---



##### 



Cautionary Statement Regarding Forward-looking Information and
Statements




---



##### 



SELECT FINANCIAL AND OPERATING INFORMATION  (Stated in thousands of Canadian dollars, except per share amounts)
 % Increase
    
    
    
    
    
    
    
    % Increase
    
    
    
    
    
    
    % IncreaseYears ended December 31,
    
    2010
    
    
    (Decrease)
    
    
    
    2009
    
    
    (Decrease)
    
    
    2008
    
    
    (Decrease)Revenue
    
    $
    1,429,653
    
    
    
    19.4
    
    
    
    $
    1,197,446
    
    
    
    8.7
    
    
    $
    1,101,891
    
    
    
    9.2EBITDA (1)
    
    
    435,383
    
    
    
    7.0
    
    
    
    
    407,001
    
    
    
    (6.8
    )
    
    
    436,536
    
    
    
    (0.1
    )Net earnings
    
    
    62,091
    
    
    
    (61.6
    )
    
    
    
    161,703
    
    
    
    (46.6
    )
    
    
    302,730
    
    
    
    (12.4
    )Cash provided by operations
    
    
    305,395
    
    
    
    (39.5
    )
    
    
    
    504,729
    
    
    
    46.8
    
    
    
    343,910
    
    
    
    (29.0
    )Capital spending: (2)Upgrade capital expenditures
    
    
    104,722
    
    
    
    245.6
    
    
    
    
    30,303
    
    
    
    (49.0
    )
    
    
    59,454
    
    
    
    29.3Expansion capital expenditures
    
    
    71,179
    
    
    
    (56.4
    )
    
    
    
    163,132
    
    
    
    (4.1
    )
    
    
    170,125
    
    
    
    20.7Proceeds on sale of assets
    
    
    (12,256
    )
    
    
    (23.3
    )
    
    
    
    (15,978
    )
    
    
    53.0
    
    
    
    (10,440
    )
    
    
    81.0Net capital spending
    
    
    163,645
    
    
    
    (7.8
    )
    
    
    
    177,457
    
    
    
    (19.0
    )
    
    
    219,139
    
    
    
    20.9Earnings per share:Basic
    
    
    0.23
    
    
    
    (64.6
    )
    
    
    
    0.65
    
    
    
    (70.9
    )
    
    
    2.23
    
    
    
    (13.2
    )Diluted
    
    $
    0.22
    
    
    
    (65.1
    )
    
    
    $
    0.63
    
    
    
    (71.7
    )
    
    $
    2.23
    
    
    
    (13.2
    )Drilling rig utilization days:Canada
    
    
    31,176
    
    
    
    46.9
    
    
    
    
    21,229
    
    
    
    (38.4
    )
    
    
    34,488
    
    
    
    (0.2
    )United States
    
    
    32,450
    
    
    
    43.1
    
    
    
    
    22,672
    
    
    
    183.2
    
    
    
    8,006
    
    
    
    281.6International
    
    
    602
    
    
    
    (15.2
    )
    
    
    
    710
    
    
    
    346.5
    
    
    
    159
    
    
    
    n/mService rig operating hours: (3)Canada
    
    
    294,126
    
    
    
    33.9
    
    
    
    
    219,649
    
    
    
    (39.2
    )
    
    
    361,367
    
    
    
    (4.9
    )
 
 (1)
    
    EBITDA is non-GAAP measure and is defined as earnings before interest, taxes, loss on asset
decommissioning, depreciation and amortization and foreign exchange.
See page 45.(2)
    
    Excludes acquisitions.(3)
    
    Now includes snubbing services. Comparative numbers
have been restated to reflect this change.n/m 
calculation not meaningful. Financial Position and Ratios  (Stated in thousands of Canadian dollars, except ratios)
 Years ended December 31,
    
    2010
    
    
    
    2009
    
    
    2008Working capital
    
    $
    460,149
    
    
    
    $
    320,860
    
    
    $
    345,329Working capital ratio
    
    
    3.1
    
    
    
    
    3.5
    
    
    
    2.0Long-term debt (1)
    
    $
    804,494
    
    
    
    $
    748,725
    
    
    $
    1,368,349Total long-term financial liabilities
    
    $
    834,813
    
    
    
    $
    775,418
    
    
    $
    1,399,300Total assets
    
    $
    4,296,788
    
    
    
    $
    4,191,713
    
    
    $
    4,833,702Enterprise value (2)
    
    $
    2,990,937
    
    
    
    $
    2,536,477
    
    
    $
    2,636,170Long-term debt to long-term debt plus equity
(1)
    
    
    0.24
    
    
    
    
    0.22
    
    
    
    0.37Long-term debt to cash provided by operations
(1)
    
    
    2.63
    
    
    
    
    1.48
    
    
    
    3.98Long-term debt to enterprise value (1)
    
    
    0.27
    
    
    
    
    0.30
    
    
    
    0.52
 
 (1)
    
    Excludes current portion of long-term debt which is included in working capital and is net of
unamortized debt issue costs.(2)
    
    Share price as listed on the Toronto Stock Exchange as at December 31 multiplied by the number
of shares outstanding plus long-term debt minus working capital. See page 22.




---



##### 



2010 OBJECTIVES
  1.
    
    Continue to deliver the High Performance, High Value level of services that customers require
to drill the technically challenging wells of todays unconventional resource play
exploitation;2.
    
    Focus on our North American organic growth program;3.
    
    Strengthen the balance sheet with improved financial liquidity; and4.
    
    Position the Corporation for future growth.
  1.
    
    Upgraded 12 drilling rigs from Tier 2 or Tier 3 to Tier 1 and increased our capacity to
provide drilling rigs capable of drilling horizontal or highly deviated wells by adding 19 top
drives. Precisions engineering group works with the customer in design modification to fit
their complex drilling needs and requirements.2.
    
    Undertook our 2010 new build rig program which included nine rigs, all of which are under
long-term contracts. Six of those rigs are complete and working and the remaining three are
projected to be completed and working by the end of the second quarter of 2011. Precisions
2011 new build rig program currently stands at six rigs, all of which are contracted and
expected to be completed and working by the end of 2011. Total capital spending for 2010 was
$176 million of which $71 million related to expansion initiatives. For 2011, the Corporation
currently estimates $444 million in capital expenditures, including $193 million of expansion
capital.3.
    
    Refinanced its long-term debt in the fourth quarter of 2010 with the issuance of US$650
million of senior unsecured notes due in 2020. These unsecured notes bear interest at 6.625%
per annum. The net proceeds from the notes offering were used to repay, in full, the
outstanding indebtedness under the Corporations then existing term loan A and term loan B
credit facilities. In conjunction with the closing of the notes offering, Precision terminated
its then existing senior secured credit facilities and entered into a new US$550 million
senior secured revolving credit facility expiring in 2013. Subsequent to year end Precision
repaid the 10% senior unsecured notes (10% Senior Notes) and issued $200 million of Canadian
dollar senior unsecured notes bearing interest at a rate of 6.5% per annum which will result
in annual interest rate savings, removal of restrictive covenants and improved financial
flexibility. An improved balance sheet increases financial flexibility and ultimately provides
the financial liquidity to be able to continue to seize opportunities to grow the
Corporation. Precision plans on pursuing both organic growth and acquisition opportunities in the
North American drilling, directional drilling and international drilling arena during 2011.4.
    
    Converted from a open-ended income trust to a growth-oriented corporation for reasons which
included:
 
    
    A belief that a corporate structure was important for future attraction and retention of
worldwide investors;
    
    A corporate structure removed the restriction on non-resident ownership;
    
    On October 31, 2006, the Canadian Minister of Finance announced the Specified Investment
Flow Through Trust (SIFT) income and distribution tax which effectively eliminated the
benefits of Precisions income trust structure by introducing additional income taxes to be
imposed on trusts (generally) for taxation years commencing January 1, 2011; and
    
    The conversion removed the growth limitations imposed by the SIFT legislation.




---



##### 



VISION AND STRATEGY




---



##### 



OUTLOOK




---



##### 



ABOUT PRECISION




---



##### 



FUNDAMENTALS OF THE ENERGY SERVICES INDUSTRY
    Global markets




---



##### 








---



##### 



North American markets




---



##### 



Economic drivers




---



##### 



Precision Drilling Corporation 2010 Annual Report      13




---



##### 



Drilling rig activity in Canada and the United States
  
 
  OPERATING CAPABILITIES
  14     Managements Discussion and Analysis




---



##### 



High Performance Drilling Rigs
     Large Diversified Rig Fleets
    Inventory of Ancillary Equipment
   Precision Drilling Corporation 2010 Annual Report       15




---



##### 



Safety, Environmental and Employee Wellness Programs
  Well-maintained Equipment
   
  Employees
  Information Systems
  16      Managements Discussion and Analysis




---



##### 



KEY PERFORMANCE DRIVERS
  Safety Management:
  Environmental Management:
   
    
    Heat recovery and distribution systems
    
    Power generation and distribution
    
    Fuel management
    
    Fuel type
    
    Recycling of used materials
    
    Use of recycled materials
    
    Efficient equipment designs
    
    Spill containment
 Operating Efficiency
   
    
    Mechanical downtime which is minimized 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.
 Precision Drilling Corporation 2010 Annual Report      17




---



##### 



Customer Demand
  Workforce
  Financial Performance
   
    
    Safety performance  total recordable incident frequency per 200,000 man-hours:
  
    
    Operational performance  rig down time for repair as measured by time not
billed to customer:
  
    
    Key field employee retention  senior field employee
retention rates:
  
    
    Financial performance  return on capital employed calculated as a percentage of operating
earnings divided by total assets less current liabilities:
  
    
    Financial performance  share value performance for year against industry peer group,
including dividends or distributions:
  
    
    Financial performance  operating earnings
achieved:
  18      Managements Discussion and Analysis




---



##### 



CAPITAL AND LIQUIDITY MANAGEMENT
        Secured Revolver Facility
  Precision Drilling Corporation 2010 Annual Report      19




---



##### 




    
    the Secured Revolving Facility provides senior secured financing of up to US$550 million, with a
provision for an increase in the facility of up to an additional US$100 million. The Secured
Revolver Facility has a term of three years maturing on November 17, 2013, with an option on
Precisions part to request that the lenders extend, at their discretion, the facility to a new
maturity date not to exceed three years from the date of the extension request;
    
    a maximum consolidated senior debt to EBITDA ratio of 2.5 to 1.0 for the most recent four
consecutive fiscal quarters;
    
    a maximum consolidated total debt to EBITDA ratio of 3.5 to 1.0 for the most recent four
consecutive fiscal quarters;
    
    a minimum interest coverage ratio of 2.75 to 1.0 for the most recent four consecutive fiscal
quarters; and
    
    the Secured Revolver Facility is secured by liens on substantially all of the present and future
assets of Precision and the present and future assets of Precisions material U.S. and Canadian
subsidiaries (including subsidiaries that Precision designates as material). The Secured Revolver
Facility contains representations and warranties, covenants and events of default customary for
transactions of this nature, including financial ratio covenants discussed above that are tested on
a quarterly basis.
  6.625% Senior Unsecured Notes
      20       Managements Discussion and Analysis




---



##### 



10% Senior Unsecured Notes
   6.50% Senior Notes
     General
   Precision Drilling Corporation 2010 Annual Report      21




---



##### 



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
    
    $
    821,490
    
    
    $
    
    
    
    $
    
    
    
    $
    58,333
    
    
    $
    763,157Interest on long-term debt
    
    
    516,150
    
    
    
    60,330
    
    
    
    120,660
    
    
    
    116,771
    
    
    
    218,389Rig construction
    
    
    16,480
    
    
    
    16,480
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    78,240
    
    
    
    13,187
    
    
    
    19,370
    
    
    
    15,267
    
    
    
    30,416Contractual incentive plans (1)
    
    
    34,258
    
    
    
    10,210
    
    
    
    24,048
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    1,466,618
    
    
    $
    100,207
    
    
    $
    164,078
    
    
    $
    190,371
    
    
    $
    1,011,962
 
 (1)
    
    Includes amounts not yet accrued at December 31, 2010 but payable at the end of the contract
term. Share based compensation amounts disclosed at year-end share price. Precision has multiple
long-term incentive plans (LTIP) which compensate officers and key employees through cash
payments at the end of a stated term. Outstanding share data
 March 15,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,2011
    
    
    2010
    
    
    2009
    
    
    2008Shares
    
    
    275,733,253
    
    
    
    275,686,676
    
    
    
    275,516,778
    
    
    
    160,042,065Exchangeable LP units
    
    
    
    
    
    
    
    
    
    
    118,820
    
    
    
    151,583Total Shares outstanding
    
    
    275,733,253
    
    
    
    275,686,676
    
    
    
    275,635,598
    
    
    
    160,193,648Deferred shares outstanding
    
    
    393,717
    
    
    
    393,717
    
    
    
    290,732
    
    
    
    54,543Warrants outstanding
    
    
    15,000,000
    
    
    
    15,000,000
    
    
    
    15,000,000
    
    
    
    Share options outstanding
    
    
    5,595,912
    
    
    
    3,723,123
    
    
    
    1,787,700
    
    
    
    
  (Stated in thousands of Canadian dollars except per share amounts)
    
    2010
    
    
    
    2009
    
    
    2008Shares outstanding
    
    
    275,686,676
    
    
    
    
    275,635,598
    
    
    
    160,193,648Year-end share price (1)
    
    $
    9.60
    
    
    
    $
    7.65
    
    
    $
    10.07Shares at market
    
    $
    2,646,592
    
    
    
    $
    2,108,612
    
    
    $
    1,613,150Long-term debt
    
    
    804,494
    
    
    
    
    748,725
    
    
    
    1,368,349Less: Working capital
    
    
    (460,149
    )
    
    
    
    (320,860
    )
    
    
    (345,329
    )Enterprise value
    
    $
    2,990,937
    
    
    
    $
    2,536,477
    
    
    $
    2,636,170
 
 (1)
    
    As per the Toronto Stock Exchange.




---



##### 




    
    202 land drilling rigs in Canada;
    
    150 land drilling rigs in the United
States;
    
    two land drilling rigs in
Mexico;
    
    one land drilling rig in
South America;
    
    82 drilling and base camps;
    
    engineering, manufacturing and repair services primarily for Precisions operations; and
    
    centralized procurement, inventory and distribution of consumable supplies primarily for
Precisions Canadian, United States and Mexico operations.
  
    
    200 well completion and workover service rigs;
    
    20 snubbing units;
    
    approximately 11,050 oilfield rental items including well control equipment, surface equipment,
specialty tubulars and wellsite accommodation units; and
    
    77 wastewater treatment and three potable water production units.




---



##### 



CONTRACT DRILLING SERVICES




---



##### 



Horsepower
    
    < 1,000
    
    
    1,000-1,500
    
    
    >1,500
    
    
    TotalTier 1
    
    
    61
    
    
    
    47
    
    
    
    12
    
    
    
    120Tier 2
    
    
    66
    
    
    
    37
    
    
    
    23
    
    
    
    126Tier 3
    
    
    81
    
    
    
    22
    
    
    
    6
    
    
    
    109Total
    
    
    208
    
    
    
    106
    
    
    
    41
    
    
    
    355
 Geographic location
    
    Canada
    
    
    U.S.
    
    
    International
    
    
    TotalTier 1
    
    
    66
    
    
    
    54
    
    
    
    
    
    
    
    120Tier 2
    
    
    65
    
    
    
    58
    
    
    
    3
    
    
    
    126Tier 3
    
    
    71
    
    
    
    38
    
    
    
    
    
    
    
    109Total
    
    
    202
    
    
    
    150
    
    
    
    3
    
    
    
    355
 COMPLETION AND PRODUCTION SERVICES
    Type of Service Rig
    
    Horsepower
    
    
    2010
    
    
    
    2009
    
    
    2008
    
    
    2007Singles:Mobile
    
    
    150-400
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    5Freestanding mobile
    
    
    150-400
    
    
    
    94
    
    
    
    
    94
    
    
    
    97
    
    
    
    94Doubles:Mobile
    
    
    250-550
    
    
    
    25
    
    
    
    
    28
    
    
    
    42
    
    
    
    43Freestanding mobile
    
    
    200-550
    
    
    
    35
    
    
    
    
    30
    
    
    
    23
    
    
    
    9Skid
    
    
    300-860
    
    
    
    28
    
    
    
    
    30
    
    
    
    48
    
    
    
    55Slants:Freestanding
    
    
    250-400
    
    
    
    18
    


    
    
    18
    
    
    
    17
    
    
    
    17Total Service Rigs
    
    
    
    
    
    
    200
    
    
    
    
    200
    
    
    
    229
    
    
    
    223Snubbing Units
    
    
    
    
    
    
    20
    
    
    
    
    20
    
    
    
    29
    
    
    
    27Total Service Rigs and Snubbing Units
    
    
    
    
    
    
    220
    
    
    
    
    220
    
    
    
    258
    
    
    
    250




---



##### 



CONSOLIDATED OVERVIEW
 Summary of Consolidated Statements of Earnings  (Stated in thousands of Canadian dollars)
 Years ended December 31,
    
    2010
    
    
    
    2009
    
    
    2008Revenue:Contract Drilling Services
    
    $
    1,212,656
    
    
    
    $
    1,030,852
    
    
    $
    809,317Completion and Production Services
    
    
    227,835
    
    
    
    
    176,422
    
    
    
    308,624Inter-segment elimination
    
    
    (10,838
    )
    
    
    
    (9,828
    )
    
    
    (16,050
    )1,429,653
    
    
    
    
    1,197,446
    
    
    
    1,101,891EBITDA: (1)Contract Drilling Services
    
    
    416,638
    
    
    
    
    397,467
    
    
    
    359,137Completion and Production Services
    
    
    59,158
    
    
    
    
    42,499
    
    
    
    109,054Corporate and Other
    
    
    (40,413
    )
    
    
    
    (32,965
    )
    
    
    (31,655
    )435,383
    
    
    
    
    407,001
    
    
    
    436,536Depreciation and amortization
    
    
    182,719
    
    
    
    
    138,000
    
    
    
    83,829Loss on asset decommissioning
    
    
    
    
    
    
    
    82,173
    
    
    
    Operating earnings (1)
    
    
    252,664
    
    
    
    
    186,828
    
    
    
    352,707Foreign exchange gain
    
    
    (12,712
    )
    
    
    
    (122,846
    )
    
    
    (2,041
    )Finance charges
    
    
    211,327
    
    
    
    
    147,401
    
    
    
    14,174Earnings before income taxes
    
    
    54,049
    
    
    
    
    162,273
    
    
    
    340,574Income taxes
    
    
    (8,042
    )
    
    
    
    570
    
    
    
    37,844Net earnings
    
    $
    62,091
    
    
    
    $
    161,703
    
    
    $
    302,730
 
 (1)
    
    Non-GAAP measure. See page 45.




---



##### 



Quarterly Financial Summary  (Stated in thousands of Canadian dollars, except per diluted share amounts)
 Year ended December 31, 2010
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    YearRevenue
    
    $
    373,136
    
    
    $
    261,828
    
    
    $
    359,152
    
    
    $
    435,537
    
    
    $
    1,429,653EBIDTA (1)
    
    
    118,403
    
    
    
    58,994
    
    
    
    112,597
    
    
    
    145,389
    
    
    
    435,383Net earnings
    
    
    62,017
    
    
    
    (66,547
    )
    
    
    61,078
    
    
    
    5,543
    
    
    
    62,091Per diluted share
    
    
    0.22
    
    
    
    (0.24
    )
    
    
    0.21
    
    
    
    0.02
    
    
    
    0.22Cash provided by operations
    
    
    20,624
    
    
    
    142,004
    
    
    
    67,575
    
    
    
    75,192
    
    
    
    305,395Distributions to unitholders  declared
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Year ended December 31, 2009
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    YearRevenue
    
    $
    448,445
    
    
    $
    209,597
    
    
    $
    253,337
    
    
    $
    286,067
    
    
    $
    1,197,446EBIDTA (1)
    
    
    169,387
    
    
    
    59,260
    
    
    
    85,739
    
    
    
    92,615
    
    
    
    407,001Net earnings
    
    
    57,417
    
    
    
    57,475
    
    
    
    71,696
    
    
    
    (24,885
    )
    
    
    161,703Per diluted share
    
    
    0.28
    
    
    
    0.22
    
    
    
    0.25
    
    
    
    (0.09
    )
    
    
    0.63Cash provided by operations
    
    
    201,596
    
    
    
    212,554
    
    
    
    19,948
    
    
    
    70,631
    
    
    
    504,729Distributions to unitholders  declared
    
    $
    6,408
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,408
 
 (1)
    
    Non-GAAP measure. See page 45.




---



##### 



FOURTH QUARTER 2010




---



##### 








---



##### 



YEAR ENDED DECEMBER 31
 Contract Drilling Services Financial Results  (Stated in thousands of Canadian dollars, except where indicated)
 % of
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofYears ended December 31,
    
    2010
    
    
    Revenue
    
    
    
    2009
    
    
    Revenue
    
    
    2008
    
    
    RevenueRevenue
    
    $
    1,212,656
    
    
    
    
    
    
    
    $
    1,030,852
    
    
    
    
    
    
    $
    809,317Expenses:Operating
    
    
    738,515
    
    
    
    60.9
    
    
    
    
    578,225
    
    
    
    56.1
    
    
    
    425,051
    
    
    
    52.5General and administrative
    
    
    57,503
    
    
    
    4.7
    
    
    
    
    55,160
    
    
    
    5.3
    
    
    
    25,129
    
    
    
    3.1EBITDA (1)
    
    
    416,638
    
    
    
    34.4
    
    
    
    
    397,467
    
    
    
    38.6
    
    
    
    359,137
    
    
    
    44.4Depreciation and amortization
    
    
    156,179
    
    
    
    12.9
    
    
    
    
    118,889
    
    
    
    11.5
    
    
    
    57,076
    
    
    
    7.1Loss on asset decommissioning
    
    
    
    
    
    
    
    
    
    
    
    67,794
    
    
    
    6.6
    
    
    
    
    
    
    
    Operating earnings (1)
    
    $
    260,459
    
    
    
    21.5
    
    
    
    $
    210,784
    
    
    
    20.4
    
    
    $
    302,061
    
    
    
    37.3
 % Increase
    
    
    
    
    
    
    
    % Increase
    
    
    
    
    
    
    % Increase2010
    
    
    (Decrease)
    
    
    
    2009
    
    
    (Decrease)
    
    
    2008
    
    
    (Decrease)Number of
drilling rigs (end of year)
    
    
    355
    
    
    
    0.9
    
    
    
    
    352
    
    
    
    (5.9
    )
    
    
    374
    
    
    
    52.7Drilling
utilization days
(operating and
moving):Canada
    
    
    31,176
    
    
    
    46.9
    
    
    
    
    21,229
    
    
    
    (38.4
    )
    
    
    34,488
    
    
    
    (0.2
    )United States
    
    
    32,450
    
    
    
    43.1
    
    
    
    
    22,672
    
    
    
    183.2
    
    
    
    8,006
    
    
    
    281.6International
    
    
    602
    
    
    
    (15.2
    )
    
    
    
    710
    
    
    
    346.5
    
    
    
    159
    
    
    
    n/mDrilling revenue
per utilization
day:Canada
    
    $
    16,139
    
    
    
    (9.5
    )
    
    
    $
    17,824
    
    
    
    8.6
    
    
    $
    16,420
    
    
    
    (2.5
    )United
States (in US$)
    
    $
    18,965
    
    
    
    (17.4
    )
    
    
    $
    22,951
    
    
    
    6.2
    
    
    $
    21,610
    
    
    
    (7.9
    )Drilling
statistics: (2)Number of
wells drilled
    
    
    3,196
    
    
    
    45.4
    
    
    
    
    2,198
    
    
    
    (45.9
    )
    
    
    4,061
    
    
    
    (13.9
    )Average days
per well
    
    
    8.8
    
    
    
    2.3
    
    
    
    
    8.6
    
    
    
    13.2
    
    
    
    7.6
    
    
    
    16.9Number of
metres drilled (000s)
    
    
    5,119
    
    
    
    54.4
    
    
    
    
    3,316
    
    
    
    (39.0
    )
    
    
    5,440
    
    
    
    (6.4
    )Average
metres per well
    
    
    1,602
    
    
    
    6.2
    
    
    
    
    1,509
    
    
    
    12.6
    
    
    
    1,340
    
    
    
    8.8
 (1)
    
    Non-GAAP measure. See page 45.(2)
    
    Canadian operations only. 2010 Compared to 2009




---



##### 



2009 Compared to 2008




---



##### 



Completion and Production Services Financial Results  (Stated in thousands of Canadian dollars, except where indicated)
 % of
    
    
    
    
    
    
    
        % of
    
    
    
    
    
    
        % ofYears ended December 31,
    
        2010
    
    
        Revenue
    
    
    
        2009
    
    
        Revenue
    
    
        2008
    
    
        RevenueRevenue
    
    $
    227,835
    
    
    
    
    
    
    
    $
    176,422
    
    
    
    
    
    
    $
    308,624Expenses:Operating
    
    
    159,071
    
    
    
    69.8
    
    
    
    
    123,846
    
    
    
    70.2
    
    
    
    188,705
    
    
    
    61.2General and administrative
    
    
    9,606
    
    
    
    4.2
    
    
    
    
    10,077
    
    
    
    5.7
    
    
    
    10,865
    
    
    
    3.5EBITDA (1)
    
    
    59,158
    
    
    
    26.0
    
    
    
    
    42,499
    
    
    
    24.1
    
    
    
    109,054
    
    
    
    35.3Depreciation and amortization
    
    
    21,491
    
    
    
    9.4
    
    
    
    
    17,186
    
    
    
    9.7
    
    
    
    22,966
    
    
    
    7.4Loss on asset decommissioning
    
    
    
    
    
    
    
    
    
    
    
    14,379
    
    
    
    8.2
    
    
    
    
    
    
    
    Operating earnings (1)
    
    $
    37,667
    
    
    
    16.5
    
    
    
    $
    10,934
    
    
    
    6.2
    
    
    $
    86,088
    
    
    
    27.9
 % Increase
    
    
    
    
    
    
    
        % Increase
    
    
    
    
    
    
        % Increase2010
    
    
        (Decrease)
    
    
    
        2009
    
    
        (Decrease)
    
    
        2008
    
    
        (Decrease)Number of
service rigs (2)(end of
year)
    
    
    220
    
    
    
    
    
    
    
    
    220
    
    
    
    (14.7
    )
    
    
    258
    
    
    
    2.7Service rig operating hours
    
    
    294,126
    
    
    
    33.9
    
    
    
    
    219,649
    
    
    
    (39.2
    )
    
    
    361,367
    
    
    
    (5.9
    )Revenue per operating hour
    
    $
    637
    
    
    
    (3.8
    )
    
    
    $
    662
    
    
    
    (8.4
    )
    
    $
    723
    
    
    
    (3.0
    )
 (1)
    
    Non-GAAP measure. See page 45.(2)
    
    Now includes snubbing services. Comparative numbers have been restated to reflect this change. 2010 Compared to 2009




---



##### 



2009 Compared to 2008




---



##### 



Corporate and other items
 2010 Compared to 2009
 Corporate and Other Expenses
  Foreign Exchange
  Financing Charges
  Income Taxes
  2009 Compared to 2008
 Corporate and Other Expenses
  Foreign Exchange
  Financing Charges
  Income Taxes




---



##### 



RESULTS BY GEOGRAPHIC SEGMENT  (Stated in thousands of Canadian dollars)
 Years ended December 31,
    
        2010
    
    
    
        2009
    
    
        2008Revenue:Canada
    
    $
    772,332
    
    
    
    $
    569,013
    
    
    $
    909,001United States
    
    
    634,885
    
    
    
    
    608,109
    
    
    
    189,796International
    
    
    27,239
    
    
    
    
    23,748
    
    
    
    4,686Inter-segment elimination
    
    
    (4,803
    )
    
    
    
    (3,424
    )
    
    
    (1,592
    )$
    1,429,653
    
    
    
    $
    1,197,446
    
    
    $
    1,101,891Total Assets:Canada
    
    $
    1,818,875
    
    
    
    $
    1,639,046
    
    
    $
    1,741,462United States
    
    
    2,422,842
    
    
    
    
    2,498,909
    
    
    
    3,033,378International
    
    
    55,071
    
    
    
    
    53,758
    
    
    
    58,862$
    4,296,788
    
    
    
    $
    4,191,713
    
    
    $
    4,833,702




---



##### 



CRITICAL ACCOUNTING ESTIMATES
    Allowance for doubtful accounts receivable
  Impairment of long-lived assets




---



##### 



Depreciation and amortization
  Income taxes
   Transition to International Financial Reporting Standards
    
    
    Identification and assessment of differences between Canadian GAAP (CGAAP) and IFRS;
    
    Identification of key personnel required for design and implementation of the
differences and accounting policies;
    
    Selection of new and revision of existing accounting policies to meet the requirements
under IFRS;
    
    Design of information systems business processes to facilitate transition to IFRS and
future compliance with IFRS;
    
    Review of the internal control environment and modification to controls as needed;
    
    Review of compensation plans and debt covenants; and
    
    Implementation of changes to information systems to facilitate dual reporting of
financial results for transition year of 2010.




---



##### 



Estimated impact of IFRS on Precisions Balance Sheet on adoption of IFRS (unaudited)
 As at January 1, 2010 (Transition Date)Effect ofPrevious
    
    
    transition(Stated in thousands of Canadian dollars)
    
    Note
    
    
    CGAAP
    
    
    to IFRS
    
    
    IFRSASSETSCurrent assets:Cash
    
    
    
    
    
    $
    130,799
    
    
    $
    
    
    
    $
    130,799Accounts receivable
    
    
    
    
    
    
    283,899
    
    
    
    
    
    
    
    283,899Income tax recoverable
    
    
    
    
    
    
    25,753
    
    
    
    
    
    
    
    25,753Inventory
    
    
    
    
    
    
    9,008
    
    
    
    
    
    
    
    9,008449,459
    
    
    
    
    
    
    
    449,459Income tax recoverable
    
    
    
    
    
    
    64,579
    
    
    
    
    
    
    
    64,579Property, plant and equipment
    
    
    B
    
    
    
    2,913,966
    
    
    
    (260,762
    )
    
    
    2,653,204Intangibles
    
    
    A
    
    
    
    3,156
    
    
    
    
    
    
    
    3,156Goodwill
    
    
    A
    
    
    
    760,553
    
    
    
    (476,016
    )
    
    
    284,537$
    4,191,713
    
    
    $
    (736,778
    )
    
    $
    3,454,935LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued liabilities
    
    
    C,D
    
    
    $
    128,376
    
    
    $
    6,598
    
    
    $
    134,974Current portion of long-term debt
    
    
    
    
    
    
    223
    
    
    
    
    
    
    
    223128,599
    
    
    
    6,598
    
    
    
    135,197Long-term liabilities
    
    
    G
    
    
    
    26,693
    
    
    
    909
    
    
    
    27,602Long-term debt
    
    
    
    
    
    
    748,725
    
    
    
    
    
    
    
    748,725Future income taxes
    
    
    A to F
    
    
    
    703,195
    
    
    
    (82,910
    )
    
    
    620,2851,607,212
    
    
    
    (75,403
    )
    
    
    1,531,809Shareholders equity:Shareholders capital
    
    
    A,G
    
    
    
    2,770,708
    
    
    
    (571,969
    )
    
    
    2,198,739Contributed surplus
    
    
    C,D
    
    
    
    4,063
    
    
    
    (4,063
    )
    
    
    Retained earnings (deficit)
    
    
    H
    
    
    
    107,227
    
    
    
    (382,840
    )
    
    
    (275,613
    )Accumulated other comprehensive income (loss)
    
    
    F
    
    
    
    (297,497
    )
    
    
    297,497
    
    
    
    2,584,501
    
    
    
    (661,375
    )
    
    
    1,923,126$
    4,191,713
    
    
    $
    (736,778
    )
    
    $
    3,454,935
 
 Notes:A)
    
    Precision has elected to apply IFRS retrospectively to all business combinations that
occurred on or after December 23, 2008. Changes from the application of IFRS 3 Business
Combinations on its Grey Wolf acquisition (the only acquisition to be restated) would have resulted
in $590 million less purchase consideration, acquisition-related costs of $22 million to be
expensed, intangible asset valued at $69 million to be recognized and amortized over its estimated
life and additional deferred tax of $26 million which would have been subsequently realized in 2009
as the intangible asset would have been fully amortized in 2009.




---



##### 



(Stated in thousands of Canadian dollars)
    
    CGAAP
    
    
    IFRSNet assets at assigned values:Working capital
    
    $
    470,586
    
    
    $
    470,586Property, plant and equipment
    
    
    1,869,875
    
    
    
    1,869,875Intangible assets
    
    
    4,428
    
    
    
    77,643Goodwill (no tax basis)
    
    
    553,335
    
    
    
    (103,109
    )Long-term liabilities
    
    
    (23,308
    )
    
    
    (23,308
    )Long-term debt
    
    
    (319,115
    )
    
    
    (319,115
    )Deferred income taxes
    
    
    (553,682
    )
    
    
    (581,504
    )$
    2,002,119
    
    
    $
    1,391,068Consideration:Cash
    
    $
    1,113,034
    
    
    $
    1,091,522Trust units
    
    
    889,085
    
    
    
    299,546$
    2,002,119
    
    
    $
    1,391,068
 
 Under CGAAP, purchase consideration was valued based on Precisions share price on the date
at which the acquisition was announced while under IFRS it is valued based on the share price on
the date at which the acquisition closed. The additional intangible asset to be recognized under
IFRS related to the purchased name which Precision did not intend to use in the long term and is
fully amortized during 2009 under IFRS. Under IFRS negative goodwill acquired on a business
combination is recognized in income in the year of acquisition. The goodwill adjustment was
restated for foreign exchange translation as at December 31, 2009 resulting in a Canadian dollar
reduction of carrying value of $75 million.B)
    
    In accordance with IFRS 1, Precision elected to fair value select rigs in the United States
and Canada. The fair value election for certain rigs has resulted in an adjustment to the
carrying value of $146 million. For the remaining property, plant and equipment, historical
records were built from inception of Precision using principles of IAS 16 Property Plant and
Equipment. This has resulted in a decrease in the carrying value of Property, Plant and
Equipment of $115 million. The adjustment to the carrying value resulted in a decrease to
future income tax liability of $84 million.C)
    
    Prior to Precisions conversion to a corporation, the capital structure consisted of Trust
units and exchangeable LP units which contained features that allowed the units to be redeemed
for cash at any time and on demand by the unitholder. Under IFRS this redemption feature
requires Precisions equity settled share based compensation plan for non-management directors
and share option plan for employees to be accounted for as liability based awards and be
re-measured until settlement at the end of each reporting period. Under CGAAP the share-based
compensation plan for non-management directors was accounted for by reference to the trading
value of the Corporations shares at the date of grant while the share option plan was treated
as equity settled award and valued based on the fair value of the option at the date of grant
using the Black-Scholes option pricing model. The net effect of these differences is to
decrease retained earnings by $1 million for additional compensation expense (net of tax),
remove $4 million from contributed surplus and record $5 million in current liabilities.D)
    
    Precision has a cash settled share appreciation rights plan (SAR) which under CGAAP is
recorded based on the intrinsic value method which uses the balance sheet date share price to
value the associated liability. IFRS requires the use of an option pricing model to fair value
the SAR. The differences in methodology resulted in a decrease to retained earnings of $1
million for additional compensation expense (net of tax) and a $2 million increase to current
liabilities at the date of transition.




---



##### 



E)
    
    Under CGAAP, Precision expensed borrowing costs as incurred. At the date of transition,
Precision elected to capitalize borrowing costs only in respect of qualifying assets for which
the commencement date for capitalization was on or after the date of transition. There was no
effect to Precisions financial statements as a result of this election as there were no
qualifying assets at the transition date.F)
    
    In accordance with IFRS 1, Precision has elected to deem all foreign currency translation
adjustments included in accumulated other comprehensive loss prior to the date of transition
to be nil.G)
    
    Prior to Precisions conversion to a corporation, it had issued and outstanding exchangeable
LP units which under IFRS would be considered a financial liability. This financial liability
would be revalued at the end of each reporting period based on the period end trading price of
Precisions Trust units with the resulting gains or losses included in earnings. Upon the
exchange of LP units for Trust units, the LP unit would be revalued to the trading price of
Precisions Trust unit on the date of exchange with the associated amount transferred from
long-term liabilities to Shareholders Equity.H)
    
    Estimated impact of IFRS on Precisions retained earnings on adoption of IFRS (unaudited). As at(Stated in thousands of Canadian dollars)
    
    Note
    
    
    January 1, 2010Business combination:
    
    
    AAcquisition costs
    
    
    
    
    
    $
    (21,512
    )Amortization of intangibles
    
    
    
    
    
    
    (68,677
    )Negative goodwill
    
    
    
    
    
    
    103,109Foreign exchange
    
    
    
    
    
    
    74,506Deferred income tax
    
    
    
    
    
    
    26,097113,523Fair valuation of selected rigs net of depreciation
    
    
    B
    
    
    
    (145,868
    )Calculation of historical PP&E cost net of depreciation
    
    
    B
    
    
    
    (114,894
    )Deferred tax PP&E adjustments
    
    
    B
    
    
    
    84,049Unit based compensation
    
    
    C,D
    
    
    
    (1,644
    )Foreign currency translation adjustment
    
    
    F
    
    
    
    (297,497
    )Difference in accounting for deferred tax
    
    
    
    
    
    
    (2,030
    )Exchangeable LP units
    
    
    G
    
    
    
    (18,479
    )Decrease in retained earnings
    
    
    
    
    
    $
    (382,840
    )




---



##### 



Overview of Business Risks
   Crude Oil and Natural Gas Prices
   Business is Seasonal and Highly Variable
  Workforce Availability




---



##### 



Credit Market Conditions May Adversely Affect Business
   Access to Additional Financing
   Technology
   Competitive Industry




---



##### 



Capital Overbuild in the Drilling Industry
  Tax Consequences of Previous Transactions Completed by Precision
  Environmental
   United States Dollar Exchange Exposure
  
    
    Translation of United States Subsidiaries




---



##### 




    
    Transaction Exposure
  Safety Risk
   Dependence on Third Party Suppliers




---



##### 



Evaluation of Disclosure Controls and Procedures
     Non-GAAP Measures
  EBITDA




---



##### 



(Stated in thousands of Canadian dollars)
    
    2010
    
    


    
    2009
    
    
    2008EBITDA
    
    $
    435,383
    
    
    
    $
    407,001
    
    
    $
    436,536Add (deduct):Depreciation and amortization
    
    
    (182,719
    )
    
    
    
    (138,000
    )
    
    
    (83,829
    )Loss on asset decommissioning
    
    
    
    
    
    
    
    (82,173
    )
    
    
    Foreign exchange
    
    
    12,712
    
    
    
    
    122,846
    
    
    
    2,041Financing charges
    
    
    (211,327
    )
    
    
    
    (147,401
    )
    
    
    (14,174
    )Income taxes
    
    
    8,042
    
    
    
    
    (570
    )
    
    
    (37,844
    )Net earnings
    
    $
    62,091
    
    
    
    $
    161,703
    
    
    $
    302,730
 Operating earnings
  (Stated in thousands of Canadian dollars)
    
    2010
    
    
    
    2009
    
    
    2008Operating earnings
    
    $
    252,664
    
    
    
    $
    186,828
    
    
    $
    352,707Add (deduct):Foreign exchange
    
    
    12,712
    
    
    
    
    122,846
    
    
    
    2,041Financing charges
    
    
    (211,327
    )
    
    
    
    (147,401
    )
    
    
    (14,174
    )Income taxes
    
    
    8,042
    
    
    
    
    (570
    )
    
    
    (37,844
    )Net earnings
    
    $
    62,091
    
    
    
    $
    161,703
    
    
    $
    302,730