##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 40-F
  o
    
    Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2008
 Commission file number 001-14534
 PRECISION DRILLING TRUST
  Alberta, Canada
    
    1381
    
    Not applicable(Province or other jurisdiction of 
incorporation or organization)
    
    (Primary Standard Industrial
Classification Code Number (if
applicable))
    
    (I.R.S. Employer
Identification Number (if
Applicable))
 4200-150 6th Avenue, S.W., Calgary, Alberta, Canada T2P 3Y7
(403) 716-4500
 CT Corporation System, North St. Paul Street, Dallas, Texas 77022
(214) 979-1172
  Title of each class
    
    Name of each exchange on which registeredTrust Units
    
    New York Stock Exchange
    þ þ
   o þ
  þ o
  Form
    
    Registration No.F-10
    
    
    333-156844




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##### Table of Contents



PRINCIPAL DOCUMENTS
     UNDERTAKING
  DISCLOSURE CONTROLS AND PROCEDURES
  AUDIT COMMITTEE FINANCIAL EXPERT
  CODE OF ETHICS
  PRINCIPAL ACCOUNTANT FEES AND SERVICES
  OFF-BALANCE SHEET ARRANGEMENTS
  TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS




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##### Table of Contents



IDENTIFICATION OF THE AUDIT COMMITTEE
  Chair:
    
    Patrick M. MurrayMembers:
    
    Allen R. HagermanRobert J.S. GibsonWilliam T. DonovanRobert L. Phillips
 SIGNATURES
  Precision Drilling Corporation,as agent for
and on behalf of Precision Drilling TrustBy:
    /s/ Kevin A. NeveuName:
    Kevin A. NeveuTitle:
    President and Chief Executive Officer  EXHIBITS
 23.1
    
    Consent of KPMG LLP, Chartered Accountants.31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer regarding Periodic Report containing
Financial Statements.32.2
    
    Certification of Chief Financial Officer regarding Periodic Report containing
Financial Statements.




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##### Table of Contents



PRECISION
    DRILLING TRUSTANNUAL INFORMATION
    FORM
   For the
    fiscal year ended December 31, 2008
   Dated March
    27, 2009




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##### Table of Contents



TABLE OF
    CONTENTS
  
  CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
    INFORMATION AND STATEMENTS


1CORPORATE STRUCTURE


4The Trust


4Precision
    Drilling Limited Partnership


4Precision
    Drilling Corporation


4Administration
    Agreement


4INTERCORPORATE RELATIONSHIPS


5GENERAL DEVELOPMENT OF THE BUSINESS


6Recent
    Developments


6Three Year
    History


7DESCRIPTION OF THE BUSINESS OF
    PRECISION


10General


10Contract
    Drilling Services


12Completion
    And Production Services


15Material
    Debt


18RECORD OF CASH DISTRIBUTIONS/PAYMENTS


23DESCRIPTION OF CAPITAL STRUCTURE


26Description
    Of Trust Units


26Description
    Of Exchangeable Units


31MARKET FOR SECURITIES


34TRUSTEES, DIRECTORS AND EXECUTIVE
    OFFICERS


36Board Of
    Trustees


36CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR
    SANCTIONS


37AUDIT COMMITTEE INFORMATION


38LEGAL PROCEEDINGS AND REGULATORY
    ACTIONS


40INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL
    TRANSACTIONS


40TRANSFER AGENT, REGISTRAR AND VOTING AND
    EXCHANGE TRUSTEE


40MATERIAL CONTRACTS


40INTERESTS OF EXPERTS


41EVALUATION OF DISCLOSURE CONTROLS AND
    PROCEDURES


41INTERNAL CONTROL OVER FINANCIAL
    REPORTING


42MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS


42




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ADDITIONAL INFORMATION


42RISK FACTORS


42Risks
    Relating To The Structure Of The Trust


43Risks
    Relating To The Business Currently Conducted By Precision


51Risks
    Relating to the Acquisition


58APPENDIX 1 AUDIT COMMITTEE CHARTER AND
    TERMS OF REFERENCE


62Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND
    STATEMENTS  United States
    Private Securities Litigation Reform Act of 1995
    
    2009 expected cash provided by continuing operations;
    2009 capital expenditures, including the amount and nature
    thereof;
    2009 distributions on Trust Units (as defined herein) and
    payments on Exchangeable Units (as defined herein);
    the global economic crisis and its impact on operations;
    performance of the oil and natural gas industry, including oil
    and natural gas commodity prices and supply and demand;
    expansion, consolidation and other development trends of the oil
    and natural gas industry;
    demand for and status of drilling rigs and other equipment in
    the oil and natural gas industry;
    costs and financial trends for companies operating in the oil
    and natural gas industry;
    world population and energy consumption trends;
    that continental natural gas will continue to be part of the
    long-term energy solution for North America;
    our business strategy, including the 2009 strategy and outlook
    for our business segments;
    expansion and growth of our business and operations, including
    diversification of the Trusts (as defined herein) earnings
    base, safety and operating performance, the size and
    capabilities of the Trusts drilling and service rig fleet,
    the Trusts market share and the Trusts position in
    the markets in which it operates;
    the potential impact and benefits of the Acquisition (as defined
    herein);
    the integration of Precision (as defined herein) and Grey Wolf
    (as defined herein);
    the opportunities stemming from a focus on global contract
    drilling through United States expansion;
    international diversification opportunities and complementary
    product line expansion;
    the impact of shale gas drilling in Canada and the United States;
    that new drilling rigs are expected to be contracted with
    customers before completion;
    the number of rigs under daywork term contracts in Canada, the
    United States and Mexico;
    the potential rebound in land drilling activity;
    the timing of completion of rigs in Precisions rig build
    program;
    that unconventional drilling applications will require high
    performance drilling rigs;
    that some wells have a steep rate of production decline in the
    first year necessitating additional drilling to replace rapidly
    depleting wells; 1




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
    the demand for the Trusts products and services;
    the Trusts management strategy, including transitions in
    executive roles;
    labour shortages;
    climatic conditions;
    the maintenance of existing customer, supplier and partner
    relationships;
    supply channels;
    accounting policies and tax liabilities;
    expected payments pursuant to contractual obligations;
    the prospective impact of recent or anticipated regulatory
    changes;
    that planned asset growth will generally be financed through
    existing debt facilities or cash retained from continuing
    operations;
    financing strategy and compliance with debt covenants;
    potential downgrades to credit ratings;
    credit risks; and
    other such matters.    
    the impact of general economic conditions in Canada and the
    United States;
    world energy prices and government policies;
    industry conditions, including the adoption of new
    environmental, taxation and other laws and regulations and
    changes in how they are interpreted and enforced;
    the current global financial crisis and the dislocation in the
    credit markets;
    fluctuations in the level of oil and natural gas exploration and
    development activities;
    fluctuations in the demand for well servicing, contract drilling
    and ancillary oilfield services;
    the impact of initiatives by the Organization of Petroleum
    Exporting Countries and other major petroleum exporting
    countries;
    the ability of oil and natural gas companies to access external
    sources of debt and equity capital;
    the effect of weather conditions on operations and facilities;
    the existence of operating risks inherent in well servicing,
    contract drilling and ancillary oilfield services;
    the volatility of oil and natural gas prices;
    oil and natural gas product supply and demand;
    risks inherent in the ability to generate sufficient cash flow
    from operations to meet current and future obligations; 2




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
    increased competition;
    consolidation among the Trusts customers;
    risks associated with technology;
    political uncertainty, including risks of war, hostilities,
    civil insurrection, instability or acts of terrorism;
    liabilities under laws and regulations protecting the
    environment;
    the impact of purchase accounting;
    expected outcomes of litigation, claims and disputes and their
    expected effects on the Trusts financial condition and
    results of operations;
    difficulties and delays in achieving synergies and cost savings;
    the lack of availability of qualified personnel or management;
    credit risks;
    increased costs of operations, including costs of equipment;
    future capital expenditures and refurbishment, repair and
    upgrade costs;
    expected completion times for new equipment manufacture and
    refurbishment and upgrade projects;
    sufficiency of funds for required capital expenditures, working
    capital and debt service;
    the failure to realize anticipated synergies in the Acquisition;
    the Trusts ability to enter into and the terms of future
    contracts;
    the adequacy of sources of liquidity;
    the inability to carry out plans and strategies as expected;
    loss of mutual fund trust status;
    the effect of the Canadian federal governments SIFT Rules
    (as defined herein);
    the conversion of the Trust into a corporate structure and other
    unforeseen conditions which could impact the use of services
    supplied by Precision;
    fluctuations in interest rates;
    stock market volatility;
    safety performance;
    foreign operations;
    foreign currency exposure;
    dependence on third party suppliers;
    opportunities available to or pursued by the Trust; and
    other factors, many of which are beyond the Trusts control.  Form 40-F SEC SEDAR www.sedar.com EDGAR www.sec.gov
 3




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CORPORATE
    STRUCTURE The
    Trust  Trust Declaration of
    Trust (403) 716-4500, (403) 264-0251, info@precisiondrilling.com www.precisiondrilling.com.
  Precision Trust Units Plan of
    Arrangement
 Precision
    Drilling Limited Partnership  PDLP Limited
    Partnership Agreement PDLP A Exchangeable Units General
    Partner (403) 716-4500, (403) 264-0251 info@precisiondrilling.com.
 Precision
    Drilling Corporation  Business Corporations Act Live Well Service Terra (403) 716-4500, (403) 264-0251, info@precisiondrilling.com www.precisiondrilling.com.
 Administration
    Agreement  Administration Agreement
  
    ensure compliance by the Trust with continuous disclosure
    obligations under applicable securities legislation;
    provide investor relations services; 4




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
    provide or cause to be provided to holders of Trust Units
    (Trust Unitholders) all information to which
    such Trust Unitholders are entitled under the Declaration
    of Trust, including relevant information with respect to
    financial reporting and income taxes;
    call and hold meetings of Trust Unitholders and distribute
    required materials, including notices of meetings and
    information circulars, in respect of all such meetings;
    assist the Board of Trustees (as defined herein) in calculating
    distributions to Trust Unitholders;
    ensure compliance with the Trusts limitations on
    non-resident ownership, if applicable; and
    generally provide all other services as may be necessary or as
    may be requested by the Board of Trustees. INTERCORPORATE
    RELATIONSHIPS    Jurisdiction of Incorporation,Name of Subsidiary or Partnership


Percent or Interest Owned



Continuance or FormationPrecision Drilling Limited Partnership



99.9
%


Manitoba1194312 Alberta Ltd.



100
%


AlbertaPrecision Drilling Corporation



99.9
%


AlbertaPrecision Drilling Oilfield Services, Inc.
    (PDOSI)



99.9
%


DelawarePrecision Drilling Oilfield Services Corporation
    (PDOS)



99.9
%


TexasPrecision Limited Partnership (PLP)



99.9
%


AlbertaPrecision Drilling Canada Limited Partnership
    (PDCLP)(1)



99.9
%


AlbertaGrey Wolf Holdings



99.9
%


TexasGrey Wolf Drilling Corporation LP



99.9
%


Texas   NOTE:
  (1)
    
    PDCLP was formed pursuant to the
    Partnership Act(Alberta) on January 2,
    2009. 5




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Organizational
    Structure of the Trust
    
 NOTES:
  (1)
    
    As of December 31, 2008, there
    were 125,606,341 PDLP A Units outstanding.(2)
    
    As of December 31, 2008, there
    were 151,583 Exchangeable Units outstanding.(3)
    
    The interest of 1194312 Alberta
    Ltd. in PDLP is 0.001%.(4)
    
    Inter-company note owing by PDLP to
    the Trust.(5)
    
    The Trust holds PDLP A Units and
    PDLP holds an interest bearing promissory note owing by
    Precision (the Promissory Note). Cash
    generated from the operations of Precision flow to PDLP in
    settlement of principal and interest owing on such Promissory
    Note. The cash payable to PDLP is then available to be paid to
    the limited partners of PDLP which includes holders of
    Exchangeable Units and, indirectly, the holders of
    Trust Units. GENERAL
    DEVELOPMENT OF THE BUSINESS  Recent
    Developments  
    As at March 27, 2009, within the Secured Facility (as
    defined herein), US$69 million (US$64 million on
    February 4, 2009 and US$5 million on March 26,
    2009) has been reallocated from the Term Loan A Facility (as
    defined herein) to the Term Loan B Facility (as defined herein).
    See Description of the Business of Precision 
    Material Debt.
    As at March 20, 2009, holders of convertible notes of Grey
    Wolf representing US$262.3 million notified the Trust that
    they would be accepting the purchase offer made pursuant to the
    terms thereof and PDOS purchased such notes at the principal
    balance plus accrued interest of US$2.3 million on
    March 24, 2009. See General Development of the
    Business  Three Year History  Acquisition
    of Grey Wolf.
    On February 19, 2009, the Trust announced that Precision
    had postponed its previously announced offering of
    US$250 million principal amount of senior notes due 2015
    (the Senior Note Offering) due to
    unfavourable market conditions. See Risk
    Factors  Proposed Financing Arrangements. 6




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
    On February 18, 2009, the Trust closed an offering of
    46 million Trust Units at a price of US$3.75 per
    Trust Unit for aggregate gross proceeds of
    US$172.5 million (the Trust Unit
    Offering). As a result of the Trust Unit
    Offering, the funds available under the Unsecured Facility were
    reduced to US$235 million.
    On February 9, 2009, the Trust announced the suspension of
    cash distributions for an indefinite period for distributions to
    be paid after February 17, 2009. The suspension was taken
    in response to lower financial operating performance at the
    start of 2009 and will allow the Trust to increase debt
    repayment capability and balance sheet strength. Accordingly,
    Precision will not pay a distribution in March 2009, or for an
    indefinite period thereafter, to Trust Unitholders or
    holders of Exchangeable Units (Exchangeable
    Unitholders and, together with Trust Unitholders,
    the Unitholders). See Risk
    Factors  Distributions on Trust Units have been
    suspended and may not be reinstated.
    The Trusts business depends on the level of spending by
    oil and natural gas companies for exploration and development
    activities. Therefore, a sustained increase or decrease in the
    price of oil or natural gas, which could have a material impact
    on exploration and development activities, could also materially
    affect the Trusts financial position, results of
    operations and cash flows. The recent decline in commodity
    prices has primarily been driven by the deterioration of the
    global economic environment, including, without limitation,
    volatility in the capital markets and lack of liquidity in the
    credit markets. Recent commodity price declines for oil and
    natural gas are expected to reduce funding for drilling and well
    servicing activity in North America which will likely result in
    reduced demand for oilfield services in the near term. Subject
    to the severity of the current winter heating season and demand
    levels for natural gas in North America, the current economic
    slowdown could moderate energy consumption growth and may result
    in lower producer spending for marginal oil and natural gas
    programs, which may adversely affect the demand for
    Precisions services. See Risk Factors 
    The operations of Precision are dependent on the price of oil
    and natural gas.
    Precision has experienced a reduction in the demand for its
    services in late 2008 and early 2009 in correlation with the
    significant downward trend in oil and natural gas prices over
    the same period. The following table summarizes the active
    land-based drilling rigs of Precision and the drilling industry
    as a whole in Canada and the United States as at the dates
    indicated:  As at September 30, 2008

As at December 31, 2008Industry(1)

Precision(2)(3)

Industry(1)

Precision(3)Canada

416

123

277

61United States

1,995

138

1,721

115Total

2,411

261

1,998

176   NOTES:
  (1)
    
    Source: Canada  Canadian
    Association of Oilwell Drilling Contractors
    (caodc);
    United States  Baker Hughes, Inc.(2)
    
    On a pro formabasis after
    giving effect to the Acquisition.(3)
    
    Does not include Precisions
    two active drilling rigs in Mexico.    
    On January 2, 2009, Precision transferred substantially all
    of the assets of its Precision Drilling, Rostel Industries
    (Rostel Industries) and Columbia Oilfield
    Supply (Columbia) divisions to PDCLP in
    consideration for a 99% limited partnership interest in PDCLP.
    PDCLP carries on Precisions Contract Drilling Services
    business. See Description of the Business of
    Precision  Contract Drilling Services. Three
    Year History   7




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2008
  Grey Wolf Acquisition Merger Agreement Lobos
  break-up
    BAR Grey Wolf
    MCR www.sedar.com www.sec.gov.
   8




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tm tm
  LRG
      Income Tax Act Tax Act SIFT Rules SIFT
    trust Guidelines
  SIFT Conversion Rules
    2007
   9




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tm tm tm
    2006
        tm
   DESCRIPTION
    OF THE BUSINESS OF PRECISION General   10




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##### Table of Contents



(in
    thousands of Canadian dollars)
  Years ended December
    31,

2008(1)

2007

2006Contract Drilling Services

$809,317

$694,340

$1,009,821Completion and Production Services

308,624

327,471

441,017Inter-segment Eliminations

(16,050)

(12,610)

(13,254)Total Revenue

$1,101,891

$1,009,201

$1,437,584   NOTE:
  (1)
    
    Includes PDOS revenue for the eight
    day period from December 23, 2008 through December 31,
    2008.  make-up
    freeze-up
   11




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Contract
    Drilling Services    
    Precision Drilling  220 land drilling rigs in
    Canada;
    LRG  97 drilling and base camps with food catering in
    Canada and three drilling camps in the United States;
    Rostel Industries  engineering, machining,
    fabrication, component manufacturing and repair services for
    drilling and service rigs primarily for Precisions
    operations; and
    Columbia  centralized procurement, inventory and
    distribution of consumable supplies primarily for
    Precisions operations.    
    PDOS  121 land drilling rigs in the United
    States; and
    PDOSI  30 land drilling rigs in the United
    States including one scheduled to be mobilized from Canada.    
    A Precision affiliate  two land drilling rigs in
    Mexico; and
    A Precision affiliate  one land drilling rig in Chile.  Precision
    Drilling
          on-site
 12




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rig-up
      tm
    tm tm tm
  tm tm
 13




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##### Table of Contents



tm
  tm tm tm
    Region


Rig Capacity


Total< 500 Hp


500 - 999 Hp


1,000 - 1,499 Hp


1,500 - 1,999 Hp


>2,000 HpElectrical


Mechanical


Electrical


Mechanical


Electrical


Mechanical


Electrical


Mechanical


Electrical


MechanicalCanada


2


105


19


78


12


2


1


-


1


-


220United States


-


-


3


28


42


15


29


4


30


-


151International


-


-


1


-


-


-


-


-


2


-


3Total Fleet


2


105


23


106


54


17


30


4


33


-


374       8-hour 12-hour 2
   14




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##### Table of Contents



LRG
    Catering
    Rostel
    Industries
  tm
  Columbia
    Oilfield Supply
   Completion
    And Production Services    
    Precision Well Servicing  229 well completion
    and workover service rigs;
    Live Well Service  29 snubbing units; 15




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
    Precision Rentals  approximately 12,000 rental
    items including well control equipment, surface equipment,
    specialty tubulars and wellsite accommodation units; and
    Terra Water  76 wastewater treatment units.  Precision
    Well Servicing
    Type of Service Rig





Horsepower



2008



2007



2006Singles


Mobile single



150-400




2




5




12Freestanding mobile



150-400




97




94




92Doubles


Mobile



250-550




42




43




44Freestanding mobile



200-550




23




9




9Skid



300-860




48




55




65Slants


Freestanding



250-400




17




17




15Total Fleet











229




223




237        16




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Live
    Well Service
        Precision
    Rentals
     17




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##### Table of Contents



2
  Terra
    Water Systems
        Material
    Debt  Commitment Banks Secured Facility Unsecured Facility Credit
    Facilities
  and/or
  www.sedar.com www.sec.gov.
  Secured
    Facility
   18




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
    a term loan A facility in an aggregate principal amount of
    US$331 million (the Term Loan A
    Facility);
    a term loan B facility in an aggregate principal amount of
    US$469 million (the Term Loan B
    Facility); and
    a revolving credit facility in the amount of US$400 million
    (the Revolving Credit Facility).    
    a blended effective cash interest rate, as at February 4,
    2009, of approximately 8% per annum, before original issue
    discounts and upfront fees;
    covenants requiring the Trust and Precision to comply with
    certain financial ratios;
    limits on distributions based on 20% of the Trusts
    operating cash flow before changes in working capital, provided
    that 50% of operating cash flow generated in excess of certain
    base case projections will also be permitted to be paid as
    distributions, subject to an overall cap of 30% of aggregate
    operating cash flow before changes in working capital; and
    covenants that will limit the Trusts capital expenditures
    above an agreed base-case, allowing for certain exceptions.  and/or
         19




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Subsidiary
    Guarantors
    
    incur additional indebtedness;
    sell assets;
    pay dividends and distributions (including by the Trust to
    Unitholders) or purchase the Trusts, Precisions or
    their subsidiaries capital stock or trust units;
    make investments or acquisitions;
    make optional payments or repurchases of any subordinated
    indebtedness and certain other debt;
    amend material agreements relating to the Acquisition and the
    financing thereof;
    change the Trusts, Precisions or their
    subsidiaries lines of business;
    engage in sale leasebacks;
    incur liens on their assets;
    enter into mergers, consolidations or amalgamations;
    make capital expenditures;
    enter into transactions with foreign subsidiaries of the Trust
    or Precision other than wholly-owned subsidiaries that provide
    guarantees;
    enter into swap agreements;
    make changes to their respective fiscal periods;
    enter into negative pledge clauses; and
    agree to restrict subsidiary distributions.    
    a maximum total leverage ratio of 3.00 to 1.00 as at the last
    day of any period of four consecutive fiscal quarters of the
    Trust beginning March 31, 2009;
    a minimum interest coverage ratio of 3.00 to 1.00 for any period
    of four consecutive fiscal quarters of the Trust beginning
    March 31, 2009; and
    a minimum fixed charge coverage ratio for any period of four
    consecutive fiscal quarters of the Trust beginning
    March 31, 2009 of: (i) 1.00 to 1.00 for any such
    period ending on or prior to December 31, 2010; and
    (ii) 1.05 to 1.00 for any such period ending after
    December 31, 2010.   20




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Unsecured
    Facility
                
    make certain restricted payments (which include dividends,
    distributions (including by the Trust to Unitholders),
    redemptions and certain investments);
    make distributions to the Trust; 21




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
    incur additional indebtedness;
    sell assets;
    enter into transactions with affiliates;
    incur liens on their assets;
    change the primary business of the Trust;
    enter into mergers, consolidations or amalgamations; and
    amend certain material agreements.    
    where a default under the terms of the Unsecured Facility shall
    have occurred and be continuing or shall occur as a consequence
    thereof;
    where the incurrence of at least US$1.00 of additional
    indebtedness would result in the consolidated interest coverage
    ratio being less than 2.50 to 1.00;
    for so long as the Trust is a mutual fund trust for
    Canadian federal income tax purposes, where the consolidated
    leverage ratio exceeds 3.00 to 1.00; or
    where the amount of such distribution, when added to the amount
    of all distributions (subject to certain exceptions) made after
    the closing date of the Acquisition exceeds certain prescribed
    amounts specified in Section 8.1(a)(iii) of the credit
    agreement governing the Unsecured Facility.    General
       22




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RECORD OF
    CASH DISTRIBUTIONS/PAYMENTS  On February 9, 2009, the Trust announced that it had
    suspended cash distributions payable on both the
    Trust Units and Exchangeable Units for an indefinite
    period. See General Development of the
    Business  Recent Developments and Risk
    Factors  Distributions on the Trust Units have
    been suspended and may not be reinstated.
    Amount per TrustDistribution Type


Record Date


Payment Date


Unit2006Regular Distribution


January 31, 2006


February 15, 2006


$
0.270Regular Distribution


February 28, 2006


March 15, 2006


$
0.270Regular Distribution


March 31, 2006


April 18, 2006


$
0.270Regular Distribution


April 28, 2006


May 16, 2006


$
0.270Regular Distribution


May 31, 2006


June 15, 2006


$
0.310Regular Distribution


June 30, 2006


July 18, 2006


$
0.310Regular Distribution


July 31, 2006


August 15, 2006


$
0.310Regular Distribution


August 31, 2006


September 15, 2006


$
0.310Regular Distribution


September 29, 2006


October 17, 2006


$
0.310Regular Distribution


October 31, 2006


November 15, 2006


$
0.310Regular Distribution


November 30, 2006


December 15, 2006


$
0.310Regular Distribution


December 31, 2006


January 16, 2007


$
0.310Special Year-end in-kind
    Distribution(1)


December 31, 2006


January 16, 2007


$
0.1952007Regular Distribution


January 31, 2007


February 15, 2007


$
0.190Regular Distribution


February 28, 2007


March 15, 2007


$
0.190Regular Distribution


March 30, 2007


April 17, 2007


$
0.190Regular Distribution


April 30, 2007


May 15, 2007


$
0.190Regular Distribution


May 31, 2007


June 15, 2007


$
0.130Regular Distribution


June 29, 2007


July 17, 2007


$
0.130Regular Distribution


July 31, 2007


August 15, 2007


$
0.130Regular Distribution


August 31, 2007


September 18, 2007


$
0.130Regular Distribution


September 28, 2007


October 16, 2007


$
0.130Regular Distribution


October 31, 2007


November 15, 2007


$
0.130Regular Distribution


November 30, 2007


December 18, 2007


$
0.130Regular Distribution


December 31, 2007


January 15, 2008


$
0.130Special Year-end in cash Distribution


December 31, 2007


January 15, 2008


$
0.160Special Year-end in-kind
    Distribution(1)


December 31, 2007


January 15, 2008


$
0.240 23




---



##### Table of Contents



Amount per TrustDistribution Type


Record Date


Payment Date


Unit2008Regular Distribution


January 31, 2008


February 15, 2008


$
0.130Regular Distribution


February 29, 2008


March 18, 2008


$
0.130Regular Distribution


March 31, 2008


April 15, 2008


$
0.130Regular Distribution


April 30, 2008


May 15, 2008


$
0.130Regular Distribution


May 30, 2008


June 17, 2008


$
0.130Regular Distribution


June 30, 2008


July 15, 2008


$
0.130Regular Distribution


July 31, 2008


August 15, 2008


$
0.130Regular Distribution


August 29, 2008


September 16, 2008


$
0.130Regular Distribution


September 30, 2008


October 15, 2008


$
0.130Regular Distribution


October 31, 2008


November 18, 2008


$
0.130Regular Distribution


November 28, 2008


December 16, 2008


$
0.130Regular Distribution


December 31, 2008


January 15, 2009


$
0.130Special Year-end in-kind
    Distribution(1)


December 31, 2008


January 15, 2009


$
0.1502009Regular Distribution


January 30, 2009


February 17, 2009


$
0.040   NOTE:
  (1)
    The special year-end distribution was settled
    in-kind through the issuance of Trust Units
    rather than the payment of cash in order for Precision to
    minimize debt levels and retain balance sheet strength.
    Immediately after the special in-kind distribution the
    outstanding Trust Units were consolidated so that the number of
    Trust Units outstanding remained unchanged from the number
    of Trust Units outstanding immediately before the special
    in-kind distribution. See Risk Factors  The
    issuance of additional Trust Units in lieu of cash
    distributions could negatively affect the value of the
    Trust Units and result in the payment of taxes.    AmountPayment Type


Record Date


Payment Date


per Exchangeable Unit2006Regular Payment


January 31, 2006


February 15, 2006


$
0.270Regular Payment


February 28, 2006


March 15, 2006


$
0.270Regular Payment


March 31, 2006


April 18, 2006


$
0.270Regular Payment


April 28, 2006


May 16, 2006


$
0.270Regular Payment


May 31, 2006


June 15, 2006


$
0.310Regular Payment


June 30, 2006


July 18, 2006


$
0.310Regular Payment


July 31, 2006


August 15, 2006


$
0.310Regular Payment


August 31, 2006


September 15, 2006


$
0.310Regular Payment


September 29, 2006


October 17, 2006


$
0.310Regular Payment


October 31, 2006


November 15, 2006


$
0.310Regular Payment


November 30, 2006


December 15, 2006


$
0.310Regular Payment


December 31, 2006


January 16, 2007


$
0.310Special Year-end in-kind
    Payment(1)


December 31, 2006


January 16, 2007


$
0.195 24




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##### Table of Contents



AmountPayment Type


Record Date


Payment Date


per Exchangeable Unit2007Regular Payment


January 31, 2007


February 15, 2007


$
0.190Regular Payment


February 28, 2007


March 15, 2007


$
0.190Regular Payment


March 30, 2007


April 17, 2007


$
0.190Regular Payment


April 30, 2007


May 15, 2007


$
0.190Regular Payment


May 31, 2007


June 15, 2007


$
0.130Regular Payment


June 29, 2007


July 17, 2007


$
0.130Regular Payment


July 31, 2007


August 15, 2007


$
0.130Regular Payment


August 31, 2007


September 18, 2007


$
0.130Regular Payment


September 28, 2007


October 16, 2007


$
0.130Regular Payment


October 31, 2007


November 15, 2007


$
0.130Regular Payment


November 30, 2007


December 18, 2007


$
0.130Regular Payment


December 31, 2007


January 15, 2008


$
0.130Special Year-end in cash Payment


December 31, 2007


January 15, 2008


$
0.160Special Year-end in-kind
    Payment(1)


December 31, 2007


January 15, 2008


$
0.2402008Regular Payment


January 31, 2008


February 15, 2008


$
0.130Regular Payment


February 29, 2008


March 18, 2008


$
0.130Regular Payment


March 31, 2008


April 15, 2008


$
0.130Regular Payment


April 30, 2008


May 15, 2008


$
0.130Regular Payment


May 30, 2008


June 17, 2008


$
0.130Regular Payment


June 30, 2008


July 15, 2008


$
0.130Regular Payment


July 31, 2008


August 15, 2008


$
0.130Regular Payment


August 29, 2008


September 16, 2008


$
0.130Regular Payment


September 30, 2008


October 15, 2008


$
0.130Regular Payment


October 31, 2008


November 18, 2008


$
0.130Regular Payment


November 28, 2008


December 16, 2008


$
0.130Regular Payment


December 31, 2008


January 15, 2009


$
0.130Special Year-end in-kind
    Payment(1)


December 31, 2008


January 15, 2009


$
0.1502009Regular Payment


January 30, 2009


February 17, 2009


$
0.040   NOTE:
  (1)
    The special year-end distribution was settled
    in-kind through the issuance of Trust Units
    rather than cash in order for Precision to minimize debt levels
    and retain balance sheet strength. Immediately after the payment
    of the special in-kind payment, the outstanding Trust Units
    were consolidated so that the number of Trust Units
    outstanding after the special in-kind payment remained unchanged
    from the number of Trust Units outstanding immediately
    prior to the special in-kind payment. Holders of Exchangeable
    Units received the economic equivalent treatment. See Risk
    Factors  The issuance of additional Trust Units
    in lieu of cash distributions could negatively affect the value
    of the Trust Units and result in the payment of taxes.  The historical distributions described above may not be
    reflective of future distributions, which are subject to review
    by the Board of Trustees taking into account the prevailing
    circumstances at the relevant time. See Risk
    Factors  Distributions on the Trust Units are
    variable and Distribution on the Trust Units
    have been suspended and may not be reinstated.
   25




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##### Table of Contents



DESCRIPTION
    OF CAPITAL STRUCTURE Description
    Of Trust Units      The Trust Units are not deposits within the
    meaning of the Canada Deposit Insurance Corporation Act(Canada) and are not insured under the provisions of that
    Act or any other legislation. Furthermore, the Trust is not a
    trust company and, accordingly, is not registered under any
    trust and loan company legislation, as it does not carry on or
    intend to carry on the business of a trust company.
  The Trust is not a legally recognized entity within the
    relevant definitions of the Bankruptcy and Insolvency Act
    (Canada), the Companies Creditors Arrangement Act(Canada) and, in some cases, the Winding Up and
    Restructuring Act(Canada). As a result, in the event a
    restructuring of the Trust were necessary, the Trust would not
    be able to access the remedies available thereunder. In the
    event of a restructuring, the position of Unitholders may be
    different than that of the shareholders of a corporation.
  Issuance
    of Trust Units
    Purchase
    of Trust Units
   26




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##### Table of Contents



Cash
    Distributions on Trust Units and Exchangeable
    Units
        Distribution
    Reinvestment Plan
  DRIP www.precisiondrilling.com.
    Trust Unit
    Redemption Right
   27




---



##### Table of Contents



Cash
    Redemption
  Market Redemption Price
      (a)
    the total amount payable by the Trust in respect of such
    Trust Units and all other Trust Units tendered for
    redemption in the same calendar month exceeds $50,000; provided
    that the Trustees may, in their sole discretion, waive such
    limitation in respect of all Trust Units tendered for
    redemption in any calendar month. If this limitation is not so
    waived, the Trust Units tendered for redemption in such
    calendar month shall be redeemed for cash based on the Market
    Redemption Price and, unless any applicable regulatory
    approvals are required, by a distribution in specie of the
    Trusts assets, which may include Redemption Notes (as
    defined below) or other assets held by the Trust, on a pro-rata
    basis;  (b)
    at the time such Trust Units are tendered for redemption,
    the outstanding Trust Units are not listed for trading on
    the Toronto Stock Exchange or traded or quoted on any stock
    exchange or market which the Trustees consider, in their sole
    opinion, provides representative fair market value prices for
    the Trust Units;  (c)
    the normal trading of the Trust Units is suspended or
    halted on any stock exchange on which the Trust Units are
    listed for trading or, if not so listed, on any market on which
    the Trust Units are quoted for trading, on the date that
    such Trust Units tendered for redemption were tendered to
    the Trust for redemption or for more than five trading days
    during the ten day trading period prior to the date on which
    such Trust Units were tendered for redemption; or  (d)
    the redemption of Trust Units will result in the delisting
    of the Trust Units on the principal stock exchange on which
    the Trust Units are listed.  In
    Specie Redemption
  Support Agreement Redemption Notes
     28




---



##### Table of Contents



Meetings
    of Unitholders
    Special Voting Unit Voting and Exchange
    Trust Agreement
   29




---



##### Table of Contents



Limitation
    on Non-Resident Ownership
    (a)
    if determined necessary or desirable by the Trustees, in their
    sole discretion, the Trust may, from time to time, among other
    things, take all necessary steps to monitor the activities of
    the Trust and ownership of the Trust Units. If at any time
    the Trust or the Trustees become aware that the activities of
    the Trust
    and/or
    ownership of the Trust Units by non-residents of Canada may
    threaten the status of the Trust under the Tax Act as a
    unit trust or a mutual fund trust, the
    Trust, by or through the Trustees on the Trusts behalf, is
    authorized to take such action as may be necessary in the
    opinion of the Trustees to maintain the status of the Trust as a
    unit trust or a mutual fund trust
    including, without limitation, the imposition of restrictions on
    the issuance by the Trust of Trust Units or the transfer by
    any Unitholder of Trust Units to a non-resident of Canada
    and/or
    require the sale of Trust Units by non-residents of Canada
    on a basis determined by the Trustees
    and/or
    suspend distribution
    and/or other
    rights in respect of Trust Units held by non-residents of
    Canada transferred contrary to the foregoing provisions or not
    sold in accordance with the requirements thereof; and  (b)
    in addition to the foregoing, the transfer agent of the
    Trust Units, by or through the Trustees may, if determined
    appropriate by the Trustees, establish operating procedures for,
    and maintain, a reservation system which may limit the number of
    Trust Units that non-residents of Canada may hold, limit the
    transfer of the legal or beneficial interest in any
    Trust Units to non-residents of Canada unless selected
    through a process determined appropriate by the Trustees, which
    may either be a random selection process or a selection process
    based on the first to register, or such other basis as
    determined by the Trustees. The operating procedures relating to
    such reservation system shall be determined by the Trustees and,
    prior to implementation, the Trust shall publicly announce the
    implementation of the same. Such operating procedures may, among
    other things, provide that any transfer of a legal or beneficial
    interest in any Trust Units contrary to the provisions of
    such reservation system may not be recognized by the Trust.  Amendments
    to the Declaration of Trust
    (a)
    for the purpose of ensuring the Trusts continuing
    compliance with applicable laws, regulations or policies of any
    governmental authority having jurisdiction over the Trustees or
    the Trust;  (b)
    in a manner which, in the opinion of the Trustees, provides
    additional protection for the Unitholders;  (c)
    in a manner which, in the opinion of the Trustees, is necessary
    or desirable as a result of changes in Canadian tax laws;  (d)
    to remove any conflicts or inconsistencies in the Declaration of
    Trust or to make minor corrections which are, in the opinion of
    the Trustees, necessary or desirable and not prejudicial to the
    Unitholders; or  (e)
    to change the situs of, or the laws governing, the Trust which,
    in the opinion of the Trustees is desirable in order to provide
    Unitholders with the benefit of any legislation limiting their
    liability.  Term
    of the Trust
  wind-up
 30




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##### Table of Contents



wind-up wound-up,
  Take-Over
    Bids
  Securities Act
  Special
    Voting Unit
  Voting and Exchange
    Trustee
 Description
    Of Exchangeable Units      (a)
    they are exchangeable for Trust Units on a
    one-for-one
    basis at the option of the holder;  (b)
    each Exchangeable Unit entitles the holder thereof to receive
    (in the form of a non-interest bearing loan) cash payments equal
    to cash payments made by the Trust on a Trust Unit (and at
    the beginning of the next calendar year a special distribution
    will be made on each Exchangeable Unit in an amount 31




---



##### Table of Contents



equal to the outstanding non-interest bearing loan accumulated
    during the previous year which will be used to repay such
    accumulated debt);  (c)
    the holder of each Exchangeable Unit is entitled to direct the
    Voting and Exchange Trustee to vote the Special Voting Unit at
    all meetings of Trust Unit holders;  (d)
    the holders of Exchangeable Units are not entitled, as such, to
    receive notice of or to attend any meeting of the partners of
    PDLP or to vote at any such meeting, however, such holders of
    Exchangeable Units are entitled to vote separately as a class in
    respect of proposals to add to, change or remove any right,
    privilege, restriction or condition attaching to the
    Exchangeable Units or in respect of any other amendment to the
    applicable partnership agreement which would have an adverse
    impact on the holders of such Exchangeable Units; and  (e)
    there are certain restrictions on the transfer of Exchangeable
    Units.    (a)
    issue or distribute Trust Units to the holders of all, or
    substantially all, of the then outstanding Trust Units by
    way of distribution; or  (b)
    issue or distribute rights, options or warrants to the holders
    of all, or substantially all, of the then outstanding
    Trust Units entitling them to subscribe for or purchase
    Trust Units (or securities exchangeable for or converting
    into or carrying rights to acquire Trust Units); or  (c)
    issue or distribute to the holders of all, or substantially all,
    of the then outstanding Trust Units:  (i)
    securities of the Trust or any class other than Trust Units
    (other than securities exchangeable for or converting into or
    carrying rights to acquire Trust Units);  (ii)
    rights, options or warrants other than those described
    above; or  (iii)
    evidences of indebtedness of the Trust; or  (iv)
    other assets of the Trust,    Payments
    on Exchangeable Units
     32




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##### Table of Contents



The
    General Partner
    Partnership
    Units
    winding-up winding-up
  Amendment
    and Approval
    (a)
    the amendment provisions themselves may not be amended without
    the unanimous consent of the holders of the PDLP A Units and
    Exchangeable Units (together, the
    Unitholders);  (b)
    no amendments shall be made to the Limited Partnership Agreement
    which would have the effect of, among other things;
    (i) preventing the loans or distributions to the
    Unitholders or adversely affecting the rights of the Unitholders
    under the Support Agreement (as defined herein);
    (ii) changing the provisions in the Limited Partnership
    Agreement requiring that the business of PDLP be conducted 33




---



##### Table of Contents



solely through its investment in Precision or any associate or
    affiliate thereof, or in any other corporation, partnership,
    trust or other person involved, directly or indirectly, in any
    business which involves the provision of contract drilling,
    service rigs, snubbing, rentals and related services to oil and
    gas exploration and production companies, (iii) changing
    the liability of a limited partner; (iv) allowing any
    limited partner to exercise control over the business of PDLP;
    (v) changing the right of a limited partner to vote on
    resolutions; (vi) changing PDLP from a limited partnership
    to a general partnership, or (vii) causing the Trust to lose its
    status as a mutual fund trust under the Tax Act,
    without such amendment being passed by way of an extraordinary
    resolution;  (c)
    no amendment shall be made to the Limited Partnership Agreement
    which would have the effect of adding, changing or removing any
    right, privilege, restriction or condition attaching to the
    Exchangeable Units, or which would have an adverse impact on the
    holders of Exchangeable Units unless such amendment is approved
    by class vote of
    662/3%
    of the holders of Exchangeable Units; and  (d)
    no amendment shall be made which would have the effect of
    adversely affecting the rights and obligations of the General
    Partner becoming effective before 45 days after the
    resolution approving such amendment.   MARKET
    FOR SECURITIES  Trading
    Price and Volume of Trust Units
  TSX NYSE
  TSX


NYSEPeriod

High


Low


Volume


High


Low


Volume($)


($)





(US$)


(US$)2008January


18.01



15.13



11,591,630



17.70



15.15



11,208,759February


22.53



17.15



15,377,467



22.91



17.10



12,326,070March


24.00



19.61



9,855,413



23.53



19.46



15,556,649April


27.46



22.55



15,213,996



27.25



21.89



17,653,251May


28.39



24.50



10,295,190



28.38



24.03



12,249,342June


28.93



26.05



13,594,223



28.59



25.76



17,063,854July


28.09



21.30



15,022,653



28.15



21.01



18,697,742August


23.45



20.53



19,241,508



22.89



19.30



25,311,531September


22.32



16.00



20,876,778



21.05



15.42



31,944,785October


17.84



9.99



22,501,020



16.82



8.41



42,647,176November


13.90



8.10



14,143,561



12.06



6.36



34,439,385December


11.77



7.07



14,588,829



9.65



5.57



44,416,102  34




---



##### Table of Contents



Prior
    Sales
  (1)
  Number of Trust Units orDate of Issuance

Description of
    Transaction

Securities

Price per
    SecurityDecember 23, 2008

Acquisition(2)

34,435,724

US$21.22   NOTES:
 (1)
    
    On February 18, 2009, the
    Trust issued 46 million Trust Units pursuant to the
    Trust Unit Offering. See General Development of the
    Business  Recent Developments.(2)
    
    Pursuant to the Acquisition, each
    share of Grey Wolf common stock was convertible, at the option
    of the holder, into US$9.02 in cash or 0.4225 Trust Units,
    subject to proration. The total consideration paid by the Trust
    to shareholders of Grey Wolf in connection with the Acquisition
    was approximately US$897.2 million and 34.4 million
    Trust Units. Cash consideration elections exceeded the
    amount of cash available for cash elections. Accordingly, former
    Grey Wolf shareholders who properly chose to receive all-cash
    merger consideration received a prorated amount of cash
    consideration in the amount of US$5.39 and 0.17 Trust Units
    for each share of Grey Wolf common stock. Grey Wolf shareholders
    who elected to receive Trust Units or did not make a timely
    and valid merger consideration election received 0.4225
    Trust Units for each share of Grey Wolf common stock. 35




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##### Table of Contents



TRUSTEES,
    DIRECTORS AND EXECUTIVE OFFICERS Board
    of Trustees  Board of Trustees Trustee
          PositionName, Municipality, Province or


Presently


Trustee/Director/Officer


Principal OccupationState & Country of Residence


Held


Since(1)


During the Preceding 5 YearsFrank M. Brown
    (3)(5)
    Anchorage, Alaska, USA


Director


December 2008


Director of Precision since December 2008; Director of Grey Wolf
    since May 2000. Private consultant in the Alaskan oil and gas
    industry 2006-Present; Chief Executive Officer of ZRB Resources,
    LLC, since 2006.William T. Donovan
    (2)(5)
    Milwaukee, Wisconsin, USA


Director


December 2008


Director of Precision since December 2008; Director of Grey
    Wolf, 1997-2008; Chairman of the board of Rockland Industrial
    Holdings, LLC, since 2006.W.C. (Mickey)
    Dunn(3)(4)
    Edmonton, Alberta, Canada


Director


September 1992


Chairman, True Energy Trust.Brian A. Felesky, CM,
    Q.C.(4)Calgary, Alberta, Canada


Director


December 2005


Counsel, Felesky Flynn LLP. From April 1978 through July 2006,
    Partner at Felesky Flynn LLP.Robert J.S.
    Gibson(2)(4)
    Calgary, Alberta, Canada


Trustee Director


June 1996


President, Stuart & Company Limited.Allen R. Hagerman,
    FCA(2)Calgary, Alberta, Canada


Trustee Director


December 2006


Executive Vice President, Canadian Oil Sands Limited, Oil Sands
    Mining and Upgrading; Chief Financial Officer, Canadian Oil
    Sands Limited 2003  2007.Stephen J.J.
    Letwin(3)Houston, Texas, USA


Director


December 2006


Managing Director, Enbridge Energy Partners and Executive Vice
    President, Gas Transportation & International, Enbridge
    Inc. since May 2006; Group Vice President, Gas Strategy &
    Corporate Development, Enbridge Inc., April 2003 to May 2006;
    Group Vice President, Distribution & Services, Enbridge
    Inc., September 2000 to April 2003.Patrick M.
    Murray(2)Dallas, Texas, USA


Trustee Director


July 2002


Corporate Director; Chairman and Chief Executive Officer,
    Dresser, Inc. from 2001 until retiring in May 2007.Kevin A. Neveu
    Calgary, Alberta, Canada


President, Chief Executive Officer Director


August 2007


President and Chief Executive Officer since January 13, 2009.
    Chief Executive Officer, Precision Drilling Corporation from
    August 2007 to January 13, 2009; President, Rig Solutions Group,
    National Oilwell Varco 2002 to 2007. 36




---



##### Table of Contents



PositionName, Municipality, Province or


Presently


Trustee/Director/Officer


Principal OccupationState & Country of Residence


Held


Since(1)


During the Preceding 5 YearsFrederick W.
    Pheasey(3)Edmonton, Alberta, Canada


Director


July 2002


Director of Dreco Energy Services Ltd.Robert L.
    Phillips(2)(3)(4)
    Vancouver, British Columbia, Canada


Director Chairman


May 2004


Corporate Director; President and Chief Executive Officer, BCR
    Group of Companies 2001-2004.Trevor M. Turbidy
    (4)(5)
    Houston, Texas, USA


Director


December 2008


Director of Precision since December 2008; Director of Grey Wolf
    2005-2008; Energy Industry Advisor with Avista Capital Partners
    2007-Present; President and Chief Executive Officer of Trico
    Marine Services, Inc., 2005-2007.Joanne L. Alexander
    Calgary, Alberta, Canada


Vice President, General Counsel and Corporate Secretary


April 2008


Vice-President, General Counsel and Corporate Secretary since
    January 13, 2009; Vice President and General Counsel, Precision
    Drilling Corporation from April 2008 to January 13, 2009;
    General Counsel, Marathon Oil Canada Corporation 2007-2008;
    General Counsel, Western Oil Sands Inc. 2007; General Manager,
    Stakeholder Engagement & Regulatory Affairs, ConocoPhillips
    Canada Ltd. 2006; Vice President, Legal and Regulatory Affairs,
    Burlington Resources Canada Ltd. 2000-2006.David J. Crowley
    Houston, Texas, USA


President, U.S. Operations


January 2009


President, U.S. Operations since January 13, 2009. Executive
    Vice President and Chief Operating Officer, Grey Wolf 2007-2008;
    Senior Vice President of Operations, The Offshore Drilling
    Company 2003-2007.Kenneth J. Haddad
    Houston, Texas, USA


Vice President, Business Development


March 2008


Vice President, Business Development, Precision Drilling
    Corporation since March 2008; Director, Mergers and
    Acquisitions, Halliburton Company 2002-2008.Darren J. Ruhr
    Calgary, Alberta, Canada


Vice President, Corporate Services


November 2005


Vice-President, Corporate Services since January 13, 2009, Vice
    President, Corporate Services & Corporate Secretary,
    Precision Drilling Corporation from November 2005 to January 13,
    2009; Director, Information Technology, Real Estate &
    Travel, Precision Drilling Corporation 2003-2005; Director,
    Information Technology, Precision Drilling Corporation 2000-2003.Gene C. Stahl 
    Calgary, Alberta, Canada


President, Canadian Operations


November 2005


President, Canadian Operations since January 13, 2009, President
    & Chief Operating Officer, Precision Drilling Corporation
    from November 2005 to January 13, 2009; Vice President,
    Precision Rentals 2003-2005; General Manager, Ducharme
    Rentals/Big D Rentals 2002-2003.Douglas J. Strong 
    Calgary, Alberta, Canada


Chief Financial Officer


November 2005


Chief Financial Officer, Precision Drilling Corporation since
    2005; Chief Financial Officer, Precision Diversified Services
    Ltd. 2001-2005, Group Controller, Precision Drilling 2001- 2005.David W. Wehlmann 
    Houston, Texas, USA


Executive Vice President, Investor Relations


January 2009


Executive Vice President, Investor Relations since January 13,
    2009. Executive Vice President and CFO, Grey Wolf 2003-2008;
    Senior Vice President, Chief Financial Officer and Secretary,
    Grey Wolf 1998-2003; Vice President, Controller, Grey Wolf
    1996-1998.   NOTES:
 (1)
    
    Each Trustees or
    Directors term of office expires not later than the close
    of business at the next annual meeting, or until successors are
    appointed or Trustees or Directors vacate their office.(2)
    
    Member of the Audit Committee.(3)
    
    Member of the Compensation
    Committee.(4)
    
    Member of the Corporate Governance
    and Nominating Committee.(5)
    
    Nominated by Grey Wolf and
    appointed by Precision.    CEASE
    TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS  Corporate
    Cease Trade Orders
   37




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##### Table of Contents



Corporate
    Bankruptcies
    Personal
    Bankruptcies
    Penalties
    or Sanctions
    AUDIT
    COMMITTEE INFORMATION  Audit
    Committee Charter
  Audit Committee Charter
  Composition
    of the Audit Committee
  52-110  Audit Committees Sarbanes-Oxley
    Act of 2002
  Relevant
    Education and Experience
   38




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##### Table of Contents



Pre-approval
    Policies and Procedures
  minimus
      Audit
    Fees
    (in
    thousands of Canadian dollars)
  Years ended December
    31,


2008



2007Audit fees


$
2,248



$
990Audit-related fees



-




-Tax fees



442




73All other fees



40




-Total


$
2,730



$
1,063    39




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##### Table of Contents



LEGAL
    PROCEEDINGS AND REGULATORY ACTIONS     INTEREST
    OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS   TRANSFER
    AGENT, REGISTRAR AND VOTING AND EXCHANGE TRUSTEE   MATERIAL
    CONTRACTS    Declaration
    of Trust
    Limited
    Partnership Agreement
    Voting
    and Exchange Trust Agreement
   40




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##### Table of Contents



Support
    Agreement
    Administration
    Agreement
    Merger
    Agreement
    Secured
    Facility Agreement
    Unsecured
    Facility Agreement
    www.sedar.com.
 INTERESTS
    OF EXPERTS   EVALUATION
    OF DISCLOSURE CONTROLS AND PROCEDURES  Rules 13a-15(e) 15d-15(e) Securities Exchange Act of 1934 Exchange Act
     41




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##### Table of Contents



INTERNAL
    CONTROL OVER FINANCIAL REPORTING  Canadian GAAP U.S. GAAP
     MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS   ADDITIONAL
    INFORMATION  www.sedar.com. www.precisiondrilling.com corporatesecretary@precisiondrilling.com; (403) 716-4500; (403) 264-0251.
   RISK
    FACTORS   42




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##### Table of Contents



Risks
    Relating To The Structure Of The Trust  Precision
    may be unable to obtain access to additional
    financing.
    The
    Trust may not be able to obtain financing or obtain financing on
    acceptable terms because of the deterioration of the credit and
    capital markets.
      The
    Trusts debt service obligations may limit the amount of
    cash available for distributions.
     43




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##### Table of Contents



Sales
    of additional Trust Units could negatively affect the value
    of the Trust Units.
    The
    price of Trust Units may experience
    volatility.
    Distributions
    on the Trust Units have been suspended and may not be
    reinstated.
  and/or
  Asset
    valuation variability could negatively affect the value of the
    Trust Units.
    The
    Trust could face negative tax consequences for previous
    transactions.
   44




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##### Table of Contents



The
    Trust is dependent on Precision and its subsidiaries for the
    amount of cash available for distributions.
      Risks
    associated with the taxation of the Trust and Precision could
    negatively affect the value of the
    Trust Units.
        Proposed
    Amendments
 45




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##### Table of Contents



Non-Canadian Holders
           46




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##### Table of Contents



If the
    Trust does not constitute a qualified foreign
    corporation for United States federal income tax purposes,
    individual U.S. Holders (as defined below) may be taxed at a
    higher rate on distributions.
      (a)
    an individual citizen or resident of the United States;  (b)
    a corporation or other entity treated as a corporation for
    federal income tax purposes, created or organized in or under
    the laws of the United States or any State or the District of
    Columbia;  (c)
    an estate that is subject to United States federal income tax on
    its income regardless of is source; or  (d)
    a trust, the substantial decisions of which are controlled by
    one or more United States persons and which is subject to the
    primary supervision of a United States court, or a trust that
    validly has elected under applicable Treasury regulations to be
    treated as a United States person for United States federal
    income tax purposes.  Changes
    in legislation may have an adverse effect on
    Unitholders.
    Precision
    has retained liabilities as a consequence of prior
    reorganizations.
    A
    successful challenge by the tax authorities of the amount of
    interest expense deducted by Precision on its payments of
    Promissory Note interest could negatively affect the value of
    the Trust Units.
    A
    successful challenge by the tax authorities of the amount of
    expenses deducted by the Trust or its subsidiaries could
    negatively affect the value of the
    Trust Units.
   47




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A
    change in the structure of the Trust may have an adverse effect
    on Unitholders.
          Trust Units
    have certain risks not associated with traditional investments
    in the oil and natural gas services business.
    Canada Deposit Insurance Corporation Act
  Bankruptcy and Insolvency Act Companies Creditors Arrangement Act Winding Up and
    Restructuring Act
  The
    composition for Canadian federal income tax purposes of
    distributions on Trust Units may change over time, and such
    changes could negatively affect the return on the
    Trust Units.
  Canadian Holders
 48




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If the
    Trust ceases to qualify as a mutual fund trust under
    the Tax Act, the Trust Units will cease to be qualified
    investments for a variety of plans, which could have negative
    tax consequences.
  Exempt Plans
  Canadian
    withholding tax may exceed allowable United States foreign tax
    credits and reduce effective yield to United States
    investors.
    The
    Trust expects to maintain its status as a foreign private
    issuer in the United States and thus will be exempt from a
    number of rules under the Exchange Act and will be permitted to
    file less information with the SEC than a company incorporated
    in the United States.
  Exchange Act
 49




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Issuance
    of additional Trust Units in lieu of cash distributions
    could negatively affect the value of the Trust Units and
    result in the payment of taxes.
    Distributions
    on the Trust Units are variable.
  and/or
  There
    are risks associated with the indemnification of the limited
    partners of PDLP.
    The
    Trust may become a passive foreign investment company
    (PFIC), which could result in adverse United States
    tax consequences to United States investors.
  step-up
  Unitholders
    face a possibility of personal liability in connection with the
    obligations and affairs of the Trust.
   50




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Income Trusts Liability Act
  If an
    investor acquires 10% or more of the Trust Units it may be
    subject to taxation under the CFC rules.
  CFC
    The
    distribution of assets on redemption or termination of the Trust
    may have adverse consequences.
   Risks
    Relating To The Business Currently Conducted By
    Precision  The
    operations of Precision are dependent on the price of oil and
    natural gas.
  LNG
   51




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The
    intense price competition and cyclical nature of the contract
    drilling industry could have an adverse effect on revenue and
    profitability.
    
    the drilling capabilities and condition of drilling rigs;
    the quality of service and experience of rig crews;
    the safety record of the contractor and the particular drilling
    rig;
    the offering of ancillary services;
    the ability to provide drilling equipment adaptable to, and
    personnel familiar with, new technologies and drilling
    techniques; and
    the mobility and efficiency of rigs.      Deteriorating
    conditions in the credit markets may adversely affect
    business.
   52




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and/or
  The
    results of the Trusts annual assessment of goodwill may
    result in a non-cash charge against the consolidated net income
    of the Trust.
      Capital
    overbuild in the drilling industry could lead to a decline in
    demand for Precisions services.
    Customer
    merger and acquisition activity could lead to a decline in the
    demand for services.
    Business
    acquisitions entail numerous risks and may disrupt
    Precisions business or distract management
    attention.
  and/or
  
    unanticipated costs and liabilities;
    difficulty of integrating the operations and assets of the
    acquired business; 53




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##### Table of Contents




    the ability to properly access and maintain an effective
    internal control environment over an acquired company in order
    to comply with public reporting requirements;
    potential loss of key employees and customers of the acquired
    companies; and
    an increase in Precisions expenses and working capital
    requirements.  day-to-day
  Business
    in Precisions industry is seasonal and highly
    variable.
    New
    technology could place Precision at a disadvantage versus
    competitors.
    Unexpected
    cost overruns on turnkey drilling jobs could adversely affect
    Precisions revenues.
   54




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Any
    difficulty Precision experiences retaining, replacing or adding
    personnel could adversely affect its business.
          The
    business of Precision is affected by governmental regulations
    and policies.
    Precisions
    operations subject it to currency translation risk, which could
    cause results to fluctuate significantly from period to
    period.
   55




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
    Translation of United States
    Subsidiaries.  Precisions United States
    operations are considered self-sustaining operations and will be
    translated into Canadian dollars using the current rate method.
    Under this method, the assets and liabilities of
    Precisions operations in the United States will be
    recorded in the consolidated financial statements at the
    exchange rate in effect at the balance sheet dates and the
    unrealized gains and losses will be included in other
    comprehensive income, a component of Unitholders equity.
    As a result, changes in the Canadian to United States dollar
    exchange rates will increase or decrease Precisions United
    States dollar denominated net assets on consolidation which will
    increase or decrease Unitholders equity. The translation
    will increase and decrease Precisions United States dollar
    assets and liabilities as a result of changes in foreign
    exchange rates which could have a material impact on the amounts
    recorded in the balance sheet. In addition, under certain
    circumstances Canadian GAAP requires foreign exchange gains and
    losses that are accumulated in other comprehensive income to be
    recorded as a foreign exchange gain or loss in the statement of
    earnings. Precisions United States operations generate
    revenue and incur expenses in United States dollars and the
    United States dollar based earnings are converted into Canadian
    dollars for purposes of financial statement consolidation and
    reporting. The conversion of the United States dollar based
    revenue and expenses to a Canadian dollar basis does not result
    in a foreign exchange gain or loss but does result in lower or
    higher net earnings from United States operations than would
    have occurred had the exchange rate not changed. If the Canadian
    dollar strengthens versus the United States dollar, the Canadian
    dollar equivalent of net earnings from United States operations
    will be negatively impacted. Precision does not currently hedge
    any of its exposure related to the translation of United States
    dollar based earnings into Canadian dollars.
    Transaction Exposure.  Precision has long-term
    debt denominated in United States dollars. This debt is
    converted at the exchange rate in effect at the balance sheet
    dates with the resulting gains or losses included in the
    statement of earnings as foreign exchange. If the
    Canadian dollar strengthens versus the United States dollar,
    Precision will incur a foreignexchange gain from the
    translation of this debt. Currently, Precision has not
    designated any of this debt as a hedge against the net asset
    position of its self-sustaining United States operations.
    The vast majority of Precisions United States operations
    are transacted in United States dollars. Transactions for
    Precisions Canadian operations are primarily transacted in
    Canadian dollars. However, Precision occasionally purchases
    goods and supplies in United States dollars. These transactions
    and foreign exchange exposure would not typically have a
    material impact on the Canadian operations financial
    results.  Poor
    safety performance could lead to a decline in the demand for
    services.
    There
    are risks associated with increased capital
    expenditures.
   56




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Compliance
    with various environmental laws, rules, legislation and
    guidelines could impose greater costs on Precisions
    business or lead to a decline in the demand for
    services.
          There
    are certain risks associated with Precisions dependence on
    third-party suppliers.
    The
    Trust and Precision may face potential unknown
    liabilities.
   57




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Precision
    is subject to various risks from its foreign
    operations.
    Precisions
    operations face many risks of interruption and casualty
    losses.
   Risks
    Relating to the Acquisition  The
    Trust and its subsidiaries have incurred substantial debt in
    connection with the Acquisition, which could have a material
    adverse effect on its financial position and limit its future
    operations.
      
    increase the Trusts vulnerability to general adverse
    economic and industry conditions and require it to dedicate a
    substantial portion of its cash flow from operations to payments
    on its indebtedness, thereby reducing the availability of its
    cash flow to fund working capital, capital expenditures,
    acquisitions, other debt service requirements, distributions to
    Unitholders and other general corporate purposes;
    decrease the Trusts ability to satisfy its obligations
    under the Credit Facilities or other indebtedness and, if the
    Trust fails to comply with these requirements, an event of
    default could result;
    increase the Trusts vulnerability to covenants relating to
    its indebtedness which may limit the Trusts ability to
    obtain additional financing for working capital, capital
    expenditures and other general corporate activities; 58




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
    increase the Trusts exposure to risks inherent in interest
    rate fluctuations and changes in credit ratings or statements
    from rating agencies because certain of its borrowings
    (including borrowings under the Credit Facilities) are at
    variable rates of interest, which would result in higher
    interest expense to the extent the Trust has not hedged these
    risks against increases in interest rates;
    increase the Trusts exposure to exchange rate fluctuations
    because a change in the value of the Canadian dollar against the
    United States dollar will result in an increase or decrease in
    the Trusts United States dollar denominated debt, as
    expressed in Canadian dollars, as well as in the related
    interest expense;
    increase the Trusts vulnerability to covenants relating to
    its indebtedness that may limit the Trusts flexibility in
    planning for, or reacting to, changes in its business or the
    industry in which it operates;
    place the Trust at a competitive disadvantage compared to its
    competitors that have less debt;
    limit the Trusts ability to borrow additional funds to
    meet its operating expenses, to make acquisitions and for other
    purposes; and
    limit the Trusts ability to construct, purchase or acquire
    new rigs.    Precision
    will require significant amounts of cash to service
    indebtedness.
  and/or
  The
    Credit Facilities contain restrictive covenants.
     59




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The
    terms of Precisions Credit Facilities may be amended by
    the lenders.
  and/or and/or
  All
    the anticipated benefits of the Acquisition may not be
    realized.
    Grey
    Wolf may not be integrated successfully.
    The
    Trust has incurred and will incur significant transaction,
    integration and restructuring costs in connection with the
    Acquisition.
  break-up
 60




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PDOS,
    as the successor to Grey Wolf, is subject to litigation
    regarding the Acquisition.
      The
    Trusts consolidated results of operations may be
    negatively impacted by foreign currency
    fluctuations.
   61




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APPENDIX 1
    AUDIT COMMITTEE CHARTER AND TERMS OF REFERENCE  General
  Committee Corporation Board of Directors Trust
    Business Corporations Act Securities Act Securities Exchange Act of 1934 NYSE
  Committee
    Structure and Authority
  (a)
    Composition        (b)
    Appointment and Replacement of Committee Members       62




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Purpose
    
    the integrity of financial reporting to the holders of units of
    the Trust (Unitholders) and the investment community;
    the integrity of the financial reporting process, including the
    audit process;
    the Corporations and the Trusts compliance with
    legal and regulatory requirements as they relate to financial
    reporting matters;
    the external auditors qualifications and independence;
    the integrity of the system of internal accounting and financial
    reporting controls implemented by management;
    the work and performance of the Corporations and the
    Trusts financial management, internal audit function and
    its external auditor; and
    any other matter specifically delegated to the Committee by the
    Board of Directors. 63




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##### Table of Contents



Committee
    Responsibilities
    
    review the interim and annual financial statements of the
    Corporation and make any comments or recommendations to the
    Board of Directors;
    review the annual financial statements of the Trust and related
    notes and managements discussion and analysis
    (MD&A) components and make
    recommendations to the Board of Directors, and ultimately, once
    approved by the Board of Directors, to the Board of Trustees,
    for their approval;
    review the interim financial statements of the Trust and related
    notes and MD&A components prepared for distribution to the
    Unitholders and the investment community;
    be satisfied that adequate procedures are in place for the
    review of the Trusts public disclosure of financial
    information extracted or derived from the Trusts financial
    statements, other than the public disclosure referred to above,
    and must periodically assess the adequacy of those procedures;
    report, through the Chair of the Committee, to the Board of
    Directors following each meeting of the Committee, including an
    outline of the nature of discussions, major decisions reached by
    the Committee, and its activities and compliance with this
    Charter and Terms of Reference;
    approve the terms of the external auditors engagement
    letter as agreed between the external auditor and financial
    management of the Corporation, and the compensation to be paid
    by the Corporation to the external auditor;
    review the reasons for any proposed change in the external
    auditor which is not initiated by the Committee or the Board of
    Directors and any other significant issues related to the
    change, including the response of the incumbent external
    auditor, and enquire as to the qualifications of the proposed
    external auditor before making its recommendations to the Board
    of Directors;
    be directly responsible for overseeing the work of the external
    auditor engaged for the purpose of preparing or issuing an
    auditors report or performing other audit or review
    services for the Corporation or the Trust, including the
    resolution of disagreements between management and internal or
    the external auditor regarding financial reporting or the
    application of any accounting principles or practices;
    require the external auditor and internal auditor to report
    directly to the Committee;
    provide the external auditor with notice of every meeting of the
    Committee and, at the expense of the Corporation, the
    opportunity to attend and be heard thereat, and if so requested
    by a member of the Committee, shall attend every meeting of the
    Committee held during the term of the office of the external
    auditor. The external auditor of the Corporation or any member
    of the Committee may call a meeting of the Committee;  de minimus
  
    review the disclosure with respect to its pre-approval of audit
    and non-audit services provided by the external auditors;
    review and discuss with management and the external auditor, as
    applicable, (a) all critical accounting policies and
    practices to be used in the annual audit, (b) major issues
    regarding accounting principles and financial statement
    presentations, including any significant changes in the
    Trusts or the Corporations selection or application
    of accounting principles, and major issues as to the adequacy of
    the Trusts or the Corporations respective internal
    controls and any special audit steps adopted in light of
    material control deficiencies; (c) analyses prepared by
    management or the external auditor setting forth significant
    financial reporting issues and judgments made in connection with
    the preparation of the financial statements, including 64




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analyses of the effects of alternative Canadian Generally
    Accepted Accounting Principles (GAAP) methods
    on the financial statements of the Trust and any other opinions
    sought by management from an independent or other audit firm or
    advisor with respect to the accounting treatment of a particular
    item; (d) any management letter or schedule of unadjusted
    differences provided by the external auditor and the
    Trusts response to that letter and other material written
    communication between the external auditor and management;
    (e) any problems, difficulties or differences encountered
    in the course of the audit work including any disagreements with
    management or restrictions on the scope of the external
    auditors activities or on access to requested information
    and managements response thereto; (f) the effect of
    regulatory and accounting initiatives, as well as any
    off-balance sheet structures on the financial statements of the
    Trust and other financial disclosures; (h) any reserves,
    accruals, provisions or estimates that may have a significant
    effect upon the financial statements of the Trust; (i) the
    use of special purpose entities and the business purpose and
    economic effect of off balance sheet transactions, arrangements,
    obligations, guarantees and other relationships of the Trust or
    the Corporation and their impact on the reported financial
    results of the Trust; and (j) the use of any pro
    forma or adjusted information not in
    accordance with generally accepted accounting principles;  
    reviewing earnings press releases (paying particular attention
    to any use of pro forma or adjusted
    non-GAAP information) as well as financial
    information and earnings guidance provided to analysts and
    rating agencies, it being understood that such review may in the
    discretion of the Committee, be done generally (i.e., by
    discussing the types of information to be disclosed and the type
    of presentation to be made);
    review with the external auditor and management the general
    audit approach and scope of proposed audits of the financial
    statements of the Trust, the objectives, staffing, locations,
    co-ordination and reliance upon management in the audit, the
    overall audit plans, the audit procedures to be used and the
    timing and estimated budgets of the audits;
    review any legal matter, claim or contingency that could have a
    significant impact on the financial statements of the Trust, the
    Corporations or the Trusts compliance policies and
    any material reports, inquiries or other correspondence received
    from regulators or governmental agencies and the manner in which
    any such legal matter, claim or contingency has been disclosed
    in the Trusts financial statements;
    review the treatment for financial reporting purposes of any
    significant transactions which are not a normal part of the
    Corporations operations;
    review the interim review engagement report of the external
    auditor before the release of interim financial statements of
    the Trust;
    review and discuss with management the Corporations major
    financial risk exposures and the steps management has taken to
    monitor and control such exposures, including the
    Corporations risk assessment and risk management policies
    such as financial derivatives and hedging activities;
    annually request and review a report from the external auditor
    regarding (a) the external auditors quality-control
    procedures, (b) any material issues raised by the most
    recent quality-control review. Canadian Public Accountability
    Board or Public Company Accounting Oversight Board or other
    available peer review of the external auditor, or by any inquiry
    or investigation by governmental or professional authorities
    within the preceding five years respecting one or more
    independent audits carried out by the firm, and (c) any
    steps taken to deal with any such issues;
    evaluate the qualifications and performance of the external
    auditor, including a written review and evaluation of the lead
    partner of the external auditor, review and approve hiring
    policies for partners, employees or former employees of the
    external auditor and make recommendations to the Board of
    Directors as to the appointment or reappointment of the external
    auditor to be proposed for approval by the Board of Trustees and
    Unitholders;
    review the independence of the external auditor, annually
    request and review a written report from the external auditor
    respecting its independence, including a list of all
    relationships between the external auditor and each of the
    Corporation and the Trust, and consider applicable auditor
    independence standards; 65




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
    ensure that the lead audit partner of the external auditor and
    the audit partner responsible for reviewing the audit are
    rotated at least every five years as required by the
    Sarbanes-Oxley Act of 2002, and further consider rotation of the
    external auditors firm itself;
    discuss with management and the external auditors any accounting
    adjustments that were noted or proposed by the internal or
    external auditors but were not adopted (as immaterial or
    otherwise);
    review the adequacy and effectiveness of the Corporations
    and the Trusts internal accounting and financial controls
    based on recommendations from management and the external
    auditor for the improvement of accounting practices and internal
    controls;
    establish and periodically review procedures for (a) the
    receipt, retention and treatment of complaints received by the
    Corporation or the Trust regarding accounting, internal controls
    or auditing matters, and (b) the confidential, anonymous
    submission by employees of the Corporation of concerns regarding
    questionable accounting or auditing matters or other matters
    that could negatively affect the Corporation or the Trust such
    as violations of the Joint Code of Business Conduct and Ethics;
    review periodically with management and the external auditors
    any significant complaints received;
    review other financial information included in the Trusts
    Annual Report to ensure that it is consistent with the Board of
    Directors knowledge of the affairs of the Corporation and
    the Trust and is unbiased and non-selective;
    if requested by the Board of Directors, receive from the Chief
    Executive Officer and Chief Financial Officer of the Corporation
    a certificate certifying in respect of each annual and interim
    report of the Trust the matters such officers are required to
    certify in connection with the filing of such reports under
    applicable securities laws and receive and review disclosures
    made by such officers about any significant deficiencies in the
    design or operation of internal controls or material weaknesses
    therein and any fraud involving management or persons who have a
    significant role in the Corporations internal controls;
    prepare any report required by law, regulations or stock
    exchange requirement to be included in the Trusts periodic
    reports;
    meet at least four times a year on a quarterly basis or more
    frequently as circumstances require, with the Chief Financial
    Officer of the Corporation, the head of the internal audit
    function of the Corporation, if other than the Chief Financial
    Officer, and the external auditor in separate executive sessions
    to discuss any matters that the Committee or each of these
    groups believes should be discussed privately;
    meet in separate, non-management, in camerasessions at
    each regularly scheduled meeting;
    meet in separate, non-management, closed sessions with any other
    internal personnel or outside advisors, as necessary or
    appropriate;
    review annually the Corporations insurance programs and
    pension plans, not including the Directors and Officers
    insurance program;
    review the results of the annual external audit, including the
    audit report to the Trusts Unitholders and any other
    reports prepared by the external auditors and the informal
    reporting from the external auditor on accounting systems and
    internal controls, including managements response;
    review and evaluate the scope, risk assessment, and nature of
    the internal audit plan and any subsequent changes;
    consider and review the following issues with management and the
    head of the internal audit group:  
    significant findings of the internal audit group as well as
    managements response to them;
    any difficulties encountered in the course of their internal
    audits, including any restrictions on the scope of their work or
    access to required information;
    the internal auditing budget and staffing; 66




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
    the internal Audit Services Charter; and
    compliance with The Institute of Internal Auditors
    Standards for the Professional Practice of Internal
    Auditing;  
    approve the appointment, replacement or dismissal of the head of
    the internal audit group; and
    direct the head of the internal audit group to review any
    specific areas the Committee deems necessary; and
    ensure that the obligations of the Corporation pursuant to the
    Administration Agreement are met and that good corporate
    governance procedures are used in connection therewith.      Limitation
    of Committees Role
    day-to-day
     67




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2 MANAGEMENTS DISCUSSION AND ANALYSIS




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##### Table of Contents



FINANCIAL AND OPERATING HIGHLIGHTS
 (Stated in thousands of Canadian dollars, except per unit amounts)
 % Increase







% Increase






% IncreaseYears ended December 31,

2008


(Decrease)



2007


(Decrease)


2006


(Decrease)Revenue

$
1,101,891



9.2



$
1,009,201



(29.8
)

$
1,437,584



13.3EBITDA (1)


436,536



(0.1
)



437,075



(34.6
)


668,160



24.4Earnings from continuing operations


302,730



(11.7
)



342,820



(40.1
)


572,512



159.2Discontinued operations, net of tax (2)






n/m




2,956



n/m



7,077



n/mNet earnings


302,730



(12.4
)



345,776



(40.3
)


579,589



(64.5
)Cash provided by continuing operations


343,910



(29.0
)



484,115



(20.6
)


609,744



196.0Net capital spending (3)


219,139



20.9




181,239



(22.4
)


233,693



66.8Distributions declared  cash


200,659



(18.6
)



246,485



(44.9
)


447,001



n/mDistributions declared  in-kind


24,029



(20.4
)



30,182



23.1



24,523



n/mEarnings per unit from continuing operations:Basic


2.39



(12.5
)



2.73



(40.1
)


4.56



154.7Diluted


2.39



(12.5
)



2.73



(40.1
)


4.56



159.1Earnings per unit:Basic


2.39



(13.1
)



2.75



(40.5
)


4.62



(65.1
)Diluted


2.39



(13.1
)



2.75



(40.5
)


4.62



(64.5
)Distributions declared per unit  cash


1.56



(20.4
)



1.96



(44.9
)


3.56



n/mDistributions declared per unit  in-kind


0.15



(37.5
)



0.24



23.1



0.195



n/mDrilling rig utilization days:Canada


34,488



(0.2
)



34,572



(32.3
)


51,050



(4.9
)United States


8,006



281.6




2,098



1,034.1



185



n/mInternational


159



n/m








n/m







n/mService rig operating hours:Canada


335,127



(5.9
)



355,997



(25.9
)


480,137



0.6
 (1)

Non-GAAP measure. See page 50.(2)

Includes gain on disposition
of discontinued operations.(3)

Excludes acquisitions.n/m 
calculation not meaningful.
 FINANCIAL POSITION AND RATIOS
 (Stated in thousands of Canadian dollars, except ratios)
 Years ended December 31,

2008



2007


2006Working capital

$
345,329



$
140,374


$
166,484Working capital ratio


2.0




2.1



1.8Long-term debt (1)

$
1,368,349



$
119,826


$
140,880Total long-term financial liabilities

$
1,399,300



$
133,722


$
163,579Total assets

$
4,833,702



$
1,763,477


$
1,761,186Enterprise value (2)

$
2,636,170



$
1,877,139


$
3,369,860Long-term debt to long-term debt plus equity (1)


0.37




0.08



0.10Long-term debt to cash provided by continuing operations (1)


3.98




0.25



0.23Long-term debt to enterprise value (1)


0.52




0.06



0.04
 (1)

Excludes current portion of long-term debt which is included in working capital.(2)

Unit price as at December 31 multiplied by the number of units outstanding plus long-term debt
minus working capital. See page 36.
 PRECISION DRILLING TRUST 3




---



##### Table of Contents



PROFILE AND STRATEGY
    1.

Value lives in high performing assets, people and technology, as evidenced by strong margins
and sector leading rig utilization for a heritage rig fleet. The senior management team has
global experience and is positioned to enhance Precisions existing 29 rig operation in the
United States. Precisions in-house supply, manufacturing and support systems provide levers
to increase profit margins.
 2.

Diversification was immediate with contracted drilling rigs strategically positioned in key
oil and natural gas basins, especially unconventional resource plays. The customer mix was
broad and provides immediate relationships to market Precisions rig technology and other
services.
 3.

Growth was delivered through people and assets. The combination of new and upgraded rigs with
an experienced workforce provides added capacity to leverage favourable long-term drilling
industry fundamentals, technologically advanced rigs suited for unconventional plays, history
of successful acquisition integrations and a larger platform to apply directional drilling
integration.
 4 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents





Reducing dependence on underlying economics and seasonality of the relatively mature western
Canada sedimentary basin;
 

Capitalizing on customer production growth in North America, especially unconventional
natural gas wells;
 

Pursuing global oil drilling opportunities; and
 

Achieving greater high performance high value services through investment in new asset
technology and acquisition opportunities to establish market positioning that consolidates
industry and provides profit margin improvement through people, technology and systems
initiatives.
  PRECISION DRILLING TRUST 5




---



##### Table of Contents



KEY RESOURCES AND COMPETENCIES
  Historic Levels of Long-term Debt
 
    

2009 compensation restructuring to freeze employee pay and reduce salaried positions. Also
for 2008, the Chief Executive Officer has agreed to forego certain incentive bonus obligations
due under his employment contract and the Chief Financial Officer agreed to a reduced 2008
incentive bonus remuneration;
 

2009 capital expenditures on existing equipment have been reduced to a level that will
maintain the safety and overall performance of assets;
 

During 2008 and 2009, cost reduction measures have been taken to reduce the salaried
workforce, reduce employee travel, consolidate operating and administrative locations, lower
certain field wages and optimize supplier relationships;
 

Future expansion capital expenditures have been reduced to amounts required to complete the
2008 Super Series rig programs pursuant to term customer contracts;
 

In February 2009, the Trust announced the indefinite suspension of cash distributions;
 

A US$800 million base shelf prospectus was filed with regulatory authorities in February 2009
to facilitate the possible issuance of debt or equity securities over the following 25 month
period;
 6 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents





Gross proceeds of US$172.5 million were raised through an equity offering of 46 million units
of the Trust during February 2009; and
 

Management continues to seek permanent pricing for certain remaining debt within its credit
facilities. Provisions exist for the commitment banks to facilitate syndication for a period
following the Grey Wolf acquisition which may result in further increases in any or a
combination of interest rates, original issue discounts or fees, all subject to certain market
based indexing.
   

Joanne L. Alexander, Vice President, General Counsel and Corporate Secretary, industry
experience from 1990;
 

Kenneth J. Haddad, Vice President, Business Development, industry experience from 1981;
 

David J. Crowley, President U.S. Operations, former Grey Wolf Chief Operating Officer,
industry experience from 1980; and
 

David W. Wehlmann, Executive Vice President, Investor Relations, former Grey Wolf Chief
Financial Officer, industry experience from 1980.
  SUMMARY OF CONSOLIDATED STATEMENTS OF EARNINGS
 (Stated in thousands of Canadian dollars)
 Years ended December 31,

2008



2007


2006Revenue:Contract Drilling Services

$
809,317



$
694,340


$
1,009,821Completion and Production Services


308,624




327,471



441,017Inter-segment elimination


(16,050
)



(12,610
)


(13,254
)1,101,891




1,009,201



1,437,584EBITDA: (1)Contract Drilling Services


359,137




329,351



511,883Completion and Production Services


109,054




132,030



195,173Corporate and Other


(31,655
)



(24,306
)


(38,896
)436,536




437,075



668,160Depreciation


83,829




78,326



73,234Foreign exchange


(2,041
)



2,398



(353
)Interest, net


14,174




7,318



8,029Other











(408
)Earnings from continuing operations before income taxes

340,574




349,033



587,658Income taxes


37,844




6,213



15,146Earnings from continuing operations


302,730




342,820



572,512Discontinued operations, net of tax







2,956



7,077Net earnings

$
302,730



$
345,776


$
579,589
 (1)

Non-GAAP measure. See page 50.
 PRECISION DRILLING TRUST 7




---



##### Table of Contents



Revenue and EBITDA (1)
 
 (1)

Non-GAAP measure. See page 50.
 Capital Spending  Total
 
    8 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents



OUTLOOK
       PRECISION DRILLING TRUST 9




---



##### Table of Contents



U.S. Working Gas in Underground Storage Compared with Five-year Range
 
   U.S. Natural Gas Production and Decline Rate
 
 10 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents



PRECISION DRILLING TRUST 11




---



##### Table of Contents



GLOBAL MARKETS
   12 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents



NORTH AMERICAN MARKETS
      WCSB Natural Gas Production
 
 PRECISION DRILLING TRUST 13




---



##### Table of Contents



ECONOMIC DRIVERS OF THE OILFIELD SERVICES INDUSTRY
   Number of Producing Wells in Western Canada
 
     14 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents



WCSB Well Completions vs AECO Spot Natural Gas Price
 
   Active and Existing Canadian Drilling Rigs
 
 PRECISION DRILLING TRUST 15




---



##### Table of Contents



Diversification: Unconventional Resource Coverage
 
  16 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents



HISTORY OF CONTINUING OPERATIONS
       PRECISION DRILLING TRUST 17




---



##### Table of Contents



Contract Drilling Services Segment
     Completion and Production Services Segment
    18 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents



VISION
  

Precision delivers high performance through passionate people supported by superior systems
and equipment designed to maximize and reduce risks; and
 

Precision creates high value by lowering customer costs, operating safely, developing people,
generating financial growth and attracting investment.
 STRATEGIC DIRECTION
       

Value  capitalize on vertically integrated business model; especially supply distribution,
manufacturing and internal system support capabilities to reduce costs and improve margins;
 

Value  attract investment capital through strong margins and quality management;
 

Diversification  expand to markets beyond Canada to reduce seasonality of equipment
utilization and dependence on underlying economics of the WCSB;
 

Diversification  capitalize on customer production growth and resulting drilling
opportunities, especially North American unconventional natural gas wells;
 

Diversification  develop a broad customer base;
 PRECISION DRILLING TRUST 19




---



##### Table of Contents





Growth  pursue global oil drilling and service opportunities;
 

Growth  integrate directional drilling; and
 

Growth  invest in asset growth that creates customer value through enhanced service
performance.
   KEY PERFORMANCE DRIVERS
  Safety
Management
  Environmental
Management
  Operating
Efficiency
   

Mechanical downtime which is managed through preventative maintenance programs, detailed
inspection processes, an extensive fleet of strategically placed spare equipment, an in-house
supply chain, and continuous equipment upgrades; and
 

Non-productive time, or move, rig-up and rig-out time, which is minimized by decreasing the
number of move loads per rig, using lighter move loads, and using mechanized equipment for
safer and quicker rig component connections.
 20 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents



Customer
Demand
  Workforce
  Financial
Performance
  OPERATING SEGMENTS
  

Precision Drilling operates 220 land drilling rigs in Canada;

Precision Drilling Oilfield Services operates 151 land drilling rigs in the United States;

Precision affiliates operate two rigs in Mexico and one in Chile;
 

LRG Catering operates 97 camps in Canada, with food catering, and a Precision affiliate
operates three camps in the United States;
 

Rostel Industries provides engineering, machining, fabrication, component manufacturing and
repair services for drilling and service rigs primarily for Precisions operations; and
 

Columbia Oilfield Supply provides centralized procurement, standardized product selection,
and coordinated distribution of goods for Precisions operations.
  

Precision Well Servicing operates 229 well completion and workover service rigs in Canada;

Live Well Service operates 29 snubbing units in Canada;
 

Precision Rentals provides approximately 12,000 rental items in Canada including well control
equipment, surface equipment, specialty tubulars and wellsite accommodation units; and
 

Terra Water Systems provides 76 wastewater treatment units.
 PRECISION DRILLING TRUST 21




---



##### Table of Contents



HorsepowerType of Drilling Rig

<500


500-999


1000-1499


1500-1999


2000+


TotalElectric


2



19



7



1



1



30Mechanical


82



66



2











150Super Single


23



12















35Super Triple










5











5Canada


107



97



14



1



1



220Electric






3



32



19



30



84Mechanical






23



15



4







42Super Single






5



6











11Super Triple










4



10







14United States






31



57



33



30



151Electric






1











2



3International






1











2



3Total


107



129



71



34



33



374
  Type of Service Rig

Horsepower


2008


2007


2006


2005Singles:Mobile


150-400



2



5



12



17Freestanding mobile


150-400



97



94



92



88Doubles:Mobile


250-550



42



43



44



44Freestanding mobile


200-550



23



9



9



8Skid


300-860



48



55



65



65Slants:Freestanding


250-400



17



17



15



15Total






229



223



237



237
 CAPACITY TO DELIVER
  High-Performance Drilling Rigs
   22 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents



Large Diversified Rig Fleets
     Inventory of Ancillary Equipment
   Industry Leading Safety Program
  PRECISION DRILLING TRUST 23




---



##### Table of Contents



Well-maintained Equipment
  Upgrade Capital Expenditures
 
  Employees
  Information Systems
   24 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents



CONTRACT DRILLING SERVICES SEGMENT
 (Stated in thousands of Canadian dollars, except where indicated)
 % of







% of






% ofYears ended December 31,

2008


Revenue



2007


Revenue


2006


RevenueRevenue

$
809,317







$
694,340






$
1,009,821Expenses:Operating


425,051



52.5




345,043



49.7



470,713



46.6General and administrative


25,129



3.1




19,946



2.9



27,225



2.7EBITDA (1)


359,137



44.4




329,351



47.4



511,883



50.7Depreciation


57,076



7.1




43,120



6.2



38,573



3.8Foreign exchange


(8,179
)


(1.0
)



1,477



0.2



(314
)


Operating earnings (1)

$
310,240



38.3



$
284,754



41.0


$
473,624



46.9% Increase






% Increase





% Increase2008


(Decrease)



2007


(Decrease)


2006


(Decrease)Number of drilling rigs (end of
year)


374



52.7




245



1.7



241



4.8Drilling utilization days
(operating and moving):Canada


34,488



(0.2
)



34,572



(32.3
)


51,050



(4.9
)United States


8,006



281.6




2,098











International


159



n/m
















Drilling revenue per utilization
day:Canada

$
16,420



(2.5
)


$
16,833



(6.5
)

$
18,002



14.2United States (in US$)

$
21,549



(8.2
)


$
23,473



(8.5
)

$
25,646



n/mDrilling statistics: (2)Number of wells drilled


4,432



(6.1
)



4,718



(23.7
)


6,180



(20.4
)Average days per well


6.9



6.2




6.5



(9.7
)


7.2



20.0Number of metres drilled (000s)


5,877



1.1




5,813



(25.6
)


7,810



(12.3
)Average metres per well


1,326



7.6




1,232



(2.5
)


1,264



10.3
 (1)

Non-GAAP measure. See page 50.(2)

Canadian operations only.
 PRECISION DRILLING TRUST 25




---



##### Table of Contents



2008 Compared to 2007
 The
Contract Drilling Services segment
         26 MANAGEMENTS DISCUSSION AND ANALYSIS




---



##### Table of Contents



LRG Catering
 Rostel Industries and Columbia Oilfield Supply divisions
 2007 Compared to 2006
 The Contract Drilling Services segment
     Precision Drilling Oilfield Services, Inc.
 LRG Catering
 PRECISION
DRILLING TRUST 27




---



##### Table of Contents



COMPLETION AND PRODUCTION SERVICES SEGMENT  (Stated in thousands of Canadian dollars, except where indicated)
 % of
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofYears ended December 31,
    
    2008
    
    
    Revenue
    
    
    
    2007
    
    
    Revenue
    
    
    2006
    
    
    RevenueRevenue
    
    $
    308,624
    
    
    
    
    
    
    
    $
    327,471
    
    
    
    
    
    
    $
    441,017Expenses:Operating
    
    
    188,705
    
    
    
    61.2
    
    
    
    
    183,661
    
    
    
    56.1
    
    
    
    231,602
    
    
    
    52.5General and administrative
    
    
    10,865
    
    
    
    3.5
    
    
    
    
    11,780
    
    
    
    3.6
    
    
    
    14,242
    
    
    
    3.2EBITDA
    
    
    109,054
    
    
    
    35.3
    
    
    
    
    132,030
    
    
    
    40.3
    
    
    
    195,173
    
    
    
    44.3Depreciation
    
    
    22,966
    
    
    
    7.4
    
    
    
    
    31,421
    
    
    
    9.6
    
    
    
    32,013
    
    
    
    7.3Foreign exchange
    
    
    (16
    )
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    41
    
    
    
    Operating earnings (1)
    
    $
    86,104
    
    
    
    27.9
    
    
    
    $
    100,596
    
    
    
    30.7
    
    
    $
    163,119
    
    
    
    37.0% Increase
    
    
    
    
    
    
    
    % Increase
    
    
    
    
    
    
    % Increase2008
    
    
    (Decrease)
    
    
    
    2007
    
    
    (Decrease)
    
    
    2006
    
    
    (Decrease)Number of service rigs (end of year)
    
    
    229
    
    
    
    2.7
    
    
    
    
    223
    
    
    
    (5.9
    )
    
    
    237
    
    
    
    Service rig operating hours
    
    
    335,127
    
    
    
    (5.9
    )
    
    
    
    355,997
    
    
    
    (25.9
    )
    
    
    480,137
    
    
    
    0.6Revenue per operating hour
    
    $
    708
    
    
    
    (3.0
    )
    
    
    $
    730
    
    
    
    2.5
    
    
    $
    712
    
    
    
    18.7
 (1)
    
    Non-GAAP measure. See page 50.
 2008 Compared to 2007
 The Completion and Production Services segment
   The Precision Well Servicing division
   28




---



##### Table of Contents



Live Well Service
 Precision Rentals
 The Terra Water Systems
 2007 Compared to 2006
 The Completion and Production Services segment
   The Precision Well Servicing division
 Live Well Service
 Precision Rentals
 Terra Water Systems
 PRECISION
DRILLING
TRUST 29




---



##### Table of Contents



OTHER ITEMS
 2008 Compared to 2007
 Corporate and Other Expenses
  Interest Expense
  Income Taxes
    Discontinued Operations
  2007 Compared to 2006
 Corporate and Other Expenses
  Interest Expense
  30




---



##### Table of Contents



Income Taxes
   Discontinued Operations
  LIQUIDITY AND CAPITAL RESOURCES
    Secured Facility
  
    
    Term loan A facility in an aggregate principal amount of US$336 million (the Term Loan A Facility);
    
    Term loan B facility in an aggregate principal amount of US$464 million (the Term Loan B Facility); and
    
    Revolving credit facility in the amount of US$400 million (the Revolving Credit Facility).
 31




---



##### Table of Contents




    
    Blended cash interest rate, as at February 4, 2009, of approximately 8% per annum, before original issue discounts and upfront fees;
    
    Covenants requiring the Trust and Precision to comply with certain financial ratios; and
    
    Covenants that will limit the Trusts capital expenditures above an agreed base-case, allowing for certain exceptions.
     Unsecured Facility
    32




---



##### Table of Contents



General
        33




---



##### Table of Contents



Payments Due by Period(Stated in thousands of Canadian dollars)
    
    Total
    
    Less Than 1 Year
    
    


    1 - 3 Years
    
    
    4 - 5 Years
        
    After 5 YearsLong-term debt (1)
    
    $
    1,255,388
    
    
    $
    48,953
    
    
    $
    138,990
    
    
    $
    472,933
    
    
    $
    594,512Interest on long-term debt (2)
    
    
    581,459
    
    
    
    114,953
    
    
    
    215,530
    
    
    
    191,961
    
    
    
    59,015Rig construction
    
    
    125,289
    
    
    
    66,062
    
    
    
    59,227
    
    
    
    
    
    
    
    Operating leases
    
    
    35,013
    
    
    
    10,977
    
    
    
    16,093
    
    
    
    2,811
    
    
    
    5,132Long-term incentive plans (3)
    
    
    20,751
    
    
    
    9,217
    
    
    
    11,534
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    2,017,900
    
    
    $
    250,162
    
    
    $
    441,374
    
    
    $
    667,705
    
    
    $
    658,659
 (1)
    
    Excludes unsecured convertible notes as these debt instruments contain a provision whereby
Precision is required to provide holders of the notes with an offer to purchase all or a portion of
their notes, including accrued but unpaid interest to the date of purchase, which Precision expects
to repay in 2009 with proceeds received from an equity offering and existing credit facilities.
Upon completion of this transaction the Unsecured Facility would increase to approximately $287.8
million (US$235 million) with repayment in 2016. Interest on the unsecured convertible notes to the
date of purchase is approximately $2.8 million (US$2.3 million). Amounts are after giving effect to
the February 4, 2009 re-allocation between the Term Loan A and Term Loan B facilities.(2)
    
    Interest has been calculated based upon debt balances, interest rates and foreign exchange
rates in effect as at December 31, 2008.(3)
    
    Includes amounts not yet accrued at December 31, 2008 but payable at the end of the contract
term. Unit based compensation amounts disclosed at year-end unit price.
  Outstanding Unit Data
 March 20,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006Trust units
    
    
    206,065,086
    
    
    
    160,042,065
    
    
    
    125,587,919
    
    
    
    125,536,329Exchangeable LP units
    
    
    128,562
    
    
    
    151,583
    
    
    
    170,005
    
    
    
    221,595Total units outstanding
    
    
    206,193,648
    
    
    
    160,193,648
    
    
    
    125,757,924
    
    
    
    125,757,924Deferred Trust units outstanding
    
    
    78,776
    
    
    
    54,543
    
    
    
    18,280
    
    
    
    
 DISTRIBUTIONS
  34




---



##### Table of Contents




    
    Deducts the purchase of property, plant and equipment for upgrade capital as the minimum capital reinvestment required to maintain current operating capacity;
    
    Deducts the purchase of property, plant and equipment for expansion initiatives to grow capacity;
    
    Adds the proceeds on the sale of property, plant and equipment which are incidental transactions occurring within the normal course of operations; and
    
    Deducts long-term incentive plan changes as an unfunded liability resulting from the operating activities in the current period with payments beginning March 2009.
  Years ended December 31,(Stated in thousands of Canadian dollars, except per diluted unit amounts)
    
    2008
    
    
    
    2007
    
    
    2006Cash provided by continuing operations
    
    $
    343,910
    
    
    
    $
    484,115
    
    
    $
    609,744Deduct:Purchase of property, plant and equipment for upgrade capital
    
    
    (59,454
    )
    
    
    
    (45,970
    )
    
    
    (92,123
    )Purchase of property plant and equipment for expansion initiatives
    
    
    (170,125
    )
    
    
    
    (141,003
    )
    
    
    (170,907
    )Add:Proceeds on the sale of property, plant and equipment
    
    
    10,440
    
    
    
    
    5,767
    
    
    
    29,337Standardized distributable cash (1)
    
    
    124,771
    
    
    
    
    302,909
    
    
    
    376,051Unfunded long-term incentive plan compensation
    
    
    (2,163
    )
    
    
    
    8,496
    
    
    
    (22,699
    )Distributable cash from continuing operations (1)
    
    $
    122,608
    
    
    
    $
    311,405
    
    
    $
    353,352Cash distributions declared
    
    $
    200,659
    
    
    
    $
    246,485
    
    
    $
    447,001Per diluted unit information:Cash distributions declared
    
    $
    1.56
    
    
    
    $
    1.96
    
    
    $
    3.56Standardized distributable cash (1)
    
    $
    0.98
    
    
    
    $
    2.41
    
    
    $
    3.00Distributable cash from continuing operations (1)
    
    $
    0.97
    
    
    
    $
    2.48
    
    
    $
    2.81
 (1)
    
    Non-GAAP measure. See page 50.
  35




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##### Table of Contents



Years ended December 31,(Stated in thousands of Canadian dollars)
    
    2008
    

    
    2007
    

    2006Cash provided by continuing operations (A)
    
    $
    343,910
    
    
    
    $
    484,115
    
    
    $
    609,744Net earnings (B)
    
    $
    302,730
    
    
    
    $
    345,776
    
    
    $
    579,589Distributions declared (C)
    
    $
    224,688
    
    
    
    $
    276,667
    
    
    $
    471,524Excess of cash provided by operations over distributions declared (A-C)
    
    $
    119,222
    
    
    
    $
    207,448
    
    
    $
    138,220Excess of net earnings over distributions declared (B-C)
    
    $
    78,042
    
    
    
    $
    69,109
    
    
    $
    108,065
  Years ended December 31,(Stated in thousands of Canadian dollars except per unit amounts)
    
    2008
    
    
    
    2007
    
    
    2006Units outstanding
    
    
    160,193,648
    
    
    
    
    125,757,924
    
    
    
    125,757,924Year-end unit price
    
    $
    10.07
    
    
    
    $
    15.09
    
    
    $
    27.00Units at market
    
    $
    1,613,150
    
    
    
    $
    1,897,687
    
    
    $
    3,395,464Long-term debt
    
    
    1,368,349
    
    
    
    
    119,826
    
    
    
    140,880Less working capital
    
    
    (345,329
    )
    
    
    
    (140,374
    )
    
    
    (166,484
    )Enterprise value
    
    $
    2,636,170
    
    
    
    $
    1,877,139
    
    
    $
    3,369,860
  QUARTERLY FINANCIAL SUMMARY  (Stated in thousands of Canadian dollars, except per unit amounts)
 Year ended December 31, 2008
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    YearRevenue
    
    $
    342,689
    
    
    $
    138,514
    
    
    $
    285,639
    
    
    $
    335,049
    
    
    $
    1,101,891EBITDA (1)
    
    
    147,347
    
    
    
    35,574
    
    
    
    118,820
    
    
    
    134,795
    
    
    
    436,536Earnings from continuing operations:
    
    
    106,266
    
    
    
    21,739
    
    
    
    82,349
    
    
    
    92,376
    
    
    
    302,730Per basic unit
    
    
    0.85
    
    
    
    0.17
    
    
    
    0.65
    
    
    
    0.72
    
    
    
    2.39Per diluted unit
    
    
    0.84
    
    
    
    0.17
    
    
    
    0.65
    
    
    
    0.71
    
    
    
    2.39Net earnings:
    
    
    106,266
    
    
    
    21,739
    
    
    
    82,349
    
    
    
    92,376
    
    
    
    302,730Per basic unit
    
    
    0.85
    
    
    
    0.17
    
    
    
    0.65
    
    
    
    0.72
    
    
    
    2.39Per diluted unit
    
    
    0.84
    
    
    
    0.17
    
    
    
    0.65
    
    
    
    0.71
    
    
    
    2.39Cash provided by continuing operations
    
    
    57,307
    
    
    
    200,458
    
    
    
    3,241
    
    
    
    82,904
    
    
    
    343,910Distributions to unitholders  declared
    
    $
    49,046
    
    
    $
    49,045
    
    
    $
    49,046
    
    
    $
    77,551
    
    
    $
    224,688
 Year ended December 31, 2007
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    YearRevenue
    
    $
    410,542
    
    
    $
    122,005
    
    
    $
    227,928
    
    
    $
    248,726
    
    
    $
    1,009,201EBITDA (1)
    
    
    201,831
    
    
    
    39,825
    
    
    
    92,068
    
    
    
    103,351
    
    
    
    437,075Earnings from continuing operations:
    
    
    158,067
    
    
    
    25,722
    
    
    
    69,702
    
    
    
    89,329
    
    
    
    342,820Per basic unit
    
    
    1.26
    
    
    
    0.20
    
    
    
    0.55
    
    
    
    0.71
    
    
    
    2.73Per diluted unit
    
    
    1.26
    
    
    
    0.20
    
    
    
    0.55
    
    
    
    0.71
    
    
    
    2.73Net earnings:
    
    
    158,067
    
    
    
    25,722
    
    
    
    72,658
    
    
    
    89,329
    
    
    
    345,776Per basic unit
    
    
    1.26
    
    
    
    0.20
    
    
    
    0.58
    
    
    
    0.71
    
    
    
    2.75Per diluted unit
    
    
    1.26
    
    
    
    0.20
    
    
    
    0.58
    
    
    
    0.71
    
    
    
    2.75Cash provided by continuing operations
    
    
    156,298
    
    
    
    229,073
    
    
    
    20,270
    
    
    
    78,474
    
    
    
    484,115Distributions to unitholders  declared
    
    $
    71,682
    
    
    $
    56,591
    
    
    $
    49,046
    
    
    $
    99,348
    
    
    $
    276,667
 (1)
    
    Non-GAAP measure. See page 50.
 36




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FOURTH QUARTER DISCUSSION
       PRECISION
DRILLING
TRUST 37




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38




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CRITICAL ACCOUNTING ESTIMATES
    Allowance for Doubtful Accounts Receivable
  PRECISION
DRILLING
TRUST 39




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Impairment of Long-lived Assets
  Depreciation and Amortization
  Income Taxes
   Long-term Incentive Plan Compensation
  40




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NEW ACCOUNTING STANDARDS
  
    
    Section 3064, Goodwill and Intangible Assets establishes standards for the recognition,
measurement, presentation and disclosure of goodwill and intangible assets. The new Section is
not anticipated to have a significant impact on the consolidated financial statements;
    
    Section 1582 Business Combinations will require most assets acquired and liabilities assumed, including contingent liabilities to be measured at fair value and that all acquisition costs to be expensed.
  
    
    Section 1602 Non-controlling Interests will require that non-controlling interests be recognized as a separate component of equity and that net earnings be calculated without a deduction for non-controlling interest;
    
    Section 1601 Consolidated Financial Statements establishes standards for the preparation of consolidated financial statements.
  TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS:
     
    
    Capital asset componentization
    
    Financial statement disclosure
    
    Provisions
    
    Asset Impairments
    
    IFRS 1  first time adoption
 PRECISION
DRILLING
TRUST 41




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Key Activity
    
    
    Deadlines/Milestones
    
    
    Status at December 31, 2008Financial Statement Preparation:   Identify differences in Canadian

GAAP/IFRS accounting policies
   Select

entitys continuing IFRS policies
   Select

entitys IFRS 1 choices
   Develop financial

statement format
   Quantify IFRS 1

disclosures for 2010
    
    
       Identify Canadian GAAP/IFRS differences Q4, 2008
   Identify and

evaluate IFRS 1 options Q2, 2009
   Identify disclosure

requirements under IFRS Q4, 2009
   Ready for complete

IFRS reporting in 2011 financial year including
comparative financial statements for 2010 financial year
    
    

   Diagnostic assessment completed to identify differences between

Canadian GAAP
and IFRS as applicable to Precision
   Possible

significant accounting policy choices and IFRS 1 elections identifiedInfrastructure:   Determine and develop IFRS expertise

needed at all levels within the entity
   Determine and

implement information technology changes needed to be fully IFRS
compliant
    
    

   Identify and train IFRS project team Q1, 2009
   Ready for parallel

processing of 2010 general ledger using IFRS accounting
procedures, Q1 2010
    
    

   IFRS training delivered to project team and key stakeholders

within Precision
in February 2009
   Information
technology impact assessment completed and system configuration changes to commence Q3, 2009Business Policy Assessment:   Identify impact on financial covenants

and renegotiate/ redefine as needed
   Identify impact on

compensation plans and change as required
   Evaluate impact on

customer and supplier contracts
    
    
       Impact of IFRS on debt covenants to be determined
   Review compensation

plans by Q4, 2010
   Renegotiate and

amend customer and supplier contracts by Q3, 2010 if needed
    
    

   Assessment of impact of IFRS conversion on compensation plans,

debt covenants
and customer and supplier contracts has not yet commencedControl Environment:   Assess impact on design and effectiveness

of internal control over financial
reporting
   Assess impact on

design and effectiveness of disclosure controls and procedures
    
    
       Update business process and information technology controls

documentation
timing to be determined
   Update CEO/CFO

certifications process by end of Q4, 2010 for SOX 302
    
    

   Identification of material process changes underway
   42




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BUSINESS RISKS
   Crude Oil and Natural Gas Prices
    Workforce Availability
  43




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Business is Seasonal and Highly Variable
  Deteriorating Conditions in the Credit Markets May Adversely Affect Business
   Technology
  Precision is Subject to Various Risks from its Foreign Operations
  44




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Customer Merger and Acquisition Activity
  Competitive Industry
  Capital Overbuild in the Drilling Industry
  Distributions on the Trust Units are Variable
  Distributions on the Trust Units Have Been Suspended and May Not Be Reinstated
  45




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Precision May Not Be Able to Obtain Financing or Obtain Financing on Acceptable Terms

Because of the Deterioration of the Credit and Capital Markets
   Tax Consequences of Previous Transactions Completed by Precision
   46




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Access to Additional Financing
  Taxation of Distributions
  Environmental
  United States Dollar Exchange Exposure
  
    
    Translation of United States SubsidiariesPrecisions United States operations are considered self-sustaining operations and will be
translated into Canadian dollars using the current rate method. Under this method, the assets and
liabilities of Precisions operations in the United States will be recorded in the consolidated
financial statements at the exchange rate in effect at the balance sheet dates and the unrealized
gains and losses will be included in other comprehensive income, a component of unitholders
equity. As a result, changes in the Canadian to United States dollar exchange rates will increase
or decrease Precisions United States dollar denominated net assets on consolidation which will
increase or decrease unitholders equity. The translation will increase and decrease Precisions
United States dollar assets and liabilities as a result of changes in foreign exchange rates
which could have a material impact on the amounts recorded in the balance sheet. In addition,
under certain circumstances Canadian GAAP requires foreign exchange gains and losses that are
accumulated in other comprehensive income to be recorded as a foreign exchange gain or loss in
the statement of earnings.Precisions United States operations generate revenue and incur expenses in United States dollars
and the United States dollar based earnings are converted into Canadian dollars for purposes of
financial statement consolidation and reporting. The conversion of the United States dollar based
revenue and expenses to a Canadian dollar basis does not result in a foreign exchange gain or
loss but does result in lower or higher net earnings from United States operations than would
have occurred had the exchange rate not changed. If the Canadian dollar strengthens versus the
United States dollar, the Canadian dollar equivalent of net earnings from United States
operations will be negatively impacted. Precision does not currently hedge any of its exposure
related to the translation of United States dollar based earnings into Canadian dollars.
 47




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
    
    Transaction ExposurePrecision has long-term debt denominated in United States dollars. This debt is converted at the
exchange rate in effect at the balance sheet dates with the resulting gains or losses included in
the statement of earnings as foreign exchange. If the Canadian dollar weakens versus the United
States dollar, Precision will incur a foreign exchange loss from the translation of this debt.
Currently, Precision has not designated any of this debt as a hedge against the net asset
position of its self-sustaining United States operations.The vast majority of Precisions United States operations are transacted in United States
dollars. Transactions for Precisions Canadian operations are primarily transacted in Canadian
dollars. However, Precision occasionally purchases goods and supplies in United States dollars.
These transactions and foreign exchange exposure would not typically have a material impact on
the Canadian operations financial results.
 Safety Risk
  Dependence on Third Party Suppliers
  Significant Debt and Potential Material Adverse Effect on Financial Position and Limit on Future
Operations
   
    
    increase the Trusts vulnerability to general adverse economic and industry conditions and
require it to dedicate a substantial portion of its cash flow from operations to payments on its
indebtedness, thereby reducing the availability of its cash flow to fund working capital, capital
expenditures, acquisitions, other debt service requirements, distributions to unitholders and other
general corporate purposes;
 48




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
    
    decrease the Trusts ability to satisfy our obligations under our credit facilities or other
indebtedness and, if we fail to comply with these requirements, an event of default could result;
    
    increase our vulnerability to covenants relating to our indebtedness which may limit our ability
to obtain additional financing for working capital, capital expenditures and other general
corporate activities;
    
    increase the Trusts exposure to risks inherent in interest rate fluctuations and changes in
credit ratings or statements from rating agencies because certain of its borrowings (including
borrowings under the Credit Facilities) are at variable rates of interest, which would result in
higher interest expense to the extent the Trust has not hedged these risks against increases in
interest rates;
    
    increase the Trusts exposure to exchange rate fluctuations because a change in the value of the
Canadian dollar against the United States dollar will result in an increase or decrease in the
Trusts United States dollar denominated debt, as expressed in Canadian dollars, as well as in the
related interest expense;
    
    increase our vulnerability to covenants relating to our indebtedness that may limit the Trusts
flexibility in planning for, or reacting to, changes in its business or the industry in which it
operates;
    
    place the Trust at a competitive disadvantage compared to its competitors that have less debt;
    
    limit the Trusts ability to borrow additional funds to meet its operating expenses, to make
acquisitions and for other purposes; and
    
    limit the Trusts ability to construct, purchase or acquire new rigs.
  Precision Will Require Significant Amounts of Cash to Service Indebtedness
  49




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DISCLOSURE CONTROLS AND PROCEDURES
 EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
        NON-GAAP MEASURES
  50




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EBITDA
   Years ended December 31,(Stated in thousands of Canadian dollars)
    
    2008
    
    
    
    2007
    
    
    2006EBITDA
    
    $
    436,536
    
    
    
    $
    437,075
    
    
    $
    668,160Add (deduct):Depreciation and amortization
    
    
    (83,829
    )
    
    
    
    (78,326
    )
    
    
    (73,234
    )Foreign exchange
    
    
    2,041
    
    
    
    
    (2,398
    )
    
    
    353Interest:Long-term debt
    
    
    (14,478
    )
    
    
    
    (7,767
    )
    
    
    (8,800
    )Other
    
    
    (151
    )
    
    
    
    (106
    )
    
    
    (171
    )Income
    
    
    455
    
    
    
    
    555
    
    
    
    942Other
    
    
    
    
    
    
    
    
    
    
    
    408Income taxes
    
    
    (37,844
    )
    
    
    
    (6,213
    )
    
    
    (15,146
    )Earnings from continuing operations
    
    $
    302,730
    
    
    
    $
    342,820
    
    
    $
    572,512
 Operating Earnings
  Years ended December 31,(Stated in thousands of Canadian dollars)
    
    2008
    
    
    
    2007
    
    
    2006Operating earnings
    
    $
    354,748
    
    
    
    $
    356,351
    
    
    $
    595,279Add (deduct):Interest:Long-term debt
    
    
    (14,478
    )
    
    
    
    (7,767
    )
    
    
    (8,800
    )Other
    
    
    (151
    )
    
    
    
    (106
    )
    
    
    (171
    )Income
    
    
    455
    
    
    
    
    555
    
    
    
    942Other
    
    
    
    
    
    
    
    
    
    
    
    408Income taxes
    
    
    (37,844
    )
    
    
    
    (6,213
    )
    
    
    (15,146
    )Earnings from continuing operations
    
    $
    302,730
    
    
    
    $
    342,820
    
    
    $
    572,512
 Standardized Distributable Cash, Distributable Cash from Continuing Operations, Standardized
Distributable Cash per Diluted Unit and Distributable Cash from Continuing Operations per Diluted
Unit
   51




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
 United States Private Securities Litigation Reform Act of 1995
   52




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53




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MANAGEMENTS REPORT TO THE UNITHOLDERS
        -s- Kevin A. Neveu
    
    -s- Doug J. StrongKevin A. Neveu
    
    Doug J. StrongChief Executive Officer
    
    Chief Financial OfficerPrecision Drilling Corporation,
    
    Precision Drilling Corporation,Administrator to Precision Drilling Trust
    
    Administrator to Precision Drilling TrustMarch 23, 2009
    
    March 23, 2009
 CONSOLIDATED FINANCIAL STATEMENTS




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AUDITORS REPORT TO THE UNITHOLDERS
 To the Unitholders of Precision Drilling Trust
     
 Chartered Accountants
Calgary, Canada
 March 23, 2009
 PRECISION DRILLING TRUST




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the Board of Directors of Precision Drilling Corporation, as Administrator of Precision Drilling
Trust and the Unitholders of Precision Drilling Trust
        
 Chartered Accountants
Calgary, Canada
 March 23, 2009
 CONSOLIDATED FINANCIAL STATEMENTS




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##### Table of Contents



CONSOLIDATED BALANCE SHEETS
  (Stated in thousands of Canadian dollars)
    
    
    
    
    
    2008
    
    
    
    2007ASSETSCurrent assets:Cash
    
    
    
    
    
    $
    61,511
    
    
    
    $
    Accounts receivable
    
    (Note 24)
    
    
    601,753
    
    
    
    
    256,616Income tax recoverable
    
    
    
    
    
    
    13,313
    
    
    
    
    5,952Inventory
    
    
    
    
    
    
    8,652
    
    
    
    
    9,255685,229
    
    
    
    
    271,823Income tax recoverable
    
    
    
    
    
    
    58,055
    
    
    
    
    Property, plant and equipment, net of accumulated depreciation
    
    (Note 4)
    
    
    3,243,213
    
    
    
    
    1,210,587Intangibles
    
    (Note 5)
    
    
    5,676
    
    
    
    
    318Goodwill
    
    (Note 6)
    
    
    841,529
    
    
    
    
    280,749$
    4,833,702
    
    
    
    $
    1,763,477LIABILITIES AND UNITHOLDERS EQUITYCurrent liabilities:Bank indebtedness
    
    (Note 7)
    
    $
    
    
    
    
    $
    14,115Accounts payable and accrued liabilities
    
    (Note 24)
    
    
    270,122
    
    
    
    
    80,864Distributions payable
    
    (Note 8)
    
    
    20,825
    
    
    
    
    36,470Current portion of long-term debt
    
    (Note 10)
    
    
    48,953
    
    
    
    
    339,900
    
    
    
    
    131,449Long-term liabilities
    
    (Note 9)
    
    
    30,951
    
    
    
    
    13,896Long-term debt
    
    (Note 10)
    
    
    1,368,349
    
    
    
    
    119,826Future income taxes
    
    (Note 11)
    
    
    770,623
    
    
    
    
    181,6332,509,823
    
    
    
    
    446,804Commitments and contingencies
    
    (Notes 16 and 25)Subsequent events
    
    (Notes 8, 10 and 28)Unitholders equity:Unitholders capital
    
    (Note 12(b))
    
    
    2,355,590
    
    
    
    
    1,442,476Contributed surplus
    
    (Note 12(c))
    
    
    998
    
    
    
    
    307Deficit
    
    
    
    
    
    
    (48,068
    )
    
    
    
    (126,110
    )Accumulated other comprehensive income
    
    (Note 13)
    
    
    15,359
    
    
    
    
    2,323,879
    
    
    
    
    1,316,673$
    4,833,702
    
    
    
    $
    1,763,477
 See accompanying notes to consolidated financial statements.
  -s- Robert J.S. Gibson
    
    -s- Patrick M. MurrayRobert J.S. Gibson
    
    Patrick M. MurrayTrustee
    
    Trustee
 PRECISION DRILLING TRUST




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CONSOLIDATED STATEMENTS OF EARNINGS AND DEFICIT
  (Stated in thousands of Canadian dollars, except per unit amounts)
    
    
    
    
    
    2008
    
    
    
    2007
    
    
    2006Revenue
    
    
    
    
    
    $
    1,101,891
    
    
    
    $
    1,009,201
    
    
    $
    1,437,584Expenses:Operating
    
    
    
    
    
    
    598,181
    
    
    
    
    516,094
    
    
    
    688,207General and administrative
    
    
    
    
    
    
    67,174
    
    
    
    
    56,032
    
    
    
    81,217Depreciation and amortization
    
    (Note 4)
    
    
    83,829
    
    
    
    
    78,326
    
    
    
    73,234Foreign exchange
    
    
    
    
    
    
    (2,041
    )
    
    
    
    2,398
    
    
    
    (353
    )Interest:Long-term debt
    
    
    
    
    
    
    14,478
    
    
    
    
    7,767
    
    
    
    8,800Other
    
    
    
    
    
    
    151
    
    
    
    
    106
    
    
    
    171Income
    
    
    
    
    
    
    (455
    )
    
    
    
    (555
    )
    
    
    (942
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (408
    )Earnings from continuing operations before income taxes
    
    
    
    
    
    
    340,574
    
    
    
    
    349,033
    
    
    
    587,658Income taxes:
    
    (Note 11)Current
    
    
    
    
    
    
    6,102
    
    
    
    
    (737
    )
    
    
    34,526Future
    
    
    
    
    
    
    31,742
    
    
    
    
    6,950
    
    
    
    (19,380
    )37,844
    
    
    
    
    6,213
    
    
    
    15,146Earnings from continuing operations
    
    
    
    
    
    
    302,730
    
    
    
    
    342,820
    
    
    
    572,512Gain on disposal of discontinued operations, net of tax
    
    (Note 27)
    
    
    
    
    
    
    
    2,956
    
    
    
    7,077Net earnings
    
    
    
    
    
    
    302,730
    
    
    
    
    345,776
    
    
    
    579,589Deficit, beginning of year
    
    
    
    
    
    
    (126,110
    )
    
    
    
    (195,219
    )
    
    
    (303,284
    )Distributions declared
    
    (Note 8)
    
    
    (224,688
    )
    
    
    
    (276,667
    )
    
    
    (471,524
    )Deficit, end of year
    
    
    
    
    
    $
    (48,068
    )
    
    
    $
    (126,110
    )
    
    $
    (195,219
    )Earnings per unit from continuing operations:
    
    (Note 17)Basic
    
    
    
    
    
    $
    2.39
    
    
    
    $
    2.73
    
    
    $
    4.56Diluted
    
    
    
    
    
    $
    2.39
    
    
    
    $
    2.73
    
    
    $
    4.56Earnings per unit:
    
    (Note 17)Basic
    
    
    
    
    
    $
    2.39
    
    
    
    $
    2.75
    
    
    $
    4.62Diluted
    
    
    
    
    
    $
    2.39
    
    
    
    $
    2.75
    
    
    $
    4.62
 See accompanying notes to consolidated financial statements.
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
  (Stated in thousands of Canadian dollars)
    
    
    
    
    
    2008
    
    
    
    2007
    
    
    2006Net earnings
    
    
    
    
    
    $
    302,730
    
    
    
    $
    345,776
    
    
    $
    579,589Unrealized gain recorded on translation of assets
and liabilities of self-sustaining operations
denominated in foreign currency
    
    
    
    
    
    
    11,222
    
    
    
    
    
    
    
    
    Comprehensive income
    
    
    
    
    
    $
    313,952
    
    
    
    $
    345,776
    
    
    $
    579,589
 See accompanying notes to consolidated financial statements.
 CONSOLIDATED FINANCIAL STATEMENT




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOW
  (Stated in thousands of Canadian dollars)
    
    
    
    
    
    2008
    
    
    
    2007
    
    
    2006Cash provided by (used in):Continuing operations:Earnings from continuing operations
    
    
    
    
    
    $
    302,730
    
    
    
    $
    342,820
    
    
    $
    572,512Adjustments and other items not involving cash:Long-term incentive plan compensation
    
    
    
    
    
    
    2,163
    
    
    
    
    (8,496
    )
    
    
    22,699Depreciation and amortization
    
    
    
    
    
    
    83,829
    
    
    
    
    78,326
    
    
    
    73,234Future income taxes
    
    
    
    
    
    
    31,742
    
    
    
    
    6,950
    
    
    
    (19,380
    )Other
    
    
    
    
    
    
    7,219
    
    
    
    
    112
    
    
    
    (408
    )Amortization of debt issue costs
    
    
    
    
    
    
    798
    
    
    
    
    
    
    
    
    Changes in non-cash working capital balances
    
    (Note 24)
    
    
    (84,571
    )
    
    
    
    64,403
    
    
    
    (38,913
    )343,910
    
    
    
    
    484,115
    
    
    
    609,744Investments:Business acquisitions, net of cash acquired
    
    (Note 19)
    
    
    (768,392
    )
    
    
    
    
    
    
    
    (16,428
    )Purchase of property, plant and equipment
    
    
    
    
    
    
    (229,579
    )
    
    
    
    (186,973
    )
    
    
    (263,030
    )Proceeds on sale of property, plant and equipment
    
    
    
    
    
    
    10,440
    
    
    
    
    5,767
    
    
    
    29,337Changes in income tax recoverable
    
    
    
    
    
    
    (55,148
    )
    
    
    
    
    
    
    
    Proceeds on disposal of discontinued operations
    
    (Note 27)
    
    
    
    
    
    
    
    2,956
    
    
    
    7,337Proceeds on disposal of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    510Purchase of intangibles
    
    
    
    
    
    
    
    
    
    
    
    (33
    )
    
    
    Changes in non-cash working capital balances
    
    (Note 24)
    
    
    22,583
    
    
    
    
    (13,119
    )
    
    
    7,551(1,020,096
    )
    
    
    
    (191,402
    )
    
    
    (234,723
    )Financing:Distributions paid
    
    (Note 8)
    
    
    (216,304
    )
    
    
    
    (249,000
    )
    
    
    (444,651
    )Repayment of long-term debt
    
    
    
    
    
    
    (179,826
    )
    
    
    
    (99,700
    )
    
    
    (204,910
    )Debt issue costs
    
    
    
    
    
    
    (160,098
    )
    
    
    
    
    
    
    
    Increase in long-term debt
    
    
    
    
    
    
    1,308,040
    
    
    
    
    78,646
    
    
    
    248,338Issuance of Trust units
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,896Change in bank indebtedness
    
    
    
    
    
    
    (14,115
    )
    
    
    
    (22,659
    )
    
    
    16,306737,697
    
    
    
    
    (292,713
    )
    
    
    (375,021
    )Increase in cash and cash equivalents
    
    
    
    
    
    
    61,511
    
    
    
    
    
    
    
    
    Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents, end of year
    
    
    
    
    
    $
    61,511
    
    
    
    $
    
    
    
    $
    
 See accompanying notes to consolidated financial statements.
 PRECISION DRILLING TRUST




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##### Table of Contents



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




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##### Table of Contents



Expected life
    
    Salvage value
    
    Basis of depreciationDrilling rig equipment
    
    5,000 utilization days
    
    20%
    
    unit-of-productionDrill pipe and drill collars
    
    1,500 operating days
    
    
    
    unit-of-productionService rig equipment
    
    24,000 service hours
    
    20%
    
    unit-of-productionDrilling rig spare equipment
    
    15 years
    
    
    
    straight-lineService rig spare equipment
    
    10 years
    
    
    
    straight-lineRental equipment
    
    10 to 15 years
    
    
    
    straight-lineOther equipment
    
    3 to 10 years
    
    
    
    straight-lineLight duty vehicles
    
    4 years
    
    
    
    straight-lineHeavy duty vehicles
    
    7 to 10 years
    
    
    
    straight-lineBuildings
    
    10 to 20 years
    
    
    
    straight-line
 (f) Intangibles
  Customer relationships
    
    1 to 5 yearsPatents
    
    10 years
 (g) Goodwill
    (h) Long-lived assets
  (i) Income taxes
  PRECISION DRILLING TRUST




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##### Table of Contents



Bill C-52 Budget Implementation Act, 2007
 (j) Revenue recognition
  (k) Employee benefit plans
   (l) Long-term incentive plan
  (m) Foreign currency translation
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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##### Table of Contents



(n) Unit-based compensation plans
     (o) Exchangeable LP units
  (p) Per unit amounts
  (q) Financial instruments
   PRECISION DRILLING TRUST




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##### Table of Contents



NOTE 3. CHANGES IN ACCOUNTING POLICIES
 (a) 2008 changes
  (b) 2007 changes
    (c) Future accounting pronouncements
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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##### Table of Contents



NOTE 4. PROPERTY, PLANT AND EQUIPMENT
 Accumulated
    
    
    Net Book2008
    
    Cost
    
    
    Depreciation
    
    
    ValueRig equipment
    
    $
    3,444,120
    
    
    $
    548,380
    
    
    $
    2,895,740Rental equipment
    
    
    89,433
    
    
    
    44,240
    
    
    
    45,193Other equipment
    
    
    122,795
    
    
    
    76,841
    
    
    
    45,954Vehicles
    
    
    86,260
    
    
    
    30,817
    
    
    
    55,443Buildings
    
    
    43,048
    
    
    
    12,775
    
    
    
    30,273Assets under construction
    
    
    151,003
    
    
    
    
    
    
    
    151,003Land
    
    
    19,607
    
    
    
    
    
    
    
    19,607$
    3,956,266
    
    
    $
    713,053
    
    
    $
    3,243,213
 Accumulated
    
    
    Net Book2007
    
    Cost
    
    
    Depreciation
    
    
    ValueRig equipment
    
    $
    1,464,145
    
    
    $
    485,822
    
    
    $
    978,323Rental equipment
    
    
    95,435
    
    
    
    45,917
    
    
    
    49,518Other equipment
    
    
    97,397
    
    
    
    69,483
    
    
    
    27,914Vehicles
    
    
    76,387
    
    
    
    27,892
    
    
    
    48,495Buildings
    
    
    30,614
    
    
    
    11,494
    
    
    
    19,120Assets under construction
    
    
    77,096
    
    
    
    
    
    
    
    77,096Land
    
    
    10,121
    
    
    
    
    
    
    
    10,121$
    1,851,195
    
    
    $
    640,608
    
    
    $
    1,210,587
  NOTE 5. INTANGIBLES
 Accumulated
    
    
    Net Book2008
    
    Cost
    
    
    Amortization
    
    
    ValueCustomer relationships
    
    $
    5,585
    
    
    $
    134
    
    
    $
    5,451Patents
    
    
    931
    
    
    
    706
    
    
    
    225$
    6,516
    
    
    $
    840
    
    
    $
    5,676Accumulated
    
    
    Net Book2007
    
    Cost
    
    
    Amortization
    
    
    ValuePatents
    
    $
    931
    
    
    $
    613
    
    
    $
    318
  PRECISION DRILLING TRUST




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##### Table of Contents



NOTE 6. GOODWILL
 Balance, December 31, 2006 and 2007
    
    $
    280,749Acquisitions (Note 19)
    
    
    557,165Exchange adjustment
    
    
    3,615Balance, December 31, 2008
    
    $
    841,529
 NOTE 7. BANK INDEBTEDNESS
  NOTE 8. DISTRIBUTIONS
     2008
    
    
    
    2007Declared
    
    $
    224,688
    
    
    
    $
    276,667Paid
    
    $
    216,304
    
    
    
    $
    249,000Payable in cash at December 31
    
    $
    20,825
    
    
    
    $
    36,470Payable in units at December 31
    
    $
    24,029
    
    
    
    $
    30,182
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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##### Table of Contents



NOTE 9. LONG-TERM LIABILITIES
 2008
    
    
    
    2007Long-term incentive plans (Note 14)
    
    $
    7,489
    
    
    
    $
    13,896Long-term workers compensation and other liabilities
    
    
    23,462
    
    
    
    
    $
    30,951
    
    
    
    $
    13,896
 NOTE 10. LONG-TERM DEBT
 2008
    
    
    
    2007Secured facility:Term Loan A
    
    $
    489,215
    
    
    
    $
    Term Loan B
    
    
    489,840
    
    
    
    
    Revolving credit facility
    
    
    107,981
    
    
    
    
    Unsecured facility
    
    
    168,352
    
    
    
    
    Unsecured convertible notes:3.75% notes
    
    
    168,413
    
    
    
    
    Floating rate notes
    
    
    152,801
    
    
    
    
    Unsecured revolving credit facility
    
    
    
    
    
    
    
    119,8261,576,602
    
    
    
    
    119,826Less net unamortized debt issue costs
    
    
    (159,300
    )
    
    
    
    1,417,302
    
    
    
    
    119,826Less current portion
    
    
    (48,953
    )
    
    
    
    $
    1,368,349
    
    
    
    $
    119,826
 (a) Secured facility:
    PRECISION DRILLING TRUST




---



##### Table of Contents



(b) Unsecured facility:




---



##### Table of Contents



(c) Unsecured convertible notes:
    PRECISION DRILLING TRUST




---



##### Table of Contents



(d) Unsecured revolving credit facility:
 
 2009
    
    $
    48,9532010
    
    
    69,4952011
    
    
    69,4952012
    
    
    90,0372013
    
    
    382,896Thereafter
    
    
    915,726
 NOTE 11. INCOME TAXES
  2008
    
    
    
    2007
    
    
    2006Earnings from continuing operations before income taxes
    
    $
    340,574
    
    
    
    $
    349,033
    
    
    $
    587,658Federal and provincial statutory rates
    
    
    30%
    
    
    
    
    33%
    
    
    
    33%Tax at statutory rates
    
    $
    102,172
    
    
    
    $
    115,181
    
    
    $
    193,927Adjusted for the effect of:Non-deductible expenses
    
    
    372
    
    
    
    
    1,080
    
    
    
    297Income to be distributed to Unitholders,
not subject to tax in the Trust
    
    
    (67,463
    )
    
    
    
    (91,013
    )
    
    
    (155,354
    )Other
    
    
    2,763
    
    
    
    
    3,426
    
    
    
    (2,896
    )Income tax expense before tax rate reductions
    
    
    37,844
    
    
    
    
    28,674
    
    
    
    35,974Reduction of future income tax balances due to
enacted tax rate reductions
    
    
    
    
    
    
    
    (22,461
    )
    
    
    (20,828
    )Income tax expense
    
    $
    37,844
    
    
    
    $
    6,213
    
    
    $
    15,146Effective income tax rate before enacted tax rate reductions
    
    
    11%
    
    
    
    
    8%
    
    
    
    6%
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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##### Table of Contents



The net future tax liability is comprised of the tax effect of the following temporary differences:
 2008
    
    
    
    2007Future income tax liability:Property, plant and equipment and intangibles
    
    $
    783,945
    
    
    
    $
    209,772Partnership deferrals
    
    
    4,716
    
    
    
    
    Debt issue costs
    
    
    3,352
    
    
    
    
    792,013
    
    
    
    
    209,772Future income tax assets:Losses (the non capital losses expire from time to time up to 2028)
    
    
    7,416
    
    
    
    
    9,128Long-term incentive plan
    
    
    5,664
    
    
    
    
    5,743Other
    
    
    8,310
    
    
    
    
    13,268Net future income tax liability
    
    $
    770,623
    
    
    
    $
    181,633
  NOTE 12. UNITHOLDERS CAPITAL
 (a) Authorized
  (b) Unitholders capital
 Trust units
    
    Number
    
    
    AmountBalance, December 31, 2005
    
    
    124,352,921
    
    
    $
    1,365,755Issued pursuant to distribution reinvestment plan (Note 8)
    
    
    296,621
    
    
    
    9,896Issued on retraction of exchangeable LP units
    
    
    886,787
    
    
    
    9,697Issued and consolidated pursuant to special distribution (Note 8)
    
    
    
    
    
    
    24,480Balance, December 31, 2006
    
    
    125,536,329
    
    
    
    1,409,828Issued on retraction of exchangeable LP units
    
    
    51,590
    
    
    
    574Issued and consolidated pursuant to special distribution (Note 8)
    
    
    
    
    
    
    30,141Balance, December 31, 2007
    
    
    125,587,919
    
    
    
    1,440,543Issued on the acquisition of Grey Wolf
    
    
    34,435,724
    
    
    
    889,085Issued on retraction of exchangeable LP units
    
    
    18,422
    
    
    
    209Issued and consolidated pursuant to special distribution (Note 8)
    
    
    
    
    
    
    24,006Balance, December 31, 2008
    
    
    160,042,065
    
    
    $
    2,353,843
  Exchangeable LP units
    
    Number
    
    
    AmountBalance, December 31, 2005
    
    
    1,108,382
    
    
    $
    12,120Redeemed on retraction of exchangeable LP units
    
    
    (886,787
    )
    
    
    (9,697
    )Issued and consolidated pursuant to special distribution (Note 8)
    
    
    
    
    
    
    43Balance, December 31, 2006
    
    
    221,595
    
    
    
    2,466Redeemed on retraction of exchangeable LP units
    
    
    (51,590
    )
    
    
    (574
    )Issued and consolidated pursuant to special distribution (Note 8)
    
    
    
    
    
    
    41Balance, December 31, 2007
    
    
    170,005
    
    
    
    1,933Redeemed on retraction of exchangeable LP units
    
    
    (18,422
    )
    
    
    (209
    )Issued and consolidated pursuant to special distribution (Note 8)
    
    
    
    
    
    
    23Balance, December 31, 2008
    
    
    151,583
    
    
    $
    1,747
 PRECISION DRILLING TRUST




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##### Table of Contents



2008
    
    
    
    2007Summary as at December 31,
    
    Number
    
    
    Amount
    
    
    
    Number
    
    
    AmountTrust units
    
    
    160,042,065
    
    
    $
    2,353,843
    
    
    
    
    125,587,919
    
    
    $
    1,440,543Exchangeable LP units
    
    
    151,583
    
    
    
    1,747
    
    
    
    
    170,005
    
    
    
    1,933Unitholders capital
    
    
    160,193,648
    
    
    $
    2,355,590
    
    
    
    
    125,757,924
    
    
    $
    1,442,476
 (c) Contributed surplus
 Balance, December 31, 2006
    
    $
    Unit based compensation expense (Note 4(c))
    
    
    307Balance, December 31, 2007
    
    
    307Unit based compensation expense (Note 4(c))
    
    
    691Balance, December 31, 2008
    
    $
    998
 NOTE 13. ACCUMULATED OTHER COMPREHENSIVE INCOME
 Balance, December 31, 2006 and 2007
    
    $
    Foreign currency translation adjustment upon change in translation methods
    
    
    4,137Unrealized foreign currency translation gains
    
    
    11,222Balance, December 31, 2008
    
    $
    15,359
 NOTE 14. UNIT BASED COMPENSATION PLANS
 (a) Officers and employees
  Deferred Trust Units
    
    OutstandingBalance, December 31, 2006
    
    
    Issued, including as a result of cash distributions
    
    
    87,340Redeemed on employee resignations and withdrawals
    
    
    (10,611
    )Balance, December 31, 2007
    
    
    76,729Issued, including as a result of cash distributions
    
    
    31,006Redeemed on employee resignations and withdrawals
    
    
    (24,300
    )Balance, December 31, 2008
    
    
    83,435
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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##### Table of Contents



WeightedRange of
    
    
    AverageUnit Appreciation Rights
    




    Outstanding
    
    
    Exercise Price
    
    
    Exercise Price
    
    
    ExercisableOutstanding at December 31, 2006 and 2007
    




    
    
    
    
    $
    
    
    
    $
    
    
    
    
    Granted
    




    
    925,746
    
    
    
    11.34  21.94
    
    
    
    18.20Outstanding at December 31, 2008
    




    
    925,746
    
    
    $
    11.34  21.94
    
    
    $
    18.20
    
    
    
    469,267Total UARs Outstanding
    
    

    Exercisable UARsWeightedAverageWeighted
    
    
    Remaining
    
    
    
    
    
    
    WeightedAverage
    
    
    Contractual
    
    
    
    
    
    
    AverageRange of Exercise Prices:
    
    Number
    
    
    Exercise Price
    
    
    Life (Years)
    
    
    Number
    
    
    Exercise Price$11.34  14.99
    
    
    81,641
    
    
    $
    11.34
    
    
    
    5.23
    
    
    
    53,668
    
    
    $
    11.3415.00  18.99
    
    
    492,443
    
    
    
    18.03
    
    
    
    8.33
    
    
    
    199,279
    
    
    
    17.4619.00  21.94
    
    
    351,662
    
    
    
    20.04
    
    
    
    7.75
    
    
    
    216,320
    
    
    
    20.26$11.34  21.94
    
    
    925,746
    
    
    $
    18.20
    
    
    
    7.84
    
    
    
    469,267
    
    
    $
    18.05
  (b) Executive
  (c) Non-management directors
  Deferred Trust Units
    
    OutstandingBalance, December 31, 2006
    
    
    Granted
    
    
    17,855Issued as a result of cash distributions
    
    
    425Balance, December 31, 2007
    
    
    18,280Granted
    
    
    33,058Issued as a result of cash distributions
    
    
    3,205Balance, December 31, 2008
    
    
    54,543
  PRECISION
DRILLING TRUST 73




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##### Table of Contents



NOTE 15. EMPLOYEE BENEFIT PLANS
  NOTE 16. COMMITMENTS
  2009
    
    $
    77,0392010
    
    
    68,5572011
    
    
    6,7632012
    
    
    1,6082013
    
    
    1,203
  2008
    
    $
    3,6362007
    
    
    3,8382006
    
    
    4,189
 NOTE 17. PER UNIT AMOUNTS
  (Stated in thousands)
    
    2008
    
    
    
    2007
    
    
    2006Net earnings  basic
    
    $
    302,730
    
    
    
    $
    345,776
    
    
    $
    579,589Impact of assumed conversion of convertible notes, net of tax
    
    
    164
    
    
    
    
    
    
    
    
    Net earnings  diluted
    
    $
    302,894
    
    
    
    $
    345,776
    
    
    $
    579,589
 (Stated in thousands)
    
    2008
    
    
    
    2007
    
    
    2006Weighted average units outstanding  basic
    
    
    126,507
    
    
    
    
    125,758
    
    
    
    125,545Effect of stock options and other equity compensation plans
    
    
    33
    
    
    
    
    2
    
    
    
    Effect of convertible notes
    
    
    372
    
    
    
    
    
    
    
    
    Weighted average units outstanding  diluted
    
    
    126,912
    
    
    
    
    125,760
    
    
    
    125,545
 NOTE 18. SIGNIFICANT CUSTOMERS
  74 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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##### Table of Contents



NOTE 19. BUSINESS ACQUISITIONS
     Grey Wolf
    
    
    RWS
    
    
    TotalNet assets at assigned values:Working capital
    
    $
    470,586
    (1)
    
    $
    19
    
    
    $
    470,605Property, plant and equipment
    
    
    1,869,875
    
    
    
    10,542
    
    
    
    1,880,417Intangible assets
    
    
    4,428
    
    
    
    1,128
    
    
    
    5,556Goodwill (no tax basis)
    
    
    553,335
    
    
    
    3,830
    
    
    
    557,165Long-term liabilities
    
    
    (23,308
    )
    
    
    
    
    
    
    (23,308
    )Long-term debt
    
    
    (319,115
    )
    
    
    
    
    
    
    (319,115
    )Future income taxes
    
    
    (553,682
    )
    
    
    
    
    
    
    (553,682
    )$
    2,002,119
    
    
    $
    15,519
    
    
    $
    2,017,638Consideration:Cash
    
    $
    1,113,034
    
    
    $
    15,519
    
    
    $
    1,128,553Trust units
    
    
    889,085
    
    
    
    
    
    
    
    889,085$
    2,002,119
    
    
    $
    15,519
    
    
    $
    2,017,638
 
 (1)
    
    Working capital includes cash of $360,161   Net assets acquired at assigned values:Working capital (1)
    
    $
    207Property, plant and equipment
    
    
    3,168Goodwill (no tax basis)
    
    
    13,922Long-term debt
    
    
    (614
    )Future income taxes
    
    
    (212
    )$
    16,471Consideration:Cash
    
    $
    16,471
 
 (1) Working capital includes cash of $43 PRECISION
DRILLING TRUST 75




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##### Table of Contents



NOTE 20. UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
  (a) Income taxes
  Reconciliation of unrecognized tax benefits
 Year ended December 31,
    
    2008
    
    
    
    2007Unrecognized tax benefits, beginning of year
    
    $
    44,407
    
    
    
    $
    40,047Additions:Prior years tax positions
    
    
    2,822
    
    
    
    
    5,770Assumed on acquisition of Grey Wolf, Inc.
    
    
    9,696
    
    
    
    
    Reductions:Prior years tax positions
    
    
    (362
    )
    
    
    
    (1,410
    )Unrecognized tax benefits, end of year
    
    $
    56,563
    
    
    
    $
    44,407
   (b) Equity settled unit based compensation
  (c) Cash settled unit based compensation
  (d) Redemption of Trust units




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##### Table of Contents



(e) Debt issuance costs
  (f) Goodwill
  (g) Business acquisitions
   Pro Forma (unaudited)
    
    2008
    
    
    
    2007Revenue
    
    $
    2,038,828
    
    
    
    $
    1,983,046Net earnings
    
    $
    289,892
    
    
    
    $
    437,239Earnings per unit:Basic
    
    $
    1.81
    
    
    
    $
    2.73Diluted
    
    $
    1.81
    
    
    
    $
    2.73
 (h) New accounting policies adopted
 Fair Value Measurements




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##### Table of Contents



The Fair Value Option for Financial Assets and
Liabilities  Including an amendment of FASB Statement No. 115.
 (i) Recently issued accounting pronouncements
 Non-controlling Interest in Consolidated Financial
Statements.
 Business Combinations.
 Disclosures about Derivative Instruments and Hedging
Activities.




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##### Table of Contents



Consolidated Statements of Earnings
 Years ended December 31,
    
    2008
    
    
    
    2007
    
    
    2006Earnings from continuing operations under Canadian GAAP
    
    $
    302,730
    
    
    
    $
    342,820
    
    
    $
    572,512Adjustments under U.S. GAAP:Equity-based compensation expense
    
    
    183
    
    
    
    
    35
    
    
    
    Earnings from continuing operations under U.S. GAAP
    
    
    302,913
    
    
    
    
    342,855
    
    
    
    572,512Earnings from discontinued operations under Canadian and
U.S. GAAP
    
    
    
    
    
    
    
    2,956
    
    
    
    7,077Net earnings and comprehensive income under U.S. GAAP
    
    $
    302,913
    
    
    
    $
    345,811
    
    
    $
    579,589Earnings from continuing operations per unit under U.S. GAAP:Basic
    
    $
    2.39
    
    
    
    $
    2.73
    
    
    $
    4.56Diluted
    
    $
    2.39
    
    
    
    $
    2.73
    
    
    $
    4.56Earnings per unit under U.S. GAAP:Basic
    
    $
    2.39
    
    
    
    $
    2.75
    
    
    $
    4.62Diluted
    
    $
    2.39
    
    
    
    $
    2.75
    
    
    $
    4.62Consolidated Statements of Retained Earnings (Deficit)Years ended December 31,
    
    2008
    
    
    
    2007
    
    
    2006Retained earnings (deficit) under U.S. GAAP, beginning
of year
    
    $
    (350,898
    )
    
    
    $
    (1,873,490
    )
    
    $
    (3,167,045
    )Net earnings under U.S. GAAP
    
    
    302,913
    
    
    
    
    345,811
    
    
    
    579,589Distributions declared
    
    
    (224,688
    )
    
    
    
    (276,667
    )
    
    
    (471,524
    )Change in redemption value of temporary equity
    
    
    1,333,475
    
    
    
    
    1,453,448
    
    
    
    1,185,490Retained earnings (deficit) under U.S. GAAP, end of year
    
    $
    1,060,802
    
    
    
    $
    (350,898
    )
    
    $
    (1,873,490
    )
 Consolidated Balance Sheets
 2008
    
    
    
    2007As at December 31,
    
    As reported
    
    
    U.S. GAAP
    
    
    
    As reported
    
    
    U.S. GAAPCurrent assets
    
    $
    685,229
    
    
    $
    685,229
    
    
    
    $
    271,823
    
    
    $
    271,823Income taxes recoverable
    
    
    58,055
    
    
    
    58,055
    
    
    
    
    
    
    
    
    Other long-term assets
    
    
    
    
    
    
    159,300
    
    
    
    
    
    
    
    
    Property, plant and equipment
    
    
    3,243,213
    
    
    
    3,243,213
    
    
    
    
    1,210,587
    
    
    
    1,210,587Intangibles
    
    
    5,676
    
    
    
    5,676
    
    
    
    
    318
    
    
    
    318Goodwill
    
    
    841,529
    
    
    
    904,558
    
    
    
    
    280,749
    
    
    
    343,778$
    4,833,702
    
    
    $
    5,056,031
    
    
    
    $
    1,763,477
    
    
    $
    1,826,506Current liabilities
    
    $
    339,900
    
    
    $
    349,780
    
    
    
    $
    131,449
    
    
    $
    140,117Long-term liabilities
    
    
    30,951
    
    
    
    30,951
    
    
    
    
    13,896
    
    
    
    13,896Long-term debt
    
    
    1,368,349
    
    
    
    1,527,649
    
    
    
    
    119,826
    
    
    
    119,826Future income taxes
    
    
    770,623
    
    
    
    713,918
    
    
    
    
    181,633
    
    
    
    137,226Other long-term liabilities
    
    
    
    
    
    
    47,605
    
    
    
    
    
    
    
    
    36,011Temporary equity
    
    
    
    
    
    
    1,309,967
    
    
    
    
    
    
    
    
    1,730,328Unitholders capital
    
    
    2,355,590
    
    
    
    
    
    
    
    
    1,442,476
    
    
    
    Contributed surplus
    
    
    998
    
    
    
    
    
    
    
    
    307
    
    
    
    Accumulated other comprehensive income
    
    
    15,359
    
    
    
    15,359
    
    
    
    
    
    
    
    
    Retained earnings (deficit)
    
    
    (48,068
    )
    
    
    1,060,802
    
    
    
    
    (126,110
    )
    
    
    (350,898
    )$
    4,833,702
    
    
    $
    5,056,031
    
    
    
    $
    1,763,477
    
    
    $
    1,826,506




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##### Table of Contents



NOTE 21. SEGMENTED INFORMATION
  Contract
    
    
    Completion andDrilling
    
    
    Production
    
    
    Corporate
    
    
    Inter-segment2008
    
    Services
    
    
    Services
    
    
    and Other
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    809,317
    
    
    $
    308,624
    
    
    $
    
    
    
    $
    (16,050
    )
    
    $
    1,101,891Segment profit (loss) (1)
    
    
    310,240
    
    
    
    86,104
    
    
    
    (41,596
    )
    
    
    
    
    
    
    354,748Depreciation and amortization
    
    
    57,076
    
    
    
    22,966
    
    
    
    3,787
    
    
    
    
    
    
    
    83,829Total assets
    
    
    4,289,517
    
    
    
    448,697
    
    
    
    95,488
    
    
    
    
    
    
    
    4,833,702Goodwill
    
    
    729,390
    
    
    
    112,139
    
    
    
    
    
    
    
    
    
    
    
    841,529Capital expenditures*
    
    
    202,863
    
    
    
    23,713
    
    
    
    3,003
    
    
    
    
    
    
    
    229,579
 *
    
    Excludes business acquisitions
 Contract
    
    
    Completion andDrilling
    
    
    Production
    
    
    Corporate
    
    
    Inter-segment2007
    
    Services
    
    
    Services
    
    
    and Other
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    694,340
    
    
    $
    327,471
    
    
    $
    
    
    
    $
    (12,610
    )
    
    $
    1,009,201Segment profit (loss) (1)
    
    
    284,754
    
    
    
    100,596
    
    
    
    (28,999
    )
    
    
    
    
    
    
    356,351Depreciation and amortization
    
    
    43,120
    
    
    
    31,421
    
    
    
    3,785
    
    
    
    
    
    
    
    78,326Total assets
    
    
    1,282,865
    
    
    
    457,587
    
    
    
    23,025
    
    
    
    
    
    
    
    1,763,477Goodwill
    
    
    172,440
    
    
    
    108,309
    
    
    
    
    
    
    
    
    
    
    
    280,749Capital expenditures
    
    
    159,004
    
    
    
    26,772
    
    
    
    1,230
    
    
    
    
    
    
    
    187,006
 Contract
    
    
    Completion andDrilling
    
    
    Production
    
    
    Corporate
    
    
    Inter-segment2006
    
    Services
    
    
    Services
    
    
    and Other
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    1,009,821
    
    
    $
    441,017
    
    
    $
    
    
    
    $
    (13,254
    )
    
    $
    1,437,584Segment profit (loss) (1)
    
    
    473,624
    
    
    
    163,119
    
    
    
    (41,464
    )
    
    
    
    
    
    
    595,279Depreciation and amortization
    
    
    38,573
    
    
    
    32,013
    
    
    
    2,648
    
    
    
    
    
    
    
    73,234Total assets
    
    
    1,198,284
    
    
    
    507,510
    
    
    
    55,392
    
    
    
    
    
    
    
    1,761,186Goodwill
    
    
    172,440
    
    
    
    108,309
    
    
    
    
    
    
    
    
    
    
    
    280,749Capital expenditures*
    
    
    220,397
    
    
    
    39,273
    
    
    
    3,360
    
    
    
    
    
    
    
    263,030
 *
    
 Excludes business acquisitions(1)
    
Segment profit (loss) is defined as revenue less operating, general and administrative,
depreciation and amortization and foreign exchange expenses. A reconciliation of segment profit
(loss) to earnings from continuing operations before income taxes is as follows:
 2008
    
    
    
    2007
    
    
    2006Total segment profit (loss)
    
    $
    354,748
    
    
    
    $
    356,351
    
    
    $
    595,279Add (deduct):Interest:Long-term debt
    
    
    (14,478
    )
    
    
    
    (7,767
    )
    
    
    (8,800
    )Other
    
    
    (151
    )
    
    
    
    (106
    )
    
    
    (171
    )Income
    
    
    455
    
    
    
    
    555
    
    
    
    942Other
    
    
    
    
    
    
    
    
    
    
    
    408Earnings from continuing operations before income taxes
    
    $
    340,574
    
    
    
    $
    349,033
    
    
    $
    587,658




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##### Table of Contents



Inter-segment2008
    
    Canada
    
    
    United States
    
    
    International
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    909,001
    
    
    $
    189,796
    
    
    $
    4,686
    
    
    $
    (1,592
    )
    
    $
    1,101,891Total assets
    
    
    1,741,462
    
    
    
    3,033,378
    
    
    
    58,862
    
    
    
    
    
    
    
    4,833,702Inter-segment2007
    
    Canada
    
    
    United States
    
    
    International
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    958,937
    
    
    $
    51,082
    
    
    $
    
    
    
    $
    (818
    )
    
    $
    1,009,201Total assets
    
    
    1,651,920
    
    
    
    108,683
    
    
    
    2,874
    
    
    
    
    
    
    
    1,763,477Inter-segment2006
    
    Canada
    
    
    United States
    
    
    International
    
    
    Eliminations
    
    
    TotalRevenue
    
    $
    1,432,062
    
    
    $
    5,645
    
    
    $
    
    
    
    $
    (123
    )
    
    $
    1,437,584Total assets
    
    
    1,752,403
    
    
    
    8,783
    
    
    
    
    
    
    
    
    
    
    
    1,761,186
 NOTE 22. FINANCIAL INSTRUMENTS
 (a) Fair value
  (b) Credit risk
   (c) Interest rate risk




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##### Table of Contents



(d) Foreign currency risk
   Canadian
    
    
    U.S.Operations
    
    
    OperationsCash
    
    $
    100
    
    
    $
    65,619Accounts receivable
    
    
    49
    
    
    
    262,461Accounts payable and accrued liabilities
    
    
    (15,861
    )
    
    
    (112,983
    )Long-term liabilities, excluding long-term incentive plans
    
    
    
    
    
    
    (19,158
    )Long-term debt, including current portion
    
    
    (918,591
    )
    
    
    (262,301
    )Net foreign currency exposure
    
    $
    (934,303
    )
    
    $
    (66,362
    )Impact of $ 0.01 change in the U.S. dollar to Canadian dollar
exchange rate on net earnings
    
    $
    9,343
    
    
    $
    Impact of $ 0.01 change in the U.S. dollar to Canadian dollar
exchange rate on comprehensive income
    
    $
    
    
    
    $
    664
 (e) Liquidity risk
  (Stated in thousands)
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    TotalLong-term debt (1)
    
    $
    48,953
    
    
    $
    69,495
    
    
    $
    69,495
    
    
    $
    90,037
    
    
    $
    382,896
    
    
    $
    594,512
    
    
    $
    1,255,388Interest on long-term debt (2)
    
    
    114,953
    
    
    
    110,455
    
    
    
    105,075
    
    
    
    99,288
    
    
    
    92,673
    
    
    
    59,015
    
    
    
    581,459Commitments
    
    
    77,039
    
    
    
    68,557
    
    
    
    6,763
    
    
    
    1,608
    
    
    
    1,203
    
    
    
    5,132
    
    
    
    160,302Total
    
    $
    240,945
    
    
    $
    248,507
    
    
    $
    181,333
    
    
    $
    190,933
    
    
    $
    476,772
    
    
    $
    658,659
    
    
    $
    1,997,149
 (1)
    
    Excludes unsecured convertible notes as these debt instruments contain a provision (see Note
10) whereby Precision is required to provide holders of the notes with an offer to purchase all or
a portion of their notes, including accrued but unpaid interest to the date of purchase, which
Precision expects to repay in 2009 with proceeds received from an equity offering (see Note 28) and
existing credit facilities. Upon completion of this transaction, the Unsecured Facility would
increase to approximately $ 287.8 million (US$ 235 million) with repayments in 2016. Interest on the
unsecured convertible notes to the date of purchase is approximately $ 2.8 million (US$ 2.3 million).
Amounts are after giving effect to the February 4, 2009 re-allocation between the Term Loan A and
Term Loan B facilities (see Note 10).(2)
    
    Interest has been calculated based upon debt balances, interest rates and foreign exchange
rates in effect as at December 31, 2008.
 NOTE 23. CAPITAL MANAGEMENT
  2008
    
    
    
    2007Long-term debt
    
    $
    1,368,349
    
    
    
    $
    119,826Unitholders equity
    
    
    2,323,879
    
    
    
    
    1,316,673Total capitalization
    
    $
    3,692,228
    
    
    
    $
    1,436,499Long-term debt to long-term debt plus equity ratio
    
    
    0.37
    
    
    
    
    0.08
 82     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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##### Table of Contents



NOTE 24. SUPPLEMENTAL INFORMATION
 2008
    
    
    
    2007
    
    
    2006Interest paid
    
    $
    13,394
    
    
    
    $
    7,870
    
    
    $
    8,929Income taxes paid
    
    $
    764
    
    
    
    $
    4,307
    
    
    $
    207,160Components of change in non-cash working capital balances:Accounts receivable
    
    $
    (114,444
    )
    
    
    $
    98,055
    
    
    $
    148,046Inventory
    
    
    603
    
    
    
    
    (182
    )
    
    
    (2,038
    )Accounts payable and accrued liabilities
    
    
    56,299
    
    
    
    
    (49,338
    )
    
    
    (4,736
    )Income taxes
    
    
    (4,446
    )
    
    
    
    2,749
    
    
    
    (172,634
    )$
    (61,988
    )
    
    
    $
    51,284
    
    
    $
    (31,362
    )
  2008
    
    
    
    2007Trade
    
    $
    387,004
    
    
    
    $
    144,468Accrued trade
    
    
    178,946
    
    
    
    
    96,869Prepaids and other
    
    
    35,803
    
    
    
    
    15,279$
    601,753
    
    
    
    $
    256,616
  2008
    
    
    
    2007Accounts payable
    
    $
    136,054
    
    
    
    $
    36,742Accrued liabilities:Payroll
    
    
    78,143
    
    
    
    
    28,527Other
    
    
    55,925
    
    
    
    
    15,595$
    270,122
    
    
    
    $
    80,864
 PRECISION DRILLING TRUST     83




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##### Table of Contents



NOTE 25. CONTINGENCIES AND COMMITMENTS
     NOTE 26. GUARANTEES
  84     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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##### Table of Contents



NOTE 27. DISCONTINUED OPERATIONS
  2007
  2006
     2008
    
    
    
    2007
    
    
    2006Gain on disposal:Gain on disposal of United Diamond
    
    $
    
    
    
    
    $
    
    
    
    $
    2,070Gain on disposal of Energy services and International contract drilling
    
    
    
    
    
    
    
    2,956
    
    
    
    962Gain on disposal of CEDA
    
    
    
    
    
    
    
    
    
    
    
    4,045
    
    
    
    
    2,956
    
    
    
    7,077Net earnings of discontinued operations
    
    $
    
    
    
    
    $
    2,956
    
    
    $
    7,077
  2008
    
    
    
    2007
    
    
    2006Net earnings of discontinued operations
    
    $
    
    
    
    
    $
    2,956
    
    
    $
    7,077Items not affecting cash:Gain on disposal of discontinued operations
    
    
    
    
    
    
    
    (2,956
    )
    
    
    (7,077
    )Funds provided by discontinued operations
    
    $
    
    
    
    
    $
    
    
    
    $
    
 NOTE 28. SUBSEQUENT EVENTS
   PRECISION DRILLING TRUST     85




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##### Table of Contents



UNIT TRADING SUMMARY  2008
 The Toronto Stock Exchange (TSX)
 The New York Stock Exchange (NYSE)
 
 86     SUPPLEMENTAL INFORMATION




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##### Table of Contents



CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (DEFICIT)
 Years ended December 31,(Stated in millions of Canadian dollars,except per unit/share amounts)
    
    2008
    
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Revenue
    
    $
    1,101.9
    
    
    
    $
    1,009.2
    
    
    $
    1,437.6
    
    
    $
    1,269.2
    
    
    $
    1,028.5Expenses:Operating
    
    
    598.2
    
    
    
    
    516.1
    
    
    
    688.2
    
    
    
    641.8
    
    
    
    566.3General and administrative
    
    
    67.2
    
    
    
    
    56.0
    
    
    
    81.2
    
    
    
    76.4
    
    
    
    64.2Reorganization costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17.5
    
    
    
    EBITDA
    
    
    436.5
    
    
    
    
    437.1
    
    
    
    668.2
    
    
    
    533.5
    
    
    
    398.0Depreciation and amortization
    
    
    83.8
    
    
    
    
    78.3
    
    
    
    73.2
    
    
    
    71.6
    
    
    
    74.8Foreign exchange
    
    
    (2.0
    )
    
    
    
    2.4
    
    
    
    (0.3
    )
    
    
    (3.5
    )
    
    
    (8.1
    )Operating earnings
    
    
    354.7
    
    
    
    
    356.4
    
    
    
    595.3
    
    
    
    465.4
    
    
    
    331.3Interest, net
    
    
    14.1
    
    
    
    
    7.4
    
    
    
    8.0
    
    
    
    29.3
    
    
    
    46.3Premium on redemption of bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71.9
    
    
    
    Loss on disposal of short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71.0
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    (0.4
    )
    
    
    
    
    
    
    (4.9
    )Earnings from continuing operations
before income taxes
    
    
    340.6
    
    
    
    
    349.0
    
    
    
    587.7
    
    
    
    293.2
    
    
    
    289.9Income taxes
    
    
    37.9
    
    
    
    
    6.2
    
    
    
    15.2
    
    
    
    72.4
    
    
    
    101.8Earnings from continuing operations
    
    
    302.7
    
    
    
    
    342.8
    
    
    
    572.5
    
    
    
    220.8
    
    
    
    188.1Discontinued operations, net of tax
    
    
    
    
    
    
    
    3.0
    
    
    
    7.1
    
    
    
    1,409.8
    
    
    
    59.3Net earnings
    
    
    302.7
    
    
    
    
    345.8
    
    
    
    579.6
    
    
    
    1,630.6
    
    
    
    247.4Retained earnings (deficit),
beginning of year
    
    
    (126.1
    )
    
    
    
    (195.2
    )
    
    
    (303.3
    )
    
    
    1,041.7
    
    
    
    794.3Adjustment on cash purchase of
employee stock options, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42.1
    )
    
    
    Reclassification from contributed
surplus on cash buy-out of
employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23.2
    
    
    
    Distribution of disposal proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,851.8
    )
    
    
    Repurchase of common shares of
dissenting shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34.4
    )
    
    
    Distributions declared
    
    
    (224.7
    )
    
    
    
    (276.7
    )
    
    
    (471.5
    )
    
    
    (70.5
    )
    
    
    Retained earnings (deficit), end of year
    
    $
    (48.1
    )
    
    
    $
    (126.1
    )
    
    $
    (195.2
    )
    
    $
    (303.3
    )
    
    $
    1,041.7Earnings per unit/share from
continuing operations:Basic
    
    $
    2.39
    
    
    
    $
    2.73
    
    
    $
    4.56
    
    
    $
    1.79
    
    
    $
    1.63Diluted
    
    $
    2.39
    
    
    
    $
    2.73
    
    
    $
    4.56
    
    
    $
    1.76
    
    
    $
    1.61Earnings per unit/share:Basic
    
    $
    2.39
    
    
    
    $
    2.75
    
    
    $
    4.62
    
    
    $
    13.22
    
    
    $
    2.14Diluted
    
    $
    2.39
    
    
    
    $
    2.75
    
    
    $
    4.62
    
    
    $
    13.00
    
    
    $
    2.11
 PRECISION DRILLING TRUST     87




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##### Table of Contents



ADDITIONAL SELECTED FINANCIAL INFORMATION
 Years ended December 31,(Stated in millions of Canadian dollars,except per unit/share amounts)
    
    2008
    
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Return on sales  % (1)
    
    
    27.5
    
    
    
    
    34.0
    
    
    
    39.8
    
    
    
    17.4
    
    
    
    18.3Return on assets  % (2)
    
    
    12.4
    
    
    
    
    19.9
    
    
    
    33.6
    
    
    
    43.3
    
    
    
    7.3Return on equity  % (3)
    
    
    19.6
    
    
    
    
    27.0
    
    
    
    49.4
    
    
    
    66.1
    
    
    
    12.3Working capital
    
    $
    345.3
    
    
    
    $
    140.4
    
    
    $
    166.5
    
    
    $
    152.8
    
    
    $
    557.3Current ratio
    
    
    2.0
    
    
    
    
    2.1
    
    
    
    1.81
    
    
    
    1.43
    
    
    
    2.47PP&E and intangibles
    
    $
    3,248.9
    
    
    
    $
    1,210.9
    
    
    $
    1,108.0
    
    
    $
    944.4
    
    
    $
    898.1Total assets
    
    $
    4,833.7
    
    
    
    $
    1,763.5
    
    
    $
    1,761.2
    
    
    $
    1,718.9
    
    
    $
    3,852.0Long-term debt
    
    $
    1,368.3
    
    
    
    $
    119.8
    
    
    $
    140.9
    
    
    $
    96.8
    
    
    $
    718.9Unitholders equity
    
    $
    2,323.9
    
    
    
    $
    1,316.7
    
    
    $
    1,217.1
    
    
    $
    1,074.6
    
    
    $
    2,321.7Long-term debt to long-term debt
plus equity
    
    
    0.37
    
    
    
    
    0.08
    
    
    
    0.10
    
    
    
    0.08
    
    
    
    0.24Net capital expenditures from
continuing operations excluding
business acquisitions
    
    $
    219.1
    
    
    
    $
    181.2
    
    
    $
    233.7
    
    
    $
    140.1
    
    
    $
    113.9EBITDA
    
    $
    436.5
    
    
    
    $
    437.1
    
    
    $
    668.2
    
    
    $
    533.5
    
    
    $
    398.0EBITDA  % of revenue
    
    
    39.6
    
    
    
    
    43.3
    
    
    
    46.5
    
    
    
    42.0
    
    
    
    38.7Operating earnings
    
    $
    354.7
    
    
    
    $
    356.4
    
    
    $
    595.3
    
    
    $
    465.4
    
    
    $
    331.3Operating earnings  % of revenue
    
    
    32.2
    
    
    
    
    35.3
    
    
    
    41.4
    
    
    
    36.7
    
    
    
    32.2Cash flow from continuing operations
    
    $
    343.9
    
    
    
    $
    484.1
    
    
    $
    609.7
    
    
    $
    206.0
    
    
    $
    286.4Cash flow from continuing operations
per unit/share
Basic
    
    $
    2.72
    
    
    
    $
    3.85
    
    
    $
    4.86
    
    
    $
    1.67
    
    
    $
    2.48Diluted
    
    $
    2.71
    
    
    
    $
    3.85
    
    
    $
    4.86
    
    
    $
    1.64
    
    
    $
    2.44Book value per unit/share (4)
    
    $
    14.51
    
    
    
    $
    10.47
    
    
    $
    9.68
    
    
    $
    8.57
    
    
    $
    19.10Price earnings ratio (5)
    
    
    4.21
    
    
    
    
    5.53
    
    
    
    5.84
    
    
    
    2.90
    
    
    
    17.6Basic weighted average units/shares
outstanding (000s)
    
    
    126,507
    
    
    
    
    125,758
    
    
    
    125,545
    
    
    
    123,304
    
    
    
    115,654
 (1)
    
    Return on sales was calculated by dividing earnings from
continuing operations by total revenues.(2)
    
    Return on assets
was calculated by dividing net earnings by quarter average
total assets.(3)
    
    Return on equity was calculated by dividing
net earnings by quarter average total unitholders equity.(4)
    
    Book value per unit/share was calculated by dividing
unitholders equity by units/shares outstanding.(5)
    
    Year end
closing price divided by basic earnings per unit/share.
 88     SUPPLEMENTAL INFORMATION