Allis-Chalmers Energy Reports Second Quarter 2008 Results

Business Wire, August 4, 2008

Segment Results for Second Quarter 2008

* Oilfield Services. Revenues were $68.7 million for the three months ended June 30, 2008, an increase of 18.1% compared to $58.1 million in revenues for the three months ended June 30, 2007. Our Oilfield Services segment revenues for the second quarter of 2008 increased compared to the second quarter of 2007 due primarily to our investment in new equipment in 2007 and in 2008, including air-drilling compressors, foam units, casing and tubing tools and coiled tubing units. Results in the Oilfield Services segment also improved due to small acquisitions completed in 2007. These acquisitions added downhole motors, MWD tools and directional drillers and enabled us to expand our directional drilling business in the Northern Rocky Mountains and the Mid-Continent areas. Income from operations decreased to $13.1 million in the second quarter of 2008 compared to $20.6 million in the second quarter of 2007 due to the $8.9 million gain on the sale of capillary assets recognized in the three months ended June 30, 2007. Without this gain in the year-ago quarter, operating income would have increased 11.6% period over period for the reasons enumerated above.

* Drilling and Completion. Revenues for the quarter ended June 30, 2008 for the Drilling and Completion segment were $69.8 million, an increase from $52.9 million in revenues for the quarter ended June 30, 2007. Our Drilling and Completion segment revenues increased in the second quarter of 2008 due to increased pricing for our drilling and workover services in Argentina and the activation of eight new service rigs during the first quarter of 2008 and two new service rigs during the second quarter of 2008. The new service rigs are part of our 20 rig order (16 service and 4 drilling rigs) which we expect to place in service throughout 2008. Income from operations decreased to $9.4 million in the second quarter of 2008 compared to $10.2 million in the second quarter of 2007. This was due primarily to higher wages, other payroll expenses and the increase in administrative costs all relating to labor concessions in Argentina granted by the oil industry during the second half of 2007 and the effect of labor strikes and work slow-downs resulting from the labor and political environment in Argentina. Additionally, operating income was also impacted by a significant increase in our labor force and labor-related expenses in connection with the delivery of new rigs prior to their activation.

* Rental Services. Revenues for the quarter ended June 30, 2008 for the Rental Services segment were $24.7 million, a decrease from $32.4 million in revenues for the quarter ended June 30, 2007. Income from operations decreased to $9.3 million in the second quarter of 2008 compared to $14.8 million in the second quarter of 2007. Our Rental Services segment revenues and operating income for the second quarter of 2008 decreased compared to the prior year due primarily to the decrease in utilization of our rental equipment and a more competitive pricing environment due to a decrease in drilling activity in the Gulf of Mexico.