
    135
    
    
    
    
    
    
    
    9,495(Increase) decrease in other assets
    
    
    237
    
    
    
    (98
    )
    
    
    (30
    )
    
    
    
    
    
    
    109Increase in accounts payable
    
    
    3
    
    
    
    2,089
    
    
    
    1,899
    
    
    
    
    
    
    
    3,991Increase (Decrease) in accrued
interest
    
    
    7,873
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    7,856(Decrease) increase in accrued
expenses
    
    
    (46
    )
    
    
    2,307
    
    
    
    741
    
    
    
    
    
    
    
    3,002Increase in accrued salaries,
benefits and payroll taxes
    
    
    
    
    
    
    2
    
    
    
    2,126
    
    
    
    
    
    
    
    2,128(Decrease) in other long- term
liabilities
    
    
    (15
    )
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    (43
    )Net Cash Provided By (Used In)
Operating Activities
    
    
    (8,172
    )
    
    
    49,530
    
    
    
    15,024
    
    
    
    
    
    
    
    56,382Cash Flows from Investing Activities:Notes receivable from affiliates
    
    
    1,768
    
    
    
    
    
    
    
    
    
    
    
    (1,768
    )
    
    
    Acquisition of businesses, net of cash
received
    
    
    
    
    
    
    (3,550
    )
    
    
    
    
    
    
    
    
    
    
    (3,550
    )Purchase of investment interests
    
    
    
    
    
    
    (440
    )
    
    
    
    
    
    
    
    
    
    
    (440
    )Proceeds from sale of capillary assets
    
    
    
    
    
    
    16,250
    
    
    
    
    
    
    
    
    
    
    
    16,250Proceeds from sale of property and
equipment
    
    
    
    
    
    
    3,672
    
    
    
    7
    
    
    
    
    
    
    
    3,679Purchase of property and equipment
    
    
    
    
    
    
    (41,311
    )
    
    
    (5,870
    )
    
    
    
    
    
    
    (47,181
    )Net Cash Provided By (Used in)
Investing Activities
    
    
    1,768
    
    
    
    (25,379
    )
    
    
    (5,863
    )
    
    
    (1,768
    )
    
    
    (31,242
    )Cash Flows from Financing Activities:Proceeds from long-term debt
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000Payments on long-term debt
    
    
    (300,000
    )
    
    
    (3,229
    )
    
    
    (1,970
    )
    
    
    
    
    
    
    (305,199
    )
 16




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 10  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: (continued)Accounts receivable from affiliates
    
    
    (40,672
    )
    
    
    10,859
    
    
    
    
    
    
    
    29,813
    
    
    
    Accounts payable to affiliates
    
    
    
    
    
    
    29,830
    
    
    
    (17
    )
    
    
    (29,813
    )
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    (1,768
    )
    
    
    1,768
    
    
    
    Proceeds from issuance of common
stock
    
    
    100,055
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,055Proceeds from exercises of options
and warrants
    
    
    3,138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,138Tax benefits on stock plans
    
    
    1,464
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,464Debt issuance costs
    
    
    (7,581
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,581
    )Net Cash Provided By (Used
In) Financing Activities
    
    
    6,404
    
    
    
    37,460
    
    
    
    (3,755
    )
    
    
    1,768
    
    
    
    41,877Net change in cash and cash
equivalents
    
    
    
    
    
    
    61,611
    
    
    
    5,406
    
    
    
    
    
    
    
    67,017Cash and cash equivalents at
beginning of year
    
    
    
    
    
    
    37,769
    
    
    
    1,976
    
    
    
    
    
    
    
    39,745Cash and cash equivalents at end
of period
    
    $
    
    
    
    $
    99,380
    
    
    $
    7,382
    
    
    $
    
    
    
    $
    106,762
 NOTE 11  SUPPLEMENTAL CASH FLOW INFORMATION
 For the Six Months EndedJune 30,2007
    
    
    2006Cash paid for interest and income taxes:Interest
    
    $
    15,819
    
    
    $
    832Income taxes
    
    
    1,140
    
    
    
    2,063Non cash activities:Insurance premium financed
    
    
    3,150
    
    
    
    1,933Common stock issued for acquisition of business
    
    
    
    
    
    
    1,650Note payable issued for acquisition of business
    
    
    350
    
    
    
    750Non-compete payable in the future
    
    
    
    
    
    
    150
 17




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC  NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 12  SEGMENT INFORMATION
  For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006RevenuesRental Services
    
    $
    32,379
    
    
    $
    12,707
    
    
    $
    63,960
    
    
    $
    23,128International Drilling
    
    
    52,861
    
    
    
    
    
    
    
    101,749
    
    
    
    Directional Drilling
    
    
    21,307
    
    
    
    19,228
    
    
    
    41,796
    
    
    
    35,165Tubular Services
    
    
    14,061
    
    
    
    14,569
    
    
    
    28,447
    
    
    
    24,028Underbalanced Drilling
    
    
    12,966
    
    
    
    10,949
    
    
    
    23,521
    
    
    
    20,048Production Services
    
    
    9,788
    
    
    
    3,930
    
    
    
    19,789
    
    
    
    6,925$
    143,362
    
    
    $
    61,383
    
    
    $
    279,262
    
    
    $
    109,294Operating Income (Loss):Rental Services
    
    $
    14,770
    
    
    $
    7,308
    
    
    $
    28,693
    
    
    $
    12,306International Drilling
    
    
    10,218
    
    
    
    
    
    
    
    19,832
    
    
    
    Directional Drilling
    
    
    4,004
    
    
    
    4,367
    
    
    
    8,289
    
    
    
    6,972Tubular Services
    
    
    3,167
    
    
    
    4,314
    
    
    
    6,360
    
    
    
    6,165Underbalanced Drilling
    
    
    3,525
    
    
    
    3,204
    
    
    
    6,136
    
    
    
    5,441Production Services
    
    
    9,899
    
    
    
    341
    
    
    
    11,502
    
    
    
    618General corporate
    
    
    (4,616
    )
    
    
    (3,663
    )
    
    
    (8,825
    )
    
    
    (6,998
    )$
    40,967
    
    
    $
    15,871
    
    
    $
    71,987
    
    
    $
    24,504Depreciation and Amortization:Rental Services
    
    $
    6,490
    
    
    $
    1,715
    
    
    $
    12,751
    
    
    $
    3,386International Drilling
    
    
    2,741
    
    
    
    
    
    
    
    5,448
    
    
    
    Directional Drilling
    
    
    547
    
    
    
    359
    
    
    
    1,012
    
    
    
    648Tubular Services
    
    
    1,233
    
    
    
    1,069
    
    
    
    2,436
    
    
    
    1,768Underbalanced Drilling
    
    
    839
    
    
    
    731
    
    
    
    1,662
    
    
    
    1,415Production Services
    
    
    1,258
    
    
    
    299
    
    
    
    2,555
    
    
    
    592General corporate
    
    
    635
    
    
    
    321
    
    
    
    1,183
    
    
    
    622$
    13,743
    
    
    $
    4,494
    
    
    $
    27,047
    
    
    $
    8,431Capital Expenditures:Rental Services
    
    $
    10,369
    
    
    $
    417
    
    
    $
    18,882
    
    
    $
    1,101International Drilling
    
    
    3,150
    
    
    
    
    
    
    
    5,870
    
    
    
    Directional Drilling
    
    
    1,658
    
    
    
    707
    
    
    
    5,941
    
    
    
    3,405Tubular Services
    
    
    2,094
    
    
    
    4,373
    
    
    
    4,758
    
    
    
    5,500Underbalanced Drilling
    
    
    5,067
    
    
    
    792
    
    
    
    6,525
    
    
    
    3,016Production Services
    
    
    2,272
    
    
    
    365
    
    
    
    4,630
    
    
    
    1,046General corporate
    
    
    226
    
    
    
    6
    
    
    
    575
    
    
    
    178$
    24,836
    
    
    $
    6,660
    
    
    $
    47,181
    
    
    $
    14,246
 18




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##### Table of Contents



NOTE 12  SEGMENT INFORMATION (Continued)
 As ofJune 30,
    
    
    December 31,2007
    
    
    2006Goodwill:Rental Services
    
    $
    106,382
    
    
    $
    106,132International Drilling
    
    
    1,523
    
    
    
    1,504Directional Drilling
    
    
    6,014
    
    
    
    4,168Tubular Services
    
    
    6,103
    
    
    
    6,464Underbalanced Drilling
    
    
    3,950
    
    
    
    3,950Production Services
    
    
    3,679
    
    
    
    3,617General corporate
    
    
    
    
    
    
    $
    127,651
    
    
    $
    125,835Identifiable Assets:Rental Services
    
    $
    460,878
    
    
    $
    453,802International Drilling
    
    
    199,463
    
    
    
    185,677Directional Drilling
    
    
    41,388
    
    
    
    28,585Tubular Services
    
    
    78,000
    
    
    
    74,372Underbalanced Drilling
    
    
    61,132
    
    
    
    54,288Production Services
    
    
    55,211
    
    
    
    57,954General corporate
    
    
    121,670
    
    
    
    53,648$
    1,017,742
    
    
    $
    908,326Long Lived Assets:United States
    
    $
    603,907
    
    
    $
    574,302International
    
    
    145,508
    
    
    
    153,262$
    749,415
    
    
    $
    727,564
 For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:United States
    
    $
    86,232
    
    
    $
    59,485
    
    
    $
    170,466
    
    
    $
    105,458International
    
    
    57,130
    
    
    
    1,898
    
    
    
    108,796
    
    
    
    3,836$
    143,362
    
    
    $
    61,383
    
    
    $
    279,262
    
    
    $
    109,294
 NOTE 13  LEGAL MATTERS
   NOTE 14  SUBSEQUENT EVENTS
  19




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS  OF OPERATION
 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 30.
 Overview of Our Business
     Cyclical Nature of Equipment Rental and Services Industry
   20




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Results of Operations
   Comparison of Three Months Ended June 30, 2007 and 2006
    Share-Based Payment,
 21




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##### Table of Contents



Revenues
    
    
    Income (Loss) from OperationsThree Months Ended
    
    
    Three Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006
    
    
    Change(in thousands)Rental Services
    
    $
    32,379
    
    
    $
    12,707
    
    
    $
    19,672
    
    
    $
    14,770
    
    
    $
    7,308
    
    
    $
    7,462International Drilling
    
    
    52,861
    
    
    
    
    
    
    
    52,861
    
    
    
    10,218
    
    
    
    
    
    
    
    10,218Directional Drilling
    
    
    21,307
    
    
    
    19,228
    
    
    
    2,079
    
    
    
    4,004
    
    
    
    4,367
    
    
    
    (363
    )Tubular Services
    
    
    14,061
    
    
    
    14,569
    
    
    
    (508
    )
    
    
    3,167
    
    
    
    4,314
    
    
    
    (1,147
    )Underbalanced Drilling
    
    
    12,966
    
    
    
    10,949
    
    
    
    2,017
    
    
    
    3,525
    
    
    
    3,204
    
    
    
    321Production Services
    
    
    9,788
    
    
    
    3,930
    
    
    
    5,858
    
    
    
    9,899
    
    
    
    341
    
    
    
    9,558General corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,616
    )
    
    
    (3,663
    )
    
    
    (953
    )Total
    
    $
    143,362
    
    
    $
    61,383
    
    
    $
    81,979
    
    
    $
    40,967
    
    
    $
    15,871
    
    
    $
    25,096
 22




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##### Table of Contents



Rental Services Segment
  International Drilling Segment
  Directional Drilling Segment
  Tubular Services Segment
  Underbalanced Drilling Segment
  Production Services Segment
  General Corporate
  23




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Comparison of Six Months Ended June 30, 2007 and 2006
    Share-Based Payment,
   24




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##### Table of Contents



Revenues
    
    
    Income (Loss) from OperationsSix Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    Change
    
    
    2007
    
    
    2006
    
    
    Change(in thousands)Rental Services
    
    $
    63,960
    
    
    $
    23,128
    
    
    $
    40,832
    
    
    $
    28,693
    
    
    $
    12,306
    
    
    $
    16,387International Drilling
    
    
    101,749
    
    
    
    
    
    
    
    101,749
    
    
    
    19,832
    
    
    
    
    
    
    
    19,832Directional Drilling
    
    
    41,796
    
    
    
    35,165
    
    
    
    6,631
    
    
    
    8,289
    
    
    
    6,972
    
    
    
    1,317Tubular Services
    
    
    28,447
    
    
    
    24,028
    
    
    
    4,419
    
    
    
    6,360
    
    
    
    6,165
    
    
    
    195Underbalanced Drilling
    
    
    23,521
    
    
    
    20,048
    
    
    
    3,473
    
    
    
    6,136
    
    
    
    5,441
    
    
    
    695Production Services
    
    
    19,789
    
    
    
    6,925
    
    
    
    12,864
    
    
    
    11,502
    
    
    
    618
    
    
    
    10,884General corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,825
    )
    
    
    (6,998
    )
    
    
    (1,827
    )Total
    
    $
    279,262
    
    
    $
    109,294
    
    
    $
    169,968
    
    
    $
    71,987
    
    
    $
    24,504
    
    
    $
    47,483
 Rental Services Segment
  25




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International Drilling Segment
  Directional Drilling Segment
  Tubular Services Segment
  Underbalanced Drilling Segment
  Production Services Segment
  General Corporate
  Liquidity and Capital Resources
  26




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Operating Activities
     Investing Activities
   27




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##### Table of Contents



Financing Activities
           28




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##### Table of Contents



Off Balance Sheet Arrangements
  Capital Requirements
   Recent Developments
  29




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##### Table of Contents



Critical Accounting Policies
  Accounting for Uncertainty in Income
Taxes  an interpretation of FASB Statement No. 109 Accounting for Income Taxes
  Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Forward-Looking Statements
  30




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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.
  31




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##### Table of Contents



PART II. OTHER INFORMATION
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     For
    
    Against or Withheld
    
    Abstentions1.
    
    Election of DirectorsBurt A. Adams
    
    
    25,636,831
    
    
    
    38,498
    
    
    Ali H. Afdhal
    
    
    25,632,790
    
    
    
    42,539
    
    
    Alejandro P. Bulgheroni
    
    
    25,634,102
    
    
    
    41,227
    
    
    Carlos A. Bulgheroni
    
    
    25,633,302
    
    
    
    42,027
    
    
    Victor F. Germack
    
    
    25,637,274
    
    
    
    38,055
    
    
    James M. Hennessy
    
    
    25,636,037
    
    
    
    39,292
    
    
    Munawar H. Hidayatallah
    
    
    25,632,969
    
    
    
    42,360
    
    
    John E. McConnaughy, Jr.
    
    
    25,628,066
    
    
    
    47,263
    
    
    Robert E. Nederlander
    
    
    25,626,471
    
    
    
    48,858
    
    
    Leonard Toboroff
    
    
    25,625,766
    
    
    
    49,563
    
    
    Zane Tankel
    
    
    25,627,064
    
    
    
    48,265
    
    
    2.
    
    Ratification of UHY LLP as our
independent accountants
    
    
    25,648,139
    
    
    
    15,492
    
    
    
    11,698
 
 ITEM 6. EXHIBITS
  
 SIGNATURES
  Allis-Chalmers Energy Inc.
(Registrant)/s/ Munawar H. HidayatallahMunawar H. HidayatallahChief Executive Officer andChairman 32




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##### Table of Contents



EXHIBIT INDEX
 10.1
    
    
    Agreement, dated April 1, 2007, between Allis-Chalmers Energy Inc. and David Wilde
(incorporated by reference to Exhibit 99.1 to the Registrants Form 8-K filed on April 3,
2007).10.2
    
    
    Employment Agreement between Strata Directional Technology, Inc. and David K. Bryan,
effective July 1, 2007 (incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K
filed on July 13, 2007).10.3
    
    
    Employment Agreement between AirComp L.L.C. and Terrence P. Keane, effective July 1, 2007
(incorporated by reference to Exhibit 10.1 to the Registrants Form 8-K filed on July 24, 2007).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