INVESTORS RIGHTS AGREEMENT

Exhibit 10.2

INVESTOR RIGHTS AGREEMENT

     This Investor Rights Agreement dated as of December 18 2006 (this “Agreement”) is entered into by and among Allis-Chalmers Energy Inc., a Delaware corporation (the “Company”), and Oil & Gas Rental Services, Inc., a Louisiana corporation (the “Investor”).

     WHEREAS, the Company and the Investor have entered into an Asset Purchase Agreement dated as of October 25, 2006 (the “Asset Purchase Agreement”) pursuant to which the Investor shall receive a number of shares of the common stock, par value $0.01 per share, of the Company (the “Common Stock”), as set forth therein;

     WHEREAS, in order to induce the Investor to enter into the Asset Purchase Agreement, the Company has agreed to grant certain registration rights to the Investor with respect to such shares and certain Board designation rights, in each case, subject to the terms and conditions set forth herein;

     NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

     Section 1. Definitions. As used herein, the following terms have the indicated meanings, unless the context otherwise requires:

     “Agreement” has the meaning given to such term in the preamble hereto.

     “Asset Purchase Agreement” has the meaning given to such term in the recitals hereto.

     “Beneficially Own,” “Beneficially Owned,” “Beneficial Ownership” and “Beneficial Owner” with respect to any securities means a Holder’s having such ownership, control or power to direct the voting with respect to, or which otherwise enables a Holder to legally act with respect to, such securities as contemplated hereby, including without limitation pursuant to any agreement, arrangement or understanding, regardless of whether in writing. Securities “Beneficially Owned” shall include securities Beneficially Owned by all other persons with whom a Holder would constitute a “group” as within the meaning of Section 13(d) of the Exchange Act.

     “Blackout Period” means, with respect to a Registration Statement, a period in each case commencing on the day immediately after the Company notifies the Holders that they are required, pursuant to Section 4(c)(vi), to suspend offers and sales of Registrable Securities during which the Company, in the good faith judgment of the Board, determines (because of the existence of, or in anticipation of, any acquisition, financing activity, or other transaction involving the Company, or the unavailability for reasons beyond the Company’s control of any required financial statements, disclosure of information which is in its best interest not to publicly disclose, or any other event or condition of similar significance to the Company) that the registration and distribution of (and/or the registration of the offer and sale of) the Registrable Securities covered or to be covered by such Registration Statement would be seriously detrimental to the Company and its stockholders and ending on the earlier of (a) the date upon

which the material non-public information commencing the Blackout Period is disclosed to the public or ceases to be material and (b) such time as the Company notifies the selling Holders that the Company will no longer delay such filing of such Registration Statement, recommence taking steps to make such Registration Statement effective, or allow sales pursuant to such Registration Statement to resume; provided that no Blackout Period may last for more than 60 consecutive days; provided, further, that during any period of 365 consecutive days, Blackout Periods may not, in the aggregate, last for more than the greater of (a) zero days and (b) the result of 90 days minus the number of days that Holders are required pursuant to Section 4(d) to discontinue and suspend disposition of Registrable Securities because of the happening of any event described in Section 4(c)(vi).

     “Board” means the board of directors of the Company.

     “Business Day” means any day of the year, other than a Saturday, Sunday, or other day on which the SEC is required or authorized to close.

     “Closing Date” has the meaning given to such term in the Asset Purchase Agreement.

     “Common Stock” has the meaning given to such term in the recitals hereto.

     “Company” has the meaning given to such term in the preamble hereto.

     “Designation Rights Termination Date” has the meaning given to such term in Section 2(b) hereto.

     “Effectiveness Period” has the meaning given to such term in Section 4(c)(i).

     “Equity Securities Offering” means any underwritten registered offering of Relevant Securities, and any offering or placement of any Relevant Securities pursuant to Rule 144A under the Securities Act.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

     “Family Member” means (a) with respect to any individual, such individual’s spouse, any descendants (whether natural or adopted), any trust all of the beneficial interests of which are owned by any of such individuals or by any of such individuals together with any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any such individual, and any corporation, association, partnership, limited liability company or other entity all of the equity interests of which are owned by those above described individuals, trusts or organizations and (b) with respect to any trust, the owners of the beneficial interests of such trust.

     “Form S-1” means such form under the Securities Act as in effect on the date of this Agreement or any successor registration form thereto under the Securities Act subsequently adopted by the SEC.

     “Form S-3” means such form under the Securities Act as in effect on the date of this Agreement or any successor registration form thereto under the Securities Act subsequently adopted by the SEC.

     “Form S-4” means such form under the Securities Act as in effect on the date of this Agreement or any successor registration form thereto under the Securities Act subsequently adopted by the SEC.

     “Form S-8” means such form under the Securities Act as in effect on the date of this Agreement or any successor registration form thereto under the Securities Act subsequently adopted by the SEC.

     “Holder” means the Investor or any of such Investor’s successors and Permitted Assignees who acquire rights in accordance with this Agreement with respect to the Registrable Securities directly or indirectly from the Investor or another Holder (including from any Permitted Assignee) and “Holders” means all of the foregoing individuals or entities.

     “Inspector” means any attorney, accountant or other agent retained by a Holder for the purposes provided in Section 4(c)(x).

     “Investor” has the meaning given to such term in the preamble hereto.

     “Investor Director” means any member of the Board that was nominated for election to the Board by the Holders pursuant to and in accordance with Section 2(a).

     “Market Standoff Period” means, with respect to each Equity Securities Offering, the period beginning on the date of first sale of securities pursuant to such Equity Securities Offering and ending on the date that shall be requested by the Company or the underwriters or initial purchasers retained by the Company to facilitate such Equity Securities Offering; provided, however, that each such period shall not be more than 90 days; provided further that (i) such period shall be no longer than the shortest period imposed by the Company or the underwriters upon any other person or entity and (ii) if any other person or entity receives a waiver with respect to any such matters, the Holders shall be given a waiver with respect to their Shares as well.

     “NASD” means the National Association of Securities Dealers.

     “Permitted Assignee” means (a) with respect to a partnership or limited partnership, its partners or former partners in accordance with their partnership interests, (b) with respect to a corporation, its stockholders or former stockholders in accordance with their interest in the corporation, (c) with respect to a limited liability company, its members or former members in accordance with their interest in the limited liability company, (d) with respect to an individual, any Family Member or (e) an entity that is controlled by, controls, or is under common control with a transferor.

     “Piggyback Registration” has the meaning given to such term in Section 4(b)(i).

     “Piggyback Registration Statement” has the meaning given to such term in Section 4(b)(i).

     “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

     “Registrable Securities” means the Shares, excluding any such Shares (a) that have been publicly sold or may be sold immediately without registration or the requirement to make filings with the SEC under the Securities Act either pursuant to Rule 144 of the Securities Act or otherwise, (b) sold by a person in a transaction pursuant to a registration statement filed under the Securities Act or (c) that are at the time subject to an effective registration statement under the Securities Act (other than the Registration Statements contemplated hereby).

     “Registration Expenses” has the meaning given to such term in Section 4(e).

     “Registration Statement” means either of the Piggyback Registration Statements or the Shelf Registration Statement; and “Registration Statements” means, collectively, the Piggyback Registration Statements and the Shelf Registration Statement.

     “Relevant Security” means the Shares, any other equity security of the Company or any of its subsidiaries and any security convertible into, or exercisable or exchangeable for, any Shares or other such equity security.

     “SEC” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

     “SEC Effective Date” means, with respect to a Registration Statement, the date as of which such Registration Statement is originally declared effective by the SEC.

     “Securities Act” means the Securities Act of 1933, as amended, or any similar federal statute promulgated in replacement thereof, and the rules and regulations of the SEC thereunder, all as the same shall be in effect from time to time.

     “Selling Expenses” has the meaning given to such term in Section 4(e).

     “Shares” means the shares of Common Stock issued to the Investor pursuant to the Asset Purchase Agreement and (a) any and all shares of capital stock or other equity securities of the Company which are added to or exchanged or substituted for such shares of Common Stock by reason of the declaration of any stock dividend or stock split, the issuance of any distribution or the reclassification, readjustment, recapitalization or other such modification of the capital structure of the Company; and (b) any and all shares of capital stock or other equity securities of any other corporation (now or hereafter organized under the laws of any state or other governmental authority) with which the Company is merged, which results from any consolidation or reorganization to which the Company is a party, or to which is sold all or substantially all of the shares or assets of the Company, for which such shares of Common Stock are exchanged or substituted in connection with such merger, consolidation, reorganization or sale, if immediately after such merger, consolidation, reorganization or sale, the Company or the stockholders of the Company own equity securities having in the aggregate more than 50% of the total voting power of such other corporation.

     “Shelf Registration Statement” has the meaning given to such term in Section 4(a).

     “Transfer” has the meaning given to such term in Section 3(a).

     Section 2. Board Designation Rights.

     (a) Designation. Until the Designation Rights Termination Date, the Holders of a majority of the Shares shall have the right to designate one nominee for election to the Board.

     (b) Termination of Designation Rights. The Holders of a majority of the Shares shall not be entitled to designate any nominees for election to the Board pursuant to this Agreement from and after the date (the “Designation Rights Termination Date”) that is the first date on which the Shares Beneficially Owned by the Holders collectively represent less than thirty-one and one-quarter percent (31.25%) of the Shares initially acquired by the Investor pursuant to the Asset Purchase Agreement.

     (c) Company Support. At all times prior to the Designation Rights Termination Date, the Company shall support the nominations of the persons designated by the Holders of a majority of the Shares pursuant to Section 2(a), and the Company shall use its best efforts to cause the Board (and the Company’s nominating committee, if any) to recommend the inclusion of such persons in the slate of nominees recommended to stockholders for election as directors at each annual meeting of stockholders of the Company.

     (d) Vacancies. If at any time prior to the Designation Rights Termination Date, a vacancy is created on the Board by reason of the incapacity, death, removal or resignation of any Investor Director, then the Company shall use its best efforts to cause the Board to appoint an individual designated by the Holders of a majority of the Shares to fill such vacancy until the next meeting of the Company’s stockholders at which directors are elected.

     Section 3. Market Standoff. Notwithstanding anything to the contrary set forth in this Agreement, with respect to each Equity Securities Offering conducted after the Closing Date, the following provisions of this Section 3 shall apply, if and only if (x) the underwriters or initial purchasers retained by the Company to facilitate such offering request, in connection with such offering, that the officers or directors or significant stockholders of the Company refrain from selling any Relevant Security during any period, and (y) either (1) any nominee designated by the Holders pursuant to Section 2(a) is a member of the Board, or (2) the Holders Beneficially Own shares of Common Stock representing at least 10% of the fully diluted equity interests in the Company (calculated giving effect to the exercise of all outstanding options, warrants and other rights to purchase to acquire any Common Stock of the Company):

     (a) Without the prior written consent of the Company, during the Market Standoff Period applicable to such Equity Securities Offering, each Holder will not (i), directly or indirectly, offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, borrow or otherwise dispose of any Relevant Security, or (ii) establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” (in each case within the meaning of Section 16 of the Exchange Act) with respect to any Relevant Security, or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of a Relevant Security (each of the transactions described in the immediately preceding clauses (i) and (ii), being referred to as a “Transfer”), regardless of

whether such transaction is to be settled by delivery of Relevant Securities, other securities, cash or other consideration; provided, however, that a Transfer to a Permitted Assignee will not be subject to this Section 3 as long as (x) such Transfer is effected in accordance with applicable securities laws; (y) such transferee agrees in writing to become subject to the terms of this Agreement as a Holder; and (z) the Company is given written notice by such Holder of such Transfer, stating the name and address of the transferee and identifying the Shares being Transferred.

     (b) Furthermore, each Holder hereby authorizes the Company during the Market Standoff Period to cause any transfer agent for the Relevant Securities to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, any Relevant Securities for which such Holder is the record holder and, in the case of Relevant Securities for which such Holder is the Beneficial Owner but not the record holder, agrees during the Market Standoff Period to cause the record holder thereof to cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, such Relevant Securities.

     (c) Subject to the provisions of Section 4(b), without the prior written consent of the Company, during the Market Standoff Period such Holder (x) will not participate in the filing with the SEC of any registration statement, or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document with respect to any proposed offering or sale of a Relevant Security and (y) will not exercise any rights the undersigned may have to require registration with the SEC of any proposed offering or sale of a Relevant Security (including without limitation pursuant to this Agreement).

     Section 4. Registration Rights.

     (a) Shelf Registration Statement. The Company shall (i) file with the SEC a shelf registration statement on Form S-1 (or, if the Company is eligible to use such form, Form S-3) relating to the registration of the offer and resale by the Holders of all of the Registrable Securities (the “Shelf Registration Statement”) and (ii) use its commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective by the SEC no later than the date that is one (1) year after the Closing Date; provided, however, that the Company shall not be obligated to effect any such registration pursuant to this Section 4(a), or keep such registration or the Shelf Registration Statement effective pursuant to Section 4(c)(i), during any Blackout Period.

     (b) Piggyback Registration Rights.

     (i) Piggyback Registration. If after the date that is one (1) year after the Closing Date, the Company shall determine to register the offer and sale for cash of any of its Common Stock for its own account, other than (i) a registration relating solely to employee benefit plans or securities issued or issuable to employees, consultants (to the extent the securities owned or to be owned by such consultants could be registered on Form S-8) or any of their Family Members (including a registration on Form S-8), (ii) a registration on Form S-4 in connection with a merger, acquisition, divestiture, reorganization, exchange offer or similar event, or (iii) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt

securities that are also being registered, then (subject to Section 4(b)(iii)) the Company shall promptly give to the Holders written notice thereof, and in no event shall such notice be given less than 20 calendar days prior to the filing of a registration statement (each a “Piggyback Registration Statement” and collectively the “Piggyback Registration Statements”) with respect to such registration (each a “Piggyback Registration”), and shall, subject to Section 4(b)(ii) and Section 4(b)(iii), include in such Piggyback Registration, all of the Registrable Securities specified in a written request or requests, made within 10 calendar days after receipt of such written notice from the Company, by any Holder or Holders. However, the Company may, without the consent of the Holders, withdraw such Piggyback Registration Statement prior to its becoming effective if the Company has elected to abandon the proposal to register the securities proposed to be registered thereby.

     (ii) Underwriting. If a Piggyback Registration is for a registered public offering involving an underwriting, the Company shall so advise the Holders in writing or as a part of the written notice given pursuant to Section 4(b)(i). In such event the right of any Holder to registration pursuant to Section 4(b)(i) shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of this Section 4(b)(ii), if the underwriter or the Company determines that marketing factors require a limitation of the number of shares to be underwritten, the underwriter may exclude some or all Registrable Securities from such registration and underwriting. The Company shall so advise all Holders (except those Holders who failed to timely elect to distribute their Registrable Securities through such underwriting or have indicated to the Company their decision not to do so), and the number of shares that may be included in the registration and underwriting shall be allocated:

     (A) first to the Company; and

     (B) then, subject to written obligations and commitments existing as of October 25, 2006, to all selling stockholders, including the Holders, who have requested to sell in the registration on a pro rata basis according to the number of shares requested to be included.

No Registrable Securities excluded from the underwriting by reason of the underwriter’s marketing limitation shall be included in such registration. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter. The Registrable Securities and/or other securities so withdrawn from such underwriting shall also be withdrawn from such registration; provided, however, that, if by the withdrawal of such Registrable Securities a greater number of Registrable Securities held by other Holders may be included in such registration (up to the maximum of any limitation imposed by the underwriters), then the Company shall offer to all Holders who have included Registrable Securities in the registration the right to include additional Registrable Securities pursuant to the terms and

limitations set forth herein in the same proportion used above in determining the underwriter limitation.

     (iii) Notwithstanding anything to the contrary set forth in this Agreement, the Company shall not be obligated to effect, or take any action to effect, any registration pursuant to Section 4(b) after the Company has initiated two (2) such registrations (counting for this purpose only registrations which have been declared or ordered effective and pursuant to which securities have been sold).

     (c) Registration Procedures. In the case of each registration, qualification, or compliance effected by the Company pursuant to Section 4(a) and Section 4(b), the Company will keep each Holder including securities therein reasonably advised in writing (which may include e-mail) as to the initiation of each registration, qualification, and compliance and as to the completion thereof. In addition, the Company hereby agrees as follows with respect to each Registration Statement:

     (i) The Company will use its commercially reasonable efforts to cause such Registration Statement to become and remain effective at least for a period ending with the first to occur of (A) the sale by the Holders of all Registrable Securities covered by such Registration Statement, (B) the availability under Rule 144 for the Holders to immediately, freely resell without restriction under United States federal securities laws all Registrable Securities covered by such Registration Statement, or (C) the date that is two years after the SEC Effective Date of such Registration Statement (provided, however, that if the Company files a Registration Statement on Form S-1 and subsequently becomes eligible to use Form S-3, it may file a post-effective amendment to such Form S-1 on Form S-3 prior to the end of such period and use its commercially reasonable efforts to cause such Registration Statement as amended to become effective until the end of such period) (in any such case, the “Effectiveness Period”). At any time after the end of the Effectiveness Period with respect to the Shelf Registration Statement, if (a) the Holders Beneficially Own Registrable Securities representing more than 10% of the fully diluted equity interests in the Company (calculated giving effect to the exercise of all outstanding options, warrants and other rights to purchase to acquire any Common Stock of the Company) or (b) any nominee designated by the Holders pursuant to Section 2(a) is a member of the Board, then (x) as promptly as reasonably practicable after the written request of Holders of a majority of the Registrable Securities, the Company shall file with the SEC another shelf registration statement on Form S-1 (or, if the Company is eligible to use such form, Form S-3) relating to the registration of the offer and resale by the Holders of all of the Registrable Securities, (y) the provisions of this Agreement (including without limitation the provisions of Section 4(a) and Section 4(c)) shall apply to such registration statement and (z) such registration statement shall be deemed to be the Shelf Registration Statement (as defined in Section 4(a)) for purposes of this Agreement.

     (ii) If any Registration Statement becomes subject to review by the SEC, the Company will promptly respond to all comments and diligently pursue resolution of any comments to the satisfaction of the SEC.

     (iii) The Company will prepare and file with the SEC such amendments and supplements to each Registration Statement