U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 40-F
(Check One)

[_]  Registration statement pursuant to Section 12 of the Securities Exchange
     Act of 1934

                                       or

[X]  Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange
     Act of 1934

For the fiscal year ended December 31, 2003

Commission file number 1-14534

                         PRECISION DRILLING CORPORATION
             (Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S>                                    <C>                                   <C>
         ALBERTA, CANADA                            1381                           NOT APPLICABLE
(Province or other jurisdiction of      (Primary Standard Industrial              (I.R.S. Employer
  incorporation or organization)       Classification Code Number (if        Identification Number (if
                                                applicable))                        Applicable))
</TABLE>

           4200-150 6TH AVENUE, S.W., CALGARY, ALBERTA, CANADA T2P 3Y7
                                 (403) 716-4500
   (Address and Telephone Number of Registrant's Principal Executive Offices)

         CT CORPORATION SYSTEM, 811 DALLAS AVENUE, HOUSTON, TEXAS 77022
                                 (713) 658-9486
            (Name, Address (Including Zip Code) and Telephone Number
        (Including Area Code) of Agent For Service in the United States)

          Securities registered or to be registered pursuant to Section
                               12(b) of the Act.

      TITLE OF EACH CLASS             NAME OF EACH EXCHANGE ON WHICH REGISTERED
      -------------------             -----------------------------------------
         Common Shares                         New York Stock Exchange

              Securities registered or to be registered pursuant to
                           Section 12(g) of the Act.
                                      None

        Securities for which there is a reporting obligation pursuant to
                           Section 15(d) of the Act.
                                      None

For annual reports, indicate by check mark the information filed with this Form:

      [X] Annual Information Form       [X] Audited Annual Financial Statements

         Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by the
annual report: 54,845,678

         Indicate by check mark whether the registrant by filing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
(the "Exchange Act"). If "Yes" is marked, indicate the file number assigned to
the registrant in connection with such rule.

                              Yes [_]      No [X]

         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports); and (2) has been subject to such filing
requirements for the past 90 days.

                              Yes [X]      No [_]


                                       1
<PAGE>

The Annual Report on Form 40-F shall be incorporated by reference into each of
the registrant's Registration Statements on Form S-8 under the Securities Act of
1933: File Nos. 333-105648, 333-14284, 333-13432 and 333-11982.


                                       2
<PAGE>

PRINCIPAL DOCUMENTS

The following documents have been filed as part of this Annual Report on Form
40-F, beginning on the following page:

     Page 4        (a)     Annual Information Form for the fiscal year ended
                           December 31, 2003;

     Page 20       (b)     Management's Discussion and Analysis of Financial
                           Condition and Results of Operations for the fiscal
                           year ended December 31, 2003; and

     Page 39       (c)     Consolidated Financial Statements for the fiscal year
                           ended December 31, 2003 (NOTE 15 TO THE CONSOLIDATED
                           FINANCIAL STATEMENTS RELATES TO UNITED STATES
                           GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S.
                           GAAP)).


                                       3
<PAGE>


2003 PRECISION DRILLING CORPORATION RENEWAL ANNUAL INFORMATION FORM
DATED AS OF APRIL 26, 2004

Cautionary Statement on Forward-Looking Information                 Page       2
Corporate Structure of Precision Drilling Corporation               Page       3
     INCORPORATION INFORMATION                                      Page       3
     INTERCORPORATE RELATIONSHIPS                                   Page       3
General Development of the Business                                 Page       3
     THREE YEAR HISTORY                                             Page       3
     SIGNIFICANT ACQUISITIONS AND SIGNIFICANT DISPOSITIONS          Page       5
     TRENDS                                                         Page       6
Description of the Business of Precision                            Page       8
     DESCRIPTION OF BUSINESS SEGMENTS                               Page       8
     CONTRACT DRILLING                                              Page       9
         CANADIAN DRILLING                                          Page      10
         INTERNATIONAL DRILLING                                     Page      13
         CANADIAN WELL SERVICING                                    Page      14
     TECHNOLOGY SERVICES                                            Page      17
         WIRELINE                                                   Page      17
         DIRECTIONAL DRILLING                                       Page      18
         SEPARATION SERVICES                                        Page      20
         OTHER                                                      Page      21
     RENTAL AND PRODUCTION                                          Page      21
         RENTAL SERVICES                                            Page      22
         PRODUCTION SERVICES                                        Page      22
     EMPLOYEES                                                      Page      23
     LEGAL PROCEEDINGS                                              Page      23
Selected Consolidated Financial Information                         Page      23
     SUMMARY OF OPERATING RESULTS                                   Page      23
     DIVIDENDS                                                      Page      24
Management's Discussion and Analysis of Financial Condition
     and Results of Operations                                      Page      24
Market for Securities                                               Page      24
Directors and Officers                                              Page      25
Additional Information                                              Page      26
     EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES               Page      26
     REQUEST FOR ADDITIONAL INFORMATION                             Page      27


                                       4
<PAGE>

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

     Certain statements contained in this Renewal Annual Information Form (AIF)
and under the heading "Management's Discussion and Analysis" on pages 43 to 75
of the 2003 Annual Report and in other sections of such Annual Report, including
statements which may contain words such as "anticipate", "could", "expect",
"seek", "may", "intend", "will", "believe" and similar expressions, statements
that are based on current expectations and estimates about the markets in which
the Corporation operates and statements of the Corporation's belief, intentions
and expectations about development, results and events which will or may occur
in the future constitute "forward-looking statements" within the meaning of the
"safe harbor" provision of the United States Private Securities Litigation
Reform Act of 1995, and are based on certain assumptions and analysis made by
the Corporation derived from its experience and perceptions. Forward-looking
statements in this AIF include, but are not limited to, statements with respect
to future capital expenditures, including the amount and nature thereof; oil and
gas prices and demand; other development trends of the oil and gas industry;
business strategy; expansion and growth of the Corporation's business and
operations, including the Corporation's market share and position in the
domestic and international drilling and oilfield service markets; and other such
matters. In addition, other written or oral statements which constitute
forward-looking statements may be made from time to time by and on behalf of the
Corporation. Such forward-looking statements are subject to important risks,
uncertainties, and assumptions which are difficult to predict which affect the
Corporation's operations, including: the impact of general economic conditions
in Canada, the U.S. and in other countries in which the Corporation currently
does business; industry conditions, including the adoption of new environmental
and other laws and regulations and changes in how they are interpreted and
enforced; volatility of oil and gas prices; oil and gas product supply and
demand; risks inherent in the Corporation's ability to generate sufficient cash
flow from operations to meet its current and future obligations; increased
competition; the lack of availability of qualified personnel or management;
labor unrest; fluctuation in foreign exchange or interest rates; stock market
volatility; opportunities available to or pursued by the Corporation and other
factors, many of which are beyond the control of the Corporation. The
Corporation's actual results, performance or achievements could differ
materially from those expressed in, or implied by, these forward-looking
statements and, accordingly, no assurance can be given that any of the events
anticipated by the forward-looking statements will transpire or occur, or if any
of them do so, what benefits, including the amount of proceeds, the Corporation
will derive therefrom. The Corporation disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

CORPORATE STRUCTURE OF PRECISION DRILLING CORPORATION

INCORPORATION INFORMATION

     Precision Drilling Corporation (the Corporation or Precision) was
originally incorporated on March 25, 1985, amalgamated with two wholly owned
subsidiary companies on January 1, 2000; on January 1, 2002 was amalgamated with
one wholly owned subsidiary and on January 1, 2004 was amalgamated with one
wholly owned subsidiary, all pursuant to Articles of Amalgamation and other
provisions of the Business Corporations Act of Alberta. The Corporation
maintains its head office and principal place of business at 4200, 150 - 6th
Avenue S.W., Calgary, Alberta T2P 3Y7. The telephone number is (403) 716-4500,
the facsimile number is (403) 264-0251 and the website address is
www.precisiondrilling.com.

INTERCORPORATE RELATIONSHIPS

     The following table sets forth the names of the Material Subsidiaries
(which includes major Limited Partnerships) of Precision, the percentage of
shares (or interest) owned by it and the jurisdiction of incorporation or
continuance of each such subsidiary (or partnership) as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                                      Jurisdiction of
Name of Subsidiary or Partnership                       Percentage Owned        Incorporation or Continuance
------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                     <C>
Precision Limited Partnership                                100%                          Alberta
Precision Drilling Technology Services Group Inc.            100%                          Alberta
CEDA International Corporation                               100%                          Alberta
PD International Services Inc.                               100%                          Alberta
PD Holdings Mexicana, S. de R.L. de C.V.                     100%                          Mexico
PD Holdings (USA), L.P.                                      100%
Delaware
Computalog Holdings, Inc.                                    100%                          Nevada
Precision Drilling Holdings, Inc.                            100%
Delaware
------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

GENERAL DEVELOPMENT OF THE BUSINESS

THREE YEAR HISTORY

     Precision provides oilfield and industrial services to customers in Canada,
the U.S., Mexico and internationally. For more than the last three years, the
Corporation has been the leading provider, in Canada, of land drilling services
to oil and gas exploration and production companies, based on the number of
wells and metres drilled. Additionally, the Corporation provided the following
during 2003: well service rigs and hydraulic well assist snubbing units;
procurement and distribution of oilfield supplies; camp and catering services;
manufacture, sale and repair of drilling equipment; open hole logging, cased
hole logging and completion services, slickline services, directional drilling
services; measurement-while-drilling (MWD) and logging-while-drilling (LWD)
services; the manufacture, rental and sale of polycrystalline diamond compact
(PDC) drill bits; controlled pressure drilling services (CPD) and well testing
services; the design, manufacture, rental and sale of downhole completion
products; pressure pumping and coiled tubing services; rental of mobile
combination office and industrial housing; rental of surface oilfield equipment
for drilling, completion and production activities; and also provided industrial
maintenance and turnaround services, including specialized equipment and labour
services, to downstream oil and gas, petrochemical and other process industry
customers.

     During the fourth quarter 2003, two product lines within the Technology
Services segment, namely pressure pumping services and the rental and sale of
downhole completion products, were identified as being not core to the segment's
ongoing growth initiatives. As a result a program was initiated to dispose of
these businesses. Results of operations of these businesses were classified as
results of discontinued operations at December 31, 2003.

     Effective February 12, 2004, Precision sold the operating assets of Fleet
Cementers, Inc. (Fleet), the wholly owned subsidiary that carried on the
pressure pumping business. Effective as of March 29, 2004, an agreement was
entered into to sell the assets of Polar Completions, representing the rental
and sale of downhole completion products business of the Corporation.

      The Corporation has grown primarily through a series of acquisitions of
related businesses as well as reinvestment in its core business to become the
largest Canadian integrated oilfield and industrial service contractor. Over the
past three fiscal years, the Corporation has reinvested substantially all of its
cash flow from operations to grow its service and product offerings. In the year
ended December 31, 2003, 18% of the Corporation's revenue was generated by
operations outside of Canada and the U.S.

     Since January 1, 2001, the Corporation has made a number of acquisitions
and dispositions as follows:

     In January 2001, the Corporation acquired 100% of the shares of BecField
Drilling Services Ltd. (BecField). BecField, with established operations in
Europe and the Middle East, provided directional drilling and MWD services
through its technical field and support personnel to both onshore and offshore
oil and gas companies. It also owned an interest in Smart Stabilizer Systems
Limited which was established to develop a new generation rotary steerable
device used to steer a drill bit down hole.

     Also in January 2001, Precision Drilling Technology Services Group Inc.
(formerly Computalog Ltd.), acquired the shares it did not own of Computalog
Europe GmbH. Thereafter, Computalog Europe GmbH and BecField Drilling Services
GmbH merged and subsequently became Precision Drilling Technology Services GmbH.
Precision Drilling Technology Services GmbH, a 100% owned subsidiary, supplies
wireline, directional drilling, MWD, LWD, CPD, well testing services and PDC
drilling bits throughout Europe.

     In July 2001, Computalog U.S.A., Inc. acquired all of the issued and
outstanding shares of Premium Pump Services, Inc. (Premium). Premium provided
pressure pumping services, including cementing, fracturing and other stimulation
services in Texas. In December 2001, Premium was merged with Fleet, with the
operations of both entities being carried on under Fleet.

     In December 2001, Precision's wholly owned subsidiary, BecField, acquired
the remaining outstanding shares it did not own of Smart Stabilizer Systems
Limited and has since taken steps to complete the commercialization of the
rotary steerable device.

     On March 6, 2003 (but effective January 1, 2003), Precision Drilling
Corporation sold 100% of the shares of Energy Industries Inc.

     In May 2003 a wholly owned subsidiary of Precision sold its 50% interest in
Equipment Rentals General Partnership and Oil Drilling & Exploration (Argentina)
SA., both of which pertained to two rigs in Argentina.

     On September 30, 2003, a wholly owned subsidiary of Precision sold its 49%
interest in Computalog SA (Argentina) to an unrelated third party.

     Since January 1, 2001, the Corporation has undertaken a number of internal
reorganization transactions as follows:

     In August 2001, Precision Drilling Limited Partnership was dissolved into
Precision Limited Partnership (PLP), with the drilling operations continuing to
operate as Precision Drilling (PD) and the well servicing operations

<PAGE>


continuing to operate as Precision Well Servicing (PWS), and the hydraulic rig
assist snubbing units continuing to operate as Live Well Service (Live), all as
divisions of PLP.

     In November 2001, the Four Lakes Precision Drilling Limited Partnership
(FLPD) was formed as a 50% limited partnership with Alberta Treaty Six First
Nations, to operate a jointly owned drilling rig, with a 100% owned subsidiary
of the Corporation as General Partner. FLPD has engaged PD to operate the rig
through an Operating Agreement.

     In December 2001, Computalog Ltd. changed its name to Precision Drilling
Technology Services Group Inc. (PDTSG).

     On January 1, 2002, Precision was amalgamated with a wholly owned
subsidiary to form and continue as Precision Drilling Corporation.

     On January 1, 2003, Precision Drilling Technology Services Group Inc.,
Plains Perforating Ltd., Polar Completions Engineering Inc. and Northland Energy
Corporation were amalgamated to form "new" Precision Drilling Technology
Services Group Inc.

     On April 8, 2003 Montero Oilfield Services Ltd. changed its name to
"Precision Rentals Ltd."

     On December 31, 2003, PD Holdings (USA), Inc. was converted from a Delaware
Corporation to a Delaware limited partnership, and now operates under the name
"PD Holdings (USA), L.P."

     On January 1, 2004, Precision was amalgamated with a wholly owned
subsidiary to continue as Precision Drilling Corporation.

SIGNIFICANT ACQUISITIONS AND SIGNIFICANT DISPOSITIONS

     There were no significant acquisitions or dispositions during 2003.

TRENDS

     As illustrated above, crude oil and natural gas prices have historically
been quite volatile. Oil prices, which during 2003 averaged US$31.10 per barrel
for West Texas Intermediate (WTI), are the result of political instability in
some OPEC member nations (Venezuela, Iraq and Nigeria) and from a generally
improving world economy with energy demand growth particularly strong in China
and Southeast Asia. Another important factor in the crude oil pricing equation,
and one that has seen a fundamental change from past pricing scenarios, is the
value of the U.S. dollar. Since oil prices are denominated in U.S. dollars
around the world, the devaluation of the U.S. dollar that has occurred over the
past year has implications for both the seller and buyer of the commodity. Oil
producing nations, with OPEC members taking the lead in controlling supplies and
prices, are motivated to see an increase in the U.S. dollar price of oil to
maintain their purchasing power in other currencies such as the Euro. From a
buyer's perspective, the devaluation of the U.S. dollar has made oil a cheaper
commodity for those who spend Euros and Japanese Yen, for instance, thus
supporting the increased demand.

     The supply and demand fundamentals that have brought commodity prices to
today's relatively high levels are not expected to change rapidly. Energy price
prognosticators have historically focused on the supply side of the equation
where geopolitical events can have a large impact on short-term supply and where
consensus was generally that there was an abundant supply to fill long-term
requirements. This view is now starting to be questioned by some pricing
analysts. The surplus crude oil production capacity of the Middle East is being
examined with suggestions that it is not as high as once thought. Similarly, the
ability to rapidly increase production of the vast crude oil reserves in the
former Soviet Union is being slowed by the recognition of the large amount of
infrastructure investment required to bring these reserves to market. Recent
world events have also brought security of supply issues to the top of the
energy agenda for many countries.

     North American natural gas prices are also being supported by strong
fundamentals. Demand has been increasing with recent economic growth while
supply from relatively mature producing basins is starting to decline. The near
record gas drilling activity in 2003 served only to slow the decline in
production reserves. High oil prices also served to support natural gas prices
as the economic benefit of switching between the two fuels is minimal. The
importing of liquefied natural gas into the North American market, once thought
to be the competitive product that would cause gas prices to decline, is now
viewed by many industry analysts as a requirement to fill the gap between demand
and conventional production capabilities. It is not anticipated that the price
of natural gas will experience sustained downward pressure from the supply side
of the pricing equation any time soon.

     Many analysts are now looking at the demand elements of energy pricing
economics. Commodity prices have risen over the last number of years in an
environment where the major economies of the world were generally in a period of
slow growth. This is changing as growth rates in the major industrialized
countries are beginning to recover. Of particular importance to the outlook for
the demand for energy is the emergence of countries such as China where economic
expansion is bringing new found purchasing power to a very large population. On
a per capita basis, these

<PAGE>


populations use energy at a fraction of the rate of other industrialized
nations. This should change as new products, such as automobiles and electric
appliances, are introduced to these markets which in turn should drive
exponential growth in energy demand.

DESCRIPTION OF THE BUSINESS OF PRECISION

DESCRIPTION OF BUSINESS SEGMENTS

     Precision's continuing operations are managed in three segments consisting
of Contract Drilling, Technology Services and Rental and Production. Contract
Drilling includes drilling rigs, service rigs, hydraulic well assist snubbing
units, camp and catering services, procurement and distribution of oilfield
supplies, and manufacture, sale and repair of drilling equipment. Technology
Services includes wireline logging services, slickline services, directional
drilling, measurement-while-drilling/logging-while-drilling (MWD/LWD) services,
controlled pressure drilling (CPD), well testing, and the design and manufacture
of PDC drill bits. Rental and Production includes oilfield equipment rental
services and industrial maintenance.

     Effective February 12, 2004, Precision sold the operating assets of Fleet,
the wholly owned subsidiary that carried on the pumping services for cementing,
fracturing and well stimulation, which business was carried on primarily in
Texas. Precision has initiated the process of disposing of Polar Completions
which carries on the design, manufacture, rental and sale of downhole completion
and production equipment business. A definitive agreement dated March 29, 2004
was entered into to sell the Polar Completions assets, and it is anticipated
that this transaction will close in early May 2004. Results of operations of
these businesses have been classified as results from discontinued operations.

     The Corporation's revenue by industry and geographic segments are
illustrated in thousands in the following table:

YEARS ENDED DECEMBER 31,                2003              2002             2001
--------------------------------------------------------------------------------
Contract Drilling                 $  992,824        $  770,147       $1,004,265
Technology Services                  714,385           603,088          614,152
Rental and Production                210,724           192,840          194,567
Corporate and other                       --             1,431            2,224
--------------------------------------------------------------------------------
Total Revenue                     $1,917,933        $1,567,506       $1,815,208
--------------------------------------------------------------------------------

YEARS ENDED DECEMBER 31,                                  2003             2002
                                                                           2001
--------------------------------------------------------------------------------
Canada                            $1,349,565        $1,022,489       $1,320,989
International                        568,368           545,017          494,219
--------------------------------------------------------------------------------
Total                             $1,917,933        $1,567,506       $1,815,208
--------------------------------------------------------------------------------

     The Corporation sells its services to oil and natural gas exploration and
production companies. Macro economic and geopolitical factors associated with
oil and natural gas supply and demand are the prime drivers for pricing and
profitability within the energy services industry. Generally, when commodity
prices are relatively high, demand for the Corporation's services is high, while
the opposite is true when commodity prices are low. The markets for oil and
natural gas are separate and distinct. Oil is a global commodity with a vast
distribution network. Natural gas is most economically transported in its
gaseous state via pipeline. Therefore, its market is dependent on pipeline
infrastructure and is subject to regional supply and demand factors. Recent
developments in the transportation of liquefied natural gas (LNG) in ocean going
tanker ships has introduced an element of globalization to the natural gas
market. However, the volume capability of the world's LNG infrastructure is not
expected to be large enough to influence pricing in North American markets for a
number of years. As illustrated earlier, crude oil and natural gas prices are
quite volatile, which accounts for much of the cyclical nature of the energy
service business. The energy service business cycles are muted somewhat in
non-North American markets where projects tend to be larger and more long term
thus less susceptible to short term commodity price fluctuations.

     The Corporation derived 70% of its revenue from the Canadian market in
2003. Energy service activity in Canada is subject to seasonal fluctuation. The
ability to move heavy equipment in the Canadian oil and natural gas fields is
dependent on weather conditions. As warm weather returns in the spring the
winter's frost comes out of the ground rendering many secondary roads incapable
of supporting the weight of heavy equipment until they have thoroughly dried
out. The duration of "spring breakup" has a direct impact on the Corporation's
activity levels. In addition, many exploration and production areas in northern
Canada are accessible only in winter months when the ground is frozen hard
enough to support equipment. The timing of freeze up and spring breakup affects
the ability to move equipment in and out of these areas. Equally, wet weather
can also defer commencement of drilling or servicing operations on any given day
or well location.


<PAGE>


CONTRACT DRILLING

     This segment consists of three main categories of operations; Canadian
Drilling, (which includes contract drilling support), International Drilling and
Canadian Well Servicing, (which includes Live's snubbing operations).

     Revenue generated by these operations is as follows:

<TABLE>
<CAPTION>
                                                      2003                       2002                         2001
-------------------------------------------------------------------------------------------------------------------------
Years ended December 31, (In thousands)        REVENUE     % OF          Revenue      % of             Revenue      % of
-------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>            <C>         <C>            <C>          <C>              <C>
Canadian Drilling                           $  654,572      66%        $ 474,051       61%         $   661,659       66%
International Drilling                         114,131      11%          105,108       14%             113,404       11%
Canadian Well Servicing                        224,121      23%          190,988       25%             229,202       23%
-------------------------------------------------------------------------------------------------------------------------
                                            $  992,824     100%        $ 770,147      100%         $ 1,004,265      100%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

CANADIAN DRILLING

     The Corporation owns and operates the largest fleet of land drilling rigs
in Canada, through Precision Drilling, a division of PLP, with 225 actively
marketed rigs located throughout the Western Canada Sedimentary Basin (WCSB),
accounting for approximately 33% of the actively marketed land drilling rigs in
Canada.

     Additionally, the operations of Contract Drilling may extend into the Rocky
Mountain area of the U.S. when demand for drilling rigs is high and economic
profit margin targets are attainable. Strategically, the Corporation's interest
within this market is to serve the needs and requests of existing customers. To
this end, the rig fleet is mobile and responsive to opportunity. Based out of
Casper, Wyoming, the Corporation's U.S. drilling business, operates through the
legal entity Precision Drilling Oilfield Services, Inc., and as at December 31,
2003 it had one racked drilling rig and no active operations after running as
many as five rigs during 2002. Subsequent to the year ended December 31, 2003,
the lone remaining rig was sold.

     Precision's land drilling rigs have varying configurations and capabilities
which allows it to provide services in virtually all areas of drilling activity
in the WCSB. Precision's rigs have drilling depth capacities of up to 7,600
metres. All of Precision's Canadian drilling rigs are winterized, allowing for
operations in the harsh weather conditions faced in the Canadian drilling
environment. Traditional rigs are configured to handle either one, two or three
joints of range 2 drill pipe at one time and are categorized as singles, doubles
or triples based on this capability. As well, Precision has coiled tubing
drilling rigs which utilize a single strand of pipe coiled around a reel. As the
rig drills, the coiled tubing is unwound and when the bit returns to surface the
coiled tubing is rewound onto the reel. Except for connecting the bottom hole
assembly, which usually includes the drill bit and a drilling fluid powered
drilling motor, which provides the rotation for drilling, no other connections
are necessary. As a result coil rigs can drill very fast at shallower depths.
These rigs are well suited for shallow vertical drilling. They are compact, have
a small footprint and can be made ready to move to new locations more quickly
than conventional rigs.

     Single, double and coiled tubing rigs are generally used in the shallow
drilling market while triple rigs, which have greater hoisting capacity, are
used in deeper exploration and development drilling which is usually carried out
in western Canada's foothills and Rocky Mountain regions. The deeper rig fleet
includes specialized rigs for deep sour gas well drilling and Arctic class rigs
that, although currently operating in Alberta and British Columbia, are equipped
to operate in very cold temperatures. The remaining rigs in Precision's fleet
are Super Single rigs, which garner an industry market share of 83% within their
rig class. The Super Single rigs are manufactured by Precision and are equipped
with top-drive drilling systems, range 3 drill pipe and automated pipe handling
and are capable of slant drilling.

     Slant drilling involves tilting a rig mast from vertical and is primarily
used to drill multiple directional wells from one location. In certain
instances, Super Single rigs allow for drilling to be carried out on a more cost
effective basis than using conventional drilling techniques. Drilling multiple
wells from one location improves the economics of developing shallow heavy oil
reserves in the WCSB. Additionally the same technique also allows for
exploitation of reserves located in environmentally sensitive areas or
inaccessible locations and eliminates the costs of building access roads for
multiple drilling locations. Precision believes Super Single drilling rigs offer
the potential for significant future revenue growth. Precision's Super Single
drilling rigs have been further developed to meet operational needs in the
development of oil sands production in northern Alberta.

     Precision has taken a lead role in drilling numerous steam assisted gravity
drainage (SAGD) projects that involve a centralized mud system and other
innovative rig design features. SAGD is used extensively in the production of
heavy oil reserves.

     A total of 41 of Precision's drilling rigs are electrically powered and the
remaining rigs mechanically powered. Diesel-electric powered rigs provide
precise rotational control and are considered more power efficient than
mechanical rigs. A diesel-electric rig is well suited for horizontal and
directional drilling. Many of Precision's mechanically powered rigs are also
capable of horizontal and directional drilling by equipping the rigs with
additional equipment which Precision has readily available. Precision
continually seeks to upgrade and modify its rig fleet to

<PAGE>


maximize performance. Precision works hard to remain abreast of, and in many
cases, leads advances in specialized drilling techniques and technology to
maximize power output and minimize environmental impact.

     To facilitate customer requirements on moderate to deep wells, PD owns 16
mobile top drives. A top drive is used to rotate the drill string and provides
greater efficiency in the drilling of a well compared to the traditional rotary
table. A top drive is suspended in the mast of the drilling rig and is powered
by a hydraulic or electric motor. All Super Single drilling rigs are equipped
with a permanently mounted top drive as part of the rig inventory.

     The following table lists the drilling depth capability of Precision's
actively marketed drilling rigs and the total Canadian land drilling industry's
rigs in the WCSB as at December 31, 2003. In addition, the capabilities of the
segment's rigs operating outside Canada are listed.

<TABLE>
<CAPTION>
                                                          CANADA                                          INTERNATIONAL
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                  PD Market
                               Drilling    PD Canada                              Industry (2)    Share (3)                   PD %
Type of Drilling Rig   Depth Capability    # of Rigs    % of Fleet    # of Rigs     % of Fleet      by Rig    # of Rigs   of Fleet
----------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>                 <C>          <C>           <C>         <C>             <C>         <C>         <C>
Single                           1,200m           17             8           93             14          18%           0          0
Super Single(R)(1)               2,500m           15             7           18              2          83%           4         21
Double                           3,000m           96            42          322             48          30%           7         37
Light triple                     3,600m           47            21          119             17          40%           6         32
Heavy triple                     7,600m           39            17           99             15          39%           2         10
Coiled tubing                    1,300m           11             5           24              4          46%          --         --
----------------------------------------------------------------------------------------------------------------------------------
Total                                            225           100          675            100          33%          19        100
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:

(1)  SUPER SINGLE(R) EXCLUDES RIGS THAT CANNOT DRILL SLANT, OR DO NOT HAVE
     AUTOMATED PIPE HANDLING SYSTEMS, OR DO NOT HAVE A SELF CONTAINED TOP DRIVE,
     OR CAN NOT RUN RANGE 3 DRILL PIPE/CASING.

(2)  SOURCE: CANADIAN ASSOCIATION OF OILWELL DRILLING CONTRACTORS (CAODC) AS OF
     DECEMBER 31, 2003 FOR TOTAL RIG COUNT PER CONTRACTOR SUMMARY SHEET ADJUSTED
     BY PRECISION TO INCLUDE NON REPORTING CONTRACTORS. PRECISION HAS ALLOCATED
     EACH COMPANY'S RIG FLEET BY CATEGORY - THIS IS NOT TRACKED BY CAODC.
     SURFACE HOLE RIGS AND WATER WELL RIGS ARE NOT INCLUDED ABOVE.

(3)  MARKET SHARE MEANS PRECISION'S RIGS AS A PERCENTAGE OF THE INDUSTRY'S RIGS.

     Precision has consistently been the most active land drilling contractor in
Canada as measured by metres and wells drilled. Since 1997, Precision has
sustained a market share in those categories of greater than 30%. During 2003,
Precision achieved a utilization rate of 52.0% for its drilling rigs compared to
the average industry utilization rate in Canada of 53.1%. Precision's strategy
with respect to its drilling operations emphasizes achieving an industry
equivalent level of utilization for its equipment, thereby enabling Precision to
maintain a stable workforce and a high level of equipment maintenance. In
periods of low equipment utilization, Precision may under-perform industry
utilization in order to preserve reasonable profit margins in certain rig
markets. Precision believes that its efficiently configured and well maintained
drilling rigs should allow it to retain its leading role in the Canadian land
drilling market.

     For calendar year 2003, Precision drilled 8,451 exploration and development
wells, accounting for 40.8% of industry wells in western Canada.

     The following table lists the drilling rig utilization rates and certain
other drilling statistics for Precision in Canada and the total Canadian land
drilling industry in the WCSB for the years indicated in this table:

<TABLE>
<CAPTION>
                                  Drilling Rig             Metres Drilled (000s)              Wells Drilled (2)
                            Utilization Rates (%)(1)            % of (1)                          % of (1)
                                 PD    Industry          PD    Industry   Industry          PD    Industry   Industry
---------------------------------------------------------------------------------------------------------------------
<S>                            <C>         <C>        <C>        <C>          <C>        <C>        <C>          <C>
2003                           52.0        53.1       8,604      21,802       39.5       8,451      20,694       40.8
2002                           38.3        39.4       6,222      15,708       39.6       6,315      14,920       42.3
2001                           51.6        53.0       7,384      18,855       39.2       6,907      17,359       39.8
2000                           52.5        55.2       6,771      18,242       37.1       6,143      16,565       37.1
1999                           37.4        39.8       4,613      13,018       35.4       3,803      11,816       32.2
---------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES

(1)  INDUSTRY NUMBERS EXCLUDE DRILLING RIGS NOT REGISTERED WITH THE CANADIAN
     ASSOCIATION OF OILWELL DRILLING CONTRACTORS (CAODC) AND NON-REPORTING CAODC
     MEMBER CONTRACTORS.

(2)  THE NUMBER OF WELLS DRILLED IS REPORTED ON A RIG RELEASE BASIS.

<PAGE>


     Oil and gas well drilling contracts are carried out on either a daywork,
meterage or turnkey basis. Under daywork contracts, Precision charges the
customer a fixed charge per day regardless of the number of days needed to drill
the well. In addition, daywork contracts usually provide for a reduced day rate
(or a lump sum amount) for mobilization of the rig to the well location and for
assembly and dismantling of the rig. Under daywork contracts, Precision
ordinarily bears no part of the costs arising from downhole risks (such as time
delays for various reasons, including a stuck or broken drill string or
blowouts). Other contracts could provide for payment on a meterage basis,
whereby Precision is paid a fixed charge for each metre drilled regardless of
the time required or the problems encountered in drilling the well. Some
contracts are carried out on a meterage basis to a specified depth and on a
daywork basis thereafter. Turnkey contracts contemplate the drilling of a well
for a fixed price. Compared to daywork contracts, meterage and turnkey contracts
involve a higher degree of risk to Precision and, accordingly, normally provide
greater profit or loss potential. Over the last five years, Precision's
contracts have been carried out almost exclusively on a daywork basis except for
the contract in the Burgos Basin of Mexico, which is being carried out on a
turnkey basis for each well drilled.

     In conjunction with its customers, PD is working to involve Canada's First
Nations aboriginal people in the delivery of contract drilling services.
Precision's involvement with First Nations communities is directed towards local
employment to meet oilfield service manpower needs and to foster the economic
participation of aboriginals in commerce that is taking place in and around
their traditional lands. The economic arrangements include joint ownership of
one drilling rig through the Four Lakes Precision Drilling Limited Partnership
and sponsorship based on rig activity to support community development in remote
areas.

     The Corporation owns three subsidiaries which provide support services to
its contract drilling operations being Columbia Oilfield Supply Ltd., LRG
Catering Ltd. and Rostel Industries Ltd.

     Columbia Oilfield Supply Ltd. (Columbia) became a wholly owned subsidiary
of Precision in 1997 and has been in business since 1977 as a general supply
store to the oilfield service industry with drilling contractors as their main
customers. Columbia's prime focus is to facilitate the consumable requirements
of PD, PWS and the other subsidiaries of the Corporation. Increasingly, Columbia
is being relied upon to procure and distribute specialty supply requirements for
international contract drilling rig operations.

     LRG Catering Ltd. (LRG) is a camp and catering company providing food and
accommodations to the Canadian oil and gas drilling industry and became a wholly
owned subsidiary of Precision in 1993. A typical drilling camp consists of a
five or six-unit structure that can accommodate 20 field employees and feed up
to 50 workers daily. Established in 1976, LRG has grown significantly over the
past six years. Effective February 1, 2003 LRG acquired all of the operating
assets of MacKenzie Caterers (1984) Ltd. namely, 17 camps complete with
ancillary assets. LRG also added a new six unit electric camp in February 2003.
As a result, the fleet grew by an additional 18 camps during 2003 and operated
88 quality camp facilities as at December 31, 2003. Most of LRG's business is in
support of Precision's drilling rig operations.

     Rostel Industries Ltd. (Rostel) was established in 1976 as a machining and
fabricating shop and became a wholly owned subsidiary of Precision in 1996.
Rostel provides drilling and service rig contractors in southern Alberta with
complete equipment manufacture and repair services. The manufacture of drilling
and service rig components is a core business for Rostel. It also repairs and
certifies, as required, rig components such as crowns, handling tools, traveling
blocks and blowout preventers. This business uniquely positions the Corporation
as the only Canadian drilling contractor with in-house rig building capability.

INTERNATIONAL DRILLING

     The international drilling operations of Precision, which are carried out
through various international subsidiaries, are focused on expansion into
countries where drilling opportunities fit the Corporation's niche capabilities,
and where it can attain a strategic position in the near to medium term.

     In 2003, Precision Drilling International continued its focus on delivering
performance drilling as a key member of Precision's integrated services package
providing turnkey drilling services in the Burgos region of Mexico. In 2003 a
total of 176 wells were drilled by Precision in the Burgos region. In June 2003,
Precision received a contract extension covering the provision of three
additional drilling rigs bringing the total rig count in Mexico to 10, and
adding approximately 186 wells to the existing contract.

     In South America, international drilling continued to provide specialty
drilling services to multinational oil companies, many of whom have strategic
alliances with national oil companies. Five of the Corporation's drilling rigs
were operational on contracts of lengths varying from one to five years. In
April 2003, the Corporation's 50% interest in two additional drilling rigs
located in South America and operated by a third party were sold.

<PAGE>


     In the Middle East, the Corporation owns two drilling rigs, one of which is
operated by a third party and is under contract until February 2006, and the
second rig commenced drilling in November 2003.

     In the Asia/Pacific region a Super Single rig was contracted continuously
throughout 2003 and among its achievements drilled the first slant well in the
region from a man-made island. Additionally, the Corporation was awarded a
contract to construct and operate its first offshore platform mounted rig for
the same operator, which commenced drilling in April 2004.

     On April 1, 2004, the Corporation entered into an agreement with
GlobalSantaFe Corporation which contemplates the acquisition by the Corporation
of 31 land based drilling rigs located in the Middle East and Venezuela for a
purchase price of US$316,500,000. It is anticipated that the transaction should
close near the end of May 2004.

CANADIAN WELL SERVICING

     For the past three years, the Corporation has operated the largest fleet of
services rigs in Canada. As a result of the acquisition of 18 service rigs
through Plains in August, 2000, and a further 164 service rigs in October 2000,
through CenAlta, the Corporation now owns the largest well servicing fleet in
Canada.

     The Corporation has a diverse workover rig fleet capable of performing
service and completion jobs in any depth range, including heavy oil wells. It is
also a leader in horizontal re-entry drilling. The characteristics of the fleet,
which currently operates only in the WCSB, is illustrated in the following
table:

<TABLE>
<CAPTION>
                                              2003                  2002                 2001
--------------------------------------------------------------------------------------------------
                                         # OF     % OF          # of    % of        # of    % of
 Type of Service Rig                     RIGS     FLEET         Rigs    Fleet       Rigs    Fleet
--------------------------------------------------------------------------------------------------
<S>                                      <C>      <C>           <C>     <C>         <C>      <C>
Freestanding mobile single                75       31            50      21          23       9
Single                                     1       --             1      --           4       2
Mobile single                             29       12            55      23          91      35
Double                                    57       24            58      24          60      23
Freestanding mobile double                 6        3             6       2           5       2
Mobile double                             46       19            45      19          48      19
Heavy double                               7        3             7       3           9       4
Freestanding heavy double                  2        1             2       1          --      --
Slant                                     16        7            16       7          16       6
Swab                                      --       --            --      --           1      --
--------------------------------------------------------------------------------------------------
TOTAL                                    239      100           240     100         257     100
--------------------------------------------------------------------------------------------------
</TABLE>

     During 2003, the PWS rig fleet generated 439,519 operating hours for a
utilization rate of 50% based on 239 available rigs. The calculation assumes
that available hours per year is 3,650 for each rig.

                 # of Rigs       # of Operating Hours          Rig Utilization %
--------------------------------------------------------------------------------
2003                  239                     439,519                         50
2002                  240                     392,210                         45
2001                  257                     492,480                         53
--------------------------------------------------------------------------------

     During 2003, PWS maintained an industry market share of 27% based on an
average registered CAODC industry service rig fleet of 887 in western Canada.
The PWS rig fleet has been rationalized over the past two years resulting in the
retirement of 18 rigs that were no longer marketable due to equipment condition
and/or capacity. The current fleet is also being upgraded through initiatives
that include freestanding conversion, new five ton transporters and, new pump
trucks, engines, doghouses and mud pumps. As at December 31, 2003 PWS had 83
freestanding service rigs representing 35% of its service rig fleet. This is an
increase of 25 rigs and 11 percentage points over 2002. A freestanding rig is
more efficient to set up, minimizes surface disturbance and, as there is no need
for mooring, the possibility of striking underground pipelines is reduced.

     Well service rigs are typically operated by a crew of four or five workers
and include additional equipment such as circulating pumps, tanks, blowout
preventers and tools. These rigs are mobile and can be moved to new locations
quickly and with relative ease. In general, well servicing activities are
conducted during daylight hours. PWS

<PAGE>


typically charges its customers an hourly rate for its services based on a
number of considerations including market demand in the region in which the
service rig operates, the type of rig and equipment being used, and the amount
of additional services or equipment required. Seven of PWS's well service rigs
are specifically configured for re-entry drilling and have 24-hour operational
capabilities. Service rigs are typically used during the completion phase of a
well, instead of larger, more expensive drilling rigs, to reduce the cost of
completing the well. The demand for well completion services is directly related
to the level of drilling activity in a region, whereas the demand for other well
servicing activities is based upon the total number of active wells, their age
and their production characteristics otherwise referred to as "workover"
service. Consequently, demand for completion services is generally less stable
than demand for workover well servicing activities. Completion services account
for approximately 33% of PWS's well servicing activity in 2003.

     Completion services prepare a newly drilled well for production. Completion
services may involve cleaning out the well bore, and the installation of
production tubing, downhole equipment and wellheads. Service rigs work jointly
with other services to perforate the well bore to open the producing zones and
in stimulating the producing zones to improve productivity. The well completion
process may take one day to many weeks to complete and PWS provides a service
rig to assist during most or all of this process.

     Well workover services are generally provided when a well needs major
repairs or modifications and often involve operations similar to those conducted
during the initial completion of a well. Workovers may also involve restoring or
enhancing production in an existing producing zone, changing to a new producing
zone, converting the well for use as an injection well during enhanced recovery
operations or plugging and abandoning the well. Workover services also include
major subsurface repairs such as casing repair or replacement, recovery of
tubing and removal of foreign objects, such as lost tools, in the well bore.
Workover activities may require a few days to several weeks to complete and
additional equipment and services are provided by PWS or PDTSG during this
process.

     Well maintenance services are often required to ensure continuous and
efficient operation of producing wells. These services include routine
mechanical repairs such as repairing broken pumping equipment in an oil well or
replacing damaged production tubing. Maintenance services are generally required
throughout the life of a producing well and are typically required more often by
oil wells than gas wells. Well maintenance activities may require a few hours to
several days to complete. While workover and maintenance activities are not
directly linked to drilling activities, they are influenced by both the short
term and long term outlooks for oil and gas prices and reservoir depletion.
Furthermore, an increase in drilling activity leads to more producing wells that
require workover and maintenance services in future years.

     Live, also a division of PLP, currently markets 25 portable hydraulic rig
assist snubbing units in western Canada. The Live fleet grew by two units on
December 30, 2003 through an asset acquisition from a private company based in
southern Alberta. Rig assist snubbing units are equipped with specialized
pressure control devices, which allows for completions and workover operations
while the well is under pressure. The snubbing unit provided by Live is a
hydraulic rig assist unit, which can be rigged up in less than two hours onto a
service rig floor. Snubbing units are also part of the equipment used in
controlled pressure drilling operations.

     Traditional well servicing operations requires the pressure in a well to be
neutralized, or killed, prior to performing such operations so that they can be
conducted safely. Certain wells can be damaged if they are killed, as the fluids
used in the process may cause the flow characteristics of the producing
formation to be adversely affected. Consequently, snubbing units have been
developed to perform certain workover, completion and controlled pressure
drilling (CPD) activities without killing the well. The Corporation believes
that the use of snubbing units is increasing as oil and gas companies become
more aware of potential risks of formation damage that can be avoided by using
snubbing units and techniques. Snubbing is typically performed on natural gas
wells. Increasing natural gas well drilling and production in the Western Canada
Sedimentary Basin is having a positive effect on demand for Live's services.

TECHNOLOGY SERVICES

     The TS segment carries on business through three main business lines,
being; wireline, directional drilling and separation services. Wireline includes
cased hole, open hole and slickline services. Directional drilling includes MWD,
LWD, directional drilling and rotary steerable services. Separation services
includes well testing and controlled pressure drilling (which includes
underbalanced drilling services). In addition to the three main business lines,
TS manufactures, rents and sells PDC bits and derives revenues from the
provision of project management services on the Burgos Project in Mexico.


<PAGE>

     Revenue generated by TS operations is as follows:

<TABLE>
<CAPTION>
                                                     2003                             2002                         2001
-----------------------------------------------------------------------------------------------------------------------------
Years ended December 31, (In thousands)      REVENUE      % OF                 Revenue    % of              Revenue    % of
-----------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>              <C>               <C>           <C>             <C>          <C>
Wireline                                 $   298,568       42%              $  227,497     38%            $ 308,569     50%
Directional Drilling                         223,442       31%                 178,675     29%              175,614     29%
Separation Services                           95,426       13%                 100,670     17%               85,530     14%
Other                                         96,949       14%                  96,246     16%               44,439      7%
-----------------------------------------------------------------------------------------------------------------------------
                                         $   714,385      100%              $  603,088    100%            $ 614,152    100%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

WIRELINE

     Wireline services are offered from numerous locations throughout the world.
Wireline tools are primarily manufactured in Fort Worth, Texas. Once a hole is
drilled, wireline logging services are used to measure the physical properties
of underground formations to help determine the location and potential
deliverability of oil and gas in a reservoir. The provision of Wireline Services
is divided into three categories; open hole services, cased hole services and
slickline services. Open hole logging assists in locating oil and gas by
measuring certain characteristics of geological formations and providing
permanent records called "logs". Cased hole services are performed at various
times throughout the life of the well and include perforating, completion
logging, production logging and well bore integrity services. Wireline services
are provided from surface logging units, which lower tools and sensors into the
well bore on a single or multiple conductor wireline. As the wireline pulls the
tools through the well bore, log measurements are gathered and relayed through
the wireline cable to a computerized surface data acquisition and processing
system. These state-of-the-art systems are an integral component of each
wireline unit.

     Open hole logging is performed at different intervals during the well
drilling process or immediately after a well is drilled. This logging data
provides a valuable benchmark that future well procedures may be referenced to.
The open hole sensors and tools are used to determine well lithology and the
presence of hydrocarbons. Formation characteristics such as resistivity, density
and porosity are accurately measured using electrical, nuclear, acoustic,
magnetic and mechanical technologies. This data is then used to characterize the
reservoir and describe it in terms of porosity, oil, gas, or water content and
an estimation of productivity. This information can be further refined at a
later time in one of the Corporation's log interpretation centers. Wireline
services can relay this information on a real time basis via a secure satellite
transmission network and secure internet connection to the client's office for
faster evaluation and decisions. Most of TS's open hole tools and sensors are
proprietary.

     After the well bore is cased and cemented, the cased hole division can
perform a number of different services. Perforating the casing allows oil and
gas to flow to the surface. Production logging may be performed throughout the
life of the well to measure temperature, fluid type, flow rate, pressure and
other reservoir characteristics. This helps the operator analyze and monitor
well performance and determine when a well may need a workover or further
stimulation. In addition, cased hole services may involve well bore remediation,
which could include the positioning, and installation of various plugs and
packers to maintain production or repair well problems. Some of the cased hole
tools are proprietary.

     At its Fort Worth facility, which is ISO 9001 accredited, TS designs,
assembles and services open hole and cased hole logging tools, and surface
equipment. The specialized truck-mounted and skid-mounted wireline logging units
are manufactured and assembled to the Corporation's specifications by third
parties, primarily in Canada. The focus of wireline research and engineering has
been on the development of new or improved downhole sensors which are currently
being introduced for open hole logging that will take advantage of our new
Wireline Communications System (WCS). In cased hole the Slim Monopole Array
Sonic, Pulsed Neutron Decay Detector, Ultrasonic Cement Scanner, Production
Fluid Identifier, and Casing Inspection Tool, are under research and/or
development.

     The AQRIT(TM) (Accurate Quick Reservoir Insitu Testing) technology is
deployed within Canada on electric wireline and enables customers to gather key
hydrocarbon reservoir information from both producing and non-producing well
bores.

     Slickline, which utilizes a solid steel, nonconductor line in place of a
single or multiple conductor braided line used in electric logging, is used
primarily in producing wells for running downhole memory tools, manipulating
downhole production devices and fishing services.

     TS provides wireline and slickline services with 39 open hole units, 175
cased hole units, 10 combination open hole/cased units, 14 slickline and six
combination slickline/cased hole units deployed from its service centres in
Canada, the U.S,. Mexico, and internationally.


<PAGE>

DIRECTIONAL DRILLING

     Directional drilling is the use of equipment and engineering to
intentionally change the angle of a well bore so that the trajectory of the well
bore can be accurately controlled, drilling efficiency can be enhanced or
formations or obstructions can be circumvented in order to reach the pay zone.
Directional drilling services offered worldwide, was strengthened with the
acquisitions of BecField Drilling Services Ltd. in January 2001, and the EM/MWD
technology, from Geoservices Incorporated, in October 2000. Directional drilling
equipment is engineered and assembled in Edmonton, Alberta and MWD/LWD tools are
manufactured and assembled in Houston, Texas. TS also has research and
engineering facilities in Forth Worth and Houston, Texas; Hannover, Germany;
Cheltenham, England and Edmonton, Alberta, Canada.

     TS supplies specialized equipment including MWD, LWD, rotary steerable
systems and drilling motors along with experienced personnel for directional and
horizontal drilling operations. Those services are available for directional
control, slant well drilling, single and multi-lateral horizontal wells, and
other directional applications.

     An MWD system is connected behind the mud motor or rotary steerable system
and relays continuous real time information to the surface to monitor the
trajectory of the well being drilled. An LWD system is connected behind the mud
motor or rotary steerable system and monitors formation characteristics while
drilling, similar to the measurements mode with open hole logging tools. MWD and
LWD information is transmitted to the surface via mud pulses or by
electromagnetic waves. Using MWD information the operator steers the drill bit
to the prescribed target location. Unlike previous technologies, MWD and LWD do
not require the drill string to be tripped out of the hole while the well
trajectory and formation characteristics are being measured, thus saving
valuable time.

     New products were the rationale behind the formation of Advantage R & D,
Inc., (Advantage) in 1999. Advantage focuses on the research and engineering of
MWD and LWD technologies and advanced directional drilling systems. The
Advantage research and engineering strategy has initially been directed towards
the high temperature MWD and LWD market with respect to land-based as well as
deep-water drilling markets. Advantage has developed directional, gamma ray,
resistivity, neutron porosity, bulk density, pressure while drilling and
downhole environment severity sensors. Advantage is located in Houston, Texas,
in a research and development facility that has state of the art testing
equipment complete with extensive well simulation capabilities.

     The directional drilling facility in Edmonton is responsible for the design
and assembly of mud pulse MWD systems and certain directional survey tools which
are manufactured to company specifications by third parties in Canada. This
Edmonton facility is also responsible for the design of drilling motors which
are manufactured by third parties in Canada to company specifications and
assembled at its Fort Worth facilities. These MWD, survey and drilling motors
are either used by the company or may be sold worldwide.

SEPARATION SERVICES

     Northland, a division of PDTSG (Northland) provides separation services,
well testing and controlled pressure drilling (CPD) services to oil and gas
producers.

     The separation business supplies personnel and equipment on a well site to
recover a mixture of solids, liquids and gases from oil and gas wells. These
recoveries include oil and gas as well as drilling and workover fluids and well
stimulation by-products. Northland equipment is used to safely separate the
recovered solids, liquids and gases while accurately measuring each component
and ensuring proper well control. These services are used during drilling
operations for "kick control", for well cleanup services after the stimulation
of the well and for well testing operations. The operator requires these
services to properly clean up the well prior to undertaking a flow test to
determine the deliverability potential of the well. Northland is the largest
provider of such services in Canada. With the acquisition of Plains Energy
Services Ltd., in 2000, Northland Energy Corporation acquired the Entest Corp.
personnel and equipment to expand its well testing and CPD operation into low
and medium pressure market segments in Canada. The acquisition of Norward Energy
Services in 2001 increased the capabilities of Northland to provide
high-pressure and sour separation services to Canada as well as gaining a
testing operation in the northwest U.S. In 2001, Northland acquired the assets
of ITS-Testco LLC and an affiliate of that company to establish a separation
services base in Mexico as part of the Burgos region contract and also acquired
the separation assets of Core Laboratories de Venezuela SA. and its affiliates
to establish a separation services base in eastern Venezuela.

     An extension to the conventional separation services provided by Northland
is the provision of mobile incineration systems. In applications where the
operator is required to further restrict gas flaring, the use of portable
incineration systems may, in certain circumstances, ensure a 99.95% efficiency
in the destruction of the waste gases. Although incinerators have been used for
decades to destroy waste gases of various compositions, this equipment was
limited to permanent installation applications.

     Northland also provides personnel and surface control equipment for CPD
from offices in Canada, U.S., Mexico, South America, Europe/Africa, the Middle
East and Asia/Pacific. It offers a complete service of engineering, data
acquisition, equipment and personnel to drill a CPD well.

<PAGE>


     The concept of CPD is to use a lighter drilling medium than that normally
used to ensure pressure in the well bore is lowered to reduce drilling related
challenges and formation damage and allow formation characterization during
drilling operations. Often, inert gas such as nitrogen or exhaust gas is
injected downhole with the drilling mud to create the required lighter drilling
medium. Reservoir fluids can be allowed to flow to the surface as the well is
being drilled instead of exposing the reservoir to drilling mud invasion due to
the overpressure nature of a mud column in the well bore. This concept is used
in an attempt to avoid formation damage experienced in many wells, particularly
horizontal wells, which are more susceptible to formation damage problems caused
by the drilling mud itself. With the increase in the number of horizontal wells
being drilled and the increase of sub-hydrostatic reservoirs where drilling
challenges, such as lost circulation and differential sticking are often
encountered, the use of CPD technology has been increasing.

     Northland developed its first separation package for CPD in the early
1990s. In the late 1990s, Precision acquired Northland and various other
companies which provided Northland with rotating blowout preventers (RBOP(TM)),
proprietary exhaust gas processors (EGP) and nitrogen membrane systems. The
RBOP(TM) device seals off the well bore at surface by gripping and sealing
around the drill pipe and rotating freely with it, thus diverting the
pressurized flow of drilling fluids, gas, oil and cuttings to the choke manifold
and separation package. The proprietary EGP satisfied the service gas
requirements of CPD and the acquisition of the nitrogen membrane systems
compliments the EGP technology and increases Northland's total CPD service gas
capabilities. In addition, during the last two years, Northland has developed a
new patented 5,000 PSI RBOP(TM) and a next generation patented EGP unit.

OTHER

     United Diamond Ltd. designs, manufactures, sells and rents PDC drill bits.
Its design and manufacturing facility is located in Nisku, Alberta. United
Diamond is currently selling and renting its drill bits into the Canadian market
and selected international markets.

     United Diamond has developed the torsional impact motor (TorkBuster(TM)) to
increase the drilling performance of PDC bits.

RENTAL AND PRODUCTION

<TABLE>
<CAPTION>
Years ended December 31, (In thousands)               2003                2002                 2001
-----------------------------------------------------------------------------------------------------
<S>                                              <C>                 <C>                  <C>
Rental Services                                  $  36,478           $  24,469            $  42,290
Production Services                                174,246             168,371              152,277
-----------------------------------------------------------------------------------------------------
Total                                            $ 210,724           $ 192,840            $ 194,567
-----------------------------------------------------------------------------------------------------
</TABLE>

     The rental services component of the Rental and Production segment of the
Corporation is carried out through Precision Rentals Ltd. (formerly Montero
Oilfield Services Ltd), which provides a wide array of rental products and
services, including surface, drilling, completion and production equipment;
tubular and well control equipment and field and well site accommodations. The
production services component of this segment is carried out through CEDA, which
is a leading provider of industrial maintenance and turnaround services,
including specialized catalyst handling, both in Canada and the U.S.

RENTAL SERVICES

     The businesses of Smoky Oilfield Rentals, Big D Rentals and Ducharme
Oilfield Rentals were combined and now operate as Precision Rentals Ltd.
("Precision Rentals"). Precision Rentals maintains an inventory of rental
equipment including storage tanks, high and low pressure oil and gas separators,
sump and shale tanks and related equipment. Precision Rentals also supplies the
patented Vapour Tight Oil Battery(TM), which allows for safe, single well
production of oil with H2S content through the use of a 500-barrel vessel with
gas metering and flaring capabilities.

     The field and well site accommodation portion of Precision Rentals consists
of a fleet of approximately 281 fully equipped and furnished units. Trailer
units are delivered to rig locations using Precision Rental's own air-ride
trucks and tri-axle trailers.

     The tubular and well control business of Precision Rentals consists of the
rental of specialized drilling equipment (approximately 10,000 joints of
specialty drill pipe and collars and 4,000 handling tools, valves, kellys and
floats) to hydrocarbon producers and service and drilling rig contractors
engaged in the Canadian oil and gas industry. The present inventory consists of
various sizes and grades of oilfield tubulars, blowout prevention equipment,
valves, pumps and diverter systems.

<PAGE>

PRODUCTION SERVICES

     CEDA is a leading provider of industrial maintenance and turnaround
services and other specialized services to various production industries in
Canada and the U.S. The main areas of its operations are industrial cleaning,
catalyst handling and mechanical services, usually carried out in large plants
such as refineries, gas plants, petro-chemical facilities and the pulp and paper
industry. Industrial cleaning encompasses high pressure water blasting, large
scale industrial vacuuming (169 vacuum trucks) and specialized chemical
cleaning. High pressure water blasting equipment (79 units and 14 bundle
blasters) pumps water at pressures up to 40,000 PSI to clean equipment and
systems that are externally accessible. When equipment and systems are not
externally accessible, cleaning requires the circulation of chemical
formulations through a closed system. Specialized chemical cleaning utilizes a
team of chemists, engineers and service technicians who combine their expertise
to provide highly specialized and environmentally sound chemical cleaning
services. Catalyst handling involves the removal and replacement of catalyst in
reactors at refineries or petrochemical facilities. Mechanical services include
bolt tensioning, machining and leak repair services. Specialized mechanical
services utilize technology and equipment to unfasten, repair and refasten
flanges and piping systems with resulting savings of time and money and
reduction of fugitive emissions. These services are usually undertaken at
customer locations, frequently under critical time constraints, during scheduled
shut downs or emergencies.

     With many years of experience in providing dredging, dewatering and water
recycling services, CEDA operates a modern fleet of equipment that includes
portable dredges, dewatering centrifuges and unique oil-skimming equipment
capable of assisting companies in dealing with a variety of water-related
maintenance services. The equipment and staff work in a variety of industries
from chemical plants and refineries to mining, utilities and pulp and paper
operations.

     In Canada, CEDA and its subsidiaries operate from 18 operating centers plus
a network of five dealerships. In the U.S., CEDA provides a full suite of
services out of 10 major operating centers.

EMPLOYEES

     The total number of employees fluctuates with rig utilization in contract
drilling services and well servicing and with seasonal variations in certain of
the Corporation's other businesses but is expected to range between 8,000 and
12,000 employees, consisting of between 4,000 and 6,000 employees in the
Contract Drilling segment, 3,000 and 4,000 employees in the Technology Services
segment and 1,000 and 2,000 employees in the Rental and Production segment.
LEGAL PROCEEDINGS

     The Corporation is not involved in any legal proceedings that it believes
might have a material adverse effect on its business or results of operations.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

SUMMARY OF OPERATING RESULTS

     The following table sets forth selected financial information of the
Corporation for each of the years ended, as indicated:

<TABLE>
<CAPTION>
Years ended December 31, (millions of CDN $ except per share amounts)     2003        2002       2001
-----------------------------------------------------------------------------------------------------
<S>                                                                    <C>         <C>        <C>
Revenue                                                                1,917.9     1,567.5    1,815.2
Earnings from continuing operations
    before goodwill amortization                                         191.1        89.5      206.3
Earnings from continuing operations
    before goodwill amortization per share:
    Basic (2)                                                             3.51        1.67       3.90
    Diluted                                                               3.46        1.63       3.81
Earnings from continuing operations                                      191.1        89.5      175.7
Earnings from continuing operations per share:
    Basic (2)                                                             3.51        1.67       3.31
    Diluted                                                               3.46        1.63       3.23
Net earnings (3)                                                         188.7        91.3      186.5
Net earnings per share:
    Basic (2)                                                             3.47        1.70       3.52
    Diluted                                                               3.41        1.66       3.44
Cash flow from operations (4)                                            258.4       199.2      432.2
Total assets                                                           2,908.4     2,760.0    2,651.4
Long-term debt (5)                                                       399.4       514.9      496.2
-----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

NOTES:

(1)  THE DATA SET OUT FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 IS
     COMPARATIVE IN ALL MATERIAL RESPECTS.

(2)  BASIC PER SHARE AMOUNTS WERE CALCULATED USING THE WEIGHTED AVERAGE NUMBER
     OF COMMON SHARES OUTSTANDING.

(3)  THE YEAR ENDED DECEMBER 31, 2003 INCLUDES GAINS ON DISPOSAL OF INVESTMENTS
     AND A WRITEDOWN AND GAIN ON DISPOSAL OF ASSETS HELD AS DISCONTINUED
     OPERATIONS. THE YEARS ENDED DECEMBER 31, 2002 AND 2001 INCLUDED A GAIN ON
     DISPOSAL OF INVESTMENTS.

(4)  CASH FLOW FROM OPERATIONS INCLUDES DISCONTINUED OPERATIONS.

(5)  EXCLUDING CURRENT PORTION OF LONG-TERM DEBT.

DIVIDENDS

     No dividends have been paid on any Common Shares of the Corporation since
the purchase of the assets of Precision Drilling Limited in 1987. Any decision
to pay dividends on the Common Shares in the future will be made by the Board of
Directors of the Corporation and will be based on the Corporation's earnings,
financial requirements and other conditions at the time.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

     Management's Discussion and Analysis relating to the consolidated financial
statements for the fiscal year ended December 31, 2003 forms part of the
Corporation's 2003 Annual Report and is incorporated herein by reference and
forms an integral part of this Renewal Annual Information Form. The Management's
Discussion and Analysis appears on pages 43 to 75 of the 2003 Annual Report.

MARKET FOR SECURITIES

     The Common Shares of the Corporation are listed for trading on the Toronto
Stock Exchange (TSX) and trade under the symbol PD (and effective February 2,
2004 PD.U); and on the New York Stock Exchange (NYSE) under the symbol PDS. The
share trading summaries for both the TSX and NYSE for the past three years is
located on page 101 of the 2003 Annual Report.

DIRECTORS AND OFFICERS

     The following table sets forth all of the current directors and officers of
the Corporation together with the positions currently held by them with the
Corporation, their principal occupation or employment during the last five years
and the year in which they were first elected a director of the Corporation. The
term of office of each director will expire at the end of the next annual
meeting of shareholders of the Corporation.

<TABLE>
<CAPTION>
NAME                 TITLE                  PRINCIPAL OCCUPATION                                            DIRECTOR SINCE
--------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                                                             <C>
W.C. (Mickey) Dunn   Director               Chairman, True Energy Ltd.                                      September 1992
Edmonton, Alberta
--------------------------------------------------------------------------------------------------------------------------
Robert J.S. Gibson   Director               President, Stuart & Company Limited                                  June 1996
Calgary, Alberta
--------------------------------------------------------------------------------------------------------------------------
Murray K. Mullen     Director               Chairman, President                                             September 1996
Calgary, Alberta                            and Chief Executive Officer
                                            of Mullen Transportation Inc.
--------------------------------------------------------------------------------------------------------------------------
Patrick M. Murray    Director               President and Chief Executive Officer                                July 2002
Dallas, Texas                               Dresser, Inc.
--------------------------------------------------------------------------------------------------------------------------
Fred W. Pheasey      Director               Executive Vice President                                             July 2002
Edmonton, Alberta                           National Oilwell, Inc.
--------------------------------------------------------------------------------------------------------------------------
Robert L. Phillips   Nominee Director       President and CEO, BCR Group of Companies                              Nominee
Vancouver,                                  since March 2001. Prior to that, from March 1999 to March 2001,
British Columbia                            Mr. Phillips was Executive Vice President at MacMillan Bloedel
                                            Limited; prior to that, from March 1998 to March 1999 Mr. Phillips
                                            was President and CEO of PTI Group Inc.; prior to that, from April
                                            1994 to March 1998
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
--------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                                                             <C>
                                            Mr. Phillips was President and CEO of Dreco Energy Services
                                            Ltd.
--------------------------------------------------------------------------------------------------------------------------
Hank B. Swartout     Chairman of the        Officer of the Corporation                                           July 1987
Calgary, Alberta     Board President and
                     Chief Executive
                     Officer
--------------------------------------------------------------------------------------------------------------------------
H. Garth Wiggins     Director               Principal, Kenway Mack Slusarchuk Stewart,                      September 1997
Calgary, Alberta                            Chartered Accountants
--------------------------------------------------------------------------------------------------------------------------
Jan M. Campbell      Corporate Secretary    Officer of the Corporation                                                 N/A
Calgary, Alberta
--------------------------------------------------------------------------------------------------------------------------
R.T. (Bob) German    Vice President and     Officer of the Corporation N/A
Calgary, Alberta     Chief Accounting
                     Officer
--------------------------------------------------------------------------------------------------------------------------
John R. King         Senior Vice President  Officer of the Corporation since March 2003.                               N/A
Calgary, Alberta     Technology Services    Prior to joining Precision, Mr. King was a Founder and
                                            Managing Director of RedTree Capital Corporation since
                                            February 1998.
--------------------------------------------------------------------------------------------------------------------------
M.J. (Mick) McNulty  Senior Vice President  Officer of the Corporation N/A
Calgary, Alberta     Operations Finance
--------------------------------------------------------------------------------------------------------------------------
Dale E. Tremblay     Senior Vice President  Officer of the Corporation                                                 N/A
Airdrie, Alberta     Finance and Chief
                     Financial Officer
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

     As of the date hereof, the directors and officers of the Corporation, as a
group, beneficially owned, directly or indirectly, or exercise control or
direction over 529,623 Common Shares, which represents 0.95% of the issued and
outstanding common shares. The information as to shares beneficially owned has
been furnished by the respective directors and officers of the Corporation
individually.

     The Corporation is required to have an Audit Committee. The directors who
are currently members of that Committee are Robert J.S. Gibson, Patrick M.
Murray and H. Garth Wiggins. In addition, the Corporation has a Compensation
Committee whose members are W.C. (Mickey) Dunn and Murray K. Mullen, and a
Corporate Governance and Nominating Committee whose members are Robert J.S.
Gibson, W.C. (Mickey) Dunn and Fred W. Pheasey.

ADDITIONAL INFORMATION

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

     As of the end of Precision's fiscal year ended December 31, 2003, an
evaluation of the effectiveness of Precision's "disclosure controls and
procedures" (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) was carried
out by the Precision's principal executive officer and principal financial
officer. Based upon that evaluation, the principal executive officer and
principal financial officer have concluded that as of the end of that fiscal
year, Precision's disclosure controls and procedures are effective to ensure
that information required to be disclosed by Precision in reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.

     During the fiscal year ended December 31, 2003, there were no changes in
Precision's internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, Precision's internal
control over financial reporting.

     It should be noted that while Precision's principal executive officer and
principal financial officer believe that Precision's disclosure controls and
procedures provide a reasonable level of assurance that they are effective, they
do not expect that Precision's disclosure controls and procedures or internal
control over financial reporting will prevent all errors and fraud. A control
system, no matter how well conceived or operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are met.

REQUEST FOR ADDITIONAL INFORMATION

     Additional information, including information as to directors and officers
remuneration and indebtedness, principal holders of the Corporation's
securities, options to purchase securities and interests of insiders in material
transactions is contained in the Management Information Circular of the
Corporation provided for the Annual and Special Meeting of shareholders of the
Corporation to be held on May 11, 2004. Additional financial information is

<PAGE>


provided in the Corporation's Financial Statements for the year ended December
31, 2003, which are contained in the Annual Report of the Corporation for the
year ended December 31, 2003.

     Upon request the Corporation will provide to any person:

     1.  one copy of this Renewal Annual Information Form;

     2.  one copy of the Corporation's audited financial statement for year
         ended December 31, 2003, together with the report of the auditors
         thereon contained in the Annual Report, and one copy of any of the
         Corporation's interim financial statements subsequent to such audited
         financial statements;

     3.  one copy of the Corporation's Management Information Circular provided
         for the Annual and Special Meeting of the shareholders of the
         Corporation to be held on May 11, 2004; and

     4.  when the Corporation's securities are in the course of a distribution
         pursuant to a short form prospectus or when a preliminary short form
         prospectus has been filed in respect of a distribution of the
         Corporation's securities, also upon request to the Corporate Secretary,
         one copy of any other document that is incorporated by reference in the
         preliminary short form prospectus or short form prospectus.

     Copies of these documents may be obtained upon request to the Corporate
Secretary, Precision Drilling Corporation, 4200, 150 - 6th Avenue S.W., Calgary,
Alberta, T2P 3Y7, Telephone (403) 716-4500 or Facsimile (403) 264-0251.









                         Precision Drilling Corporation
                             4200, 150-6th Avenue SW
                        Calgary, Alberta, Canada T2P 3Y7
                             Telephone: 403-716-4500
                             Facsimile: 403-264-0251
                       Website: www.precisiondrilling.com



<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS

     The Management's Discussion and Analysis has been prepared taking into
consideration information available to February 10, 2004. The discussion focuses
on key statistics from the Consolidated Financial Statements, and pertains to
known risks and uncertainties relating to the oilfield and industrial service
sectors. This discussion should not be considered all-inclusive, as it excludes
changes that may occur in general economic, political and environmental
conditions. Additionally, other elements may or may not occur which could affect
the Corporation in the future. In order to obtain the best overall perspective,
this discussion should be read in conjunction with the material contained in
other parts of this annual report, including the audited Consolidated Financial
Statements. The effects on the Consolidated Financial Statements arising from
differences in generally accepted accounting principles (GAAP) between Canada
and the United States are described in Note 15 to the Consolidated Financial
Statements.

HIGHLIGHTS(1)
(STATED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS,
WHICH ARE PRESENTED ON A DILUTED BASIS)

<TABLE>
<CAPTION>
                                                           Increase                     Increase                   Increase
Years ended December 31,                         2003     (DECREASE)          2002     (Decrease)         2001    (Decrease)
---------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>          <C>            <C>          <C>            <C>
Revenue                                     1,917,933       350,427      1,567,506      (247,702)    1,815,208      504,234
     % change                                      22%          (14%)           45%
Operating earnings (2)                        297,110       141,551        155,559      (206,226)      361,785      115,840
     % change                                      91%          (57%)           47%
Earnings from continuing operations
     before goodwill amortization             191,131       101,597         89,534      (116,763)      206,297       59,439
     % change                                     113%          (57%)           40%
Earnings from continuing operations           191,131       101,597         89,534       (86,176)      175,710       50,694
     % change                                     113%          (49%)           41%
Net earnings                                  188,676        97,411         91,265       (95,269)      186,534       56,421
     % change                                     107%          (51%)           43%
Earnings per share from
     continuing operations                       3.46          1.83           1.63         (1.60)         3.23         0.75
     % change                                     112%          (50%)           30%
Net earnings per share                           3.41          1.75           1.66         (1.78)         3.44         0.86
     % change                                     105%          (52%)           33%
Cash flow from operations                     258,427        59,204        199,223      (233,007)      432,230      195,345
     % change                                      30%          (54%)           82%
Net capital spending                          290,504        50,961        239,543      (101,418)      340,961      160,207
     % change                                      21%          (30%)           89%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  QUARTERLY FINANCIAL INFORMATION FOR THE TWO-YEAR PERIOD ENDED DECEMBER 31,
     2003 IS PRESENTED ON PAGE 104 OF THIS ANNUAL REPORT.

(2)  OPERATING EARNINGS IS NOT A RECOGNIZED MEASURE UNDER CANADIAN GENERALLY
     ACCEPTED ACCOUNTING PRINCIPLES (GAAP). MANAGEMENT BELIEVES THAT IN ADDITION
     TO NET EARNINGS, OPERATING EARNINGS IS A USEFUL SUPPLEMENTAL MEASURE AS IT
     PROVIDES AN INDICATION OF THE RESULTS GENERATED BY THE CORPORATION'S
     PRINCIPAL BUSINESS ACTIVITIES PRIOR TO CONSIDERATION OF HOW THOSE
     ACTIVITIES ARE FINANCED OR HOW THE RESULTS ARE TAXED IN VARIOUS
     JURISDICTIONS. INVESTORS SHOULD BE CAUTIONED, HOWEVER, THAT OPERATING
     EARNINGS 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 OPERATING EARNINGS MAY
     DIFFER FROM OTHER COMPANIES AND, ACCORDINGLY, OPERATING EARNINGS MAY NOT BE
     COMPARABLE TO MEASURES USED BY OTHER COMPANIES.


                                       20
<PAGE>

FINANCIAL POSITION AND RATIOS
(STATED IN THOUSANDS OF CANADIAN DOLLARS)

Years ended December 31,                        2003          2002         2001
-------------------------------------------------------------------------------
Working capital                              248,261       210,256      215,919
Working capital ratio                            1.6           1.5          1.6
Long-term debt (1)                           399,422       514,878      496,200
Long-term debt to long-term debt
   plus equity (1)                              0.19          0.25         0.26
Long-term debt to cash flow
   from operations (1)                          1.5            2.6          1.1
Interest coverage (2)                           8.5            4.4          8.4
--------------------------------------------------------------------------------

(1)  EXCLUDING CURRENT PORTION OF LONG-TERM DEBT WHICH IS INCLUDED IN WORKING
     CAPITAL.

(2)  OPERATING EARNINGS DIVIDED BY NET INTEREST EXPENSE.


     The 107% increase in net earnings in 2003 over 2002 was driven largely by
the strong Canadian market where drilling activity increased by 30% year over
year. Technology Services (TS) return to profitability was also a contributor to
the improvement. While not as significant quantitatively, this milestone
provides a measure of success for management's efforts to re-focus that business
from top line growth to bottom line profitability.

     Interim objectives in the Corporation's five year plan to develop the
Technology Services segment have been achieved, the most significant of which
relate to technological advancements. Our new logging-while-drilling (LWD),
measurement-while-drilling (MWD) and rotary steerable tools have set new
standards for operating in high temperature and high pressure environments and
have demonstrated superior information gathering and steering response
capabilities. The tools are now being put to work by our customers and revenues
should increase as the number of systems deployed to operations increases and as
we fill out our fleet with the full complement of tool sizes.

     Our research and engineering programs were successful at mitigating the
technology risk associated with the TS development plan. However, it was
recognized that insufficient attention had been paid to managing factors that
put achievement of profitability objectives at risk. As is often the case,
achievement of one set of objectives requires different skills than achieving
another set of objectives. As a result, changes were made at various levels of
the TS management team to add the experience required to focus on delivering a
consistent product to our customers in a systematic and profitable manner.

     Change was not isolated to the Technology Services segment. Early in the
year, the Corporation sold its gas compression business, which was carried on by
Energy Industries Inc. Although Energy Industries had been profitable since its
acquisition by Precision in 1996, the compression packaging business was
determined to be not core to the Corporation's energy services globalization
strategy. In September the Corporation's rental businesses were brought under
one umbrella to form Precision Rentals Ltd. This served to simplify purchasing
decisions for our customers by providing one point of contact for all their
rental needs.

<PAGE>

<TABLE>
<CAPTION>
SUMMARY INCOME STATEMENT
(STATED IN THOUSANDS OF CANADIAN DOLLARS)

Years ended December 31,                                       2003                  2002                  2001
---------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                   <C>                   <C>
Operating earnings (loss)
     Contract Drilling                                    $ 285,753             $ 184,553             $ 298,737
     Technology Services                                      4,842               (31,733)               52,257
     Rental and Production                                   39,350                30,090                39,365
     Corporate and Other                                    (32,835)              (27,351)              (28,574)
---------------------------------------------------------------------------------------------------------------
                                                            297,110               155,559               361,785
Interest, net                                                35,050                35,123                43,059
Dividend income                                                  --                   (39)               (1,106)
Gain on disposal of investments                              (3,355)                 (900)               (1,805)
Earnings from continuing operations before
     income taxes, non-controlling interest
     and goodwill amortization                              265,415               121,375               321,637
Income taxes                                                 72,532                30,690               114,472
---------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before
     non-controlling interest and
     goodwill amortization                                  192,883                90,685               207,165
Non-controlling interest                                      1,752                 1,151                   868
---------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before
     goodwill amortization                                  191,131                89,534               206,297
Goodwill amortization, net of tax                                --                    --                30,587
---------------------------------------------------------------------------------------------------------------
Earnings from continuing operations                         191,131                89,534               175,710
Gain on disposal of discontinued operations                  17,460                    --                    --
Discontinued operations                                     (19,915)                1,731                10,824
Net earnings                                              $ 188,676             $  91,265             $ 186,534
---------------------------------------------------------------------------------------------------------------
</TABLE>

ECONOMIC DRIVERS OF THE OILFIELD SERVICES BUSINESS

     Crude oil and natural gas (hydrocarbons) are the primary sources of energy
in the world. The provision of these commodities to the consuming public
involves a number of players, each of whom take on different risks in the
process of exploring for, producing, refining and distributing hydrocarbons and
its associated refined by-products. Exploration and production companies assume
the risk of finding hydrocarbons in pools of sufficient size to economically
develop and produce the reserves. The economics of exploration and production is
dictated by the current and expected future margin between the cost to find and
develop hydrocarbons and the price at which those products can be sold. The
wider the margin, the more incentive there is to undertake the activities
involved in the process of finding, producing, refining and distributing energy
to residential and business users.

<PAGE>

The worldwide oilfield services industry (broadly defined) is a 100 billion
business that provides a wide array of services and equipment to support oil and
gas exploration and production activities.



[GRAPHIC OMITTED - PIE CHART]             [GRAPHIC OMITTED - PIE CHART]
[OILFIELD SPENDING WORLDWIDE]             [SOURCES OF ENERGY USED WORLDWIDE]

-------------------------------           --------------------------------------
Reservoir Info              5%            Crude Oil                          39%
Drilling                   26%            Natural Gas                        23%
Drilling Related           17%            Coal                               23%
Completion                 16%            Hydroelectric Power                 7%
Infrastructure             16%            Nuclear Electric Power              7%
Production/Maintenance     14%            Geothermal, Solar, Wind and
Logisitical Support         6%               Wood and Waste Electric Power    1%
-------------------------------           --------------------------------------


     These activities include acquiring access to prospective lands, shooting
seismic to detect the presence of hydrocarbons, drilling wells and measuring the
characteristics of subsurface geological formations. If a well is evaluated to
be commercially viable, additional oilfield services are required to complete
the new well and then subsequently to maintain production. Exploration and
production companies hire oilfield service companies to perform the majority of
these services, hence, they are Precision's customers. The revenue for an
oilfield service company is therefore, our customer's finding and development
cost.

     Providing these services incorporates three main elements: people,
technology and equipment. Attracting, training and retaining qualified employees
is the single biggest challenge for a service company. Exploration and
production activities are taking place in ever changing surface and subsurface
conditions. Developing technology and building equipment that can withstand
increasing physical challenges and operate more efficiently is key to
maintaining and improving the economics of crude oil and natural gas production.
The primary economic risks assumed by oilfield service companies are the
volatility of activity levels, that translate into utilization rates for its
investment in people, technology and equipment, and cost control to maximize the
margins it earns.

     The economics of a service company is thus largely driven by the current
and expected price of crude oil and natural gas, which is determined by the
supply and demand for the commodity. Since crude oil can be transported
relatively easily, it is priced in a worldwide market which is influenced by a
wide array of economic and political factors. Natural gas is priced in more
local markets due to the requirement to transport this gaseous product in
pressurized pipelines.

<PAGE>

                         [GRAPHIC OMITTED - LINE CHART]
                       [WTI OIL AND HENRY HUB GAS PRICES]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Date              Jan-85  Jan-86  Jan-87  Jan-88  Jan-89  Jan-90  Jan-91  Jan-92  Jan-93  Jan-94
--------------------------------------------------------------------------------------------------
<S>                <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
US$/Bbl            25.75   23.63   18.48   17.01   17.98   22.87   25.78   18.82   19.15   14.97
--------------------------------------------------------------------------------------------------
US$/MMBtu           2.82    2.06    1.47    1.84    1.83    2.23    1.57    1.29    1.77    2.08
--------------------------------------------------------------------------------------------------
4 Year Gas Avg      1.77    1.77    1.77    1.77    1.53    1.53    1.53    1.53    1.89    1.89
--------------------------------------------------------------------------------------------------
4 Year Oil Avg     19.54   19.54   19.54   19.54   21.53   21.53   21.53   21.53   19.06   19.06
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------
Date               Jan-95  Jan-96  Jan-97 Jan-98  Jan-99  Jan-00  Jan-01  Jan-02  Jan-03
-----------------------------------------------------------------------------------------
<S>                 <C>     <C>     <C>     <C>    <C>     <C>     <C>     <C>     <C>
US$/Bbl             17.98   18.88   25.13   16.7   12.49   27.27   29.55   19.57   32.87
-----------------------------------------------------------------------------------------
US$/MMBtu            1.33    2.34    3.46   2.02    1.75    2.26    8.72    2.14    5.15
-----------------------------------------------------------------------------------------
4 Year Gas Avg       1.89    1.89    2.66   2.66    2.66    2.66    4.07    4.07    4.07
-----------------------------------------------------------------------------------------
4 Year Oil Avg      19.06   19.06   21.15  21.15   21.15   21.15   26.77   26.77   26.77
-----------------------------------------------------------------------------------------
</TABLE>


     Although, as illustrated above, crude oil and natural gas prices have
historically been quite volatile, the consensus of industry observers is that
the relatively high current price environment appears to be sustainable for the
foreseeable future. Oil prices, which during 2003 averaged US$31.10 per barrel
for West Texas Intermediate (WTI), are the result of political instability in
some OPEC member nations (Venezuela, Iraq and Nigeria) and from a generally
improving world economy with energy demand growth particularly strong in China
and Southeast Asia. Another important factor in the crude oil pricing equation,
and one that has seen a fundamental change from past pricing scenarios, is the
value of the U.S. dollar. Since oil prices are denominated in U.S. dollars
around the world, the devaluation of the U.S. dollar that has occurred over the
past year has implications for both the seller and buyer of the commodity. Oil
producing nations, with OPEC members taking the lead in controlling supplies and
prices, are motivated to see an increase in the U.S. dollar price of oil to
maintain their purchasing power in other currencies such as the Euro. From a
buyer's perspective, the devaluation of the U.S. dollar has made oil a cheaper
commodity for those who spend Euros and Japanese Yen thus supporting the
increased demand.

     North American natural gas prices are also being supported by strong
fundamentals. Demand is increasing with improved economic growth while supply
from relatively mature producing basins is starting to decline. The near record
gas drilling activity in 2003 served only to slow the decline in the production
rate and this situation is not expected to change in the near future. High oil
prices also serve to support natural gas prices as the

<PAGE>

economic benefit of switching between the two fuels is minimal. The importation
of liquefied natural gas into the North American market, once thought to be the
competitive product that would cause gas prices to decline, is now viewed by
many industry analysts as a requirement to fill the gap between demand and
conventional production capabilities.

THE CANADIAN MARKET - PRECISION'S PLATFORM

     The Western Canada Sedimentary Basin (WCSB) is maturing and our Canadian
business units are adapting to this change. Overall production in the WCSB is
growing, however, conventional oil is on the decline and natural gas reserve
growth is struggling to replace 2003 production volumes. Growth opportunities
exist in oil sands, heavy oil and tight gas drilling, coal bed methane drilling
in particular. Longer-term medium to deep drilling prospects will be long
awaited opportunity for oilfield service providers. With strong commodity
prices, our customers first exploit low risk quick tie-in production. For
western Canada this is shallow natural gas and the statistics prove this out.
The number of wells drilled in 2003 set an all-time high with 19,851 completed
wells. Note that well statistics on a completion basis differ from rig releases
due to delays in reporting. While the statistics vary, well completion
statistics accurately profile work opportunity over longer periods of time.

     The following chart profiles the type of wells drilled in Canada over the
past 10 years.



                           [GRAPHIC OMITTED - BAR CHART]
                       [WESTERM CANADA SEDIMENTARY BASIN]
            [NUMBER OF INDUSTRY WELLS DRILLED ON A COMPLETION BASIS]

       ------------------------------------------------------------------------
                         Oil              Gas              Dry          Service
                         ---              ---              ---          -------
       1994             3853             5370             2503              145
       1995             4843             3618             2414              187
       1996             6332             3726             2459              178
       1997             8558             4857             2777              292
       1998             3142             4585             1850              167
       1999             2730             6309             1427              139
       2000             5462             8934             1903              186
       2001             4689            11177             1759              308
       2002             3832             9073             1289              265
       2003             4473            13944             1233              201
       ------------------------------------------------------------------------



<PAGE>

     The steady growth in natural gas drilling has fueled activity for the past
decade. The shift from oil to natural gas wells impacts the underlying nature of
the energy services that companies like Precision provide. It has created higher
demand for snubbing and in general, lower demand for service rigs, as natural
gas wells do not need to be worked over as frequently as oil wells.

     The following chart profiles 10-year drilling rig activity trends as
measured by spud to rig release operating days by category of drilling rig depth
rating.


                          [GRAPHIC OMITTED - BAR CHART]
                       [WESTERN CANADA SEDIMENTARY BASIN]
                            [INDUSTRY OPERATING DAYS]
                         [BY DRILLING RIG DEPTH RATING]

--------------------------------------------------------------------------------
         0-950    951 - 1850  1851-2450  2451-3050  3051-3700  3701-4600  4601+
         -----    ----------  ---------  ---------  ---------  ---------  -----
1994     14273      38573       22592      12433       5557       3407      587
1995     14056      35205       17349       9980       4788       2963     1955
1996     19393      37593       20276      10615       5169       2944     1407
1997     24996      43085       27204      18797       5729       5670     2563
1998     13023      24323       20697      17292       5828       6265     1973
1999     14976      21422       17541      14378       4930       6464     2037
2000     22198      32103       23848      19390       9214       6646     4047
2001     22529      30300       23301      23320       9719       6988     4288
2002     18894      21877       17327      17299       8004       4228     4358
2003     27543      31431       21842      22002      13987       5188     4505
--------------------------------------------------------------------------------


     While the year 2003 set the WCSB well count record, it is 1997 that
continues to hold the high mark for drilling rig work in terms of utilization
and operating days. At 33% of industry drilling rigs, Precision's activity
tracks very close to industry. While the well count is important, the reduction
in time to drill a well deserves emphasis.

     It is the development of shallow well oil and natural gas prospects that
underpins the Canadian market and continues to be the agent for activity
volatility. The trend towards deeper drilling prospects is progressing at a slow
pace. However as our customers drill out the shallow well inventories that they
hold today, they will be forced to pursue deeper prospects. We believe that we
are beginning to see this shift as demand for medium depth light triple type
drilling rigs has never been stronger than it is in the first quarter of 2004.

<PAGE>

     The following chart profiles the 10-year trend in terms of average well
depth and average operating days to drill a well.



                         [GRAPHIC OMITTED - LINE CHART]
                       [WESTERN CANADA SEDIMENTARY BASIN]
                AVERAGE INDUSTRY WELL DEPTH VERSUS TIME TO DRILL

              ------------------------------------------------------
                             Days                              Depth
                             ----                              -----
              1994           8.21             1994             1152
              1995            7.8             1995             1162
              1996           7.67             1996             1107
              1997           7.77             1997             1108
              1998           9.17             1998             1240
              1999           7.71             1999             1078
              2000           7.12             2000             1068
              2001           6.72             2001             1062
              2002           6.36             2002             1067
              2003           6.37             2003             1032
              ------------------------------------------------------


     On average, oil and gas well depths are increasingly shallow. This is
entirely consistent with the production shift to natural gas in the WCSB.
Experience shows that our customers, the producers, first develop low risk close
to market prospects such as those in southern Alberta. The average time to drill
a well in the WCSB in 2003 was just over six days. For Precision in Canada, the
average time is 5.1 days. The average drilling time per well has shown
considerable reduction since 1999 as drilling contractors continue to search for
niche equipment solutions to specific well parameters. Precision's coil tubing
drilling rigs, since their emergence in the year 2000, have had a significant
impact on industry drilling statistics and in some ways have diminished the
meaning of a well count in terms of drilling rig activity.

     Improvements in drilling equipment and processes in combination with better
downhole tools like MWD, LWD and the drill bit have provided productivity gains
that lower customer costs. Precision's coil tubing drilling rigs is a case in
point. Available rigs averaged 10.5 in 2003 and all together they drilled 2,641
wells during the year. Each well averaged a well depth of 614 metres, took 16.8
hours to drill with an operating utilization of 48%, move time excluded. These
types of drilling solutions are applicable to specific drilling programs only
and have filled a customer need to better exploit shallow natural gas. Another
example is oil sands drilling in northeast Alberta where Precision has taken a
lead industry role in the development of specialized equipment configuration
with our Super Single(R) drilling rig to meet the drilling requirement for
programs that enable recovery techniques such as Steam Assisted Gravity Drainage
(SAGD).

<PAGE>

     Innovations such as these may reduce our drilling revenue days in the near
term, however it balances out as we enable our customers to pursue more
prospects in the exploitation of hydrocarbons within the WCSB.

     The following chart profiles the 10-year trend in terms of available
drilling rigs and operating day rig utilization.



                       [GRAPHIC OMITTED - LINE/BAR CHART]
                       [WESTERN CANADA SEDIMENTARY BASIN]
         [INDUSTRY UTILIZATION VERSUS NUMBER OF DRILLING RIGS AVAILABLE]

         ---------------------------------------------------------------
                   Drilling Rigs                      Rig Operating
                    Available at                                Day
                        Year End                        Utilization
                        --------                        -----------
           1994              445             1994               62
           1995              458             1995               51
           1996              479             1996               58
           1997              545             1997               69
           1998              579             1998               43
           1999              588             1999               39
           2000              615             2000               54
           2001              652             2001               52
           2002              662             2002               38
           2003              681             2003               52
         ---------------------------------------------------------------


     The supply of drilling rigs in Canada has steadily increased over the past
10 years to almost 700, an all-time high. Customer demand as measured by
operating day utilization peaked in 1997 and has languished between 38% and 56%
since. This has not deterred the industry from adding rigs as drilling
contractors have continued to build capacity. In the short term the capacity is
geared toward peak winter demand in January and February. In the medium to
long-term it provides the capacity to drill more wells through better
utilization in the other ten months of the year. If commodity prices weaken for
a prolonged period the industry may have a large supply demand imbalance.
Clearly the industry believes that the pace of drilling to sustain natural gas
production for domestic Canadian use and export to the United States will keep
equipment utilization in good stead.

     Within the Contract Drilling segment, Precision underwent tremendous growth
in Canada up to 1997. Subsequently we diversified our service offering through
service rigs and snubbing units to service and work-over the increasing number
of wells drilled and in production. This included camp and catering capabilities
to meet the logistical reality of remote drilling locations and the need to
reduce travel incidents for field employees at the well site. Precision's
drilling rig fleet represented 40% of the industry in 1997. Our market share has
eroded to 33% in 2003. Precision is comfortable at this level and we acknowledge
that it would take the acquisition of 55 existing rigs to regain lost market
share.

<PAGE>

     With a lead industry market share in Canada and reduced acquisition
opportunities within Canada our focus has been to reach out and gain experience
in the international drilling market. We have gained considerable work
experience and projects like the Burgos Basin in Mexico demonstrate our ability
to deploy and operate on a large scale in the global arena.

PRECISION'S DEVELOPMENT IN THE OILFIELD SERVICES BUSINESS

     Precision's development is best described in the context of its three
business segments which are distinguished by not only by the types of services
provided but also by their position on the continuum from start-up to maturity.
Contract Drilling includes drilling rigs, service rigs, hydraulic well assist
snubbing units, procurement and distribution of oilfield supplies, camp and
catering services, and manufacture, sale and repair of rig equipment. Technology
Services includes wireline, directional drilling, MWD, LWD services, separation
services, controlled pressure drilling, and the design, manufacture and
marketing of polycrystalline diamond compact drill bits. Rental and Production
includes oilfield equipment rental services and industrial process services.

     The following graphs illustrate how each of the Contract Drilling,
Technology Services and Rental and Production segments have historically
contributed to Precision's profitability and investment.



[GRAPHIC OMITTED - BAR CHART]
[REVENUE ($ millions)]

------------------------------------------------
               CD            TS          R&P
               --            --          ---
1999        428.15        125.95       113.15
2000        739.61        352.10       159.00
2001       1004.27        614.15       194.57
2002        777.15        603.09       192.84
2003        992.82        714.39       210.72
------------------------------------------------


[GRAPHIC OMITTED - BAR CHART]
[OPERATING EARNINGS ($ millions)]

------------------------------------------------
               CD             TS          R&P
               --             --          ---
1999         98.42          6.80         9.99
2000        211.03         30.62        32.62
2001        298.73         52.26        39.36
2002        184.55         31.73        30.09
2003        285.73          4.84        39.35
------------------------------------------------


[GRAPHIC OMITTED - BAR CHART]
[CAPITAL SPENDING ($ millions)]

------------------------------------------------
               CD            TS           R&P
               --            --           ---
1999         27.67         9.138         15.8
2000         97.50         78.46        21.28
2001        122.58        203.54        27.35
2002         50.00        189.09        22.35
2003         99.03        177.75        15.16
------------------------------------------------

<PAGE>

CONTRACT DRILLING - CANADA IS THE CORE - WORLDWIDE DRILLING IS IN SIGHT

     The Contract Drilling segment is the current financial foundation of the
Corporation. Canadian business units within the segment are well established.
Each core business unit has undergone asset growth and has a lead market role
within Canada. Using the financial and operational leverage gained, the segment
continues to evolve within Canada with a view to exporting its capabilities to
niche markets worldwide.

     Within Canada the segment has individual business units that are tightly
integrated in terms of operational management, safety, engineering, accounting
and senior management supervision and governance. Communication is a skill that
has been refined and ingrained in the operating culture. The strength to
successfully integrate acquisitions with vertical integration within and between
related ancillary business units has been developed through the handling of
acquisitions over the past 15 years.

     Precision's roots began in Western Canada as a land drilling contractor and
the Corporation's development has matched that of the WCSB. Initially founded in
1985 as Cypress Drilling Ltd., the business quickly grew from four drilling rigs
to 19 with the reverse takeover in 1987 of Precision Drilling Ltd., a company
formed in 1952. Over the following decade a series of nine acquisitions expanded
the Canadian drilling rig fleet to 200 as of May 1997 and a 40% market share of
industry rigs. International operations in Venezuela commenced in 1992 with the
Sierra Drilling acquisition. Diversification into service rig and snubbing
operations came with the 1996 acquisition of Enserv Corporation. In the second
half of the year 2000, Precision became fully vested in the Canadian service rig
business as the CenAlta Energy Services Inc. acquisition created a combined
fleet of 257 service rigs and a lead industry market share of 28%. The
additional acquisition in 2000 of coil tubing drilling rigs and other shallow
drilling rigs rounds out key milestones in our asset base growth.

     While each business unit is at its own stage in the business life cycle
continuum, drilling has matured over the past three years. Today the business
has developed critical equipment mass and employee depth. It has developed
integrity-based systems that enable the business to evolve in meeting
fundamental industry challenges while delivering better profit and safety
performance. Employee retention and seasonal cycles remain a huge manpower
challenge for the industry. This condition is rather unique in that there is a
reasonable supply of equipment; it is the people element that keeps the market
in tight supply. The supply of experienced people yields profit leverage for
oilfield service companies, not just the "iron".

<PAGE>

<TABLE>
<CAPTION>
CORE BUSINESS ASSETS
                                                                        Five Year History, end of year status
---------------------------------------------------------------------------------------------------------------------------
                                                                  2003        2002         2001          2000          1999
---------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>         <C>          <C>           <C>           <C>
International (beyond Canada and the U.S.)
   Drilling Rigs                                                    19          16           15            12            11
United States
   Drilling Rigs                                                     1           1            4             2             0
Canada
   Drilling Rigs - 33% of industry                                 225         226          229           230           211
   Service Rigs - 28% of industry                                  239         240          257           257            76
   Rig Assist Snubbing Units - 33% of industry                      25          23           24            19            20
   Oilfield Drilling Camps - 25% of industry                        88          74           74            74            75
Enabling Infrastructure (Canada - in square feet)
   Equipment Manufacture Facility                               48,000      48,000       48,000        38,000        38,000
Consumable Supply Procurement and
     Distribution Facility                                      40,000      40,000       40,000        40,000        40,000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


The following tables provide a worldwide summary of Precision's drilling and
service rig fleets.

<TABLE>
<CAPTION>
                                                                   2003                                     2002
Type of Drilling Rig            Depth      CANADA/U.S.    INTERNATIONAL      TOTAL    Canada/U.S.  International      Total
---------------------------------------------------------------------------------------------------------------------------
<S>                        <C>             <C>            <C>                <C>      <C>          <C>                <C>
Single                     to 1,200 m               18               --         18             17             --         17
Super Single(R)            to 2,500 m               15                4         19             16              4         20
Double                     to 3,000 m               96                7        103             96              6        102
Light triple               to 3,600 m               47                6         53             48              5         53
Heavy triple               to 7,600 m               39                2         41             39              1         40
Coiled tubing                                       11               --         11             11             --         11
---------------------------------------------------------------------------------------------------------------------------
Total fleet                                        226               19        245            227             16        243
---------------------------------------------------------------------------------------------------------------------------

<CAPTION>
Type of Service Rig - Canada                                      2003         2002          2001         2000         1999
---------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>          <C>           <C>          <C>          <C>
Single                                                               1            1             4            4           --
Freestanding mobile single                                          75           50            23            8            4
Mobile single                                                       29           55            91          105           42
Double                                                              57           58            60           59           24
Freestanding mobile double                                           6            6             5            4           --
Mobile double                                                       46           45            48           50           --
Heavy double                                                         7            7             9            9            2
Freestanding heavy double                                            2            2            --           --           --
Freestanding slants                                                 16           16            16           16            4
Swab                                                                --           --             1            2           --
---------------------------------------------------------------------------------------------------------------------------
Total fleet                                                        239          240           257          257           76
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

     As shallow natural gas drilling runs its course in Canada, our diverse and
versatile fleet of drilling and service rigs are very well positioned for the
eventual shift to deeper drilling prospects.

TECHNOLOGY SERVICES

     The acquisition of Computalog Ltd. in 1999 marked the initial step in a
five-year strategy to develop the Technology Services business. The market for
downhole services was and still is dominated by three large multi-national
oilfield service companies. However, oil and gas exploration and production
companies are keen to see competition in the ranks of their service providers
and a niche was available to a smaller participant that could deliver quality
products and service. Precision's mature drilling operation provided the
reputation of a respected service provider and the financial backing required to
take on such a venture. In addition, the TS business provided the means to
participate in the offshore oil and gas exploration and production market.

     The objectives of TS are the same today as they were in 1999. They are to
expand our product offering, globalize the presence of the whole Precision group
outside of Canada, and introduce a step change in technological capabilities of
what existed in TS and the industry. An advantage that TS had as a new
"greenfield" participant in the market was that it was not burdened by the
challenge of integrating new technology with old, nor need it be concerned with
the impact new technology might have on the economics of a substantial
investment in earlier generation technologies.

     Initially, activities aimed at achieving TS objectives were undertaken
across a broad front. Since 1999 Precision has spent $133 million on its
research and engineering efforts. Much of this work was centered around
Advantage R&D, Inc. in Houston, Texas, which was established by Precision in
2000 with the mandate to develop the next generation of LWD and MWD tools.
Another significant element of the research and engineering program focused on
the development of our Rotary Steerable tools, which work was undertaken by
Smart Stabilizer Systems Ltd., a Precision subsidiary based in Cheltenham,
England.

     Acquisitions, including Geoservices S.A in October 2000 and BecField
Drilling Services Ltd. in January 2001, were completed to gain access to
innovative technologies and to establish a presence in certain regional
international markets. By early 2001, TS had established regional centers in
seven strategic geographic areas around the world, namely Canada, the U.S.,
Mexico, Latin America, Europe/Africa, the Middle East and Asia/Pacific.

     Technology Services revenue grew from $126 million in 1999 to $603 million
in 2002. A significant amount of this expansion came outside of the Canadian and
U.S. markets with the other regional operations accounting for 38% of revenue in
2002 compared to 14% in 1999. However, the scope of TS growth initiatives, in
terms of both geography and product lines, combined with the impact of delays in
the deployment of new technologies, resulted in operations support and
administrative organizations that were uneconomic for the start-up revenue
levels realized.

<PAGE>

     Fiscal 2003 can best be characterized as a "year of re-focus" for TS. A
number of management changes occurred during the year which changed the style
and culture of the TS segment. No longer is the segment purely focused on
revenue growth and geographic expansion. The renewed goal is profitable growth
in areas where we believe we can achieve an acceptable long-term return on our
investment.

RENTAL AND PRODUCTION

     Precision entered this segment of its business in 1996 when it acquired
EnServ Corporation. Since then the Corporation has reduced the operations
carried on by this segment through strategic divestitures that took advantage of
attractive valuations to dispose of operations determined to be not core to
Precision's future growth plans. The industrial rental division was sold in
February 1999 and the gas compression operation was sold in March 2003. Each of
these transactions produced gains for the Corporation. Both of the businesses
currently carried on by the segment, namely, industrial plant maintenance and
oilfield equipment rental, have grown through acquisitions and the pursuit of
internal growth opportunities.

     CEDA's plant maintenance operations have become increasingly focused on the
expanding activity in northern Alberta's oilsands regions. The acquisition of
JJay Exchanger Industries Ltd. in the second quarter of 2000 solidified the
segment's position in this market as a provider of all the required services in
a major refinery or petro-chemical plant turnaround/shutdown.

     Innovation has also played an important role in CEDA's steady growth. Their
research and development efforts have grown out of their unique knowledge and
experience, with the focus on developing new tools and applications that are
marketable in the field. Examples of products that CEDA has introduced to the
market include the SuperLance(TM) System, which combined Precision's experience
in coil tubing drilling with water blasting technology to increase the
efficiency of cleaning coker units in refineries, and various adaptations of
robotics technology to increase the safety and timeliness of tank cleaning
operations.

     The oilfield equipment rental business expanded its product offerings in
1997 with the acquisition of substantially all of the business assets of
Ducharme Oilfield Rentals Ltd. whose primary product line was the rental of
portable industrial housing, which is used at many remote drilling locations in
western Canada. Since then many initiatives have been undertaken to integrate
the delivery of products to customers and increase the profitability of
operations. Among them is the closure of the wellsite trailer manufacturing
facility in favour of less costly outsourcing arrangements in 2002 and more
recently the consolidation of all rental product lines to form Precision Rentals
Ltd. This latter move was in response to changing and growing customer needs to
simplify their purchasing decisions by providing one point of contact to access
all their rental needs.

<PAGE>

RESULTS OF OPERATIONS

CONTRACT DRILLING
(STATED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER DAY/HOUR AMOUNTS)

<TABLE>
<CAPTION>
                                                                  % OF                       % of                        % of
Years ended December 31,                          2003         REVENUE          2002      Revenue          2001       Revenue
-----------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>        <C>             <C>        <C>              <C>
Revenue                                       $  992,824                  $  770,147                 $1,004,265
Expenses:
   Operating                                     602,418          60.7       491,433         63.8       599,159          59.7
   General and administrative                     29,364           3.0        29,769          3.9        32,453           3.2
   Depreciation                                   77,725           7.8        62,524          8.1        75,170           7.5
   Foreign exchange                               (2,436)         (0.3)        1,868          0.2        (1,254)         (0.1)
-----------------------------------------------------------------------------------------------------------------------------
Operating earnings                            $  285,753          28.8    $  184,553         24.0    $  298,737          29.7
-----------------------------------------------------------------------------------------------------------------------------

<CAPTION>
                                                            % INCREASE                 % Increase                  % Increase
                                                  2003       (DECREASE)         2002    (Decrease)         2001     (Decrease)
-----------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>             <C>        <C>             <C>         <C>
Number of drilling rigs (end of year)             245              0.8           243         (2.0)          248           1.6
Drilling operating days (worldwide)            46,715             33.2        35,081        (25.6)       47,142           8.7
Revenue per operating day                    $ 15,984             (0.1)     $ 16,008         (0.1)     $ 16,097          15.3
Number of service rigs (end of year)              239             (0.4)          240         (6.6)          257            --
Service rig operating hours                   439,519             12.1       392,210        (20.4)      492,480         121.3
Revenue per operating hour                   $    462              3.6      $    446          4.4      $    427          12.4
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

2003 COMPARED TO 2002

     In financial terms, the Contract Drilling segment had a very good year in
2003 with a sharp rebound in Canadian drilling activity to 2001 levels, higher
international rig activity with fourth quarter growth and a moderate increase in
Canadian service rig activity. Snubbing and camps services were also more active
with equipment utilization improvement similar to drilling. While international
conditions were positive, seasonally adjusted Canadian performance strengthened
throughout 2003. In 2002, the quarterly trend was quite the opposite where in
Canada conditions were deteriorating after the torrid pace of 2001. For 2003,
segment revenues increased by 29% to $993 million, an improvement of $223
million over the prior year. Operating earnings increased by 55% to $286
million, an improvement of $101 million and 4.8 percentage points of revenue for
a margin improvement of 20%. Of the $101 million improvement in operating
earnings, 70% or $70 million of this is attributable to Canadian drilling rig
and service rig operations. This earnings improvement is attributable to more
equipment activity and higher pricing. The equipment activity increase, volume
factor, generated incremental operating earnings of $50 million over prior year
with higher pricing, price factor, generating $20 million virtually all of which
was generated in the second half of the year. Service rig performance is
noteworthy, as the operating earnings margin improvement was almost half the
total at $9 million or $21 per service rig operating hour.

<PAGE>

     International drilling operations experienced significant expansion in 2003
as operating earnings and operating days increased by 31% and 32%, respectively,
over 2002. The increased activity is attributable to additional rigs working in
Mexico and the commencement of operations in the Middle East and the
Asia/Pacific region.

     In summary, current year performance is significantly ahead of 2002, and
close to the record setting performance of fiscal 2001.

     Coming off a relatively weak 2002, fiscal 2003 steadily gained strength as
our customers stepped up field activity to increase production in an environment
where commodity price strength became more entrenched. With firm global oil
pricing and firm North American natural gas pricing, sustained demand for
Canadian Contract Drilling services throughout the year has allowed for strong
revenue rates as we exit the fourth quarter of 2003. In the Canadian market,
this is in sharp contrast to 2002, where rates were being undermined to start
the year and continued to erode during the year.

     During 2003 Contract Drilling kept tight control on capital expenditures
with a focus to strengthen the existing asset base, grow international drilling
and be opportunistic to acquisitions within Canada. Capital expenditures,
including business acquisitions, totaled $106 million, representing an increase
of $55 million or 108% compared with 2002. The increase is primarily
attributable to asset base growth as the level of expenditure to upgrade our
existing asset base is a continual priority.

     International drilling operations continued along a path of patient growth.
The rig count increased by three to exit the year at 19, with 10 in Mexico, two
in the Middle East, two in Asia/Pacific, and five in South America. There were
four additions and net one rig disposal. Three new rigs were built in Canada
with one deployed to Mexico, one to the Middle East and one platform rig to the
Asia/Pacific region. The fourth rig is a retrofitted mechanical light triple
deployed to Mexico from the Canadian fleet. A net one rig ownership interest in
Argentina was disposed of during the year. The platform-mounted rig 703 is of
particular interest as it is Precision's first offshore drilling rig. The rig
was mobilized for Asia/Pacific late in the year and is not expected to start
operations until the second quarter of 2004.



[GRAPHIC OMITTED - PIE CHART]
[GEOGRAPHIC DISTRIBUTION OF
 CONTRACT DRILLING REVENUE (2003)]

-----------------------------------
Canada     Mexico     Rest of World
------     ------     -------------
  88         7              5
-----------------------------------

<PAGE>

     In Canada, our asset base expanded with the acquisition of two snubbing
units, 19 oilfield camps and the construction of one new generation single
drilling rig, a Super Single(R) Light with a 1,200 metre depth rating. A second
such rig commenced drilling in February 2004. Asset reductions include the
decommissioning of one drilling and one service rig, the sale of one surface
hole drilling rig and one camp and the transformation of certain four unit camps
into six unit configurations.

     Canada spurred the improved financial performance on the strength of record
shallow natural gas well drilling activity.

o    Canadian drilling rig activity increased 36% over prior year to 42,725
     operating days and 52% utilization, an improvement of 11,362 days and 14
     utilization percentage points.

o    Service rig activity increased 12% over prior year to 439,519 operating
     hours and 50% utilization, an improvement of 47,309 hours and five
     utilization percentage points.

o    Snubbing unit activity increased 39% over prior year to 4,322 utilization
     days and 54% utilization, an improvement of 1,210 days and 12 utilization
     percentage points.

o    Camp activity increased 38% over prior year to 12,451 camp days and 39%
     utilization, an improvement of 3,406 days and 6 utilization percentage
     points.

     International drilling rig activity increased 32% over prior year to 3,990
operating days, an improvement of 975 days. Two thirds of the additional days
occurred in the Mexico operations where additional rigs were put to work with
the extension of the Burgos integrated services project. Drilling operations ran
for a full year in the Asia/Pacific region adding 280 days to the increase in
2003 while Middle East operations commenced in the fourth quarter of 2003.

     Looking ahead to 2004 we carry strong momentum in all business lines within
the segment.

o    Precision Drilling International's drilling operation is expected to
     benefit from a full year of 2003 growth in the Middle East and Asia/Pacific
     regions. We expect operations in Venezuela to carry forward at current
     levels.

o    Precision Drilling in Canada is off to an excellent first quarter start
     with drilling rig activity 4% ahead of 2003 and superior operating earning
     margins.

o    Precision Well Servicing in Canada is off to an even better first quarter
     start with service rig activity 8% ahead of 2003 and superior operating
     earnings margins.

o    Live Well Service and LRG Catering are also ahead of last year's pace as
     natural gas drilling and production activity is generating strong demand
     for snubbing and camp/catering services.

<PAGE>

2002 COMPARED TO 2001

     The asset base for Contract Drilling was virtually unchanged during 2002,
as there were no additions and certain rigs, 4 drilling and 17 service, were
taken out of service. The reasons for the decline in activity in 2002 compared
to 2001 were two-fold. First, competition and industry capacity continued to
increase, albeit at a slower pace, as competitors continued to build new
equipment. Available rigs in Canada reached an all-time record high. Second,
although the fourth best year ever in western Canada in terms of well
completions, 2002 was characterized by low risk drilling whereby short duration
shallow gas wells were dominant. A lack of confidence in energy commodity
pricing triggered conservative spending by our customers. This was noteworthy as
drilling parameters serve as a lead indicator for most future energy services
within a region. There were 14,459 wells drilled in Canada in 2002, a mark that
resulted in a drilling rig activity decline of 27% to 31,363 operating days for
Precision in Canada representing a 38% utilization rate, a post-1992 low.
Service rig activity declined 20% to 392,210 hours in Canada (44% utilization).
Our service rig work was split one-third new well completion with the remaining
two-thirds directed towards the workover of existing wells in production.
Snubbing unit activity declined 15% and camp and catering days declined 37% to
9,041 days (33% utilization).

     Capital expenditures were managed to closely match changes in demand for
our existing asset base. Measures of demand include utilization, revenue and
operating earnings. Compared to the prior year service and drilling rig
utilization declined a combined 24%, capital expenditures declined 59%, revenue
decline of 23% and operating earnings declined 38%.

     In terms of operating earnings, the $114 million dollar decline over prior
year was due to a volume reduction of $71 million due to lower equipment
utilization, with the remaining $43 million due to price competitiveness
resulting in lower rig dayrates and less coverage of fixed infrastructure costs.
Drilling and service rig dayrates were strong in the first quarter of 2002 as
record 2001 performance momentum carried forward through winter drilling.
However, as the remaining three quarters progressed, steadily softening demand
continued to erode operating margins and Contract Drilling exited the year with
margins at 52 week lows.



<PAGE>

<TABLE>
<CAPTION>
TECHNOLOGY SERVICES
(STATED IN THOUSANDS OF CANADIAN DOLLARS)
                                                                        % OF                     % of                     % of
Years ended December 31,                                   2003      REVENUE         2002     Revenue         2001     Revenue
------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>        <C>           <C>        <C>           <C>
Revenue                                              $  714,385                 $ 603,088                $ 614,152
Expenses:
   Operating                                            523,105         73.2      463,632        76.9       404,577       65.9
   General and administrative                            70,619          9.9       80,751        13.4        75,468       12.3
   Depreciation and amortization                         75,578         10.6       53,347         8.8        47,694        7.8
   Research & engineering                                42,419          5.9       34,862         5.8        31,677        5.1
   Foreign exchange                                      (2,178)        (0.3)       2,229         0.4         2,479        0.4
Operating earnings (loss)                            $    4,842          0.7    $ (31,733)       (5.3)   $   52,257        8.5

<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                              % INCREASE                 % Increase                 % Increase
                                                       2003    (DECREASE)        2002     (Decrease)        2001     (Decrease)
------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>      <C>              <C>       <C>              <C>       <C>
Wireline jobs performed                              38,403         24.6       30,813        (18.6)       37,845          28.6
Directional wells drilled                             2,954         78.6        1,654          44.1        1,148          15.1
Well testing/CPD man days (Canada only) (1)          53,377          8.4       49,227        (18.1)       60,135          43.9
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) CONTROLLED PRESSURE DRILLING (CPD).


2003 COMPARED TO 2002

     As noted earlier, 2003 was a year of transition for Technology Services
with new management changing the focus of the business from top line growth and
geographic expansion to enhanced bottom line profitability. Return on capital
employed is now the yardstick by which success is measured and investment
decisions are guided. The transition is not complete, however, significant
improvements were achieved in all regions and we will strive to make further
progress in 2004.

     Notable accomplishments in 2003 include the following:

o    Non-profitable product lines were shut down in many regions. This is
     consistent with another key element of the Technology Services strategy
     going forward. That being, not trying to be everything to everybody
     everywhere. The segment will focus on what it is good at in regions where
     economies of scale will contribute to profitable operations.

o    Other businesses were rationalized and re-focused. In some instances this
     involved consolidating management functions where geographically possible.
     In others it meant trimming cost structures to better match anticipated
     revenue levels and renegotiating customer contracts to recognize additional
     services being provided.

o    Non-core businesses were identified. The sale of one such business, Fleet
     Cementers, Inc., was completed in February 2004, and a similar transaction
     is being pursued with respect to Polar Completions.

<PAGE>

o    TS was successful in signing a number of large contracts throughout the
     world on which the Corporation will use its new technologies.

o    A technology review was completed in the third quarter which provided the
     direction for our research and engineering work for the next few years.
     This review centered on a road map for a development plan that considers
     key customer needs and requirements, identifies the related project
     parameters, and set priorities.

o    The first phase of the segment's Enterprise Resource Planning information
     system implementation project was completed in the fourth quarter when the
     Canadian operations went live on the software. The new system and processes
     are already beginning to pay dividends in terms of expense analysis and
     additional information available to manage the business.

     One critical factor that hampered the roll out of our new suite of tools in
the first part of 2003 was the ability for the hostile environment logging
(HEL(TM))/LWD tool to demonstrate that it could reliably perform in many
different geological environments. The fourth quarter saw a step change in the
reliability of these tools. The mean time between failure almost quadrupled in
December and that success has continued in early 2004. This operating
reliability allows our customers to also see the technological advantages of our
tools which are demonstrating logging speeds well in excess of existing industry
standards. The HEL(TM)/LWD tools now appear to be nearing the end of the process
of evolving from a science project to a viable business. We began the project by
designing and building tools to collect high quality geological and geophysical
information. The next phase focused on collecting that information in a reliable
and efficient manner, which is what we accomplished in the latter half of 2003.
We are now starting to generate advanced interpretation products from that
information and should be able to grow the business using our existing wireline
infrastructure such as our computing and interpretation centers in Calgary and
Houston.

     With respect to our Rotary Steerable tool, although several runs have been
completed with over 125 hours in the hole, we are having some reliability
challenges of the same nature as we experienced with the HEL(TM)/LWD tools in
early 2003. The tools have demonstrated superior capability to generate high
build angles and to kick off directionally from a vertical wellbore, both of
which add efficiencies to our customers' drilling operations.

<PAGE>


                         [GRAPHICS OMITTED - BAR CHARTS]
                     [GEOGRAPHICAL DISTRIBUTION OF REVENUE]
                               [2003, 2002, 2001]

----------------------------------------------------------------------------
          Canada        US         Mexico      Rest of World   TOTAL REVENUE
          ------        --         ------      -------------   -------------
2003        44          22            19            15          $714 MILLION
----------------------------------------------------------------------------

----------------------------------------------------------------------------
          Canada        US         Mexico      Rest of World   TOTAL REVENUE
          ------        --         ------      -------------   -------------
2002        38          22           19            21           $603 MILLION
----------------------------------------------------------------------------

----------------------------------------------------------------------------
          Canada        US         Mexico      Rest of World   TOTAL REVENUE
          ------        --         ------      -------------   -------------
2001        47          29            6            18           $614 MILLION
----------------------------------------------------------------------------


     Revenue increased by $111 million or 18% in 2003 over 2002. All of the
increase came from the Canada, U.S. and Mexico operations. Operations in Canada
increased in conjunction with increased drilling activity. This increased demand
for services also resulted in generally improved pricing. Similarly, revenue and
pricing in the U.S. operation responded to the increase in the average rig count
from 830 in 2002 to 1,030 in 2003. The Mexico business benefited from the
extension of the Burgos integrated services project and from the award of
additional contracts outside of that project.

     Combined revenue from the segment's other regional operations was flat year
over year. Increased revenue associated with a large wireline contract with a
Canadian-based company in the Middle East was offset by reduced controlled
pressure drilling work in the North Sea. Although it improved late in the year,
activity in Venezuela was also lower than 2002 as a result of the political
unrest in that country. Other countries in the region have improved over the
last half of the year.

     Profitability of the segment improved year over year moving from an
operating loss in 2002 of $32 million to earnings of $5 million in 2003. The
effort to review and rationalize businesses in TS brought with it incremental
expenses in the form of severance and closure costs and write-downs of unusable
assets. These expenses totaled $15 million in 2003. Operating and general and
administrative expenses declined as a percentage of revenue due to cost
reduction initiatives and economies of scale associated with certain fixed
infrastructure costs. However, continued improvements are anticipated as we
further develop our execution plan. This involves refining our personnel
development, recruiting and training programs to make sure we have the
appropriate people in place to facilitate the utilization of assets. It also
involves standardizing our maintenance systems and operating procedures, all
standard things that must be put in place to provide the foundation upon which
to grow.


<PAGE>

     An important element in continuing the profitability improvements in TS is
increased utilization of the new tools being put into service. Currently the
jobs being performed are usually isolated from one another requiring backup
equipment for every location. As customer acceptance increases, more jobs will
be occurring simultaneously in one geographic region requiring less backup
equipment on a per job basis. Plans are also in place to refine our
manufacturing processes to reduce the overall cost of tools being built. These
developments should serve to reduce depreciation expense as a percentage of
revenue.

     Research and engineering expenditures increased in 2003 as tool development
programs moved from the laboratory to field operations. During the initial
stages of the roll out, product support initiatives were being performed by the
research and engineering teams. With the commercialization of operations, this
work has been transferred to the operations groups. The target for sustained
research and engineering expenditures is 5% of revenue.

2002 COMPARED TO 2001

     TS continued its geographic diversification efforts in 2002. Revenue
declined by $11 million or 1.8% in 2002 compared to 2001. The Canadian and U.S.
operations saw revenue decline as a result of reduced activity levels. The year
over year decline in the number of wells drilled amounted to approximately 20%
in both markets. The U.S. operations were also hampered by delays in the roll
out of the new suite of tools.

     Revenue increased in all regions outside of Canada and the U.S. as the
segment's expanded international presence facilitated the participation in a
broader spectrum of projects. The political situation in Venezuela did have a
negative effect on revenue as oil and gas production activity in that country
was virtually shut down in the last six weeks of the year.

     Having set up regional operations centers in 2001, the strategy was to
establish brand recognition for Precision through successful completion of
competitively bid projects. With these expanded operations, Precision increased
its recognition as a viable alternative to the historical group of oilfield
service providers in many international markets. However, the scope of the TS
growth initiatives, in terms of both geography and product lines, combined with
the impact of delays in the deployment of new technologies, resulted in
operations support and administrative organizations that were uneconomic for the
start-up revenue levels realized. This is also reflected in operating and
general and administrative expense which grew 13.4% while revenue declined by
1.8%.

<PAGE>

RENTAL AND PRODUCTION
(STATED IN THOUSANDS OF CANADIAN DOLLARS)

<TABLE>
<CAPTION>
                                                               % OF                     % of                       % of
Years ended December 31,                          2003      REVENUE          2002     Revenue         2001      Revenue
-----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>        <C>            <C>        <C>            <C>
Revenue                                     $  210,724                 $  192,840                $  194,567
Expenses:
   Operating                                   147,911         70.2       139,781       72.5        132,832        68.3
   General and administrative                   10,479          5.0         9,518        4.9          9,484         4.9
   Depreciation                                 12,533          5.9        13,159        6.8         13,388         6.9
   Foreign exchange                                451          0.2           292        0.2           (502)       (0.3)
-----------------------------------------------------------------------------------------------------------------------
Operating earnings                          $   39,350         18.7    $   30,090       15.6     $   39,365        20.2
-----------------------------------------------------------------------------------------------------------------------

<CAPTION>
                                                           % INCREASE               % Increase               % Increase
                                                  2003      (DECREASE)      2002     (Decrease)       2001    (Decrease)
-----------------------------------------------------------------------------------------------------------------------
<S>                                               <C>      <C>              <C>     <C>               <C>    <C>
Equipment rental days (000's)                      820           35.1        607         (34.4)        925         37.9
Plant maintenance man-days (000's)                 272            5.0        259          12.6         230         15.0
----------------------------------------------------------------------------------------------------------------------
</TABLE>


2003 COMPARED TO 2002

     Revenue in the Rental and Production segment increased by 9% in 2003
compared to 2002. Both the oilfield equipment rental and industrial plant
maintenance operations contributed to the increase. Equipment rental days
increased in conjunction with increased drilling activity and operating earnings
in this business improved significantly as most expenses are fixed in nature.

     The cornerstone to the plant maintenance operations continues to be the
work performed at the oilsands projects in northern Alberta. The division's
ability to offer the complete suite of cleaning, mechanical, catalyst and
dredging services required to maintain these large projects, and the continued
training and development of its employees, differentiates it from its
competitors. Recognition of the value this business brings to its customers has
resulted in continued steady revenue growth and consistent operating margins.

2002 COMPARED TO 2001

     Revenue declined modestly as reductions in the oilfield equipment rental
business was only partially offset by increases in the industrial plant
maintenance operation. The rental business saw revenue decline in conjunction
with reduced Canadian drilling activity. This also impacted overall segment
profitability as the rental business has higher margins than the plant
maintenance business.

<PAGE>

     The plant maintenance business benefited from commissioning work performed
at a new heavy oil upgrading plant and continued high levels of maintenance work
at oil sands projects in northern Alberta. Operating margins were consistent
with 2001. During the year, this business was expanded through the acquisition
of a vacuum truck operation in northern Alberta.

OTHER ITEMS

2003 COMPARED TO 2002

CORPORATE AND OTHER EXPENSES

     Expenses in the Corporate and Other segment increased by $4.1 million in
2003 compared to 2002. In contrast to last year, variable compensation payments
tied to corporate performance increased in 2003. In addition, directors and
officers insurance premiums have increased as a result of increased scrutiny of
corporate governance practices of public equity market participants in North
America and around the world. General and administrative expenses are also
affected by the ongoing requirements surrounding Sarbanes-Oxley legislation.

INTEREST EXPENSE

     Net interest expense remained constant at $35 million in 2003 and 2002. The
impact of a $24 million increase in average debt outstanding was offset by
reduced interest rates. As anticipated at the end of last year, interest
coverage, defined as operating earnings divided by net interest expense,
returned to 2001 levels. Interest coverage in 2003, 2002 and 2001 was
approximately 9, 4 and 8 times respectively, and is expected to improve in 2004
with the free cash flow being generated.

INCOME TAXES

     The Corporation's effective tax rate on earnings from continuing operations
before income taxes, non-controlling interest and goodwill amortization in 2003
was 27.3% compared to 25.3% in 2002. The Alberta government reduced tax rates by
0.5% in each of 2003 and 2002. Canadian GAAP requires that the effect of these
rate reductions be reflected as a decrease of future tax expense. The impact of
these rate reductions on tax expense was similar in 2003 and 2002 at $3 million
and $2.6 million respectively. However, given the higher before tax earnings in
2003 compared to 2002, the impact of the reductions on the Corporation's
effective tax rate amounted to 1.1 percentage points in 2003 versus 2.1 in 2002.

     Similarly, the Corporation's organization structure generates tax savings
which, in absolute dollar terms, are relatively consistent from year to year. In
2003 these tax savings reduced the effective tax rate by 4.1 percentage points
compared to 9.4 in 2002.

<PAGE>

     In the absence of the above factors the Corporation's effective tax rate
would have been 32.6% in 2003 compared to 36.8% in 2002. This decrease is a
reflection of the tax rate reduction initiatives of the Canadian Federal and
Alberta Provincial governments and of the mix of income from different tax rate
jurisdictions. The Corporation's effective tax rate is expected to be in the
range of 32 - 34% in 2004.

2002 COMPARED TO 2001

CORPORATE AND OTHER EXPENSES

     Net expenses for Corporate and Other declined by $1.2 million in 2002
compared to 2001. The primary reason was the reduction in variable compensation
payments, which are tied to corporate performance.

INTEREST EXPENSE

     Net interest expense declined by $7.9 million in 2002 as a result of
reduced cost of borrowing due to declining interest rates and reduced borrowing
levels. The average debt outstanding in 2002 was $568.4 million compared to
$630.8 million in 2001. Interest coverage, defined as operating earnings divided
by net interest expense, declined to 4 times in 2002 compared to 8 times in
2001.

INCOME TAXES

     The effective tax rate on earnings before income taxes and goodwill
amortization was 25.3% in 2002 compared to 35.6% in 2001. This reduction is due
to the combined impact of tax rate reductions instituted by both the Alberta and
Canadian governments and income taxed in jurisdictions with lower tax rates.

     The effective tax rate in 2002 and 2001 was reduced by 0.5% and 2%,
respectively, as a result of tax rate decreases enacted by the Alberta
government in those years. Canadian GAAP required that the effect of these rate
reductions be reflected as a decrease of future tax expense. The impact of these
rate reductions was $2.6 million in 2002 and $6.0 million in 2001.

GOODWILL AMORTIZATION

     In 2001, standards under both Canadian and U.S. GAAP were issued that
eliminated the amortization of goodwill. These rules were adopted January 1,
2002 by the Corporation.


LIQUIDITY AND CAPITAL RESOURCES

     Historically the oilfield services business has been very cyclical. In
managing the risk of this volatility, Precision has adhered to its philosophy of
maintaining a strong balance sheet. In addition, a strong balance sheet has
allowed the Corporation to grow through acquisition by providing the financial
flexibility to respond to attractive investment opportunities in the form of
both acquisitions and internal growth. The following graph gives a historical
perspective on how Precision has managed its cash flows and its debt levels.

<PAGE>


                      [GRAPHIC OMMITTED - BAR/LINE CHART]
                   [INVESTMENT, CASH FLOW and CAPITALIZATION]

--------------------------------------------------------------------------------
      Debt to Capitalization    Investment Equals Net
       Equals the Ratio of       Cash Cost of Capital
     Long-term Debt to Long-   Expenditures and Business  Cash Flow Equals Funds
      term Debt Plus Equity          Acquisitions            From Operations
     -----------------------   -------------------------  ----------------------

1999           20                        39                        101
2000           31                       545                        298
2001           26                       372                        449
2002           25                       244                        188
2003           19                       297                        358
--------------------------------------------------------------------------------


     In 2004 the Corporation expects cash flow from operations to approach $400
million and net capital expenditures to amount to approximately $320 million.
Another significant source of cash has been proceeds from the exercise of
employee stock options, which has contributed an average of $23 million over
each of the past three years ended December 31, 2003. In January 2004 the
Corporation received $25 million from the exercise of options and the total
amount for the year is anticipated to exceed $50 million.

     As a Corporation with multiple lines of business, Precision also regularly
assesses each unit from the perspective of strategic fit with future growth
plans and profitability improvement initiatives. In 2003 the Corporation
received $67 million from the sale of business units identified as non-core,
primarily the gas compression business carried on by Energy Industries Inc. In
February 2004, the Corporation completed the sale of substantially all of the
assets of Fleet Cementers, Inc. realizing proceeds of approximately $26 million
(US$20 million). A similar transaction is being pursued with respect to the
Polar Completions division.

     The Corporation exited 2003 with a long-term debt to long-term debt plus
equity ratio of 19% and a ratio of long-term debt to trailing cash flow from
operations of 155%. Both measures showed improvement over 2002 when these ratios
amounted to 25% and 258% respectively. Continued improvement is expected in
2004, barring the impact of any significant acquisitions.

     Precision has a number of lines of credit available to finance its
activities, the most significant of which is a $350 million extendable revolving
unsecured facility with a syndicate led by a Canadian chartered bank. At
December 31, 2003, $140 million had been borrowed under this facility, the
majority of which was used to finance working capital requirements. Canadian
oilfield activity peaks in the first quarter of every year with a

<PAGE>

swift reduction in the second quarter due to spring breakup which precludes the
movement of heavy equipment. As a result, accounts receivable are expected to
increase by approximately $175 million during the first quarter with a similar
reduction in the second quarter.

     The Corporation's contractual obligations are outlined in the following
table:

<TABLE>
<CAPTION>
(STATED IN THOUSANDS OF CANADIAN DOLLARS)                                       Payments Due by Period
                                                                Less Than                                             After
                                                  Total            1 Year     1 - 3 Years      4 - 5 Years          5 Years
---------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>               <C>           <C>              <C>               <C>
Long-term debt                                $ 415,951          $ 16,566       $ 239,570         $     --        $ 159,815
Capital lease obligations                           629               592              37               --               --
Operating leases                                110,500            28,104          49,566           11,168           21,662
---------------------------------------------------------------------------------------------------------------------------
Total contractual obligations                 $ 527,080          $ 45,262       $ 289,173         $ 11,168         $181,477
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


CRITICAL ACCOUNTING ESTIMATES

     This Management's Discussion and Analysis of Precision's financial
condition and results of operations is based on its consolidated financial
statements which are prepared in accordance with Canadian generally accepted
accounting principles. The Corporation's significant accounting policies are
described in Note 1 to its consolidated financial statements. The preparation of
these financial statements requires that certain estimates and judgments be made
that affect the reported assets, liabilities, revenues and expenses. These
estimates and judgments are based on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances.
Anticipating future events cannot be done with certainty, therefore these
estimates may change as new events occur, more experience is acquired and as the
Corporation's operating environment changes.

     The accounting estimates believed to require the most difficult, subjective
or complex judgments and which are the most critical to our reporting of results
of operations and financial position are as follows:

ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

     The Corporation performs ongoing credit evaluations of our customers and
grants credit based upon past payment history, financial condition and
anticipated industry conditions. Customer payments are regularly monitored and a
provision for doubtful accounts is established based upon specific situations
and overall industry conditions. The Corporation's history of bad debt losses
has been within expectations and generally limited to specific customer
circumstances, however, given the cyclical nature of the oil and gas industry
and the inherent risk of successfully finding hydrocarbon reserves, a customer's
ability to fulfill its payment obligations can change suddenly and without
notice. In addition, many of our customers are located in international areas
that are inherently subject to risks of economic, political and civil
instabilities, which may impact our ability to collect those accounts
receivable.

<PAGE>

EXCESS AND OBSOLETE INVENTORY PROVISIONS

     Quantities of inventory on hand are regularly reviewed and provisions for
excess or obsolete inventory are established based on historical usage patterns
and known changes to equipment or processes that would render specific items no
longer usable in operations. Significant or unanticipated changes in business
conditions could impact the amount and timing of any additional provision for
excess or obsolete inventory that may be required. The TS segment of our
operations involves the application of new technologies in its efforts to
deliver superior products to our customers and therefore has a greater risk of
obsolescence due to finding or developing better products. The TS inventories
comprise 87% of our total inventory of $99 million. These inventories are
reviewed on a quarterly basis to assess the appropriateness of quantities and
valuation.

IMPAIRMENT OF LONG-LIVED ASSETS

     Long-lived assets, which includes property, plant and equipment,
intangibles and goodwill, comprise the majority of the Corporation's assets. The
carrying value of these assets is periodically reviewed for impairment or
whenever events or changes in circumstances indicate that their carrying amounts
may not be recoverable. This requires the Corporation to forecast future cash
flows to be derived from the utilization of these assets based upon assumptions
about future business conditions and technological developments. Significant,
unanticipated changes to these assumptions could require a provision for
impairment in the future. During the fourth quarter of 2003 the Corporation
completed its goodwill assessment incorporating the work of independent
valuation experts resulting in the conclusion that there was no impairment of
the carrying value.

DEPRECIATION AND AMORTIZATION

     The Corporation's property, plant and equipment and its intangible assets
are depreciated and amortized based upon estimates of useful lives and salvage
values. These estimates may change as more experience is gained, market
conditions shift or new technological advancements are made. The high
depreciation expense associated with the TS segment is anticipated to improve
with the optimization of equipment fleet sizes in each geographic region.

<PAGE>

INCOME TAXES

     The Corporation uses the liability method which takes into account the
differences between financial statement treatment and tax treatment of certain
transactions, assets and liabilities. Future tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Valuation allowances are established to reduce
future tax assets when it is more likely than not that some portion or all of
the asset will not be realized. Estimates of future taxable income and the
continuation of ongoing prudent tax planning arrangements have been considered
in assessing the utilization of available tax losses. Changes in circumstances
and assumptions and clarification of uncertain tax regimes may require changes
to the valuation allowances associated with the Corporation's future tax assets.

NEW ACCOUNTING STANDARDS

     In 2003 the Canadian Institute of Chartered Accountants issued revised
recommendations with respect to accounting for stock based compensation.
Effective January 1, 2004 the Corporation will retroactively apply these new
standards to all common share purchase options granted in 2002 and subsequent
years. Under the new standard, the fair value of common share purchase options
will be calculated at the date of grant and that value will be recorded as
compensation expense over the vesting period of those grants. Under the previous
Canadian accounting standard, the Corporation had the choice of using the
intrinsic value method of accounting for grants of common share purchase
options, which resulted in no associated compensation expense being recognized,
and disclosing in a note to the financial statements the impact of expensing the
fair value of option grants. This alternative still exists under U.S. generally
accepted accounting principles.


BUSINESS RISKS

CRUDE OIL AND NATURAL GAS PRICES

     The price received by our customers for the crude oil and natural gas they
produce has a direct impact on cash flow available for them to finance the
acquisition of services provided by the Corporation.

     Prices for crude oil are established in a worldwide market in which supply
and demand are subject to a vast array of economic and political influences.
This results in very volatile pricing; a prime example of which is West Texas
Intermediate crude oil trading at US$12 per barrel in late 1998 and in excess of
US$40 per barrel at one point in 2000. Natural gas prices are established in a
more "local" North American market due to the requirement to transport this
gaseous product in pressurized pipelines. Demand for natural gas is seasonal and
is correlated to heating and electricity generation requirements. Demand for
natural gas and fuel oils is also affected by consumers ability to switch from
one to the other to take advantage of relative price variations.

<PAGE>

     The Corporation partially manages the risk of volatile commodity prices,
and thus volatile demand for its services, by striving to maintain cost
structures that are scalable to activity levels. However, cost structures in
Contract Drilling are more variable in nature than those within TS. In addition,
our strong balance sheet and adherence to conservative financing practices
provide the resilience to withstand and benefit from downturns and upturns in
the business cycle.

     North American oilfield service activity is focused on natural gas. One
objective of the Corporation's international growth initiatives is to increase
our exposure to crude oil activity in less cyclical markets.

WORKFORCE AVAILABILITY

     The Corporation's ability to provide reliable services is dependent upon
the availability of well trained, experienced crews to operate our field
equipment. We must also balance the requirement to maintain a skilled workforce
with the need to establish cost structures that vary as much as possible with
activity levels.

     Within Contract Drilling, our most experienced people are retained during
periods of low utilization by having them fill lower level positions on our
field crews. The Corporation has established training programs for employees new
to the oilfield service sector and we work closely with industry associations to
ensure competitive compensation levels and to attract new workers to the
industry as required.

     Many of our Canadian businesses are currently experiencing manpower
shortages. Over 50 drilling rigs have been running without relief crews,
requiring them to shut down when crews need time off. Technology Services
Canadian operations have been supported by additional people and equipment
brought in from other regional operations to meet peak winter demand.

WEATHER

     The ability to move heavy equipment in the Canadian oil and natural gas
fields is dependent on weather conditions. As warm weather returns in the
spring, the winter's frost comes out of the ground rendering many secondary
roads incapable of supporting the weight of heavy equipment until they have
thoroughly dried out. The duration of this "spring breakup" has a direct impact
on the Corporation's activity levels. In addition, many exploration and
production areas in northern Canada are accessible only in winter months when
the ground is frozen hard enough to support equipment. The timing of freeze up
and spring breakup affects the ability to move equipment in and out of these
areas.


<PAGE>

     Working with customers, we strive to position equipment where possible such
that it can be working on location during spring breakup, limiting the need to
move equipment during this time period as much as possible. However, many
uncontrollable factors affect our ability to plan in this fashion and the spring
breakup, which can occur any time from late March through May, is traditionally
our slowest time.

TECHNOLOGY

     Technological innovation by oilfield service companies has improved the
effectiveness of the entire exploration and production sector over the
industry's 140-year history. Recently, development of directional and horizontal
drilling, controlled pressure drilling, coil tubing drilling, and methods of
providing real time data during drilling and production operations have
increased production volumes and the recoverable amount of discovered reserves.
Innovations such as 3-D and 4-D seismic have improved the success rate of
exploration wells partially offsetting the decline in the quantity of drillable
prospects.

     Our ability to deliver more efficient services is critical to our continued
success. The Corporation has continuously built upon its experience and teamed
with customers to provide solutions to their unique problems. Our ability to
design and build specialized equipment has kept us on the leading edge of
technology. The success of our in-house designed and built Super Single(R) rig,
both in Canada and abroad, is testimony of our dedication to these efforts.

     The continued development of our Technology Services segment, and in
particular the research and development work of Advantage R&D, Inc., puts the
Corporation at another level where high-end technological innovation is
paramount to success. We have a team of highly qualified experienced
professionals, that has been assembled and working together for over two years
in state-of-the-art testing facilities. The technologies they have developed
over this time are at or near the commercial deployment stage, however, the
success of future technological endeavours is never certain.

ACQUISITION INTEGRATION

     The Corporation has worked towards its strategic objective of becoming an
integrated service provider of sufficient size to benefit from economies of
scale and to provide the foundation from which to pursue international
opportunities. Business acquisitions have been an important tool in this pursuit
and will continue to be so in the future. Continued successful integration of
new businesses, people and systems is key to our future success.

<PAGE>

FOREIGN OPERATIONS

     The Corporation is working hard to export its expertise and technologies to
oil and gas producing regions around the world. With this comes the risk of
dealing with business and political systems that are much different than we are
accustomed to in North America. The Corporation has hired employees who have
experience working in the international arena and it is committed to recruiting
qualified resident nationals on the staffs of all of its international
operations.

FOREIGN CURRENCY EXCHANGE RATES

     The Corporation has a number of sources of foreign currency exchange risk.
On international contracts, attempts are made to structure revenue streams such
that a portion sufficient to match local expenditures is denominated in the
local currency, with the remainder being denominated in U.S. dollars. In
addition, many of our business units buy a portion of their parts and supplies
from suppliers in the United States. Also, the manufacturing effort associated
with the deployment of the new suite of tools is taking place in the U.S. As a
result, the Corporation is presently a net payer of U.S. dollars.

MERGER AND ACQUISITION ACTIVITY

     Merger and acquisition activity in the oil and gas exploration and
production sector can impact demand for our services as customers focus on
reorganization activities prior to committing funds to significant drilling and
maintenance projects. Future merger and acquisition activity could have a
short-term impact on our business, but in the long-term should result in a
stronger, more active market.


OUTLOOK

     The fortunes of the oilfield services business are dictated by current and
anticipated future crude oil and natural gas prices. The supply and demand
fundamentals that have brought prices to today's relatively high levels are not
expected to change rapidly. Energy price prognosticators have historically
focused on the supply side of the equation where geopolitical events can have a
large impact on short-term supply and where consensus was generally that there
was abundant supply to fill long-term requirements. This view is now starting to
be questioned in some corners. The surplus crude oil production capacity of the
Middle East is being examined with suggestions that it is not as high as once
thought. Similarly, the ability to rapidly increase production of the vast crude
oil reserves in the former Soviet Union is being slowed by the recognition of
the large amount of infrastructure investment required. Recent world events have
also brought security of supply issues to the top of the energy agenda for many
countries.

<PAGE>

     The North American natural gas market is also facing supply challenges.
Natural gas directed drilling activity has increased significantly in recent
years, however this has only served to maintain production. Liquefied natural
gas, once viewed as the element that would increase gas supplies and thus reduce
prices, is now being thought of as a requirement to fill the void between future
demand requirements and conventional production capabilities. It is not
anticipated that the price of natural gas will experience sustained downward
pressure from the supply side of the pricing equation any time soon.

     Many analysts are now looking at the demand elements of energy pricing
economics. Commodity prices have risen over the last number of years in an
environment where the major economies of the world were generally in a period of
slow growth. This is changing as growth rates in the major industrialized
countries are beginning to recover. Of particular importance to the outlook for
the demand for energy is the emergence of countries such as China where economic
expansion is bringing new found purchasing power to a very large population. On
a per capita basis, these populations use energy at a fraction of the rate of
other industrialized nations. This should change as new products, such as
automobiles and electric appliances, are introduced to these markets which in
turn should drive exponential growth in energy demand.

     On the basis of these fundamentals, Precision is optimistic about the
prospects to operate and grow our businesses profitably. Canada will play a
major role in supplying the energy needs of North America and our dominant
position in that market will continue to be the cornerstone of the Corporation.
From this strong foundation we will continue to step out into international
markets where the opportunities are such that operations can reach an efficient
size in a reasonable time frame. The strength of our balance sheet will allow us
to examine acquisition opportunities that may allow this process to be
accelerated.

<PAGE>

MANAGEMENT'S REPORT TO THE SHAREHOLDERS


     The accompanying consolidated financial statements and all information in
the Annual Report are the responsibility of management. The consolidated
financial statements have been prepared by management in accordance with the
accounting policies in the notes to financial statements. When necessary,
management has made informed judgments and estimates in accounting for
transactions which were not complete at the balance sheet date. In the opinion
of management, the financial statements have been prepared within acceptable
limits of materiality, and are in accordance with Canadian generally accepted
accounting principles (GAAP) appropriate in the circumstances. The financial
information elsewhere in the Annual Report has been reviewed to ensure
consistency with that in the consolidated financial statements.

     Management has prepared Management's Discussion and Analysis (MD&A). The
MD&A is based upon the Corporation's financial results prepared in accordance
with Canadian GAAP. The MD&A compares the audited financial results for the
twelve months ended December 31, 2003 to December 31, 2002 and the twelve months
ended December 31, 2002 to December 31, 2001. Note 15 to the consolidated
financial statements describes the impact on the consolidated financial
statements of significant differences between Canadian and United States GAAP.

     Management maintains appropriate systems of internal control. Policies and
procedures are designed to give reasonable assurance that transactions are
properly authorized, assets are safeguarded and financial records properly
maintained to provide reliable information for the preparation of financial
statements.

     KPMG LLP, an independent firm of Chartered Accountants, was engaged, as
approved by a vote of shareholders at the Corporation's most recent Annual and
Special Meeting, to audit the consolidated financial statements in accordance
with generally accepted auditing standards in Canada and provide an independent
professional opinion.

     The Audit Committee of the Board of Directors, which is comprised of three
independent and unrelated directors who are not employees of the Corporation,
has discussed the consolidated financial statements, including the notes
thereto, with management and external Auditors. The consolidated financial
statements have been approved by the Board of Directors on the recommendation of
the Audit Committee.



/s/ Hank B. Swartout                          /s/ Dale E. Tremblay
--------------------------------              ----------------------------------
HANK B. SWARTOUT (signed)                     DALE E. TREMBLAY  (signed)
Chairman of the Board, President              Senior Vice President Finance
and Chief Executive Officer                   and Chief Financial Officer

February 10, 2004



                                       39
<PAGE>

AUDITORS' REPORT TO THE SHAREHOLDERS

     We have audited the consolidated balance sheets of Precision Drilling
Corporation as at December 31, 2003 and 2002 and the consolidated statements of
earnings and retained earnings and cash flow for each of the years in the
three-year period ended December 31, 2003. These consolidated financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

     We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.

     In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Corporation as at December
31, 2003 and 2002 and the results of its operations and its cash flow for each
of the years in the three-year period ended December 31, 2003 in accordance with
Canadian generally accepted accounting principles.



/s/ KPMG LLP
---------------------
KPMG LLP (signed)
Chartered Accountants
Calgary, Canada

February 10, 2004


<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
                                                                                ------------------------------
As at December 31, (stated in thousands of dollars)                                   2003                2002
--------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                 <C>
ASSETS
Current assets:
   Cash                                                                         $   21,370          $   17,315
   Accounts receivable                                                             544,850             431,331
   Income taxes recoverable                                                             --               8,712
   Inventory (NOTE 3)                                                               99,088              92,744
   Assets of discontinued operations (NOTE 20)                                      21,150              51,725
--------------------------------------------------------------------------------------------------------------
                                                                                   686,458             601,827
Property, plant and equipment, net of accumulated depreciation (NOTE 4)          1,588,250           1,457,273
Intangibles, net of accumulated amortization of $19,844 (2002 - $13,792)            65,262              71,355
Goodwill                                                                           527,443             527,443
Other assets (NOTE 5)                                                                8,932              17,443
Assets of discontinued operations (NOTE 20)                                         32,040              84,674
                                                                                $2,908,385          $2,760,015
--------------------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Bank indebtedness (NOTE 6)                                                   $  147,909          $   95,321
   Accounts payable and accrued liabilities (NOTE 18)                              260,545             257,913
   Incomes taxes payable                                                             7,373                  --
   Current portion of long-term debt (NOTE 7)                                       17,158              27,098
   Liabilities of discontinued operations (NOTE 20)                                  5,212              11,239
--------------------------------------------------------------------------------------------------------------
                                                                                   438,197             391,571
Long-term debt (NOTE 7)                                                            399,422             514,878
Future income taxes (NOTE 11)                                                      320,599             311,164
Future income taxes of discontinued operations (NOTE 20)                             1,107               7,383
Non-controlling interest                                                             3,771               2,019
Shareholders' equity:
   Share capital (NOTE 8)                                                          936,529             912,916
   Retained earnings                                                               808,760             620,084
--------------------------------------------------------------------------------------------------------------
Commitments and contingencies (NOTES 10 AND 19)                                  1,745,289           1,533,000
--------------------------------------------------------------------------------------------------------------
                                                                                $2,908,385          $2,760,015
--------------------------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Approved by the Board:


/s/ Hank B. Swartout                          /s/ H. Garth Wiggins
--------------------------------              ----------------------------------
HANK B. SWARTOUT (signed)                     H. GARTH WIGGINS (signed)
Director                                      Director

<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS

Years ended December 31,
(stated in thousands of dollars, except per share amounts)                2003               2002                 2001
----------------------------------------------------------------------------------------------------------------------
                                                                                                    (RESTATED - NOTE 2)
<S>                                                                <C>                 <C>                 <C>
Revenue                                                            $ 1,917,933         $ 1,567,506         $ 1,815,208
Expenses:
   Operating                                                         1,273,434           1,094,846           1,138,231
   General and administrative                                          136,747             144,466             143,521
   Depreciation and amortization                                       170,788             133,384             139,271
   Research and engineering                                             42,419              34,862              31,677
   Foreign exchange                                                     (2,565)              4,389                 723
----------------------------------------------------------------------------------------------------------------------
                                                                     1,620,823           1,411,947           1,453,423
Operating earnings                                                     297,110             155,559             361,785
Interest:
   Long-term debt                                                       34,492              34,378              43,577
   Other                                                                 1,425               1,334                 556
   Income                                                                 (867)               (589)             (1,074)
Dividend income                                                             --                 (39)             (1,106)
Gain on disposal of investments                                         (3,355)               (900)             (1,805)
----------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes,
   non-controlling interest and goodwill amortization                  265,415             121,375             321,637
Income taxes: (NOTE 11)
   Current                                                              59,681              64,762              17,841
   Future                                                               12,851             (34,072)             96,631
----------------------------------------------------------------------------------------------------------------------
                                                                        72,532              30,690             114,472
Earnings from continuing operations before
   non-controlling interest and goodwill amortization                  192,883              90,685             207,165
Non-controlling interest                                                 1,752               1,151                 868
----------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations
   before goodwill amortization                                        191,131              89,534             206,297
Goodwill amortization, net of tax (NOTE 2)                                  --                  --              30,587
----------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations                                    191,131              89,534             175,710
Gain on disposal of discontinued operations (NOTE 20)                   17,460                  --                  --
Discontinued operations, net of tax (NOTE 20)                          (19,915)              1,731              10,824
Net earnings                                                           188,676              91,265             186,534
Retained earnings, beginning of year (NOTE 2)                          620,084             528,819             342,285
----------------------------------------------------------------------------------------------------------------------
Retained earnings, end of year                                     $   808,760         $   620,084         $   528,819
----------------------------------------------------------------------------------------------------------------------
Earnings per share from continuing operations
  before goodwill amortization (NOTE 12)
   Basic                                                           $      3.51         $      1.67         $      3.90
   Diluted                                                         $      3.46         $      1.63         $      3.81
----------------------------------------------------------------------------------------------------------------------
Earnings per share from continuing operations (NOTE 12)
   Basic                                                           $      3.51         $      1.67         $      3.31
   Diluted                                                         $      3.46         $      1.63         $      3.23
----------------------------------------------------------------------------------------------------------------------
Earnings per share: (NOTE 12)
   Basic                                                           $      3.47         $      1.70         $      3.52
   Diluted                                                         $      3.41         $      1.66         $      3.44
----------------------------------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW

Years ended December 31,
(stated in thousands of dollars)                                    2003               2002               2001
--------------------------------------------------------------------------------------------------------------
                                                                                            (RESTATED - NOTE 2)
<S>                                                            <C>                <C>                <C>
Cash provided by (used in):
Continuing operations:
   Earnings from continuing operations                         $ 191,131          $  89,534          $ 175,710
   Items not affecting cash:
       Depreciation and amortization                             170,788            133,384            139,271
       Goodwill amortization                                          --                 --             30,587
       Future income taxes                                        12,851            (34,072)            96,631
       Gain on disposal of investments                            (3,355)              (900)            (1,805)
       Amortization of deferred financing costs                    1,286              1,294              1,302
       Unrealized foreign exchange loss (gain)
         on long-term monetary items                             (16,433)            (2,039)             6,576
       Non-controlling interest                                    1,752              1,151                868
--------------------------------------------------------------------------------------------------------------
   Funds provided by continuing operations                       358,020            188,352            449,140
   Changes in non-cash working capital balances (NOTE 18)       (101,146)              (601)           (22,600)
--------------------------------------------------------------------------------------------------------------
                                                                 256,874            187,751            426,540
Discontinued operations: (NOTE 20)
   Funds provided by (used in) discontinued operations            (5,692)             6,868             17,261
   Changes in non-cash working capital balances of
       discontinued operations                                     7,245              4,604            (11,571)
--------------------------------------------------------------------------------------------------------------
                                                                   1,553             11,472              5,690
Investments:
   Business acquisitions, net of cash acquired (NOTE 14)          (6,800)            (4,594)           (35,557)
   Purchase of property, plant and equipment                    (314,921)          (267,794)          (366,019)
   Purchase of intangibles                                            (6)            (4,198)            (5,673)
   Proceeds on sale of property, plant and equipment              24,423             32,449             31,001
   Proceeds on disposal of investments                            10,966              1,872              2,283
   Investments                                                    (1,080)            (5,672)               227
   Proceeds on disposal of discontinued operations                67,274                 --                 --
--------------------------------------------------------------------------------------------------------------
                                                                (220,144)          (247,937)          (373,738)
Financing:
   Increase in long-term debt                                     85,228            119,380             22,083
   Repayment of long-term debt                                  (145,657)          (102,275)           (83,437)
   Deferred financing costs on long-term debt                         --                 --                (38)
   Issuance of common shares on exercise of options               23,613             25,756             20,294
   Issuance of common shares on exercise of warrants                  --                 --              2,371
   Change in bank indebtedness                                     2,588              9,937            (27,236)
--------------------------------------------------------------------------------------------------------------
                                                                 (34,228)            52,798            (65,963)
--------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash                                        4,055              4,084             (7,471)
Cash, beginning of year                                           17,315             13,231             20,702
Cash, end of year                                              $  21,370          $  17,315          $  13,231
--------------------------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR AMOUNTS STATED IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)

         Precision Drilling Corporation (the "Corporation") is a global oilfield
services company providing a broad range of drilling, production and evaluation
services with focus on fulfilling customer needs through fit-for-purpose
technologies.

         The financial statements are prepared in accordance with generally
accepted accounting principles (GAAP) in Canada. Management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from these estimates.


NOTE 1:  SIGNIFICANT ACCOUNTING POLICIES

         (a)   PRINCIPLES OF CONSOLIDATION:

               The consolidated financial statements include the accounts of the
               Corporation and its subsidiaries, all of which, except one, are
               wholly-owned.

         (b)   INVENTORY:

               Inventory is carried at the lower of average cost and replacement
               cost.

         (c)   PROPERTY, PLANT AND EQUIPMENT:

               Drilling rig equipment is depreciated by the unit-of-production
               method based on 3,650 drilling days with a 20% salvage value.
               Drill pipe and drill collars are depreciated over 1,100 drilling
               days and have no salvage value. Service rig equipment is
               depreciated by the unit-of-production method based on 24,000
               hours for single and double rigs and 48,000 hours for heavy
               double rigs. Service rigs have a 20% salvage value.

               Field technical equipment is depreciated by the straight-line
               method over periods ranging from 2 to 10 years.

               Rental equipment is depreciated by the straight-line method over
               periods ranging from 10 to 15 years. Other equipment is
               depreciated by the straight-line method over periods ranging from
               3 to 10 years.

               Light duty vehicles are depreciated by the straight-line method
               over 4 years. Heavy-duty vehicles are depreciated by the
               straight-line method over periods ranging from 7 to 10 years.

               Buildings are depreciated by the straight-line method over
               periods ranging from 10 to 30 years.

         (d)   INTANGIBLES:

               Intangibles, which are comprised of acquired patents, are
               recorded at cost and amortized by the straight-line method over
               their useful lives ranging from 5 to 15 years.

<PAGE>

         (e)   GOODWILL:

               Goodwill is the residual amount that results when the purchase
               price of an acquired business exceeds the sum of the amounts
               allocated to the assets acquired, less liabilities assumed, based
               on their fair values. Goodwill is allocated as of the date of the
               business combination to the Corporation's reporting segments that
               are expected to benefit from the business combination.

               Goodwill is not amortized and is tested for impairment annually
               in the fourth quarter, or more frequently if events or changes in
               circumstances indicate that the asset might be impaired. The
               impairment test is carried out in two steps. In the first step,
               the carrying amount of the reporting segment is compared with its
               fair value. When the fair value of a reporting segment exceeds
               its carrying amount, goodwill of the reporting segment is
               considered not to be impaired and the second step of the
               impairment test is unnecessary. The second step is carried out
               when the carrying amount of a reporting segment exceeds its fair
               value, in which case the implied fair value of the reporting
               segment's goodwill is compared with its carrying amount to
               measure the amount of the impairment loss, if any. The implied
               fair value of goodwill is determined in the same manner as the
               value of goodwill is determined in a business combination
               described in the preceding paragraph, using the fair value of the
               reporting segment as if it was the purchase price. When the
               carrying amount of the reporting segment's goodwill exceeds the
               implied fair value of the goodwill, an impairment loss is
               recognized in an amount equal to the excess.

         (f)   INVESTMENTS:

               Investments in shares of associated companies, over which the
               Corporation has significant influence, are accounted for by the
               equity method. Other investments are carried at cost. If there
               are other than temporary declines in value, these investments are
               written down to their net realizable value.

         (g)   DEFERRED FINANCING COSTS:

               Costs associated with the issuance of long-term debt are deferred
               and amortized by the straight-line method over the term of the
               debt. The amortization is included in interest expense.

         (h)   INCOME TAXES:

               The Corporation follows the liability method of accounting for
               future income taxes. Under the liability method, future income
               tax assets and liabilities are determined based on "temporary
               differences" (differences between the accounting basis and the
               tax basis of the assets and liabilities), and are measured using
               the currently enacted, or substantively enacted, tax rates and
               laws expected to apply when these differences reverse. Income tax
               expense is the sum of the Corporation's provision for current
               income taxes and the difference between opening and ending
               balances of the future income tax assets and liabilities.

<PAGE>

         (i)   REVENUE RECOGNITION:

               The Corporation's services are generally sold based upon purchase
               orders or contracts with the customer that include fixed or
               determinable prices based upon daily, hourly or job rates.
               Customer contract terms do not include provisions for significant
               post-service delivery obligations. Revenue is recognized when
               services and equipment rentals are rendered and only when
               collectability is reasonably assured.

         (j)   RETIREMENT ALLOWANCE:

               The Corporation has entered into an employment agreement with a
               senior officer, which provides for a one-time payment upon
               retirement. The amount of this retirement allowance increases by
               a fixed amount for each year of service over a ten year period
               commencing April 30, 1996. The estimated cost of this benefit is
               accrued and charged to earnings on a straight-line basis over the
               10-year period.

         (k)   FOREIGN CURRENCY TRANSLATION:

               Accounts of foreign operations, all of which are considered
               financially and operationally integrated, are translated to
               Canadian dollars using average exchange rates for the year for
               revenue and expenses. Monetary assets and liabilities are
               translated at the year-end current exchange rate and non-monetary
               assets and liabilities are translated using historical rates of
               exchange. Gains or losses resulting from these translation
               adjustments are included in net earnings.

               Transactions in foreign currencies are translated at rates in
               effect at the time of the transaction. Monetary assets and
               liabilities are translated at current rates. Gains and losses are
               included in net earnings.

         (l)   STOCK-BASED COMPENSATION PLANS:

               The Corporation has equity incentive plans, which are described
               in Note 8. No compensation expense is recognized for these plans
               when stock options are issued. Any consideration received on
               exercise of the stock options is credited to share capital. The
               Corporation discloses the pro forma effect of stock options
               grants, had those grants been accounted for following the fair
               value method.

               Effective January 1, 2004, the Corporation will retroactively
               adopt new required Canadian accounting standards that will apply
               the fair value method to all stock options granted in 2002 and
               subsequent years.

               Under the fair value method, the Corporation will calculate the
               fair value of stock option grants and record that fair value as
               compensation expense over the vesting period of those grants.

         (m)   RESEARCH AND ENGINEERING:

               Research and engineering costs are charged to income as incurred.
               Costs associated with the development of new operating tools and
               systems are expensed during the period unless the recovery of
               these costs can be reasonably assured given the existing and
               anticipated future industry conditions. Upon successful
               completion and field testing of the tools any deferred costs are
               transferred to the related capital asset accounts.

<PAGE>

         (n)   PER SHARE AMOUNTS:

               Basic per share amounts are calculated using the weighted average
               number of shares outstanding during the year. Diluted per share
               amounts are calculated based on the treasury stock method, which
               assumes that any proceeds obtained on exercise of options would
               be used to purchase common shares at the average market price
               during the period. The weighted average number of shares
               outstanding is then adjusted by the net change.

         (o)   COMPARATIVE FIGURES:

               Certain comparative figures have been reclassified to conform
               with the current financial statement presentation.


NOTE 2:  ACCOUNTING CHANGES

         (a)   ACCOUNTING FOR BUSINESS COMBINATIONS, GOODWILL AND OTHER
               INTANGIBLE ASSETS:

               Effective January 1, 2002, the Corporation prospectively adopted
               the new Canadian accounting standards relating to business
               combinations and goodwill and other intangible assets, as
               outlined in Note 1(e).

         (b)   FOREIGN CURRENCY TRANSLATION:

               Effective January 1, 2002, the Corporation adopted, on a
               retroactive basis, a new Canadian accounting standard whereby
               unrealized gains or losses are not deferred and amortized as
               previously required but rather expensed as incurred.

               As a result of this change, unrealized gains and losses related
               to translation of foreign currency denominated long-term debt are
               no longer deferred and amortized over the term of the debt but
               are expensed as incurred. Prior period results have been restated
               to reflect this change. The retroactive application of this
               standard has reduced the opening balance of retained earnings by
               $1.6 million and $115,000 at January 1, 2002 and January 1, 2001
               respectively.


NOTE 3:  INVENTORY
                                                            2003           2002
         Operating supplies and spare parts             $ 95,254       $ 86,002
         Manufacturing parts and materials                 3,834          6,742
         ----------------------------------------------------------------------
                                                        $ 99,088       $ 92,744
         ----------------------------------------------------------------------

<PAGE>

<TABLE>
<CAPTION>
NOTE 4:  PROPERTY, PLANT AND EQUIPMENT
                                                                          ACCUMULATED             NET BOOK
         2003                                               COST         DEPRECIATION                VALUE
         -------------------------------------------------------------------------------------------------
<S>                                                   <C>                   <C>                  <C>
         Rig equipment                                $1,128,300            $ 324,097            $ 804,203
         Field technical equipment                       601,752              113,617              488,135
         Rental equipment                                 77,640               30,128               47,512
         Other equipment                                 201,533               95,980              105,553
         Vehicles                                         88,329               23,444               64,885
         Buildings                                        77,839               15,799               62,040
         Land                                             15,922                   --               15,922
         -------------------------------------------------------------------------------------------------
                                                     $ 2,191,315            $ 603,065          $ 1,588,250
         -------------------------------------------------------------------------------------------------

                                                                          Accumulated             Net Book
         2002                                               Cost         Depreciation                Value
         Rig equipment                               $ 1,059,772            $ 267,174            $ 792,598
         Field technical equipment                       472,957               65,528              407,429
         Rental equipment                                 76,328               27,900               48,428
         Other equipment                                 163,361               78,890               84,471
         Vehicles                                         77,360               19,240               58,120
         Buildings                                        64,211               12,967               51,244
         Land                                             14,983                   --               14,983
         -------------------------------------------------------------------------------------------------
                                                     $ 1,928,972            $ 471,699          $ 1,457,273
         -------------------------------------------------------------------------------------------------

<CAPTION>
NOTE 5:  OTHER ASSETS

                                                                               2003          2002
         ----------------------------------------------------------------------------------------
<S>                                                                         <C>          <C>
         Investments, at cost less provision for impairment                 $ 3,539      $  8,960
         Investments, at equity                                                 310         2,114
         Deferred financing costs, net of accumulated amortization            5,083         6,369
         ----------------------------------------------------------------------------------------
                                                                            $ 8,932      $ 17,443
         ----------------------------------------------------------------------------------------
</TABLE>

NOTE 6:  BANK INDEBTEDNESS

               The Corporation has available a revolving credit loan facility
         of US$25.0 million. Advances under this facility bear interest at the
         bank's prime lending rate less 0.75%. The facility is renewable and
         extendable annually at the option of the lenders. As at December 31,
         2003 $17.9 million (US$13.7 million) was drawn on this facility as
         compared to $14.3 million (US$9.2 million) at December 31, 2002.
         Availability of this facility is further reduced by outstanding
         letters of credit in the amount of $1.1 million (US$850,000).

               As at December 31, 2003 the Corporation has included $130.0
         million (December 31, 2002 - $80.0 million) of its extendable
         revolving unsecured facility in bank indebtedness, as the funds were
         used to finance working capital.

<PAGE>

<TABLE>
<CAPTION>
NOTE 7:  LONG-TERM DEBT
                                                                               2003             2002
         -------------------------------------------------------------------------------------------
<S>                                                                      <C>              <C>
         Unsecured debentures - Series 1                                 $  200,000       $  200,000
         Unsecured debentures - Series 2                                    150,000          150,000
         EDC facility (2003 - US$2,639; 2002 - US$7,917)                      3,459           12,255
         EDC facility (2003 - US$20,000; 2002 - US$30,000)                   26,214           46,440
         EDC facility (US$20,190)                                            26,463               --
         Extendable revolving unsecured facility                              9,815          128,318
         Other                                                                  629            4,963
         -------------------------------------------------------------------------------------------
                                                                            416,580          541,976
         Less amounts due within one year                                    17,158           27,098
         -------------------------------------------------------------------------------------------
                                                                         $  399,422       $  514,878
         -------------------------------------------------------------------------------------------
</TABLE>

               The $200.0 million 6.85% Series 1 unsecured debentures mature
         June 26, 2007 and have an effective interest rate of 7.44% after
         taking into account deferred financing costs. The debentures are
         redeemable at any time at the option of the Corporation upon payment
         of a redemption price equal to the greater of an amount calculated
         with reference to the yield on a Government of Canada bond with the
         same maturity, and par.

               The $150.0 million 7.65% Series 2 unsecured debentures mature
         October 27, 2010 and have an effective interest rate of 7.71% after
         taking into account deferred financing costs. The debentures are
         redeemable at any time at the option of the Corporation upon payment
         of a redemption price equal to the greater of an amount calculated
         with reference to the yield on a Government of Canada bond with the
         same maturity, and par.

               The $3.5 million unsecured term financing facility with Export
         Development Canada (EDC) is repayable in semi-annual installments,
         matures on January 20, 2004 and bears interest at six-month U.S.
         Libor plus applicable margin. The margin is dependent upon the
         Corporation's credit rating, which at December 31, 2003 resulted in a
         margin of 0.8%.

               The $26.2 million unsecured term financing facility with EDC is
         repayable over five years in semi-annual installments, matures
         September 15, 2005 and bears interest at six-month U.S. Libor plus
         applicable margin. The margin is dependent upon the Corporation's
         credit rating, which at December 31, 2003 results in a margin of
         0.9%.

               The $26.5 million unsecured financing facility with EDC matures
         on October 24, 2004 and bears interest at six-month U.S. Libor plus
         applicable margin. The margin is dependent upon the Corporation's
         margin on its $350.0 million extendable revolving unsecured credit
         facility, which at December 31, 2003 resulted in a margin of 0.8%.
         The facility is extendable upon mutual agreement between the
         Corporation and the Lender, or can be converted, at the Corporation's
         option, to a term loan repayable in two equal semi-annual
         installments, with the first payment due April 25, 2005.

<PAGE>

               The Corporation has an extendable revolving unsecured facility
         of $350.0 million (or U.S. equivalent) with a syndicate led by a
         Canadian chartered bank. Advances are available at either the bank's
         prime lending rate, U.S. base rate, U.S. Libor plus applicable margin
         or Bankers' Acceptance plus applicable margin or in combination. The
         applicable margin is dependent on the Corporation's credit rating and
         the percentage of the total facility outstanding, which at December
         31, 2003 resulted in a margin of 0.8%. The facility is extendable
         annually at the option of the lenders. Should this facility not be
         extended, outstanding amounts will be transferred to a two-year term
         facility repayable in equal quarterly installments. As at December
         31, 2003 the Corporation had drawn $139.8 million under this
         facility, of which $130.0 million has been included in bank
         indebtedness as the funds were used to finance working capital.

         Principal repayments over the next five years are as follows:

         2004                                                      $ 17,158
         2005                                                        39,588
         2006                                                            19
         2007                                                       200,000
         2008                                                            --
         Thereafter                                                 159,815
         ------------------------------------------------------------------
                                                                  $ 416,580
         ------------------------------------------------------------------


NOTE 8:  SHARE CAPITAL

         (a)   AUTHORIZED:

               o  unlimited number of non-voting cumulative convertible
                  redeemable preferred shares without nominal or par value;

               o  unlimited number of common shares without nominal or par
                  value.

<TABLE>
<CAPTION>
         (b)   ISSUED:

               Common Shares:                                    Number             Amount
               ---------------------------------------------------------------------------
<S>                                                          <C>                 <C>
               Balance, December 31, 2000                    52,283,053          $ 864,495
                     Options exercised                          855,935             20,294
                     Warrants exercised                          37,050              2,371
               ---------------------------------------------------------------------------
               Balance, December 31, 2001                    53,176,038          $ 887,160
                     Options exercised                          890,715             25,756
               ---------------------------------------------------------------------------
               Balance, December 31, 2002                    54,066,753          $ 912,916
                     Options exercised                          778,925             23,613
               ---------------------------------------------------------------------------
               BALANCE, DECEMBER 31, 2003                    54,845,678          $ 936,529
               ---------------------------------------------------------------------------
</TABLE>

<PAGE>

         (c)   EQUITY INCENTIVE PLANS:

               The Corporation has equity incentive plans under which a
               combined total of 3,966,711 options to purchase common shares
               are reserved to be granted to employees and directors. Of the
               amount reserved, 3,393,194 options have been granted. Under
               these plans, the exercise price of each option equals the
               market value of the Corporation's stock on the date of the
               grant and an option's maximum term is 10 years. Options vest
               over a period from 1 to 4 years from the date of grant as
               employees or directors render continuous service to the
               Corporation.

               A summary of the equity incentive plans as at December 31,
               2001, 2002 and 2003, and changes during the periods then ended
               is presented below:

<TABLE>
<CAPTION>
                                                                                                  Weighted
                                                                                   Range of        Average
                                                             Options               Exercise       Exercise            Options
                                                         Outstanding                  Price          Price        Exercisable
               --------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>       <C>          <C>                <C>
               Outstanding at December 31, 2000            4,474,103        $ 13.50 - 54.20        $ 31.18            946,087
                   Granted                                 1,055,350          31.05 - 65.90          44.03
                   Exercised                               (855,935)          13.50 - 44.38          23.71
                   Cancelled or expired                    (267,237)          25.50 - 52.39          38.63
               --------------------------------------------------------------------------------------------------------------
               Outstanding at December 31, 2001            4,406,281        $ 13.50 - 65.90        $ 35.21          1,217,428
                   Granted                                   786,050          41.06 - 52.61          48.77
                   Exercised                               (890,715)          13.50 - 44.38          28.92
                   Cancelled or expired                    (182,288)          25.50 - 65.90          40.19
               --------------------------------------------------------------------------------------------------------------
               Outstanding at December 31, 2002            4,119,328        $ 13.50 - 65.90        $ 38.93          1,627,777
                   Granted                                   416,000          49.28 - 51.04          50.61
                   Exercised                               (778,925)          13.50 - 51.00          30.34
                   Cancelled or expired                    (363,209)          31.05 - 65.90          44.89
               --------------------------------------------------------------------------------------------------------------
               OUTSTANDING AT DECEMBER 31, 2003            3,393,194        $ 13.50 - 65.90        $ 41.69          2,038,198
               --------------------------------------------------------------------------------------------------------------
</TABLE>

               The range of exercise prices for options outstanding at
               December 31, 2003 are as follows:

<TABLE>
<CAPTION>
                                                                        Total Options Outstanding           Exercisable Options
               ----------------------------------------------------------------------------------------------------------------
                                                                                         Weighted
                                                                         Weighted         Average                      Weighted
                                                                          Average       Remaining                       Average
                                                                         Exercise     Contractual                      Exercise
               Range of Exercise Prices:                  Number            Price     Life (Years)        Number          Price
               ----------------------------------------------------------------------------------------------------------------
<S>            <C>                                     <C>               <C>          <C>             <C>              <C>
               $  13.50 - 19.99                          161,486          $ 14.12            0.39        161,486        $ 14.12
                  20.00 - 29.99                           51,300            28.98            0.79         51,300          28.98
                  30.00 - 39.99                        1,089,665            34.96            1.21        907,940          35.29
                  40.00 - 49.99                        1,029,943            42.86            3.34        557,172          42.29
                  50.00 - 59.99                        1,038,300            51.98            4.69        359,050          53.24
                  60.00 - 65.90                           22,500            65.81            2.55          1,250          65.10
               ----------------------------------------------------------------------------------------------------------------
               $  13.50 - 65.90                        3,393,194          $ 41.69            2.89      2,038,198        $ 38.55
               ----------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

               In accordance with the Corporation's stock option plans, these
               options have an exercise price equal to the market price at
               date of grant. The per share weighted average fair value of
               stock options granted during the year ended December 31, 2003
               was $19.48 (2002 - $20.85) based on the date of grant using the
               Black-Scholes option pricing model with the following
               assumptions: average risk-free interest rate of 3.47% (2002 -
               4.53%), average expected life of 3.42 years (2002 - 3.88 years)
               and expected volatility of 47% (2002 - 49%).

               Had the Corporation determined compensation costs based on the
               fair value at the date of grant for stock options granted since
               January 1, 2002; net earnings and earnings per share (EPS)
               would have decreased to the pro forma amounts indicated below.
               These pro forma amounts reflect compensation cost amortized
               over the option's vesting period.

<TABLE>
<CAPTION>
                                                                     2003                               2002
               ------------------------------------------------------------------------------------------------------
               Years Ended December 31                 AS REPORTED        PRO FORMA         As Reported     Pro forma
               ------------------------------------------------------------------------------------------------------
<S>                                                    <C>                <C>               <C>              <C>
               Net earnings                             $  188,676        $ 178,993           $  91,265      $ 85,071
               Basic EPS                                $     3.47        $    3.29           $    1.70      $   1.59
               Diluted EPS                              $     3.41        $    3.24           $    1.66      $   1.55
               ------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 9:  EMPLOYEE BENEFIT PLANS

               The Corporation has a defined contribution employee benefit
         plan covering a significant number of its employees. The Corporation
         matches individual employee contributions up to 5% of the employee's
         compensation. Employer matching contributions under the plan totalled
         $7.5 million for the year ended December 31, 2003 (year ended
         December 31, 2002 - $6.9 million; year ended December 31, 2001 - $6.3
         million).

               With respect to the retirement allowance described in Note
         1(j), the Corporation charged $351,000 to earnings in 2003 (2002 -
         $371,000; 2001 - $360,000) and at December 31, 2003 had accrued a
         total of $2.5 million, which amount is included in accounts payable
         and accrued liabilities.


NOTE 10: COMMITMENTS

               The Corporation has commitments for operating lease agreements,
         primarily for vehicles and office space, in the aggregate amount of
         $110.5 million. Payments over the next five years are as follows:

         ---------------------------------------------------------------------
         2004                                                        $  28,104
         2005                                                           21,439
         2006                                                           15,948
         2007                                                           12,179
         2008                                                           11,168
         ---------------------------------------------------------------------

<PAGE>

         Rent expense included in the statements of earnings is as follows:

         2003                                                        $  23,924
         2002                                                           18,085
         2001                                                           16,923
         ---------------------------------------------------------------------


NOTE 11: INCOME TAXES

               The provision for income taxes differs from that which would be
         expected by applying statutory rates. A reconciliation of the
         difference is as follows:

<TABLE>
<CAPTION>
                                                                                2003                2002                2001
         -------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                 <C>                 <C>
         Earnings before income taxes, non-controlling interest,
              discontinued operations and goodwill amortization            $ 265,415           $ 121,375           $ 321,637
         Income tax rate                                                          36%                 39%                 42%
         -------------------------------------------------------------------------------------------------------------------
         Expected income tax provision                                     $  95,549           $  47,336           $ 135,088
         Add (deduct):
              Non-deductible expenses                                          2,380               2,084               3,861
              Income taxed in jurisdictions with lower tax rates             (14,062)            (13,450)            (14,302)
              Non-taxable disposition of investment                           (2,327)                 --                  --
                Other                                                         (6,020)             (2,729)             (4,211)
         -------------------------------------------------------------------------------------------------------------------
                                                                              75,520              33,241             120,436
         Reduction of future tax balances due to
               substantively enacted tax rate reductions                      (2,988)             (2,551)             (5,964)
         -------------------------------------------------------------------------------------------------------------------
                                                                           $  72,532           $  30,690           $ 114,472
         -------------------------------------------------------------------------------------------------------------------
</TABLE>

               In both 2003 and 2002, the Province of Alberta enacted a 0.5%
         reduction in tax rates and in 2001 it enacted a 2% reduction in tax
         rates. These rate changes have been reflected as a reduction in
         future tax expense in 2003, 2002 and 2001.

               The Corporation's operations are complex and computation of the
         provision for income taxes involves tax interpretations, regulations
         and legislation that are continually changing. There are tax matters
         that have not yet been confirmed by taxation authorities, however,
         management believes the provision for income taxes is adequate.

<PAGE>

               The net future tax liability is comprised of the tax effect of
         the following temporary differences:

<TABLE>
<CAPTION>
                                                                               2003                   2002
         -------------------------------------------------------------------------------------------------
<S>                                                                       <C>                     <C>
         Liabilities:
              Property, plant and equipment and intangibles               $ 290,371               $288,720
              Assets held in partnership with different tax year             92,163                 50,640
                Deferred financing costs                                      1,774                  2,385
         -------------------------------------------------------------------------------------------------
                                                                          $ 384,308               $341,745
         -------------------------------------------------------------------------------------------------
         Assets:
              Losses carried forward                                      $  63,431               $ 29,070
                Accrued liabilities                                             278                  1,511
         -------------------------------------------------------------------------------------------------
                                                                             63,709                 30,581
         -------------------------------------------------------------------------------------------------
                                                                          $ 320,599               $311,164
         -------------------------------------------------------------------------------------------------
</TABLE>

               The Corporation has available losses of $251.4 million of which
         the benefit of $181.9 million has been recognized. These losses
         expire depending upon the year incurred and various limitations under
         tax codes in the jurisdictions in which the losses were incurred.


NOTE 12: PER SHARE AMOUNTS

               Per share amounts have been calculated on the weighted average
         number of common shares outstanding. The weighted average shares
         outstanding for the year ended December 31, 2003 was 54,430,468 (year
         ended

               December 31, 2002 - 53,701,873; year ended December 31, 2001 -
         52,952,879).

               Diluted per share amounts reflect the dilutive effect of the
         exercise of the options outstanding. The diluted shares for the year
         ended December 31, 2003 was 55,299,920 (year ended December 31, 2002
         - 54,815,167; year ended December 31, 2001 - 54,198,348).


NOTE 13: SIGNIFICANT CUSTOMERS

               During the years ended December 31, 2003, 2002 and 2001, no one
         customer accounted for more than 10% of the Corporation's revenue.


NOTE 14: ACQUISITIONS

               Acquisitions have been accounted for by the purchase method
         with results of operations acquired included in the financial
         statements from the effective date of acquisition. The details of
         acquisitions for the past three years are as follows.

<PAGE>

               In February 2003, the Corporation completed the acquisition of
         the operating assets of MacKenzie Caterers (1984) Ltd., a provider of
         oilfield camp and catering services in western Canada, for $6.8
         million. No value was assigned to intangibles or goodwill.

               During the year ended December 31, 2002, the Corporation
         completed the following business acquisitions:

               (a)  Acquisition of the business assets of NightHawk Vacuum
                    Services Ltd. (NightHawk) in September 2002. NightHawk
                    provides oilfield vacuum services in northern Alberta and
                    British Columbia.

               (b)  Paid additional consideration in conjunction with an
                    acquisition made in 2001. This additional consideration
                    was payable based on the development of a commercially
                    viable technology.

<TABLE>
<CAPTION>
                                                                   NightHawk               Other                  Total
         --------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                 <C>                     <C>
         Net assets acquired at assigned values:
              Working capital                                     $      (47)         $        --             $     (47)
              Property, plant and equipment                            3,097                   --                 3,097
              Goodwill                                                    --                1,544                 1,544
         --------------------------------------------------------------------------------------------------------------
                                                                       3,050                1,544                 4,594
         --------------------------------------------------------------------------------------------------------------
         Consideration:
                Cash                                                 $ 3,050              $ 1,544               $ 4,594
         --------------------------------------------------------------------------------------------------------------
</TABLE>

               During the year ended December 31, 2001, the Corporation
         completed business acquisitions, the most significant of which was
         the acquisition of all the issued and outstanding shares of BecField
         Drilling Services Ltd. (BecField) in January 2001. BecField provides
         directional drilling and measurement-while-drilling services through
         its technical field and support personnel to the onshore and offshore
         oil and gas industry. It has established operations in Europe and the
         Middle East.

<TABLE>
<CAPTION>
                                                                    BecField                Other                 Total
         --------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                    <C>                   <C>
         Net assets acquired at assigned values:
              Working capital                                     $    2,446(a)          $  1,136(b)           $  3,582
              Property, plant and equipment                            5,036                4,074                 9,110
              Goodwill                                                23,877                2,783                26,660
                Future income taxes                                       --                (800)                  (800)
         --------------------------------------------------------------------------------------------------------------
                                                                  $   31,359             $  7,193              $ 38,552
         --------------------------------------------------------------------------------------------------------------
         Consideration:
                Cash                                              $   31,359             $  7,193              $ 38,552
         --------------------------------------------------------------------------------------------------------------
         (a) INCLUDES CASH OF $ 1,880
         (b) INCLUDES CASH OF $ 1,115


<PAGE>

NOTE 15: UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

               These financial statements have been prepared in accordance
         with Canadian GAAP which, in the case of the Corporation conform with
         United States generally accepted accounting principles (U.S. GAAP) in
         all material respects, except as follows:

         a)    INCOME TAXES:

               In 2000 the Corporation adopted the liability method as
               described in Note 1 without restatement of prior years. As a
               result, the Corporation recorded an adjustment to retained
               earnings and future tax liability in the amount of $70 million
               at January 1, 2000. U.S. GAAP required the use of the liability
               method prescribed in the Statement of Financial Accounting
               Standards (SFAS) No. 109, which substantially conforms with the
               Canadian GAAP accounting standard adopted in 2000. Application
               of U.S. GAAP in years prior to 2000 would have resulted in $70
               million of additional goodwill being recognized at January 1,
               2000 as opposed to an implementation adjustment to retained
               earnings allowed under Canadian GAAP. In 2001, 2002 and 2003
               the U.S. GAAP financial statements would reflect an increase in
               goodwill of $63 million and a corresponding increase in
               retained earnings. An additional charge to earnings of $3.5
               million in 2001 would be required related to the amortization
               of the goodwill.

               Under Canadian GAAP, future tax liabilities and assets are
               calculated by reference to current tax legislation and proposed
               legislation that is considered substantively enacted but not
               yet enacted into law. U.S. GAAP requires that only enacted
               income tax legislation be used for calculation of future tax
               amounts. In 2000 the Federal Government of Canada introduced
               tax rate reductions that were substantively enacted at December
               31, 2000 but that were not passed into legislation until 2001.
               The resulting reduction of future tax balances recognized under
               Canadian GAAP in 2000 would not be recognized under U.S. GAAP
               until 2001.

               The application of U.S. accounting principles would have the
               following impact on the consolidated financial statements:

               CONSOLIDATED STATEMENTS OF EARNINGS
               Years ended December 31,                                   2003                  2002                 2001
               ----------------------------------------------------------------------------------------------------------
               Net earnings under Canadian GAAP                    $   188,676            $   91,265            $ 186,534
               Adjustments under U.S. GAAP:
                   Goodwill amortization                                    --                    --               (3,502)
                   Income tax rate                                          --                    --               19,934
               ----------------------------------------------------------------------------------------------------------
                 Net income and comprehensive income
                   under U.S. GAAP                                 $   188,676            $   91,265            $ 202,966
               ----------------------------------------------------------------------------------------------------------
               Earnings per share under U.S. GAAP:
                   Basic                                           $      3.47            $     1.70            $    3.83
                   Diluted                                         $      3.41            $     1.66            $    3.74
               ----------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
               BALANCE SHEETS
                                                                       DECEMBER 31, 2003                   December 31, 2002
                                                              AS REPORTED          U.S. GAAP        As reported          U.S. GAAP
               -------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                <C>                <C>                <C>
               Current assets                                  $  686,458         $  686,458         $  601,827         $  601,827
               Property, plant and equipment                    1,588,250          1,588,250          1,457,273          1,457,273
               Intangibles                                         65,262             65,262             71,355             71,355
               Goodwill                                           527,443            590,472            527,443            590,472
               Other assets                                         8,932              8,932             17,443             17,443
                   Long-term assets
                   of discontinued operations                      32,040             32,040             84,674             84,674
               -------------------------------------------------------------------------------------------------------------------
                                                               $2,908,385         $2,971,414         $2,760,015         $2,823,044
               -------------------------------------------------------------------------------------------------------------------
               Current liabilities                             $  438,197         $  438,197         $  391,571         $  391,571
               Long-term debt                                     399,422            399,422            514,878            514,878
               Future income taxes                                320,599            320,599            311,164            311,164
               Liabilities of discontinued operations               1,107              1,107              7,383              7,383
               Non-controlling interest                             3,771              3,771              2,019              2,019
                 Shareholders' equity                           1,745,289          1,808,318          1,533,000          1,596,029
               -------------------------------------------------------------------------------------------------------------------
                                                               $2,908,385         $2,971,414         $2,760,015         $2,823,044
               -------------------------------------------------------------------------------------------------------------------
</TABLE>

               CONSOLIDATED STATEMENT OF CASH FLOWS

               The application of U.S. accounting principles would have no
               impact on the consolidated statement of cash flows.

               STOCK COMPENSATION

               In 2003 and 2002 Canadian GAAP and U.S. GAAP were substantially
               the same with respect to stock compensation. Prior to 2002,
               U.S. GAAP required the disclosure of the impact of using fair
               value accounting for stock options if in fact this alternative
               was not used. Canadian GAAP did not require such disclosure.
               The per share weighted average fair value of stock options
               granted during the year ended December 31, 2001 was $19.87 on
               the date of grant using the Black-Scholes option pricing model
               with the following assumptions: risk free interest rate of
               5.75%, expected life of 5 years and expected volatility of 49%.

               Had the Corporation determined compensation cost based on the
               fair value at the date of grant for its stock options under
               SFAS 123, net earnings in accordance with U.S. GAAP would have
               decreased by $12.2 million to $190.8 million (basic EPS -
               $3.60) for the year ended December 21, 2001.

<PAGE>

NOTE 16: SEGMENTED INFORMATION

               The Corporation operates in three industry segments. Contract
         Drilling includes drilling rigs, service rigs and hydraulic well
         assist snubbing units, procurement and distribution of oilfield
         supplies, camp and catering services, and manufacture, sale and
         repair of drilling equipment. Technology Services includes wireline,
         directional drilling,
         measurement-while-drilling/logging-while-drilling services,
         separation services, and the design, manufacture and marketing of
         polycrystalline diamond compact drill bits. Rental and Production
         includes oilfield equipment rental services and industrial process
         services.

<TABLE>
<CAPTION>
                                                CONTRACT       TECHNOLOGY        RENTAL AND        CORPORATE
         2003                                   DRILLING         SERVICES        PRODUCTION        AND OTHER             TOTAL
         ---------------------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>               <C>              <C>               <C>
         Revenue                             $   992,824      $   714,385       $   210,724               --       $ 1,917,933
         Operating earnings                      285,753            4,842            39,350          (32,835)          297,110
         Research and engineering                     --           42,419                --               --            42,419
         Depreciation and
              amortization                        77,725           75,578            12,533            4,952           170,788
         Total assets                          1,423,036        1,257,235           166,300           61,814         2,908,385
         Goodwill                                257,531          241,340            28,572               --           527,443
         Capital expenditures*                    99,034          177,756            15,158           22,979           314,927
         ---------------------------------------------------------------------------------------------------------------------

                                                Contract       Technology        Rental and        Corporate
         2002                                   Drilling         Services        Production        and Other             Total
         ---------------------------------------------------------------------------------------------------------------------
         Revenue                             $   770,147      $   603,088       $   192,840      $     1,431       $ 1,567,506
         Operating earnings                      184,553          (31,733)           30,090          (27,351)          155,559
         Research and engineering                     --           34,862                --               --            34,862
         Depreciation and
              amortization                        62,524           53,347            13,159            4,354           133,384
         Total assets                          1,312,459        1,127,550           240,842           79,164         2,760,015
         Goodwill                                257,531          241,340            28,572               --           527,443
         Capital expenditures*                    50,686          189,092            22,346            9,868           271,992
         ---------------------------------------------------------------------------------------------------------------------

                                                Contract       Technology        Rental and        Corporate
         2002                                   Drilling         Services        Production        and Other             Total
         ---------------------------------------------------------------------------------------------------------------------
         Revenue                             $ 1,004,265      $   614,152       $   194,567      $     2,224       $ 1,815,208
         Operating earnings                      298,737           52,257            39,365          (28,574)          361,785
         Research and engineering                     --           31,677                --               --            31,677
         Depreciation and
              amortization                        75,170           47,694            13,388            3,019           139,271
         Total assets                          1,367,682          987,061           241,044           55,571         2,651,358
         Goodwill                                257,531          239,796            28,572               --           525,899
         Capital expenditures*                   122,575          203,547            27,352           18,218           371,692
         ---------------------------------------------------------------------------------------------------------------------
</TABLE>
         * EXCLUDES BUSINESS ACQUISITIONS


<PAGE>

               The Corporation's operations are carried on in the following
         geographic locations:

         2003                    CANADA        INTERNATIONAL              TOTAL
         ----------------------------------------------------------------------
         Revenue           $ 1,349,565            $  568,368        $ 1,917,933
         Assets               2,121,832              786,553          2,908,385
         ----------------------------------------------------------------------

         2002                    Canada        International              Total
         ----------------------------------------------------------------------
         Revenue           $  1,022,489           $  545,017       $  1,567,506
         Assets               2,081,200              678,815          2,760,015
         ----------------------------------------------------------------------

         2001                    Canada        International              Total
         ----------------------------------------------------------------------
         Revenue           $  1,320,989          $  494,219        $  1,815,208
         Assets               2,175,877              475,481          2,651,358
         ----------------------------------------------------------------------

NOTE 17: FINANCIAL INSTRUMENTS

         (a)   FAIR VALUE

               The carrying value of cash, accounts receivable and accounts
               payable and accrued liabilities approximate their fair value
               due to the relatively short period to maturity of the
               instruments. The fair value of long-term debt, exclusive of the
               unsecured debentures, approximates its carrying value as it
               bears interest at floating rates. The $200 million Series 1
               debentures have a fair value of approximately $216.2 million as
               at December 31, 2003 (December 31, 2002 - $210.5 million) and
               the $150 million Series 2 unsecured debentures have a fair
               value of approximately $170.8 million at December 31, 2003
               (December 31, 2002 - $161.1 million). As at December 31, 2003
               investments have a carrying value of $3.8 million (December 31,
               2002 - $11.1 million) and a fair value of approximately $5.2
               million (December 31, 2002 - $12.7 million).

         (b)   CREDIT RISK

               Accounts receivable includes balances from a large number of
               customers. The Corporation assesses the credit worthiness of
               its customers on an ongoing basis as well as monitoring the
               amount and age of balances outstanding. Accordingly, the
               Corporation views the credit risks on these amounts as normal
               for the industry. As at December 31, 2003 the Corporation's
               allowance for doubtful accounts was $16.0 million (December 31,
               2002 - $14.9 million).

         (c)   INTEREST RATE RISK

               The Corporation manages its exposure to interest rate risks
               through a combination of fixed and floating rate borrowings. As
               at December 31, 2003, 39% of its total borrowings was at
               floating rates.

         (d)   FOREIGN CURRENCY RISK

               The Corporation is exposed to foreign currency fluctuations in
               relation to its international operations; however, management
               believes this exposure is not material to its overall
               operations.

<PAGE>

NOTE 18: SUPPLEMENTAL INFORMATION

<TABLE>
<CAPTION>
                                                                                2003           2002             2001
         -----------------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>              <C>
         Cash interest paid                                                $  36,721      $  35,660        $  45,967
         Cash income taxes paid                                               43,994         89,856           11,066
         Components of change in non-cash working capital balances:
              Accounts receivable                                          $(113,519)     $  14,231        $ (35,607)
              Inventory                                                       (6,344)       (13,982)         (18,245)
              Accounts payable and accrued liabilities                         2,632         20,000           15,878
                Income taxes payable                                          16,085        (20,850)          15,374
         -----------------------------------------------------------------------------------------------------------
                                                                           $(101,146)     $    (601)       $ (22,600)
         -----------------------------------------------------------------------------------------------------------
</TABLE>

              The components of accounts payable and accrued liabilities are as
         follows:

<TABLE>
<CAPTION>
                                                                                              2003             2002
         ----------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>              <C>
         Accounts payable                                                                $  62,958         $ 66,015
         Accrued liabilities
              Payroll                                                                       43,901           43,547
                Other                                                                      153,686          148,351
         ----------------------------------------------------------------------------------------------------------
                                                                                         $ 260,545         $257,913
         ----------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 19: CONTINGENCIES

               The Corporation, through the performance of its services and
         product sales obligations, is sometimes named as a defendant in
         litigation. One such case relates to a former agent of the
         Corporation in Indonesia who filed a suit in Indonesian courts
         seeking a pronouncement that they be the sole agent for certain of
         the Corporation's product lines in Indonesia and they are seeking
         damages of US$17.5 million. This matter is at trial and all written
         evidence and oral testimony has been presented by all parties. The
         outcome of this and other claims is not determinable at this time;
         however, their ultimate resolution is not expected to have a material
         adverse effect on the Corporation.


               The Corporation maintains a level of insurance coverage deemed
         appropriate by management and for matters for which insurance
         coverage can be acquired.


<PAGE>

NOTE 20: DISCONTINUED OPERATIONS

               On March 6, 2003, the Corporation sold Energy Industries Inc.,
         a wholly-owned subsidiary included in the Rental and Production
         segment, for $60.0 million cash. The effective date of the
         transaction was January 1, 2003. Energy Industries designed and
         manufactured modularized natural gas compression packages. Although
         Energy Industries had been profitable since its acquisition by
         Precision in 1996, the compression packaging business was determined
         to be not core to the Corporation's energy services globalization
         strategy.

               In May 2003 the Corporation sold its 50% interest in Energy
         Equipment Rentals General Partnership ("EER") and Oil Drilling
         Exploration (Argentina) SA ("OD&E") for cash proceeds of $6.9
         million, net of transaction costs. Both entities were components of
         the Contract Drilling segment.

               The review of the business plan for the Technology Services
         segment was completed in the fourth quarter of 2003. One of the
         outcomes of this process was the identification of two product lines,
         namely pressure pumping and completion services carried on by the
         Fleet Cementers and Polar Completions divisions respectively, as
         being not core to the segment's ongoing growth initiatives. As a
         result, a program has been initiated to dispose of these businesses
         and discussions are being held with interested parties.

               Results of the operations of these businesses have been
         classified as results of discontinued operations. The following table
         provides additional information with respect to amounts included in
         the results of discontinued operations:

<TABLE>
<CAPTION>
                                                                     2003                  2002                  2001
        -------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                   <C>                   <C>
        Gain on disposal of Energy Industries                   $  13,071             $      --             $      --
        Gain on disposal of EER and OD&E                            4,389                    --                    --
        -------------------------------------------------------------------------------------------------------------
                                                                $  17,460             $      --             $      --
        -------------------------------------------------------------------------------------------------------------
        Revenue
             Gas compression                                    $      --             $  81,563             $  77,313
             Pressure pumping and completion services              48,150                36,279                55,287
               Other                                                  560                 3,802                 5,755
        -------------------------------------------------------------------------------------------------------------
        Discontinued operations before income taxes             $  48,710             $ 121,644             $ 138,355
        -------------------------------------------------------------------------------------------------------------

        Results of operations before income taxes
             Gas compression                                    $      --             $  13,545             $  11,685
             Pressure pumping and completion services             (15,585)               (9,042)                7,078
             Other                                                     49                (1,154)                 (637)
               Writedown of assets held for sale                  (10,799)                   --                    --
        -------------------------------------------------------------------------------------------------------------
                                                                  (26,335)                3,349                18,126
        Income tax expense (recovery)                              (6,420)                1,618                 7,302
        -------------------------------------------------------------------------------------------------------------
        Discontinued operations                                 $ (19,915)            $   1,731             $  10,824
        -------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

               The following table provides additional information with
         respect to amounts included in the balance sheet as
         assets/liabilities held for sale:

<TABLE>
<CAPTION>
                                                                                     2003          2002
         ----------------------------------------------------------------------------------------------
<S>                                                                              <C>           <C>
         Accounts receivable                                                     $  7,157      $ 12,468
         Inventory                                                                 12,482        40,165
         Other                                                                      1,511          (908)
         ----------------------------------------------------------------------------------------------
                                                                                 $ 21,150      $ 51,725
         ----------------------------------------------------------------------------------------------
         Capital assets                                                          $ 27,010      $ 64,171
         Goodwill                                                                   4,267        19,478
         Other                                                                        763         1,025
         ----------------------------------------------------------------------------------------------
                                                                                 $ 32,040      $ 84,674
         ----------------------------------------------------------------------------------------------
         Accounts payable                                                        $  4,473      $ 10,655
         Other                                                                        739           584
         ----------------------------------------------------------------------------------------------
                                                                                 $  5,212      $ 11,239
         ----------------------------------------------------------------------------------------------
         Future income taxes                                                     $  1,107      $  7,383
         ----------------------------------------------------------------------------------------------
</TABLE>

               The following table provides additional information with
         respect to amounts included in the cash flow statement of funds
         provided by (used in) assets classified as discontinued operations:

<TABLE>
<CAPTION>
                                                                             2003                2002           2001
         -----------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                 <C>            <C>
         Net earnings of discontinued operations                         $ (2,455)           $  1,731       $ 10,824
         Items not affecting cash:
              Gain on disposal of discontinued operations                 (17,460)                 --             --
              Depreciation and amortization                                 8,340               8,045          5,849
              Goodwill amortization                                            --                  --          1,198
              Writedown of assets of discontinued operations               10,799                  --             --
                Future income taxes                                        (4,916)             (2,908)          (610)
         -----------------------------------------------------------------------------------------------------------
         Funds provided (used in) by discontinued operations             $ (5,692)           $  6,868       $ 17,261
         -----------------------------------------------------------------------------------------------------------
</TABLE>


               Components of change in non-cash working capital balances
         related to discontinued operations:

<TABLE>
<CAPTION>
                                                             2003            2002           2001
         ---------------------------------------------------------------------------------------
<S>                                                      <C>             <C>            <C>
         Accounts receivable                             $  2,843        $ 16,598       $ (6,002)
         Inventory                                          3,243          (7,534)        (5,477)
         Accounts payable and accrued liabilities           1,931          (4,742)           596
         Income taxes payable                                (772)            282           (688)
         ---------------------------------------------------------------------------------------
                                                         $  7,245        $  4,604       $(11,571)
         ---------------------------------------------------------------------------------------
</TABLE>

<PAGE>

NOTE 21: GUARANTEES

               The Corporation has entered into agreements indemnifying
         certain parties primarily with respect to tax and specific third
         party claims associated with businesses sold by the Corporation. Due
         to the nature of the indemnifications, the maximum exposure under
         these agreements cannot be estimated. No amounts have been recorded
         for such indemnities as the Corporation's obligations under them are
         not probable and estimable.


<PAGE>

CERTIFICATIONS AND DISCLOSURE REGARDING CONTROLS AND PROCEDURES.


(a)      CERTIFICATIONS. See Exhibits 99.1 and 99.2 to this Annual Report on
         Form 40-F.

(b)      DISCLOSURE CONTROLS AND PROCEDURES. As of the end of the registrant's
         fiscal year ended December 31, 2003, an evaluation of the effectiveness
         of the registrant's "disclosure controls and procedures" (as such term
         is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange
         Act of 1934, as amended (the "Exchange Act")) was carried out by the
         registrant's principal executive officer and principal financial
         officer. Based upon that evaluation, the registrant's principal
         executive officer and principal financial officer have concluded that
         as of the end of that fiscal year, the registrant's disclosure controls
         and procedures are effective to ensure that information required to be
         disclosed by the registrant in reports that it files or submits under
         the Exchange Act is recorded, processed, summarized and reported within
         the time periods specified in Securities and Exchange Commission rules
         and forms.

         It should be noted that while the registrant's principal executive
         officer and principal financial officer believe that the registrant's
         disclosure controls and procedures provide a reasonable level of
         assurance that they are effective, they do not expect that the
         registrant's disclosure controls and procedures or internal control
         over financial reporting will prevent all errors and fraud. A control
         system, no matter how well conceived or operated, can provide only
         reasonable, not absolute, assurance that the objectives of the control
         system are met.

(c)      CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. During the fiscal
         year ended December 31, 2003, there were no changes in the registrant's
         internal control over financial reporting that have materially
         affected, or are reasonably likely to materially affect, the
         registrant's internal control over financial reporting.

NOTICES PURSUANT TO REGULATION BTR.

None.

AUDIT COMMITTEE FINANCIAL EXPERT.

The registrant's board of directors has determined that H. Garth Wiggins, a
member of the registrant's audit committee, qualifies as an "audit committee
financial expert" (as such term is defined in Form 40-F). Mr. Wiggins is
"independent" as such term is defined in the NYSE listing standards.

CODE OF ETHICS.

The registrant has adopted a "code of ethics" (as that term is defined in Form
40-F), entitled the "Business Conduct and Ethics Practice" (the "Code of
Ethics"), that applies to its principal executive officer, principal financial
officer, principal accounting officer or controller, and persons performing
similar functions (together, the "Financial Supervisors").

The Code of Ethics is available for viewing on the registrant's website at
www.precisiondrilling.com.

Since the adoption of the Code of Ethics, there have not been any amendments to
the Code of Ethics or waivers, including implicit waivers, from any provision of
the Code of Ethics.

PRINCIPAL ACCOUNTANT FEES AND SERVICES.


                                       40
<PAGE>

The following table provides information about the fees billed to the registrant
for professional services rendered by KPMG LLP during fiscal 2003 and 2002:

(CANADIAN $000)                                          2003              2002
--------------------------------------------------------------------------------
Audit Fees                                             $1,295            $1,088
Audit-Related Fees                                         --               $67
Tax Fees                                                 $703              $535
All Other Fees                                           $618              $135
--------------------------------------------------------------------------------
Total                                                  $2,616            $1,825
================================================================================


AUDIT FEES. Audit fees consist of fees for the audit of the registrant's annual
financial statements or services that are normally provided in connection with
statutory and regulatory filings or engagements.

AUDIT-RELATED FEES. Audit-related fees consist of fees for assurance and related
services that are reasonably related to the performance of the audit or review
of the registrant's financial statements and are not reported as Audit Fees.
During fiscal 2002, the services provided in this category related to
consultation and research of accounting and audit-related issues.

TAX FEES. Tax fees consist of fees for tax compliance services, tax advice and
tax planning. During fiscal 2003 and 2002, the services provided in this
category included assistance and advice in relation to the preparation of
corporate income tax returns for the company and its subsidiaries, tax advice
and planning, commodity tax and property tax consultation.

ALL OTHER FEES.

Other fees in 2003 included investigative and forensic services, translation of
financial statements and information, consultation regarding compliance with
Sarbanes Oxley implementation and advice on foreign registrations. In 2002 other
fees included translation of financial statements and information, investigative
and forensic services and advice on foreign registrations.

PRE-APPROVAL POLICIES AND PROCEDURES

For audit services related to the consolidated financial statements, the
independent auditor provides the committee with an audit engagement letter
outlining the scope of the audit to be performed relating to the fiscal year. If
agreed to by the committee, the engagement letter is formally accepted. After
acceptance of the engagement letter the committee reviews an audit plan,
presented by the auditor, including an audit services fee proposal.

The company's auditor presents, at each audit committee meeting a list of
services which management has requested the auditor perform. The auditor and
management each confirm to the committee that each service proposed is
permissible under all applicable legal requirements. If the committee is
satisfied that it is appropriate for the auditor to perform the services, the
services are approved, enabling the auditor to commence provision of those
services.

In circumstances where the auditor is requested to perform non-audit services
not previously approved by the committee, the audit committee chair, or another
auditor committee member so delegated, is authorized to approve the service
after discussion with the auditor and management. Services so approved are
reported to the full committee at the next scheduled meeting for ratification by
the full committee.

The auditor must ensure that all services provided by the auditor's firm,
throughout the world, are appropriately pre-approved by the audit committee.


                                       41
<PAGE>

The committee is informed routinely as to the services performed pursuant to the
pre-approval process.


OFF-BALANCE SHEET ARRANGEMENTS.

The registrant has no off-balance sheet arrangements.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS.

The required disclosure is included on page 69 of the registrant's Management's
Discussion and Analysis of Financial Condition and Results of Operations for the
fiscal year ended December 31, 2003, included in this Annual Report on Form
40-F.

IDENTIFICATION OF THE AUDIT COMMITTEE.

The registrant has a separately-designated standing audit committee established
in accordance with section 3(a)(58)(A) of the Exchange Act. The members of the
audit committee are: Robert J.S. Gibson, Patrick M. Murray and H. Garth Wiggins.

DISCLOSURE PURSUANT TO THE REQUIREMENTS OF THE NEW YORK STOCK EXCHANGE

LEAD DIRECTOR AT MEETINGS OF NON-MANAGEMENT DIRECTORS

The registrant schedules regular executive sessions in which the registrant's
"non-management directors" (as that term is defined in the rules of the New York
Stock Exchange) meet without management participation. The Board of Directors of
the registrant appoint a lead director (the "Lead Director") from the
independent and unrelated Directors present at each regularly held in-camera
session of the Board of Directors. The Lead Director is responsible for
developing the agenda for, and presiding over, in-camera sessions and acting as
principal liaison between the non-management Directors and the Chief Executive
Officer on matters dealt with during the in-camera session. Each of the
registrant's non-management directors is "unrelated" as such term is used in the
rules of the Toronto Stock Exchange

CATEGORICAL STANDARDS OF DIRECTOR INDEPENDENCE

The registrant's Board of Directors has adopted categorical standards for
director independence. These categorical standards are attached hereto as
Exhibit 99.6.

COMMUNICATION WITH NON-MANAGEMENT DIRECTORS

Shareholders may send communications to the registrant's non-management
directors by writing to the Lead Director, c/o Jan Campbell, Corporate
Secretary, Precision Drilling Corporation, 4200, 150 - 6th Avenue S.W., Calgary,
Alberta, Canada, T2P 3Y7. Communications will be referred to the Lead Director
for appropriate action. The status of all outstanding concerns addressed to the
Lead Director will be reported to the board of directors as appropriate.


                                       42
<PAGE>

CORPORATE GOVERNANCE GUIDELINES

According to NYSE Rule 303A.09, a listed company must adopt and disclose a set
of corporate governance guidelines with respect to specified topics. Such
guidelines are required to be posted on the listed company's website. The
registrant has adopted the required guidelines and has posted them on its
website at www.precisiondrilling.com.

BOARD COMMITTEE MANDATES

The Mandates of the registrant's audit committee, and compensation committee,
and corporate governance and nominating committee are each available for viewing
on the registrant's website at www.precisiondrilling.com, and are available in
print to any shareholder who requests them. Requests for copies of these
documents should be made by contacting: Jan Campbell, Corporate Secretary,
Precision Drilling Corporation, 4800, 150-6th Avenue S.W., Calgary, Alberta,
Canada T2P 3Y7.


                                       43
<PAGE>

                  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 Company 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 Securities and Exchange
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 April 26, 2004.

                                           PRECISION DRILLING CORPORATION



                                           By:    /s/ Hank B. Swartout
                                                  -----------------------------
                                           Name:  Hank B. Swartout
                                           Title: Chairman, President and Chief
                                                  Executive Officer



<PAGE>

                                  EXHIBIT INDEX

EXHIBIT       DESCRIPTION

99.1          Certification of Chief Executive Officer pursuant to Rule
              13a-14(a) or 15d-14 of the Securities Exchange Act of 1934

99.2          Certification of Chief Financial Officer pursuant to Rule
              13a-14(a) or 15d-14 of the Securities Exchange Act of 1934

99.3          Section 1350 Certification of Chief Executive Officer

99.4          Section 1350 Certification of Chief Financial Officer

99.5          Consent of KPMG LLP

99.6          Categorical Standards of Director Independence