Allis-Chalmers Energy Reports Second Quarter 2008 Results

Business Wire, August 4, 2008

HOUSTON -- Allis-Chalmers Energy Inc. (NYSE:ALY) today announced results for the three and six months ended June 30, 2008.

Revenues for the second quarter of 2008 rose 13.8% to $163.1 million compared to $143.4 million for the second quarter of 2007. Income from operations for the second quarter of 2008 decreased to $27.7 million compared to $41.5 million in the second quarter of 2007. Net income for the second quarter of 2008 was $10.6 million, or $0.30 per diluted share, compared to $19.5 million, or $0.55 per diluted share in the second quarter of 2007. Results in the second quarter of 2007 include an $8.9 million pre-tax gain on the sale of our capillary tubing assets, equal to approximately $0.16 in earnings per share. Excluding the impact of the gain, the decrease in operating income and net income in the second quarter of 2008 as compared to the second quarter of 2007 was principally due to the reduction in revenues in our Rental Services segment.

Revenues for the first six months of 2008 rose 13.3% to $316.3 million compared to $279.3 million for the first six months of 2007. Income from operations for the first six months of 2008 decreased to $51.3 million compared to $72.9 million for the first six months of 2007. Net income for the first six months of 2008 was $18.6 million, or $0.53 per diluted share, compared to $31.7 million, or $0.93 per diluted share for the first six months of 2007. Results for the first six months of 2007 include an $8.9 million pre-tax gain on the sale of assets, equal to approximately $0.16 in earnings per share.

Adjusted EBITDA was $46.2 million for the second quarter of 2008, compared to $55.4 million for the second quarter of 2007. For the first six months of 2008 Adjusted EBITDA was $88.0 million compared to $100.5 million for the first six months of 2007. Adjusted EBITDA for 2007 includes the $8.9 million gain on the sale of assets. EBITDA and Adjusted EBITDA are non-GAAP financial measures that are not necessarily comparable from one company to another and additional information and discussion regarding EBITDA and Adjusted EBITDA are provided later in this release.

Weighted average shares of common stock outstanding on a diluted basis increased 1% to 35.5 million shares for the second quarter of 2008 compared to 35.2 million shares for the second quarter of 2007. The provision for income taxes for the second quarter of 2008 was $7.0 million, or 39.8% of net income before income taxes, compared to $11.3 million, or 36.7% of net income before income taxes, for the second quarter of 2007.

Micki Hidayatallah, Allis-Chalmers' Chairman and Chief Executive Officer, stated, "In the second quarter of 2008, our operations performed as we had anticipated. Compared to the first quarter of 2008, our net income increased 31.2% and our earnings per share increased 30.4%. We expect that in the second half of 2008 and during 2009, our Oilfield Services Segment, which includes our underbalanced drilling, directional drilling, tubular and production services operations, will see the benefits of our capital expenditure program. In particular, we expect this segment to benefit from the new casing running tools delivered to us in the second quarter of 2008, and the six new coiled tubing units that we expect to receive during the third and fourth quarters of 2008. Our Rental Services segment entered into a 300 day contract in Libya for the rental of drill pipe. We have also increased our presence in the U.S. land market in an effort to replace Rental Services revenues lost as a result of the migration of rigs away from the U.S. Gulf of Mexico. These strategic initiatives resulted in a sequential increase of 48.9% in the operating income of our Rental Services segment in the second quarter of 2008 compared to the first quarter of 2008."

Mr. Hidayatallah also stated, "Our Drilling and Completion segment, while attaining higher levels of both revenue and operating income compared to the first quarter of 2008, faced short term challenges due to the labor and political environment in Argentina. In the second quarter of 2008 the Argentine oil industry experienced strikes in the Neuquen area and a supervisor work slow-down in Comodoro. In addition, rig movements were delayed because of road blockades by the farmers and the builders' union. We also had idle time on our 3000 hp rig in Bolivia because of ever changing tax, royalty and ownership issues facing our customers in that country. Labor-related expenses and other costs have also increased in connection with the delivery of our new rigs prior to their being placed in service. We expect that by the fourth quarter of 2008 we will be operating all of our new workover and drilling rigs at more favorable prices."

Mr. Hidayatallah concluded, "We expect a strong drilling and production market both in the U.S. and internationally in 2009. As demand for oilfield services increases, and equipment utilization improves, Allis-Chalmers anticipates being in a unique position to benefit from its integrated service offerings."