EMPLOYMENT
AGREEMENT

    


    This
Employment Agreement (the “Agreement”), is made effective as of April 21, 2010
by and between DLS Argentina Limited - Sucursal Argentina, the Argentine branch
of a corporation duly organized, validly existing and in good standing under the
laws of the British Virgin Islands (“Employer” and/or “Company”), and Mr. Carlos
F. Etcheverry a resident of Buenos Aires, Argentina (“Employee”).

     

    WITNESSETH

    


    WHEREAS,
the Company is a branch under indirect control of Allis-Chalmers Energy Inc.
(“Allis-Chalmers”), after the Stock Purchase Agreement, dated August 14, 2006
(the “SPA”) when Allis-Chalmers acquired all the shares of DLS Drilling
Logistics and Services Corporation, taking control over it.

    


    WHEREAS, Allis-Chalmers provides
several services to the oil and gas industry and in particular the Company
provides Drilling and Completion services.

    


    WHEREAS, the Company makes an
employment offer to Employee, and Employee accepts it, under an indefinite
period employment relationship governed by Labor Contract Law No. 20,744 of
September 27, 1974 as amended and complemented (the “LCL”).

    


    WHEREAS,
the Employer and Employee desire to enter into this Agreement (i) to describe
the terms and conditions of the employment relationship between the Employer and
the Employee, and (ii) to provide that Employee will not engage in activities
that are detrimental to the Employer upon the termination of said
relationship.

    


    NOW,
THEREFORE, in consideration of the mutual promises contained herein and other
valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the parties agree, as follows:

    


    Section
1.             Employment.  Upon
the terms and subject to the conditions set forth in this Agreement, the
Employee will begin his labor relationship with Employer as of April 21,
2010.  Employee agrees to serve in a management capacity with the
Employer and further agrees to perform such duties attendant to such position and/or
such other positions and duties as may be prescribed by Employer from time to
time.  While employed by Employer, Employee shall devote all his
business time and
efforts to Company’s business.  The Employee title shall be Senior
Vice President of Drilling and Completion of the business of the current
Allis-Chalmers Energy Inc. ́s companies engaged in these businesses.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section
2.             Compensation.

    


    (a)           Starting
when this Agreement is signed, Employee shall receive an annual gross salary of
United States Dollars Four Hundred Thousand (US $ 400,000) (the “Base
Compensation”), payable at regular intervals in accordance with Company’s normal
payroll practices and the LCL.  Employer may consider and declare
increases in the salary it pays and thereby increase his Base Compensation. This Base Compensation
is inclusive of any and all items (“conceptos remunerativos”)
provided for in the applicable law included but not limited to the 13th salary
(“Sueldo Anual
Complenetario, SAC”) of the
LCL.  Employee acknowledges that the compensation established above is
the full remuneration, with the exception of the bonus that may be applicable
under (b) below, that he has right to receive from the Employer.

    


    (b)              Discretionary
Bonus.  Employee shall be eligible to participate in the
Employer’s Cash Incentive Plan for senior executives. The Cash Incentive Plan
for 2010 is described on Exhibit A
hereto.  The calculation will be similar to that of other senior
executive personnel of Allis-Chalmers.  However, due to the
discretionary nature of the bonus plan, the EBITDA goals will be changed to
reflect the Company’s budgeted EBITDA for each successive year and such bonus
plan may be changed in future years at discretion of the Compensation Committee
and Board of Directors.

    


    Section
3.            Benefits.  So
long as Employee is employed by Employer pursuant to this Agreement, he shall be
included as a participant in all employee benefit, retirement, and compensation
plans generally
available to employees of the Company (subject to the eligibility requirements
thereof).  Employee is included in Allis-Chalmers’ Long Term Incentive
Plan for executives and will be provided separately a Stock Option Agreement,
Restricted Stock Agreement and Performance Award Agreement.

    


    Section
4.            Reimbursement of
Expenses.  So long as Employee is employed by the Company
pursuant to this Agreement, Employee shall receive reimbursement from the
Company for all reasonable business expenses incurred in the course of his
employment in conformity with the Company’s policies, upon submission to the
Company of written vouchers and statements for reimbursement in a manner
which complies with
the Company’s policies.

    


    Section
5.            Termination.
Employee’s employment with the Company may be terminated or extinguished in
accordance with the applicable Argentine labor laws.

    


    (a)
Provided the Employee is terminated without cause by the Employer and, provided,
further that Employee does not considers himself indirectly terminated in his
labor relationship with Employer, then and only then, Employee will be entitled
to be paid by the Company an amount equal to his Base Compensation for a period
of one year, this is the total of United States Dollars Four Hundred Thousand
(US $400,000).  This special termination package is inclusive of any
and all items (“conceptos
indemnizatorios”) provided for in the applicable law included but not
limited to the 13th salary
(“Sueldo Anual
Complenetario, SAC”), vacations, prior
notice (“preaviso”) of the LCL. Provided the
above mentioned conditions are met, then said amounts shall be treated, as
follows:

    


    
      	
               
      

            	
              (i)

            	
              the
      amounts corresponding to the legal applicable severance under the LCL
      shall be paid with the final liquidation from Employer to
      Employee;

            


    

     

    
      
         

      

      
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              (ii)

            	
              any
      balance thereof (this is after deducting the payments under Section 5 (i)
      above from the US$400,000) will be divided in twelve (12) consecutive
      monthly installments in and paid for one year starting the month after the
      end of his employment with the Company as payment of the non compete
      obligation set forth on Section 6 of this
  Agreement.

            


    

    


    (b)  If
Employee is terminated without cause by the Employer and, provided, further that
Employee does not considers himself indirectly terminated in his labor
relationship with Employer, and provided Employee is not in breach of the
non-compete provisions of Section 6 hereto, Employee will be entitled to be paid
by the Company an amount equal to his Base Compensation for a period of one
additional year following the one year period described in subsection (a) above,
this is the total of United States Dollars Four Hundred Thousand (US
$400,000).  For purposes of clarity, it is the intention of the
parties that if Employee is terminated without cause and does not breach the
non-compete provisions of Section 6, Employee will receive a total of United
States Dollars Eight Hundred Thousand (US $800,000) paid over a two year
period.  This special termination package is inclusive of any and all
items (“conceptos
indemnizatorios”) provided for in the applicable law included but not
limited to the 13th salary
(“Sueldo Anual
Complenetario, SAC”), vacations, prior
notice (“preaviso”) of the
LCL.  Provided the above mentioned conditions are met, then said
amounts shall be paid in the same manner as the payments set forth in subsection
(a) above.

    


    (c)  If
Employee breaches his non-competition obligation set forth in Section 6 hereto,
then the Employee shall return any of the amounts already paid under subsection
(b) above in full to Employer within five (5) business days of the written
request by Employer, and at the same time Employer will have the right to stop
the payments of any installments remaining under subsection (b).

    


    (d)  Employer shall make
any withholdings that may be applicable by law to the amount described
above.  Employee acknowledges that in this particular situation the
termination package described above is the full amount that he has right to
receive from the Employer.  In the event Employee desires to accept
employment with a competitor as described in Section 6(b)(ii), then Employee
shall notify Employer in writing and within thirty (30) days from such
notification Employee shall be released from his non-compete under Section 6(b)
and at such time Employer shall be released from any further payments pursuant
to Section 5(b) of this Agreement.

    


    Section
6.           Covenants of Confidentiality
and Non-Competition.

    


    (a)           Confidential
Information.  Unless otherwise required to do so by law,
including the order of a court or governmental agency, Employee shall not
divulge or furnish any confidential information including, without limitation,
customer lists, customer files, customer requirements, any other information
regarding customers, price lists, inventory schedules, sales figures, business
plans, trade secrets, inventions, formulae, techniques, computer files, software
programs, processes, systems, concepts, technological developments, know-how or
any other confidential information, acquired by him while employed by the
Company, before or after the the date of this Agreement, which is used in the
business operations of the Company or otherwise in the possession of Employer
(collectively defined as “Confidential Information”) to any person, firm or
corporation, or use any such Confidential Information directly or indirectly for
Employee’s own benefit or for the benefit of any person, firm or entity other
than Employer and the Company, since such Confidential Information are
confidential and shall at all times remain the property of the
Company.  The limitations of this provision shall not apply to
information which is in the public domain, unless such information is available
in the public domain due to a disclosure by Employee in violation of this
Agreement.

     

    
      
         

      

      
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    (b)          Non-Competition.  For
a period of two (2) years after termination of Employee’s employment with the
Employer for any reason, Employee shall not, directly or indirectly, in any
capacity:

    


    
      	
               
      

            	
              (i)

            	
              invest
      (other than investments in publicly-owned companies which constitute not
      more than 1% of the voting securities of any such company) or engage in
      any business that is competitive with that of Employer and/or
      Allis-Chalmers, or

            


    

    


    
      	
               
      

            	
              (ii)

            	
              accept
      employment with or render services to a competitor of Employer and/or
      Allis-Chalmers, in the oil and gas drilling business in Argentina and
      Brazil, as a director, officer, agent, employee or consultant (with or
      without compensation).

            


    

    


    For purposes of clarification, a
company that is primarily engaged in the activities of exploration and
production of oil and gas, that does not otherwise compete with the Company or
Allis-Chalmers, shall not be considered a company that directly or indirectly
competes with the Company or Allis-Chalmers for purposes of this Section
6.

    


    (c)          Return of Confidential
Information and Property.  If Employee’s employment by the
Company is terminated for any reason, Employee will turn over immediately
thereafter to Employer all business correspondence, letters, papers, reports,
customers’ lists, financial statements, records, drawings, computer files,
software, credit reports or other Confidential Information, documents or
property of Employer or the Company in the possession or control of Employee,
all of which are and will continue to be the sole and exclusive property of
Employer or the Company.

    


    (d)          Remedies.  Employee
acknowledges that the covenants of this Section 6 are reasonable in scope and
duration and reasonably necessary and appropriate to protect the goodwill and
other appropriate interests of Employer and/or Allis-Chalmers following
Employee’s termination and that any violation of such covenants by Employee
would result in irreparable harm to Employer and/or Allis-Chalmers, for which
any remedy at law would be inadequate.  In addition to any other
remedy to which it may be entitled, Employer and/Allis-Chalmers shall be
entitled to equitable relief, including restraining orders and specific
performance for any violation of this Section 6.

     

    
      
         

      

      
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    Section
7.       
     Addresses for Communications
and Notices.  For purposes of this Agreement, notices and all
other communications provided for herein shall be in writing and shall be deemed
to have been given when delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

    


    If to
Employee:                  
Carlos F. Etcheverry

    Azucena Villaflor 669 - Piso
12B

    Torres El Faro - Puerto
Madero

    Capital
Federal - Argentina

    


    If to
Employer:                   DLS
Argentina Limited - Sucursal Argentina

    Sarmirnto 663 – Piso 4

    (C1041AAM) Buenos Aires –
Argentina

    Attention: Martin Zoldi

    Facsimile: (54-11)
5129-2919

    


    With a
copy
to:                   Allis-Chalmers
Energy Inc.

    5075
Westheimer, Suite 890

    Houston,
Texas  77056

    Attention: Theodore F. Pound
III

    Facsimile:
(713) 369-0555

    


    Alliani & Bruzzon

    Reconquista
458, Piso 14

    Buenos
Aires (C1003ABJ) - Argentina

    Attention: Pablo J.
Alliani

    Facsimile:
(54-11) 4325-3032

    


    or such
address as either party hereto may have furnished to the other party in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

    


    Section
8.       
    Governing
Law.  The validity, interpretation, and performance of this
Agreement shall be governed by the laws of Argentina without regard to any
choice of laws provisions contained therein.  Any disputes arising
hereunder and all actions to enforce this Agreement must be brought and
maintained in a court located in Argentina.

    


    Section
9.            Modification.  No
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by Employee and
Employer.  No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
any other provisions or conditions at the same or any prior subsequent
time.  No agreements or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.

     

    
      
         

      

      
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    Section
10.           Severability and
Merger.  The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and
effect.  This is the entire agreement between Employer and Employee
concerning the subject matter hereof and all prior agreements with respect to
such subject matter, written or oral, are superseded.

    


    Section
11.           Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
agreement.

     

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    IN
WITNESS WHEREOF, the parties have caused this Agreement to be dated as of May
17, 2010 and to be effective as of the date first written above.

    


    
      
        
          
            	 
      	
                    “Employer”

                  	 
	 
      	 
      	 
	 
      	
                    DLS
      Argentina Limited

                  	 
	 
      	 
      	 
      	 
	 
      	
                    By:

                  	
                    /s/ Victor M. Perez

                  	  
      
	 
      	 
      	
                    Victor
      M. Perez, Vice President

                  	 
	 
      	 
      	 
      	 
	 
      	
                    “Employee”

                  	 
	 
      	 
      	 
      	 
	 
      	
                    By:

                  	 
      	 
	 
      	 
      	
                    /s/ Carlos Etcheverry

                  	  
      
	 
      	 
      	
                    Carlos
      Etcheverry

                  	 


          

        

      

    

     

    
      
         

      

      
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