3982--3/9/2009--Allis_Chalmers_Energy

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{debt, indebtedness, cash}

{operation, international, foreign}

{stock, price, share}

{cost, contract, operation}

{financial, litigation, operation}

{personnel, key, retain}

{gas, price, oil}

{investment, property, distribution}

{operation, natural, condition}

{cost, regulation, environmental}

{cost, operation, labor}

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Risks Associated With Our Company Our business depends on spending by the oil and natural gas industry, and this spending and our business may be adversely affected by industry and financial market conditions that are beyond our control. Historically, we have been dependent on a few customers operating in a single industry; the loss of one or more customers could adversely affect our financial condition and results of operations. Our customers may seek to cancel or renegotiate some of our Drilling and Completion contracts during periods of depressed market conditions or if we experience operational difficulties. An oversupply of comparable rigs in the geographic markets in which we compete could depress the utilization rates and dayrates for our rigs and materially reduce our revenues and profitability. We may experience increased labor costs or the unavailability of skilled workers and the failure to retain key personnel could hurt our operations. The operations and financial condition of our Drilling and Completion business could be affected by union activity and general labor unrest. Additionally, the labor expenses of our Drilling and Completion business could increase as a result of governmental regulation of payments to employees. Rig upgrade, refurbishment and construction projects are subject to risks, including delays and cost overruns, which could have an adverse effect on our results of operations and cash flows. Severe weather could have a material adverse impact on our business. We have recorded substantial goodwill as the result of our acquisitive nature and as such goodwill is subject to periodic reviews of impairment. We may fail to acquire additional businesses, which will restrict our growth and may have a material adverse effect on our ability to meet our obligations under the notes. Difficulties in integrating acquired businesses may result in reduced revenues and income. Failure to maintain effective disclosure controls and procedures and/or internal controls over financial reporting could have a material adverse effect on our operations. We do business in international jurisdictions whose political and regulatory environments and compliance regimes differ from those in the U.S: Devaluation of the Argentine Peso, the Mexican Peso or the Brazilian Real could adversely affect our results of operations. Argentina continues to face considerable political and economic uncertainty. An increase in inflation in Argentina could have a material adverse effect on our results of operations. The loss of key executives would adversely affect our ability to effectively finance and manage our business, acquire new businesses, and obtain and retain customers. We are subject to numerous governmental laws and regulations, including those that may impose significant liability on us for environmental and natural resource damages. Environmental liabilities relating to discontinued operations could result in substantial losses. Products liability claims relating to discontinued operations could result in substantial losses. We may be subject to claims for personal injury and property damage, which could materially adversely affect our financial condition and results of operations. Risks Associated With an Investment in Our Common Stock Our common stock price has been volatile, which could adversely affect our business and cause our stockholders to suffer significant losses Substantial sales of our common stock could adversely affect our stock price. In connection with our acquisitions of DLS, the DLS sellers have the right to designate two nominees for election to our board of directors. The interests of the DLS sellers may be different from yours. Existing stockholders interest in us may be diluted by additional issuances of equity securities. We do not expect to pay dividends on our common stock, and investors will be able to receive cash in respect of the shares of common stock only upon the sale of the shares. Risks Associated With Our Indebtedness We are a holding company, and as a result we are dependent on dividends from our subsidiaries to meet our obligations, including with respect to the notes. We have a substantial amount of debt, which could adversely affect our financial health and prevent us from making principal and interest payments on the notes and our other debt. If we fail to obtain additional financing, we may be unable to refinance our existing debt, expand our current operations or acquire new businesses, which could result in a failure to grow or result in defaults in our obligations under our credit agreement, our 9.0% senior notes, our 8.5% senior notes or our other debt securities.

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3982--3/9/2009--Allis_Chalmers_Energy_Inc.