THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

Exhibit 10.1

THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “ Amendment ”) is entered into as of April 9, 2009, among ALLIS-CHALMERS ENERGY INC., a Delaware corporation, as borrower (the “ Borrower ”), the undersigned Guarantors (collectively, the “ Guarantors ”), ROYAL BANK OF CANADA, as Administrative Agent and Collateral Agent for the Lenders parties to the hereinafter defined Credit Agreement (in such capacities, the “ Administrative Agent ” and “ Collateral Agent ,” respectively) and the undersigned Required Lenders.

Reference is made to the Second Amended and Restated Credit Agreement dated as of April 26, 2007 among Borrower, the Administrative Agent, the Collateral Agent and the Lenders parties thereto, as amended by a First Amendment to Second Amended and Restated Credit Agreement dated as of December 3, 2007 and a Second Amendment to Second Amended and Restated Credit Agreement dated as of December 30, 2008 (as amended, the “ Credit Agreement ”). Unless otherwise defined in this Amendment, capitalized terms used herein shall have the meanings set forth in the Credit Agreement; all section, exhibit and schedule references herein are to sections, exhibits and schedules in the Credit Agreement; and all paragraph references herein are to paragraphs in this Amendment.

RECITALS

A.  The Borrower has requested certain amendments to the Credit Agreement and the Lenders are willing, on the terms and conditions set forth herein, to amend the Credit Agreement as hereinafter set forth.

Accordingly, for adequate and sufficient consideration, the parties hereto agree, as follows:

Paragraph 1. Amendments . Effective as of the Third Amendment Effective Date, the Credit Agreement is amended as follows:

1.1 Definitions. Section 1.01 of the Credit Agreement is amended as follows:

(a) The following definitions are amended in their entirety to read as follows:

“ Agreement means this Second Amended and Restated Credit Agreement as amended by the First Amendment to Second Amended and Restated Credit Agreement, Second Amendment to Second Amended and Restated Credit Agreement and Third Amendment to Second Amended and Restated Credit Agreement.”

“ Applicable Rate means the following percentages per annum set forth in the table below, on any date of determination, with respect to the Type of Credit Extension or commitment fee that corresponds to the Leverage Ratio at such date of determination, as calculated based on the quarterly Compliance Certificate most recently delivered pursuant to Section 6.02(a) :

Third Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

Any increase or decrease in the Applicable Rate resulting from a change in the Leverage Ratio shall become effective as of the first day of the fiscal quarter of the Borrower immediately following the date of a Compliance Certificate delivered pursuant to Section 6.02(a) ; provided, however, that if no Compliance Certificate is delivered during a fiscal quarter within 10 days after such Compliance Certificate is due in accordance with such Section, Pricing Level 5 shall apply as of the first day of such following fiscal quarter.

In the event that any Compliance Certificate delivered hereunder is shown to be inaccurate (regardless of whether this Agreement or the Aggregate Revolving Commitment is in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Rate based upon the foregoing pricing grid (the “ Accurate Applicable Rate ”) for any period that such Compliance Certificate covered, then (i) the Borrower shall immediately deliver to the Administrative Agent a Compliance Certificate for such period, (ii) the Applicable Rate shall be adjusted such that after giving effect to the corrected Compliance Certificate the Applicable Rate shall be reset to the Accurate Applicable Rate based upon the foregoing pricing grid for such period as set forth in the foregoing pricing grid and (iii) if the Accurate Applicable Rate is higher than the Applicable Rate based upon the foregoing pricing grid, the Borrower shall immediately pay to the Administrative Agent, for the account of the Lenders, the accrued additional interest owing as a result of such Accurate Applicable Rate for such period.

“ Cash Adjusted Consolidated Funded Debt means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, the excess of (a) Consolidated Funded Debt less (b) the excess of (i) unrestricted cash and Cash Equivalents as reflected on the balance sheet less (ii) Net Cash Proceeds from Equity Issuances to the extent such Net Cash Proceeds have not been expended or invested, as certified by the Borrower in the most recently delivered Compliance Certificate.”

“ Net Cash Proceeds means (i) any Insurance Payment, (ii) cash received in connection with any Disposition (including any cash received by way of deferred payment as and when received), in each case received by the Borrower or any of its Subsidiaries in connection with and as consideration therefor, on or after the date of consummation of such transaction, after (a) deduction of taxes payable in connection with or as a result of such transaction, and (b) payment of all usual and customary brokerage commissions and all other reasonable fees and expenses related to such transaction (including, without limitation, reasonable attorneys’ fees and closing costs incurred in connection with such transaction), and (iii) with respect to any Equity Issuance, proceeds of such Equity Issuance after payment of underwriting fees and payment of all cash closing costs and transaction costs, including reasonable attorneys fees.”

Third Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

(b) The following definitions are inserted alphabetically into Section 1.01 of the Credit Agreement:

“Accounts Receivable means and includes all of the Borrower’s and its Domestic Subsidiaries’ now owned or hereafter acquired or arising accounts, as defined in the UCC, including any rights to payment for the sale or lease of goods or rendition of services, whether or not they have been earned by performance.”

“Borrowing Base has the meaning given to such term in Section 2.01A .”

“Borrowing Base Period means the period of time commencing with the Third Amendment Effective Date until the fiscal quarter beginning July 1, 2010.

“Borrowing Base Report means a report in the form attached hereto as Exhibit E , appropriately completed, together with the following attachments: (a) a detailed aged schedule of all Accounts Receivable as of the date specified in such report, listing face amounts and dates of invoices of each such Accounts Receivable and the name of each account debtor obligated on such Accounts Receivable (and, upon request of Administrative Agent, copies of invoices, credit reports, and any other matters and information relating to the Accounts Receivable), (b) a detailed aged schedule of all Eligible Accounts Receivable as of the date specified in such report, listing face amounts and dates of invoices of each such Accounts Receivable and the name of each account debtor obligated on such Accounts Receivable (and, upon request of Administrative Agent, copies of invoices, credit reports, and any other matters and information relating to the Eligible Accounts Receivable) and (c) an appraisal report dated within the most recent 12 month period, setting forth the orderly liquidation value of Borrower’s and Subsidiaries’ domestic fixed assets.”

“Eligible Accounts Receivable means Accounts Receivable of the Borrower and any Domestic Subsidiary which is a Guarantor, excluding any Accounts Receivable:

(i) with respect to which more than ninety (90) days have elapsed since the date of the original invoice;

(ii) with respect to which any of the representations, warranties, covenants, and agreements contained in any Collateral Document are incorrect or have been breached in any material respect;

(iii) with respect to which, in whole or in part, a check, promissory note, draft, trade acceptance or other instrument for the payment of money has been received, presented for payment and returned uncollected for any reason for such Accounts Receivable (or any other Accounts Receivable due from such account debtor);

Third Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

(iv) which represents a progress billing (as hereinafter defined) or as to which the Borrower or any of the Domestic Subsidiaries has extended the time for payment without the consent of the Administrative Agent; for the purposes hereof, “ progress billing ” means any invoice for goods sold or leased or services rendered under a contract or agreement pursuant to which the account debtor’s obligation to pay such invoice is conditioned upon the Borrower’s or any of the Domestic Subsidiaries’ completion of any further performance under the contract or agreement;

(v) with respect to which any one or more of the following events has occurred to the account debtor on such Accounts Receivable: death or judicial declaration of incompetency of an account debtor who is an individual; the filing by or against the account debtor of a request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or other relief under Debtor Relief Laws of the U.S. or any foreign jurisdiction, now or hereafter in effect; the making of any general assignment by the account debtor for the benefit of creditors; the appointment of a receiver or trustee for the account debtor or for any of the assets of the account debtor including, without limitation, the appointment of or taking possession by a “custodian,” as defined in the Bankruptcy Code of the United States; the institution by or against the account debtor of any other type of insolvency proceeding (under Debtor Relief Laws of the United States or otherwise) or of any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against, or winding up of affairs of, the account debtor; the sale, assignment, or transfer of all or any material part of the assets of the account debtor; the nonpayment generally by the account debtor of its debts as they become due; or the cessation of the business of the account debtor as a going concern;

(vi) if twenty percent (20%) or more of the aggregate Dollar amount of outstanding Accounts Receivable owed at such time by the account debtor thereon is classified as ineligible under clause (i) above;

(vii) owed by an account debtor which: (1) does not maintain its chief executive office in the United States; or (2) is not organized under the Laws of the United States or any state thereof; or (3) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof; except to the extent that such Accounts Receivable is secured or payable by a letter of credit or guarantee satisfactory to the Administrative Agent in its reasonable discretion;

(viii) owed by an account debtor which is an Affiliate or employee of the Borrower or any of its Subsidiaries;

Third Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

(ix) except as provided in clause (xi) below, with respect to which either the perfection, enforceability, or validity of the Administrative Agent’s Liens in such Accounts Receivable, or the Administrative Agent’s right or ability to obtain direct payment to the Administrative Agent of the proceeds of such Accounts Receivable, is governed by any federal, state, or local statutory requirements other than those of the UCC;

(x) owed by an account debtor to which the Borrower or any of its Subsidiaries, is indebted in any way, or which is subject to any right of setoff or recoupment by the account debtor, unless the account debtor has entered into an agreement acceptable to the Administrative Agent to waive setoff rights; or if the account debtor thereon has disputed liability or made any claim with respect to any other Accounts Receivable due from such account debtor; but in each such case only to the extent of such indebtedness, setoff, recoupment, dispute, or claim;

(xi) owed by the government of the United States, or any department, agency, public corporation, or other instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. §3727 et seq .), and any other steps necessary to perfect the Administrative Agent’s Liens therein, have been complied with to the Administrative Agent’s satisfaction with respect to such Accounts Receivable;

(xii) owed by any state, municipality, or other political subdivision of the United States, or any department, agency, public corporation or other instrumentality thereof and as to which the Administrative Agent determines that its Lien therein is not or cannot be perfected;

(xiii) which represents a sale on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or other repurchase or return basis;

(xiv) which is evidenced by a promissory note or other instrument or by chattel paper;

(xv) intentionally deleted;

(xvi) with respect to which the account debtor is located in any state requiring the filing of a Notice of Business Activities Report or similar report in order to permit the Borrower or any of the Domestic Subsidiaries to seek judicial enforcement in such state of payment of such Accounts Receivable, unless such Borrower or Domestic Subsidiary has qualified to do business in such state, has filed a Notice of Business Activities Report or equivalent report for the then current year (unless the laws of such state permit the Notice of Business Activities Report or equivalent report to be filed immediately prior to such suit) or the failure to file such Notice of Business Activities Report or equivalent report is not otherwise an impediment to the collection of such Accounts Receivable;

(xvii) with respect to which the goods giving rise to such Accounts Receivable have not been shipped and delivered to and accepted by the account debtor or the services giving rise to such Accounts Receivable have not been performed by the Borrower or a Domestic Subsidiary, as applicable, and, if applicable, accepted by the account debtor, or the account debtor revokes its acceptance of such goods or services;

Third Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

(xviii) owed by an account debtor which is obligated to the Borrower or any of the Domestic Subsidiaries representing Accounts Receivable the aggregate unpaid balance of which exceeds fifteen percent (15%) of the aggregate unpaid balance of all Accounts Receivable owed to the Borrower or any of the Domestic Subsidiaries at such time by all of the Borrower’s and the Domestic Subsidiaries’ account debtors, but only to the extent of such excess;

(xx) which is not subject to a first priority and perfected security interest in favor of the Administrative Agent for the benefit of the Lenders; or

(xxi) which is owed to any Subsidiary acquired after the Closing Date unless a field audit of such Person’s Accounts Receivable has been delivered to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent.

If any Accounts Receivable at any time ceases to be an Eligible Accounts Receivable, then such Accounts Receivable shall promptly be excluded from the calculation of Eligible Accounts Receivable.”

“ Third Amendment Effective Date means the date the Third Amendment to Second Amended and Restated Credit Agreement by its terms becomes effective among the parties thereto.”

“ Third Amendment to Second Amended and Restated Credit Agreement means that certain Third Amendment to Second Amended and Restated Credit Agreement dated as of April _____, 2009, among the Borrower, the Guarantors, Royal Bank of Canada, as Administrative Agent and Collateral Agent, and the Required Lenders.”

1.2 Section 2.01. Section 2.01 of the Credit Agreement is amended in its entirety as follows:

“ Section 2.01 Revolving Loans . Subject to and in reliance upon the terms, conditions, representations, and warranties in the Loan Documents, each Lender severally, but not jointly, agrees to make revolving loans (each such loan a “ Revolving Loan ”) to Borrower from time to time on any Business Day during the period from the Second Amended and Restated Closing Date to the Maturity Date, in an aggregate amount not to exceed at any time outstanding the lesser of (i) the amount of such Lender’s Pro Rata Share of one or more Revolving Loan Borrowings not to exceed, when aggregated with the Outstanding Amount of the L/C Obligations, such Lender’s Revolving Commitment and (ii) such Lender’s Pro Rata Share of the Borrowing Base. Revolving Loan Borrowings may be repaid and reborrowed from time to time in accordance with the terms and provisions of the Loan Documents; provided that , each such Revolving Loan Borrowing must occur on a Business Day and no later than the Business Day immediately preceding the Maturity Date. Revolving Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein; provided, however, all Revolving Loan Borrowings made on the Second Amended and Restated Closing Date shall be made as Base Rate Loans.”

Third Amendment to Allis-Chalmers
Energy Second Amended and
Restated Credit Agreement

1.3 Section 2.01A. A new Section 2.01A to the Credit Agreement is hereby added as follows:

“ Section 2.01A Borrowing Base Determinations.

(a) During the Borrowing Base Period, the Borrowing Base (the “ Borrowing Base ”) shall be equal to the sum of (i) twenty-five percent (25%) of the orderly liquidation value of the Borrower’s and its Subsidiaries’ domestic fixed assets (as determined by the most recently delivered asset appraisals delivered to the Administrative Agent pursuant to Section 6.02(e) or (f ), and (ii) eighty percent (80%) of Eligible Accounts Receivable. The Borrowing Base shall be determined each month by reference to the most recent Borrowing Base Report delivered to the Administrative Agent (absent any error in such Borrowing Base Report) which shall be effective as of the date such Borrowing Base Report is required to be delivered pursuant to Section 6.02(j) .

(b) During the period from Third Amendment Effective Date to the first redetermination of the Borrowing Base pursuant to Section 2.01A(a) , the Borrowing Base shall be determined by the Borrowing Base Report delivered on the Third Amendment Effective Date.”

1.4 Section 2.03(e). A new Section 2.03(e) to the Credit Agreement is hereby added as follows:

“(e) Prepayments by Reason of Borrowing Base Deficiency . If on any date during the Borrowing Base Period the Outstanding Amount of all Revolving Loans and L/C Obligations shall exceed the Borrowing Base, then the Borrower shall immediately make a mandatory prepayment of the Revolving Loans equal to such excess, and if any such excess remains after such prepayments, to the extent of such excess the Borrower sha