Lime Rock Completes Allis-Chalmers PIPE

Lime Rock Partners has paid $49.7 million to acquire approximately 19.89 million shares of common stock in Allis-Chalmers Energy Inc. (NYSE: ALY), which represents around a 27.9% ownership position. The position could rise to 39.8%, based on a backstop agreement and preferred stock purchase commitment.

PRESS RELEASE

Allis-Chalmers Energy Inc. (NYSE:ALY – News) today announced the closing of its previously announced private placement transactions with Lime Rock Partners V, L.P. Lime Rock had agreed, subject to certain terms and conditions, to backstop Allis-Chalmers’ previously announced rights offering by purchasing from Allis-Chalmers, at a price of $2.50 per share, shares not purchased by Allis-Chalmers’ existing stockholders. Pursuant to this backstop commitment, Lime Rock purchased from Allis-Chalmers 19,889,044 shares of Allis-Chalmers’ common stock, representing approximately 27.9% of Allis-Chalmers’ common stock outstanding after the closing of the rights offering and the backstop commitment. The backstop commitment yielded gross proceeds to Allis-Chalmers of approximately $49.7 million.

Lime Rock had also agreed, subject to certain terms and conditions, to purchase from Allis-Chalmers shares of newly-issued 7.0% convertible perpetual preferred stock. Pursuant to this preferred stock purchase commitment, Lime Rock purchased from Allis-Chalmers 36,393 shares of convertible preferred stock at a price of $1,000.00 per share. The shares of convertible preferred stock sold to Lime Rock will be convertible into 14,202,146 shares of Allis-Chalmers’ common stock at a conversion price of approximately $2.56 per share, subject to adjustment. The sale of preferred stock yielded gross proceeds to Allis-Chalmers of approximately $36.4 million.

The aggregate gross proceeds of Allis-Chalmers’ rights offering to its stockholders, the sale of common stock to Lime Rock through the backstop commitment, and the sale of convertible preferred stock to Lime Rock were approximately $125.6 million. Allis-Chalmers intends to use the net proceeds of the rights offering and sale of common stock to Lime Rock to repay indebtedness outstanding under its bank credit facility and senior notes, and intends to use the net proceeds of the sale of convertible preferred stock to Lime Rock to repay indebtedness and for general corporate purposes.

Pursuant to its backstop commitment and preferred stock purchase commitment, Lime Rock has acquired approximately 39.8% of Allis-Chalmers’ outstanding common stock on a pro forma basis, as adjusted for the rights offering, the backstop commitment and the convertible preferred stock purchase (counting the convertible preferred stock on an as converted basis). However, pursuant to the terms of the agreements between Allis-Chalmers and Lime Rock, Lime Rock’s total voting power will not exceed 35% of the total voting power of Allis-Chalmers’ stockholders. Lime Rock has also agreed, with certain exceptions, that for a period of three years it will not acquire any shares of voting stock of Allis-Chalmers that would, when combined with shares of voting stock already owned by Lime Rock, cause it to own more than 45% of Allis-Chalmers’ common stock or more than 35% of the total voting power of Allis-Chalmers’ stockholders.

RBC Capital Markets Corporation served as Allis-Chalmers’ financial advisor in connection with the rights offering, backstop commitment and private placement of convertible preferred stock.

This press release does not constitute an offer to sell, or the solicitation of an offer to buy, any securities, and there will be no sale of any securities in any state in which such an offer, solicitation, or sale would be unlawful prior to the registration of qualification of such securities under the securities laws of any such state. The common stock and convertible preferred stock sold to Lime Rock were not, and will not be, registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration under such act or the availability of an applicable exemption from the registration requirements of such act.

About Allis-Chalmers

Allis-Chalmers Energy Inc. is a Houston-based multi-faceted oilfield services company. Allis-Chalmers provide 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. For more information, visit Allis-Chalmers’ website at http://www.alchenergy.com.