##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 Form 10-K/A
 Amendment No. 1
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM            TO
 Commission file number 1-2199
 ALLIS-CHALMERS ENERGY INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    27-3321250(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)11125 EQUITY DRIVE, SUITE 200, HOUSTON, TEXAS
    
    77041(Address of principal executive offices)
    
    (Zip code)
 (713) 856-4222  Registrants telephone number, including area code
 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
 SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 o þ
 o þ
 o þ
 o o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   Allis-Chalmers Energy Inc. meets the conditions set forth in general instruction I(1)(a)
and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format.




---



##### 



TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    - 6 -Item 1A. Risk Factors
    
    
    - 11 -Item 1B. Unresolved Staff Comments
    
    
    - 20 -Item 2. Properties
    
    
    - 21 -Item 3. Legal Proceedings
    
    
    - 21 -Item 4. [Reserved]
    
    
    - 23 -PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    - 23 -Item 6. Selected Financial Data
    
    
    - 25 -Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    - 25 -Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    - 34 -Item 8. Financial Statements and Supplementary Data
    
    
    - 35 -Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    - 74 -Item 9A. Controls and Procedures
    
    
    - 74 -Item 9B. Other Information
    
    
    - 75 -PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    - 75 -Item 11. Executive Compensation
    
    
    - 75 -Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
    
    
    - 75 -Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    - 76 -Item 14. Principal Accounting Fees and Services
    
    
    - 76 -PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    - 76 -Signatures and Certifications
    
    
    - 78 -EX-23.1EX-31.1EX-31.2EX-32.1
  - 2 -




---



##### Table of Contents



DEFINITIONS
 blow out preventers
    
    A large safety device placed on the surface of an oil or natural gas well to maintain
high pressure well bores.booster
    
    A machine that increases the pressure and/or volume of air when used in conjunction with
a compressor or a group of compressors.capillary tubing
    
    A small diameter tubing installed in producing wells and through which chemicals are
injected to enhance production and reduce corrosion and other problems.casing
    
    A pipe placed in a drilled well to secure the well bore and formation.choke manifolds
    
    An arrangement of pipes, valves and special valves on the rig floor that controls
pressure during drilling by diverting pressure away from the blow-out preventers and the
annulus of the well.coiled tubing
    
    A small diameter tubing used to service producing and problematic wells and to work in
high pressure applications during drilling, production and workover operations.directional drilling
    
    The technique of drilling a well while varying the angle of direction of a well and
changing the direction of a well to hit a specific target.double studded adapter
    
    A device that joins two dissimilar connections on certain equipment, including valves,
piping and blow-out preventers.drill pipe
    
    A pipe that attaches to the drill bit to drill a well.foam unit
    
    A compressor, a booster, a mist pump and a fuel tank all mounted together on one flat
bed trailer to be used for completion, workover and/or shallow drilling operations.
Foam units are designed to provide a small footprint and easy transport.horizontal drilling
    
    The technique of drilling wells at a 90-degree angle.land drilling rig
    
    Composed of a drawworks or hoist, a derrick, a power plant, rotating equipment and pumps
to circulate the drilling fluid and the drill string.measurement-while-drilling
    
    The technique used to measure direction and angle while drilling a well.mist pump
    
    A drilling pump that uses mist as the circulation medium for injecting small amounts of
foaming agent, corrosion agent and other chemical solutions into the well.pulling rig
    
    A type of well-servicing rig used to pull downhole equipment, such as tubing, rods or
the pumps from a well, and replace them when necessary. A pulling rig is also used to
set downhole tools and perform lighter jobs.service rig
    
    A type of well-servicing rig which can function as either a workover or as a pulling rig.spacer spools
    
    High pressure connections or links which are stacked to elevate the blow out preventers
to the drilling rig floor.spiral heavy weight drill
pipe
    
    A heavy drill pipe used for special applications primarily in directional drilling. The
spiral design increases flexibility and penetration of the pipe.straight-hole drilling
    
    The technique of drilling that allows very little or no vertical deviation.test plugs
    
    A device used to test the connections of well heads and the blow out preventers.tubing
    
    A pipe placed inside the casing to allow the well to produce.
 - 3 -




---



##### Table of Contents



tubing work strings
    
    The tubing used on workover rigs through which high pressure
liquids, gases or mixtures are pumped into a well to perform
production operations.underbalanced drilling
    
    A technique in which oil, natural gas, or geothermal wells are
drilled by creating a pressure within the well that is lower than
the reservoir pressure. The result is increased rate of
penetration, reduced formation damage and reduced drilling costs.wear bushings
    
    A device placed inside a wellhead to protect the wellhead from wear.workover rigs
    
    Similar to a land drilling rig, however, they are smaller than the
drilling rig for the same depth of well. These rigs are used to
complete the drilled wells or to repair them whenever necessary.
 - 4 -




---



##### Table of Contents



SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS
  
    
    the impact of the weak economic conditions and the future impact of such conditions on
the oil and natural gas industry and demand for our services;
    
    unexpected future capital expenditures (including the amount and nature thereof);
    
    unexpected difficulties in integrating our operations as a result of any significant
acquisitions;
    
    adverse weather conditions in certain regions;
    
    the impact of political disturbances, war, or terrorist attacks and changes in global
trade policies;
    
    the availability (or lack thereof) of capital to fund our business strategy and/or
operations;
    
    the potential impact of the loss of one or more key employees;
    
    the effect of environmental liabilities that are not covered by an effective indemnity
or insurance;
    
    the impact of current and future laws;
    
    the impact of customer defaults and related bad debt expense;
    
    the potential impairment in the carrying value of goodwill and other acquired intangible
assets;
    
    the risks associated with doing business outside the United States, including currency
exchange rates;
    
    the effects of competition; and
    
    the effects of our indebtedness, which could adversely restrict our ability to operate,
could make us vulnerable to general adverse economic and industry conditions, could place
us at a competitive disadvantage compared to competitors that have less debt, and could
have other adverse consequences
  EXPLANATORY NOTE
   - 5 -




---



##### Table of Contents




    
    Part I  Item 1A. Risk Factors
    
    Part II  Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    Part II  Item 8. Financial Statements and Supplementary Data
    
    Part II  Item 9A. Control and Procedures
    
    Part IV  Item 15. Exhibits and Financial Statement Schedules
   
 PART I
 
 ITEM 1.
    
    BUSINESS
   - 6 -




---



##### Table of Contents



Our History
       Our Industry
   Business Segments
  
    
    Oilfield Services. This segment includes the following oilfield service divisions:
directional drilling services, casing and tubular services, underbalanced drilling
services and production services.
    
    Drilling and Completion. This segment includes drilling, completion, workover and
related services.
    
    Rental Services. This segment includes the rental of specialized oilfield equipment.
 - 7 -




---



##### Table of Contents



Oilfield Services.
      Drilling and Completion.
  - 8 -




---



##### Table of Contents



Rental Services.
 Customers
  Suppliers
  Competition
     Backlog
  - 9 -




---



##### Table of Contents



Employees
  Insurance
  Seasonality
  Federal Regulations and Environmental Matters
   Intellectual Property Rights
  Available Information
 www.alchenergy.com
 - 10 -




---



##### Table of Contents



ITEM 1A.
    
    RISK FACTORS
  Risks Associated With Our Industry
 Global political, economic and market conditions could negatively impact our business.
  The Deepwater Horizon incident in the United States Gulf of Mexico and its consequences,
including the potential enactment of further restrictions or regulations on offshore drilling,
could have a material adverse effect on our business.
    Our industry is highly competitive, with intense price competition.
  - 11 -




---



##### Table of Contents



Risks Associated With Our Company
 Our business depends on spending by the oil and natural gas industry, and this spending and our
business may be adversely affected by industry and financial market conditions that are beyond
our control.
   
    
    economic conditions in the United States and elsewhere;
    
    changes in global supply and demand for oil and natural gas;
    
    the level of production of the Organization of Petroleum Exporting Countries, commonly
called OPEC;
    
    the level of production of non-OPEC countries;
    
    the price and quantity of imports of foreign oil and natural gas;
    
    political conditions, including embargoes, in or affecting other oil and natural gas
producing activities;
    
    the level of global oil and natural gas inventories;
    
    advances in exploration, development and production technologies; and
    
    the availability of capital for exploration and production companies.
  Historically, we have been dependent on a few customers operating in a single industry; the loss
of one or more customers could adversely affect our financial condition and results of
operations.
    - 12 -




---



##### Table of Contents



Our customers may seek to cancel or renegotiate some of our Drilling and Completion contracts
during periods of depressed market conditions or if we experience operational difficulties.
  If we are unable to renew or obtain new and favorable contracts for rigs whose contracts are
expiring or are terminated, our revenues and profitability could be materially reduced.
  An oversupply of comparable rigs in the geographic markets in which we compete could depress the
utilization rates and dayrates for our rigs and materially reduce our revenues and
profitability.
  The loss of the services of key executives or our failure to attract and retain skilled workers
and key personnel could hurt our operations.
   The operations and financial condition of our Drilling and Completion business could be affected
by union activity and general labor unrest. Additionally, the labor expenses of our Drilling
and Completion business could increase as a result of governmental regulation of payments to
employees.
  - 13 -




---



##### Table of Contents



Rig upgrade, refurbishment and construction projects are subject to risks, including delays and
cost overruns, which could have an adverse effect on our results of operations and cash flows.
   Severe weather could have a material adverse impact on our business.
  
    
    curtailment of services;
    
    weather-related damage to facilities and equipment resulting in suspension of operations;
    
    inability to deliver materials to job sites in accordance with contract schedules; and
    
    loss of productivity.
  We have recorded substantial goodwill as the result of our acquisitive nature and as such
goodwill is subject to periodic reviews of impairment.
   - 14 -




---



##### Table of Contents



Future growth could impact our ability to maintain effective disclosure controls and
procedures and/or internal controls over financial reporting, which could have a material
adverse effect on our operations.
  We have discovered material weaknesses in our internal accounting controls and our inability to
correct these weaknesses could reduce confidence in our financial statements.
   
    
    could harm our business and operating results,
    
    cause investors to lose confidence in the accuracy and completeness of our financial
reports, or
    
    adversely affect our ability to timely file our periodic reports with the SEC.
  We do business in international jurisdictions whose political and regulatory environments and
compliance regimes differ from those in the United States.
  
    
    political instability, terrorist acts, war and civil disturbances;
    
    changes in laws or policies regarding the award of contracts;
    
    the inability to collect or repatriate currency, income, capital or assets;
    
    expropriation of assets;
    
    nationalization of components of the energy industry in the geographic areas where we
operate;
    
    foreign currency fluctuations and devaluation; and
    
    new economic and tax policies.
   - 15 -




---



##### Table of Contents



Devaluation of the Argentine Peso, the Mexican Peso or the Brazilian Real could adversely affect
our results of operations.
  Argentina continues to face considerable political and economic uncertainty.
   An increase in inflation in Argentina could have a material adverse effect on our results of
operations.
  We are subject to numerous governmental laws and regulations, including those that may impose
significant liability on us for environmental and natural resource damages.
  - 16 -




---



##### Table of Contents



Existing or future laws, regulations, treaties or international agreements related to greenhouse
gases and climate change could have a negative impact on our business and may result in
additional compliance obligations with respect to the release, capture, and use of carbon
dioxide that could have a material adverse effect on our liquidity, consolidated results of
operations, and consolidated financial condition.
   Environmental liabilities relating to discontinued operations could result in substantial
losses.
  Products liability claims relating to discontinued operations could result in substantial
losses.
  - 17 -




---



##### Table of Contents



We may be subject to claims for personal injury and property damage, which could materially
adversely affect our financial condition and results of operations.
    
    
    General Aggregate $2,000,000;
    
    Products/Completed Operations Aggregate $2,000,000;
    
    Occurrence Limit $1,000,000;
    
    Personal/Advertising Injury Limit $1,000,000;
    
    Deductible (Bodily Injury & Property Damage Combined) Per Claim $100,000.
    - 18 -




---



##### Table of Contents



Risks Related to the Merger
 We have and will continue to incur transaction costs in connection with the merger.
  Following the merger, the combined company may be unable to successfully integrate our
business into Archers business and realize the anticipated benefits of the merger.
  
    
    the inability to successfully integrate our business into Seawells business in a
manner that permits the combined company to achieve the cost savings and operating
synergies anticipated to result from the merger, which would result in the anticipated
benefits of the merger not being realized partly or wholly in the time frame currently
anticipated or at all;
    
    integrating personnel from the two companies while maintaining focus on providing
consistent, high quality products and customer service;
    
    potential unknown liabilities and unforeseen increased expenses, delays or
regulatory conditions associated with the merger; and
    
    performance shortfalls at one or both of the two companies as a result of the
diversion of managements attention caused by completing the merger and integrating
the companies operations.
  Following the merger, the carrying value of our assets may differ significantly from the
historical cost.
  The failure of the lenders under Seawells undrawn credit facilities to perform could have a
material adverse effect on our liquidity and results of operations. We are exposed to systemic
risk of the financial markets and institutions and the risk of non-performance of the individual
lenders under Seawells undrawn credit facilities.
  - 19 -




---



##### Table of Contents



Risks Associated With Our Indebtedness
 We are an indirect wholly owned subsidiary of Seawell. Seawell can exercise substantial control
over our business and operations and could do so in a manner that is adverse to our interests.
  
    
    decisions on our financings and our capital raising activities;
    
    mergers or other business combinations; and
    
    our acquisition or disposition of assets.
   The indenture governing our 9.0% senior notes, the indenture governing our 8.5% senior notes
impose restrictions on us that may limit the discretion of management in operating our business
and that, in turn, could impair our ability to meet our obligations.
  
    
    incur additional debt;
    
    make certain investments or pay dividends or distributions on our capital stock or
purchase or redeem or retire capital stock;
    
    sell assets, including capital stock of our restricted subsidiaries;
    
    restrict dividends or other payments by restricted subsidiaries;
    
    create liens;
    
    enter into transactions with affiliates; and
    
    merge or consolidate with another company.
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  - 20 -




---



##### Table of Contents



ITEM 2.
    
    PROPERTIES
  Business Segment
    
    Location
    
    Owned/LeasedOilfield Services
    
    Kensett, Arkansas
    
    LeasedYoungsville, Louisiana
    
    OwnedCarlsbad, New Mexico
    
    LeasedFarmington, New Mexico
    
    LeasedElk City, Oklahoma
    
    LeasedMcAlester, Oklahoma
    
    LeasedMt Morris, Pennsylvania
    
    LeasedMuncy, Pennsylvania
    
    LeasedConroe, Texas
    
    LeasedCorpus Christi, Texas
    
    Leased  2 locationsHouston, Texas
    
    LeasedKilgore, Texas
    
    LeasedLongview, Texas
    
    LeasedDrilling and Completion
    
    Buenos Aires, Argentina
    
    LeasedComodoro Rivadavia, Argentina
    
    OwnedNeuquen, Argentina
    
    OwnedPio Truncado, Santa Cruz, Argentina
    
    LeasedRincon de los Sauces, Argentina
    
    OwnedRio Grande, Tierra del Fuego, Argentina
    
    LeasedTartagal, Argentina
    
    OwnedSanta Cruz, Bolivia
    
    LeasedCatu, Bahia, Brazil
    
    OwnedAracuja, Sergipe, Brazil
    
    LeasedMacae, Rio de Janeiro, Brazil
    
    LeasedParnamirim, Rio Grande de Norte, Brazil
    
    LeasedRio de Janeiro, Rio de Janeiro, Brazil
    
    LeasedRental Services
    
    Broussard, Louisiana
    
    LeasedMorgan City, Louisiana
    
    OwnedMuncy, Pennsylvania
    
    LeasedConroe, Texas
    
    OwnedVictoria, Texas
    
    Owned
 
 ITEM 3.
    
    LEGAL PROCEEDINGS
     - 21 -




---



##### Table of Contents



- 22 -




---



##### Table of Contents



ITEM 4. [RESERVED]
 
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
 MARKET PRICE INFORMATION
  Calendar Quarter
    
    High
    
    
    Low2010First Quarter
    
    $
    4.57
    
    
    $
    3.36Second Quarter
    
    
    4.28
    
    
    
    2.00Third Quarter
    
    
    4.18
    
    
    
    1.79Fourth Quarter
    
    
    7.17
    
    
    
    4.162009First Quarter
    
    $
    6.07
    
    
    $
    0.71Second Quarter
    
    
    4.53
    
    
    
    1.80Third Quarter
    
    
    4.94
    
    
    
    2.01Fourth Quarter
    
    
    4.87
    
    
    
    3.06
 Holder
  Dividends
  EQUITY COMPENSATION PLAN INFORMATION
  Number of SecuritiesRemaining AvailableNumber of
    
    
    
    
    
    
    for Future IssuanceSecurities to be
    
    
    Weighted
    
    
    Under EquityIssued Upon
    
    
    Average Exercise
    
    
    Compensation PlansExercise of
    
    
    Price of
    
    
    (excludingOutstanding
    
    
    Outstanding
    
    
    securitiesOptions, Warrants
    
    
    Options, Warrants
    
    
    reflected in firstPlan Category
    
    And Rights
    
    
    and Rights
    
    
    column)Equity compensation plans approved by security holders
    
    
    2,683,101
    
    
    $
    4.74
    
    
    
    4,342,286Equity compensation plans not approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    2,683,101
    
    
    $
    4.74
    
    
    
    4,342,286
 Equity Compensation Plans Not Approved By Security Holders
  - 23 -




---



##### Table of Contents



PERFORMANCE GRAPH
   
 - 24 -




---



##### Table of Contents



COMPARISON OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD MARKETS
 FISCAL YEAR ENDINGCOMPANY/INDEX/MARKET
    
    12/31/2005
    
    
    12/31/2006
    
    
    12/30/2007
    
    
    12/29/2008
    
    
    12/31/2009
    
    
    12/31/2010Allis-Chalmers Energy Inc.
    
    
    100.00
    
    
    
    184.76
    
    
    
    118.28
    
    
    
    44.11
    
    
    
    31.51
    
    
    
    59.25Russell 2000 Index
    
    
    100.00
    
    
    
    118.37
    
    
    
    116.51
    
    
    
    77.15
    
    
    
    98.11
    
    
    
    124.46Oil & Gas Equipment/Svcs
    
    
    100.00
    
    
    
    120.81
    
    
    
    174.92
    
    
    
    70.98
    
    
    
    116.10
    
    
    
    158.33
 
 ITEM 6.
    
    SELECTED FINANCIAL DATA.
  
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  The following discussion and analysis should be read in conjunction with our accompanying
financial statements and the notes to those financial statements included elsewhere in this
document. The following discussion contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that reflect our plans, estimates and beliefs.
Our actual results could differ materially from those anticipated in these forward-looking
statements as a result of risks and uncertainties, including, but not limited to, those discussed
under Item 1A. Risk Factors.
 Restatement of the Consolidated Financial Statements
  Overview of Our Business
    - 25 -




---



##### Table of Contents



Merger with Seawell
  Company Outlook
    Results of Operations
  Comparison of Years Ended December 31, 2010 and December 31, 2009
  - 26 -




---



##### Table of Contents



- 27 -




---



##### Table of Contents



Revenues
    
    
    Income (Loss) from Operations2010
    
    
    2009
    
    
    Change
    
    
    2010
    
    
    2009
    
    
    Change(In thousands)Oilfield Services
    
    $
    210,617
    
    
    $
    143,564
    
    
    $
    67,053
    
    
    $
    15,393
    
    
    $
    (14,691
    )
    
    $
    30,084Drilling & Completion
    
    
    378,154
    
    
    
    303,975
    
    
    
    74,179
    
    
    
    4,369
    
    
    
    19,222
    
    
    
    (14,853
    )Rental Services
    
    
    70,894
    
    
    
    58,714
    
    
    
    12,180
    
    
    
    4,115
    
    
    
    140
    
    
    
    3,975General Corporate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,314
    )
    
    
    (13,218
    )
    
    
    (9,096
    )Total
    
    $
    659,665
    
    
    $
    506,253
    
    
    $
    153,412
    
    
    $
    1,563
    
    
    $
    (8,547
    )
    
    $
    10,110
 Oilfield Services.
 Drilling and Completion.
 - 28 -




---



##### Table of Contents



Rental Services
 General Corporate.
 Liquidity and Capital Resources
  Operating Activities
    - 29 -




---



##### Table of Contents



Investing Activities
   Financing Activities
   - 30 -




---



##### Table of Contents



- 31 -




---



##### Table of Contents



Payments by PeriodLess ThanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    After 5 Years(In thousands)Contractual ObligationsLong-term debt
    
    $
    493,440
    
    
    $
    15,215
    
    
    $
    10,907
    
    
    $
    261,518
    
    
    $
    205,800Interest payments on long-term debt
    
    
    174,492
    
    
    
    41,450
    
    
    
    76,896
    
    
    
    35,786
    
    
    
    20,360Operating leases
    
    
    11,218
    
    
    
    3,376
    
    
    
    4,095
    
    
    
    2,026
    
    
    
    1,721Purchase obligations
    
    
    21,045
    
    
    
    21,045
    
    
    
    
    
    
    
    
    
    
    
    Employment contracts
    
    
    2,846
    
    
    
    1,915
    
    
    
    931
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    703,041
    
    
    $
    83,001
    
    
    $
    92,829
    
    
    $
    299,330
    
    
    $
    227,881
 Critical Accounting Policies
  Allowance For Doubtful Accounts.
 Revenue Recognition.
 - 32 -




---



##### Table of Contents



Impairment Of Long-Lived Assets.
 Goodwill and Other Intangibles.
  Purchase Price Allocation of Acquired Businesses
 Income Taxes.
  Recently Issued Accounting Standards
  - 33 -




---



##### Table of Contents



Off-Balance Sheet Arrangements
  
 ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  Interest Rate Risk
    Foreign Currency Exchange Rate Risk
  - 34 -




---



##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO FINANCIAL STATEMENTS
 ALLIS-CHALMERS ENERGY INC. AND SUBSIDIARIES
 PageManagements Report to the Stockholders of Allis-Chalmers Energy Inc.
    
    
    36Reports of Independent Registered Public Accounting Firm
    
    
    37Consolidated Balance Sheets
    
    
    39Consolidated Statements of Operations
    
    
    40Consolidated Statement of Stockholders Equity
    
    
    41Consolidated Statements of Cash Flows
    
    
    42Notes to Consolidated Financial Statements
    
    
    43Supplemental Information to Consolidated Financial StatementsSummarized Quarterly Financial Data
    
    
    73
 - 35 -




---



##### Table of Contents



MANAGEMENTS REPORT TO THE STOCKHOLDERS OF ALLIS-CHALMERS ENERGY INC.
 Managements Report on Internal Control Over Financial Reporting
  Internal Control Integral Framework
 Internal Control-Integrated Framework
  Managements Certifications
  ALLIS- CHALMERS ENERGY INC.By:
    
    /s/ JORGEN RASMUSSEN
    
    By:
    
    /s/ CHRISTOPH BAUSCHJorgen Rasmussen
    
    
    
    Christoph BauschChief Executive Officer
    
    
    
    Chief Financial Officer
 - 36 -




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Internal Control-Integrated Framework
  
  - 37 -




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control-Integrated Framework
      Internal Control-Integrated Framework
   
 - 38 -




---



##### Table of Contents



ALLIS-CHALMERS
ENERGY INC.
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2010
    
    
    2009(Restated)(In thousands, except for share and pershare amounts)ASSETSCash and cash equivalents
    
    $
    20,940
    
    
    $
    41,072Trade receivables, net of allowance for
doubtful accounts of $4,361 and $4,923 at
December 31, 2010 and 2009, respectively
    
    
    144,960
    
    
    
    105,059Inventories
    
    
    42,140
    
    
    
    34,528Deferred income tax asset
    
    
    81
    
    
    
    3,790Prepaid expenses and other
    
    
    9,192
    
    
    
    13,799Total current assets
    
    
    217,313
    
    
    
    198,248Property and equipment, at cost net of
accumulated depreciation of $286,062 and
$209,782 at December 31, 2010 and 2009,
respectively
    
    
    723,234
    
    
    
    746,478Goodwill
    
    
    46,333
    
    
    
    40,639Other intangible assets, net of accumulated
amortization of $16,835 and $13,973 at
December 31, 2010 and 2009, respectively
    
    
    33,899
    
    
    
    32,649Debt issuance costs, net of accumulated
amortization of $8,490 and $6,314 at December
31, 2010 and 2009, respectively
    
    
    7,405
    
    
    
    9,545Deferred income tax asset
    
    
    1,969
    
    
    
    22,047Other assets
    
    
    8,116
    
    
    
    31,014Total assets
    
    $
    1,038,269
    
    
    $
    1,080,620LIABILITIES AND STOCKHOLDERS EQUITYCurrent maturities of long-term debt
    
    $
    15,215
    
    
    $
    17,027Trade accounts payable
    
    
    46,042
    
    
    
    34,839Accrued salaries, benefits and payroll taxes
    
    
    32,790
    
    
    
    22,854Accrued interest
    
    
    15,524
    
    
    
    15,821Accrued expenses
    
    
    30,676
    
    
    
    21,918Total current liabilities
    
    
    140,247
    
    
    
    112,459Deferred income tax liability
    
    
    8,240
    
    
    
    8,166Long-term debt, net of current maturities
    
    
    478,225
    
    
    
    475,206Other long-term liabilities
    
    
    233
    
    
    
    1,142Total liabilities
    
    
    626,945
    
    
    
    596,973Commitments and ContingenciesStockholders EquityPreferred stock, $0.01 par value (25,000,000
shares authorized, 36,393 shares issued and
outstanding at December 31, 20010 and 2009)
    
    
    34,183
    
    
    
    34,183Common stock, $0.01 par value (200,000,000
shares authorized; 73,722,347 issued and
outstanding at December 31, 2010 and
71,378,529 issued and outstanding at December
31, 2009)
    
    
    737
    
    
    
    714Capital in excess of par value
    
    
    429,924
    
    
    
    422,823(Accumulated deficit) retained earnings
    
    
    (53,520
    )
    
    
    25,927Total stockholders equity
    
    
    411,324
    
    
    
    483,647Total liabilities and stockholders equity
    
    $
    1,038,269
    
    
    $
    1,080,620
  - 39 -




---



##### Table of Contents



ALLIS-CHALMERS
ENERGY INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended December 31,2010
    
    
    2009
    
    
    2008(Restated)(In thousands, except pershare amounts)Revenues
    
    $
    659,665
    
    
    $
    506,253
    
    
    $
    675,948Operating costs and expensesDirect costs
    
    
    498,120
    
    
    
    379,437
    
    
    
    443,414Depreciation
    
    
    84,118
    
    
    
    78,276
    
    
    
    63,460Selling, general and administrative
    
    
    60,434
    
    
    
    50,763
    
    
    
    62,774Loss (gain) on asset dispositions
    
    
    10,624
    
    
    
    1,602
    
    
    
    (166
    )Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    115,774Amortization
    
    
    4,806
    
    
    
    4,722
    
    
    
    4,212Total operating costs and expenses
    
    
    658,102
    
    
    
    514,800
    
    
    
    689,468Income (loss) from operations
    
    
    1,563
    
    
    
    (8,547
    )
    
    
    (13,520
    )Other income (expense):Interest expense
    
    
    (45,825
    )
    
    
    (48,145
    )
    
    
    (48,411
    )Interest income
    
    
    537
    
    
    
    72
    
    
    
    5,617Gain on debt extinguishment
    
    
    
    
    
    
    26,365
    
    
    
    Other
    
    
    (3,211
    )
    
    
    (798
    )
    
    
    (563
    )Total other expense
    
    
    (48,499
    )
    
    
    (22,506
    )
    
    
    (43,357
    )Loss before income taxes
    
    
    (46,936
    )
    
    
    (31,053
    )
    
    
    (56,877
    )Income tax benefit (expense)
    
    
    (29,963
    )
    
    
    9,863
    
    
    
    17,413Net loss
    
    
    (76,899
    )
    
    
    (21,190
    )
    
    
    (39,464
    )Preferred stock dividend
    
    
    (2,548
    )
    
    
    (1,302
    )
    
    
    Net loss attributed to common stockholders
    
    $
    (79,447
    )
    
    $
    (22,492
    )
    
    $
    (39,464
    )Loss per common share:Basic
    
    $
    (1.11
    )
    
    $
    (0.42
    )
    
    $
    (1.13
    )Diluted
    
    $
    (1.11
    )
    
    $
    (0.42
    )
    
    $
    (1.13
    )Weighted average number of common shares outstanding:Basic
    
    
    71,726
    
    
    
    53,669
    
    
    
    35,052Diluted
    
    
    71,726
    
    
    
    53,669
    
    
    
    35,052
  - 40 -




---



##### Table of Contents



ALLIS-CHALMERS
ENERGY INC.
 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Capital in
    
    
    Retained
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Excess of
    
    
    Earnings
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Par Value
    
    
    (Deficit)
    
    
    Equity(Restated)
    
    
    (Restated)(In thousands, except share amounts)Balances, December 31, 2007
    
    
    
    
    
    $
    
    
    
    
    35,116,035
    
    
    $
    351
    
    
    $
    326,095
    
    
    $
    87,883
    
    
    $
    414,329Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,464
    )
    
    
    (39,464
    )Issuance of common stock:Issuance under stock plans
    
    
    
    
    
    
    
    
    
    
    558,707
    
    
    
    6
    
    
    
    627
    
    
    
    
    
    
    
    633Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,902
    
    
    
    
    
    
    
    7,902Tax benefits on stock plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    9Balances, December 31, 2008
    
    
    
    
    
    
    
    
    
    
    35,674,742
    
    
    
    357
    
    
    
    334,633
    
    
    
    48,419
    
    
    
    383,409Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,190
    )
    
    
    (21,190
    )Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,302
    )
    
    
    (1,302
    )Issuance of common stock:Rights offering, net of offering costs
    
    
    36,393
    
    
    
    34,183
    
    
    
    35,683,688
    
    
    
    357
    
    
    
    85,683
    
    
    
    
    
    
    
    120,223Issuance under stock plans
    
    
    
    
    
    
    
    
    
    
    20,099
    
    
    
    
    
    
    
    43
    
    
    
    
    
    
    
    43Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,799
    
    
    
    
    
    
    
    4,799Tax benefits on stock plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,335
    )
    
    
    
    
    
    
    (2,335
    )Balances, December 31, 2009
    
    
    36,393
    
    
    
    34,183
    
    
    
    71,378,529
    
    
    
    714
    
    
    
    422,823
    
    
    
    25,927
    
    
    
    483,647Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76,899
    )
    
    
    (76,899
    )Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,548
    )
    
    
    (2,548
    )Issuance of common stock:Business acquisition
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    10
    
    
    
    1,990
    
    
    
    
    
    
    
    2,000Issuance under stock plans
    
    
    
    
    
    
    
    
    
    
    1,343,818
    
    
    
    13
    
    
    
    (1,735
    )
    
    
    
    
    
    
    (1,722
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,030
    
    
    
    
    
    
    
    8,030Tax benefits on stock plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,184
    )
    
    
    
    
    
    
    (1,184
    )Balances, December 31, 2010
    
    
    36,393
    
    
    $
    34,183
    
    
    
    73,722,347
    
    
    $
    737
    
    
    $
    429,924
    
    
    $
    (53,520
    )
    
    $
    411,324
  - 41 -




---



##### Table of Contents



ALLIS-CHALMERS
ENERGY INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,2010
    
    
    2009
    
    
    2008(Restated)(In thousands)Cash Flows from Operating Activities:Net loss
    
    $
    (76,899
    )
    
    $
    (21,190
    )
    
    $
    (39,464
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    88,924
    
    
    
    82,998
    
    
    
    67,672Amortization and write-off of deferred issuance costs
    
    
    2,214
    
    
    
    2,231
    
    
    
    2,089Gain on debt extinguishment
    
    
    
    
    
    
    (26,365
    )
    
    
    Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    115,774Stock-based compensation
    
    
    8,030
    
    
    
    4,799
    
    
    
    7,902Allowance for bad debts
    
    
    368
    
    
    
    2,835
    
    
    
    3,283Deferred income taxes
    
    
    20,310
    
    
    
    (17,883
    )
    
    
    (29,949
    )Loss on investment
    
    
    1,466
    
    
    
    
    
    
    
    Equity in loss of unconsolidated affiliates
    
    
    783
    
    
    
    
    
    
    
    Loss (gain) on sale of property and equipment
    
    
    680
    
    
    
    (948
    )
    
    
    (1,762
    )Loss (gain) on asset dispositions
    
    
    10,624
    
    
    
    1,602
    
    
    
    (166
    )Changes in operating assets and liabilities, net of acquisitions:Decrease (increase) in trade receivable
    
    
    (35,683
    )
    
    
    49,977
    
    
    
    (27,499
    )Decrease (increase) in inventories
    
    
    (5,954
    )
    
    
    4,559
    
    
    
    (9,719
    )Decrease (increase) in prepaid expenses and other assets
    
    
    11,142
    
    
    
    4,628
    
    
    
    (1,623
    )Decrease in other assets
    
    
    1,746
    
    
    
    1,648
    
    
    
    1,224(Decrease) increase in trade accounts payable
    
    
    11,061
    
    
    
    (27,588
    )
    
    
    21,903(Decrease) increase in accrued interest
    
    
    (297
    )
    
    
    (2,802
    )
    
    
    567(Decrease) increase in accrued expenses
    
    
    7,438
    
    
    
    (4,607
    )
    
    
    1,131(Decrease) in other liabilities
    
    
    (909
    )
    
    
    (1,051
    )
    
    
    (1,130
    )Increase in accrued salaries, benefits and payroll taxes
    
    
    9,872
    
    
    
    2,662
    
    
    
    3,452Net cash provided by operating activities
    
    
    54,916
    
    
    
    55,505
    
    
    
    113,685Cash Flows from Investing Activities:Acquisitions, net of cash acquired
    
    
    (15,935
    )
    
    
    
    
    
    
    (53,709
    )Net sales (purchases) of investment interests
    
    
    368
    
    
    
    (1,102
    )
    
    
    1,374Purchases of property and equipment
    
    
    (102,155
    )
    
    
    (78,067
    )
    
    
    (154,468
    )Deposits on asset commitments
    
    
    18,347
    
    
    
    2,685
    
    
    
    (9,901
    )Proceeds from asset dispositions
    
    
    25,000
    
    
    
    3,916
    
    
    
    3,000Proceeds from sale of property and equipment
    
    
    6,638
    
    
    
    8,581
    
    
    
    11,480Net cash used in investing activities
    
    
    (67,737
    )
    
    
    (63,987
    )
    
    
    (202,224
    )Cash Flows from Financing Activities:Proceeds from issuance of long-term debt
    
    
    4,000
    
    
    
    25,000
    
    
    
    25,000Payments on long-term debt
    
    
    (42,168
    )
    
    
    (64,755
    )
    
    
    (9,905
    )Net borrowings (repayments) on lines of credit
    
    
    36,500
    
    
    
    (36,500
    )
    
    
    36,500Proceeds from issuance of stock, net of offering costs
    
    
    
    
    
    
    120,223
    
    
    
    Payment of preferred stock dividend
    
    
    (2,548
    )
    
    
    (665
    )
    
    
    Exercise of options and warrants
    
    
    (1,722
    )
    
    
    43
    
    
    
    633Income tax impact of stock-based compensation plans
    
    
    (1,184
    )
    
    
    
    
    
    
    9Debt issuance costs
    
    
    (189
    )
    
    
    (658
    )
    
    
    (525
    )Net cash (used) provided by financing activities
    
    
    (7,311
    )
    
    
    42,688
    
    
    
    51,712Net increase (decrease) in cash and cash equivalents
    
    
    (20,132
    )
    
    
    34,206
    
    
    
    (36,827
    )Cash and cash equivalents at beginning of year
    
    
    41,072
    
    
    
    6,866
    
    
    
    43,693Cash and cash equivalents at end of year
    
    $
    20,940
    
    
    $
    41,072
    
    
    $
    6,866
  - 42 -




---



##### Table of Contents



ALLIS-CHALMERS
ENERGY INC.
 
 Notes to Consolidated Financial Statements
 NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization of Business
   Use of Estimates
  Principles of Consolidation
  Revenue Recognition
  - 43 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 Allowance for Doubtful Accounts
   Cash Equivalents
  Inventories
  Property and Equipment
    Goodwill, Intangible Assets and Amortization
   - 44 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 Impairment of Long-Lived Assets
  Financial Instruments
  Concentration of Credit and Customer Risk
   Debt Issuance Costs
  Income Taxes
   - 45 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
   Stock-Based Compensation
    For the Years Ended December 31,2010
    
    
    2009Expected dividend yield
    
    
    
    
    
    
    Expected price volatility
    
    
    89.81
    %
    
    
    77.32
    %Risk-free interest rate
    
    
    1.41
    %
    
    
    1.37
    %Expected life of options
    
    5 years
    
    5 yearsWeighted
average fair value of options granted at market value
    
    $
    2.63
    
    
    $
    0.77
 Income (Loss) Per Common Share
  - 46 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
  For the Years Ended December 31,2010
    
    
    2009
    
    
    2008(Restated)Numerator:Net loss
    
    $
    (76,899
    )
    
    $
    (21,190
    )
    
    $
    (39,464
    )Preferred stock dividend
    
    
    (2,548
    )
    
    
    (1,302
    )
    
    
    Net loss attributed to common stockholders
    
    $
    (79,447
    )
    
    $
    (22,492
    )
    
    $
    (39,464
    )Denominator:Weighted average common shares outstanding excluding nonvested restricted stock
    
    
    71,726
    
    
    
    53,669
    
    
    
    35,052Effect of potentially dilutive common shares:Warrants and share based compensation shares
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares outstanding and assumed conversions
    
    
    71,726
    
    
    
    53,669
    
    
    
    35,052Loss per common share:Basic
    
    $
    (1.11
    )
    
    $
    (0.42
    )
    
    $
    (1.13
    )Diluted
    
    $
    (1.11
    )
    
    $
    (0.42
    )
    
    $
    (1.13
    )Potentially dilutive securities excluded as anti-dilutive
    
    
    15,680
    
    
    
    15,059
    
    
    
    1,041
  Segments of an Enterprise and Related Information
  New Accounting Pronouncements
   - 47 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
   NOTE 2  RESTATEMENT OF THE CONSOLIDATED FINANCIAL STATEMENTS
   Year Ended December 31, 2010PreviouslyReported
    
    
    Adjustments
    
    
    Restated(In thousands, except per share amounts)Consolidated Balance SheetsDeferred income tax asset  current
    
    $
    1,835
    
    
    $
    (1,754
    )
    
    $
    81Deferred income tax asset  noncurrent
    
    
    37,602
    
    
    
    (35,633
    )
    
    
    1,969Accumulated deficit
    
    
    (16,133
    )
    
    
    (37,387
    )
    
    
    (53,520
    )Consolidated Statements of OperationsIncome tax benefit (expense)
    
    $
    7,424
    
    
    $
    (37,387
    )
    
    $
    (29,963
    )Net loss
    
    
    (39,512
    )
    
    
    (37,387
    )
    
    
    (76,899
    )Net loss attributed to common stockholders
    
    
    (42,060
    )
    
    
    (37,387
    )
    
    
    (79,447
    )Loss per common share:Basic
    
    $
    (0.59
    )
    
    $
    (0.52
    )
    
    $
    (1.11
    )Diluted
    
    $
    (0.59
    )
    
    $
    (0.52
    )
    
    $
    (1.11
    )Weighted Average Shares Outstanding:Basic
    
    
    71,726
    
    
    
    
    
    
    
    71,726Diluted
    
    
    71,726
    
    
    
    
    
    
    
    71,726Consolidated Statements of Cash FlowsNet loss
    
    $
    (39,512
    )
    
    $
    (37,387
    )
    
    $
    (76,899
    )Deferred income taxes
    
    
    (17,077
    )
    
    
    37,387
    
    
    
    20,310
 - 48 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 NOTE 3  EMPLOYEE BENEFIT PLANS
  NOTE 4  ACQUISITIONS AND ASSET DISPOSITIONS
  Current assets
    
    $
    7,622Property and equipment
    
    
    53,369Intangible assets, including goodwill
    
    
    26,199Total assets acquired
    
    
    87,190Current liabilities
    
    
    14,456Long-term debt, less current portion
    
    
    16,364Total liabilities assumed
    
    
    30,820Net assets acquired
    
    $
    56,370
   Current assets
    
    $
    7,585Property and equipment
    
    
    2,756Intangible assets, including goodwill
    
    
    11,749Other long-term assets
    
    
    2Total assets acquired
    
    
    22,092Current liabilities
    
    
    1,527Long-term liabilities
    
    
    1,401Net assets acquired
    
    $
    19,164
   - 49 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
    NOTE 5  INVENTORIES
  2010
    
    
    2009ManufacturedFinished goods
    
    $
    4,238
    
    
    $
    2,983Work in process
    
    
    2,990
    
    
    
    2,299Raw materials
    
    
    3,600
    
    
    
    884Total manufactured
    
    
    10,828
    
    
    
    6,166Rig parts and related inventory
    
    
    11,565
    
    
    
    10,654Shop supplies and related inventory
    
    
    9,620
    
    
    
    7,762Chemicals and drilling fluids
    
    
    4,814
    
    
    
    4,381Rental supplies
    
    
    1,761
    
    
    
    2,134Hammers
    
    
    2,380
    
    
    
    2,257Coiled tubing and related inventory
    
    
    1,046
    
    
    
    939Drive pipe
    
    
    126
    
    
    
    235Total inventories
    
    $
    42,140
    
    
    $
    34,528
 NOTE 6  PROPERTY AND OTHER INTANGIBLE ASSETS
  DepreciationPeriod
    
    
    2010
    
    
    2009Land
    
    
    
    
    
    $
    2,452
    
    
    $
    2,211Building and improvements
    
    15-20 years
    
    
    
    10,201
    
    
    
    8,611Transportation equipment
    
    2-10 years
    
    
    

    37,060
    
    
    

    33,353Drill pipe and rental equipment
    
        2-20 years
    
    
    
    390,263
    
    
    
    380,185Drilling, workover and pulling rigs
    
        20 years
    
    
    
    255,647
    
    
    
    248,780Machinery and equipment
    
        2-20 years
    
    
    
    245,609
    
    
    
    226,601Furniture, computers, software and leasehold improvements
    
        3-10 years
    
    
    
    10,839
    
    
    
    9,128Construction in progress  equipment
    
    
    N/A
    
    
    
    57,225
    
    
    
    47,391Total
    
    
    
    
    
    
    1,009,296
    
    
    
    956,260Less: accumulated depreciation
    
    
    
    
    
    
    (286,062
    )
    
    
    (209,782
    )Property and equipment, net
    
    
    
    
    
    $
    723,234
    
    
    $
    746,478
  - 50 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
  AmortizationPeriod
    
    
    2010
    
    
    2009Intellectual property
    
    10-20 years
    
    
    $
    4,229
    
    
    $
    3,829Non-compete agreements
    
    3-5 years
    
    
    
    895
    
    
    
    2,640Customer relationships
    
    10-15 years
    
    
    
    43,633
    
    
    
    38,033Patents
    
    12-15 years
    
    
    
    1,327
    
    
    
    1,327Other intangible assets
    
    2-10 years
    
    
    
    650
    
    
    
    793Total
    
    
    
    
    
    
    50,734
    
    
    
    46,622Less: accumulated amortization
    
    
    
    
    
    
    (16,835
    )
    
    
    (13,973
    )Other intangibles assets, net.
    
    
    
    
    
    $
    33,899
    
    
    $
    32,649
 2010
    
    
    2009Gross
    
    
    Accumulated
    
    
    Gross
    
    
    AccumulatedValue
    
    
    Amortization
    
    
    Value
    
    
    AmortizationIntellectual property
    
    $
    4,229
    
    
    $
    1,157
    
    
    $
    3,829
    
    
    $
    823Non-compete agreements
    
    
    895
    
    
    
    576
    
    
    
    2,640
    
    
    
    1,879Customer relationships
    
    
    43,633
    
    
    
    13,998
    
    
    
    38,033
    
    
    
    10,209Patents
    
    
    1,327
    
    
    
    484
    
    
    
    1,327
    
    
    
    382Other intangible assets
    
    
    650
    
    
    
    620
    
    
    
    793
    
    
    
    680Total
    
    $
    50,734
    
    
    $
    16,835
    
    
    $
    46,622
    
    
    $
    13,973
  Intangible Amortization by PeriodYears Ended December 31,2015 and2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    ThereafterIntellectual property
    
    $
    356
    
    
    $
    356
    
    
    $
    356
    
    
    $
    347
    
    
    $
    1,657Non-compete agreements
    
    
    266
    
    
    
    43
    
    
    
    10
    
    
    
    
    
    
    
    Customer relationships
    
    
    4,092
    
    
    
    4,092
    
    
    
    4,092
    
    
    
    4,071
    
    
    
    13,288Patents
    
    
    102
    
    
    
    102
    
    
    
    102
    
    
    
    102
    
    
    
    435Other intangible assets
    
    
    28
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Total intangible amortization
    
    $
    4,844
    
    
    $
    4,595
    
    
    $
    4,560
    
    
    $
    4,520
    
    
    $
    15,380
 NOTE 7  INCOME TAXES
    - 51 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
  Years Ended December 31,2010
    
    
    2009
    
    
    2008(Restated)Current income tax expense (benefit):Federal
    
    $
    (1,123
    )
    
    $
    8
    
    
    $
    (1,525
    )State
    
    
    580
    
    
    
    324
    
    
    
    471Foreign
    
    
    10,196
    
    
    
    7,688
    
    
    
    13,5909,653
    
    
    
    8,020
    
    
    
    12,536Deferred income tax expense (benefit):Federal
    
    
    18,441
    
    
    
    (15,185
    )
    
    
    (28,462
    )State
    
    
    1,570
    
    
    
    (1,626
    )
    
    
    (1,149
    )Foreign
    
    
    299
    
    
    
    (1,072
    )
    
    
    (338
    )20,310
    
    
    
    (17,883
    )
    
    
    (29,949
    )$
    29,963
    
    
    $
    (9,863
    )
    
    $
    (17,413
    )
  2010
    
    
    2009(Restated)Deferred income tax assets:Amortization
    
    $
    27,473
    
    
    $
    30,902Net operating loss carryforwards
    
    
    64,620
    
    
    
    40,752Share-based compensation
    
    
    1,055
    
    
    
    2,199Foreign tax credits
    
    
    6,106
    
    
    
    992A-C Product Liability Trust
    
    
    
    
    
    
    803Other net future deductible items
    
    
    2,014
    
    
    
    3,083Valuation allowance
    
    
    (58,343
    )
    
    
    (13,999
    )Gross deferred income tax assets
    
    
    42,925
    
    
    
    64,732Deferred income tax liabilitiesDepreciation
    
    
    (48,115
    )
    
    
    (46,050
    )Other net future taxable items
    
    
    (1,000
    )
    
    
    (1,011
    )Gross deferred income tax liabilities
    
    
    (49,115
    )
    
    
    (47,061
    )Net deferred income tax assets (liabilities)
    
    $
    (6,190
    )
    
    $
    17,671Net current deferred income tax assets
    
    $
    81
    
    
    $
    3,790Net noncurrent deferred income tax assets
    
    
    1,969
    
    
    
    22,047Net noncurrent deferred income tax liabilities
    
    
    (8,240
    )
    
    
    (8,166
    )Net deferred income tax assets
    
    $
    (6,190
    )
    
    $
    17,671
  - 52 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
  Years Ended December 31,2010
    
    
    2009
    
    
    2008Statutory income tax rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State taxes, net of federal benefit
    
    
    (0.3
    )
    
    
    1.7
    
    
    
    0.4Foreign currency remeasurement
    
    
    1.1
    
    
    
    0.3
    
    
    
    2.1Valuation allowance, permanent differences and other
    
    
    (98.6
    )
    
    
    (4.2
    )
    
    
    (5.9
    )Effective tax rate
    
    
    (63.8
    )%
    
    
    31.8
    %
    
    
    30.6
    %
    NOTE 8  DEBT
  2010
    
    
    2009Senior notes
    
    $
    430,238
    
    
    $
    430,238Revolving line of credit
    
    
    36,500
    
    
    
    Bank term loans
    
    
    25,723
    
    
    
    60,744Insurance premium financing notes
    
    
    979
    
    
    
    997Capital lease obligations
    
    
    
    
    
    
    254Total debt
    
    
    493,440
    
    
    
    492,233Less: current maturities of long-term debt
    
    
    15,215
    
    
    
    17,027Long-term debt
    
    $
    478,225
    
    
    $
    475,206
   TotalYear Ending:December 31, 2011
    
    $
    15,215December 31, 2012
    
    
    6,891December 31, 2013
    
    
    4,016December 31, 2014
    
    
    261,518December 31, 2015
    
    
    Thereafter
    
    
    205,800Total
    
    $
    493,440
 - 53 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 Senior notes, term loans and line of credit agreements
        - 54 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
  Notes payable
  Other debt
  NOTE 9  COMMITMENTS AND CONTINGENCIES
    Years Ending:December 31, 2011
    
    $
    3,376December 31, 2012
    
    
    2,278December 31, 2013
    
    
    1,817December 31, 2014
    
    
    1,188December 31, 2015
    
    
    838Thereafter
    
    
    1,721Total
    
    $
    11,218
 NOTE 10  STOCKHOLDERS EQUITY
   - 55 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
        NOTE 11  STOCK OPTIONS
   - 56 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
   December 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008Shares
    
    
    Weighted Ave.
    
    
    Shares
    
    
    Weighted Ave.
    
    
    Shares
    
    
    Weighted Avg.Under
    
    
    Exercise
    
    
    Under
    
    
    Exercise
    
    
    Under
    
    
    ExerciseOption
    
    
    Price
    
    
    Option
    
    
    Price
    
    
    Option
    
    
    PriceBeginning balance
    
    
    701,732
    
    
    $
    6.31
    
    
    
    901,732
    
    
    $
    10.95
    
    
    
    986,763
    
    
    $
    10.77Granted
    
    
    1,072,253
    
    
    
    3.78
    
    
    
    125,000
    
    
    
    1.23
    
    
    
    
    
    
    
    Canceled
    
    
    (21,967
    )
    
    
    8.30
    
    
    
    (305,000
    )
    
    
    18.18
    
    
    
    (13,328
    )
    
    
    8.87Exercised
    
    
    (1,000
    )
    
    
    1.23
    
    
    
    (20,000
    )
    
    
    2.75
    
    
    
    (71,703
    )
    
    
    8.83Ending balance
    
    
    1,751,018
    
    
    $
    4.74
    
    
    
    701,732
    
    
    $
    6.31
    
    
    
    901,732
    
    
    $
    10.95
   Options Outstanding
    
    Options ExercisableWeighted Average
    
    Weighted
    
    
    
    
    
    Weighted Average
    
    WeightedRange of
    
    
    
    
    
    Remaining
    
    Average
    
    
    
    
    
    Remaining
    
    AverageExercise
    
    Number of
    
    Contractual Life
    
    Exercise
    
    Number of
    
    Contractual Life
    
    ExercisePrices
    
    options
    
    (in Years)
    
    Price
    
    options
    
    (in Years)
    
    Price$1.232.75
    
    
    126,000
    
    
    
    8.10
    
    
    $
    1.25
    
    
    
    26,000
    
    
    
    7.78
    
    
    $
    1.353.774.87
    
    
    1,359,086
    
    
    
    8.08
    
    
    
    3.87
    
    
    
    293,500
    
    
    
    4.07
    
    
    
    4.1810.8514.74
    
    
    265,932
    
    
    
    4.96
    
    
    
    10.86
    
    
    
    265,932
    
    
    
    4.96
    
    
    
    10.86$1.2314.74
    
    
    1,751,018
    
    
    
    7.61
    
    
    $
    4.74
    
    
    
    585,432
    
    
    
    4.64
    
    
    $
    7.09
  - 57 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 Restricted Stock Awards
   December 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008Number
    
    
    Weighted Ave.
    
    
    Number
    
    
    Weighted Ave.
    
    
    Number
    
    
    Weighted Ave.of
    
    
    Grant Date Fair
    
    
    of
    
    
    Grant Date Fair
    
    
    of
    
    
    Grant Date FairShares
    
    
    Value Per Share
    
    
    Shares
    
    
    Value Per Share
    
    
    Shares
    
    
    Value Per ShareBeginning balance
    
    
    837,626
    
    
    $
    15.63
    
    
    
    953,102
    
    
    $
    15.34
    
    
    
    993,203
    
    
    $
    17.45Granted
    
    
    2,061,750
    
    
    
    3.78
    
    
    
    17,000
    
    
    
    1.23
    
    
    
    258,670
    
    
    
    9.47Vested
    
    
    (1,193,976
    )
    
    
    8.80
    
    
    
    (122,276
    )
    
    
    11.68
    
    
    
    (298,771
    )
    
    
    17.26Forfeited
    
    
    (3,333
    )
    
    
    3.77
    
    
    
    (10,200
    )
    
    
    12.05
    
    
    
    
    
    
    
    Ending balance
    
    
    1,702,067
    
    
    $
    6.09
    
    
    
    837,626
    
    
    $
    15.63
    
    
    
    953,102
    
    
    $
    15.34
  NOTE 12  STOCK PURCHASE WARRANTS
  NOTE 13  GAIN ON DEBT EXTINGUISHMENT
  NOTE 14  CONDENSED CONSOLIDATED FINANCIAL INFORMATION
  - 58 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 CONDENSED CONSOLIDATING BALANCE SHEETS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalAssetsCash and cash equivalents
    
    $
    
    
    
    $
    16,380
    
    
    $
    4,560
    
    
    $
    
    
    
    $
    20,940Trade receivables, net
    
    
    
    
    
    
    79,100
    
    
    
    77,397
    
    
    
    (11,537
    )
    
    
    144,960Inventories
    
    
    
    
    
    
    22,066
    
    
    
    20,074
    
    
    
    
    
    
    
    42,140Intercompany receivables
    
    
    
    
    
    
    84,766
    
    
    
    
    
    
    
    (84,766
    )
    
    
    Note receivable from affiliate
    
    
    18,359
    
    
    
    
    
    
    
    
    
    
    
    (18,359
    )
    
    
    Prepaid expenses and other
    
    
    2,068
    
    
    
    3,280
    
    
    
    3,925
    
    
    
    
    
    
    
    9,273Total current assets
    
    
    20,427
    
    
    
    205,592
    
    
    
    105,956
    
    
    
    (114,662
    )
    
    
    217,313Property and equipment, net
    
    
    
    
    
    
    461,187
    
    
    
    262,047
    
    
    
    
    
    
    
    723,234Goodwill
    
    
    
    
    
    
    28,944
    
    
    
    17,389
    
    
    
    
    
    
    
    46,333Other intangible assets, net
    
    
    414
    
    
    
    27,278
    
    
    
    6,207
    
    
    
    
    
    
    
    33,899Debt issuance costs, net
    
    
    7,405
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,405Note receivable from affiliates
    
    
    1,800
    
    
    
    
    
    
    
    
    
    
    
    (1,800
    )
    
    
    Investments in affiliates
    
    
    934,274
    
    
    
    
    
    
    
    
    
    
    
    (934,274
    )
    
    
    Other assets
    
    
    
    
    
    
    7,390
    
    
    
    2,695
    
    
    
    
    
    
    
    10,085Total assets
    
    $
    964,320
    
    
    $
    730,391
    
    
    $
    394,294
    
    
    $
    (1,050,736
    )
    
    $
    1,038,269Liabilities and Stockholders
EquityCurrent maturities of long-term
debt
    
    $
    
    
    
    $
    979
    
    
    $
    14,236
    
    
    $
    
    
    
    $
    15,215Trade accounts payable
    
    
    
    
    
    
    18,634
    
    
    
    38,945
    
    
    
    (11,537
    )
    
    
    46,042Accrued salaries, benefits and
payroll taxes
    
    
    
    
    
    
    8,983
    
    
    
    23,807
    
    
    
    
    
    
    
    32,790Accrued interest
    
    
    15,310
    
    
    
    
    
    
    
    214
    
    
    
    
    
    
    
    15,524Accrued expenses
    
    
    1,192
    
    
    
    18,504
    
    
    
    10,980
    
    
    
    
    
    
    
    30,676Intercompany payables
    
    
    69,756
    
    
    
    
    
    
    
    15,010
    
    
    
    (84,766
    )
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    18,359
    
    
    
    (18,359
    )
    
    
    Total current
liabilities
    
    
    86,258
    
    
    
    47,100
    
    
    
    121,551
    
    
    
    (114,662
    )
    
    
    140,247Long-term debt, net of current
maturities
    
    
    466,738
    
    
    
    
    
    
    
    11,487
    
    
    
    
    
    
    
    478,225Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    1,800
    
    
    
    (1,800
    )
    
    
    Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    8,473
    
    
    
    
    
    
    
    8,473Total liabilities
    
    
    552,996
    
    
    
    47,100
    
    
    
    143,311
    
    
    
    (116,462
    )
    
    
    626,945Commitments and contingenciesStockholders EquityPreferred Stock
    
    
    34,183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,183Common stock
    
    
    737
    
    
    
    3,527
    
    
    
    42,963
    
    
    
    (46,490
    )
    
    
    737Capital in excess of par value
    
    
    429,924
    
    
    
    589,676
    
    
    
    137,439
    
    
    
    (727,115
    )
    
    
    429,924Retained earnings (deficit)
    
    
    (53,520
    )
    
    
    90,088
    
    
    
    70,581
    
    
    
    (160,669
    )
    
    
    (53,520
    )Total stockholders
equity
    
    
    411,324
    
    
    
    683,291
    
    
    
    250,983
    
    
    
    (934,274
    )
    
    
    411,324Total liabilities
and stock holders
equity
    
    $
    964,320
    
    
    $
    730,391
    
    
    $
    394,294
    
    
    $
    (1,050,736
    )
    
    $
    1,038,269
 - 59 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 CONDENSED CONSOLIDATING INCOME STATEMENTS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    280,919
    
    
    $
    380,308
    
    
    $
    (1,562
    )
    
    $
    659,665Operating costs and expensesDirect costs
    
    
    
    
    
    
    177,205
    
    
    
    322,477
    
    
    
    (1,562
    )
    
    
    498,120Depreciation
    
    
    
    
    
    
    58,066
    
    
    
    26,052
    
    
    
    
    
    
    
    84,118Selling, general and
administrative
    
    
    7,168
    
    
    
    38,005
    
    
    
    15,261
    
    
    
    
    
    
    
    60,434Loss on asset dispositions
    
    
    
    
    
    
    10,624
    
    
    
    
    
    
    
    
    
    
    
    10,624Amortization
    
    
    46
    
    
    
    4,014
    
    
    
    746
    
    
    
    
    
    
    
    4,806Total operating costs and
expenses
    
    
    7,214
    
    
    
    287,914
    
    
    
    364,536
    
    
    
    (1,562
    )
    
    
    658,102Income (loss) from
operations
    
    
    (7,214
    )
    
    
    (6,995
    )
    
    
    15,772
    
    
    
    
    
    
    
    1,563Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    (27,269
    )
    
    
    
    
    
    
    
    
    
    
    27,269
    
    
    
    Interest, net
    
    
    (42,476
    )
    
    
    (506
    )
    
    
    (2,306
    )
    
    
    
    
    
    
    (45,288
    )Other
    
    
    60
    
    
    
    (2,322
    )
    
    
    (949
    )
    
    
    
    
    
    
    (3,211
    )Total other income
(expense)
    
    
    (69,685
    )
    
    
    (2,828
    )
    
    
    (3,255
    )
    
    
    27,269
    
    
    
    (48,499
    )Income (loss) before income
taxes
    
    
    (76,899
    )
    
    
    (9,823
    )
    
    
    12,517
    
    
    
    27,269
    
    
    
    (46,936
    )Income tax expense
    
    
    
    
    
    
    (20,291
    )
    
    
    (9,672
    )
    
    
    
    
    
    
    (29,963
    )Net income (loss)
    
    
    (76,899
    )
    
    
    (30,114
    )
    
    
    2,845
    
    
    
    27,269
    
    
    
    (76,899
    )Preferred stock dividend
    
    
    (2,548
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,548
    )Net income (loss) attributed
to common stockholders
    
    $
    (79,447
    )
    
    $
    (30,114
    )
    
    $
    2,845
    
    
    $
    27,269
    
    
    $
    (79,447
    )
 - 60 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(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)
    
    $
    (76,899
    )
    
    $
    (30,114
    )
    
    $
    2,845
    
    
    $
    27,269
    
    
    $
    (76,899
    )Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:Depreciation & amortization
    
    
    46
    
    
    
    62,080
    
    
    
    26,798
    
    
    
    
    
    
    
    88,924Amortization and write-off of
deferred financing fees
    
    
    2,192
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    2,214Stock based compensation
    
    
    8,030
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,030Allowance for bad debts
    
    
    
    
    
    
    368
    
    
    
    
    
    
    
    
    
    
    
    368Equity earnings in affiliates
    
    
    27,269
    
    
    
    
    
    
    
    
    
    
    
    (27,269
    )
    
    
    Deferred income taxes
    
    
    20,920
    
    
    
    (1,003
    )
    
    
    393
    
    
    
    
    
    
    
    20,310Loss on sale of equipment
    
    
    
    
    
    
    646
    
    
    
    34
    
    
    
    
    
    
    
    680Loss on asset dispositions
    
    
    
    
    
    
    10,624
    
    
    
    
    
    
    
    
    
    
    
    10,624Loss on investment
    
    
    
    
    
    
    1,466
    
    
    
    
    
    
    
    
    
    
    
    1,466Equity in losses of
unconsolidated affiliates
    
    
    
    
    
    
    783
    
    
    
    
    
    
    
    
    
    
    
    783Changes in operating assets and
liabilities, net of
acquisitions:(Increase) in trade receivables
    
    
    
    
    
    
    (17,248
    )
    
    
    (18,435
    )
    
    
    
    
    
    
    (35,683
    )(Increase) in inventories
    
    
    
    
    
    
    (4,137
    )
    
    
    (1,817
    )
    
    
    
    
    
    
    (5,954
    )Decrease (increase) in other
current assets
    
    
    (1,917
    )
    
    
    7,533
    
    
    
    5,526
    
    
    
    
    
    
    
    11,142Decrease in other assets
    
    
    
    
    
    
    426
    
    
    
    1,320
    
    
    
    
    
    
    
    1,746(Decrease) increase in
accounts payable
    
    
    
    
    
    
    (3,979
    )
    
    
    15,040
    
    
    
    
    
    
    
    11,061(Decrease) in accrued interest
    
    
    (62
    )
    
    
    (228
    )
    
    
    (7
    )
    
    
    
    
    
    
    (297
    )Increase in accrued expenses
    
    
    440
    
    
    
    5,577
    
    
    
    1,421
    
    
    
    
    
    
    
    7,438(Decrease) in other liabilities
    
    
    
    
    
    
    
    
    
    
    (909
    )
    
    
    
    
    
    
    (909
    )Increase in accrued salaries,
benefits and payroll taxes
    
    
    
    
    
    
    6,157
    
    
    
    3,715
    
    
    
    
    
    
    
    9,872Net cash provided (used)
by operating activities
    
    
    (19,981
    )
    
    
    38,973
    
    
    
    35,924
    
    
    
    
    
    
    
    54,916Cash Flows from Investing Activities:Acquisition, net of cash acquired
    
    
    
    
    
    
    (15,935
    )
    
    
    
    
    
    
    
    
    
    
    (15,935
    )Proceeds from sale of investments
    
    
    
    
    
    
    368
    
    
    
    
    
    
    
    
    
    
    
    368Purchase of property and equipment
    
    
    
    
    
    
    (75,488
    )
    
    
    (26,667
    )
    
    
    
    
    
    
    (102,155
    )Deposits on asset commitments
    
    
    
    
    
    
    18,604
    
    
    
    (257
    )
    
    
    
    
    
    
    18,347Investment in affiliates
    
    
    (17,165
    )
    
    
    
    
    
    
    
    
    
    
    17,165
    
    
    
    Notes receivable from affiliates
    
    
    13,820
    
    
    
    
    
    
    
    
    
    
    
    (13,820
    )
    
    
    Proceeds from asset dispositions
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    25,000Proceeds from sale of equipment
    
    
    
    
    
    
    6,181
    
    
    
    457
    
    
    
    
    
    
    
    6,638Net cash provided (used)
in investing activities
    
    
    (3,345
    )
    
    
    (41,270
    )
    
    
    (26,467
    )
    
    
    3,345
    
    
    
    (67,737
    )
 - 61 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW (Continued)
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Financing Activities:Proceeds from issuance of
long-term debt
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    
    
    
    
    4,000Payments on long-term debt
    
    
    
    
    
    
    (26,281
    )
    
    
    (15,887
    )
    
    
    
    
    
    
    (42,168
    )Borrowings under line of credit
    
    
    36,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,500Payment of preferred stock dividend
    
    
    (2,548
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,548
    )Proceeds from parent contributions
    
    
    
    
    
    
    17,165
    
    
    
    
    
    
    
    (17,165
    )
    
    
    Accounts receivable from affiliates
    
    
    
    
    
    
    (4,065
    )
    
    
    
    
    
    
    4,065
    
    
    
    Accounts payable to affiliates
    
    
    (7,531
    )
    
    
    
    
    
    
    11,596
    
    
    
    (4,065
    )
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    (13,820
    )
    
    
    13,820
    
    
    
    Proceeds from exercise of options
    
    
    (1,722
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,722
    )Income tax impact of stock-based
compensation plans
    
    
    (1,184
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,184
    )Debt issuance costs
    
    
    (189
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (189
    )Net cash provided (used)
by financing activities
    
    
    23,326
    
    
    
    (13,181
    )
    
    
    (14,111
    )
    
    
    (3,345
    )
    
    
    (7,311
    )Net increase (decrease) in cash
and cash equivalents
    
    
    
    
    
    
    (15,478
    )
    
    
    (4,654
    )
    
    
    
    
    
    
    (20,132
    )Cash and cash equivalents at
beginning of year
    
    
    
    
    
    
    31,858
    
    
    
    9,214
    
    
    
    
    
    
    
    41,072Cash and cash equivalents at end
of year
    
    $
    
    
    
    $
    16,380
    
    
    $
    4,560
    
    
    $
    
    
    
    $
    20,940
 - 62 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 CONDENSED CONSOLIDATING BALANCE SHEETS
  Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalAssetsCash and cash equivalents
    
    $
    
    
    
    $
    31,858
    
    
    $
    9,214
    
    
    $
    
    
    
    $
    41,072Trade receivables, net
    
    
    
    
    
    
    47,358
    
    
    
    58,962
    
    
    
    (1,261
    )
    
    
    105,059Inventories
    
    
    
    
    
    
    16,271
    
    
    
    18,257
    
    
    
    
    
    
    
    34,528Intercompany receivables
    
    
    
    
    
    
    79,521
    
    
    
    767
    
    
    
    (80,288
    )
    
    
    Note receivable from affiliate
    
    
    28,379
    
    
    
    
    
    
    
    
    
    
    
    (28,379
    )
    
    
    Prepaid expenses and other
    
    
    891
    
    
    
    6,826
    
    
    
    9,872
    
    
    
    
    
    
    
    17,589Total current assets
    
    
    29,270
    
    
    
    181,834
    
    
    
    97,072
    
    
    
    (109,928
    )
    
    
    198,248Property and equipment, net
    
    
    
    
    
    
    489,921
    
    
    
    256,557
    
    
    
    
    
    
    
    746,478Goodwill
    
    
    
    
    
    
    23,251
    
    
    
    17,388
    
    
    
    
    
    
    
    40,639Other intangible assets, net
    
    
    460
    
    
    
    25,236
    
    
    
    6,953
    
    
    
    
    
    
    
    32,649Debt issuance costs, net
    
    
    9,408
    
    
    
    137
    
    
    
    
    
    
    
    
    
    
    
    9,545Note receivable from affiliates
    
    
    4,415
    
    
    
    
    
    
    
    
    
    
    
    (4,415
    )
    
    
    Investments in affiliates
    
    
    942,378
    
    
    
    
    
    
    
    
    
    
    
    (942,378
    )
    
    
    Other assets
    
    
    24,366
    
    
    
    25,039
    
    
    
    3,656
    
    
    
    
    
    
    
    53,061Total assets
    
    $
    1,010,297
    
    
    $
    745,418
    
    
    $
    381,626
    
    
    $
    (1,056,721
    )
    
    $
    1,080,620Liabilities and Stockholders
EquityCurrent maturities of long-term
debt
    
    $
    
    
    
    $
    4,444
    
    
    $
    12,583
    
    
    $
    
    
    
    $
    17,027Trade accounts payable
    
    
    
    
    
    
    12,195
    
    
    
    23,905
    
    
    
    (1,261
    )
    
    
    34,839Accrued salaries, benefits and
payroll taxes
    
    
    
    
    
    
    2,762
    
    
    
    20,092
    
    
    
    
    
    
    
    22,854Accrued interest
    
    
    15,372
    
    
    
    228
    
    
    
    221
    
    
    
    
    
    
    
    15,821Accrued expenses
    
    
    752
    
    
    
    11,608
    
    
    
    9,558
    
    
    
    
    
    
    
    21,918Intercompany payables
    
    
    80,288
    
    
    
    
    
    
    
    
    
    
    
    (80,288
    )
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    28,379
    
    
    
    (28,379
    )
    
    
    Total current
liabilities
    
    
    96,412
    
    
    
    31,237
    
    
    
    94,738
    
    
    
    (109,928
    )
    
    
    112,459Long-term debt, net of current
maturities
    
    
    430,238
    
    
    
    19,941
    
    
    
    25,027
    
    
    
    
    
    
    
    475,206Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    4,415
    
    
    
    (4,415
    )
    
    
    Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    9,308
    
    
    
    
    
    
    
    9,308Total liabilities
    
    
    526,650
    
    
    
    51,178
    
    
    
    133,488
    
    
    
    (114,343
    )
    
    
    596,973Commitments and contingenciesStockholders EquityPreferred Stock
    
    
    34,183
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,183Common stock
    
    
    714
    
    
    
    3,526
    
    
    
    42,963
    
    
    
    (46,489
    )
    
    
    714Capital in excess of par value
    
    
    422,823
    
    
    
    570,512
    
    
    
    137,439
    
    
    
    (707,951
    )
    
    
    422,823Retained earnings
    
    
    25,927
    
    
    
    120,202
    
    
    
    67,736
    
    
    
    (187,938
    )
    
    
    25,927Total stockholders
equity
    
    
    483,647
    
    
    
    694,240
    
    
    
    248,138
    
    
    
    (942,378
    )
    
    
    483,647Total liabilities
and stock holders
equity
    
    $
    1,010,297
    
    
    $
    745,418
    
    
    $
    381,626
    
    
    $
    (1,056,721
    )
    
    $
    1,080,620
 - 63 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 CONDENSED CONSOLIDATING INCOME STATEMENTS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    202,727
    
    
    $
    303,579
    
    
    $
    (53
    )
    
    $
    506,253Operating costs and expensesDirect costs
    
    
    
    
    
    
    133,629
    
    
    
    245,861
    
    
    
    (53
    )
    
    
    379,437Depreciation
    
    
    
    
    
    
    56,886
    
    
    
    21,390
    
    
    
    
    
    
    
    78,276Selling, general and
administrative
    
    
    4,054
    
    
    
    32,592
    
    
    
    14,117
    
    
    
    
    
    
    
    50,763Loss on asset dispositions
    
    
    
    
    
    
    
    
    
    
    1,602
    
    
    
    
    
    
    
    1,602Amortization
    
    
    46
    
    
    
    3,907
    
    
    
    769
    
    
    
    
    
    
    
    4,722Total operating costs and
expenses
    
    
    4,100
    
    
    
    227,014
    
    
    
    283,739
    
    
    
    (53
    )
    
    
    514,800Income (loss) from
operations
    
    
    (4,100
    )
    
    
    (24,287
    )
    
    
    19,840
    
    
    
    
    
    
    
    (8,547
    )Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    1,051
    
    
    
    
    
    
    
    
    
    
    
    (1,051
    )
    
    
    Interest, net
    
    
    (44,568
    )
    
    
    (25
    )
    
    
    (3,480
    )
    
    
    
    
    
    
    (48,073
    )Gain on debt
extinguishment
    
    
    26,365
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,365Other
    
    
    62
    
    
    
    (155
    )
    
    
    (705
    )
    
    
    
    
    
    
    (798
    )Total other income
(expense)
    
    
    (17,090
    )
    
    
    (180
    )
    
    
    (4,185
    )
    
    
    (1,051
    )
    
    
    (22,506
    )Income (loss) before income
taxes
    
    
    (21,190
    )
    
    
    (24,467
    )
    
    
    15,655
    
    
    
    (1,051
    )
    
    
    (31,053
    )Income tax benefit
(expense)
    
    
    
    
    
    
    15,590
    
    
    
    (5,727
    )
    
    
    
    
    
    
    9,863Net income (loss)
    
    
    (21,190
    )
    
    
    (8,877
    )
    
    
    9,928
    
    
    
    (1,051
    )
    
    
    (21,190
    )Preferred stock dividend
    
    
    (1,302
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,302
    )Net income (loss) attributed
to common stockholders
    
    $
    (22,492
    )
    
    $
    (8,877
    )
    
    $
    9,928
    
    
    $
    (1,051
    )
    
    $
    (22,492
    )
 - 64 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(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)
    
    $
    (21,190
    )
    
    $
    (8,877
    )
    
    $
    9,928
    
    
    $
    (1,051
    )
    
    $
    (21,190
    )Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:Depreciation & amortization
    
    
    46
    
    
    
    60,793
    
    
    
    22,159
    
    
    
    
    
    
    
    82,998Amortization and write-off of
deferred financing fees
    
    
    2,215
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    2,231Gain on debt extinguishment
    
    
    (26,365
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,365
    )Stock based compensation
    
    
    4,799
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,799Allowance for bad debts
    
    
    
    
    
    
    2,835
    
    
    
    
    
    
    
    
    
    
    
    2,835Equity earnings in affiliates
    
    
    (1,051
    )
    
    
    
    
    
    
    
    
    
    
    1,051
    
    
    
    Deferred income taxes
    
    
    (18,173
    )
    
    
    1,569
    
    
    
    (1,279
    )
    
    
    
    
    
    
    (17,883
    )(Gain) loss on sale of equipment
    
    
    
    
    
    
    (957
    )
    
    
    9
    
    
    
    
    
    
    
    (948
    )Loss on asset dispositions
    
    
    
    
    
    
    
    
    
    
    1,602
    
    
    
    
    
    
    
    1,602Changes in operating assets and
liabilities, net of acquisitions:Decrease in accounts receivables
    
    
    
    
    
    
    38,074
    
    
    
    11,903
    
    
    
    
    
    
    
    49,977Decrease in inventories
    
    
    
    
    
    
    3,111
    
    
    
    1,448
    
    
    
    
    
    
    
    4,559Decrease (increase) in other
current assets
    
    
    7,369
    
    
    
    3,279
    
    
    
    (6,020
    )
    
    
    
    
    
    
    4,628Decrease (increase) in other assets
    
    
    (111
    )
    
    
    223
    
    
    
    1,536
    
    
    
    
    
    
    
    1,648(Decrease) in accounts payable
    
    
    
    
    
    
    (13,346
    )
    
    
    (14,242
    )
    
    
    
    
    
    
    (27,588
    )(Decrease) increase in accrued
interest
    
    
    (2,560
    )
    
    
    228
    
    
    
    (470
    )
    
    
    
    
    
    
    (2,802
    )(Decrease) in accrued expenses
    
    
    (632
    )
    
    
    (2,233
    )
    
    
    (1,742
    )
    
    
    
    
    
    
    (4,607
    )(Decrease) in other liabilities
    
    
    
    
    
    
    (64
    )
    
    
    (987
    )
    
    
    
    
    
    
    (1,051
    )(Decrease) increase in accrued
salaries, benefits and payroll
taxes
    
    
    
    
    
    
    (1,171
    )
    
    
    3,833
    
    
    
    
    
    
    
    2,662Net cash provided (used) by
operating activities
    
    
    (55,653
    )
    
    
    83,480
    
    
    
    27,678
    
    
    
    
    
    
    
    55,505Cash Flows from Investing Activities:Net sales (purchases) of investment
interests
    
    
    (2,393
    )
    
    
    
    
    
    
    1,291
    
    
    
    
    
    
    
    (1,102
    )Purchase of property and equipment
    
    
    
    
    
    
    (58,142
    )
    
    
    (19,925
    )
    
    
    
    
    
    
    (78,067
    )Deposits on asset commitments
    
    
    
    
    
    
    1,995
    
    
    
    690
    
    
    
    
    
    
    
    2,685Investment in affiliates
    
    
    (4,100
    )
    
    
    
    
    
    
    
    
    
    
    4,100
    
    
    
    Notes receivable from affiliates
    
    
    (2,069
    )
    
    
    
    
    
    
    
    
    
    
    2,069
    
    
    
    Proceeds from asset dispositions
    
    
    
    
    
    
    
    
    
    
    3,916
    
    
    
    
    
    
    
    3,916Proceeds from sale of equipment
    
    
    
    
    
    
    8,400
    
    
    
    181
    
    
    
    
    
    
    
    8,581Net cash provided (used) in
investing activities
    
    
    (8,562
    )
    
    
    (47,747
    )
    
    
    (13,847
    )
    
    
    6,169
    
    
    
    (63,987
    )
 - 65 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW (Continued)
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Financing Activities:Proceeds from issuance of
long-term debt
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    25,000Payments on long-term debt
    
    
    (47,167
    )
    
    
    (4,811
    )
    
    
    (12,777
    )
    
    
    
    
    
    
    (64,755
    )Net repayments on lines of credit
    
    
    (36,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,500
    )Proceeds from issuance of stock,
net of offering costs
    
    
    120,223
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,223Payment of preferred stock dividend
    
    
    (665
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (665
    )Proceeds from parent contributions
    
    
    
    
    
    
    
    
    
    
    4,100
    
    
    
    (4,100
    )
    
    
    Accounts receivable from affiliates
    
    
    
    
    
    
    (26,834
    )
    
    
    (1,952
    )
    
    
    28,786
    
    
    
    Accounts payable to affiliates
    
    
    28,786
    
    
    
    
    
    
    
    
    
    
    
    (28,786
    )
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    2,069
    
    
    
    (2,069
    )
    
    
    Proceeds from exercise of options
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43Debt issuance costs
    
    
    (505
    )
    
    
    (153
    )
    
    
    
    
    
    
    
    
    
    
    (658
    )Net cash provided (used)
by financing activities
    
    
    64,215
    
    
    
    (6,798
    )
    
    
    (8,560
    )
    
    
    (6,169
    )
    
    
    42,688Net increase in cash and cash
equivalents
    
    
    
    
    
    
    28,935
    
    
    
    5,271
    
    
    
    
    
    
    
    34,206Cash and cash equivalents at
beginning of year
    
    
    
    
    
    
    2,923
    
    
    
    3,943
    
    
    
    
    
    
    
    6,866Cash and cash equivalents at end
of year
    
    $
    
    
    
    $
    31,858
    
    
    $
    9,214
    
    
    $
    
    
    
    $
    41,072
 - 66 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 CONDENSED CONSOLIDATING INCOME STATEMENTS
 Allis-Chalmers
    
    
    
    
    
    
    Subsidiary(Parent/
    
    
    Subsidiary
    
    
    Non-
    
    
    Consolidating
    
    
    ConsolidatedGuarantor)
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalRevenues
    
    $
    
    
    
    $
    384,649
    
    
    $
    291,335
    
    
    $
    (36
    )
    
    $
    675,948Operating costs and expensesDirect costs
    
    
    
    
    
    
    217,360
    
    
    
    226,090
    
    
    
    (36
    )
    
    
    443,414Depreciation
    
    
    
    
    
    
    49,177
    
    
    
    14,283
    
    
    
    
    
    
    
    63,460Selling, general and
administrative
    
    
    6,924
    
    
    
    45,147
    
    
    
    10,703
    
    
    
    
    
    
    
    62,774Gain on asset dispositions
    
    
    
    
    
    
    (166
    )
    
    
    
    
    
    
    
    
    
    
    (166
    )Impairment of goodwill
    
    
    
    
    
    
    115,774
    
    
    
    
    
    
    
    
    
    
    
    115,774Amortization
    
    
    46
    
    
    
    4,133
    
    
    
    33
    
    
    
    
    
    
    
    4,212Total operating costs and
expenses
    
    
    6,970
    
    
    
    431,425
    
    
    
    251,109
    
    
    
    (36
    )
    
    
    689,468Income (loss) from
operations
    
    
    (6,970
    )
    
    
    (46,776
    )
    
    
    40,226
    
    
    
    
    
    
    
    (13,520
    )Other income (expense):Equity earnings in
affiliates, net of tax
    
    
    9,161
    
    
    
    
    
    
    
    
    
    
    
    (9,161
    )
    
    
    Interest, net
    
    
    (41,727
    )
    
    
    57
    
    
    
    (1,124
    )
    
    
    
    
    
    
    (42,794
    )Other
    
    
    72
    
    
    
    88
    
    
    
    (723
    )
    
    
    
    
    
    
    (563
    )Total other income
(expense)
    
    
    (32,494
    )
    
    
    145
    
    
    
    (1,847
    )
    
    
    (9,161
    )
    
    
    (43,357
    )Income (loss) before income
taxes
    
    
    (39,464
    )
    
    
    (46,631
    )
    
    
    38,379
    
    
    
    (9,161
    )
    
    
    (56,877
    )Income tax benefit
(expense)
    
    
    
    
    
    
    29,580
    
    
    
    (12,167
    )
    
    
    
    
    
    
    17,413Net income (loss)
    
    $
    (39,464
    )
    
    $
    (17,051
    )
    
    $
    26,212
    
    
    $
    (9,161
    )
    
    $
    (39,464
    )
 - 67 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(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)
    
    $
    (39,464
    )
    
    $
    (17,051
    )
    
    $
    26,212
    
    
    $
    (9,161
    )
    
    $
    (39,464
    )Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:Depreciation and amortization
    
    
    46
    
    
    
    53,310
    
    
    
    14,316
    
    
    
    
    
    
    
    67,672Amortization and write-off of debt
issuance costs
    
    
    2,089
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,089Impairment of goodwill
    
    
    
    
    
    
    115,774
    
    
    
    
    
    
    
    
    
    
    
    115,774Stock based compensation
    
    
    7,902
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,902Allowance for bad debts
    
    
    
    
    
    
    3,283
    
    
    
    
    
    
    
    
    
    
    
    3,283Equity earnings in affiliates
    
    
    (9,161
    )
    
    
    
    
    
    
    
    
    
    
    9,161
    
    
    
    Deferred income taxes
    
    
    (13,620
    )
    
    
    (16,959
    )
    
    
    630
    
    
    
    
    
    
    
    (29,949
    )(Gain) on sale of equipment
    
    
    
    
    
    
    (1,485
    )
    
    
    (277
    )
    
    
    
    
    
    
    (1,762
    )(Gain) on asset dispositions
    
    
    
    
    
    
    (166
    )
    
    
    
    
    
    
    
    
    
    
    (166
    )Changes in operating assets and
liabilities, net of acquisitions:(Increase) in trade receivables
    
    
    
    
    
    
    (7,168
    )
    
    
    (20,331
    )
    
    
    
    
    
    
    (27,499
    )(Increase) in inventories
    
    
    
    
    
    
    (7,037
    )
    
    
    (2,682
    )
    
    
    
    
    
    
    (9,719
    )(Increase) decrease in other
current assets
    
    
    211
    
    
    
    219
    
    
    
    (2,053
    )
    
    
    
    
    
    
    (1,623
    )(Increase) decrease in other assets
    
    
    (138
    )
    
    
    (83
    )
    
    
    1,445
    
    
    
    
    
    
    
    1,224Increase in accounts payable
    
    
    
    
    
    
    9,427
    
    
    
    12,476
    
    
    
    
    
    
    
    21,903(Decrease) increase in accrued
interest
    
    
    223
    
    
    
    (33
    )
    
    
    377
    
    
    
    
    
    
    
    567(Decrease) increase in accrued
expenses
    
    
    (1,379
    )
    
    
    3,823
    
    
    
    (1,313
    )
    
    
    
    
    
    
    1,131(Decrease) in other liabilities
    
    
    (31
    )
    
    
    (178
    )
    
    
    (921
    )
    
    
    
    
    
    
    (1,130
    )Increase in accrued salaries,
benefits and payroll taxes
    
    
    
    
    
    
    221
    
    
    
    3,231
    
    
    
    
    
    
    
    3,452Net cash provided (used) by
operating activities
    
    
    (53,322
    )
    
    
    135,897
    
    
    
    31,110
    
    
    
    
    
    
    
    113,685Cash Flows from Investing Activities:Acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (53,709
    )
    
    
    
    
    
    
    (53,709
    )Net sales of investment interests
    
    
    
    
    
    
    1,374
    
    
    
    
    
    
    
    
    
    
    
    1,374Purchase of property and equipment
    
    
    
    
    
    
    (81,724
    )
    
    
    (72,744
    )
    
    
    
    
    
    
    (154,468
    )Deposits on asset commitments
    
    
    
    
    
    
    (20,667
    )
    
    
    10,766
    
    
    
    
    
    
    
    (9,901
    )Investment in affiliates
    
    
    (58,370
    )
    
    
    
    
    
    
    
    
    
    
    58,370
    
    
    
    Notes receivable from affiliates
    
    
    (6,075
    )
    
    
    
    
    
    
    
    
    
    
    6,075
    
    
    
    Proceeds from asset dispositions
    
    
    
    
    
    
    3,000
    
    
    
    
    
    
    
    
    
    
    
    3,000Proceeds from sale of equipment
    
    
    
    
    
    
    11,046
    
    
    
    434
    
    
    
    
    
    
    
    11,480Net cash provided (used) in
investing activities
    
    
    (64,445
    )
    
    
    (86,971
    )
    
    
    (115,253
    )
    
    
    64,445
    
    
    
    (202,224
    )
 - 68 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOW (Continued)
 Allis-
    
    
    
    
    
    
    OtherChalmers
    
    
    
    
    
    
    Subsidiaries(Parent/
    
    
    Subsidiary
    
    
    (Non-
    
    
    Consolidated
    
    
    ConsolidatingGuarantor)
    
    
    Guarantors
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalCash Flows from Financing Activities:Proceeds from issuance of
long-term debt
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    25,000Payments on long-term debt
    
    
    
    
    
    
    (6,029
    )
    
    
    (3,876
    )
    
    
    
    
    
    
    (9,905
    )Net borrowings on lines of credit
    
    
    36,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,500Proceeds from parent contributions
    
    
    
    
    
    
    
    
    
    
    58,370
    
    
    
    (58,370
    )
    
    
    Accounts receivable from affiliates
    
    
    81,150
    
    
    
    
    
    
    
    
    
    
    
    (81,150
    )
    
    
    Accounts payable to affiliates
    
    
    
    
    
    
    (81,150
    )
    
    
    
    
    
    
    81,150
    
    
    
    Note payable to affiliate
    
    
    
    
    
    
    
    
    
    
    6,075
    
    
    
    (6,075
    )
    
    
    Proceeds from exercise of options
    
    
    633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    633Tax benefit on stock plans
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9Debt issuance costs
    
    
    (525
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (525
    )Net cash provided (used)
by financing activities
    
    
    117,767
    
    
    
    (87,179
    )
    
    
    85,569
    
    
    
    (64,445
    )
    
    
    51,712Net increase (decrease) in cash
and cash equivalents
    
    
    
    
    
    
    (38,253
    )
    
    
    1,426
    
    
    
    
    
    
    
    (36,827
    )Cash and cash equivalents at
beginning of year
    
    
    
    
    
    
    41,176
    
    
    
    2,517
    
    
    
    
    
    
    
    43,693Cash and cash equivalents at end
of year
    
    $
    
    
    
    $
    2,923
    
    
    $
    3,943
    
    
    $
    
    
    
    $
    6,866
 - 69 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 NOTE 15  RELATED PARTY TRANSACTIONS
    NOTE 16  SEGMENT INFORMATION
  Years Ended December 31,2010
    
    
    2009
    
    
    2008Revenues:Oilfield Services
    
    $
    210,617
    
    
    $
    143,564
    
    
    $
    280,835Drilling & Completion
    
    
    378,154
    
    
    
    303,975
    
    
    
    291,335Rental Services
    
    
    70,894
    
    
    
    58,714
    
    
    
    103,778Total revenues
    
    $
    659,665
    
    
    $
    506,253
    
    
    $
    675,948Operating Income (Loss):Oilfield Services
    
    $
    15,393
    
    
    $
    (14,691
    )
    
    $
    38,643Drilling & Completion
    
    
    4,369
    
    
    
    19,222
    
    
    
    40,226Rental Services
    
    
    4,115
    
    
    
    140
    
    
    
    (74,361
    )General corporate
    
    
    (22,314
    )
    
    
    (13,218
    )
    
    
    (18,028
    )Total income (loss) from operations
    
    $
    1,563
    
    
    $
    (8,547
    )
    
    $
    (13,520
    )Depreciation and Amortization Expense:Oilfield Services
    
    $
    32,294
    
    
    $
    30,589
    
    
    $
    24,725Drilling & Completion
    
    
    26,422
    
    
    
    22,321
    
    
    
    14,316Rental Services
    
    
    29,927
    
    
    
    29,791
    
    
    
    28,131General corporate
    
    
    281
    
    
    
    297
    
    
    
    500Total depreciation and amortization expense
    
    $
    88,924
    
    
    $
    82,998
    
    
    $
    67,672Capital Expenditures:Oilfield Services
    
    $
    26,586
    
    
    $
    11,357
    
    
    $
    58,400Drilling & Completion
    
    
    60,214
    
    
    
    58,393
    
    
    
    73,362Rental Services
    
    
    14,626
    
    
    
    8,230
    
    
    
    22,550General corporate
    
    
    729
    
    
    
    87
    
    
    
    156Total capital expenditures
    
    $
    102,155
    
    
    $
    78,067
    
    
    $
    154,468
 - 70 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 As of December 31,2010
    
    
    2009
    
    
    2008(Restated)Goodwill:Oilfield Services
    
    $
    23,250
    
    
    $
    23,250
    
    
    $
    23,250Drilling & Completion
    
    
    17,389
    
    
    
    17,389
    
    
    
    20,023Rental Services
    
    
    5,694
    
    
    
    
    
    
    
    General corporate
    
    
    
    
    
    
    
    
    
    
    Total goodwill
    
    $
    46,333
    
    
    $
    40,639
    
    
    $
    43,273Assets:Oilfield Services
    
    $
    267,091
    
    
    $
    255,899
    
    
    $
    309,901Drilling & Completion
    
    
    426,633
    
    
    
    441,482
    
    
    
    411,486Rental Services
    
    
    309,315
    
    
    
    307,283
    
    
    
    360,376General corporate
    
    
    35,230
    
    
    
    75,956
    
    
    
    33,288Total assets
    
    $
    1,038,269
    
    
    $
    1,080,620
    
    
    $
    1,115,051
 Years Ended December 31,2010
    
    
    2009
    
    
    2008Revenues:United States
    
    $
    268,883
    
    
    $
    188,436
    
    
    $
    365,529Argentina
    
    
    307,194
    
    
    
    243,913
    
    
    
    288,792Brazil
    
    
    40,716
    
    
    
    43,564
    
    
    
    Other international
    
    
    42,872
    
    
    
    30,340
    
    
    
    21,627Total revenues
    
    $
    659,665
    
    
    $
    506,253
    
    
    $
    675,948
 As of December 31,2010
    
    
    2009
    
    
    2008(Restated)Long Lived Assets:United States
    
    $
    501,117
    
    
    $
    572,727
    
    
    $
    573,975Argentina
    
    
    167,137
    
    
    
    168,681
    
    
    
    212,456Brazil
    
    
    86,949
    
    
    
    82,477
    
    
    
    79,568Other international
    
    
    65,753
    
    
    
    58,487
    
    
    
    23,814Total long lived assets
    
    $
    820,956
    
    
    $
    882,372
    
    
    $
    889,813
 Oilfield
    
    
    Drilling &
    
    
    RentalServices
    
    
    Completion
    
    
    Services
    
    
    TotalGoodwill:Balance as of December 31, 2007
    
    $
    30,493
    
    
    $
    1,523
    
    
    $
    106,382
    
    
    $
    138,398Goodwill acquired during period
    
    
    3,000
    
    
    
    18,500
    
    
    
    
    
    
    
    21,500Asset dispositions
    
    
    (851
    )
    
    
    
    
    
    
    
    
    
    
    (851
    )Impairment charges
    
    
    (9,392
    )
    
    
    
    
    
    
    (106,382
    )
    
    
    (115,774
    )Balance as of December 31, 2008
    
    
    23,250
    
    
    
    20,023
    
    
    
    
    
    
    
    43,273Purchase price and other adjustments
    
    
    
    
    
    
    (2,634
    )
    
    
    
    
    
    
    (2,634
    )Balance as of December 31, 2009
    
    
    23,250
    
    
    
    17,389
    
    
    
    
    
    
    
    40,639Goodwill acquired during period
    
    
    
    
    
    
    
    
    
    
    5,694
    
    
    
    5,694Balance as of December 31, 2010
    
    $
    23,250
    
    
    $
    17,389
    
    
    $
    5,694
    
    
    $
    46,333
 - 71 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
 NOTE 17  SUPPLEMENTAL CASH FLOWS INFORMATION
 Years Ended December 31,2010
    
    
    2009
    
    
    2008Interest paid
    
    $
    43,940
    
    
    $
    49,605
    
    
    $
    46,541Income taxes paid
    
    $
    3,575
    
    
    $
    6,242
    
    
    $
    20,670Other non-cash investing and financing transactions:Insurance premiums financed
    
    $
    2,875
    
    
    $
    3,204
    
    
    $
    2,995Assets transferred as investment in joint venture
    
    
    
    
    
    
    1,639
    
    
    
    Receivable related to sale of investment
    
    
    274
    
    
    
    
    
    
    
    Preferred stock dividend
    
    
    2,548
    
    
    
    637
    
    
    
    Tax benefit on stock plans
    
    
    
    
    
    
    2,335
    
    
    
    Non-cash investing and financing transactions in connection with acquisitions:Fair value of Property and equipment
    
    $
    
    
    
    $
    
    
    
    $
    Fair value of goodwill and other intangibles
    
    
    2,000
    
    
    
    (1,343
    )
    
    
    3,000$
    2,000
    
    
    $
    (1,343
    )
    
    $
    3,000Accrued expense
    
    $
    
    
    
    $
    (1,343
    )
    
    $
    3,000Stockholders equity
    
    
    2,000
    
    
    
    
    
    
    
    $
    2,000
    
    
    $
    (1,343
    )
    
    $
    3,000Non-cash investing and financing transactions in connection with asset disposition:Value of goodwill and other intangibles disposed
    
    $
    
    
    
    $
    
    
    
    $
    2,246Value of inventory financed
    
    
    
    
    
    
    
    
    
    
    509Value of property and equipment disposed
    
    
    
    
    
    
    
    
    
    
    337Accrued expenses
    
    
    
    
    
    
    
    
    
    
    10Fair value of note receivable
    
    $
    
    
    
    $
    
    
    
    $
    3,102
 NOTE 18  LEGAL MATTERS
   - 72 -




---



##### Table of Contents



ALLIS-CHALMERS ENERGY INC.
Notes to Consolidated Financial Statements-(Continued)
    NOTE 19  SUBSEQUENT EVENT
   
 NOTE 20  SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
 First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter(Restated)Year 2010Revenues
    
    $
    140,370
    
    
    $
    158,644
    
    
    $
    174,288
    
    
    $
    186,363Operating income (loss)
    
    
    (752
    )
    
    
    4,134
    
    
    
    11,545
    
    
    
    (13,364
    )Net loss attributed to common stockholders
    
    $
    (10,168
    )
    
    $
    (6,016
    )
    
    $
    (3,203
    )
    
    $
    (60,060
    )Loss per common share:Basic
    
    $
    (0.14
    )
    
    $
    (0.08
    )
    
    $
    (0.04
    )
    
    $
    (0.83
    )Diluted
    
    $
    (0.14
    )
    
    $
    (0.08
    )
    
    $
    (0.04
    )
    
    $
    (0.83
    )
 First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterYear 2009Revenues
    
    $
    145,103
    
    
    $
    112,505
    
    
    $
    120,016
    
    
    $
    128,629Operating income (loss)
    
    
    7,771
    
    
    
    (12,543
    )
    
    
    (3,070
    )
    
    
    (705
    )Net loss attributed to common stockholders
    
    $
    (2,605
    )
    
    $
    (125
    )
    
    $
    (10,280
    )
    
    $
    (9,482
    )Income (loss) per common share:Basic
    
    $
    (0.07
    )
    
    $
    0.00
    
    
    $
    (0.14
    )
    
    $
    (0.13
    )Diluted
    
    $
    (0.07
    )
    
    $
    0.00
    
    
    $
    (0.14
    )
    
    $
    (0.13
    )
 - 73 -




---



##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 (a) Evaluation Of Disclosure Controls And Procedures
   (b) Managements Report on Internal Control Over Financial Reporting
    - 74 -




---



##### Table of Contents



Restatement of the Consolidated Financial Statements
  Plan for Remediation of Material Weakness
  Management Report on Internal Control Over Financial Reporting
  (c) Change in Internal Control Over Financial Reporting.
  
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  - 75 -




---



##### Table of Contents



ITEM 13 . CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  Fiscal YearFee Category
    
    2010
    
    
    2009Audit Fees(1)
    
    $
    813,661
    
    
    $
    863,096Audit Related Fees(2)
    
    
    171,022
    
    
    
    20,026Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    $
    984,683
    
    
    $
    883,122
 
 (1)
    
    Includes fees and out-of-pocket charges paid for audit of our annual financial statements
and reviews of the related quarterly financial statements.(2)
    
    Includes fees paid for assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements and are not reported under Audit
Fees. These services include accounting and reporting consultations.  Pre-Approval Policies and Procedures
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    (1) Financial Statements:The following financial statements for Allis-Chalmers Energy Inc.
and Subsidiaries are included in Item 8. Financial Statements and Supplementary DataConsolidated Balance Sheets as of December 31, 2010 and 2009.Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008.Consolidated Statement of Stockholders Equity for the years ended December 31, 2010, 2009
and 2008.Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008.Notes to Consolidated Financial Statements.(2) Financial Statement SchedulesSchedule II  Valuation and Qualifying AccountsAll other schedules are omitted because they are not applicable, not required, or the
information is included in the financial statements or the notes thereto.(3) ExhibitsThe exhibits listed on the accompanying Exhibit Index are incorporated by reference into
this annual report on Form 10-K.
 - 76 -




---



##### Table of Contents



(2)
    
    Financial Statement Schedule:
 Schedule II  Valuation and Qualifying Accounts
 Allis-Chalmers Energy Inc.
Valuation and Qualifying Accounts
 Additions
    
    
    AdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    Other
    
    
    
    
    
    
    End ofDescription
    
    of Period
    
    
    Expense
    
    
    Account
    
    
    Deductions
    
    
    Period(In thousands)Year Ended December 31, 2010:Allowance for doubtful accounts
    
    $
    4,923
    
    
    $
    368
    
    
    $
    
    
    
    $
    (930
    )
    
    $
    4,361Deferred tax assets valuation allowance
    
    
    13,999
    
    
    
    44,344
    
    
    
    
    
    
    
    
    
    
    
    58,343Year Ended December 31, 2009:Allowance for doubtful accounts
    
    
    4,205
    
    
    
    2,835
    
    
    
    
    
    
    
    (2,117
    )
    
    
    4,923Deferred tax assets valuation allowance
    
    
    13,265
    
    
    
    2,076
    
    
    
    (1,342
    )
    
    
    
    
    
    
    13,999Year Ended December 31, 2008:Allowance for doubtful accounts
    
    
    1,924
    
    
    
    3,283
    
    
    
    
    
    
    
    (1,002
    )
    
    
    4,205Deferred tax assets valuation allowance
    
    
    
    
    
    
    
    
    
    
    13,265
    
    
    
    
    
    
    
    13,265
  - 77 -




---



##### Table of Contents



SIGNATURES
  ALLIS-CHALMERS ENERGY INC./s/ JORGEN RASMUSSENJorgen RasmussenChief Executive Officer and Chairman  Name
    
    Title
    
    Date/s/ JORGEN RASMUSSEN

Jorgen Rasmussen
    
    Chairman and Chief Executive Officer
(Principal Executive Officer)
    
    August 31, 2011/s/ CHRISTOPH BAUSCH

Christoph Bausch
    
    Chief Financial Officer
(Principal Financial Officer)
    
    August 31, 2011/s/ THORLEIF EGELI

Thorleif Egeli
    
    Director
    
    August 31, 2011/s/ LARS BETHUELSEN

Lars Bethuelsen
    
    Director
    
    August 31, 2011/s/ MAX BOUTHILLETTE

Max Bouthillette
    
    Director
    
    August 31, 2011
 - 78 -




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    Description2.1
    
    First Amended Disclosure Statement pursuant to Section 1125
of the Bankruptcy Code, dated September 14, 1988, which
includes the First Amended and Restated Joint Plan of
Reorganization dated September 14, 1988 (incorporated by
reference to Registrants Current Report on Form 8-K dated
December 1, 1988).2.2
    
    Reorganization Trust Agreement dated September 14, 1988 by
and between Registrant and John T. Grigsby, Jr., Trustee
(incorporated by reference to Exhibit D of the First Amended
and Restated Joint Plan of Reorganization dated September 14,
1988 included in Registrants Current Report on Form 8-K
dated December 1, 1988).2.3
    
    Agreement and Plan of Merger dated as of May 9, 2001 by and
among Registrant, Allis-Chalmers Acquisition Corp. and Oil
Quip Rentals, Inc. (incorporated by reference to Exhibit 2.1
to the Registrants Current Report on Form 8-K filed May 15,
2001).2.4
    
    Stock Purchase Agreement dated February 1, 2002 by and
between Registrant and Jens H. Mortensen, Jr. (incorporated
by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K filed February 21, 2002).2.5
    
    Stock Purchase Agreement dated February 1, 2002 by and among
Registrant, Energy Spectrum Partners LP, and Strata
Directional Technology, Inc. (incorporated by reference to
Exhibit 2.10 to the Registrants Annual Report on Form 10-K
for the year ended December 31, 2001).2.6
    
    Stock Purchase Agreement dated August 10, 2004 by and among
Allis-Chalmers Corporation and the investors named thereto
(incorporated by reference to Exhibit 10.37 to the
Registration Statement on Form S-1 (Registration No. 118916)
filed on September 10, 2004).2.7
    
    Amendment to Stock Purchase Agreement dated August 10, 2004
(incorporated by reference to Exhibit 10.38 to the
Registration Statement on Form S-1 (Registration No. 118916)
filed on September 10, 2004).2.8
    
    Addendum to Stock Purchase Agreement dated September 24, 2004
(incorporated by reference to Exhibit 10.55 to Registrants
Current Report on Form 8-K filed on September 30, 2004).2.9
    
    Asset Purchase Agreement dated November 10, 2004 by and among
AirComp LLC, a Delaware limited liability company, Diamond
Air Drilling Services, Inc., a Texas corporation, and Marquis
Bit Co., L.L.C., a New Mexico limited liability company, Greg
Hawley and Tammy Hawley, residents of Texas and Clay Wilson
and Linda Wilson, residents of New Mexico (incorporated by
reference to Exhibit 10.61 to the Registrants Current Report
on Form 8-K filed on November 16, 2004).2.10
    
    Purchase Agreement and related Agreements by and among
Allis-Chalmers Corporation, Chevron USA, Inc., Dale Redman
and others dated December 10, 2004 (incorporated by reference
to Exhibit 10.63 to the Registrants Current Report on Form
8-K filed on December 16, 2004).2.11
    
    Stock Purchase Agreement dated April 1, 2005, by and among
the Registrant, Thomas Whittington, Sr., Werlyn R. Bourgeois
and SAM and D, LLC. (incorporated by reference to Exhibit
10.51 to the Registrants Current Report on Form 8-K filed on
April 5, 2005).2.12
    
    Stock Purchase Agreement effective May 1, 2005, by and among
the Registrant, Wesley J. Mahone, Mike T. Wilhite, Andrew D.
Mills and Tim Williams (incorporated by reference to Exhibit
10.51 to the Registrants Current Report on Form 8-K filed on
May 6, 2005).2.13
    
    Purchase Agreement dated July 11, 2005 among the Registrant,
Mountain Compressed Air, Inc. and M-I, L.L.C. (incorporated
by reference to Exhibit 10.42 to the Registrants Current
Report on Form 8-K filed on July 15, 2005).2.14
    
    Asset Purchase Agreement dated July 11, 2005 between AirComp
LLC, W.T. Enterprises, Inc. and William M. Watts
(incorporated by reference to Exhibit 10.43 to the
Registrants Current Report on Form 8-K filed on July 15,
2005).
 - 79 -




---



##### Table of Contents



Exhibit
    
    Description2.15
    
    Asset Purchase Agreement by and between Patterson Services,
Inc. and Allis-Chalmers Tubular Services, Inc. (incorporated
by reference to Exhibit 10.44 to the Registrants Current
Report on Form 8-K filed on September 8, 2005).2.16
    
    Stock Purchase Agreement dated as of December 20, 2005
between the Registrant and Joe Van Matre (incorporated by
reference to Exhibit 10.33 to the Registrants Annual Report
on Form 10-K for the year ended December 31, 2005).2.17
    
    Stock Purchase Agreement, dated as of April 27, 2006, by and
among Bridas International Holdings Ltd., Bridas Central
Company Ltd., Associated Petroleum Investors Limited, and the
Registrant. (incorporated by reference to Exhibit 2.3 to the
Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 2006)2.18
    
    Stock Purchase Agreement, dated as of October 17, 2006, by
and between Allis-Chalmers Production Services, Inc. and
Randolph J. Hebert (incorporated by reference to Exhibit 10.1
to the Registrants Current Report on Form 8-K filed on
October 19, 2006).2.19
    
    Asset Purchase Agreement, dated as of October 25, 2006, by
and between the Registrant and Oil & Gas Rental Services,
Inc. (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed on October 26,
2006).2.20
    
    Agreement and Plan of Merger by and among the Registrant,
Bronco Drilling Company, Inc. and Elway Merger Sub, Inc.,
dated as of January 23, 2008 (incorporated by reference to
Exhibit 2.1 to the Registrants Current Report on Form 8-K
filed on January 24, 2008).2.21
    
    First Amendment, dated as of June 1, 2008, to the Agreement
and Plan of Merger, by and among the Registrant, Elway Merger
Sub, Inc. and Bronco Drilling Company, Inc. (incorporated by
reference to Exhibit 2.1 to the Registrants Current Report
on Form 8-K filed on June 2, 2008).2.22
    
    Stock Purchase Agreement, dated December 19, 2008, by and
between the Registrant and BrazAlta Resources Corp.
(incorporated by reference to Exhibit 2.22 to the
Registrants Annual Report on Form 10-K filed on March 9,
2009).2.23
    
    Agreement and Plan of Merger, dated as of August 12, 2010, by
and among Seawell Limited, Wellco Sub Company and
Allis-Chalmers Energy Inc. (incorporated by reference to
Exhibit 2.1 to the Registrants Current Report on Form 8-K
filed August 13, 2010).2.24
    
    Amendment Agreement, dated as of October 1, 2010, by and
among Seawell Limited, Wellco Sub Company and Allis-Chalmers
Energy Inc. (incorporated by reference to Exhibit 2.1 to the
Registrants Current Report on Form 8-K filed October 5,
2010).3.1
    
    Amended and Restated Certificate of Incorporation of
Registrant (incorporated by reference to Exhibit 3.1 to the
Registrants Annual Report on Form 10-K for the year ended
December 31, 2001).3.2
    
    Certificate of Designation, Preferences and Rights of the
Series A 10% Cumulative Convertible Preferred Stock ($.01 Par
Value) of Registrant (incorporated by reference to Exhibit
3.1 to the Registrants Current Report on Form 8-K filed
February 21, 2002).3.3
    
    Second Amended and Restated By-laws of Registrant
(incorporated by reference to Exhibit 3.1. to the
Registrants Current Report of Form 8-K filed April 3, 2008).3.4
    
    Certificate of Amendment of Certificate of Incorporation
filed with the Delaware Secretary of State on June 9, 2004
(incorporated by reference to Exhibit 3.3 to the Registrants
Quarterly Report on Form 10-Q for the quarter ended June 30,
2004).3.5
    
    Certificate of Amendment of Certificate of Incorporation
filed with the Delaware Secretary of State on January 5, 2005
(incorporated by reference to Exhibit 3.5 to the Registrants
Current Report on Form 8-K filed January 11, 2005).3.6
    
    Certificate of Amendment of Certificate of Incorporation
filed with the Delaware Secretary of State on August 16, 2005
(incorporated by reference to Exhibit 3.5 to the Registrants
Current Report on Form 8-K filed August 17, 2005).
 - 80 -




---



##### Table of Contents



Exhibit
    
    Description3.7
    
    Certificate of Amendment to Amended and Restated Certificate
of Incorporation filed with the Delaware Secretary of State
on November 9, 2009 (incorporated by reference to Exhibit 3.7
to the Registrants Annual Report of Form 10-K for the year
ended December 31, 2009).3.8
    
    Certificate of Designations of 7% Convertible Perpetual
Preferred Stock (incorporated by reference to Exhibit 3.1 to
the Registrants Current Report on Form 8-K filed July 1,
2009).3.9
    
    Certificate of Amendment to Certificate of Designations of
7.0% Convertible Perpetual Preferred Stock of the Registrant,
dated February 23, 2011 (incorporated by reference to Exhibit
3.2 to the Registrants Current Report on Form 8-K filed
March 1, 2011).3.10
    
    Certificate of Merger of the Registrant with and into Wellco
Sub Company, dated February 23, 2011 (incorporated by
reference to Exhibit 3.1 to the Registrants Current Report
on Form 8-K filed March 1, 2011).4.1
    
    Specimen Stock Certificate of Common Stock of the Registrant
(incorporated by reference to Exhibit 4.1 to the Registrants
Quarterly Report on Form 10-Q for the quarter ended June 30,
2004).4.2
    
    Registration Rights Agreement dated as of March 31, 1999, by
and between Allis-Chalmers Corporation and the Pension
Benefit Guaranty Corporation (incorporated by reference to
Exhibit 10.3 to the Registrants Quarterly Report on Form
10-Q for the quarter ended June 30, 1999).4.3
    
    Registration Rights Agreement dated as of January 29, 2007 by
and among the Registrant, the Guarantors named therein and
the Initial Purchasers named therein (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report
on Form 8-K filed on January 29, 2007).4.4
    
    Registration Rights Agreement dated as of January 18, 2006 by
and among the Registrant, the Guarantors named therein and
the Initial Purchasers named therein (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report
on Form 8-K filed on January 24, 2006).4.5
    
    Registration Rights Agreement dated as of August 14, 2006 by
and among the Registrant, the guarantors listed on Schedule A
thereto and RBC Capital Markets Corporation (incorporated by
reference to Exhibit 10.1 to the Registrants Form 8-K filed
on August 14, 2006).4.6
    
    Indenture dated as of January 18, 2006 by and among the
Registrant, the Guarantors named therein and Wells Fargo
Bank, N.A., as trustee (incorporated by reference to Exhibit
4.1 to the Registrants Current Report on Form 8-K filed on
January 24, 2006).4.7
    
    First Supplemental Indenture dated as of August 11, 2006 by
and among Allis-Chalmers GP, LLC, Allis-Chalmers LP, LLC,
Allis-Chalmers Management, LP, Rogers Oil Tool Services,
Inc., the Registrant, the other Guarantors (as defined in the
Indenture referred to therein) and Wells Fargo Bank, N.A
(incorporated by reference to Exhibit 4.2 to the Registrants
Current Report on Form 8-K filed on August 14, 2006).4.8
    
    Second Supplemental Indenture dated as of January 23, 2007 by
and among Petro-Rentals, Incorporated, the Registrant, the
other Guarantor parties thereto and Wells Fargo Bank, N.A.,
as trustee (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed on January 24,
2007).4.9
    
    Third Supplemental Indenture, dated February 23, 2011, by and
among the Registrant, the other Guarantors parties thereto
and Wells Fargo Bank N.A., as Trustee, relating to the 9.0%
Senior Notes due 2014 (incorporated by reference to Exhibit
10.1 to the Registrants Current Report on Form 8-K filed
March 1, 2011).4.10
    
    Indenture, dated as of January 29, 2007, by and among the
Registrant, the Guarantors named therein and Wells Fargo
Bank, N.A. (incorporated by reference to Exhibit 4.1 to the
Registrants Current Report on Form 8-K filed on January 29,
2007).4.11
    
    Supplemental Indenture, dated February 23, 2011, by and among
the Registrant, the other Guarantors parties thereto and
Wells Fargo Bank N.A., as Trustee, relating to the 8.5%
Senior Notes due 2017 (incorporated by reference to Exhibit
10.2 to the Registrants Current Report on Form 8-K filed
March 1, 2011).
 - 81 -




---



##### Table of Contents



Exhibit
    
    Description4.12
    
    Form of 9.0% Senior Note due 2014 (incorporated by reference
to Exhibit A to Exhibit 4.1 to the Registrants Current
Report on Form 8-K filed on January 24, 2006).4.13
    
    Form of 8.5% Senior Note due 2017 (incorporated by reference
to Exhibit A to Exhibit 4.1 to the Registrants Current
Report on Form 8-K filed on January 29, 2007).4.14
    
    Investment Agreement, dated May 20, 2009, between the
Registrant and Lime Rock Partners V, L.P. (incorporated by
reference to Exhibit 4.1 to the Registrants Current Report
on Form 8-K filed on May 27, 2009).4.15
    
    First Amendment to Investment Agreement, dated June 25, 2009,
between the Registrant and Lime Rock Partners V, L.P.
(incorporated by reference to Exhibit 4.1 to the Registrants
Current Report on Form 8-K filed on July 1, 2009).4.16
    
    Second Amendment to Investment Agreement, dated September 1,
2009, between the Registrant and Lime Rock Partners V, L.P.
(incorporated by reference to Exhibit 4.1 to the Registrants
Current Report on Form 8-K filed on September 2, 2009).4.17
    
    Third Amendment to Investment Agreement, dated September 1,
2009, between the Registrant and Lime Rock Partners V, L.P.
(incorporated by reference to Exhibit 4.1 to the Registrants
Current Report on Form 8-K filed on January 5, 2010).4.18
    
    Fourth Amendment to Investment Agreement, dated July 14,
2010, between the Registrant and Lime Rock Partners V, L.P.
(incorporated by reference to Exhibit 4.1 to the Registrants
Current Report on Form 8-K filed on July 14, 2010).4.19
    
    Fifth Amendment to Investment Agreement, dated September 27,
2010, between the Registrant and Lime Rock Partners V, L.P.
(incorporated by reference to Exhibit 4.1 to the Registrants
Current Report on Form 8-K filed on September 30, 2010).4.20
    
    Registration Rights Agreement, dated June 26, 2009, between
the Registrant and Lime Rock Partners V, L.P. (incorporated
by reference to Exhibit 4.2 to the Registrants Current
Report on Form 8-K filed on July 1, 2009).10.1
    
    Amended and Restated Retiree Health Trust Agreement dated
September 14, 1988 by and between Registrant and Wells Fargo
Bank (incorporated by reference to Exhibit C-1 of the First
Amended and Restated Joint Plan of Reorganization dated
September 14, 1988 included in Registrants Current Report on
Form 8-K dated December 1, 1988).10.2
    
    Amended and Restated Retiree Health Trust Agreement dated
September 18, 1988 by and between Registrant and Firstar
Trust Company (incorporated by reference to Exhibit C-2 of
the First Amended and Restated Joint Plan of Reorganization
dated September 14, 1988 included in Registrants Current
Report on Form 8-K dated December 1, 1988).10.3
    
    Product Liability Trust Agreement dated September 14, 1988 by
and between Registrant and Bruce W. Strausberg, Trustee
(incorporated by reference to Exhibit E of the First Amended
and Restated Joint Plan of Reorganization dated September 14,
1988 included in Registrants Current Report on Form 8-K
dated December 1, 1988).10.4*
    
    Allis-Chalmers Savings Plan (incorporated by reference to
Registrants Annual Report on Form 10-K for the year ended
December 31, 1988).10.5*
    
    Allis-Chalmers Consolidated Pension Plan (incorporated by
reference to Registrants Annual Report on Form 10-K for the
year ended December 31, 1988).10.6
    
    Agreement dated as of March 31, 1999 by and between
Registrant and the Pension Benefit Guaranty Corporation
(incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).
 - 82 -




---



##### Table of Contents



Exhibit
    
    Description10.7
    
    Letter Agreement dated May 9, 2001 by and between Registrant
and the Pension Benefit Guarantee Corporation (incorporated
by reference to Exhibit 99.1 to the Registrants Current
Report on Form 8-K filed May 15, 2001).10.8
    
    Termination Agreement dated May 9, 2001 by and between
Registrant, the Pension Benefit Guarantee Corporation and
others (incorporated by reference to Exhibit 99.2 to the
Registrants Current Report on Form 8-K filed on May 15,
2001).10.9*
    
    Executive Employment Agreement, dated April 1, 2007, by and
between the Registrant and Munawar H. Hidayatallah
(incorporated by reference to Exhibit 10.3 to the
Registrants Current Report on Form 8-K filed on November 6,
2007).10.10*
    
    Amendment to Executive Employment Agreement, dated as of
December 31, 2008, by and between the Registrant and Munawar
H. Hidayatallah (incorporated by reference to Exhibit 10.2 to
the Registrants Current Report on Form 8-K filed on January
7, 2009).10.11*
    
    Amended and Restated Employment Agreement, dated August 5,
2009, between the Registrant and Victor M. Perez.
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed on August 11,
2009).10.12*
    
    Employment Agreement, effective April 1, 2010, by and between
the Registrant and Victor M. Perez (incorporated by reference
to Exhibit 10.1 to the Registrants Current Report on Form
8-K filed on August 17, 2010).10.13*
    
    Amendment to Executive Employment Agreement, dated effective
as of February 22, 2011, by and between the Registrant and
Victor M. Perez (incorporated by reference to Exhibit 10.2 to
the Registrants Current Report on Form 8-K filed on February
28, 2011).10.14*
    
    Employment Agreement, effective April 1, 2010, by and between
the Registrant and Theodore F. Pound (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report
on Form 8-K filed on August 17, 2010).10.15*
    
    Amendment to Executive Employment Agreement, dated effective
as of February 22, 2011, by and between the Registrant and
Theodore F. Pound III (incorporated by reference to Exhibit
10.1 to the Registrants Current Report on Form 8-K filed on
February 28, 2011).10.16*
    
    Employment Agreement, effective April 1, 2010, by and between
the Registrant and Terrence P. Keane (incorporated by
reference to Exhibit 10.3 to the Registrants Current Report
on Form 8-K filed on August 17, 2010).10.17*
    
    Employment Agreement, effective April 1, 2010, by and between
the Registrants and Mark Patterson (incorporated by reference
to Exhibit 10.4 to the Registrants Current Report on Form
8-K filed on August 17, 2010).10.18*
    
    Employment Agreement, effective April 1, 2010, by and between
Allis-Chalmers Directional Drilling Services LLC and David K.
Bryan (incorporated by reference to Exhibit 10.5 to the
Registrants Current Report on Form 8-K filed on August 17,
2010).10.19*
    
    Employment Agreement, effective April 21, 2010, by and
between DLS Argentina Limited and Carlos F. Etcheverry
(incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed May 20, 2010).10.20
    
    Strategic Agreement dated July 1, 2003 between Pan American
Energy LLC Sucursal Argentina and DLS Argentina Limited
Sucursal Argentina (incorporated by reference to Exhibit
10.13 to the Registrants Quarterly Report on Form 10-Q filed
on December 29, 2006).10.21
    
    Amendment No. 1 dated May 18, 2005 to Strategic Agreement
between Pan American Energy LLC Sucursal Argentina and DLS
Argentina Limited Sucursal Argentina (incorporated by
reference to Exhibit 10.14 to the Registrants Quarterly
Report on Form 10-Q filed on December 29, 2006).10.22
    
    Amendment No. 2 dated January 1, 2006 between Pan American
Energy LLC Sucursal Argentina and DLS Argentina Limited
Sucursal Argentina (incorporated by reference to Exhibit
10.15 to the Registrants Quarterly Report on Form 10-Q filed
on December 29, 2006).
 - 83 -




---



##### Table of Contents



Exhibit
    
    Description10.23
    
    Investor Rights Agreement, dated December 18, 2006, by and between the Registrant and Oil & Gas
Rental Services, Inc. (incorporated by reference to Exhibit 10.2 to the Registrants Current
Report on Form 8-K filed on December 19, 2006).10.24
    
    First Amendment to Investor Rights Agreement, by and among the Registrant and the holders named
thereto, dated June 23, 2008 (incorporated by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K filed on June 26, 2008).10.25
    
    Investors Rights Agreement dated as of August 18, 2006 by and among the Registrant and the
investors named on Exhibit A thereto (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed on August 14, 2006).10.26*
    
    2003 Incentive Stock Plan (incorporated by reference to Exhibit 4.12 to the Registrants Current
Report on Form 8-K filed August 17, 2005).10.27*
    
    Form of Option Certificate issued pursuant to 2003 Incentive Stock Plan (incorporated by reference
to Exhibit 10.41 to the Registrants Annual Report on Form 10-K for the year ended December 31,
2003).10.28*
    
    Second Amended and Restated 2006 Incentive Plan (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed on November 12, 2009).10.29*
    
    Form of Employee Restricted Stock Agreement pursuant to the Registrants 2006 Incentive Plan
(incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed on
September 18, 2006).10.30*
    
    Form of Employee Nonqualified Stock Option Agreement pursuant to the Registrants 2006 Incentive
Plan (incorporated by reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K
filed on September 18, 2006).10.31*
    
    Form of Employee Incentive Stock Option Agreement pursuant to the Registrants 2006 Incentive Plan
(incorporated by reference to Exhibit 10.4 to the Registrants Current Report on Form 8-K filed on
September 18, 2006).10.32*
    
    Form of Non-Employee Director Restricted Stock Agreement pursuant to the Registrants 2006
Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrants Current Report on
Form 8-K filed on September 18, 2006).10.33*
    
    Form of Non-Employee Director Nonqualified Stock Option Agreement pursuant to the Registrants
2006 Incentive Plan (incorporated by reference to Exhibit 10.6 to the Registrants Current Report
on Form 8-K filed on September 18, 2006).10.34*
    
    Form of Performance Award Agreement, as amended and restated effective March 3, 2010, pursuant to
the Registrants 2006 Incentive Plan (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed on March 9, 2010).10.35
    
    Second Amended and Restated Credit Agreement, dated as of April 26, 2007, by and among the
Registrant, as borrower, Royal Bank of Canada, as administrative agent and collateral agent, RBC
Capital Markets, as lead arranger and sole bookrunner, and the lenders party thereto (incorporated
by reference to Exhibit 10.1 to the Registrants Quarterly Report Form 10-Q filed on May 10,
2007).10.36
    
    First Amendment to Second Amended and Restated Credit Agreement, dated as of December 3, 2007, by
and among the Registrant, the guarantors named thereto, Royal Bank of Canada and the lenders named
thereto (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K
filed on December 6, 2007).10.37
    
    Second Amendment to Second Amended and Restated Credit Agreement, dated as of December 29, 2008,
by and among the Registrant, as borrower, Royal Bank of Canada, as administrative agent, and the
lenders named thereto (incorporated by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K filed on January 7, 2009).10.38
    
    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 Current Report on Form 8-K filed on April 9, 2009).
 - 84 -




---



##### Table of Contents



Exhibit
    
    Description10.39
    
    Fourth Amendment to Second Amended and Restated Credit Agreement, dated May 20, 2009, by and among
Allis-Chalmers Energy Inc., the subsidiary guarantors party thereto, Royal Bank of Canada, as
Administrative Agent and Collateral Agent, and the lenders party thereto (incorporated by
reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed on May 27, 2009).10.40
    
    Fifth Amendment to Second Amended and Restated Credit Agreement, dated as of October 13, 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 Current Report on Form 8-K filed on October 16, 2009).10.41
    
    Sixth Amendment to Second Amended and Restated Credit Agreement, dated as of February 25, 2010, 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 Current Report on Form 8-K filed on March 2, 2010).10.42
    
    Seventh Amendment to Second Amended and Restated Credit Agreement, dated as of November 12, 2010,
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 Current Report on Form 8-K filed on November 12, 2010).10.43*
    
    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 Current Report on Form 8-K filed on March 13, 2009).10.44*
    
    Amended and Restated Performance Award Agreement, dated August 5, 2009, between Allis-Chalmers
Energy Inc. and Victor M. Perez (incorporated by reference to Exhibit 10.2 to the Registrants
Current Report on Form 8-K filed on August 11, 2009).10.45*
    
    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 (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed on March 13, 2009).23.1 
    
    Consent of UHY LLP.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.
 
 *
    
    Compensation Plan or Agreement
    
    Filed herewith. - 85 -