ALY Allis-Chalmers Energy

Allis-Chalmers Energy Inc. (NYSE: ALY) today announced the acquisition of American Well Control, Inc. for total consideration of approximately $17.2 million in cash and 1.0 million shares of Allis-Chalmers common stock. Based in Conroe, Texas, American Well Control is a leading manufacturer of premium high pressure valves used in hydraulic fracturing in the unconventional gas shale plays.

American Well Control manufactures 4”, 5” and 7”, 10,000 psi to 20,000 psi Torque Master and Hydro Master valves. American Well Control also provides its customers with extensive service, parts and repairs of its manufactured valves. For the twelve-month period ended December 31, 2009, American Well Control generated revenues of approximately $18.5 million and estimated EBITDA of approximately $4.1 million. For the five-month period ended May 31, 2010, revenues were $9.5 million and EBITDA was $2.9 million (unaudited).

Micki Hidayatallah, Chairman and CEO of Allis-Chalmers, stated, “We believe American Well Control has the best frac valve product in the market. We welcome Richard Mitchell and Mark Albert as part of our management team. American Well Control has built a reputation for a quality product with superior service to its customers. With an existing strong position for the frac valve product in the Haynesville Shale, American Well Control intends to increase its presence in the Marcellus, Eagle Ford and Bakken Shale markets by establishing service and repair facilities side by side with Allis-Chalmers’ existing locations. The acquisition of American Well Control increases Allis-Chalmers’ presence in the active, onshore, non-conventional gas markets.”

About Allis-Chalmers

Allis-Chalmers Energy Inc. is a Houston-based multi-faceted oilfield services company. Allis-Chalmers provides services and equipment to oil and natural gas exploration and production companies, domestically primarily in Texas, Louisiana, New Mexico, Oklahoma, Arkansas, offshore in the Gulf of Mexico, and internationally primarily in Argentina, Brazil and Mexico. Allis-Chalmers provides directional drilling services, casing and tubing services, underbalanced drilling, production and workover services with coiled tubing units, rental of drill pipe and blow-out prevention equipment, and international drilling and workover services.

Forward-Looking Statements

This press release contains forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Allis-Chalmers’ business, financial condition, results of operations and prospects. Words such as expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this press release.

Although forward-looking statements in this press release reflect the good faith judgment of our management, such statements can only be based on facts and factors that our management currently knows. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, demand for oil and natural gas drilling services in the areas and markets in which Allis-Chalmers operates, competition, obsolescence of products and services, the ability to obtain financing to support operations, environmental and other casualty risks, and the effect of government regulation.

Further information about the risks and uncertainties that may affect our business are set forth in our most recent filings on Form 10-K (including without limitation in the "Risk Factors" section) and in our other SEC filings and publicly available documents. We urge readers not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Allis-Chalmers undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this press release.

Use of EBITDA & Regulation G Reconciliation

This press release contains references to EBITDA, a non-GAAP financial measure that complies with federal securities regulations when it is defined as net income (the most directly comparable GAAP financial measure) before interest, taxes, depreciation and amortization. Allis-Chalmers defines EBITDA accordingly for the purposes of this press release. EBITDA, as used and defined by Allis-Chalmers, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other Income or cash flow statement data prepared in accordance with GAAP. However, we believe EBITDA is useful to an investor in evaluating our operating performance because these measures:

• are widely used by investors in the energy industry to measure a company’s operating performance without regard to the items excluded from EBITDA, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;
• help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure and asset base from our operating results; and
• are used by our management for various purposes, including as a measure of operating performance, in presentations to our board of directors, as a basis for strategic planning and forecasting, as a component for setting incentive compensation, and to assess compliance in financial ratios.

There are significant limitations to using EBITDA as a measure of performance, including the inability to analyze the effect of recurring and non-recurring items that are excluded from EBITDA and materially affect net income or loss, results of operations, and the lack of compatibility of the results of operations of different companies. Reconciliations of these financial measures to net income, the most directly comparable GAAP financial measure, are provided in the table below.

Reconciliation of EBITDA to GAAP Net Income

($ in thousands-unaudited)

   

For the FiveMonths EndedMay 31,

2010

For the TwelveMonths EndedDecember 31,

2009   Net income $1,773.6 $1,625.2 Depreciation and amortization 191.9 418.8 Interest expense, net 0.1 22.6 Income taxes 919.0 2,053.3 EBITDA $2,884.6 $4,119.9