Allis-Chalmers Energy (ALY)

[MWM]

Allis-Chalmers Energy Announces Backstopped Rights Offering, Investment by Lime Rock Partners and Modified Dutch Auction Tender Offers for its Senior Notes

Houston, Texas, May 20, 2009 — Allis-Chalmers Energy Inc. (NYSE: ALY) today announced an issuance to its stockholders of rights to purchase approximately 35.7 million shares of its common stock at a subscription price of $2.50 per share. Lime Rock Partners V, L.P. has agreed, subject to certain terms and conditions, to backstop the offering by purchasing from Allis-Chalmers, at the same price, any shares not purchased by Allis-Chalmers’ existing stockholders, up to the number of shares of common stock that will constitute 34.055% of Allis-Chalmers’ common stock outstanding after the offering and the closing of the backstop commitment. Allis-Chalmers intends to use the proceeds of the offering to repay indebtedness outstanding under its bank credit facility and senior notes. If the conditions to Lime Rock’s backstop commitment are met, Allis-Chalmers expects the aggregate gross proceeds of the offering and the backstop commitment to be between approximately $79.9 and $89.3 million.