##### 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 MARCH 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 Commission file number 1-02199
 ALLIS-CHALMERS ENERGY INC.
  DELAWARE
    
    39-0126090(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)5075 WESTHEIMER, SUITE 890, HOUSTON, TEXAS
    
    77056(Address of principal executive offices)
    
    (Zip Code)
 (713) 369-0550  Registrants telephone number, including area code
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



ALLIS-CHALMERS ENERGY INC.
 FORM 10-Q
 For the Quarterly Period Ended March 31, 2009
 TABLE OF CONTENTS
 PAGEPART IITEM1. Financial StatementsConsolidated Condensed Balance Sheets as of March 31, 2009 and December 31, 2008
    
    
    3Consolidated Condensed Income Statements for the three months ended
March 31, 2009 and 2008
    
    
    4Consolidated Condensed Statements of Cash Flows for the three months ended
March 31, 2009 and 2008
    
    
    5Notes to Consolidated Condensed Financial Statements
    
    
    62. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    233. Quantitative and Qualitative Disclosures about Market Risk
    
    
    334. Controls and Procedures
    
    
    33PART II6. Exhibits
    
    
    33Signatures
    
    
    34Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 ALLIS-CHALMERS ENERGY INC.
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
  March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)AssetsCash and cash equivalents
    
    $
    10,860
    
    
    $
    6,866Trade receivables, net
    
    
    132,548
    
    
    
    157,871Inventories
    
    
    37,324
    
    
    
    39,087Deferred income tax asset
    
    
    5,182
    
    
    
    6,176Prepaid expenses and other
    
    
    13,622
    
    
    
    15,238Total current assets
    
    
    199,536
    
    
    
    225,238Property and equipment, net
    
    
    754,109
    
    
    
    760,990Goodwill
    
    
    43,273
    
    
    
    43,273Other intangible assets, net
    
    
    36,184
    
    
    
    37,371Debt issuance costs, net
    
    
    12,200
    
    
    
    12,664Deferred income tax asset
    
    
    9,496
    
    
    
    3,993Other assets
    
    
    31,113
    
    
    
    31,522Total assets
    
    $
    1,085,911
    
    
    $
    1,115,051Liabilities and Stockholders EquityCurrent maturities of long-term debt
    
    $
    13,568
    
    
    $
    14,617Trade accounts payable
    
    
    46,041
    
    
    
    62,078Accrued salaries, benefits and payroll taxes
    
    
    19,869
    
    
    
    20,192Accrued interest
    
    
    7,475
    
    
    
    18,623Accrued expenses
    
    
    25,402
    
    
    
    26,642Total current liabilities
    
    
    112,355
    
    
    
    142,152Long-term debt, net of current maturities
    
    
    581,446
    
    
    
    579,044Deferred income taxes
    
    
    8,388
    
    
    
    8,253Other long-term liabilities
    
    
    1,838
    
    
    
    2,193Total liabilities
    
    
    704,027
    
    
    
    731,642Commitments 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;
35,691,742 issued and outstanding at March 31, 2008 and
35,674,742 issued and outstanding at December 31, 2008)
    
    
    357
    
    
    
    357Capital in excess of par value
    
    
    335,713
    
    
    
    334,633Retained earnings
    
    
    45,814
    
    
    
    48,419Total stockholders equity
    
    
    381,884
    
    
    
    383,409Total liabilities and stockholders equity
    
    $
    1,085,911
    
    
    $
    1,115,051
   3




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
 
 CONSOLIDATED CONDENSED INCOME STATEMENTS
   For the Three Months EndedMarch 31,2009
    
    
    2008Revenues
    
    $
    145,103
    
    
    $
    153,182Operating costs and expensesDirect costs
    
    
    103,134
    
    
    
    98,511Depreciation
    
    
    19,371
    
    
    
    14,502Selling, general and administrative
    
    
    13,640
    
    
    
    15,471Amortization
    
    
    1,187
    
    
    
    1,116Total operating costs and expenses
    
    
    137,332
    
    
    
    129,600Income from operations
    
    
    7,771
    
    
    
    23,582Other income (expense):Interest expense
    
    
    (13,507
    )
    
    
    (12,041
    )Interest income
    
    
    5
    
    
    
    1,152Other
    
    
    217
    
    
    
    107Total other income (expense)
    
    
    (13,285
    )
    
    
    (10,782
    )Income (loss) before income taxes
    
    
    (5,514
    )
    
    
    12,800Provision for income taxes
    
    
    2,909
    
    
    
    (4,750
    )Net income (loss)
    
    $
    (2,605
    )
    
    $
    8,050Net income (loss) per common share:Basic
    
    $
    (0.07
    )
    
    $
    0.23Diluted
    
    $
    (0.07
    )
    
    $
    0.23Weighted average shares outstanding:Basic
    
    
    35,206
    
    
    
    34,837Diluted
    
    
    35,206
    
    
    
    35,173
   4




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
   For the Three Months EndedMarch 31,2009
    
    
    2008Cash Flows from Operating Activities:Net income (loss)
    
    $
    (2,605
    )
    
    $
    8,050Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    20,558
    
    
    
    15,618Amortization and write-off of deferred financing fees
    
    
    555
    
    
    
    519Stock-based compensation
    
    
    1,080
    
    
    
    2,612Allowance for bad debts
    
    
    385
    
    
    
    267Deferred taxes
    
    
    (4,374
    )
    
    
    1,965Gain on sale of property and equipment
    
    
    (357
    )
    
    
    (130
    )Changes in operating assets and liabilities, net of acquisitions:Decrease (increase) in trade receivable
    
    
    24,938
    
    
    
    (10,306
    )Decrease (increase) in inventories
    
    
    1,763
    
    
    
    (810
    )Decrease in prepaid expenses and other current assets
    
    
    1,616
    
    
    
    228Decrease (increase) in other assets
    
    
    657
    
    
    
    (1,271
    )Increase (decrease) in trade accounts payable
    
    
    (16,037
    )
    
    
    1,523(Decrease) in accrued interest
    
    
    (11,148
    )
    
    
    (10,926
    )Increase (decrease) in accrued expenses
    
    
    (1,240
    )
    
    
    10,943Increase (decrease) in accrued salaries, benefits and payroll taxes
    
    
    (323
    )
    
    
    564(Decrease) in other long-term liabilities
    
    
    (355
    )
    
    
    (162
    )Net Cash Provided By Operating Activities
    
    
    15,113
    
    
    
    18,684Cash Flows from Investing Activities:Investment in note receivable
    
    
    
    
    
    
    (40,000
    )Deposits on asset commitments
    
    
    (248
    )
    
    
    (5,331
    )Proceeds from sale of property and equipment
    
    
    1,825
    
    
    
    1,488Purchase of property and equipment
    
    
    (13,958
    )
    
    
    (39,677
    )Net Cash Used In Investing Activities
    
    
    (12,381
    )
    
    
    (83,520
    )Cash Flows from Financing Activities:Proceeds from exercises of options
    
    
    
    
    
    
    61Proceeds from long-term debt
    
    
    
    
    
    
    13,142Net borrowings under line of credit
    
    
    6,000
    
    
    
    20,500Payments on long-term debt
    
    
    (4,647
    )
    
    
    (2,292
    )Debt issuance costs
    
    
    (91
    )
    
    
    (21
    )Net Cash Provided By Financing Activities
    
    
    1,262
    
    
    
    31,390Net change in cash and cash equivalents
    
    
    3,994
    
    
    
    (33,446
    )Cash and cash equivalents at beginning of year
    
    
    6,866
    
    
    
    43,693Cash and cash equivalents at end of period
    
    $
    10,860
    
    
    $
    10,247Supplemental information:Interest paid
    
    $
    23,867
    
    
    $
    22,412Income taxes paid
    
    $
    2,589
    
    
    $
    2,181
   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
    Fair Value Measurements,
  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)
 Business Combinations,
 Determination of the Useful Life of
Intangible Assets
 Accounting for Assets Acquired
and Liabilities Assumed in a Business Combination That Arise from Contingencies Reasonable Estimation of the Amount of a Loss
 Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
 Interim Disclosures
about Fair Value of Financial Instruments Disclosures about Fair Value of Financial Instruments,
  7




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ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 2  STOCK-BASED COMPENSATION
 Share-Based Payment
    Weighted
    
    
    WeightedShares
    
    
    Average
    
    
    Average
    
    
    AggregateUnder
    
    
    Exercise
    
    
    Contractual
    
    
    Intrinsic ValueOption
    
    
    Price
    
    
    Life (Years)
    
    
    (millions)Balance at December 31, 2008
    
    
    901,732
    
    
    $
    10.95Granted
    
    
    120,000
    
    
    
    1.23Canceled
    
    
    (206,000
    )
    
    
    21.66Exercised
    
    
    Outstanding at March 31, 2009
    
    
    815,732
    
    
    
    6.82
    
    
    
    6.79
    
    
    $
    0.08Exercisable at March 31, 2009
    
    
    683,732
    
    
    $
    7.53
    
    
    
    6.21
    
    
    $
    0.00
   For the Three Months EndedMarch 31,2009Expected dividend yield
    
    
    Expected price volatility
    
    
    77.32
    %Risk free interest rate
    
    
    1.37
    %Expected life of options
    
    5 yearsWeighted average fair value of options granted
at market value
    
    $
    0.77
  8




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ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 2  STOCK-BASED COMPENSATION (Continued)
  Weighted AverageNumber of
    
    
    Grant-Date Fair ValueShares
    
    
    Per ShareNonvested at December 31, 2008
    
    
    953,102
    
    
    $
    15.34Granted
    
    
    17,000
    
    
    
    1.23Vested
    
    
    (6,740
    )
    
    
    10.42Forfeited
    
    
    (5,600
    )
    
    
    16.50Nonvested at March 31, 2009
    
    
    957,762
    
    
    $
    15.12
  NOTE 3  INCOME PER COMMON SHARE
 Earnings Per Share,
  For the Three Months EndedMarch 31,2009
    
    
    2008Numerator:Net income (loss)
    
    $
    (2,605
    )
    
    $
    8,050Denominator:Weighted average common shares outstanding excluding
nonvested restricted stock
    
    
    35,206
    
    
    
    34,837Effect of potentially dilutive common shares:Warrants and employee and director stock options
and restricted shares
    
    
    
    
    
    
    336Weighted average common shares outstanding
and assumed conversions
    
    
    35,206
    
    
    
    35,173Net income (loss) per common shareBasic
    
    $
    (0.07
    )
    
    $
    0.23Diluted
    
    $
    (0.07
    )
    
    $
    0.23Potentially dilutive securities excluded as anti-dilutive
    
    
    1,537
    
    
    
    1,088
   9




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ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 4  GOODWILL AND INTANGIBLE ASSETS
 Goodwill and Other
Intangible Assets
  NOTE 5  INVENTORIES
  March 31,
    
    
    December 31,2009
    
    
    2008ManufacturedFinished goods
    
    $
    3,298
    
    
    $
    2,821Work in process
    
    
    2,203
    
    
    
    1,654Raw materials
    
    
    2,225
    
    
    
    2,499Total manufactured
    
    
    7,726
    
    
    
    6,974Hammers
    
    
    2,164
    
    
    
    2,257Drive pipe
    
    
    485
    
    
    
    443Rental supplies
    
    
    2,837
    
    
    
    3,023Chemicals and drilling fluids
    
    
    3,733
    
    
    
    3,698Rig parts and related inventory
    
    
    10,667
    
    
    
    13,097Coiled tubing and related inventory
    
    
    1,729
    
    
    
    1,817Shop supplies and related inventory
    
    
    7,983
    
    
    
    7,778Total inventories
    
    $
    37,324
    
    
    $
    39,087
  10




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ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 6  DEBT
  March 31,
    
    
    December 31,2009
    
    
    2008Senior notes
    
    $
    505,000
    
    
    $
    505,000Bank term loans
    
    
    46,048
    
    
    
    49,609Revolving line of credit
    
    
    42,500
    
    
    
    36,500Seller notes
    
    
    750
    
    
    
    750Notes payable to former directors
    
    
    32
    
    
    
    32Insurance premium financing
    
    
    85
    
    
    
    991Capital lease obligations
    
    
    599
    
    
    
    779Total debt
    
    
    595,014
    
    
    
    593,661Less: current maturities
    
    
    13,568
    
    
    
    14,617Long-term debt obligations
    
    $
    581,446
    
    
    $
    579,044
 Senior notes, bank loans and line of credit agreements
      11




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




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ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING BALANCE SHEETS
 Allis-Chalmers
    
    
    
    
    
    
    SubsidiaryParent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalAssetsCash and cash equivalents
    
    $
    
    
    
    $
    6,736
    
    
    $
    4,124
    
    
    $
    
    
    
    $
    10,860Trade receivables, net
    
    
    
    
    
    
    67,637
    
    
    
    67,857
    
    
    
    (2,946
    )
    
    
    132,548Inventories
    
    
    
    
    
    
    19,690
    
    
    
    17,634
    
    
    
    
    
    
    
    37,324Intercompany receivables
    
    
    
    
    
    
    70,595
    
    
    
    
    
    
    
    (70,595
    )
    
    
    Note receivable from affiliate
    
    
    22,087
    
    
    
    
    
    
    
    
    
    
    
    (22,087
    )
    
    
    Prepaid expenses and other
    
    
    6,208
    
    
    
    7,175
    
    
    
    5,421
    
    
    
    
    
    
    
    18,804Total current assets
    
    
    28,295
    
    
    
    171,833
    
    
    
    95,036
    
    
    
    (95,628
    )
    
    
    199,536Property and equipment, net
    
    
    
    
    
    
    493,506
    
    
    
    260,603
    
    
    
    
    
    
    
    754,109Goodwill
    
    
    
    
    
    
    23,251
    
    
    
    20,022
    
    
    
    
    
    
    
    43,273Other intangible assets, net
    
    
    494
    
    
    
    28,163
    
    
    
    7,527
    
    
    
    
    
    
    
    36,184Debt issuance costs, net
    
    
    12,114
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    12,200Note receivable from affiliates
    
    
    8,638
    
    
    
    
    
    
    
    
    
    
    
    (8,638
    )
    
    
    Investments in affiliates
    
    
    947,839
    
    
    
    
    
    
    
    
    
    
    
    (947,839
    )
    
    
    Other assets
    
    
    9,444
    
    
    
    27,430
    
    
    
    3,735
    
    
    
    
    
    
    
    40,609Total assets
    
    $
    1,006,824
    
    
    $
    744,269
    
    
    $
    386,923
    
    
    $
    (1,052,105
    )
    
    $
    1,085,911Liabilities and Stockholders EquityCurrent maturities of long-term debt
    
    $
    782
    
    
    $
    85
    
    
    $
    12,701
    
    
    $
    
    
    
    $
    13,568Trade accounts payable
    
    
    
    
    
    
    20,160
    
    
    
    28,827
    
    
    
    (2,946
    )
    
    
    46,041Accrued salaries, benefits and payroll taxes
    
    
    
    
    
    
    4,628
    
    
    
    15,241
    
    
    
    
    
    
    
    19,869Accrued interest
    
    
    7,150
    
    
    
    
    
    
    
    325
    
    
    
    
    
    
    
    7,475Accrued expenses
    
    
    98
    
    
    
    11,754
    
    
    
    13,550
    
    
    
    
    
    
    
    25,402Intercompany payables
    
    
    69,410
    
    
    
    
    
    
    
    1,185
    
    
    
    (70,595
    )
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    22,087
    
    
    
    (22,087
    )
    
    
    Total current liabilities
    
    
    77,440
    
    
    
    36,627
    
    
    
    93,916
    
    
    
    (95,628
    )
    
    
    112,355Long-term debt, net of current maturities
    
    
    547,500
    
    
    
    
    
    
    
    33,946
    
    
    
    
    
    
    
    581,446Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    8,638
    
    
    
    (8,638
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    8,388
    
    
    
    
    
    
    
    8,388Other long-term liabilities
    
    
    
    
    
    
    45
    
    
    
    1,793
    
    
    
    
    
    
    
    1,838Total liabilities
    
    
    624,940
    
    
    
    36,672
    
    
    
    146,681
    
    
    
    (104,266
    )
    
    
    704,027Commitments and contingenciesStockholders EquityCommon stock
    
    
    357
    
    
    
    3,526
    
    
    
    42,963
    
    
    
    (46,489
    )
    
    
    357Capital in excess of par value
    
    
    335,713
    
    
    
    570,512
    
    
    
    133,339
    
    
    
    (703,851
    )
    
    
    335,713Retained earnings
    
    
    45,814
    
    
    
    133,559
    
    
    
    63,940
    
    
    
    (197,499
    )
    
    
    45,814Total stockholders equity
    
    
    381,884
    
    
    
    707,597
    
    
    
    240,242
    
    
    
    (947,839
    )
    
    
    381,884Total liabilities and
stockholders equity
    
    $
    1,006,824
    
    
    $
    744,269
    
    
    $
    386,923
    
    
    $
    (1,052,105
    )
    
    $
    1,085,911
  13




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ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING INCOME STATEMENTS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    65,967
    
    
    $
    79,789
    
    
    $
    (653
    )
    
    $
    145,103Operating costs and expensesDirect costs
    
    
    
    
    
    
    41,295
    
    
    
    62,492
    
    
    
    (653
    )
    
    
    103,134Depreciation
    
    
    
    
    
    
    14,309
    
    
    
    5,062
    
    
    
    
    
    
    
    19,371Selling, general and
administrative
    
    
    942
    
    
    
    9,168
    
    
    
    3,530
    
    
    
    
    
    
    
    13,640Amortization
    
    
    12
    
    
    
    980
    
    
    
    195
    
    
    
    
    
    
    
    1,187Total
operating costs and expenses
    
    
    954
    
    
    
    65,752
    
    
    
    71,279
    
    
    
    (653
    )
    
    
    137,332Income (loss) from
operations
    
    
    (954
    )
    
    
    215
    
    
    
    8,510
    
    
    
    
    
    
    
    7,771Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    10,612
    
    
    
    
    
    
    
    
    
    
    
    (10,612
    )
    
    
    Interest, net
    
    
    (12,284
    )
    
    
    (8
    )
    
    
    (1,210
    )
    
    
    
    
    
    
    (13,502
    )Other
    
    
    21
    
    
    
    (31
    )
    
    
    227
    
    
    
    
    
    
    
    217Total other income
(expense)
    
    
    (1,651
    )
    
    
    (39
    )
    
    
    (983
    )
    
    
    (10,612
    )
    
    
    (13,285
    )Net income (loss)before
income taxes
    
    
    (2,605
    )
    
    
    176
    
    
    
    7,527
    
    
    
    (10,612
    )
    
    
    (5,514
    )Provision for income taxes
    
    
    
    
    
    
    4,304
    
    
    
    (1,395
    )
    
    
    
    
    
    
    2,909Net income (loss)
    
    $
    (2,605
    )
    
    $
    4,480
    
    
    $
    6,132
    
    
    $
    (10,612
    )
    
    $
    (2,605
    )
  14




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Operating Activities:Net income (loss)
    
    $
    (2,605
    )
    
    $
    4,480
    
    
    $
    6,132
    
    
    $
    (10,612
    )
    
    $
    (2,605
    )Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    12
    
    
    
    15,289
    
    
    
    5,257
    
    
    
    
    
    
    
    20,558Amortization and write-off of
deferred financing fees
    
    
    555
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    555Stock based compensation
    
    
    1,080
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,080Allowance for bad debts
    
    
    
    
    
    
    385
    
    
    
    
    
    
    
    
    
    
    
    385Equity earnings in affiliates
    
    
    (10,612
    )
    
    
    
    
    
    
    
    
    
    
    10,612
    
    
    
    Deferred taxes
    
    
    (4,702
    )
    
    
    1,177
    
    
    
    (849
    )
    
    
    
    
    
    
    (4,374
    )(Gain) on sale of equipment
    
    
    
    
    
    
    (343
    )
    
    
    (14
    )
    
    
    
    
    
    
    (357
    )Changes in operating assets and
liabilities, net of acquisitions:Decrease in trade receivables
    
    
    
    
    
    
    21,930
    
    
    
    3,008
    
    
    
    
    
    
    
    24,938(Increase) decrease in inventories
    
    
    
    
    
    
    (308
    )
    
    
    2,071
    
    
    
    
    
    
    
    1,763(Increase) decrease in prepaid
expenses and other current assets
    
    
    1,789
    
    
    
    (278
    )
    
    
    105
    
    
    
    
    
    
    
    1,616(Increase) decrease in other assets
    
    
    (104
    )
    
    
    233
    
    
    
    528
    
    
    
    
    
    
    
    657(Decrease) in trade accounts
payable
    
    
    
    
    
    
    (9,023
    )
    
    
    (7,014
    )
    
    
    
    
    
    
    (16,037
    )(Decrease) in accrued interest
    
    
    (10,782
    )
    
    
    
    
    
    
    (366
    )
    
    
    
    
    
    
    (11,148
    )(Decrease) increase in accrued
expenses
    
    
    (183
    )
    
    
    (2,087
    )
    
    
    1,030
    
    
    
    
    
    
    
    (1,240
    )(Decrease) increase in accrued
salaries, benefits and payroll
taxes
    
    
    
    
    
    
    695
    
    
    
    (1,018
    )
    
    
    
    
    
    
    (323
    )(Decrease) in other long- term
liabilities
    
    
    
    
    
    
    (19
    )
    
    
    (336
    )
    
    
    
    
    
    
    (355
    )Net Cash Provided By (Used In)
Operating Activities
    
    
    (25,552
    )
    
    
    32,131
    
    
    
    8,534
    
    
    
    
    
    
    
    15,113Cash Flows from Investing Activities:Deposits on asset commitments
    
    
    
    
    
    
    
    
    
    
    (248
    )
    
    
    
    
    
    
    (248
    )Proceeds from sale of property and
equipment
    
    
    
    
    
    
    1,810
    
    
    
    15
    
    
    
    
    
    
    
    1,825Purchase of property and equipment
    
    
    
    
    
    
    (9,578
    )
    
    
    (4,380
    )
    
    
    
    
    
    
    (13,958
    )Net Cash Used in Investing
Activities
    
    
    
    
    
    
    (7,768
    )
    
    
    (4,613
    )
    
    
    
    
    
    
    (12,381
    )
  15




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Financing Activities:Accounts receivable from affiliates
    
    
    
    
    
    
    (19,557
    )
    
    
    
    
    
    
    19,557
    
    
    
    Accounts payable to affiliates
    
    
    19,557
    
    
    
    
    
    
    
    
    
    
    
    (19,557
    )
    
    
    Net borrowing under line of credit
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,000Payments on long-term debt
    
    
    
    
    
    
    (907
    )
    
    
    (3,740
    )
    
    
    
    
    
    
    (4,647
    )Debt issuance costs
    
    
    (5
    )
    
    
    (86
    )
    
    
    
    
    
    
    
    
    
    
    (91
    )Net Cash Provided By (Used
In) Financing Activities
    
    
    25,552
    
    
    
    (20,550
    )
    
    
    (3,740
    )
    
    
    
    
    
    
    1,262Net change in cash and cash
equivalents
    
    
    
    
    
    
    3,813
    
    
    
    181
    
    
    
    
    
    
    
    3,994Cash and cash equivalents at
beginning of year
    
    
    
    
    
    
    2,923
    
    
    
    3,943
    
    
    
    
    
    
    
    6,866Cash and cash equivalents at end
of period
    
    $
    
    
    
    $
    6,736
    
    
    $
    4,124
    
    
    $
    
    
    
    $
    10,860
  16




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING BALANCE SHEETS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalAssetsCash and cash equivalents
    
    $
    
    
    
    $
    2,923
    
    
    $
    3,943
    
    
    $
    
    
    
    $
    6,866Trade receivables, net
    
    
    
    
    
    
    88,528
    
    
    
    70,865
    
    
    
    (1,522
    )
    
    
    157,871Inventories
    
    
    
    
    
    
    19,382
    
    
    
    19,705
    
    
    
    
    
    
    
    39,087Intercompany receivables
    
    
    
    
    
    
    51,038
    
    
    
    
    
    
    
    (51,038
    )
    
    
    Note receivable from affiliate
    
    
    20,680
    
    
    
    
    
    
    
    
    
    
    
    (20,680
    )
    
    
    Prepaid expenses and other
    
    
    8,798
    
    
    
    8,074
    
    
    
    4,542
    
    
    
    
    
    
    
    21,414Total current assets
    
    
    29,478
    
    
    
    169,945
    
    
    
    99,055
    
    
    
    (73,240
    )
    
    
    225,238Property and equipment, net
    
    
    
    
    
    
    499,704
    
    
    
    261,286
    
    
    
    
    
    
    
    760,990Goodwill
    
    
    
    
    
    
    23,251
    
    
    
    20,022
    
    
    
    
    
    
    
    43,273Other intangible assets, net
    
    
    506
    
    
    
    29,143
    
    
    
    7,722
    
    
    
    
    
    
    
    37,371Debt issuance costs, net
    
    
    12,664
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,664Note receivable from affiliates
    
    
    10,045
    
    
    
    
    
    
    
    
    
    
    
    (10,045
    )
    
    
    Investments in affiliates
    
    
    937,227
    
    
    
    
    
    
    
    
    
    
    
    (937,227
    )
    
    
    Other assets
    
    
    3,837
    
    
    
    27,663
    
    
    
    4,015
    
    
    
    
    
    
    
    35,515Total assets
    
    $
    993,757
    
    
    $
    749,706
    
    
    $
    392,100
    
    
    $
    (1,020,512
    )
    
    $
    1,115,051Liabilities and Stockholders
EquityCurrent maturities of long-term
debt
    
    $
    782
    
    
    $
    992
    
    
    $
    12,843
    
    
    $
    
    
    
    $
    14,617Trade accounts payable
    
    
    
    
    
    
    27,759
    
    
    
    35,841
    
    
    
    (1,522
    )
    
    
    62,078Accrued salaries, benefits and
payroll taxes
    
    
    
    
    
    
    3,933
    
    
    
    16,259
    
    
    
    
    
    
    
    20,192Accrued interest
    
    
    17,932
    
    
    
    
    
    
    
    691
    
    
    
    
    
    
    
    18,623Accrued expenses
    
    
    281
    
    
    
    13,841
    
    
    
    12,520
    
    
    
    
    
    
    
    26,642Intercompany payables
    
    
    49,853
    
    
    
    
    
    
    
    1,185
    
    
    
    (51,038
    )
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    20,680
    
    
    
    (20,680
    )
    
    
    Total current
liabilities
    
    
    68,848
    
    
    
    46,525
    
    
    
    100,019
    
    
    
    (73,240
    )
    
    
    142,152Long-term debt, net of current
maturities
    
    
    541,500
    
    
    
    
    
    
    
    37,544
    
    
    
    
    
    
    
    579,044Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    10,045
    
    
    
    (10,045
    )
    
    
    Deferred income tax liability
    
    
    
    
    
    
    
    
    
    
    8,253
    
    
    
    
    
    
    
    8,253Other long-term liabilities
    
    
    
    
    
    
    64
    
    
    
    2,129
    
    
    
    
    
    
    
    2,193Total liabilities
    
    
    610,348
    
    
    
    46,589
    
    
    
    157,990
    
    
    
    (83,285
    )
    
    
    731,642Commitments and contingenciesStockholders EquityCommon stock
    
    
    357
    
    
    
    3,526
    
    
    
    42,963
    
    
    
    (46,489
    )
    
    
    357Capital in excess of par value
    
    
    334,633
    
    
    
    570,512
    
    
    
    133,339
    
    
    
    (703,851
    )
    
    
    334,633Retained earnings
    
    
    48,419
    
    
    
    129,079
    
    
    
    57,808
    
    
    
    (186,887
    )
    
    
    48,419Total stockholders
equity
    
    
    383,409
    
    
    
    703,117
    
    
    
    234,110
    
    
    
    (937,227
    )
    
    
    383,409Total liabilities
and stock holders
equity
    
    $
    993,757
    
    
    $
    749,706
    
    
    $
    392,100
    
    
    $
    (1,020,512
    )
    
    $
    1,115,051
  17




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING INCOME STATEMENTS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    90,128
    
    
    $
    63,061
    
    
    $
    (7
    )
    
    $
    153,182Operating costs and expensesDirect costs
    
    
    
    
    
    
    49,865
    
    
    
    48,653
    
    
    
    (7
    )
    
    
    98,511Depreciation
    
    
    
    
    
    
    11,333
    
    
    
    3,169
    
    
    
    
    
    
    
    14,502Selling, general and
administrative
    
    
    2,376
    
    
    
    10,733
    
    
    
    2,362
    
    
    
    
    
    
    
    15,471Amortization
    
    
    12
    
    
    
    1,095
    
    
    
    9
    
    
    
    
    
    
    
    1,116Total
operating costs and expenses
    
    
    2,388
    
    
    
    73,026
    
    
    
    54,193
    
    
    
    (7
    )
    
    
    129,600Income (loss) from
operations
    
    
    (2,388
    )
    
    
    17,102
    
    
    
    8,868
    
    
    
    
    
    
    
    23,582Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    21,223
    
    
    
    
    
    
    
    
    
    
    
    (21,223
    )
    
    
    Interest, net
    
    
    (10,812
    )
    
    
    76
    
    
    
    (153
    )
    
    
    
    
    
    
    (10,889
    )Other
    
    
    27
    
    
    
    44
    
    
    
    36
    
    
    
    
    
    
    
    107Total other income
(expense)
    
    
    10,438
    
    
    
    120
    
    
    
    (117
    )
    
    
    (21,223
    )
    
    
    (10,782
    )Net income (loss)before
income taxes
    
    
    8,050
    
    
    
    17,222
    
    
    
    8,751
    
    
    
    (21,223
    )
    
    
    12,800Provision for income taxes
    
    
    
    
    
    
    (1,511
    )
    
    
    (3,239
    )
    
    
    
    
    
    
    (4,750
    )Net income (loss)
    
    $
    8,050
    
    
    $
    15,711
    
    
    $
    5,512
    
    
    $
    (21,223
    )
    
    $
    8,050
  18




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##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Operating Activities:Net income (loss)
    
    $
    8,050
    
    
    $
    15,711
    
    
    $
    5,512
    
    
    $
    (21,223
    )
    
    $
    8,050Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    12
    
    
    
    12,428
    
    
    
    3,178
    
    
    
    
    
    
    
    15,618Amortization and write-off of
deferred financing fees
    
    
    519
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    519Stock based compensation
    
    
    2,612
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,612Allowance for bad debts
    
    
    
    
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    267Equity earnings in affiliates
    
    
    (21,223
    )
    
    
    
    
    
    
    
    
    
    
    21,223
    
    
    
    Deferred taxes
    
    
    901
    
    
    
    
    
    
    
    1,064
    
    
    
    
    
    
    
    1,965(Gain) on sale of equipment
    
    
    
    
    
    
    (130
    )
    
    
    
    
    
    
    
    
    
    
    (130
    )Changes in operating assets and
liabilities, net of acquisitions:(Increase) in trade receivables
    
    
    
    
    
    
    (2,800
    )
    
    
    (7,506
    )
    
    
    
    
    
    
    (10,306
    )(Increase) in inventories
    
    
    
    
    
    
    (720
    )
    
    
    (90
    )
    
    
    
    
    
    
    (810
    )(Increase) decrease in prepaid
expenses and other current assets
    
    
    
    
    
    
    690
    
    
    
    (462
    )
    
    
    
    
    
    
    228(Increase) decrease in other assets
    
    
    (1,457
    )
    
    
    36
    
    
    
    150
    
    
    
    
    
    
    
    (1,271
    )(Decrease) increase in trade
accounts payable
    
    
    
    
    
    
    (328
    )
    
    
    1,851
    
    
    
    
    
    
    
    1,523(Decrease) increase in accrued
interest
    
    
    (10,958
    )
    
    
    30
    
    
    
    2
    
    
    
    
    
    
    
    (10,926
    )(Decrease) increase in accrued
expenses
    
    
    (1,488
    )
    
    
    9,677
    
    
    
    2,754
    
    
    
    
    
    
    
    10,943Increase in accrued salaries,
benefits and payroll taxes
    
    
    
    
    
    
    171
    
    
    
    393
    
    
    
    
    
    
    
    564(Decrease) in other long- term
liabilities
    
    
    (31
    )
    
    
    (32
    )
    
    
    (99
    )
    
    
    
    
    
    
    (162
    )Net Cash Provided By (Used In)
Operating Activities
    
    
    (23,063
    )
    
    
    35,000
    
    
    
    6,747
    
    
    
    
    
    
    
    18,684Cash Flows from Investing Activities:Notes receivable from affiliates
    
    
    (3,075
    )
    
    
    
    
    
    
    
    
    
    
    3,075
    
    
    
    Investment in note receivable
    
    
    (40,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,000
    )Deposits on asset commitments
    
    
    
    
    
    
    
    
    
    
    (5,331
    )
    
    
    
    
    
    
    (5,331
    )Proceeds from sale of property and
equipment
    
    
    
    
    
    
    1,488
    
    
    
    
    
    
    
    
    
    
    
    1,488Purchase of property and equipment
    
    
    
    
    
    
    (21,149
    )
    
    
    (18,528
    )
    
    
    
    
    
    
    (39,677
    )Net Cash Provided By (Used in)
Investing Activities
    
    
    (43,075
    )
    
    
    (19,661
    )
    
    
    (23,859
    )
    
    
    3,075
    
    
    
    (83,520
    )
  19




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ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 8  CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Financing Activities:Accounts receivable from affiliates
    
    
    45,598
    
    
    
    
    
    
    
    
    
    
    
    (45,598
    )
    
    
    Accounts payable to affiliates
    
    
    
    
    
    
    (45,598
    )
    
    
    
    
    
    
    45,598
    
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    3,075
    
    
    
    (3,075
    )
    
    
    Proceeds from exercises of options
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    13,142
    
    
    
    
    
    
    
    13,142Net borrowing under line of credit
    
    
    20,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,500Payments on long-term debt
    
    
    
    
    
    
    (1,662
    )
    
    
    (630
    )
    
    
    
    
    
    
    (2,292
    )Debt issuance costs
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Net Cash Provided By (Used
In) Financing Activities
    
    
    66,138
    
    
    
    (47,260
    )
    
    
    15,587
    
    
    
    (3,075
    )
    
    
    31,390Net change in cash and cash
equivalents
    
    
    
    
    
    
    (31,921
    )
    
    
    (1,525
    )
    
    
    
    
    
    
    (33,446
    )Cash and cash equivalents at
beginning of year
    
    
    
    
    
    
    41,176
    
    
    
    2,517
    
    
    
    
    
    
    
    43,693Cash and cash equivalents at end
of period
    
    $
    
    
    
    $
    9,255
    
    
    $
    992
    
    
    $
    
    
    
    $
    10,247
  20




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ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 9  SEGMENT INFORMATION
  For the Three Months EndedMarch 31,2009
    
    
    2008RevenuesOilfield Services
    
    $
    44,450
    
    
    $
    67,903Drilling and Completion
    
    
    79,146
    
    
    
    63,061Rental Services
    
    
    21,507
    
    
    
    22,218$
    145,103
    
    
    $
    153,182Operating Income (Loss):Oilfield Services
    
    $
    (1,213
    )
    
    $
    13,297Drilling and Completion
    
    
    8,509
    
    
    
    8,868Rental Services
    
    
    3,948
    
    
    
    6,222General corporate
    
    
    (3,473
    )
    
    
    (4,805
    )$
    7,771
    
    
    $
    23,582Depreciation and Amortization:Oilfield Services
    
    $
    7,315
    
    
    $
    5,630Drilling and Completion
    
    
    5,257
    
    
    
    3,178Rental Services
    
    
    7,904
    
    
    
    6,669General corporate
    
    
    82
    
    
    
    141$
    20,558
    
    
    $
    15,618Capital Expenditures:Oilfield Services
    
    $
    4,032
    
    
    $
    14,427Drilling and Completion
    
    
    4,639
    
    
    
    18,529Rental Services
    
    
    5,256
    
    
    
    6,691General corporate
    
    
    31
    
    
    
    30$
    13,958
    
    
    $
    39,677Revenues:United States
    
    $
    61,559
    
    
    $
    83,984Argentina
    
    
    63,425
    
    
    
    62,641Brazil
    
    
    10,766
    
    
    
    Other international
    
    
    9,353
    
    
    
    6,557$
    145,103
    
    
    $
    153,182
  21




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ALLIS-CHALMERS ENERGY INC.
 NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 NOTE 9  SEGMENT INFORMATION (Continued)
 As ofMarch 31,
    
    
    December 31,2009
    
    
    2008Goodwill:Oilfield Services
    
    $
    23,250
    
    
    $
    23,250Drilling and Completion
    
    
    20,023
    
    
    
    20,023Rental Services
    
    
    
    
    
    
    $
    43,273
    
    
    $
    43,273Assets:Oilfield Services
    
    $
    289,454
    
    
    $
    309,901Drilling and Completion
    
    
    405,236
    
    
    
    411,486Rental Services
    
    
    352,317
    
    
    
    360,376General corporate
    
    
    38,904
    
    
    
    33,288$
    1,085,911
    
    
    $
    1,115,051Long Lived Assets:United States
    
    $
    570,649
    
    
    $
    573,975Argentina
    
    
    190,200
    
    
    
    212,456Brazil
    
    
    82,130
    
    
    
    79,568Other international
    
    
    43,396
    
    
    
    23,814$
    886,375
    
    
    $
    889,813
 NOTE 10  LEGAL MATTERS
     22




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS  OF OPERATIONS
 The following discussion and analysis should be read in conjunction with our consolidated financial
statements and the notes thereto included elsewhere in this report. This report contains
forward-looking statements that involve risks and uncertainties. Our actual results may differ
materially from the results discussed in such forward-looking statements. Factors that might cause
such differences include, but are not limited to, the general condition of the oil and natural gas
drilling industry, demand for our oil and natural gas service and rental products, and competition.
For more information on forward-looking statements please refer to the section entitled
Forward-Looking Statements on page 32.
 Overview of Our Business
     Our Industry
   23




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Company Outlook
     Results of Operations
    24




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##### Table of Contents



Comparison of Three Months Ended March 31, 2009 and 2008
       25




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##### Table of Contents



Revenues
    
    
    Income (Loss) from OperationsThree Months Ended
    
    
    Three Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    Change(in thousands)Oilfield Services
    
    $
    44,450
    
    
    $
    67,903
    
    
    $
    (23,453
    )
    
    $
    (1,213)
    
    
    $
    13,297
    
    
    $
    (14,510
    )Drilling and Completion
    
    
    79,146
    
    
    
    63,061
    
    
    
    16,085
    
    
    
    8,509
    
    
    
    8,868
    
    
    
    (359
    )Rental Services
    
    
    21,507
    
    
    
    22,218
    
    
    
    (711
    )
    
    
    3,948
    
    
    
    6,222
    
    
    
    (2,274
    )General corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,473
    )
    
    
    (4,805
    )
    
    
    1,332Total
    
    $
    145,103
    
    
    $
    153,182
    
    
    $
    (8,079
    )
    
    $
    7,771
    
    
    $
    23,582
    
    
    $
    (15,811
    )
  26




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##### Table of Contents



Oilfield Services
  Drilling and Completion
  Rental Services
  General Corporate
  Liquidity
   27




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##### Table of Contents



Operating Activities
     Investing Activities
    28




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##### Table of Contents



Financing Activities
          29




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##### Table of Contents



Notes payable
    Other debt
  Off Balance Sheet Arrangements
  Capital Resources
   30




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##### Table of Contents



Recent Developments
   Critical Accounting Policies
  Recently Issued Accounting Standards
 Fair Value Measurements,
 Business Combinations,
 Determination of the Useful Life of
Intangible Assets
  31




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##### Table of Contents



Accounting for Assets Acquired
and Liabilities Assumed in a Business Combination That Arise from Contingencies Reasonable Estimation of the Amount of a Loss
 Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
 Interim Disclosures
about Fair Value of Financial Instruments Disclosures about Fair Value of Financial Instruments,
 Forward-Looking Statements
   32




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  Interest Rate Risk.
  Foreign Currency Exchange Rate Risk.
  
 ITEM 4. CONTROLS AND PROCEDURES.
 (a) Evaluation of Disclosure Controls and Procedures
   (b) Change in Internal Control Over Financial Reporting.
  
 PART II. OTHER INFORMATION
 
 ITEM 6. EXHIBITS
   33




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##### Table of Contents



SIGNATURES
  Allis-Chalmers Energy Inc.

           (Registrant)/s/ Munawar H. HidayatallahMunawar H. HidayatallahChief Executive Officer and
Chairman  34




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##### Table of Contents



EXHIBIT INDEX
 10.1
    
    Amended and Restated Performance award Agreement, dated March 11, 2009, between
Allis-Chalmers Energy Inc. and Munawar H. Hidayatallah (incorporated by reference to Exhibit
10.1 to the Registrants Form 8-K filed on March 13, 2009).10.2
    
    Letter agreements dated March 9, 2009, by each of Munawar H. Hidayatallah, Victor M. Perez,
Theodore F. Pound III, David Bryan, Terrence P. Keane and Mark Patterson (incorporate by
reference to Exhibit 10.2 to the Registrants Form 8-K filed on March 13, 2009).10.3
    
    Third Amendment to Second Amended and Restated Credit Agreement, dated as of April 9, 2009,
by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors,
Royal Bank of Canada, as administrative agent, and the lenders named thereto (incorporated by
reference to Exhibit 10.1 to the Registrants Form 8-K filed on April 9, 2009).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  35