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Item 1.01. Entry into a Material Definitive Agreement.

On August 11, 2010, Allis-Chalmers Energy Inc., a Delaware corporation (the “Company”) entered into revised Employment Agreements with each of Victor M. Perez, its Chief Financial Officer, Theodore F. Pound, its General Counsel and Secretary, Terrence P. Keane, its Senior Vice President—Oilfield Services and Mark Patterson, its Senior Vice President—Rental Services. In addition, on August 11, 2010, Allis-Chalmers Directional Drilling Services LLC (“Allis-Chalmers Directional Drilling”) entered into a revised Employment Agreement with David K. Bryan, its President and Chief Executive Officer, effective August 1, 2010. The Company hereby incorporates by reference the disclosure made in Item 5.02 below.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. 

On August 11, 2010, the Company entered into revised Employment Agreements, effective August 1, 2010, with each of Victor M. Perez, its Chief Financial Officer, Theodore F. Pound, its General Counsel and Secretary, Terrence P. Keane, its Senior Vice President—Oilfield Services and Mark Patterson, its Senior Vice President—Rental Services. In addition, on August 11, 2010, Allis-Chalmers Directional Drilling entered into a revised Employment Agreement with David K. Bryan, its President and Chief Executive Officer, effective August 1, 2010. Each Employment Agreement has a term of two years.

Pursuant to the Employment Agreements, the applicable officer will receive the following base salary, subject to an annual increase in the discretion of the board of directors of the Company:

In addition, each officer will be eligible to participate in the Company’s annual cash incentive program whereby he may earn up to 200% of his base salary based upon the achievement of certain established performance objectives related to the Company attaining established earnings before interest, taxes, depreciation and amortization (EBITDA) and the attainment of individual goals set by the Company’s Compensation Committee.

In addition, if such officer is terminated without “cause” not in connection with a “change in control” as such terms are defined in the applicable Employment Agreement, such officer will receive (i) severance payments equal to his base compensation for one year (ii) continuation of group health coverage and (iii) any further compensation that may be provided by the terms of any benefit plans in which he participates and the terms of any outstanding equity grants.

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If such officer is terminated without “cause” within 18-months of a “change in control” as such terms are defined in the applicable Employment Agreement, such officer will receive (i) severance payments equal to his base compensation for two years (ii) continuation of group health coverage and (iii) any further compensation that may be provided by the terms of any benefit plans in which he participates and the terms of any outstanding equity grants.

The Employment Agreements also contain customary non-compete agreements.

The foregoing description of the Employment Agreements is not complete and is qualified in its entirety by reference to the Employment Agreements, a copy of which is attached as Exhibit 10.1, Exhibit 10.2, Exhibit 10.3, Exhibit 10.4 and Exhibit 10.5 to this Current Report on Form 8-K and incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits:

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.

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EXHIBIT INDEX

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