##### 



U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 40-F
  o
    
    Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2007
 Commission file number 001-14534
 PRECISION DRILLING TRUST
  Alberta, Canada
(Province or other jurisdiction of 
incorporation or organization)
    
    1381
(Primary Standard Industrial
Classification Code Number (if
applicable))
    
    Not applicable
(I.R.S. Employer
Identification Number (if
Applicable))
 4200-150 6th Avenue, S.W., Calgary, Alberta, Canada T2P 3Y7
(403) 716-4500
 CT Corporation System, North St. Paul Street, Dallas, Texas 77022
(214) 979-1172
  Title of each class
    
    Name of each exchange on which registeredTrust Units
    
    New York Stock Exchange
    þ þ
   o þ
  þ o




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##### 



Principal Documents
  (a)
    
    Annual Information Form for the fiscal year ended December 31, 2007;(b)
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations for the
fiscal year ended December 31, 2007; and(c)
    
    Consolidated Financial Statements for the fiscal year ended December 31, 2007 (Note 16 to the
Consolidated Financial Statements relates to United States Generally Accepted Accounting
Principles (U.S. GAAP)).




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##### 



PRECISION DRILLING TRUST
ANNUAL INFORMATION FORM
 For the fiscal year ended December 31, 2007
 Dated March 25, 2008




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##### 



TABLE OF CONTENTS
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
    
    
    1CORPORATE STRUCTURE
    
    
    3INCORPORATION INFORMATION AND ADDRESS
    
    
    3The Trust
    
    
    3Precision Drilling Limited Partnership
    
    
    3Precision Drilling Corporation
    
    
    3INTERCORPORATE RELATIONSHIPS
    
    
    3Organizational Structure of the Trust
    
    
    4GENERAL DEVELOPMENT OF THE BUSINESS
    
    
    4THREE YEAR HISTORY
    
    
    4Significant Acquisitions
    
    
    5Significant Dispositions
    
    
    6Significant Reorganizations
    
    
    6Cash Flow
    
    
    7Cash Distributions on Trust Units
    
    
    7Payments on Exchangeable Units
    
    
    7Distribution Reinvestment Plan
    
    
    8Board of Trustees
    
    
    8Administration Agreement
    
    
    9DESCRIPTION OF THE BUSINESS OF PRECISION
    
    
    9GENERAL
    
    
    9CONTRACT DRILLING SERVICES
    
    
    10Precision Drilling
    
    
    11Precision Drilling Oilfield Services, Inc.
    
    
    14LRG Catering
    
    
    14Rostel Industries
    
    
    14Columbia Oilfield Supply
    
    
    15COMPLETION AND PRODUCTION SERVICES
    
    
    15Precision Well Servicing
    
    
    15Live Well Service
    
    
    17Precision Rentals
    
    
    17Terra Water
    
    
    17RISK FACTORS
    
    
    18THE TRUST
    
    
    18The Trust is Dependent on Precision for All Cash Available for Distributions
    
    
    18Variability of Distributions
    
    
    18Changes in Legislation
    
    
    18Taxation of the Trust
    
    
    18Residual Liability of Precision
    
    
    20Nature of Trust Units
    
    
    20Qualified Dividend Treatment for Individual U.S. Holders of Trust Units
    
    
    20Taxation of Precision
    
    
    21Risks
Associated with Trust Units for Non-Resident Holders of Trust Units
    
    
    21Nature of Distributions
    
    
    21Possible Restriction on Growth
    
    
    21Investment Eligibility
    
    
    21Debt Service
    
    
    22Potential Sales of Additional Trust Units
    
    
    22Issuance of Additional Trust Units
    
    
    22Distribution of Assets on Redemption or Termination of the Trust
    
    
    22Deductibility of Expenses
    
    
    22Trust Unitholder Limited Liability
    
    
    23Precision Drilling Limited Partnership
    
    
    23Net Asset Value
    
    
    23Risks Associated with Exchangeable Units
    
    
    23Indemnity of Limited Partners
    
    
    23RISKS RELATING TO THE BUSINESS CURRENTLY CONDUCTED BY PRECISION
    
    
    23
 i




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Operations Dependent on the Price of Oil and Natural Gas
    
    
    24Competitive Industry
    
    
    24Workforce Availability
    
    
    24Capital Overbuild in the Drilling Industry
    
    
    24Business is Seasonal
    
    
    25Tax Consequences of Previous Transactions Completed by Precision
    
    
    25Safety Performance
    
    
    25New Technology
    
    
    25Foreign Operations
    
    
    26Capital Expenditures
    
    
    26Environmental Legislation
    
    
    26Credit Risk
    
    
    27Access to Additional Financing
    
    
    27Customer Merger and Acquisition Activity
    
    
    27Dependence on Third Party Suppliers
    
    
    27Potential Unknown Liabilities
    
    
    27Currency Exchange Exposure
    
    
    27Business Interruption and Casualty Losses
    
    
    28RECORD OF CASH DISTRIBUTIONS/PAYMENTS
    
    
    29DESCRIPTION OF CAPITAL
    
    
    31GENERAL DESCRIPTION OF CAPITAL STRUCTURE
    
    
    31Trust Units
    
    
    31Special Voting Unit
    
    
    31Precision Drilling Limited Partnership
    
    
    31The General Partner
    
    
    33MARKET FOR SECURITIES
    
    
    33Trading Price and Volume of Trust Units
    
    
    33ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER
    
    
    34TRUSTEES,
DIRECTORS AND EXECUTIVE OFFICERS
    
    
    34CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS
    
    
    36AUDIT COMMITTEE INFORMATION
    
    
    36Audit Committee Charter
    
    
    36Composition of the Audit Committee
    
    
    36Relevant Education and Experience
    
    
    36Preapproval Policies and Procedures
    
    
    37Audit Fees
    
    
    37LEGAL PROCEEDINGS AND REGULATORY ACTIONS
    
    
    38INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
    
    
    38TRANSFER AGENT, REGISTRAR AND VOTING AND EXCHANGE TRUSTEE
    
    
    38MATERIAL CONTRACTS
    
    
    38INTERESTS OF EXPERTS
    
    
    39EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
    
    
    39CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
    
    
    39MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    39ADDITIONAL INFORMATION
    
    
    39APPENDIX  1 PRECISION DRILLING CORPORATION AUDIT COMMITTEE CHARTER AND TERMS OF REFERENCE
    
    
    40
 ii




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##### 



cautionary statement regarding forward-looking information and statements
 United States Private Securities Litigation Reform Act of 1995
  
    
    2008 expected cash provided by continuing operations;
    
    2008 capital expenditures, including the amount and nature thereof;
    
    2008 distributions on Trust Units and payments on Exchangeable Units;
    
    performance of the oil and natural gas industry, including oil and natural gas commodity
prices and supply and demand;
    
    expansion, consolidation and other development trends of the oil and natural gas industry;
    
    demand for and status of drilling rigs and other equipment in the oil and natural gas
industry;
    
    costs and financial trends for companies operating in the oil and natural gas industry;
    
    world population and energy consumption trends;
    
    our business strategy, including the 2008 strategy and outlook for our business segments;
    
    expansion and growth of our business and operations, including diversification of our
earnings base, safety and operating performance, the size and capabilities of our drilling and
service rig fleet, our market share and our position in the markets in which we operate;
    
    demand for our products and services;
    
    our management strategy, including transitions in executive roles;
    
    labour shortages;
    
    climatic conditions;
    
    the maintenance of existing customer, supplier and partner relationships;
    
    supply channels;
    
    accounting policies and tax liabilities;
    
    expected payments pursuant to contractual obligations;
    
    the prospective impact of recent or anticipated regulatory changes;
    
    financing strategy and compliance with debt covenants;
    
    credit risks; and
    
    other such matters.
  1




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##### 




    
    the impact of general economic conditions in Canada and the United States;
    
    world energy prices and government policies;
    
    industry conditions, including the adoption of new environmental, taxation and other laws
and regulations and changes in how they are interpreted and enforced;
    
    the impact of initiatives by the Organization of Petroleum Exporting Countries and other
major petroleum exporting countries;
    
    the ability of oil and natural gas companies to access external sources of debt and equity
capital;
    
    the effect of weather conditions on operations and facilities;
    
    the existence of operating risks inherent in well servicing, contract drilling and
ancillary oilfield services;
    
    volatility of oil and natural gas prices;
    
    oil and natural gas product supply and demand;
    
    risks inherent in the ability to generate sufficient cash flow from operations to meet
current and future obligations;
    
    increased competition;
    
    consolidation among our customers;
    
    risks associated with technology;
    
    political uncertainty, including risks of war, hostilities, civil insurrection, instability
or acts of terrorism;
    
    the lack of availability of qualified personnel or management;
    
    credit risks;
    
    increased costs of operations, including costs of equipment;
    
    fluctuations in interest rates;
    
    stock market volatility;
    
    safety performance;
    
    foreign operations;
    
    foreign currency exposure;
    
    dependence on third party suppliers;
    
    opportunities available to or pursued by us;
    
    and other factors, many of which are beyond our control.
   2




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##### 



CORPORATE STRUCTURE
 INCORPORATION INFORMATION AND ADDRESS
 The Trust
    Precision Drilling Limited Partnership
  Precision Drilling Corporation
 Business Corporations Act
 INTERCORPORATE RELATIONSHIPS
  3




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##### 



Name of Subsidiary or Partnership
    
    
    Percent or Interest Owned
    
    
    Jurisdiction of Incorporation or ContinuancePrecision Drilling Limited Partnership
    
    
    
    99.86
    %
    
    
    Manitoba1194312 Alberta Ltd.
    
    
    
    100%
    
    
    
    AlbertaPrecision Drilling Corporation
    
    
    
    99.86
    %
    
    
    Alberta
 Organizational Structure of the Trust
  
 NOTES:
 (1)
    
    As of December 31, 2007 there were 125,587,919 PDLP A Units outstanding.(2)
    
    As of December 31, 2007 there were 170,005 Exchangeable Units outstanding.(3)
    
    The interest of 1194312 Alberta Ltd. in PDLP is 0.001%.(4)
    
    Inter-company note owing by Precision to PDLP (the Promissory Note).
 GENERAL DEVELOPMENT OF THE BUSINESS
 THREE YEAR HISTORY
  4




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##### 



Significant Acquisitions
 
    
    On August 17, 2006 Precision acquired Terra, a privately owned wastewater treatment
business operating at remote worksite locations, for an aggregate purchase price of $16
million. Terra had 41 treatment units at the time of the acquisition. The service provided
by Terra complements those provided by the LRG Catering and Precision Rentals divisions and
expanded the diversity of services Precision offered its customers.
 5




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##### 



Significant Dispositions
 
    
    On August 31, 2005 Precision sold its Energy Services and International Contract Drilling
divisions to Weatherford for a purchase price consisting of nearly 26 million common shares of
Weatherford and $1.13 billion cash pursuant to a stock purchase agreement dated June 6, 2005
between Precision and Weatherford (the Weatherford Sale Agreement). The Energy Services
division of Precision consisted of three main business segments: wireline logging services;
drilling and evaluation services; and production services. Wireline services included open
hole logging, cased hole logging and completion and slick line services. Drilling and
evaluation services included measurement-while-drilling, logging-while-drilling, directional
drilling and rotary steerable services. Production services included well testing and
controlled pressure drilling (which included under balanced drilling services). Precisions
International Contract Drilling division was comprised of 48 land drilling rigs operating in
Kuwait, Saudi Arabia, Oman, Iran, Egypt, India, Mexico and Venezuela.
 
    
    On September 13, 2005 Precision sold 100% of the shares of CEDA to an investment entity of
the Ontario Municipal Employees Retirement System for approximately $274 million pursuant to
an agreement dated September 13, 2005 between Precision and 1191678 Alberta Inc. (the CEDA
Sale Agreement). CEDA was a leading provider of industrial maintenance, turnaround services
and other specialized services to various production industries in Canada and the United
States. Its main areas of operation included industrial cleaning, catalyst handling and
mechanical services usually carried out in large facilities operating in the oil and natural
gas, petrochemical and pulp and paper industries.
 Significant Reorganizations
 
    
    On July 31, 2005 Precision Limited Partnership (which carried on Precisions Canadian
contract drilling, service rig and snubbing businesses) completed a re-organization whereby
substantially all of the assets of the Precision Drilling and Precision Well Servicing
divisions of Precision Limited Partnership were transferred to its wholly-owned subsidiary
Precision Drilling Ltd. Precision Limited Partnership also transferred its ownership in LRG
Catering Ltd. (Precisions camp and catering business) to Precision Drilling Ltd.
 
    
    On August 25, 2005 Precision Limited Partnership was dissolved, with its partners Precision
Diversified Services Ltd. and Precision being allocated their pro rata share of the net assets
of Precision Limited Partnership. Precision Diversified Services Ltd. and Precision
transferred those net assets to Live Well Service Ltd.
 
    
    On October 31, 2005 the shareholders of Precision approved the Plan of Arrangement which
became effective on November 7, 2005. The Plan of Arrangement resulted in the following:
 
    
    the former holders of common shares of Precision received, for each share of
Precision they owned, at their option, either a Trust Unit or an Exchangeable Unit, in
addition to 0.2089 of a Weatherford share and a special cash payment of $6.83;
    
    Precision amalgamated with the following wholly-owned subsidiaries: Columbia
Oilfield Supply Ltd., Rostel Industries Ltd., Precision Diversified Services Ltd., LRG
Catering Ltd., Precision Rentals Ltd., 1181177 Alberta Ltd. and Precision Drilling Ltd.,
to form Precision Drilling Corporation;
    
    1195309 Alberta ULC, a wholly-owned subsidiary of PDLP, became indebted to PDLP;
    
    all of the issued and outstanding options issued pursuant to Precisions various
stock option plans were converted into New Options (as defined in the Plan of
Arrangement) which became fully vested and were exercisable up to and including November
22, 2005; and
    
    all of the PDLP A Units were issued to the Trust, representing 99.12% of the total
number of limited partnership units of PDLP (the Limited Partnership Units)
outstanding, 0.88% of the Limited Partnership Units represented by Exchangeable Units were issued to certain former
shareholders of Precision, and 1194312 Alberta Ltd. (the General Partner) became a
nominal interest holder in PDLP.
 6




---



##### 




    
    On November 23, 2005 Precision amalgamated with 1195309 Alberta ULC to form Precision
Drilling Corporation.
 
    
    On January 1, 2006 Precision amalgamated with Live Well Service Ltd.
 
    
    On August 17, 2006 Terra transferred substantially all of its net assets to Terra Water
Systems Limited Partnership (Terra Water).
 
    
    On January 1, 2007 Precision amalgamated with Terra.
 Cash Flow
  Cash Distributions on Trust Units
 th Certain Canadian Federal Income Tax Considerations 
Taxation of the Trust
  Risk Factors
  Payments on Exchangeable Units
  7




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##### 



Distribution Reinvestment Plan
   Board of Trustees
     8




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##### 



Administration Agreement
  
    
    ensure compliance by the Trust with continuous disclosure obligations under applicable
securities legislation;
 
    
    provide investor relations services;
 
    
    provide or cause to be provided to Trust Unitholders all information to which Trust
Unitholders are entitled under the Declaration of Trust, including relevant information with
respect to financial reporting and income taxes;
 
    
    call and hold meetings of Trust Unitholders and distribute required materials, including
notices of meetings and information circulars, in respect of all such meetings;
 
    
    assist the Board of Trustees in calculating distributions to Trust Unitholders;
 
    
    ensure compliance with the Trusts limitations on non-resident ownership, if applicable;
and
 
    
    generally provide all other services as may be necessary or as may be requested by the
Board of Trustees.
 DESCRIPTION OF THE BUSINESS OF PRECISION
 GENERAL
   (in thousands CDN$)
 Years ended December 31,
    
    
    
    2007
    
    
    
    
    2006
    
    
    
    
    2005Contract Drilling Services
    
    
    $
    694,340
    
    
    
    $
    1,009,821
    
    
    
    $
    916,221Completion and Production Services
    
    
    
    327,471
    
    
    
    
    441,017
    
    
    
    
    369,667Inter-segment eliminations
    
    
    
    (12,610
    )
    
    
    
    (13,254
    )
    
    
    
    (16,709
    )Total Revenue
    
    
    $
    1,009,201
    
    
    
    $
    1,437,584
    
    
    
    $
    1,269,179
  9




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##### 



CONTRACT DRILLING SERVICES
  
    
    Precision Drilling  232 land drilling rigs in Canada;
 
    
    Precision Drilling Oilfield Services  12 land drilling rigs in the United States;
 
    
    A Precision affiliate  one land drilling rig in Latin America;
 
    
    LRG Catering (LRG)  102 drilling and base camps, with food catering in Canada and the
United States;
 10




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##### 




    
    Rostel Industries (Rostel)  engineering, machining, fabrication, component
manufacturing and repair services for drilling and service rigs primarily for Precisions
operations; and
 
    
    Columbia Oilfield Supply (Columbia)  centralized procurement, inventory and
distribution of consumable supplies primarily for Precisions operations.
 Precision Drilling
          
 11




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##### 



  
     Precision Fleet
    
    
    
    Industry Fleet(1)Maximum
    
    
    
    Number
    
    
    
    % of
    
    
    
    Market
    
    
    
    Number of
    
    
    
    % ofType of Drilling Rig
    
    
    Depth Rating
    
    
    
    of Rigs
    
    
    
    Total
    
    
    
    Share %(3)
    
    
    
    Rigs
    
    
    
    Total
    
    
    
    Change(4)Single
    
    
    
    1,200 m
    
    
    
    
    14
    
    
    
    
    6
    
    
    
    
    8
    
    
    
    
    165
    
    
    
    
    18
    
    
    
    
    20Super Single(2)
    
    
    
    3,000 m
    
    
    
    
    33
    
    
    
    
    14
    
    
    
    
    89
    
    
    
    
    37
    
    
    
    
    4
    
    
    
    
    4Double
    
    
    
    3,000 m
    
    
    
    
    87
    
    
    
    
    38
    
    
    
    
    22
    
    
    
    
    393
    
    
    
    
    44
    
    
    
    
    29Light triple
    
    
    
    3,600 m
    
    
    
    
    40
    
    
    
    
    17
    
    
    
    
    34
    
    
    
    
    116
    
    
    
    
    13
    
    
    
    
    (1)Super Triple(5)
    
    
    
    4,000 m
    
    
    
    
    8
    
    
    
    
    3
    
    
    
    
    100
    
    
    
    
    8
    
    
    
    
    1
    
    
    
    
    3Heavy triple
    
    
    
    6,700 m
    
    
    
    
    39
    
    
    
    
    17
    
    
    
    
    36
    
    
    
    
    109
    
    
    
    
    12
    
    
    
    
    (4)Coiled tubing
    
    
    
    1,500 m
    
    
    
    
    11
    
    
    
    
    5
    
    
    
    
    16
    
    
    
    
    70
    
    
    
    
    8
    
    
    
    
    5Total
    
    
    
    
    
    
    
    
    232
    
    
    
    
    100%
    
    
    
    
    26%
    
    
    
    
    898
    
    
    
    
    100%
    
    
    
    
    56
 NOTES:
 (1)
    
    Source: Daily Oil Bulletin  Rig Locator Report as of January 2008. Precision has allocated
the industry rig fleet by rig type and removed its 11 decommissioned rigs.(2)
    
    Super Single excludes single rigs that do not have automated pipe handling, a
self contained top drive, or run extended length drill pipe/casing.(3)
    
    Market share means Precisions rigs as a percent of the industry rigs.(4)
    
    Change in number of industry rigs as compared to the prior year.(5)
    
    Super Triple includes features such as extended length drill pipe, AC power, iron roughneck,
mobility without cranes, top drive and an advanced control system.  12




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##### 



Utilization Rates (%)
    
    
    
    Metres Drilled (000s)
    
    
    
    Wells Drilled(1)% of
    
    
    
    
    
    
    
    
    
    
    
    
    
    % ofPrecision
    
    
    
    Industry(2)
    
    
    
    Precision
    
    
    
    Industry(2)
    
    
    
    Industry
    
    
    
    Precision
    
    
    
    Industry(2)
    
    
    
    Industry2007
    
    
    
    34.5
    
    
    
    
    37.7
    
    
    
    
    5,813
    
    
    
    
    22,189
    
    
    
    
    26.2
    
    
    
    
    4,718
    
    
    
    
    18,342
    
    
    
    
    25.72006
    
    
    
    52.1
    
    
    
    
    55.1
    
    
    
    
    7,810
    
    
    
    
    27,373
    
    
    
    
    28.5
    
    
    
    
    6,180
    
    
    
    
    22,575
    
    
    
    
    27.42005
    
    
    
    56.1
    
    
    
    
    59.6
    
    
    
    
    8,901
    
    
    
    
    28,143
    
    
    
    
    31.6
    
    
    
    
    7,766
    
    
    
    
    24,351
    
    
    
    
    31.92004
    
    
    
    50.3
    
    
    
    
    52.9
    
    
    
    
    8,021
    
    
    
    
    23,526
    
    
    
    
    34.1
    
    
    
    
    7,525
    
    
    
    
    21,793
    
    
    
    
    34.52003
    
    
    
    52.0
    
    
    
    
    53.1
    
    
    
    
    8,604
    
    
    
    
    21,802
    
    
    
    
    39.5
    
    
    
    
    8,451
    
    
    
    
    20,694
    
    
    
    
    40.8
 NOTES:
 (1)
    
    The number of wells drilled is reported on a rig release basis, compiled by Precision.(2)
    
    Industry numbers exclude drilling rigs not registered with the Canadian Association of
Oilwell Drilling Contractors (CAODC) and non-reporting CAODC member contractors.    2
   13




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##### 



Precision Drilling Oilfield Services, Inc.
 TM
 LRG Catering
  Rostel Industries
 . TM
 14




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##### 



Columbia Oilfield Supply
  COMPLETION AND PRODUCTION SERVICES
  
    
    Precision Well Servicing  223 well completion and workover service rigs;
    
    Live Well Service  27 snubbing units;
    
    Precision Rentals  about 13,000 rental items including well control equipment, surface
equipment, specialty tubulars and wellsite accommodation units; and
    
    Terra Water  63 wastewater treatment units.
 Precision Well Servicing
  Type of Service Rig
    
    
    2007
    
    
    
    2006
    
    
    
    2005Singles:Mobile single
    
    
    
    5
    
    
    
    
    12
    
    
    
    
    17Freestanding mobile
    
    
    
    94
    
    
    
    
    92
    
    
    
    
    88Doubles:Mobile
    
    
    
    43
    
    
    
    
    44
    
    
    
    
    44Freestanding mobile
    
    
    
    9
    
    
    
    
    9
    
    
    
    
    8Skid
    
    
    
    55
    
    
    
    
    65
    
    
    
    
    65Slants:Freestanding
    
    
    
    17
    
    
    
    
    15
    
    
    
    
    15Total
    
    
    
    223
    
    
    
    
    237
    
    
    
    
    237
  15




---



##### 



16




---



##### 



Live Well Service
     Precision Rentals
    2
 Terra Water
    17




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##### 



RISK FACTORS
 THE TRUST
  The Trust is Dependent on Precision for All Cash Available for Distributions
   Variability of Distributions
  Changes in Legislation
   Taxation of the Trust
 Certain
Canadian Federal Income Tax Considerations  Taxation of Trust Unitholders
  18




---



##### 



19




---



##### 



Residual Liability of Precision
  Nature of Trust Units
  Canada Deposit Insurance
Corporation Act
 Qualified Dividend Treatment for Individual U.S. Holders of Trust Units
  20




---



##### 



Taxation of Precision
  Risks Associated with Trust Units for Non-Resident Holders of Trust Units
 Certain United States Federal
Income Tax Considerations
 Nature of Distributions
  Possible Restriction on Growth
  Investment Eligibility
  21




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##### 



Income Tax Act
 Debt Service
  Potential Sales of Additional Trust Units
  Issuance of Additional Trust Units
 Certain Canadian Federal Income Tax Considerations 
Taxation of Trust Unitholders General Development of
the Business  Cash Distributions on Trust Units
 Distribution of Assets on Redemption or Termination of the Trust
  Deductibility of Expenses
  22




---



##### 



Trust Unitholder Limited Liability
 Income Trusts Liability Act
 Precision Drilling Limited Partnership
 Risk Factors  The Trust
 Net Asset Value
  Risks Associated with Exchangeable Units
  Indemnity of Limited Partners
  RISKS RELATING TO THE BUSINESS CURRENTLY CONDUCTED BY PRECISION
  23




---



##### 



Operations Dependent on the Price of Oil and Natural Gas
   Competitive Industry
  Workforce Availability
  Capital Overbuild in the Drilling Industry
  24




---



##### 



Business is Seasonal
  Tax Consequences of Previous Transactions Completed by Precision
   Safety Performance
  New Technology
  25




---



##### 



Foreign Operations
  Capital Expenditures
  Environmental Legislation
     26




---



##### 



Credit Risk
  Access to Additional Financing
  Customer Merger and Acquisition Activity
  Dependence on Third Party Suppliers
  Potential Unknown Liabilities
  Currency Exchange Exposure
  Translation of U.S. Currency Assets and Liabilities to Canadian Dollars
 27




---



##### 



Translation of U.S. Currency Statement of Earnings Items to Canadian Dollars
  Transaction Exposure
  Business Interruption and Casualty Losses
  28




---



##### 



RECORD OF CASH DISTRIBUTIONS/PAYMENTS
  Amount per TrustDistribution Type
    
    
    Record Date
    
    
    Payment Date
    
    
    Unit2005Regular Distribution
    
    
    November 30, 2005
    
    
    December 15, 2005
    
    
    $
    0.270Regular Distribution
    
    
    December 31, 2005
    
    
    January 17, 2006
    
    
    $
    0.270Special Distribution
    
    
    December 31, 2005
    
    
    January 17, 2006
    
    
    $
    0.0222006Regular Distribution
    
    
    January 31, 2006
    
    
    February 15, 2006
    
    
    $
    0.270Regular Distribution
    
    
    February 28, 2006
    
    
    March 15, 2006
    
    
    $
    0.270Regular Distribution
    
    
    March 31, 2006
    
    
    April 18, 2006
    
    
    $
    0.270Regular Distribution
    
    
    April 28, 2006
    
    
    May 16, 2006
    
    
    $
    0.270Regular Distribution
    
    
    May 31, 2006
    
    
    June 15, 2006
    
    
    $
    0.310Regular Distribution
    
    
    June 30, 2006
    
    
    July 18, 2006
    
    
    $
    0.310Regular Distribution
    
    
    July 31, 2006
    
    
    August 15, 2006
    
    
    $
    0.310Regular Distribution
    
    
    August 31, 2006
    
    
    September 15, 2006
    
    
    $
    0.310Regular Distribution
    
    
    September 29, 2006
    
    
    October 17, 2006
    
    
    $
    0.310Regular Distribution
    
    
    October 31, 2006
    
    
    November 15, 2006
    
    
    $
    0.310Regular Distribution
    
    
    November 30, 2006
    
    
    December 15, 2006
    
    
    $
    0.310Regular Distribution
    
    
    December 31, 2006
    
    
    January 16, 2007
    
    
    $
    0.310Special Year-end in-kind Distribution(1)
    
    
    December 31, 2006
    
    
    January 16, 2007
    
    
    $
    0.1952007Regular Distribution
    
    
    January 31, 2007
    
    
    February 15, 2007
    
    
    $
    0.190Regular Distribution
    
    
    February 28, 2007
    
    
    March 15, 2007
    
    
    $
    0.190Regular Distribution
    
    
    March 30, 2007
    
    
    April 17, 2007
    
    
    $
    0.190Regular Distribution
    
    
    April 30, 2007
    
    
    May 15, 2007
    
    
    $
    0.190Regular Distribution
    
    
    May 31, 2007
    
    
    June 15, 2007
    
    
    $
    0.130Regular Distribution
    
    
    June 29, 2007
    
    
    July 17, 2007
    
    
    $
    0.130Regular Distribution
    
    
    July 31, 2007
    
    
    August 15, 2007
    
    
    $
    0.130Regular Distribution
    
    
    August 31, 2007
    
    
    September 18, 2007
    
    
    $
    0.130Regular Distribution
    
    
    September 28, 2007
    
    
    October 16, 2007
    
    
    $
    0.130Regular Distribution
    
    
    October 31, 2007
    
    
    November 15, 2007
    
    
    $
    0.130Regular Distribution
    
    
    November 30, 2007
    
    
    December 18, 2007
    
    
    $
    0.130Regular Distribution
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.130Special Year-end in cash Distribution
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.160Special Year-end in-kind Distribution(1)
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.2402008Regular Distribution
    
    
    January 31, 2008
    
    
    February 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    February 29, 2008
    
    
    March 18, 2008
    
    
    $
    0.130Regular Distribution
    
    
    March 31, 2008
    
    
    April 15, 2008
    
    
    $
    0.130
 NOTE:
 (1)
    
    Immediately after the in-kind special year-end distribution, the outstanding trust units of
the Trust were consolidated so that the number of trust units remained unchanged from the
number outstanding prior to the in-kind special year-end distribution. Trust Unitholders did
not receive cash and ultimately did not receive additional units of the Trust as part of the
consolidation process. 29




---



##### 



AmountPayment Type
    
    
    Record Date
    
    
    Payment Date
    
    
    per Exchangeable Unit2005Regular Payment
    
    
    November 30, 2005
    
    
    December 15, 2005
    
    
    $
    0.270Regular Payment
    
    
    December 31, 2005
    
    
    January 17, 2006
    
    
    $
    0.270Special Payment
    
    
    December 31, 2005
    
    
    January 17, 2006
    
    
    $
    0.0222006Regular Payment
    
    
    January 31, 2006
    
    
    February 15, 2006
    
    
    $
    0.270Regular Payment
    
    
    February 28, 2006
    
    
    March 15, 2006
    
    
    $
    0.270Regular Payment
    
    
    March 31, 2006
    
    
    April 18, 2006
    
    
    $
    0.270Regular Payment
    
    
    April 28, 2006
    
    
    May 16, 2006
    
    
    $
    0.270Regular Payment
    
    
    May 31, 2006
    
    
    June 15, 2006
    
    
    $
    0.310Regular Payment
    
    
    June 30, 2006
    
    
    July 18, 2006
    
    
    $
    0.310Regular Payment
    
    
    July 31, 2006
    
    
    August 15, 2006
    
    
    $
    0.310Regular Payment
    
    
    August 31, 2006
    
    
    September 15, 2006
    
    
    $
    0.310Regular Payment
    
    
    September 29, 2006
    
    
    October 17, 2006
    
    
    $
    0.310Regular Payment
    
    
    October 31, 2006
    
    
    November 15, 2006
    
    
    $
    0.310Regular Payment
    
    
    November 30, 2006
    
    
    December 15, 2006
    
    
    $
    0.310Regular Payment
    
    
    December 31, 2006
    
    
    January 16, 2007
    
    
    $
    0.310Special Year-end in-kind Payment(1)
    
    
    December 31, 2006
    
    
    January 16, 2007
    
    
    $
    0.1952007Regular Payment
    
    
    January 31, 2007
    
    
    February 15, 2007
    
    
    $
    0.190Regular Payment
    
    
    February 28, 2007
    
    
    March 15, 2007
    
    
    $
    0.190Regular Payment
    
    
    March 30, 2007
    
    
    April 17, 2007
    
    
    $
    0.190Regular Payment
    
    
    April 30, 2007
    
    
    May 15, 2007
    
    
    $
    0.190Regular Payment
    
    
    May 31, 2007
    
    
    June 15, 2007
    
    
    $
    0.130Regular Payment
    
    
    June 29, 2007
    
    
    July 17, 2007
    
    
    $
    0.130Regular Payment
    
    
    July 31, 2007
    
    
    August 15, 2007
    
    
    $
    0.130Regular Payment
    
    
    August 31, 2007
    
    
    September 18, 2007
    
    
    $
    0.130Regular Payment
    
    
    September 28, 2007
    
    
    October 16, 2007
    
    
    $
    0.130Regular Payment
    
    
    October 31, 2007
    
    
    November 15, 2007
    
    
    $
    0.130Regular Payment
    
    
    November 30, 2007
    
    
    December 18, 2007
    
    
    $
    0.130Regular Payment
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.130Special Year-end in cash Payment
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.160Special Year-end in-kind Payment(1)
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.2402008Regular Payment
    
    
    January 31, 2008
    
    
    February 15, 2008
    
    
    $
    0.130Regular Payment
    
    
    February 29, 2008
    
    
    March 18, 2008
    
    
    $
    0.130Regular Payment
    
    
    March 31, 2008
    
    
    April 15, 2008
    
    
    $
    0.130
 NOTE:
 (1)
    
    Immediately after the in-kind special year-end distribution, the outstanding trust units of
the Trust were consolidated so that the number of trust units remained unchanged from the
number outstanding prior to the in-kind special year-end distribution. Trust Unitholders
did not receive cash and ultimately did not receive additional units of the Trust as part of
the consolidation process. Holders of Exchangeable Units of PDLP received the economic
equivalent treatment. 30




---



##### 



General Development of the
Business  Cash Distributions on Trust Units Risk Factors  The Trust
 DESCRIPTION OF CAPITAL
 GENERAL DESCRIPTION OF CAPITAL STRUCTURE
 Trust Units
  Special Voting Unit
  Declaration of
Trust and Description of Units
 Precision Drilling Limited Partnership
    31




---



##### 




    
    they are exchangeable for Trust Units on a one-for-one basis at the option of the holder;
    
    each Exchangeable Unit entitles the holder thereof to receive (in the form of a
non-interest bearing loan) cash payments equal to cash distributions made by the Trust on a
Trust Unit (and at the beginning of the next calendar year a special distribution will be made
on each Exchangeable Unit in an amount equal to the outstanding non-interest bearing loan
accumulated during the previous year which will be used to repay such accumulated debt);
    
    the holder of each Exchangeable Unit is entitled to direct the Voting and Exchange Trustee
to vote the Special Voting Unit at all meetings of Trust Unit holders;
    
    the holders of Exchangeable Units are not entitled, as such, to receive notice of or to
attend any meeting of the partners of PDLP or to vote at any such meeting, however, such
holders of Exchangeable Units are entitled to vote separately as a class in respect of
proposals to add to, change or remove any right, privilege, restriction or condition attaching
to the Exchangeable Units or in respect of any other amendment to the applicable Partnership
Agreement which would have an adverse impact on the holders of such Exchangeable Units; and
    
    there are certain restrictions on the transfer of Exchangeable Units.
   
    
    issue or distribute Trust Units to the holders of all, or substantially all, of the then
outstanding Trust Units by way of distribution; or
    
    issue or distribute rights, options or warrants to the holders of all, or substantially
all, of the then outstanding Trust Units entitling them to subscribe for or purchase Trust
Units (or securities exchangeable for or converting into or carrying rights to acquire Trust
Units); or
    
    issue or distribute to the holders of all, or substantially all, of the then outstanding
Trust Units;
 
    
    securities of the Trust or any class other than Trust Units (other than securities
exchangeable for or converting into or carrying rights to acquire Trust Units);
    
    rights, options or warrants other than those described in the second bullet above; or
    
    evidences of indebtedness of the Trust; or
    
    other assets of the Trust.
   32




---



##### 



The General Partner
  MARKET FOR SECURITIES
 TRADING PRICE AND VOLUME OF TRUST UNITS
  TSX PD.UN (1)
 Period
    
    
    High
    
    
    Low
    
    
    Close
    
    
    Volume TradedJanuary
    
    
    
    28.30
    
    
    
    
    25.30
    
    
    
    
    26.50
    
    
    
    
    9,384,691February
    
    
    
    27.90
    
    
    
    
    24.60
    
    
    
    
    27.43
    
    
    
    
    10,003,698March
    
    
    
    27.50
    
    
    
    
    25.31
    
    
    
    
    26.37
    
    
    
    
    10,864,946Q1 2007
    
    
    
    28.30
    
    
    
    
    24.60
    
    
    
    
    26.37
    
    
    
    
    30,253,335April
    
    
    
    29.75
    
    
    
    
    26.15
    
    
    
    
    26.58
    
    
    
    
    10,421,263May
    
    
    
    30.93
    
    
    
    
    26.50
    
    
    
    
    27.39
    
    
    
    
    14,668,754June
    
    
    
    28.19
    
    
    
    
    25.62
    
    
    
    
    26.00
    
    
    
    
    14,561,328Q2 2007
    
    
    
    30.93
    
    
    
    
    25.62
    
    
    
    
    26.00
    
    
    
    
    39,651,345July
    
    
    
    26.87
    
    
    
    
    20.85
    
    
    
    
    21.32
    
    
    
    
    14,254,162August
    
    
    
    21.75
    
    
    
    
    18.57
    
    
    
    
    20.53
    
    
    
    
    11,051,188September
    
    
    
    20.78
    
    
    
    
    18.33
    
    
    
    
    19.07
    
    
    
    
    9,102,062Q3 2007
    
    
    
    26.87
    
    
    
    
    18.33
    
    
    
    
    19.07
    
    
    
    
    34,407,412October
    
    
    
    19.54
    
    
    
    
    17.06
    
    
    
    
    17.22
    
    
    
    
    15,286,205November
    
    
    
    17.50
    
    
    
    
    15.07
    
    
    
    
    16.00
    
    
    
    
    12,976,122December
    
    
    
    16.35
    
    
    
    
    14.82
    
    
    
    
    15.09
    
    
    
    
    12,960,850Q4 2007
    
    
    
    19.54
    
    
    
    
    14.82
    
    
    
    
    15.09
    
    
    
    
    41,223,177January
    
    
    
    18.01
    
    
    
    
    15.13
    
    
    
    
    17.31
    
    
    
    
    11,591,630February
    
    
    
    22.53
    
    
    
    
    17.15
    
    
    
    
    21.85
    
    
    
    
    15,377,467March(2)
    
    
    
    22.25
    
    
    
    
    19.61
    
    
    
    
    22.22
    
    
    
    
    7,274,505Q1 2008
    
    
    
    22.53
    
    
    
    
    15.13
    
    
    
    
    22.22
    
    
    
    
    34,243,602
 NOTES:
 (1)
    
    Price and volume information is taken from the website maintained by the TSX.(2)
    
    For the period from March 1, 2008 to March 25, 2008. 33




---



##### 



NYSE  PDS (1)
  Period
    
    
    High
    
    
    Low
    
    
    Close
    
    
    Volume TradedJanuary
    
    
    
    24.12
    
    
    
    
    21.50
    
    
    
    
    22.59
    
    
    
    
    20,949,100February
    
    
    
    24.02
    
    
    
    
    21.06
    
    
    
    
    23.41
    
    
    
    
    13,976,307March
    
    
    
    23.74
    
    
    
    
    21.71
    
    
    
    
    22.85
    
    
    
    
    18,068,539Q1 2007
    
    
    
    24.12
    
    
    
    
    21.06
    
    
    
    
    22.85
    
    
    
    
    52,993,946April
    
    
    
    26.30
    
    
    
    
    22.60
    
    
    
    
    24.07
    
    
    
    
    16,440,258May
    
    
    
    27.89
    
    
    
    
    23.92
    
    
    
    
    25.67
    
    
    
    
    22,360,450June
    
    
    
    26.50
    
    
    
    
    24.11
    
    
    
    
    24.45
    
    
    
    
    10,273,271Q2 2007
    
    
    
    27.89
    
    
    
    
    22.60
    
    
    
    
    24.45
    
    
    
    
    49,073,979July
    
    
    
    25.45
    
    
    
    
    19.57
    
    
    
    
    19.82
    
    
    
    
    13,278,093August
    
    
    
    20.33
    
    
    
    
    17.25
    
    
    
    
    19.45
    
    
    
    
    11,444,618September
    
    
    
    20.00
    
    
    
    
    18.50
    
    
    
    
    19.15
    
    
    
    
    9,084,637Q3 2007
    
    
    
    25.45
    
    
    
    
    17.25
    
    
    
    
    19.15
    
    
    
    
    33,807,348October
    
    
    
    19.65
    
    
    
    
    17.42
    
    
    
    
    18.24
    
    
    
    
    14,684,534November
    
    
    
    18.49
    
    
    
    
    15.65
    
    
    
    
    15.95
    
    
    
    
    13,801,832December
    
    
    
    16.15
    
    
    
    
    14.91
    
    
    
    
    15.17
    
    
    
    
    10,418,470Q4 2007
    
    
    
    19.65
    
    
    
    
    14.91
    
    
    
    
    15.17
    
    
    
    
    38,904,836January
    
    
    
    17.70
    
    
    
    
    15.15
    
    
    
    
    17.25
    
    
    
    
    10,815,429February
    
    
    
    22.91
    
    
    
    
    17.10
    
    
    
    
    22.45
    
    
    
    
    12,326,070March(2)
    
    
    
    22.46
    
    
    
    
    19.46
    
    
    
    
    20.59
    
    
    
    
    11,467,197Q1 2008
    
    
    
    22.91
    
    
    
    
    15.15
    
    
    
    
    20.59
    
    
    
    
    34,608,696
 NOTES:
 (1)
    
    Price and volume information is taken from the website maintained by the NYSE.(2)
    
    For the period from March 1, 2008 to March 25, 2008. ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTION ON TRANSFER
  TRUSTEES, DIRECTORS AND EXECUTIVE OFFICERS
  34




---



##### 



PositionName, Municipality, Province or
    
    
    Presently
    
    
    Director/Officer
    
    
    Principal OccupationState & Country of Residence
    
    
    Held
    
    
    Since(1)
    
    
    During the Preceding 5 YearsW.C. (Mickey)
Dunn(3)(4)
Edmonton, Alberta, Canada
    
    
    Director
    
    
    September 1992
    
    
    Chairman, True Energy Trust.Brian A. Felesky, CM,
Q.C.(4)
Calgary, Alberta, Canada
    
    
    Director
    
    
    December 2005
    
    
    Counsel, Felesky Flynn LLP. From
April 1978 through July 2006, Partner
at Felesky Flynn LLP.Robert J.S. Gibson(2)(4)Calgary, Alberta, Canada
    
    
    Trustee
Director
    
    
    June 1996
    
    
    President, Stuart & Company Limited.Allen R. Hagerman, FCA(2)Calgary, Alberta, Canada
    
    
    Director
    
    
    December 2006
    
    
    Executive Vice President, Canadian
Oil Sands; Chief Financial Officer,
Canadian Oil Sands Limited 2003 
2007; Chief Financial Officer,
Fording Canadian Coal Trust 2002 
2003.Stephen J.J. Letwin(3)Houston, Texas, USA
    
    
    Director
    
    
    December 2006
    
    
    Managing Director, Enbridge Energy
Partners and Executive Vice
President, Gas Transportation &
International, Enbridge Inc. since
May 2006; Group Vice President, Gas
Strategy & Corporate Development,
Enbridge Inc., April 2003 to May
2006; Group Vice President,
Distribution & Services, Enbridge
Inc., September 2000 to April 2003.Patrick M. Murray(2)Dallas, Texas, USA
    
    
    Trustee
Director
    
    
    July 2002
    
    
    Corporate Director; Chairman and
Chief Executive Officer, Dresser Inc.
from 2001 until retiring in May 2007.Frederick W. Pheasey(3)Edmonton, Alberta, Canada
    
    
    Director
    
    
    July 2002
    
    
    Director of Dreco Energy Services Ltd.Robert L. Phillips(3)(4)Vancouver, British Columbia, Canada
    
    
    Director
Chairman
    
    
    May 2004
    
    
    Corporate Director; President and
Chief Executive Officer, BCR Group of
Companies 2001-2004.Kevin A. Neveu
Calgary, Alberta, Canada
    
    
    Chief Executive
Officer
Director
    
    
    August 2007
    
    
    Chief Executive Officer, Precision
Drilling Corporation since August
2007; President, Rig Solutions Group,
National Oilwell Varco 2002 to 2007.Gene C. Stahl
Calgary, Alberta, Canada
    
    
    President &
Chief Operating
Officer
    
    
    November 2005
    
    
    President & Chief Operating Officer,
Precision Drilling Corporation since
2005; Vice President, Precision
Rentals 2003-2005; General Manager,
Ducharme Rentals/Big D Rentals
2002-2003.Douglas J. Strong
Calgary, Alberta, Canada
    
    
    Chief Financial
Officer
    
    
    November 2005
    
    
    Chief Financial Officer, Precision
Drilling Corporation since 2005;
Chief Financial Officer, Precision
Diversified Services Ltd. 2001-2005,
Group Controller, Precision Drilling
2001-2005.Darren J. Ruhr
Calgary, Alberta, Canada
    
    
    Vice President,
Corporate Services & Corporate
Secretary
    
    
    November 2005
    
    
    Vice President, Corporate Services &
Corporate Secretary, Precision
Drilling Corporation since 2005;
Director, Information Technology,
Real Estate & Travel, Precision
Drilling Corporation 2003-2005;
Director, Information Technology,
Precision Drilling Corporation
2000-2003.Kenneth J. Haddad
Houston, Texas, USA
    
    
    Vice President,
Business
Development
    
    
    March 2008
    
    
    Vice President, Business Development,
Precision Drilling Corporation since
March 2008; Director, Mergers and
Acquisitions, Halliburton Company
2002-2008.
 NOTES:
 (1)
    
    Each Directors term of office expires not later than the close of business at the next
annual meeting, or until successors are appointed or Directors vacate their office.(2)
    
    Member of the Audit Committee.(3)
    
    Member of the Compensation Committee.(4)
    
    Member of the Corporate Governance and Nominating Committee.
  35




---



##### 



CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS
     AUDIT COMMITTEE INFORMATION
 Audit Committee Charter
  Composition of the Audit Committee
  Audit Committees Sarbanes-Oxley Act of 2002
 Relevant Education and Experience
  36




---



##### 



Pre-approval Policies and Procedures
 de minimus
   Audit Fees
  (in thousands CDN$)
 Years ended December 31,
    
    
    2007
    
    
    
    2006Audit fees
    
    
    $
    990
    
    
    
    $
    1,813Audit-related fees
    
    
    
    
    
    
    
    
    Tax fees
    
    
    
    73
    
    
    
    
    579All other fees
    
    
    
    
    
    
    
    
    Total
    
    
    $
    1,063
    
    
    
    $
    2,392
  37




---



##### 



LEGAL PROCEEDINGS AND REGULATORY ACTIONS
   INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
  TRANSFER AGENT, REGISTRAR AND VOTING AND EXCHANGE TRUSTEE
  MATERIAL CONTRACTS
 Continuous Disclosure Obligations
 1.
    
    Weatherford Sale Agreement;2.
    
    CEDA Sale Agreement;3.
    
    Declaration of Trust;4.
    
    Limited Partnership Agreement;5.
    
    Voting and Exchange Trust Agreement;6.
    
    Support Agreement; and7.
    
    Administration Agreement.
  38




---



##### 



INTERESTS OF EXPERTS
  EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
 Securities Exchange Act of 1934
  CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  ADDITIONAL INFORMATION
   39




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##### 



Appendix 1
 PRECISION DRILLING CORPORATION
 AUDIT COMMITTEE  CHARTER AND TERMS OF REFERENCE
 General
   Business Corporations Act Securities Act Securities Exchange Act of 1934
 Committee Structure and Authority
 (a) Composition
    (b) Appointment and Replacement of Committee Members
  40




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##### 



(c) Quorum
  (d) Review of Charter and Terms of Reference
  (e) Delegation
  (f) Reporting to the Board of Directors
  (g) Committee Chair Responsibilities
  (h) Other Authority
   Purpose
  
    
    the integrity of financial reporting to the holders of units of the Trust
(Unitholders) and the investment community;
 41




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##### 




    
    the integrity of the financial reporting process, including the audit process;
    
    the Corporations and the Trusts compliance with legal and regulatory requirements as
they relate to financial reporting matters;
    
    the external auditors qualifications and independence;
    
    the integrity of the system of internal accounting and financial reporting controls
implemented by management;
    
    the work and performance of the Corporations and the Trusts financial management,
internal audit function and its external auditor; and
  Committee Responsibilities
  
    
    review the interim and annual financial statements of the Corporation and make any
comments or recommendations to the Board of Directors or where authorized by the Board of
Directors, approve the interim financial statements;
    
    review the annual financial statements of the Trust and related notes and managements
discussion and analysis (MD&A) components and make recommendations to the Board of
Directors, and ultimately, once approved by the Board of Directors, to the Board of
Trustees, for their approval;
    
    review the interim financial statements of the Trust and related notes and MD&A
components prepared for distribution to the Unitholders and the investment community;
    
    be satisfied that adequate procedures are in place for the review of the Trusts public
disclosure of financial information extracted or derived from the Trusts financial
statements, other than the public disclosure referred to above, and must periodically
assess the adequacy of those procedures;
    
    report, through the Chair of the Committee, to the Board of Directors following each
meeting of the Committee, including an outline of the nature of discussions, major
decisions reached by the Committee, and its activities and compliance with this Charter
and Terms of Reference;
    
    approve the terms of the external auditors engagement letter as agreed between the
external auditor and financial management of the Corporation, and the compensation to be
paid by the Corporation to the external auditor;
    
    review the reasons for any proposed change in the external auditor which is not
initiated by the Committee or the Board of Directors and any other significant issues
related to the change, including the response of the incumbent external auditor, and
enquire as to the qualifications of the proposed external auditor before making its
recommendations to the Board of Directors;
    
    be directly responsible for overseeing the work of the external auditor engaged for the
purpose of preparing or issuing an auditors report or performing other audit or review
services for the Corporation or the Trust, including the resolution of disagreements
between management and the external auditor regarding financial reporting or the
application of any accounting principles or practices;
    
    require the external auditor and internal auditor to report directly to the Committee;
 42




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##### 




    
    provide the external auditor with notice of every meeting of the Committee and, at the
expense of the Corporation, the opportunity to attend and be heard thereat, and if so
requested by a member of the Committee, shall attend every meeting of the Committee held
during the term of the office of the external auditor. The external auditor of the
Corporation or any member of the Committee may call a meeting of the Committee;
    
    pre-approve all permitted non-audit services to the Corporation or any affiliated
entities by the external auditor or any of their affiliates subject to any de minimus
exception allowed by applicable law. The Committee may delegate to one or more designated
members of the Committee the authority to pre-approve non-audit services, however any
non-audit services that have been pre-approved by any such delegate of the Committee must
be presented to the Committee at its first scheduled meeting following such pre-approval;
    
    review the disclosure with respect to its pre-approval of audit and non-audit services
provided by the external auditors;
    
    review and discuss with management and the external auditor, as applicable: (a) all
critical accounting policies to be used in the preparation of the interim and annual
financial statements and the annual audit; (b) major issues regarding accounting
principles and financial statement presentations, including any significant changes in the
Trusts or the Corporations selection or application of accounting principles, and major
issues as to the adequacy of the Trusts or the Corporations respective internal controls
and any special audit steps adopted in light of material control deficiencies; (c)
analyses prepared by management or the external auditor setting forth significant
financial reporting issues and judgments made in connection with the preparation of the
financial statements, including analyses of the effects of alternative Canadian Generally
Accepted Accounting Principles (GAAP) methods on the financial statements of the Trust
and any other opinions sought by management from an independent or other audit firm or
advisor with respect to the accounting treatment of a particular item; (d) any management
letter or schedule of unadjusted differences provided by the external auditor and the
Trusts response to that letter and other material written communication between the
external auditor and management; (e) any problems, difficulties or differences encountered
in the course of the audit work including any disagreements with management or
restrictions on the scope of the external auditors activities or on access to requested
information and managements response thereto; (f) the effect of regulatory and accounting
initiatives, as well as any off balance sheet structures on the financial statements of
the Trust and other financial disclosures; (h) any reserves, accruals, provisions or
estimates that may have a significant effect upon the financial statements of the Trust;
(i) the use of special purpose entities and the business purpose and economic effect of
off balance sheet transactions, arrangements, obligations, guarantees and other
relationships of the Trust or the Corporation and their impact on the reported financial
results of the Trust; and (j) the use of any pro forma or adjusted information not in
accordance with generally accepted accounting principles;
    
    reviewing earnings press releases (paying particular attention to any use of pro
forma or adjusted non-GAAP information) as well as financial information and earnings
guidance provided to analysts and rating agencies, it being understood that such review
may in the discretion of the Committee, be done generally (i.e., by discussing the types
of information to be disclosed and the type of presentation to be made);
    
    review with the external auditor and management the general audit approach and scope of
proposed audits of the financial statements of the Trust, the objectives, staffing,
locations, co-ordination and reliance upon management in the audit, the overall audit
plans, the audit procedures to be used and the timing and estimated budgets of the audits;
    
    review any legal matter, claim or contingency that could have a significant impact on
the financial statements of the Trust, the Corporations or the Trusts compliance
policies and any material reports, inquiries or other correspondence received from
regulators or governmental agencies and the manner in which any such legal matter, claim
or contingency has been disclosed in the Trusts financial statements;
 43




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##### 




    
    review the treatment for financial reporting purposes of any significant transactions
which are not a normal part of the Corporations operations;
    
    review the interim review engagement report of the external auditor before the release
of interim financial statements of the Trust;
    
    review and discuss with management the Corporations major financial risk exposures and
the steps management has taken to monitor and control such exposures, including the
Corporations risk assessment and risk management policies such as financial derivatives
and hedging activities;
    
    annually request and review a report from the external auditor regarding: (a) the
external auditors quality control procedures; (b) any material issues raised by the most
recent quality control review or peer review of the external auditor, or by any inquiry or
investigation by governmental or professional authorities within the preceding five years
respecting one or more independent audits carried out by the firm; and (c) any steps taken
to deal with any such issues;
    
    evaluate the qualifications and performance of the external auditor, review the
Corporations hiring policies for partners, employees or former employees of the external
auditor and make recommendations to the Board of Directors as to the appointment or
reappointment of the external auditor to be proposed for approval by the Board of Trustees
and Unitholders;
    
    review the independence of the external auditor, annually request and review a written
report from the external auditor respecting its independence, including a list of all
relationships between the external auditor and each of the Corporation and the Trust, and
consider applicable auditor independence standards;
    
    verify that the lead audit partner of the external auditor and the audit partner
responsible for reviewing the audit are rotated at least every five years as required by
the Sarbanes-Oxley Act of 2002, and further consider rotation of the external auditors
firm itself;
    
    discuss with management and the external auditors any accounting adjustments that were
noted or proposed by the external auditors but were not adopted (as immaterial or
otherwise);
    
    review the adequacy and effectiveness of the Corporations and the Trusts internal
accounting and financial controls based on recommendations from management and the
external auditor for the improvement of accounting practices and internal controls;
    
    establish and periodically review procedures for: (a) the receipt, retention and
treatment of complaints received by the Corporation or the Trust regarding accounting,
internal controls or auditing matters; and (b) the confidential, anonymous submission by
employees of the Corporation of concerns regarding questionable accounting or auditing
matters or other matters that could negatively affect the Corporation or the Trust such as
violations of the Joint Code of Business Conduct and Ethics;
    
    review periodically with management and the external auditors any significant
complaints received;
    
    review other financial information included in the Trusts Annual Report to ensure that
it is consistent with the Board of Directors knowledge of the affairs of the Corporation
and the Trust and is unbiased and non-selective;
    
    if requested by the Board of Directors, receive from the Chief Executive Officer and
Chief Financial Officer of the Corporation a certificate certifying in respect of each
annual and interim report of the Trust the matters such officers are required to certify
in connection with the filing of such reports under applicable securities laws and receive
and review disclosures made by such officers about any significant deficiencies in the
design or operation of internal controls or material weaknesses therein and any fraud
involving management or persons who have a significant role in the Corporations internal
controls;
 44




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##### 




    
    review any report required by law, regulations or stock exchange requirement to be
included in the Trusts periodic reports;
    
    meet at least four times a year on a quarterly basis or more frequently as
circumstances require, with the Chief Financial Officer of the Corporation, the head of
the internal audit function of the Corporation, if other than the Chief Financial Officer,
and the external auditor in separate executive sessions to discuss any matters that the
Committee or each of these groups believes should be discussed privately;
    
    meet in separate, non-management, in-camera sessions at each regularly scheduled
meeting;
    
    meet in a separate non-management, closed sessions with any other internal personnel or
outside advisors, as necessary or appropriate;
    
    review annually the Corporations insurance programs and pension plans, not including
the Directors and Officers insurance program;
    
    review the results of the annual external audit, including the audit report to the
Trusts Unitholders and any other reports prepared by the external auditors and the
informal reporting from the external auditor on accounting systems and internal controls,
including managements response;
    
    review and evaluate the scope, risk assessment, and nature of the internal audit plan
and any subsequent changes;
    
    consider and review the following issues with management and the head of the internal audit group:
 
    
    significant findings of the internal audit group as well as managements response to them;
    
    any difficulties encountered in the course of their internal audits,
including any restrictions on the scope of their work or access to required
information;
    
    the internal auditing budget and staffing;
    
    the internal Audit Services Charter; and
    
    compliance with The Institute of Internal Auditors Standards for the
Professional Practice of Internal Auditing;
 
    
    approve the appointment, replacement or dismissal of the head of the internal audit
group; and
    
    direct the head of the internal audit group to review any specific areas the Committee
deems necessary; and
    
    receive assurance that the obligations of the Corporation pursuant to the
Administration Agreement are met and that good corporate governance procedures are used in
connection therewith.
   45




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##### 



Limitation of Committees Role
     46




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### 



FINANCIAL AND OPERATING HIGHLIGHTS  (Stated in thousands of Canadian dollars, except per diluted unit amounts)
 % Increase
    
    
    
    
    
    
    
    % Increase
    
    
    
    
    
    
    % IncreaseYears ended December 31,
    
    2007
    
    
    (Decrease)
    
    
    
    2006
    
    
    (Decrease)
    
    
    2005
    
    
    (Decrease)Revenue
    
    $
    1,009,201
    
    
    
    (30
    )
    
    
    $
    1,437,584
    
    
    
    13
    
    
    $
    1,269,179
    
    
    
    23Operating
earnings (1)
    
    
    356,351
    
    
    
    (40
    )
    
    
    
    595,279
    
    
    
    28
    
    
    
    465,378
    
    
    
    40Earnings from continuing
operations
    
    
    342,820
    
    
    
    (40
    )
    
    
    
    572,512
    
    
    
    159
    
    
    
    220,848
    
    
    
    17Discontinued operations, net of
tax (2)
    
    
    2,956
    
    
    
    n/m
    
    
    
    
    7,077
    
    
    
    n/m
    
    
    
    1,409,715
    
    
    
    n/mNet earnings
    
    
    345,776
    
    
    
    (40
    )
    
    
    
    579,589
    
    
    
    (64
    )
    
    
    1,630,563
    
    
    
    559Cash provided by continuing
operations
    
    
    484,115
    
    
    
    (21
    )
    
    
    
    609,744
    
    
    
    196
    
    
    
    206,013
    
    
    
    (28
    )Net capital spending from
continuing operations
(3)
    
    
    181,239
    
    
    
    (22
    )
    
    
    
    233,693
    
    
    
    67
    
    
    
    140,077
    
    
    
    23Distributions declared  cash
    
    
    246,485
    
    
    
    (45
    )
    
    
    
    447,001
    
    
    
    n/m
    
    
    
    70,510
    
    
    
    n/mDistributions declared  in-kind
    
    
    30,182
    
    
    
    23
    
    
    
    
    24,523
    
    
    
    n/m
    
    
    
    
    
    
    
    Per diluted unit information:Earnings from continuing
operations
    
    
    2.73
    
    
    
    (40
    )
    
    
    
    4.56
    
    
    
    159
    
    
    
    1.76
    
    
    
    9Net earnings
    
    
    2.75
    
    
    
    (40
    )
    
    
    
    4.62
    
    
    
    (64
    )
    
    
    13.00
    
    
    
    516Distributions declared  cash
    
    
    1.96
    
    
    
    (45
    )
    
    
    
    3.56
    
    
    
    n/m
    
    
    
    0.562
    
    
    
    n/mDistributions declared  in-kind
    
    
    0.24
    
    
    
    23
    
    
    
    
    0.195
    
    
    
    n/m
    
    
    
    
    
    
    
    Drilling rig operating days:Canada
    
    
    30,475
    
    
    
    (32
    )
    
    
    
    44,768
    
    
    
    (5
    )
    
    
    46,937
    
    
    
    13United States
    
    
    1,850
    
    
    
    988
    
    
    
    
    170
    
    
    
    n/m
    
    
    
    
    
    
    
    Service rig operating hours:Canada
    
    
    355,997
    
    
    
    (26
    )
    
    
    
    480,137
    
    
    
    1
    
    
    
    477,232
    
    
    
    1
 (1)
    
    Non-GAAP measure. See page 38.(2)
    
    Includes gain on disposition of discontinued operations.(3)
    
    Excludes acquisitions and discontinued operations.n/m  calculation not meaningful.
 FINANCIAL POSITION AND RATIOS  (Stated in thousands of Canadian dollars, except ratios)
 Years ended December 31,
    
    2007
    
    
    
    2006
    
    
    2005Working capital
    
    $
    140,374
    
    
    
    $
    166,484
    
    
    $
    152,754Working capital ratio
    
    
    2.1
    
    
    
    
    1.8
    
    
    
    1.4Long-term
debt (1)
    
    $
    119,826
    
    
    
    $
    140,880
    
    
    $
    96,838Total assets
    
    $
    1,763,477
    
    
    
    $
    1,761,186
    
    
    $
    1,718,882Enterprise
value (2)
    
    $
    1,877,139
    
    
    
    $
    3,369,860
    
    
    $
    4,759,289Long-term debt to long-term debt plus
equity (1)
    
    
    0.08
    
    
    
    
    0.10
    
    
    
    0.08Long-term debt to cash provided by
continuing operations
(1)
    
    
    0.25
    
    
    
    
    0.23
    
    
    
    0.47Long-term
debt to enterprise value
(1)
    
    
    0.06
    
    
    
    
    0.04
    
    
    
    0.02Interest coverage
(3)
    
    
    48.7
    
    
    
    
    74.1
    
    
    
    15.9
 (1)
    
    Excludes current portion of long-term debt which is included in working capital.(2)
    
    Unit price as at December 31 multiplied by the number of units outstanding plus long-term
debt minus working capital. See page 29.(3)
    
    Operating earnings divided by net interest expense.




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##### 



OVERVIEW AND OUTLOOK




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##### 




    
    In August 2007, Kevin Neveu was appointed Chief Executive Officer of Precision. Mr. Neveu has
over 25 years of experience in the oilfield services sector in North America and international
operations.
    
    Robert Phillips was appointed Chairman of the Board of Directors for Precision Drilling
Corporation.
    
    After 22 years as the Chief Executive of Precision, Hank Swartout retired in August 2007. Under
Mr. Swartouts leadership Precision grew from a four drilling rig operation in 1985 to 241
drilling rigs as at December 2006 and expanded continuing operations to include service rigs,
camp and catering, snubbing, ancillary equipment, rentals and waste water treatment services.
    
    Continued at year-end to carry low levels of long-term debt and had access to substantial lines
of credit to fund future investment.
    
    Achieved the safest year for Precisions people in its history.
    
    Focused capital expansion efforts toward growing its high performance rig fleet.
    
    Delivered growth in drilling rig operations with 16 new Super Series rigs deployed to drilling
projects with customers in Canada and the United States.
    
    Deployed a drilling rig to Latin America.
    
    Improved the underlying cost structure in Canadian operations with staff reduction and asset
retirements in the fourth quarter.
    
    Declared cash distributions of $246 million or $1.96 per diluted unit, 71% of net earnings.
    
    Generated a return on unitholders equity of 27%.
    
    Monitored the impact of the October 31, 2006 tax measures and subsequent amendments that will
change the tax flow-through nature of Precisions current income trust structure by January 1,
2011. Precision continued to focus on its business strategy and will work to ensure it has the
optimal capital structure to maximize unitholder value.




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##### 



Profitability
 
    
    Precision benefited from strong industry pricing established in 2006 to generate solid earnings
from continuing operations in 2007 of $343 million or $2.73 per diluted unit compared to $573
million or $4.56
per diluted unit in 2006.
    
    Precision generated operating earnings of $356 million, a decrease of $239 million or 40% over
2006. As a percent of revenue, operating margins were strong at 35%, a decline of six percentage
points over record-setting 2006.
 Growth
 
    
    Net capital investment in 2007 for the purchase of property, plant and equipment decreased 22%
or $52 million from the prior year to $181 million. Before considering proceeds on asset
disposals of $6 million, Precision invested $46 million toward the upgrade of its existing asset
base and $141 million on expansionary initiatives.
    
    Favourable year round weather and customer demand in United States natural gas basins provided
attractive returns on new capital investment.
    
    Precision grew its contract drilling operation in the United States from one to 12 rigs through
the deployment of seven new build Super Series rigs and four rigs from the Canadian rig fleet.
    
    Precision added nine new Super Series drilling rigs to its
Canadian fleet, six Super
SingleTM
rigs and three Super Triples. Precision continued to upgrade its asset base and confirm its
reputation as a high performance driller through these new rig additions and the decommissioning
of 11 low performing rigs.




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##### 




    
    Precision mobilized a triple rig from Canada to Latin America late in 2007.
    
    Precision completed the construction of two service rigs under a long-term customer arrangement
and decommissioned 16 service rigs.
    
    The camp and catering division continued to broaden its offering towards larger base camp
opportunities.
    
    The snubbing division commissioned its first rack and pinion self-contained unit capable of
snubbing and providing other well servicing operations pursuant to a long-term customer
arrangement.
    
    The wastewater treatment division grew its fleet of equipment by about 25% and diversified its
product offering toward smaller capacity wellsite applications.
    
    The rental division shifted equipment towards WCSB oil markets to optimize utilization.
 Passionately Pursue Target Zero Safety Vision
 
    
    Precision made significant strides towards its Target Zero safety vision. The year-over-year
improvement in safe work practices continued for Precision, resulting in a 15% reduction in
workplace recordable incident frequency from the prior year and a 46% reduction in the past five
years. Precisions commitment to its safety programs and education has not only reduced the
incident frequency but the severity of injuries was also lower. In the past five years, Precision
has experienced a 56% reduction in lost time injury frequency.
 Build Upon Our Core Group of People
 
    
    People are Precisions most important asset; employees deliver high performance and provide
customer value. A North American shortage of skilled and experienced oilfield employees carried
into 2007. Precision focused on the retention of experienced employees through initiatives that
provide a safe and productive work environment, opportunity for advancement and added wage
security through initiatives such as the Designated Driller Program.
    
    Precision completed its second year of internal control certification over financial reporting
pursuant to
Canadian and United States securities regulations. In addition to financial controls, initiatives
have reinforced the joint code of business conduct and ethics policy and provided opportunities
for Precisions management to strengthen its skill in identifying and managing risk.
    
    During the fourth quarter, Precision undertook initiatives to align infrastructure with the
current operating environment in Canada and expansion in the United States.
 Cash Distributions to Unitholders
 
    
    For 2007 Precision declared cash distributions of $246 million or $1.96 per diluted unit
compared to $447 million or $3.56 per diluted unit in 2006.
    
    Precision generated distributable cash from operations of $311 million compared to $353 million
in the prior year. This calculation started with $484 million in cash provided from continuing
operations less $181 million for net capital expenditures and a recovery of $8 million for
unfunded long-term incentive plan obligations.




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##### 



SUMMARY OF CONSOLIDATED STATEMENTS OF EARNINGS  (Stated in thousands of Canadian dollars)
 Years ended December 31,
    
    2007
    
    
    
    2006
    
    
    2005Revenue:Contract Drilling Services
    
    $
    694,340
    
    
    
    $
    1,009,821
    
    
    $
    916,221Completion and Production Services
    
    
    327,471
    
    
    
    
    441,017
    
    
    
    369,667Inter-segment elimination
    
    
    (12,610
    )
    
    
    
    (13,254
    )
    
    
    (16,709
    )1,009,201
    
    
    
    
    1,437,584
    
    
    
    1,269,179Operating
earnings: (1)Contract Drilling Services
    
    
    284,754
    
    
    
    
    473,624
    
    
    
    404,385Completion and Production Services
    
    
    100,596
    
    
    
    
    163,119
    
    
    
    121,643Corporate and Other
    
    
    (28,999
    )
    
    
    
    (41,464
    )
    
    
    (60,650
    )356,351
    
    
    
    
    595,279
    
    
    
    465,378Interest, net
    
    
    7,318
    
    
    
    
    8,029
    
    
    
    29,270Premium on redemption of bonds
    
    
    
    
    
    
    
    
    
    
    
    71,885Loss on disposal of short-term
investments
    
    
    
    
    
    
    
    
    
    
    
    70,992Other
    
    
    
    
    
    
    
    (408
    )
    
    
    Earnings from continuing
operations before income taxes
    
    
    349,033
    
    
    
    
    587,658
    
    
    
    293,231Income taxes
    
    
    6,213
    
    
    
    
    15,146
    
    
    
    72,383Earnings from continuing operations
    
    
    342,820
    
    
    
    
    572,512
    
    
    
    220,848Discontinued operations, net of tax
    
    
    2,956
    
    
    
    
    7,077
    
    
    
    1,409,715Net earnings
    
    $
    345,776
    
    
    
    $
    579,589
    
    
    $
    1,630,563
 (1)
    
    Non-GAAP measure. See page 38.




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##### 








---



##### 



OUTLOOK




---



##### 

\

DYNAMICS OF THE OILFIELD SERVICES INDUSTRY
  GLOBAL MARKETS
   NORTH AMERICAN MARKETS




---



##### 



ECONOMIC DRIVERS OF THE OILFIELD SERVICES INDUSTRY




---



##### 








---



##### 








---



##### 



PRECISIONS DEVELOPMENT
 PRECISIONS HISTORY OF CONTINUING OPERATIONS
  Contract Drilling Services Segment
     Completion and Production Services Segment




---



##### 



TM TM
 STRATEGIC DIRECTION
    
    
    To geographically diversify into markets beyond Canada to reduce seasonality of equipment
utilization and dependence on underlying economics of the WCSB;
    
    To capitalize on production growth and resulting drilling opportunities in the United States,
especially unconventional natural gas wells;
    
    To pursue global oil drilling opportunities;
    
    To invest in asset growth that renders customer value through enhanced service performance:
 
    
    New asset deployment results in organic growth and market share gains as onshore oil and
gas basins have matured. Precisions superior equipment technology delivers significantly better
operating performance, especially in complex and demanding customer well programs;
    
    Precision seeks consolidation opportunities to implement its core capabilities of
employee recruitment, safety, training, environmental footprint, equipment maintenance, equipment
manufacturing, supply chain management and cost control to upgrade performance of existing
equipment fleets.




---



##### 



KEY PERFORMANCE DRIVERS
  Safety Management:
 Operating Efficiency:
  
    
    Mechanical downtime which is managed through preventative maintenance programs, detailed
inspection processes, an extensive fleet of strategically placed spare equipment, an in-house
supply chain, and continuous equipment upgrades; and
    
    Non-productive time, or move, rig-up and rig-out time, which is minimized by decreasing the
number of move loads per rig, using lighter move loads, and using mechanized equipment for safer
and quicker rig component connections.
 Customer Demand:
 Workforce:
 Financial Performance:




---



##### 



OPERATING SEGMENTS
  
    
    Precision Drilling operates 232 land drilling rigs in Canada;
    
    Precision Drilling Oilfield Services operates 12 land drilling rigs in the United States;
    
    A Precision affiliate operates one rig in Latin America;
    
    LRG Catering operates 102 camps, with food catering, in Canada and the United States;
    
    Rostel Industries provides engineering, machining, fabrication, component manufacturing and
repair services for drilling and service rigs primarily for Precisions operations; and
    
    Columbia Oilfield Supply provides centralized procurement, standardized product selection, and
coordinated distribution of goods for Precisions operations.
  
    
    Precision Well Servicing operates 223 well completion and workover service rigs in Canada;
    
    Live Well Service operates 27 snubbing units in Canada;
    
    Precision Rentals provides approximately 13,000 rental items in Canada including well control
equipment, surface equipment, specialty tubulars and wellsite accommodation units; and
    
    Terra Water Systems provides 63 wastewater treatment units.
 Precision Drilling
  2007
    
    Maximum Depth RatingType of Drilling Rig
    
    Metres
    
    
    Feet
    
    
    Horsepower
    
    
    Canada
    
    
    U.S.
    
    
    International
    
    
    TotalSingle
    
    
    1,200
    
    
    
    4,000
    
    
    
    250-300
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14Super
SingleTM
    
    
    3,000
    
    
    
    10,000
    
    
    
    400-800
    
    
    
    33
    
    
    
    8
    
    
    
    
    
    
    
    41Double
    
    
    3,000
    
    
    
    10,000
    
    
    
    300-500
    
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    87Super Triple
    
    
    4,000
    
    
    
    13,000
    
    
    
    1,200
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Light triple
    
    
    3,600
    
    
    
    12,000
    
    
    
    500-750
    
    
    
    40
    
    
    
    2
    
    
    
    
    
    
    
    42Heavy triple
    
    
    6,700
    
    
    
    22,000
    
    
    
    1,000-2,000
    
    
    
    39
    
    
    
    2
    
    
    
    1
    
    
    
    42Coiled tubing
    
    
    1,500
    
    
    
    5,000
    
    
    
    250-300
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    232
    
    
    
    12
    
    
    
    1
    
    
    
    245
 2006
    
    Maximum Depth RatingType of Drilling Rig
    
    Metres
    
    
    Feet
    
    
    Horsepower
    
    
    Canada
    
    
    U.S.
    
    
    International
    
    
    TotalSingle
    
    
    1,200
    
    
    
    4,000
    
    
    
    250-300
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14Super
SingleTM
    
    
    3,000
    
    
    
    10,000
    
    
    
    400-600
    
    
    
    28
    
    
    
    1
    
    
    
    
    
    
    
    29Double
    
    
    3,000
    
    
    
    10,000
    
    
    
    300-500
    
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    94Super Triple
    
    
    4,000
    
    
    
    13,000
    
    
    
    1,200
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    5Light triple
    
    
    3,600
    
    
    
    12,000
    
    
    
    500-750
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    44Heavy triple
    
    
    6,700
    
    
    
    22,000
    
    
    
    1,000-2,000
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    44Coiled tubing
    
    
    1,500
    
    
    
    5,000
    
    
    
    250-300
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    11Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    1
    
    
    
    
    
    
    
    241




---



##### 



Precision Fleet
    
    
    Industry Fleet(1)Maximum
    
    
    
    
    
    
    
    
    
    
    %Depth Rating
    
    
    Number
    
    
    % of
    
    
    Market
    
    
    Number
    
    
    % ofType of Drilling Rig
    
    (metres)
    
    
    of Rigs
    
    
    Total
    
    
    Share(3)
    
    
    of Rigs
    
    
    Total
    
    
    Change(4)Single
    
    
    1,200
    
    
    
    14
    
    
    
    6
    
    
    
    8
    
    
    
    165
    
    
    
    18
    
    
    
    20Super Single
TM(2)
    
    
    3,000
    
    
    
    33
    
    
    
    14
    
    
    
    89
    
    
    
    37
    
    
    
    4
    
    
    
    4Double
    
    
    3,000
    
    
    
    87
    
    
    
    38
    
    
    
    22
    
    
    
    393
    
    
    
    44
    
    
    
    29Super Triple (5)
    
    
    4,000
    
    
    
    8
    
    
    
    3
    
    
    
    100
    
    
    
    8
    
    
    
    1
    
    
    
    3Light triple
    
    
    3,600
    
    
    
    40
    
    
    
    17
    
    
    
    34
    
    
    
    116
    
    
    
    13
    
    
    
    (1
    )Heavy triple
    
    
    6,700
    
    
    
    39
    
    
    
    17
    
    
    
    36
    
    
    
    109
    
    
    
    12
    
    
    
    (4
    )Coiled tubing
    
    
    1,500
    
    
    
    11
    
    
    
    5
    
    
    
    16
    
    
    
    70
    
    
    
    8
    
    
    
    5Total
    
    
    
    
    
    
    232
    
    
    
    100
    
    
    
    26
    
    
    
    898
    
    
    
    100
    
    
    
    56
 (1)
    
    Source: Daily Oil Bulletin  Rig Locator Report as of January 2008. Precision has
allocated the industry rig fleet by rig type and removed 11 decommissioned rigs.(2)
    
    Super
SingleTM excludes single rigs that do not have automated pipe-handling, a self-contained
top drive or run extended length drill pipe/casing.(3)
    
    Market share means Precisions rigs as a percent of industry rigs estimated by Precision.(4)
    
    Change in number of industry rigs as compared to the prior year.(5)
    
    Super Triple includes features such as extended length drill pipe, AC power, iron roughneck,
mobility without cranes, top drive and an advanced control system.
 Precision Well Servicing
  Type of Service Rig
    
    Horsepower
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Singles:Mobile
    
    
    150-400
    
    
    
    5
    
    
    
    12
    
    
    
    17
    
    
    
    19Freestanding mobile
    
    
    150-400
    
    
    
    94
    
    
    
    92
    
    
    
    88
    
    
    
    86Doubles:Mobile
    
    
    250-550
    
    
    
    43
    
    
    
    44
    
    
    
    44
    
    
    
    42Freestanding mobile
    
    
    200-550
    
    
    
    9
    
    
    
    9
    
    
    
    8
    
    
    
    9Skid
    
    
    300-860
    
    
    
    55
    
    
    
    65
    
    
    
    65
    
    
    
    67Slants:Freestanding
    
    
    250-400
    
    
    
    17
    
    
    
    15
    
    
    
    15
    
    
    
    16Total
    
    
    
    
    
    
    223
    
    
    
    237
    
    
    
    237
    
    
    
    239
 CAPACITY TO DELIVER
  High Performance Drilling Rigs




---



##### 



TM TM
 TM
  Large Diversified Rig Fleets
    Inventory of Ancillary Equipment
   Industry Leading Safety Program




---



##### 



Well-maintained Equipment
  
   Employees
  Information Systems




---



##### 



FINANCIAL RESULTS
 CONTRACT DRILLING SERVICES SEGMENT  (Stated in thousands of Canadian dollars, except where indicated)
 % of
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofYears ended December 31,
    
    2007
    
    
    Revenue
    
    
    
    2006
    
    
    Revenue
    
    
    2005
    
    
    RevenueRevenue
    
    $
    694,340
    
    
    
    
    
    
    
    $
    1,009,821
    
    
    
    
    
    
    $
    916,221Expenses:Operating
    
    
    345,043
    
    
    
    49.7
    
    
    
    
    470,713
    
    
    
    46.6
    
    
    
    448,930
    
    
    
    49.0General and administrative
    
    
    19,946
    
    
   
    2.9
    
    
    
    
    27,225
    
    
    
    2.7
    
    
    
    23,911
    
    
    
    2.6Depreciation
    
    
    43,120
    
    
    
    6.2
    
    
    
    
    38,573
    
    
    
    3.8
    
    
    
    39,233
    
    
    
    4.3Foreign exchange
    
    
    1,477
    
    
    
    0.2
    
    
    
    
    (314
    )
    
    
    
    
    
    
    (238
    )
    
    
    Operating earnings(1)
    
    $
    284,754
    
    
    
    41.0
    
    
    
    $
    473,624
    
    
    
    46.9
    
    
    $
    404,385
    
    
    
    44.1% Increase
    
    
    
    
    
    
    
    % Increase
    
    
    
    
    
    
    % Increase2007
    
    
    (Decrease)
    
    
    
    2006
    
    
    (Decrease)
    
    
    2005
    
    
    (Decrease)Number of drilling rigs (end of year)
    
    
    245
    
    
    
    1.7
    
    
    
    
    241
    
    
    
    4.8
    
    
    
    230
    
    
    
    0.4Drilling operating days:Canada
    
    
    30,475
    
    
    
    (31.9
    )
    
    
    
    44,768
    
    
    
    (4.6
    )
    
    
    46,937
    
    
    
    12.8United States
    
    
    1,850
    
    
    
    988.2
    
    
    
    
    170
    
    
    
    
    
    
    
    
    
    
    
    Drilling revenue per operating day:Canada
    
    $
    19,096
    
    
    
    (7.0
    )
    
    
    $
    20,528
    
    
    
    13.8
    
    
    $
    18,034
    
    
    
    9.3Drilling statistics:(2)Number of wells drilled
    
    
    4,718
    
    
    
    (23.7
    )
    
    
    
    6,180
    
    
    
    (20.4
    )
    
    
    7,766
    
    
    
    3.2Average days per well
    
    
    6.5
    
    
    
    (9.7
    )
    
    
    
    7.2
    
    
    
    20.0
    
    
    
    6.0
    
    
    
    9.1Number of metres drilled (000s)
    
    
    5,813
    
    
    
    (25.6
    )
    
    
    
    7,810
    
    
    
    (12.3
    )
    
    
    8,901
    
    
    
    11.0Average metres per well
    
    
    1,232
    
    
    
    (2.5
    )
    
    
    
    1,264
    
    
    
    10.3
    
    
    
    1,146
    
    
    
    7.5
 (1)
    
    Non-GAAP measure. See page 38.(2)
    
    Canadian operations only.




---



##### 



2007 Compared to 2006
 The Contract Drilling Services segment
   The Precision Drilling division
   Precision Drilling Oilfield Services TM
 LRG Catering
 Rostel Industries and Columbia Oilfield Supply divisions




---



##### 



2006 Compared to 2005
 The Contract Drilling Services segment
   The Precision Drilling division
   Precision
Drilling Oilfield Services, Inc.
 LRG Catering
 COMPLETION AND PRODUCTION SERVICES SEGMENT  (Stated in thousands of Canadian dollars, except where indicated)
 % of
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofYears ended December 31,
    
    2007
    
    
    Revenue
    
    
    
    2006
    
    
    Revenue
    
    
    2005
    
    
    RevenueRevenue
    
    $
    327,471
    
    
    
    
    
    
    
    $
    441,017
    
    
    
    
    
    
    $
    369,667Expenses:Operating
    
    
    183,661
    
    
    
    56.1
    
    
    
    
    231,602
    
    
    
    52.5
    
    
    
    209,657
    
    
    
    56.7General and administrative
    
    
    11,780
    
    
    
    3.6
    
    
    
    
    14,242
    
    
    
    3.2
    
    
    
    11,021
    
    
    
    3.0Depreciation
    
    
    31,421
    
    
    
    9.6
    
    
    
    
    32,013
    
    
    
    7.3
    
    
    
    27,402
    
    
    
    7.4Foreign exchange
    
    
    13
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    (56
    )
    
    
    Operating
earnings (1)
    
    $
    100,596
    
    
    
    30.7
    
    
    
    $
    163,119
    
    
    
    37.0
    
    
    $
    121,643
    
    
    
    32.9% Increase
    
    
    
    
    
    
    
    % Increase
    
    
    
    
    
    
    % Increase2007
    
    
    (Decrease)
    
    
    
    2006
    
    
    (Decrease)
    
    
    2005
    
    
    (Decrease)Number of service rigs (end of year)
    
    
    223
    
    
    
    (5.9
    )
    
    
    
    237
    
    
    
    
    
    
    
    237
    
    
    
    (0.8
    )Service rig operating hours
    
    
    355,997
    
    
    
    (25.9
    )
    
    
    
    480,137
    
    
    
    0.6
    
    
    
    477,232
    
    
    
    1.1Revenue per operating hour
    
    $
    730
    
    
    
    2.5
    
    
    
    $
    712
    
    
    
    18.7
    
    
    $
    600
    
    
    
    17.0
 (1)
    
    Non-GAAP measure. See page 38.




---



##### 



2007 Compared to 2006
 The Completion and Production Services segment
   The Precision Well Servicing division
     Live Well Service
 Precision Rentals
 Terra Water Systems




---



##### 



2006 Compared to 2005
 The Completion and Production Services segment
    The Precision Well Servicing division
 Live Well Services
 Precision Rentals
 Terra Water Systems
 OTHER ITEMS
 2007 Compared to 2006
 Corporate and Other Expenses
  Interest Expense




---



##### 



Income Taxes
    Discontinued Operations
  2006 Compared to 2005
 Corporate and Other Expenses
  Interest Expense
  Premium on Redemption of Bonds and Loss on Disposal of Short-term Investments
   Discontinued Operations




---



##### 



Income Taxes
   LIQUIDITY AND CAPITAL RESOURCES
      Payments Due by Period(Stated in thousands of Canadian
dollars)
    
    Total
    
    
    Less Than 1 Year
    
    
    1  3 Years
    
    
    4  5 Years
    
    
    After 5 YearsLong-term debt
    
    $
    119,826
    
    
    $
    
    
    
    $
    119,826
    
    
    $
    
    
    
    $
    Operating leases
    
    
    22,640
    
    
    
    7,754
    
    
    
    11,407
    
    
    
    3,479
    
    
    
    Long-term
incentive plans (1)
    
    
    21,147
    
    
    
    917
    
    
    
    20,230
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    163,613
    
    
    $
    8,671
    
    
    $
    151,463
    
    
    $
    3,479
    
    
    $
    
 (1)
    
    Includes amounts not yet accrued at December 31, 2007 but payable at the end of the contract
term. Unit based compensation amounts disclosed at year-end unit price.




---



##### 



Outstanding Unit Data
 February 29,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005Trust units
    
    
    125,588,717
    
    
    
    125,587,919
    
    
    
    125,536,329
    
    
    
    124,352,921Exchangeable LP units
    
    
    169,207
    
    
    
    170,005
    
    
    
    221,595
    
    
    
    1,108,382Total units outstanding
    
    
    125,757,924
    
    
    
    125,757,924
    
    
    
    125,757,924
    
    
    
    125,461,303Deferred Trust units outstanding
    
    
    18,523
    
    
    
    18,280
    
    
    
    
    
    
    
    
 DISTRIBUTIONS
    
    
    Deducts the purchase of property, plant and equipment for upgrade capital as the minimum
capital reinvestment required to maintain current operating capacity;
    
    Deducts the purchase of property, plant and equipment for expansion initiatives to grow
capacity;
    
    Adds the proceeds on the sale of property, plant and equipment which are incidental
transactions occurring within the normal course of operations; and
    
    Deducts long-term incentive plan changes as an unfunded liability resulting from the operating
activities in the current period with payments beginning March 2009.




---



##### 



Years ended December 31,(Stated in thousands of Canadian dollars, except per diluted unit amounts)
    
    2007
    
    
    
    2006Cash provided by continuing operations
    
    $
    484,115
    
    
    
    $
    609,744Deduct:Purchase of property, plant and equipment for upgrade capital
    
    
    (45,970
    )
    
    
    
    (92,123
    )Purchase of property plant and equipment for expansion initiatives
    
    
    (141,003
    )
    
    
    
    (170,907
    )Add:Proceeds on the sale of property, plant and equipment
    
    
    5,767
    
    
    
    
    29,337Standardized
distributable cash
(1)
    
    
    302,909
    
    
    
    
    376,051Unfunded long-term incentive plan compensation
    
    
    8,496
    
    
    
    
    (22,699
    )Distributable
cash from continuing operations
(1)
    
    $
    311,405
    
    
    
    $
    353,352Cash distributions declared
    
    $
    246,485
    
    
    
    $
    447,001Per diluted unit information:Cash distributions declared
    
    $
    1.96
    
    
    
    $
    3.56Standardized
distributable cash
(1)
    
    $
    2.41
    
    
    
    $
    3.00Distributable
cash from continuing operations
(1)
    
    $
    2.48
    
    
    
    $
    2.81
   Years ended December 31,(Stated in thousands of Canadian dollars)
    
    2007
    
    
    
    2006Cash provided by continuing operations (A)
    
    $
    484,115
    
    
    
    $
    609,744Net earnings (B)
    
    $
    345,776
    
    
    
    $
    579,589Distributions declared (C)
    
    $
    276,667
    
    
    
    $
    471,524Excess of cash provided by operations over
distributions declared (A-C)
    
    $
    207,448
    
    
    
    $
    138,220Excess of net earnings over distributions declared (B-C)
    
    $
    69,109
    
    
    
    $
    108,065
  (Stated in thousands of Canadian dollars except per unit amounts)
    
    2007
    
    
    
    2006
    
    
    2005Units outstanding
    
    
    125,757,924
    
    
    
    
    125,757,924
    
    
    
    125,461,303Year-end unit price
    
    $
    15.09
    
    
    
    $
    27.00
    
    
    $
    38.38Units at market
    
    $
    1,897,687
    
    
    
    $
    3,395,464
    
    
    $
    4,815,205Long-term debt
    
    
    119,826
    
    
    
    
    140,880
    
    
    
    96,838Less: Working capital
    
    
    (140,374
    )
    
    
    
    (166,484
    )
    
    
    (152,754
    )Enterprise value
    
    $
    1,877,139
    
    
    
    $
    3,369,860
    
    
    $
    4,759,289




---



##### 



QUARTERLY FINANCIAL SUMMARY  (Stated in thousands of Canadian dollars, except per diluted unit
amounts)
 Year ended December 31, 2007
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    YearRevenue
    
    $
    410,542
    
    
    $
    122,005
    
    
    $
    227,928
    
    
    $
    248,726
    
    
    $
    1,009,201Operating earnings (1)
    
    
    178,179
    
    
    
    27,074
    
    
    
    73,402
    
    
    
    77,696
    
    
    
    356,351Earnings from continuing operations
    
    
    158,067
    
    
    
    25,722
    
    
    
    69,702
    
    
    
    89,329
    
    
    
    342,820Per diluted unit
    
    
    1.26
    
    
    
    0.20
    
    
    
    0.55
    
    
    
    0.71
    
    
    
    2.73Net earnings
    
    
    158,067
    
    
    
    25,722
    
    
    
    72,658
    
    
    
    89,329
    
    
    
    345,776Per diluted unit
    
    
    1.26
    
    
    
    0.20
    
    
    
    0.58
    
    
    
    0.71
    
    
    
    2.75Cash provided by continuing operations
    
    
    156,298
    
    
    
    229,073
    
    
    
    20,270
    
    
    
    78,474
    
    
    
    484,115Distributions to unitholders  declared
    
    $
    71,682
    
    
    $
    56,591
    
    
    $
    49,046
    
    
    $
    99,348
    
    
    $
    276,667
 Year ended December 31, 2006
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    YearRevenue
    
    $
    536,408
    
    
    $
    223,569
    
    
    $
    349,558
    
    
    $
    328,049
    
    
    $
    1,437,584Operating earnings (1)
    
    
    245,909
    
    
    
    74,543
    
    
    
    142,431
    
    
    
    132,396
    
    
    
    595,279Earnings from continuing operations
    
    
    224,183
    
    
    
    88,303
    
    
    
    133,552
    
    
    
    126,474
    
    
    
    572,512Per diluted unit
    
    
    1.79
    
    
    
    0.70
    
    
    
    1.06
    
    
    
    1.01
    
    
    
    4.56Net earnings
    
    
    224,183
    
    
    
    88,303
    
    
    
    139,667
    
    
    
    127,436
    
    
    
    579,589Per diluted unit
    
    
    1.79
    
    
    
    0.70
    
    
    
    1.11
    
    
    
    1.01
    
    
    
    4.62Cash provided by continuing operations
    
    
    40,940
    
    
    
    339,619
    
    
    
    74,952
    
    
    
    154,233
    
    
    
    609,744Distributions to unitholders  declared
    
    $
    101,623
    
    
    $
    111,681
    
    
    $
    116,785
    
    
    $
    141,435
    
    
    $
    471,524
   FOURTH QUARTER DISCUSSION




---



##### 








---



##### 



CRITICAL ACCOUNTING ESTIMATES, NEW ACCOUNTING STANDARDS AND BUSINESS RISKS
 CRITICAL ACCOUNTING ESTIMATES
    Allowance for Doubtful Accounts Receivable
  Impairment of Long-lived Assets




---



##### 



Depreciation and Amortization
  Income Taxes
   Long-term Incentive Plan Compensation
  NEW ACCOUNTING STANDARDS
  
    
    Section 3031, Inventories, provides guidance on measurement and disclosure of inventories.
This section also provides guidance on the determination of cost and recognition in the financial
statements.
    
    Section 1535, Capital Disclosures, establishes standards for disclosing quantitative and
qualitative information regarding objectives, policies and processes for managing capital.




---



##### 



BUSINESS RISKS
   Crude Oil and Natural Gas Prices




---



##### 



Workforce Availability
   Business is Seasonal
   Technology
  Customer Merger and Acquisition Activity
  Competitive Industry
  Capital Overbuild in the Drilling Industry




---



##### 



Tax Consequences of Previous Transactions Completed by Precision
   Credit Risk
  Capital Expenditures
  Access to Additional Financing
  Taxation of Distributions
  Environmental




---



##### 



U.S. Dollar Exchange Exposure
  
    
    Translation of U.S. Currency Assets and Liabilities to Canadian DollarsFor Precisions integrated operations, non-monetary assets and liabilities are recorded in
the financial statements at the exchange rate in effect at the time of the acquisition or
expenditure. As a result the book value of these assets and liabilities are not impacted by
changes in exchange rates. Monetary assets and liabilities are converted at the exchange rate in
effect at the balance sheet dates, and the unrealized gains and losses are shown on the
statements of earnings as Foreign exchange. Precision has a net monetary asset position for its
U.S. operations, which are U.S. dollar based. As a result, if the Canadian dollar strengthens
versus the U.S. dollar, Precision will incur a foreign exchange loss from translation of net
monetary assets;
    
    Translation of U.S. Currency Statement of Earnings Items to Canadian DollarsPrecisions United States operations generate revenue and incur expenses in U.S. dollars and
the U.S. dollar based earnings are converted into Canadian dollars for purposes of financial
statement consolidation and reporting. The conversion of the U.S. dollar based revenue and
expenses to a Canadian dollar basis does not result in a foreign exchange gain or loss but does
result in lower or higher net earnings from United States operations than would have occurred had
the exchange rate not changed. If the Canadian dollar strengthens against the U.S. dollar, the
Canadian dollar equivalent of net earnings from United States operations will be negatively
impacted. Precision does not currently hedge any of its exposure related to the translation of
United States based earnings into Canadian dollars; and
    
    Transaction ExposureThe majority of Precisions United States operations are transacted in U.S. dollars.
Transactions for Precisions Canadian operations are primarily
transacted in Canadian dollars.
However, Precision occasionally purchases goods and supplies in U.S. dollars. These transactions
and foreign exchange exposure would not typically have a material impact on the Canadian
operations financial results.
 Safety Risk
  Dependence on Third Party Suppliers




---



##### 



DISCLOSURE CONTROLS AND PROCEDURES
 EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
    NON-GAAP MEASURES
  Operating Earnings
  Standardized Distributable Cash, Distributable Cash from Continuing Operations, Standardized
Distributable Cash per Diluted Unit and Distributable Cash from Continuing Operations per Diluted
Unit




---



##### 



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS




---



##### 








---



##### 



FINANCIAL REPORTING
 MANAGEMENTS REPORT TO THE UNITHOLDERS




---



##### 



-s- Kevin A. Neveu
    
    -s- Doug J. StrongKevin A. Neveu
    
    Doug J. StrongChief Executive Officer
    
    Chief Financial OfficerPrecision Drilling Corporation,
    
    Precision Drilling Corporation,Administrator to Precision Drilling Trust
    
    Administrator to Precision Drilling TrustMarch 20, 2008
    
    March 20, 2008




---



##### 



AUDITORS REPORT TO THE UNITHOLDERS
 To the
Unitholders of Precision Drilling Trust
     
 Chartered Accountants
Calgary, Canada
 March 20, 2008




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the Board of Directors of Precision Drilling Corporation, as Administrator to Precision
Drilling Trust and the Unitholders of Precision Drilling Trust
       
 Chartered Accountants
Calgary, Canada
 March 20, 2008




---



##### 



CONSOLIDATED BALANCE SHEETS
 As at December 31,(Stated in thousands of Canadian dollars)
    
    
    
    
    
    2007
    
    
    
    2006ASSETSCurrent assets:Accounts receivable
    
    (Note 19)
    
    $
    256,616
    
    
    
    $
    354,671Income taxes recoverable
    
    
    
    
    
    
    5,952
    
    
    
    
    8,701Inventory
    
    
    
    
    
    
    9,255
    
    
    
    
    9,073271,823
    
    
    
    
    372,445Property, plant and equipment, net of accumulated depreciation
    
    (Note 4)
    
    
    1,210,587
    
    
    
    
    1,107,617Intangibles, net of accumulated amortization of $593 (2006  $503)
    
    
    
    
    
    
    318
    
    
    
    
    375Goodwill
    
    
    
    
    
    
    280,749
    
    
    
    
    280,749$
    1,763,477
    
    
    
    $
    1,761,186LIABILITIES AND UNITHOLDERS EQUITYCurrent liabilities:Bank indebtedness
    
    (Note 5)
    
    $
    14,115
    
    
    
    $
    36,774Accounts payable and accrued liabilities
    
    (Note 19)
    
    
    80,864
    
    
    
    
    130,202Distributions payable
    
    (Note 6)
    
    
    36,470
    
    
    
    
    38,985131,449
    
    
    
    
    205,961Long-term incentive plan payable
    
    
    
    
    
    
    13,896
    
    
    
    
    22,699Long-term debt
    
    (Note 7)
    
    
    119,826
    
    
    
    
    140,880Future income taxes
    
    (Note 8)
    
    
    181,633
    
    
    
    
    174,571446,804
    
    
    
    
    544,111Commitments and contingencies
    
    (Notes 12 and 20)Unitholders equity:Unitholders capital
    
    (Note 9(b))
    
    
    1,442,476
    
    
    
    
    1,412,294Contributed surplus
    
    (Note 9(c))
    
    
    307
    
    
    
    
    Deficit
    
    
    
    
    
    
    (126,110
    )
    
    
    
    (195,219
    )1,316,673
    
    
    
    
    1,217,075$
    1,763,477
    
    
    
    $
    1,761,186
 See accompanying notes to consolidated financial statements.
  -s- Robert J.S. Gibson
    
    -s- Patrick M. MurrayRobert J.S. Gibson
    
    Patrick M. MurrayTrustee
    
    Trustee




---



##### 



CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (DEFICIT)
 Years ended December 31,(Stated in thousands of Canadian dollars, except per unit amounts)
    
    
    
    
    
    2007
    
    
    
    2006
    
    
    2005Revenue
    
    
    
    
    
    $
    1,009,201
    
    
    
    $
    1,437,584
    
    
    $
    1,269,179Expenses:Operating
    
    
    
    
    
    
    516,094
    
    
    
    
    688,207
    
    
    
    641,805General and administrative
    
    
    
    
    
    
    56,032
    
    
    
    
    81,217
    
    
    
    76,397Depreciation and amortization
    
    (Note 4)
    
    
    78,326
    
    
    
    
    73,234
    
    
    
    71,561Foreign exchange
    
    
    
    
    
    
    2,398
    
    
    
    
    (353
    )
    
    
    (3,474
    )Reorganization costs
    
    (Note 23)
    
    
    
    
    
    
    
    
    
    
    
    17,512652,850
    
    
    
    
    842,305
    
    
    
    803,801Operating earnings
    
    
    
    
    
    
    356,351
    
    
    
    
    595,279
    
    
    
    465,378Interest:Long-term debt
    
    
    
    
    
    
    7,767
    
    
    
    
    8,800
    
    
    
    38,735Other
    
    
    
    
    
    
    106
    
    
    
    
    171
    
    
    
    558Income
    
    
    
    
    
    
    (555
    )
    
    
    
    (942
    )
    
    
    (10,023
    )Premium on redemption of bonds
    
    (Note 7)
    
    
    
    
    
    
    
    
    
    
    
    71,885Loss on disposal of short-term investments
    
    (Note 24)
    
    
    
    
    
    
    
    
    
    
    
    70,992Other
    
    
    
    
    
    
    
    
    
    
    
    (408
    )
    
    
    Earnings from continuing operations before income taxes
    
    
    
    
    
    
    349,033
    
    
    
    
    587,658
    
    
    
    293,231Income taxes:
    
    (Note 8)Current
    
    
    
    
    
    
    (737
    )
    
    
    
    34,526
    
    
    
    241,402Future
    
    
    
    
    
    
    6,950
    
    
    
    
    (19,380
    )
    
    
    (169,019
    )6,213
    
    
    
    
    15,146
    
    
    
    72,383Earnings from continuing operations
    
    
    
    
    
    
    342,820
    
    
    
    
    572,512
    
    
    
    220,848Gain on disposal of discontinued operations, net of tax
    
    (Note 24)
    
    
    2,956
    
    
    
    
    7,077
    
    
    
    1,335,382Discontinued operations, net of tax
    
    (Note 24)
    
    
    
    
    
    
    
    
    
    
    
    74,333Net earnings
    
    
    
    
    
    
    345,776
    
    
    
    
    579,589
    
    
    
    1,630,563Retained earnings (deficit), beginning of year
    
    
    
    
    
    
    (195,219
    )
    
    
    
    (303,284
    )
    
    
    1,041,683Adjustment on cash purchase of employee stock
options, net of tax of $22,060
    
    (Note 23(c))
    
    
    
    
    
    
    
    
    
    
    
    (42,087
    )Reclassification from contributed surplus on cash
buy-out of employee stock options
    
    (Note 23(c))
    
    
    
    
    
    
    
    
    
    
    
    23,215Distribution of disposal proceeds
    
    (Note 24)
    
    
    
    
    
    
    
    
    
    
    
    (2,851,784
    )Repurchase of common shares of
dissenting shareholders
    
    (Note 23(a))
    
    
    
    
    
    
    
    
    
    
    
    (34,364
    )Distributions declared
    
    (Note 6)
    
    
    (276,667
    )
    
    
    
    (471,524
    )
    
    
    (70,510
    )Deficit, end of year
    
    
    
    
    
    $
    (126,110
    )
    
    
    $
    (195,219
    )
    
    $
    (303,284
    )Earnings per unit from continuing operations:
    
    (Note 13)Basic
    
    
    
    
    
    $
    2.73
    
    
    
    $
    4.56
    
    
    $
    1.79Diluted
    
    
    
    
    
    $
    2.73
    
    
    
    $
    4.56
    
    
    $
    1.76Earnings per unit:
    
    (Note 13)Basic
    
    
    
    
    
    $
    2.75
    
    
    
    $
    4.62
    
    
    $
    13.22Diluted
    
    
    
    
    
    $
    2.75
    
    
    
    $
    4.62
    
    
    $
    13.00
 See accompanying notes to consolidated financial statements.




---



##### 



CONSOLIDATED STATEMENTS OF CASH FLOW
 Years ended December 31,(Stated in thousands of Canadian dollars)
    
    
    
    
    
    2007
    
    
    
    2006
    
    
    2005Cash provided by (used in):Continuing operations:Earnings from continuing operations
    
    
    
    
    
    $
    342,820
    
    
    
    $
    572,512
    
    
    $
    220,848Adjustments and other items not involving cash:Long-term incentive plan compensation
    
    
    
    
    
    
    (8,496
    )
    
    
    
    22,699
    
    
    
    Depreciation and amortization
    
    
    
    
    
    
    78,326
    
    
    
    
    73,234
    
    
    
    71,561Future income taxes
    
    
    
    
    
    
    6,950
    
    
    
    
    (19,380
    )
    
    
    (169,019
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,229Write-off of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,664Loss in market value of short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,992Amortization of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,453Unrealized foreign exchange gain on long-term monetary items
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,740
    )Other
    
    
    
    
    
    
    112
    
    
    
    
    (408
    )
    
    
    Changes in non-cash working capital balances
    
    (Note 19)
    
    
    64,403
    
    
    
    
    (38,913
    )
    
    
    (3,975
    )484,115
    
    
    
    
    609,744
    
    
    
    206,013Discontinued operations:
    
    (Note 24)Funds provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    183,330Changes in non-cash working capital balances
of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (86,310
    )
    
    
    
    
    
    
    
    
    97,020Investments:Business acquisitions, net of cash acquired
    
    (Notes 15 and 24)
    
    
    
    
    
    
    
    (16,428
    )
    
    
    (30,421
    )Purchase of property, plant and equipment
    
    
    
    
    
    
    (186,973
    )
    
    
    
    (263,030
    )
    
    
    (155,231
    )Proceeds on sale of property, plant and equipment
    
    
    
    
    
    
    5,767
    
    
    
    
    29,337
    
    
    
    15,174Proceeds on disposal of discontinued operations
    
    (Note 24)
    
    
    2,956
    
    
    
    
    7,337
    
    
    
    1,306,799Proceeds on disposal of investments
    
    
    
    
    
    
    
    
    
    
    
    510
    
    
    
    14,569Purchase of property, plant and equipment of
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (128,214
    )Proceeds on sale of property, plant and equipment
of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,785Purchase of intangibles
    
    
    
    
    
    
    (33
    )
    
    
    
    
    
    
    
    (20
    )Changes in non-cash working capital balances
    
    (Note 19)
    
    
    (13,119
    )
    
    
    
    7,551
    
    
    
    (2,912
    )(191,402
    )
    
    
    
    (234,723
    )
    
    
    1,037,529Financing:Distributions paid
    
    (Note 6)
    
    
    (249,000
    )
    
    
    
    (444,651
    )
    
    
    (33,875
    )Repayment of long-term debt
    
    
    
    
    
    
    (99,700
    )
    
    
    
    (204,910
    )
    
    
    (703,970
    )Increase in long-term debt
    
    
    
    
    
    
    78,646
    
    
    
    
    248,338
    
    
    
    96,826Issuance of Trust units
    
    
    
    
    
    
    
    
    
    
    
    9,896
    
    
    
    Issuance of Trust units on exercise of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,263Issuance of Trust units on purchase of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,504Distribution of disposal proceeds
    
    (Note 24)
    
    
    
    
    
    
    
    
    
    
    
    (844,334
    )Cash buy-out of employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,147
    )Repurchase of common shares of dissenting shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,299
    )Issuance of common shares on exercise of options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,930Changes in non-cash working capital balances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,060Change in bank indebtedness
    
    
    
    
    
    
    (22,659
    )
    
    
    
    16,306
    
    
    
    20,468(292,713
    )
    
    
    
    (375,021
    )
    
    
    (1,462,574
    )Decrease in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (122,012
    )Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    122,012Cash and cash equivalents, end of year
    
    
    
    
    
    $
    
    
    
    
    $
    
    
    
    $
    
 See accompanying notes to consolidated financial statements.




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Tabular amounts are stated in thousands of Canadian dollars except unit/share numbers and per
unit/share amounts)
 NOTE 1. DESCRIPTION OF BUSINESS
     NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
 (a) Basis of presentation
   (b) Principles of consolidation
   (c) Cash and cash equivalents
  (d) Inventory




---



##### 



(e) Property, plant and equipment
   Expected life
    
    Salvage value
    
    Basis of depreciationDrilling rig equipment
    
    5,000 utilization days
    
    20%
    
    unit-of-productionDrill pipe and drill collars
    
    1,500 operating days
    
    
    
    unit-of-productionService rig equipment
    
    24,000 service hours
    
        20%

    
    unit-of-productionDrilling rig spare equipment
    
    15 years
    
        

    
    straight-lineService rig spare equipment
    
    10 years
    
        

    
    straight-lineRental equipment
    
    10 to 15 years
    
    
    
    straight-lineOther equipment
    
    3 to 10 years
    
    
    
    straight-lineLight duty vehicles
    
    4 years
    
    
    
    straight-lineHeavy duty vehicles
    
    7 to 10 years
    
    
    
    straight-lineBuildings
    
    10 to 20 years
    
    
    
    straight-line
 (f) Intangibles
  (g) Goodwill
    (h) Long-lived assets
  (i) Income taxes




---



##### 



(j) Revenue recognition
  (k) Employee benefit plans
   (l) Long-term incentive plan
  (m) Foreign currency translation
   (n) Unit-based compensation plans




---



##### 



(o) Stock-based compensation plans
  (p) Exchangeable LP units
  (q) Per unit amounts
  NOTE 3. CHANGES IN ACCOUNTING POLICIES
 (a) 2007 changes
   
    
    Cash and cash equivalents are classified as held for trading and any period change in fair
value is recorded through net earnings;
    
    Accounts receivable are classified as loans and receivables. After their initial fair value
measurement, they are measured at amortized cost using the effective interest rate method. For
the Trust, the measured amount generally corresponds to historical cost; and
    
    Accounts payable and accrued liabilities, bank indebtedness, distributions payable and
long-term debt are classified as other financial liabilities. After their initial fair value
measurement, they are measured at amortized cost using the effective interest rate method. For
the Trust, the measured amount generally corresponds to historical cost.
  (b) Future accounting pronouncements




---



##### 



NOTE 4. PROPERTY, PLANT AND EQUIPMENT
 Accumulated
    
    
    Net Book2007
    
    Cost
    
    
    Depreciation
    
    
    ValueRig equipment
    
    $
    1,464,145
    
    
    $
    485,822
    
    
    $
    978,323Rental equipment
    
    
    95,435
    
    
    
    45,917
    
    
    
    49,518Other equipment
    
    
    97,397
    
    
    
    69,483
    
    
    
    27,914Vehicles
    
    
    76,387
    
    
    
    27,892
    
    
    
    48,495Buildings
    
    
    30,614
    
    
    
    11,494
    
    
    
    19,120Assets under construction
    
    
    77,096
    
    
    
    
    
    
    
    77,096Land
    
    
    10,121
    
    
    
    
    
    
    
    10,121$
    1,851,195
    
    
    $
    640,608
    
    
    $
    1,210,587
 Accumulated
    
    
    Net Book2006
    
    Cost
    
    
    Depreciation
    
    
    ValueRig equipment
    
    $
    1,294,289
    
    
    $
    434,491
    
    
    $
    859,798Rental equipment
    
    
    94,184
    
    
    
    40,658
    
    
    
    53,526Other equipment
    
    
    95,137
    
    
    
    61,317
    
    
    
    33,820Vehicles
    
    
    78,675
    
    
    
    24,461
    
    
    
    54,214Buildings
    
    
    29,583
    
    
    
    9,673
    
    
    
    19,910Assets under construction
    
    
    76,239
    
    
    
    
    
    
    
    76,239Land
    
    
    10,110
    
    
    
    
    
    
    
    10,110$
    1,678,217
    
    
    $
    570,600
    
    
    $
    1,107,617
  NOTE 5. BANK INDEBTEDNESS
  NOTE 6. DISTRIBUTIONS




---



##### 



2007
    
    
    
    2006
    
    
    2005Declared
    
    $
    276,667
    
    
    
    $
    471,524
    
    
    $
    70,510Paid
    
    $
    249,000
    
    
    $
    444,651
    
    
    $
    33,875Payable in cash at December 31
    
    $
    36,470
    
    
    $
    38,985
    
    
    $
    36,635Payable in units at December 31
    
    $
    30,182
    
    
    $
    24,523
    
    
    $
    
  NOTE 7. LONG-TERM DEBT
 Extendible revolving unsecured facility:
  Unsecured debentures and notes:
  NOTE 8. INCOME TAXES
  2007
    
    
    
    2006
    
    
    2005Earnings from continuing operations before income taxes
    
    $
    349,033
    
    
    
    $
    587,658
    
    
    $
    293,231Federal and provincial statutory rates
    
    
    33%
    
    
    
    
    33%
    
    
    
    34%Tax at statutory rates
    
    $
    115,181
    
    
    
    $
    193,927
    
    
    $
    99,699Adjusted for the effect of:Non-deductible expenses
    
    
    1,080
    
    
    
    
    297
    
    
    
    2,795Non-deductible stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    3,216Income to be distributed to unitholders,
not subject to tax in the Trust
    
    
    (91,013
    )
    
    
    
    (155,354
    )
    
    
    (23,980
    )Utilization of losses and surcharge credits
    
    
    
    
    
    
    
    
    
    
    
    (10,550
    )Other
    
    
    3,426
    
    
    
    
    (2,896
    )
    
    
    1,203Income tax expense before tax rate reductions
    
    
    28,674
    
    
    
    
    35,974
    
    
    
    72,383Reduction of future income tax balances due to
enacted tax rate reductions
    
    
    (22,461
    )
    
    
    
    (20,828
    )
    
    
    Income tax expense
    
    $
    6,213
    
    
    
    $
    15,146
    
    
    $
    72,383Effective income tax rate before enacted tax rate reductions
    
    
    8%
    
    
    
    
    6%
    
    
    
    25%




---



##### 



2007
    
    
    
    2006Future income tax liability:Property, plant and equipment and intangibles
    
    $
    209,772
    
    
    
    $
    213,281Future income tax assets:Bond redemption premium
    
    
    9,185
    
    
    
    
    13,314Losses
    
    
    9,128
    
    
    
    
    9,879Share issue costs
    
    
    817
    
    
    
    
    1,966Long-term incentive plan
    
    
    5,743
    
    
    
    
    10,614Accrued liabilities
    
    
    3,266
    
    
    
    
    2,93728,139
    
    
    
    
    38,710Net future income tax liability
    
    $
    181,633
    
    
    
    $
    174,571
  NOTE 9. UNITHOLDERS CAPITAL
 (a) Authorized
     unlimited number of voting Trust units
 unlimited number of voting
exchangeable LP units
 (b) Unitholders capital
 Trust units
    
    Number
    
    
    AmountBalance, November 7, 2005
    
    
    
    
    
    $
    Issued pursuant to the Plan
    
    
    122,512,799
    
    
    
    1,339,646Options exercised  cash consideration
    
    
    1,676,616
    
    
    
    8,263 reclassification from contributed surplus
    
    
    
    
    
    
    12,342Issued for cash
    
    
    163,506
    
    
    
    5,504Balance, December 31, 2005
    
    
    124,352,921
    
    
    
    1,365,755Issued pursuant to distribution reinvestment plan (Note 6)
    
    
    296,621
    
    
    
    9,896Issued on retraction of exchangeable LP units
    
    
    886,787
    
    
    
    9,697Issued and consolidated pursuant to special distribution (Note 6)
    
    
    
    
    
    
    24,480Balance, December 31, 2006
    
    
    125,536,329
    
    
    
    1,409,828Issued on retraction of exchangeable LP units
    
    
    51,590
    
    
    
    574Issued and consolidated pursuant to special distribution (Note 6)
    
    
    
    
    
    
    30,141Balance, December 31, 2007
    
    
    125,587,919
    
    
    $
    1,440,543




---



##### 



Exchangeable LP units
    
    Number
    
    
    AmountBalance, November 7, 2005
    
    
    
    
    
    $
    Issued pursuant to the Plan
    
    
    1,108,382
    
    
    
    12,120Balance, December 31, 2005
    
    
    1,108,382
    
    
    
    12,120Redeemed on retraction of exchangeable LP units
    
    
    (886,787
    )
    
    
    (9,697
    )Issued and consolidated pursuant to special distribution (Note 6)
    
    
    
    
    
    
    43Balance, December 31, 2006
    
    
    221,595
    
    
    
    2,466Redeemed on retraction of exchangeable LP units
    
    
    (51,590
    )
    
    
    (574
    )Issued and consolidated pursuant to special distribution (Note 6)
    
    
    
    
    
    
    41Balance, December 31, 2007
    
    
    170,005
    
    
    $
    1,933
  2007
    
    
    
    2006Summary as at December 31,
    
    Number
    
    
    Amount
    
    
    
    Number
    
    
    AmountTrust units
    
    
    125,587,919
    
    
    $
    1,440,543
    
    
    
    
    125,536,329
    
    
    $
    1,409,828Exchangeable LP units
    
    
    170,005
    
    
    
    1,933
    
    
    
    
    221,595
    
    
    
    2,466Unitholders capital
    
    
    125,757,924
    
    
    $
    1,442,476
    
    
    
    
    125,757,924
    
    
    $
    1,412,294(c) Contributed surplusBalance, December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Unit based compensation expense (Note 10(c))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307Balance, December 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    307
 NOTE 10. UNIT BASED COMPENSATION PLANS
 (a) Officers
and Employees
   (b)
Executive
  (c)
Non-management directors




---



##### 



DeferredTrust UnitsOutstandingBalance, December 31, 2006
    
    
    Granted
    
    
    17,855Issued as a result of distributions
    
    
    425Balance, December 31, 2007
    
    
    18,280
  NOTE 11. EMPLOYEE BENEFIT PLANS
  (a) Defined contribution plan
  (b) Retirement allowance
  NOTE 12. COMMITMENTS
  2008
    
    $
    7,7542009
    
    
    6,3292010
    
    
    5,0782011
    
    
    3,4632012
    
    
    16
  Continuing
    
    
    DiscontinuedOperations
    
    
    Operations
    
    
    Total2007
    
    $
    3,838
    
    
    $
    
    
    
    $
    3,8382006
    
    
    4,189
    
    
    
    
    
    
    
    4,1892005
    
    
    3,836
    
    
    
    11,983
    
    
    
    15,819
 NOTE 13. PER UNIT AMOUNTS
  (Stated in thousands)
    
    2007
    
    
    
    2006
    
    
    2005Weighted average units outstanding  basic
    
    
    125,758
    
    
    
    
    125,545
    
    
    
    123,304Effect of stock options and other equity
compensation plans
    
    
    2
    
    
    
    
    
    
    
    
    2,108Weighted average units outstanding  diluted
    
    
    125,760
    
    
    
    
    125,545
    
    
    
    125,412




---



##### 



NOTE 14. SIGNIFICANT CUSTOMERS
  NOTE 15. BUSINESS ACQUISITIONS
   Net assets acquired at assigned values:Working
capital (1)
    
    $
    207Property, plant and equipment
    
    
    3,168Goodwill (no tax basis)
    
    
    13,922Long-term debt
    
    
    (614
    )Future income taxes
    
    
    (212
    )$
    16,471Consideration:Cash
    
    $
    16,471
  NOTE 16. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  (a)
Income taxes
   Reconciliation of unrecognized tax benefits
 Year ended December 31,
    
    2007Unrecognized tax benefits, beginning of year
    
    $
    40,047Additions:Prior years tax positions
    
    
    5,770Reductions:Prior years tax positions
    
    
    (1,410
    )Unrecognized tax benefits, end of year
    
    $
    44,407




---



##### 



(b) Equity settled unit based compensation
  (c) Stock-based compensation
    (d) Redemption of Trust units




---



##### 



(e) Recently issued accounting pronouncements
      Consolidated Statements of Earnings
 Years ended December 31,
    
    2007
    
    
    
    2006
    
    
    2005Earnings from continuing operations under Canadian GAAP
    
    $
    342,820
    
    
    
    $
    572,512
    
    
    $
    220,848Adjustments under U.S. GAAP:Equity-based compensation expense
    
    
    35
    
    
    
    
    
    
    
    
    11,229Cash buy-out of options
    
    
    
    
    
    
    
    
    
    
    
    (22,119
    )Intrinsic value recognized on options exercised and/or repriced
    
    
    
    
    
    
    
    
    
    
    
    (2,270
    )Earnings from continuing operations under U.S. GAAP
    
    
    342,855
    
    
    
    
    572,512
    
    
    
    207,688Earnings from discontinued operations under Canadian GAAP
    
    
    2,956
    
    
    
    
    7,077
    
    
    
    1,409,715Adjustments under U.S. GAAP:Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    10,109Cash buy-out of options
    
    
    
    
    
    
    
    
    
    
    
    (19,968
    )Intrinsic value recognized on options exercised and/or repriced
    
    
    
    
    
    
    
    
    
    
    
    (11,796
    )Earnings from discontinued operations under U.S. GAAP
    
    
    2,956
    
    
    
    
    7,077
    
    
    
    1,388,060Net earnings and comprehensive income under U.S. GAAP
    
    $
    345,811
    
    
    
    $
    579,589
    
    
    $
    1,595,748Earnings from continuing operations per unit under U.S. GAAP:Basic
    
    $
    2.73
    
    
    
    $
    4.56
    
    
    $
    1.68Diluted
    
    $
    2.73
    
    
    
    $
    4.56
    
    
    $
    1.66Earnings per unit under U.S. GAAP:Basic
    
    $
    2.75
    
    
    
    $
    4.62
    
    
    $
    12.94Diluted
    
    $
    2.75
    
    
    
    $
    4.62
    
    
    $
    12.72




---



##### 



Consolidated Statements of Retained Earnings (Deficit)
 Years ended December 31,
    
    2007
    
    
    
    2006
    
    
    2005Retained earnings (deficit) under U.S. GAAP, beginning
of year
    
    $
    (1,873,490
    )
    
    
    $
    (3,167,045
    )
    
    $
    1,133,030Net earnings under U.S. GAAP
    
    
    345,811
    
    
    
    
    579,589
    
    
    
    1,595,748Distributions declared
    
    
    (276,667
    )
    
    
    
    (471,524
    )
    
    
    (70,510
    )Distribution of disposal proceeds
    
    
    
    
    
    
    
    
    
    
    
    (2,851,784
    )Repurchase of common shares of dissenting shareholders
    
    
    
    
    
    
    
    
    
    
    
    (34,364
    )Opening temporary equity on conversion to an income trust
    
    
    
    
    
    
    
    
    
    
    
    (2,560,709
    )Change in redemption value of temporary equity
    
    
    1,453,448
    
    
    
    
    1,185,490
    
    
    
    (378,456
    )Deficit under U.S. GAAP, end of year
    
    $
    (350,898
    )
    
    
    $
    (1,873,490
    )
    
    $
    (3,167,045
    )
 Consolidated Balance Sheets
 2007
    
    
    
    2006As at December 31,
    
    As reported
    
    
    U.S. GAAP
    
    
    
    As reported
    
    
    U.S. GAAPCurrent assets
    
    $
    271,823
    
    
    $
    271,823
    
    
    
    $
    372,445
    
    
    $
    372,445Property, plant and equipment
    
    
    1,210,587
    
    
    
    1,210,587
    
    
    
    
    1,107,617
    
    
    
    1,107,617Intangibles
    
    
    318
    
    
    
    318
    
    
    
    
    375
    
    
    
    375Goodwill
    
    
    280,749
    
    
    
    343,778
    
    
    
    
    280,749
    
    
    
    343,778$
    1,763,477
    
    
    $
    1,826,506
    
    
    
    $
    1,761,186
    
    
    $
    1,824,215Current liabilities
    
    $
    131,449
    
    
    $
    140,117
    
    
    
    $
    205,961
    
    
    $
    205,961Long-term incentive plan payable
    
    
    13,896
    
    
    
    13,896
    
    
    
    
    22,699
    
    
    
    22,699Long-term debt
    
    
    119,826
    
    
    
    119,826
    
    
    
    
    140,880
    
    
    
    140,880Future income taxes
    
    
    181,633
    
    
    
    137,226
    
    
    
    
    174,571
    
    
    
    174,571Other long-term liabilities
    
    
    
    
    
    
    36,011
    
    
    
    
    
    
    
    
    Temporary equity
    
    
    
    
    
    
    1,730,328
    
    
    
    
    
    
    
    
    3,153,594Unitholders capital
    
    
    1,442,476
    
    
    
    
    
    
    
    
    1,412,294
    
    
    
    Contributed surplus
    
    
    307
    
    
    
    
    
    
    
    
    
    
    
    
    Deficit
    
    
    (126,110
    )
    
    
    (350,898
    )
    
    
    
    (195,219
    )
    
    
    (1,873,490
    )$
    1,763,477
    
    
    $
    1,826,506
    
    
    
    $
    1,761,186
    
    
    $
    1,824,215
 NOTE 17. SEGMENTED INFORMATION
  Contract
    
    
    Completion andDrilling
    
    
    Production
    
    
    Corporate
    
    
    Inter-segment2007
    
    Services
    
    
    Services
    
    
    and Other
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    694,340
    
    
    $
    327,471
    
    
    $
    
    
    
    $
    (12,610
    )
    
    $
    1,009,201Operating earnings
    
    
    284,754
    
    
    
    100,596
    
    
    
    (28,999
    )
    
    
    
    
    
    
    356,351Depreciation and amortization
    
    
    43,120
    
    
    
    31,421
    
    
    
    3,785
    
    
    
    
    
    
    
    78,326Total assets
    
    
    1,282,865
    
    
    
    457,587
    
    
    
    23,025
    
    
    
    
    
    
    
    1,763,477Goodwill
    
    
    172,440
    
    
    
    108,309
    
    
    
    
    
    
    
    
    
    
    
    280,749Capital expenditures
    
    
    159,004
    
    
    
    26,772
    
    
    
    1,230
    
    
    
    
    
    
    
    187,006




---



##### 



Contract
    
    
    Completion andDrilling
    
    
    Production
    
    
    Corporate
    
    
    Inter-segment2006
    
    Services
    
    
    Services
    
    
    and Other
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    1,009,821
    
    
    $
    441,017
    
    
    $
    
    
    
    $
    (13,254
    )
    
    $
    1,437,584Operating earnings
    
    
    473,624
    
    
    
    163,119
    
    
    
    (41,464
    )
    
    
    
    
    
    
    595,279Depreciation and amortization
    
    
    38,573
    
    
    
    32,013
    
    
    
    2,648
    
    
    
    
    
    
    
    73,234Total assets
    
    
    1,198,284
    
    
    
    507,510
    
    
    
    55,392
    
    
    
    
    
    
    
    1,761,186Goodwill
    
    
    172,440
    
    
    
    108,309
    
    
    
    
    
    
    
    
    
    
    
    280,749Capital expenditures*
    
    
    220,397
    
    
    
    39,273
    
    
    
    3,360
    
    
    
    
    
    
    
    263,030
 *
    
    Excludes business acquisitions
 Contract
    
    
    Completion andDrilling
    
    
    Production
    
    
    Corporate
    
    
    Inter-segment2005
    
    Services
    
    
    Services
    
    
    and Other
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    916,221
    
    
    $
    369,667
    
    
    $
    
    
    
    $
    (16,709
    )
    
    $
    1,269,179Operating earnings
    
    
    404,385
    
    
    
    121,643
    
    
    
    (60,650
    )
    
    
    
    
    
    
    465,378Depreciation and amortization
    
    
    39,233
    
    
    
    27,402
    
    
    
    4,926
    
    
    
    
    
    
    
    71,561Total assets
    
    
    1,159,687
    
    
    
    486,701
    
    
    
    72,494
    
    
    
    
    
    
    
    1,718,882Goodwill
    
    
    172,440
    
    
    
    94,387
    
    
    
    
    
    
    
    
    
    
    
    266,827Capital expenditures*
    
    
    106,986
    
    
    
    34,576
    
    
    
    13,689
    
    
    
    
    
    
    
    155,251
 *
    
    Excludes business acquisitions
 NOTE 18. FINANCIAL INSTRUMENTS
 (a) Fair value
  (b) Credit risk
   (c) Interest rate risk
  (d) Foreign currency risk




---



##### 



NOTE 19. SUPPLEMENTAL INFORMATION
 2007
    
    
    
    2006
    
    
    2005Interest paid: continuing operations
    
    $
    7,870
    
    
    
    $
    8,929
    
    
    $
    43,232 discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    304$
    7,870
    
    
    
    $
    8,929
    
    
    $
    43,536Income taxes paid: continuing operations
    
    $
    4,307
    
    
    
    $
    207,160
    
    
    $
    91,496 discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    35,176$
    4,307
    
    
    
    $
    207,160
    
    
    $
    126,672Components of change in non-cash working
capital balances:Accounts receivable
    
    $
    98,055
    
    
    
    $
    148,046
    
    
    $
    (171,363
    )Inventory
    
    
    (182
    )
    
    
    
    (2,038
    )
    
    
    699Accounts payable and accrued liabilities
    
    
    (49,338
    )
    
    
    
    (4,736
    )
    
    
    13,871Income taxes
    
    
    2,749
    
    
    
    
    (172,634
    )
    
    
    149,906$
    51,284
    
    
    
    $
    (31,362
    )
    
    $
    (6,887
    )
  2007
    
    
    
    2006Trade
    
    $
    144,468
    
    
    
    $
    220,623Accrued trade
    
    
    96,869
    
    
    
    
    93,308Prepaids and other
    
    
    15,279
    
    
    
    
    40,740$
    256,616
    
    
    
    $
    354,671
  2007
    
    
    
    2006Accounts payable
    
    $
    36,742
    
    
    
    $
    60,650Accrued liabilities:Payroll
    
    
    28,527
    
    
    
    
    47,001Other
    
    
    15,595
    
    
    
    
    22,551$
    80,684
    
    
    
    $
    130,202
 NOTE 20. CONTINGENCIES




---



##### 



NOTE 21. GUARANTEES
  NOTE 22. RELATED PARTY TRANSACTIONS
  NOTE 23. REORGANIZATION INTO A TRUST
  Severance
    
    $
    12,600Legal, accounting, financial advisory services and other
    
    
    4,912$
    17,512
  (a) Common shares
  Number
    
    
    
    AmountBalance, December 31, 2004
    
    
    60,790,212
    
    
    
    $
    1,274,967Options exercised  cash consideration
    
    
    578,346
    
    
    
    
    24,516 reclassification from contributed surplus
    
    
    
    
    
    
    
    1,521Balance, May 18, 2005
    
    
    61,368,558
    
    
    
    
    1,301,004Issued on 2:1 stock split
    
    
    61,368,558
    
    
    
    
    Options exercised  cash consideration
    
    
    1,679,110
    
    
    
    
    49,414 reclassification from contributed surplus
    
    
    
    
    
    
    
    10,284Adjustment to number of shares outstanding
    
    
    21,960
    
    
    
    
    Cancellation of shares owned by dissenting
shareholders
    
    
    (817,005
    )
    
    
    
    (8,936
    )Balance, November 7, 2005, before
conversion to units
    
    
    123,621,181
    
    
    
    
    1,351,766Conversion to Trust units
    
    
    (122,512,799
    )
    
    
    
    (1,339,646
    )Conversion to exchangeable LP units
    
    
    (1,108,382
    )
    
    
    
    (12,120
    )Balance, November 7, 2005, after conversion
to units
    
    
    
    
    
    
    $
    




---



##### 



(b) Contributed surplus:
 Balance, December 31, 2004
    
    $
    26,024Stock-based compensation expense
    
    
    13,077Accelerated vesting of options on disposal of discontinued operations
    
    
    5,205Reclassification to common shares on exercise of options prior to
the Plan
    
    
    (11,805
    )Accelerated vesting of options pursuant to the Plan
    
    
    3,056Reclassification to Trust units on exercise of options
    
    
    (12,342
    )Reclassification to retained earnings on cash buy-out of options
    
    
    (23,215
    )Balance, December 31, 2005
    
    $
    
 (c) Equity incentive plans
     WeightedOptions
    
    
    
    Range of
    
    
    Average
    
    
    OptionsCommon Share Purchase Options
    
    Outstanding
    
    
    
    Exercise Price
    
    
    Exercise Price
    
    
    ExercisableOutstanding at December 31, 2004
    
    
    6,695,120
    
    
    
    $
    15.53  36.32
    
    
    $
    27.44
    
    
    
    2,580,302Granted
    
    
    696,200
    
    
    
    
    37.76  48.29
    
    
    
    41.42Exercised
    
    
    (2,835,802
    )
    
    
    
    15.53  48.29
    
    
    
    26.07Cancelled
    
    
    (141,650
    )
    
    
    
    15.53  31.87
    
    
    
    30.26Purchased
    
    
    (1,105,018
    )
    
    
    
    15.53  45.25
    
    
    
    31.30Exchanged for Trust unit purchase options
    
    
    (3,308,850
    )
    
    
    
    15.53  48.29
    
    
    
    30.14Outstanding at December 31, 2005
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    WeightedOptions
    
    
    
    Range of
    
    
    Average
    
    
    OptionsTrust Unit Purchase Options
    
    Outstanding
    
    
    
    Exercise Price
    
    
    Exercise Price
    
    
    ExercisableOutstanding at November 7, 2005
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    Granted in exchange for common share
purchase options pursuant to the Plan
    
    
    3,308,850
    
    
    
    nil  27.25
    
    
    9.16
    
    
    
    3,308,850Granted on repricing of common share options
    
    
    5,600
    
    
    
    nil
    
    
    nilExercised
    
    
    (1,676,616
    )
    
    
    nil  27.25
    
    
    4.93Purchased
    
    
    (1,637,834
    )
    
    
    nil  27.25
    
    
    13.46Outstanding at December 31, 2005
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    
    




---



##### 



NOTE 24. DISCONTINUED OPERATIONS
   2007
  2006
    2005




---



##### 



2007
    
    
    
    2006
    
    
    2005Revenue:Energy services
    
    $
    
    
    
    
    $
    
    
    
    $
    689,319International contract drilling
    
    
    
    
    
    
    
    
    
    
    
    204,987Industrial plant maintenance
    
    
    
    
    
    
    
    
    
    
    
    149,371$
    
    
    
    
    $
    
    
    
    $
    1,043,677Gain on disposal:Gain on disposal of United Diamond
    
    $
    
    
    
    
    $
    2,070
    
    
    $
    Gain on disposal of Energy services and
International contract drilling
    
    
    2,956
    
    
    
    
    962
    
    
    
    1,203,309Gain on disposal of Industrial plant
maintenance
    
    
    
    
    
    
    
    4,045
    
    
    
    132,0732,956
    
    
    
    
    7,077
    
    
    
    1,335,382Results of operations before income taxes:Energy services
    
    
    
    
    
    
    
    
    
    
    
    76,607International contract drilling
    
    
    
    
    
    
    
    
    
    
    
    41,171Industrial plant maintenance
    
    
    
    
    
    
    
    
    
    
    
    18,135Other
    
    
    
    
    
    
    
    
    
    
    
    (22,298
    )
    
    
    
    
    
    
    
    
    113,615Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    39,282Results of operations
    
    
    
    
    
    
    
    
    
    
    
    74,333Net earnings of discontinued operations
    
    $
    2,956
    
    
    
    $
    7,077
    
    
    $
    1,409,715
  2007
    
    
    
    2006
    
    
    2005Net earnings of discontinued operations
    
    $
    2,956
    
    
    
    $
    7,077
    
    
    $
    1,409,715Items not affecting cash:Gain on disposal of discontinued operations
    
    
    (2,956
    )
    
    
    
    (7,077
    )
    
    
    (1,335,382
    )Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    95,794Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    10,109Future income taxes
    
    
    
    
    
    
    
    
    
    
    
    (1,735
    )Unrealized foreign exchange loss on
long-term monetary items
    
    
    
    
    
    
    
    
    
    
    
    4,829Funds provided by discontinued operations
    
    $
    
    
    
    
    $
    
    
    
    $
    183,330Components of changes in non-cash working capital balances of discontinued operations:2007
    
    
    
    2006
    
    
    2005Accounts receivable
    
    $
    
    
    
    
    $
    
    
    
    $
    (60,912
    )Inventory
    
    
    
    
    
    
    
    
    
    
    
    (23,463
    )Accounts payable and accrued liabilities
    
    
    
    
    
    
    
    
    
    
    
    1,688Income taxes payable
    
    
    
    
    
    
    
    
    
    
    
    (3,623
    )$
    
    
    
    
    $
    
    
    
    $
    (86,310
    )




---



##### 



(a) Employee benefit plans
   (b) Foreign currency translation
    (c) Hedging relationships
   (d) Research and engineering




---



##### 



SUPPLEMENTAL INFORMATION
 UNIT TRADING SUMMARY  2007




---



##### 



CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (DEFICIT)
 Years ended December 31,(Stated in millions of Canadian dollars,except per unit/share amounts)
    
    2007
    
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Revenue
    
    $
    1,009.2
    
    
    
    $
    1,437.6
    
    
    $
    1,269.2
    
    
    $
    1,028.5
    
    
    $
    915.2Expenses:Operating
    
    
    516.1
    
    
    
    
    688.2
    
    
    
    641.8
    
    
    
    566.3
    
    
    
    544.2General and administrative
    
    
    56.0
    
    
    
    
    81.2
    
    
    
    76.4
    
    
    
    64.2
    
    
    
    42.7Depreciation and amortization
    
    
    78.3
    
    
    
    
    73.2
    
    
    
    71.6
    
    
    
    74.8
    
    
    
    78.1Foreign exchange
    
    
    2.4
    
    
    
    
    (0.3
    )
    
    
    (3.5
    )
    
    
    (8.1
    )
    
    
    (2.2
    )Reorganization costs
    
    
    
    
    
    
    
    
    
    
    
    17.5
    
    
    
    
    
    
    
    Operating earnings
    
    
    356.4
    
    
    
    
    595.3
    
    
    
    465.4
    
    
    
    331.3
    
    
    
    252.4Interest, net
    
    
    7.4
    
    
    
    
    8.0
    
    
    
    29.3
    
    
    
    46.3
    
    
    
    34.0Premium on redemption of bonds
    
    
    
    
    
    
    
    
    
    
    
    71.9
    
    
    
    
    
    
    
    Loss on disposal of
short-term investments
    
    
    
    
    
    
    
    
    
    
    
    71.0
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    (0.4
    )
    
    
    
    
    
    
    (4.9
    )
    
    
    (1.5
    )Earnings from continuing operations
before income taxes
    
    
    349.0
    
    
    
    
    587.7
    
    
    
    293.2
    
    
    
    289.9
    
    
    
    219.9Income taxes
    
    
    6.2
    
    
    
    
    15.2
    
    
    
    72.4
    
    
    
    101.8
    
    
    
    75.7Earnings from continuing operations
    
    
    342.8
    
    
    
    
    572.5
    
    
    
    220.8
    
    
    
    188.1
    
    
    
    144.2Discontinued operations, net of tax
    
    
    3.0
    
    
    
    
    7.1
    
    
    
    1,409.8
    
    
    
    59.3
    
    
    
    36.3Net earnings
    
    
    345.8
    
    
    
    
    579.6
    
    
    
    1,630.6
    
    
    
    247.4
    
    
    
    180.5Retained earnings (deficit),
beginning of year
    
    
    (195.2
    )
    
    
    
    (303.3
    )
    
    
    1,041.7
    
    
    
    794.3
    
    
    
    613.8Adjustment on cash purchase of
employee stock options, net of tax
    
    
    
    
    
    
    
    
    
    
    
    (42.1
    )
    
    
    
    
    
    
    Reclassification from contributed
surplus on cash buy-out of
employee stock options
    
    
    
    
    
    
    
    
    
    
    
    23.2
    
    
    
    
    
    
    
    Distribution of disposal proceeds
    
    
    
    
    
    
    
    
    
    
    
    (2,851.8
    )
    
    
    
    
    
    
    Repurchase of common shares of
dissenting shareholders
    
    
    
    
    
    
    
    
    
    
    
    (34.4
    )
    
    
    
    
    
    
    Distributions declared
    
    
    (276.7
    )
    
    
    
    (471.5
    )
    
    
    (70.5
    )
    
    
    
    
    
    
    Retained earnings (deficit), end of year
    
    $
    (126.1
    )
    
    
    $
    (195.2
    )
    
    $
    (303.3
    )
    
    $
    1,041.7
    
    
    $
    794.3Earnings per unit/share from
continuing operations:Basic
    
    $
    2.73
    
    
    
    $
    4.56
    
    
    $
    1.79
    
    
    $
    1.63
    
    
    $
    1.33Diluted
    
    $
    2.73
    
    
    
    $
    4.56
    
    
    $
    1.76
    
    
    $
    1.61
    
    
    $
    1.31Earnings per unit/share:Basic
    
    $
    2.75
    
    
    
    $
    4.62
    
    
    $
    13.22
    
    
    $
    2.14
    
    
    $
    1.66Diluted
    
    $
    2.75
    
    
    
    $
    4.62
    
    
    $
    13.00
    
    
    $
    2.11
    
    
    $
    1.63




---



##### 



ADDITIONAL SELECTED FINANCIAL INFORMATION
 Years ended December 31,(Stated in millions of Canadian dollars,except per unit/share amounts)
    
    2007
    
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Return on
sales  % (1)
    
    
    34.0
    
    
    
    
    39.8
    
    
    
    17.4
    
    
    
    18.3
    
    
    
    15.8Return on
assets  %
(2)
    
    
    19.9
    
    
    
    
    33.6
    
    
    
    43.3
    
    
    
    7.3
    
    
    
    6.3Return on
equity  %
(3)
    
    
    27.0
    
    
    
    
    49.4
    
    
    
    66.1
    
    
    
    12.3
    
    
    
    11.0Working capital
    
    $
    140.4
    
    
    
    $
    166.5
    
    
    $
    152.8
    
    
    $
    557.3
    
    
    $
    249.0Current ratio
    
    
    2.1
    
    
    
    
    1.81
    
    
    
    1.43
    
    
    
    2.47
    
    
    
    1.57PP&E and intangibles
    
    $
    1,210.9
    
    
    
    $
    1,108.0
    
    
    $
    944.4
    
    
    $
    898.1
    
    
    $
    887.7Total assets
    
    $
    1,763.5
    
    
    
    $
    1,761.2
    
    
    $
    1,718.9
    
    
    $
    3,852.0
    
    
    $
    2,932.0Long-term debt
    
    $
    119.8
    
    
    
    $
    140.9
    
    
    $
    96.8
    
    
    $
    718.9
    
    
    $
    399.4Unitholders equity
    
    $
    1,316.7
    
    
    
    $
    1,217.1
    
    
    $
    1,074.6
    
    
    $
    2,321.7
    
    
    $
    1,745.3Long-term debt to long-term debt
plus equity
    
    
    0.08
    
    
    
    
    0.10
    
    
    
    0.08
    
    
    
    0.24
    
    
    
    0.19Interest
coverage (4)
    
    
    48.7
    
    
    
    
    74.1
    
    
    
    15.9
    
    
    
    7.2
    
    
    
    7.4Net capital expenditures from
continuing operations excluding
business acquisitions
    
    $
    181.2
    
    
    
    $
    233.7
    
    
    $
    140.1
    
    
    $
    113.9
    
    
    $
    84.9EBITDA
(5)
    
    $
    434.7
    
    
    
    $
    668.5
    
    
    $
    536.9
    
    
    $
    406.1
    
    
    $
    330.6EBITDA  % of revenue
    
    
    43.1
    
    
    
    
    46.5
    
    
    
    42.3
    
    
    
    39.5
    
    
    
    36.1Operating earnings
    
    $
    356.4
    
    
    
    $
    595.3
    
    
    $
    465.4
    
    
    $
    331.3
    
    
    $
    252.4Operating earnings  % of revenue
    
    
    35.3
    
    
    
    
    41.4
    
    
    
    36.7
    
    
    
    32.2
    
    
    
    27.6Cash flow from continuing operations
    
    $
    484.1
    
    
    
    $
    609.7
    
    
    $
    206.0
    
    
    $
    286.4
    
    
    $
    200.9Cash flow from continuing operations
per unit/share
Basic
    
    $
    3.85
    
    
    
    $
    4.86
    
    
    $
    1.67
    
    
    $
    2.48
    
    
    $
    1.85Diluted
    
    $
    3.85
    
    
    
    $
    4.86
    
    
    $
    1.64
    
    
    $
    2.44
    
    
    $
    1.82Book value
per unit/share (6)
    
    $
    10.47
    
    
    
    $
    9.68
    
    
    $
    8.57
    
    
    $
    19.10
    
    
    $
    15.91Price
earnings ratio (7)
    
    
    5.49
    
    
    
    
    5.84
    
    
    
    2.90
    
    
    
    17.6
    
    
    
    17.1Basic weighted average units/shares
outstanding (000s)
    
    
    125,758
    
    
    
    
    125,545
    
    
    
    123,304
    
    
    
    115,654
    
    
    
    108,860
 (1)
    
    Return on sales was calculated by dividing earnings from continuing operations by total
revenues.(2)
    
    Return on assets was calculated by dividing net earnings by quarter average total assets.(3)
    
    Return on equity was calculated by dividing net earnings by quarter average total
unitholders equity.(4)
    
    Interest coverage was calculated by dividing operating earnings by net interest expense.(5)
    
    Earnings before net interest, taxes, depreciation, amortization, non-controlling interest,
premium on redemption of bonds, gain/loss on disposal of investments and discontinued operations.
EBITDA is not a recognized measure under Canadian GAAP. Management believes that in addition to
net earnings, EBITDA is a useful supplemental measure as it provides an indication of the results
generated by the Trusts principal business activities prior to consideration of how those
activities are financed or how the results are taxed in various jurisdictions and prior to the
impact of depreciation and amortization. Investors should be cautioned, however, that EBITDA
should not be construed as an alternative to net earnings determined in accordance with GAAP as
an indicator of Precisions performance. Precisions method of calculating EBITDA may differ from
other companies and, accordingly, EBITDA may not be comparable to measures used by other
companies.(6)
    
    Book value per unit/share was calculated by dividing unitholders equity by units/shares
outstanding.(7)
    
    Year end closing price divided by basic earnings per unit/share.




---



##### 



UNITHOLDER INFORMATION
 STOCK EXCHANGE LISTINGS
  VOTING RIGHTS
  TRUST UNIT TRADING PROFILE
 Toronto (TSX: PD.UN)
 New York (NYSE: PDS)
 ACCOUNT QUESTIONS
   
    
    Change of address
    
    Lost unit certificates
    
    Transfer of trust units to another person
    
    Estate settlement
 
 
 
  QUARTERLY UPDATES
  ONLINE INFORMATION
  PUBLISHED INFORMATION
  
 ESTIMATED INTERIM RELEASE DATES




---



##### 



UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
 A.
    
    Undertaking.The Registrant undertakes to make available, in person or by telephone, representatives to
respond to inquiries made by the Securities and Exchange Commission (the Commission)
staff, and to furnish promptly, when requested to do so by the Commission staff,
information relating to: the securities registered pursuant to Form 40-F; the securities
in relation to which the obligation to file an annual report on Form 40-F arises; or
transactions in said securities.B.
    
    Consent to Service of Process.The Registrant has previously filed a Form F-X in connection with the class of securities
in relation to which the obligation to file this report arises.Any change to the name or address of the agent for service of process of the Registrant
shall be communicated promptly to the Commission by an amendment to the Form F-X
referencing the file number of the relevant registration statement.
 SIGNATURES
 Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets
all of the requirements for filing on Form 40-F and has duly caused this annual report to
be signed on its behalf by the undersigned, thereunto duly authorized, on March 28, 2008.
 Precision Drilling Corporation, as agent for
and on behalf of Precision Drilling TrustBy:

/s/  Kevin A. NeveuName:
    Kevin A. NeveuTitle:
    Chief Executive Officer




---



##### 



Exhibit
    
    Description99.1
    
    Certification of Chief Executive Officer, pursuant to Rule
13a-14(a) or 15d-14 of the Securities Exchange Act of 193499.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
or 15d-14 of the Securities Exchange Act of 193499.3
    
    Certification of Chief Executive Officer, pursuant to 18 U.S.C. 135099.4
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. 135099.5
    
    Consent of KPMG LLP