Allis-Chalmers Energy Inc. has entered into a definitive agreement to purchase substantially all the assets of Oil & Gas Rental Services, Inc., a Louisiana based corporation that provides rental tools to both offshore and onshore exploration and production companies.

The consideration for the acquisition of the assets will consist of cash in the amount of $291 million and 3.2 million shares of Allis-Chalmers' common stock, subject to post- closing working capital adjustments. The transaction is expected to close prior to the end of 2006.

Established approximately 40 years ago, Oil & Gas Rental Services has an extensive inventory of premium rental equipment, including premium drill pipe, spiral heavy weight drill pipe, tubing work strings, blow-out preventers, choke manifolds and various valves and handling tools for oil and natural gas drilling. With facilities in Morgan City, Louisiana and Victoria, Texas, Oil & Gas Rental Services provides rental equipment worldwide, including internationally in Malaysia, Colombia, Russia, Mexico and Canada.

Based on unaudited, internal financial statements, during the ten months ended August 31, 2006, Oil & Gas Rental Services generated aggregate revenues of $54.1 million, income before income taxes of $34.8 million and EBITDA of $40.2 million. EBITDA is a non-GAAP item, and additional information and discussion regarding EBITDA is provided later in this release.

Micki Hidayatallah, Allis-Chalmers' Chairman and Chief Executive Officer stated, "We are extremely excited about this acquisition. I have known Burt Adams for approximately nine years and have always thought that Oil & Gas Rental Services is the premiere rental company in the world with the most solid management. It fits our operating philosophy of balance like a glove. Approximately 65% of Oil & Gas Rental Services' revenues are derived from offshore projects or deep land wells. These operations require heavy capital expenditures and are the least likely to have rigs laid down if natural gas or crude oil prices soften. The acquisition definitely improves our offshore presence. We estimate that current capacity utilization is at approximately 30% and with the integration of our current rental operations the combined utilization of our equipment can increase to over 40% and substantially increase the individual margin contributions of our existing operations and Oil & Gas Rental Services' operations. The combined rental segment, if the rig count remains at the same average as calendar 2006, could contribute EBITDA in excess of $100 million in fiscal 2007, once again balancing rental EBITDA with our service segment. Oil & Gas Rental Services has a reputation for the highest quality of equipment and service to its customers. I believe that this acquisition will further supplement the excellent reputation of Allis-Chalmers to provide the highest quality of equipment and operators to our E&P customers."