SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K/A

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 11, 2005
ALLIS-CHALMERS ENERGY INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


DELAWARE
1-2199
(STATE OR OTHER JURISDICTION
(COMMISSION FILE NUMBER)
OF INCORPORATION)
 

39-0126090
(I.R.S. EMPLOYER
IDENTIFICATION NO.)

5075 WESTHEIMER, SUITE 890
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)



REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: 713-369-0550

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (SEE General Instruction A.2. below):

[  ] Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ] Soliciting material pursuant to Rule 14a-12 under the exchange ct (17 CFR 240.14a-12)

[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


 
 
 

Section 9. Financial Statements and Exhibits

Item 9.01 - Financial Statements and Exhibits

(a) Financial Statements of business acquired.

 
(1) Financial Statements of W. T. Enterprises, Inc.:
  
     
 
Independent Auditors' Report
F-2
     
 
Balance Sheets as of March 31, 2005, December 31, 2004 and 2003
F-3
     
 
Statements of Income for the Three Months Ended March 31, 2005, and Years Ended December 31, 2004 and 2003
F-4
     
 
Statements of Stockholders’ Equity for the Three Months Ended March 31, 2005, and Years Ended December 31, 2004 and 2003
F-5
     
 
Statements of Cash Flows for the Three Months Ended March 31, 2005, and Years Ended December 31, 2004 and 2003
F-6
     
 
Notes to Financial Statements
F-7
     
 
Balance Sheet as of June 30, 2005
F-11
     
 
Statements of Income and Retained Earnings for the Six Months ended June 30, 2005 and June 30, 2004
F-12
     
 
Schedule of Cost of Revenue and Operating Expenses for the Six Months ended June 30, 2005 and June 30, 2004
F-13
     
 
Statements of Cash Flows for the Six Months ended June 30, 2005 and June 30, 2004
F-14
     
(b) Pro Forma Financial Information.
  
     
 
Unaudited Pro Forma Consolidated Condensed Financial Statements
F-15
     
 
Unaudited Pro Forma Consolidated Condensed Statement of Financial Position as of June 30, 2005
F-17
     
 
Unaudited Pro Forma Consolidated Condensed Statement of Operations for the Six Months Ended March 31, 2005
F-18
     
 
Unaudited Pro Forma Consolidated Condensed Statement of Operations for the Year Ended December 31, 2004
F-19
     
 
Notes to Unaudited Pro Forma Consolidated Condensed Financial Statements
F-20



 
 
 



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ALLIS-CHALMERS ENERGY, INC.


     
  ALLIS-CHALMERS ENERGY, INC.
 
 		  
 		  
 
Date: September 2, 2005 By:   /s/ Victor M. Perez
 
Victor M. Perez
Chief Financial Officer

 

 

 

 

INDEX TO FINANCIAL STATEMENTS

W. T. ENTERPRISES, INC.
    
  F-2
  F-3
  F-4
  F-5
  F-6
  F-7
 
  F-11
  F-12
  F-13
  F-14
 
PRO FORMA FINANCIAL INFORMATION
    
  F-15
  F-17
  F-18
  F-19
  F-20
 

F-1

Table of Contents

INDEPENDENT AUDITOR’S REPORT
To the Board of Directors and Stockholders
of W.T. Enterprises, Inc.
      We have audited the accompanying balance sheets of W.T. Enterprises, Inc. (a Texas Corporation) (the Company) as of March 31, 2005, and December 31, 2004 and 2003 and the related statements of income, stockholders’ equity, and cash flows for the three months ended March 31, 2005 and the years ended December 31, 2004 and 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
      We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
      In our opinion the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of W.T. Enterprises, Inc. as of March 31, 2005 and December 31, 2004 and 2003, and the results of its operations and its cash flows for the three months ended March 31, 2005 and the years ended December 31, 2004 and 2003 in conformity with accounting principles generally accepted in the United States of America.
  Accounting & Consulting Group, LLP
Carlsbad, New Mexico
June 10, 2005

F-2

Table of Contents

W.T. ENTERPRISES, INC.
BALANCE SHEETS
March 31, 2005, December 31, 2004 and 2003
                             
    March 31,   December 31,   December 31,
    2005   2004   2003
             
ASSETS
Current Assets:
                        
 
Cash and cash equivalents
   $ 123,093     $ 49,695     $ 39,821  
 
Accounts receivable
     359,875       418,290       446,646  
 
Unbilled receivables
     129,325       101,400       47,000  
 
Related party receivable (Note 2)
     7,967       9,673       15,991  
 
Prepaid income taxes
     —       —       3,507  
 
Prepaid expenses
     10,497       11,593       11,697  
                   
   
Total Current Assets
     630,757       590,651       564,662  
                   
Property and Equipment:
                        
 
Transportation equipment
     137,555       137,555       137,555  
 
Machinery and equipment
     1,905,235       1,867,336       1,248,414  
 
Office furniture and equipment
     7,131       7,131       7,131  
 
Accumulated depreciation
     (748,646 )     (677,475 )     (428,031 )
                   
   
Total Property and Equipment
     1,301,275       1,334,547       965,069  
                   
   
Total Assets
   $ 1,932,032     $ 1,925,198     $ 1,529,731  
                   
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
                        
 
Current maturities of long-term debt (Note 4)
   $ 283,194     $ 312,414     $ 235,137  
 
Short-term notes payable (Note 3)
     54,601       86,765       149,995  
 
Accounts payable
     82,369       117,928       129,895  
 
Accrued expenses
     131,188       62,726       63,514  
 
Deferred income taxes (Note 9)
     68,644       72,204       33,425  
                   
   
Total Current Liabilities
     619,996       652,037       611,966  
                   
Long-Term Debt (Note 4)
     89,959       153,675       279,349  
Deferred income taxes (Note 9)
     136,593       132,577       78,565  
                   
   
Total Liabilities
     846,548       938,289       969,880  
                   
Stockholders’ Equity:
                        
 
Common stock, par value $10 100 shares issued and outstanding
     1,000       1,000       1,000  
                   
 
Retained earnings
     1,084,484       985,909       558,851  
                   
   
Total stockholders’ equity
     1,085,484       986,909       559,851  
                   
   
Total liabilities and stockholders’ equity
   $ 1,932,032     $ 1,925,198     $ 1,529,731  
                   
The accompanying notes are an integral part of these financial statements.

F-3

Table of Contents

W.T. ENTERPRISES, INC.
STATEMENTS OF INCOME
For the Three Months Ended March 31, 2005
and Years Ended December 31, 2004 and 2003
                             
    March 31,   December 31,   December 31,
    2005   2004   2003
             
Revenue
                        
 
Service revenue
   $ 926,906     $ 3,862,005     $ 2,415,266  
 
Other income
     —       —       2,800  
                   
   
Total revenue
     926,906       3,862,005       2,418,066  
                   
Expenses
                        
 
Service-related expenses
     552,472       2,514,373       1,582,313  
 
Selling, general, and administrative expenses
     150,499       514,211       459,186  
 
Depreciation and amortization
     71,171       249,444       174,386  
 
Interest expense
     8,656       44,344       27,604  
                   
   
Total expenses
     782,798       3,322,372       2,243,489  
                   
   
Operating income
     144,108       539,633       174,577  
                   
Other income
                        
 
Gain (loss) on sale of assets
     —       —       6,723  
 
Interest income
     93       585       905  
                   
Income before income taxes
     144,201       540,218       182,205  
Federal and state income taxes (Note 9)
     45,626       113,160       37,121  
                   
Net income
   $ 98,575     $ 427,058     $ 145,084  
                   
The accompanying notes are an integral part of these financial statements.

F-4

Table of Contents

W.T. ENTERPRISES, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Three Months Ended March 31, 2005 and
The Years Ended December 31, 2004 and 2003
                                 
    Common   Paid-in   Retained    
    Stock   Capital   Earnings   Total
                 
Balance, January 1, 2003
   $ 1,000     $ —     $ 413,767     $ 414,767  
Net Income
     —       —       145,084       145,084  
Dividends paid
     —       —       —       —  
                         
Balance, December 31, 2003
     1,000       —       558,851       559,851  
Net Income
     —       —       427,058       427,058  
Dividends paid
     —       —       —       —  
                         
Balance, December 31, 2004
     1,000       —       985,909       986,909  
Net Income
     —       —       98,575       98,575  
Dividends paid
     —       —       —       —  
                         
Balance, March 31, 2005
   $ 1,000     $ —     $ 1,084,484     $ 1,085,484  
                         
The accompanying notes are an integral part of these financial statements.

F-5

Table of Contents

W.T. ENTERPRISES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2005 and
The Years Ended December 31, 2004 and 2003
                             
    March 31,   December 31,   December 31,
    2005   2004   2003
             
Cash flows from operating activities:
                        
Net income
   $ 98,575     $ 427,058     $ 145,084  
Adjustments to reconcile net income to net cash provided (used) by operating activities:
                        
 
Depreciation and amortization
     71,171       249,444       174,386  
 
Gain (loss) on sale of property, plant, and equipment
     —       —       (6,723 )
 
Deferred income taxes
     457       92,791       37,121  
Change in operating assets and liabilities:
                        
 
Accounts receivable
     30,490       (26,044 )     (309,046 )
 
Shareholder loans
     1,707       6,318       5,695  
 
Prepaid expenses
     1,096       104       (858 )
 
Prepaid income tax
     —       3,507       (3,507 )
 
Accounts payable
     (35,559 )     (11,967 )     81,718  
 
Accrued payroll and employee benefits
     29,696       (14,467 )     31,379  
 
Income tax payable
     38,764       13,679       (2,076 )
                   
 
Net Cash Provided (Used) by Operating Activities
     236,397       740,423       153,173  
                   
Cash flows from investing activities:
                        
Proceeds from sale of property, plant, and equipment
     —       —       25,000  
Capital expenditures on property, plant, and equipment
     (37,899 )     (406,618 )     (220,385 )
                   
 
Net Cash Provided (Used) by Investing Activities
     (37,899 )     (406,618 )     (195,385 )
                   
Cash flows from financing activities:
                        
Repayment of long-term debt
     (92,936 )     (322,686 )     (190,748 )
Proceeds from issuance of long-term debt
     —       160,000       155,105  
Repayment of short-term debt
     (32,164 )     (1,550,165 )     (479,550 )
Proceeds from issuance of short-term debt
     —       1,388,920       561,260  
                   
 
Net Cash Provided (Used) by Financing Activities
     (125,100 )     (323,931 )     46,067  
                   
Net Increase (Decrease) in Cash and Cash Equivalents
     73,398       9,874       3,855  
Cash and Cash Equivalents at Beginning of Year
     49,695       39,821       35,966  
                   
Cash and Cash Equivalents at End of Year
   $ 123,093     $ 49,695     $ 39,821  
                   
Supplemental Schedule of Noncash Investing and Financing Activities:
                        
   
Purchase of equipment financed with debt proceeds
   $ —     $ 212,303     $ 378,396  
                   
 
Cash paid for interest
   $ 8,954     $ 44,045     $ 27,022  
                   
The accompanying notes are an integral part of these financial statements.

F-6

Table of Contents

W.T. ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2005, December 31, 2004 and 2003
Note 1: Summary of Significant Accounting Policies
      Nature of Operations. W.T. Enterprises, Inc. (the Company), is primarily engaged in the business of providing compressed air for the drilling of oil and gas wells in the state of Texas. The work is generally performed under fixed price per day contracts.
      Cash and Cash Equivalents. Cash and cash equivalents include all cash balances and highly liquid investments with an initial maturity of three months or less. The Company places its temporary cash investments with a high credit quality financial institution. At times such deposits may be in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit.
      Trade Accounts Receivable. Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectibility based on past credit history with customers and their current financial condition. Trade receivables are considered fully collectible and therefore no allowance for doubtful accounts has been provided.
      Unbilled Receivables. Unbilled receivables represent revenue earned in the current period but not billed to the customer until future dates, usually within one month.
      Property, plant and equipment. Property, plant and equipment are recorded at cost less depreciation and amortization. Depreciation is provided over the estimated useful life of each class of depreciable asset and is computed using the straight line method. Estimated useful lives for equipment and transportation equipment range from three to seven years. Betterments and large renewals which extend the life of the asset are capitalized whereas maintenance and repairs and small renewals are expensed as incurred.
      Revenue Recognition. Revenue is recognized in the financial statements in the period the services were provided.
      Advertising Costs. Advertising costs are expensed as incurred.
      Income Taxes. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. The Company files its income tax returns on the cash basis of accounting. The Company’s temporary differences relate primarily to accounts receivable, accounts payable and accrued expenses and property and equipment. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
      Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-7

Table of Contents

W.T. ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
Note 2: Related-Party Transactions
      A summary of amounts due from shareholders follows:
                         
        December 31,
    March 31,    
    2005   2004   2003
             
Note receivables from shareholders, due upon demand, bearing interest of 0%, unsecured
   $ 7,967     $ 9,673     $ 15,991  
                   
      The Company leases equipment and a storage facility from shareholders under informal month-to-month operating leases. Rental expense for these leases totaled $8,700, $34,800 and $6,000 for the three months ended March 31, 2005 and the years ended December 31, 2004 and 2003, respectively.
Note 3: Pledged Assets and Short-Term Notes Payable
      Short-term notes payable are collateralized by equipment and receivables and as of March 31, 2005 and December 31, 2004 and 2003 consisted of the following:
                         
        December 31,
    March 31,    
    2005   2004   2003
             
Note payable, FNB, $150,000 line of credit, 6.0 to 6.25% interest rate
   $ —     $ —     $ 103,850  
Note payable, FNB, $53,485, 6.0 to 7.75% interest rate
     —       —       24,299  
Note payable, FNB, $53,485, 6.25 to 8.75% interest rate
     —       —       21,846  
Note payable, FNB, $46,145, 6.0 to 7.25% interest rate
     13,380       21,106       —  
Note payable, CAT Financial, $98,013, 6.7% interest rate
     41,221       65,659       —  
                   
    $ 54,601     $ 86,765     $ 149,995  
                   
Note 4: Pledged Assets and Long-Term Debt
      Long-term debt and the related assets pledged thereon as of March 31, 2005, and December 31, 2004 and 2003, consisted of the following:
                           
        December 31,
    March 31,    
    2005   2004   2003
             
Various notes payable to banks and financing companies for vehicles and equipment, due in installments through March, 2008 at fixed interest rates ranging from 0.0% to 8.75%, collateralized by vehicles, equipment and accounts receivable
   $ 138,594     $ 160,674     $ 250,893  
Various notes payable to banks and financing companies for vehicles and equipment, due in installments through March, 2007 at variable interest rates ranging from 4.15% to 7.25%, collateralized by vehicles, equipment and accounts receivable
     234,559       305,415       263,593  
                   
Subtotal
     373,153       466,089       514,486  
 
Less current maturities
     283,194       312,414       235,137  
                   
Total Long-term debt
   $ 89,959     $ 153,675     $ 279,349  
                   

F-8

Table of Contents

W.T. ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
      As of March 31, 2005, principal payments required to amortize the debt are summarized below:
         
Year Ending March 31,    
     
2006
   $ 283,194  
2007
     79,845  
2008
     10,114  
       
    $ 373,153  
       
Note 5: Leases
      The Company has two non-cancelable operating leases for compressor equipment, which expire on November 30, 2005. The company also leases compressor equipment on various cancelable leases. Future minimum lease payments payable under non-cancelable operating lease are due as follows:
         
Year Ending March 31,    
     
2006
   $ 144,000  
       
      Rental expense for all operating leases totaled $186,936, $912,594, and $472,272 for the three months ended March 31, 2005 and the years ended December 31, 2004 and 2003, respectively.
Note 6: Stockholders’ Equity
      At March 31, 2005, December 31, 2004 and 2003, the number of authorized and issued common stock and related par value and dividends paid are as follows:
                         
        December 31,
    March 31,    
    2005   2004   2003
             
Common stock authorized
     100       100       100  
Common stock issued
     100       100       100  
Common stock outstanding
     100       100       100  
Common stock, per share par value
   $ 10     $ 10     $ 10  
Cash dividends paid on common stock
     —       —       —  
Note 7: Dependence on Key Customers
      For the three months ended March 31, 2005 and for the years ended December 31, 2004 and December 31, 2003 the Company’s revenues were almost entirely attributable to one customer. As of March 31, 2005 approximately 85% of the Company’s accounts receivable were attributable to this one customer.
Note 8: Subsequent Events
      The Company’s management is currently negotiating the sale of substantially all the Company’s assets. The anticipated sales date is June 30, 2005. The estimated sales price of the assets is substantially in excess of their book value. Upon consummation of the sale, the Company will exercise options to purchase equipment, currently under operating leases, for $550,000 and then include this equipment in the assets the Company sells.
      Subsequent to March 31, 2005 the Company purchased approximately $240,000 of equipment, which was 100% financed through short-term bank loans.

F-9

Table of Contents

W.T. ENTERPRISES, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)
Note 9: Income Tax Matters
      Net deferred tax liabilities as of March 31, 2005, December 31, 2004 and 2003 consist of the following components:
                           
        December 31,
    March 31,    
    2005   2004   2003
             
Deferred Tax Liabilities:
                        
 
Property and equipment
   $ 136,593     $ 132,577     $ 78,565  
 
Cash basis receivables
     95,394       101,340       96,261  
 
Prepaid expenses
     2,047       2,261       2,281  
                   
      234,034       236,178       177,107  
                   
Deferred Tax Assets:
                        
 
Net operating loss carryforward
     —       —       31,099  
 
Cash basis accounts payable and accrued expenses
     28,797       31,397       34,018  
                   
      28,797       31,397       65,117  
                   
Net deferred tax liabilities
   $ 205,237     $ 204,781     $ 111,990  
                   
      Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income.
      As of March 31, 2005 and December 31, 2004 and 2003, the deferred tax amounts mentioned above have been classified on the accompanying balance sheets as follows:
                         
        December 31,
    March 31,    
    2005   2004   2003
             
Current liabilities
   $ 68,644     $ 72,204     $ 33,425  
Noncurrent liabilities
     136,593       132,577       78,566  
                   
    $ 205,237     $ 204,781     $ 111,991  
                   
      The provision for income taxes charged to operation for the three months ended March 31, 2005 and the years ended December 31, 2004 and 2003 consists of the following:
                         
        December 31,
    March 31,    
    2005   2004   2003
             
Current tax expense
   $ 45,169     $ 51,469     $ —  
Deferred tax expense
     457       92,790       37,121  
Benefit of operating loss carryforward
     —       (31,099 )     —  
                   
    $ 45,626     $ 113,160     $ 37,121  
                   
      For the three months ended March 31, 2005 and the years ended December 31, 2004 and 2003 the difference between the expected tax expense that would result from applying domestic federal statutory rates to pretax income and the provision for income tax expense is due mainly to the lower average graduated tax rate expected to apply to the estimated taxable income in the years the temporary differences reverse as well as the accrual of state income taxes.

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W.T. ENTERPRISES, INC.
BALANCE SHEET
June 30, 2005
(unaudited)
                       
ASSETS
Current Assets
                
 
Cash
   $ 153,254.16          
 
Trade Receivables
     422,900.00          
 
Trade Receivables-WIP
     111,225.00          
 
Loans to Shareholder
     6,242.36          
 
Prepaid Expense
     19,120.50          
             
   
Total Current Assets
           $ 712,742.02  
Property and Equipment
                
 
Transportation Equipment
     178,238.71          
 
Machinery & Equipment
     2,140,792.13          
 
Office Furniture & Equipment
     7,131.34          
 
Accumulated Depreciation
     (829,395.00 )        
             
   
Net Property and Equipment
             1,496,767.18  
             
     
Total Assets
           $ 2,209,509.20  
             
LIABILITIES AND EQUITY
Current Liabilities
                
 
Accounts Payable
   $ 85,265.16          
 
Accrued Expenses
     114,569.38          
 
Income Tax Payable
     80,329.09          
 
Deferred Income Taxes
     71,781.00          
 
Notes Payable
     246,301.98          
 
Current Portion of L.T. Debt
     206,298.26          
             
   
Total Current Liabilities
           $ 804,544.87  
Deferred Income Tax
             158,816.00  
Long-Term Debt, Net of Current Portion
             16,014.91  
Stockholders’ Equity
                
 
Common Stock, $10 Par Value
     1,000.00          
 
Retained Earnings
     1,229,133.42          
             
   
Total Stockholders’ Equity
             1,230,133.42  
             
     
Total Liabilities & Stockholders’ Equity
           $ 2,209,509.20  
             

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W.T. ENTERPRISES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
(unaudited)
                                     
    Six Months Ended       Six Months Ended    
    Jun. 30, 2005   Pct   Jun. 30, 2004   Pct
                 
Revenue
                                
 
Service Revenue
   $ 1,949,131.25       100.00     $ 1,839,365.00       100.00  
                         
   
Total Revenue
     1,949,131.25       100.00       1,839,365.00       100.00  
Cost of Revenue
     1,257,348.70       64.51       1,421,254.04       77.27  
                         
   
Gross Profit
     691,782.55       35.49       418,110.96       22.73  
Operating Expenses
     328,061.99       16.83       269,719.48       14.66  
                         
   
Income From Operations
     363,720.56       18.66       148,391.48       8.07  
Other Income (Expense)
                                
 
Interest Income
     168.77       0.01       343.36       0.02  
 
Interest Expense
     (16,139.41 )     (0.83 )     (24,819.02 )     (1.35 )
                         
   
Total Other Income (Expense)
     (15,970.64 )     (0.82 )     (24,475.66 )     (1.33 )
                         
   
Income Before Taxes
     347,749.92       17.84       123,915.82       6.74  
Income Taxes
                                
 
Current Income Tax
     78,710.75       4.04                  
 
Deferred Income Taxes
     25,816.00       1.32       23,830.00       1.30  
                         
      104,526.75       5.36       23,830.00       1.30  
                         
   
Net Income
     243,223.17       12.48       100,085.82       5.44  
                         
Beginning Retained Earnings
     985,910.25               558,852.46          
                         
   
Ending Retained Earnings
   $ 1,229,133.42             $ 658,938.28          
                         

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W.T. ENTERPRISES, INC.
SCHEDULE OF COST OF REVENUE & OPERATING EXPENSES
For the Period Ended June 30, 2005 and 2004
(unaudited)
                                     
    Six Months Ended       Six Months Ended    
    Jun. 30, 2005   Pct   Jun. 30, 2004   Pct
                 
Cost of Revenue
                                
 
Contract Air
     191,500.00       9.83       352,300.00       19.15  
 
Freight & Trucking
     11,529.98       0.59       13,788.47       0.75  
 
Auto Expense
     57,800.36       2.97       57,554.74       3.13  
 
Depreciation
     148,285.00       7.61       110,875.00       6.03  
 
Fuel
     0.00       0.00       12,906.32       0.70  
 
Insurance
     27,634.49       1.42       21,697.12       1.18  
 
Laundry/ Uniforms
     1,365.96       0.07       5,223.46       0.28  
 
Maintenance & Repairs
     95,822.66       4.92       73,610.05       4.00  
 
Equipment Rental
     141,320.17       7.25       175,289.72       9.53  
 
Subcontracting — Other
     2,942.50       0.15       1,800.00       0.10  
 
Supplies
     104,745.30       5.37       139,860.66       7.60  
 
Taxes
     34,631.08       1.78       33,779.21       1.84  
 
Travel
     2,666.50       0.14       0.00       22.97  
 
Wages
     437,054.70       22.42       422,569.29       22.97  
                         
   
Total Cost of Revenue
   $ 1,257,348.70       64.51     $ 1,421,254.04       77.27  
                         
Operating Expenses
                                
 
Advertising & Promotional
     0.00       0.00       454.56       0.02  
 
Bank Charges
     0.00       0.00       632.62       0.03  
 
Contract Labor
     0.00       0.00       924.00       0.05  
 
Car & Truck Expense
     3,400.29       0.17       0.00       0.05  
 
Contributions
     2,250.00       0.12       1,000.00       0.05  
 
Depreciation
     3,635.00       0.19       3,341.00       0.18  
 
Dues & Subscriptions
     71.70       0.00       170.40       0.01  
 
Insurance
     21,057.11       1.08       20,040.54       1.09  
 
Laundry & Uniforms
     1,748.23       0.09       0.00       1.09  
 
Life Insurance
     288.00       0.01       269.00       0.01  
 
Medical Reimbursement
     0.00       0.00       3,621.06       0.20  
 
Meals & Entertainment
     7,604.96       0.39       1,441.28       0.08  
 
Office Expense
     936.47       0.05       1,510.61       0.08  
 
Professional fees
     5,171.03       0.27       1,054.00       0.06  
 
Rent
     6,026.48       0.31       6,938.15       0.38  
 
Repairs & Maintenance
     154.20       0.01       0.00       0.38  
 
Supplies
     497.90       0.03       40.00       0.00  
 
Taxes
     19,904.64       1.02       11,195.41       0.61  
 
Travel
     6,104.48       0.31       1,564.70       0.09  
 
Utilities & Telephone
     13,329.50       0.68       8,322.15       0.45  
 
Wages
     43,482.00       2.23       8,322.15       0.45  
 
Salaries-Officers
     192,400.00       9.87       207,200.00       11.26  
                         
   
Total Operating Expenses
   $ 328,061.99       16.83     $ 269,719.48       14.66  
                         

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W.T. ENTERPRISES, INC.
STATEMENT OF CASH FLOWS
For the Period Ended June 30, 2005 and 2004
(unaudited)
                       
    6 Months Ended   6 Months Ended
    Jun. 30, 2005   Jun. 30, 2004
         
Cash Flow from Operating Activities
                
 
Net Income (Loss)
   $ 242,223.17     $ 100,085.82  
 
Adjustments to Reconcile Cash Flow
                
   
Depreciation
     151,920.00       114,216.00  
   
Deferred Income Tax
     25,816.00       23,830.00  
 
Decrease (Increase) in Current Assets
                
   
Trade Receivables
     (4,610.00 )     56,721.00  
   
Trade Receivable WIP
     (9,825.00 )     (30,025.00 )
   
Loans to Shareholder
     3,432.23       2,959.58  
   
Prepaid Expense
     (7,527.57 )     (321.51 )
   
Prepaid Income Taxes
     0.00       894.00  
 
Increase (Decrease) in Current Liabilities
                
   
Accounts Payable
     (32,662.73 )     (19,411.84 )
   
Accrued Expenses
     65,522.20       2,781.13  
   
Credit Cards Payable
     66,650.50       10,690.02  
             
     
Total Adjustments
     258,714.63       162,333.38  
             
     
Cash Provided (Used) by Operations
     501,937.80       262,419.20  
Cash Flow From Investing Activities
                
 
Sales (Purchases) of Assets
                
   
Machinery & Equipment
     (314,139.87 )     (397,016.47 )
             
     
Cash Provided (Used) by Investing
     (314,139.87 )     (397,016.47 )
Cash Flow From Financing Activities
                
 
Cash (Used) or provided by:
                
   
Short-Term Debt
     159,537.27       42,475.87  
   
Long-Term Debt
     (243,775.81 )     137,312.81  
             
     
Cash Provided (Used) by Financing
     (84,238.54 )     179,788.68  
             
     
Net Increase (Decrease) in Cash
     103,559.39       45,191.41  
     
Cash at Beginning of Period
     49,694.77       39,821.42  
             
     
Cash at End of Period
   $ 153,254.16     $ 85,012.83  
             
See accompanying accountant’s compilation report

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ALLIS-CHALMERS ENERGY INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
      The pro forma financial statements set forth below illustrate the effects of the following acquisition transactions:
      CAPCOIL TUBING SERVICES, INC. TRANSACTION. In May 2005, Allis-Chalmers acquired 100% of the outstanding stock of Capcoil Tubing Services, Inc., a Texas corporation, based in Kilgore, Texas from four stockholders for approximately $2,750,000 in cash, 168,161 shares of Allis-Chalmers’ common stock and the payment of Capcoil secured debt in the amount of $1,190,783. Capcoil is engaged in the sale, installation and service of small diameter capillary tubing and larger diameter coil tubing for servicing producing oil and gas wells. Both types of tubing are installed in wells and used as a delivery system for chemicals and other agents to enhance production from existing oil and gas wells.
      DELTA RENTAL SERVICE, INC. TRANSACTION. In April 2005, Allis-Chalmers acquired 100% of the outstanding stock of Delta Rental Service, Inc., a Louisiana corporation, from three stockholders in Lafayette, Louisiana for approximately $4,650,000 in cash, 223,114 shares of Allis-Chalmers’ Common Stock and the issuance of two promissory notes by Allis-Chalmers in the aggregate principal amount of $350,000. Delta is a rental tool company headquartered in Lafayette, Louisiana and rents specialty rental items to the oil and gas industry such as heavy weight spiral drill pipe, spacer spools and assorted handling tools.
      DOWNHOLE INJECTION SYSTEMS, LLC TRANSACTION. In December 2004, Allis-Chalmers acquired all the equity interests in Downhole Injection Services, LLC from an investor group for approximately $1,100,000 in cash, 508,466 shares of Allis-Chalmers’ Common Stock and payment or assumption of approximately $950,000 of debt. Downhole is headquartered in Midland, Texas and provides solutions to downhole chemical treating problems through the installation of small diameter, stainless steel coiled tubing into producing oil and gas wells.
      DIAMOND AIR TRANSACTION. In November 2004, Allis-Chalmers, through its 55% owned subsidiary, AirComp, purchased substantially all the assets of Diamond Air Drilling Services, Inc. and Marquis Bit Co., L.L.C. for $4,600,000 in cash and the assumption of approximately $450,000 in liabilities. Allis-Chalmers and its joint-venture partner M-I L.L.C. contributed $2,530,000 and $2,070,000, respectively, to the equity of AirComp. Diamond Air and Marquis manufacture hammer bits and provide air hammer and hammer bits and related services required to drill and complete oil and gas wells.
      M-I FLUIDS TRANSACTION. In July 2005, Allis-Chalmers acquired the 45% minority interest in AirComp LLC owned by M.I. Fluids and a $4.8 million subordinated note issued by AirComp to M-I, making AirComp 100% owned by Allis-Chalmers. The purchase price consisted of $8.5 million in cash and the issuance of a subordinated note in the amount of $4.0 million.
      W.T. ENTERPRISES, INC. TRANSACTION. In July 2005, Allis-Chalmers acquired 100% of the compressed air drilling assets of W.T. Enterprises, Inc., a Texas corporation, for approximately $6.0 million in cash. These assets included air compressors, boosters, mist pumps, rolling stock and other equipment complementary to the services and equipment provided by AirComp.
      The accompanying unaudited pro forma consolidated condensed financial statements are based on the historical statements of operations and statements of financial position of Allis-Chalmers and the acquired subsidiaries for the year ended December 31, 2004 and as of and for the six months ended June 30, 2005. The unaudited pro forma consolidated condensed statements of operation illustrate the effects of the acquisition transactions on our results of operations as if the transactions had occurred as of the beginning of the periods presented. The pro forma consolidated statement of financial position illustrates the effects of the acquisition of Delta Rental Service, Inc., Capcoil Tubing Services, Inc., W.T. Enterprises, Inc. and the minority interest in AirComp on our financial position as if the transactions had occurred as of June 30, 2005.

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Table of Contents

ALLIS-CHALMERS ENERGY INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
      Certain information normally included in the financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited pro forma consolidated condensed financial statements should be read in conjunction with our consolidated financial statements appearing elsewhere herein. The unaudited pro forma consolidated condensed financial statements do not purport to be indicative of the results of operation or financial position that actually would have been achieved if the transactions had been consummated on the dates indicated, nor do they project Allis-Chalmers’ results of operations or financial position for any future period or date.

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Table of Contents

ALLIS-CHALMERS ENERGY INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF FINANCIAL POSITION
As of June 30, 2005
(in thousands, except per share data)
                                           
    Allis-       W. T. Enterprises   M-I   Allis-
    Chalmers   W. T. Enterprises   Purchase   Purchase   Chalmers
    Consolidated   Historical   Adjustments   Adjustments   Consolidated
                     
ASSETS
                                        
Cash and cash equivalents
   $ 2,693     $ 153     $ (153 )(G)   $ —     $ 2,693  
                                      —  
Trade Receivables
     18,001       534       (534 )(G)     —       18,001  
Inventories, net
     3,901       —       —       —       3,901  
Lease receivable, net
     180       —       —       —       180  
Prepaids and other current assets
     1,650       25       (25 )(G)     —       1,650  
                               
 
Total Current Assets
     26,425       712       (712 )     —       26,425  
Net Property, plant and equipment
     49,585       1,497       2,900 (J)     940 (R)     54,860  
                      (62 )(A)                
                      —                  
Goodwill
     12,392       —       1,103 (K)             13,495  
Other intangibles, net
     5,675       —       500 (K)     —       6,150  
                      (25 )(E)                
Debt issuance costs, net
     671                       —       671  
Lease receivable
     432                       —       432  
Other assets
     119       —       —       —       119  
                               
 
Total Assets
   $ 95,299     $ 2,209     $ 3,704     $ 940     $ 102,152  
                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                        
Current maturities of long-term debt
   $ 3,952     $ 206     $ (206 )(G)   $ —     $ 3,952  
Trade accounts payable
     6,907       85       (85 )(G)     —       6,907  
Accrued employee benefits
     834       —       —       —       834  
Accrued interest
     509       —       113 (I)     (75 )(N)     547  
Accrued expenses
     2,815       267       (267 )(G)     —       2,815  
Accounts payable, related parties
     75       —       —       —       75  
                               
 
Total Current Liabilities
     15,092       558       (446 )     (75 )     15,130  
Accrued postretirement benefit obligations
     661       —       —       —       661  
Long-term debt
     33,938       262       5,738 (H)     6,292 (M)     46,230  
Other long-term liabilities
     502       159       (159 )(G)             502  
Redeemable Warrant
     0                               0  
Preferred Stock
     0       —       —       —       0  
                               
      50,193       979       5,134       6,217       62,523  
Minority Interest
     4,911       —       —       (4,911 )(P)     0  
Shareholders’ equity
                                        
 
Common stock
     140       1       (1 )(G)     —       140  
Capital in excess of par value
     42,077       —       —       —          
                      —       —          
      —       —       —       —          
                      —       —       42,077  
Accumulated earnings (deficit)
     (2,022 )     1,229       (1,229 )(G)     (366 )(N)     (2,588 )
                      (62 )(A)                
                      (25 )(E)     —          
                      (113 )(I)                
 
Total Shareholders’ Equity
     40,195       1,230       (1,430 )     (366 )     39,629  
                               
 
Total Liabilities and Shareholders’ Equity
   $ 95,299     $ 2,209     $ 3,704     $ 940     $ 102,152  
                               
See notes to unaudited pro forma consolidated financial statements.

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ALLIS-CHALMERS ENERGY INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2005
(in thousands, except per share data)
                                                                           
    Allis-                       W.T.        
    Chalmers       Delta       Capcoil   W.T.   Enterprises   M-I   Allis-
    Consolidated   Delta   Purchase   Capcoil   Purchase   Enterprises   Purchase   Purchase   Chalmers
    Historical   Historical   Adjustments   Historical   Adjustments   Historical   Adjustments   Adjustments   Consolidated
                                     
Sales
   $ 42,922     $ 821     $ —     $ 2,161             $ 1,949                     $ 47,853  
Cost of Sales
     30,483       211       75  (A)     1,458       133  (A)     1,261       (271 )(O)     —       33,350  
                                                       
Gross Profit
     12,439       610       (75 )     703       (133 )     688       271       —       14,503  
Marketing and Administrative Expense
     7,279       985       (665 )(B)     421       28  (E)     324       23  (E)     —       8,395  
                                                                      —  
                                                       
Income (Loss) from Operations
     5,160       (375 )     590       282       (160 )     364       248       —       6,108  
Other Income
                                                                        
 
Interest Income
     —       3       —       —       —       —       —       —       3  
 
Interest Expense
     (1,166 )     (11 )     11  (C)     (26 )     (16 )(F)     (16 )     (97 )(I)     (366 )(N)     (1,687 )
 
Settlement on lawsuit
     103                                                               103  
 
Other
     55       116       —       —       —                               172  
                                                       
Income (Loss) Before Taxes
     4,152       (267 )     601       256       (176 )     348       151       (366 )     4,698  
Minority Interest
     (488 )     —       —       —       —                       488  (P)     0  
Taxes
     (329 )     (142 )     142  (D)     (87 )     87  (D)     (105 )     105  (D)     —       (329 )
                                                       
Net Income/(Loss)
     3,336       (409 )     743       169       (89 )     243       256       122       4,370  
 
Preferred Dividend
     —       —       —       —       —       —       —       —       —  
                                                       
Net income/(loss) attributed to common shares
   $ 3,336     $ (409 )   $ 743     $ 169     $ (89 )   $ 243     $ 256     $ 122     $ 4,370  
                                                       
Pro forma net income (loss) per common share
                                                                        
Basic
   $ 0.24                                                             $ 0.32  
                                                       
Diluted
   $ 0.22                                                             $ 0.29  
                                                       
Weighted average shares outstanding
                                                                        
Basic
     13,800                                                               13,800  
                                                       
Diluted
     14,900                                                               14,900  
                                                       
See notes to unaudited pro forma consolidated financial statements.

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ALLIS-CHALMERS ENERGY INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004
(in thousands, except per share data)
                                                                                                           
    Allis-                                                
    Chalmers       Diamond       Downhole       Delta       Capcoil       W.T. Enterprises   M-I   Allis-
    Consolidated   Diamond   Purchase   Downhole   Purchase   Delta   Purchase   Capcoil   Purchase   W.T. Enterprises   Purchase   Purchase   Chalmers
    Historical   Historical   Adjustments   Historical   Historical   Historical   Adjustments   Historical   Adjustments   Historical   Adjustments   Adjustments   Consolidated
                                                     
Sales
   $ 47,726     $ 5,584     $ —     $ 4,793     $ —     $ 3,249     $ —     $ 5,774     $ —     $ 3,862             $ —     $ 70,988  
Cost of Sales
     35,300       3,566       —       3,876       —       826       298 (A)     4,400       398 (A)     2,764     $ (904 )(Q)     —       50,523  
                                                                               
Gross Profit
     12,426       2,018       —       917       —       2,423       (298 )     1,374       (398 )     1,098       904       —       20,464  
Marketing and Administrative Expense
     8,199       664       163 (E)     872       83 (E)     1,798       (940 )(B)     676       110       514       93 (E)     —       12,232  
                                                                               
Income (Loss) from Operations
     4,227       1,354       (163 )     45       (83 )     625       642       698       (508 )     584       811       —       8,232  
Other Income
                                                                                                        
 
Interest Income
     32       —       —       —       —       4       —       —       —       —       —       —       36  
 
Interest Expense
     (2,808 )     (59 )     59 (C)     (74 )     74 (C)     (49 )     49 (C)     (74 )     74 (C)     (44 )     (406 )(I)     (733 )(N)     (3,991 )
 
Other
     272       (26 )     —       —       —       114       —       —       —       —       —       —       360  
                                                                               
Income (Loss) Before Taxes
     1,723       1,269       (104 )     (29 )     (9 )     694       691       624       (434 )     540       405       (733 )     4,637  
Minority Interest
     (321 )     —       (524 )     —       —       —       —       —       —       —       —       845 (P)     (0 )
Taxes
     (514 )     —       —       —       —       (265 )     265 (D)     —       —       (113 )     113 (D)     —       (514 )
                                                                               
Net Income/(Loss)
     888       1,269       (628 )     (29 )     (9 )     429       956       624       (434 )     427       518       112       4,123  
 
Preferred Dividend
     (124 )     —       —       —       —       —       —       —       —       —       —       —       (124 )
                                                                               
Net income/(loss) attributed to common shares
   $ 764     $ 1,269     $ (628 )   $ (29 )   $ (9 )   $ 429     $ 956     $ 624     $ (434 )   $ 427     $ 518     $ 112     $ 3,999  
                                                                               
Pro forma net income (loss) per common share
                                                                                                        
Basic
   $ 0.10                                                                                             $ 0.48  
                                                                               
Diluted
   $ 0.06                                                                                             $ 0.41  
                                                                               
Weighted average shares outstanding
                                                                                                        
Basic
     7,930                                                                                               8,321  
                                                                               
Diluted
     11,959                                                                                               9,901  
                                                                               
See notes to unaudited pro forma consolidated financial statements.

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ALLIS-CHALMERS ENERGY INC
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
      The following pro forma adjustments have been made to the historical financial statements of the Company:
        A.) Increase in depreciation due to the increase in the fair value of assets acquired.
 
        B.) Elimination of the year end bonus paid to the employees of Delta.
 
        C.) Reduction interest expense due to the reduction on debt not assumed.
 
        D.) Elimination of tax provision due to the Company’s net operating losses to offset the income form operations thus reducing the amount of federal income tax liability.
 
        E.) Increase in amortization due to the increase in other intangible asset value of acquired company.
 
        F.) To record interest expense related to cash borrowed to purchase Capcoil.
 
        G.) Elimination of assets and liabilities not acquired.
 
        H.) To record cash borrowed to purchase W.T. Enterprises.
 
        I.) To record interest expense related to cash borrowed to purchase W.T. Enterprises.
 
        J.) Recognition of fair value of assets in connection with the acquisition of W.T. Enterprises.
 
        K.) Recognition of goodwill and other intangible assets in connection with the acquisition of W.T. Enterprises.
 
        L.) To record the elimination of M-I’s 45% as time of purchase in AirComp.
 
        M.) To record cash borrowed to purchase M-I’s 45% of AirComp.
 
        N.) To record interest expense related to cash borrowed to purchase M-I’s 45% in AirComp.
 
        O.) To record elimination of lease expense not assumed net of additional depreciation expense of $333,000 due to the increase value of assets acquired at W.T. Enterprises.
 
        P.) Elimination of M-I’s 45% minority interest expense.
 
        Q.) To record elimination of lease expense not assumed net of additional depreciation expense of $249,000 due to the increase value of assets acquired at W.T. Enterprises.
 
        R.) Recognition of fair value of assets in connection with the acquisition of M-I’s 45%.

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