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

                                   FORM 40-F

(Check One)

[_]   Registration statement pursuant to Section 12 of the Securities
      Exchange Act of 1934
                                or
[X]   Annual report pursuant to Section 13(a) or 15(d) of the Securities
      Exchange Act of 1934

                 For the fiscal year ended December 31, 2005
                       Commission file number 001-14534

                           PRECISION DRILLING TRUST
            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                       <C>                                      <C>
          ALBERTA, CANADA                              1381                              NOT APPLICABLE
 (Province or other jurisdiction of        (Primary Standard Industrial                 (I.R.S. Employer
   incorporation or organization)         Classification Code Number (if           Identification Number (if
                                                   applicable))                            Applicable))
</TABLE>

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


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

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


    TITLE OF EACH CLASS             NAME OF EACH EXCHANGE ON WHICH REGISTERED
    -------------------             -----------------------------------------
       Trust Units                           New York Stock Exchange

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

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

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

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

     Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report: 124,352,921 Trust Units outstanding as at December 31, 2005.

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

               Yes [_]                        No  [X]

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

               Yes [X]                        No  [_]

       The Annual Report on Form 40-F shall be incorporated by reference into,
or as an exhibit to, as applicable,  the Registrant's  Registration Statements
under the Securities Act of 1933: Form F-10 (File No. 333-115330).

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<PAGE>

PRINCIPAL DOCUMENTS

The following documents have been filed as part of this Annual Report on Form
40-F and are included immediately after this section:

(a)   Annual Information Form for the fiscal year ended December 31, 2005;

(b)   Management's  Discussion and Analysis of Financial Condition and Results
      of Operations for the fiscal year ended December 31, 2005; and

(c)   Consolidated Financial Statements for the fiscal year ended December 31,
      2005 (Note 16 to the Consolidated Financial Statements relates to United
      States Generally Accepted Accounting Principles (U.S. GAAP)).

<PAGE>

                           PRECISION DRILLING TRUST
                            ANNUAL INFORMATION FORM

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

                             DATED MARCH 31, 2006

   CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS


       Certain statements contained in this Annual Information Form, including
statements  which  contain  words  such as  "anticipate",  "could",  "should",
"expect",  "seek", "may", "intend",  "likely",  "will",  "believe" and similar
expressions, statements relating to matters that are not historical facts, and
statements of our beliefs,  intentions and  expectations  about  developments,
results  and  events  which  will  or  may  occur  in the  future,  constitute
"forward-looking  information"  within  the  meaning  of  applicable  Canadian
securities legislation and "forward-looking  statements" within the meaning of
the  "safe  harbor"   provisions  of  the  UNITED  STATES  PRIVATE  SECURITIES
LITIGATION  REFORM  ACT OF 1995,  and are  based on  certain  assumptions  and
analysis made by us derived from our experience and perceptions.

       Forward-looking  information and statements in this Annual  Information
Form  include,  but are  not  limited  to:  2006  expected  cash  provided  by
continuing  operations;  2006 capital  expenditures,  including the amount and
nature thereof; 2006 distributions;  cash available for distribution;  oil and
natural gas prices and demand;  expansion and other development  trends of the
oil and natural gas industry;  business strategy,  including the 2006 strategy
and outlook for our business  segments;  expansion  and growth of our business
and operations, including market share and position in the markets in which we
operate;  demand  for  our  products  and  services;   labour  shortages;  the
maintenance of existing customer,  supplier and partner relationships;  supply
channels;   accounting   policies;   credit   risks;   planned   increases  to
subsidiaries' fleets; and other such matters.

       All  such  forward-looking  information  and  statements  are  based on
certain  assumptions  and analyses made by us in light of our  experience  and
perception  of  historical  trends,  current  conditions  and expected  future
developments,  as well as other  factors we  believe  are  appropriate  in the
circumstances.  The risks,  uncertainties,  and  assumptions  are difficult to
predict and may affect operations,  including,  without limitation: the impact
of general economic conditions in Canada;  industry conditions,  including the
adoption of new  environmental,  taxation and other laws and  regulations  and
changes  in how they are  interpreted  and  enforced;  the  ability of oil and
natural gas companies to raise  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;  increased  competition;  the lack of
availability of qualified personnel or management; labour unrest; fluctuations
in interest  rates;  stock market  volatility;  opportunities  available to or
pursued by us and other  factors,  many of which are beyond our  control.  The
foregoing  factors are not exhaustive and are further  discussed  herein under
the heading "RISK FACTORS" commencing on page 14 hereof.

       Actual  results,  performance or achievements  could differ  materially
from  those  expressed  in, or implied  by,  forward-looking  information  and
statements and, accordingly,  no assurance can be given that any of the events
anticipated by the  forward-looking  information and statements will transpire
or occur,  or if any of them do so, what benefits  will be derived  therefrom.
Except as  required  by law,  Precision  Drilling  Trust,  Precision  Drilling
Limited Partnership and Precision Drilling  Corporation disclaim any intention
or  obligation  to  update  or  revise  any  forward-looking   information  or
statements,  whether  as  a  result  of  new  information,  future  events  or
otherwise.  In the event subsequent events prove past statements about current
trends to be  materially  different,  we may  choose  to issue a news  release
explaining  the  reasons  for the  difference  and update the  guidance on the
anticipated impact on revenue, earnings and other key results.

       The forward-looking information and statements contained in this Annual
Information Form are expressly qualified by this cautionary statement.

<PAGE>

                              CORPORATE STRUCTURE

INCORPORATION INFORMATION AND ADDRESS

THE TRUST

       Precision Drilling Trust (the "Trust") is an unincorporated  open-ended
investment  trust  established  under  the  laws of the  Province  of  Alberta
pursuant to a declaration of trust dated September 22, 2005 (the  "Declaration
of  Trust").  The Trust  maintains  its head  office  and  principal  place of
business at 4200,  150 - 6th Avenue SW Calgary,  Alberta,  T2P 3Y7,  telephone
(403) 716-4500, facsimile (403) 264-0251, email info@precisiondrilling.com and
website www.precisiondrilling.com.

       The Trust issued units ("Trust  Units") to certain former  shareholders
of  Precision  Drilling  Corporation  ("Precision")  pursuant  to  a  plan  of
arrangement  which was approved by the former  shareholders  of Precision at a
special meeting held on October 31, 2005 (the "Plan of Arrangement").

       The notice of meeting and  information  circular (the "Special  Meeting
Information  Circular")  with respect to the Plan of Arrangement  was filed on
the Canadian System for Electronic  Document Analysis and Retrieval  ("SEDAR")
on October 3, 2005 under the SEDAR  profile  for  Precision,  and on March 31,
2006  under the SEDAR  profile  for the  Trust,  available  at  www.sedar.com.
Specified pages of the Special Meeting  Information  Circular are incorporated
herein by reference.

PRECISION DRILLING LIMITED PARTNERSHIP

       Precision   Drilling   Limited   Partnership   ("PDLP")  is  a  limited
partnership formed pursuant to the laws of the Province of Manitoba. The Trust
holds a 99.12%  interest  in PDLP  through  its  holding  of  Class A  Limited
Partnership Units (the "PDLP A Units") and the remaining 0.88% of PDLP is held
by former  shareholders  of Precision  who elected to receive  Class B Limited
Partnership  Units  ("Exchangeable  Units") which,  after the required holding
period,  are exchangeable  into Trust Units on a one-for-one basis and are the
economic equivalent of Trust Units. The head and principal offices of PDLP are
located at 4200,  150 - 6th Avenue SW  Calgary,  Alberta,  T2P 3Y7,  telephone
(403) 716-4500 and facsimile (403) 264-0251.

PRECISION DRILLING CORPORATION

       Precision was originally incorporated on March 25, 1985 and carried out
amalgamations  with  wholly-owned  subsidiary  companies  on  January 1, 2000,
January 1, 2002 and January 1, 2004 pursuant to Articles of  Amalgamation  and
other provisions of the BUSINESS  CORPORATIONS  ACT (Alberta).  On November 7,
2005 Precision  became a wholly-owned  subsidiary of PDLP. As part of the Plan
of  Arrangement,  Precision  amalgamated  with a  number  of its  wholly-owned
subsidiaries. On November 23, 2005, Precision amalgamated with 1195309 Alberta
ULC and on January 1, 2006 Precision  amalgamated  with Live Well Service Ltd.
In each amalgamation the name of the amalgamated  company remained  "Precision
Drilling Corporation". The head and principal offices of Precision are located
at 4200,  150 - 6th  Avenue SW  Calgary,  Alberta,  T2P 3Y7,  telephone  (403)
716-4500 and facsimile (403) 264-0251.

                         INTERCORPORATE RELATIONSHIPS

       The following  table sets forth the names of the material  subsidiaries
(which  includes  major  limited  liability  partnerships)  of the Trust,  the
percent of shares (or  interest)  owned by the Trust and the  jurisdiction  of
incorporation  or continuance of each such  subsidiary (or  partnership) as of
December 31, 2005:

<TABLE>
<CAPTION>
NAME OF SUBSIDIARY OR PARTNERSHIP          PERCENT OR INTEREST OWNED      JURISDICTION OF INCORPORATION OR CONTINUANCE
====================================================================================================================
<S>                                        <C>                            <C>
Precision Drilling Limited Partnership              99.12%                                  Manitoba
1194312 Alberta Ltd.                                 100%                                   Alberta
Precision Drilling Corporation                      99.12%                                  Alberta
</TABLE>


                                                                             2
<PAGE>

ORGANIZATIONAL STRUCTURE OF THE TRUST


       The following  diagram sets forth the  organizational  structure of the
Trust as of the date hereof:


                                 -----------
                                 Unitholders
                                 -----------
                                      |
                                      | 100%
                                      v
                                --------------
               ----------------    Precision
              |                 Drilling Trust
              |  100%           --------------
              |                       |
              v                       | 100% of
-----------------                     | PDLPA Units            ---------
1194312 Alberta  --\                  v                     /-- Limited
      Ltd.          \           ----------------           /    Partners
(General Partner)    \             Precision              /    ---------
-----------------     \-------> Drilling Limited <-------- 100% of
                     General      Partnership    <----     Exchangeable Units
                     Partner    ----------------      |
                     Interest         |               | Participating
                                      | 100%          | Debt
                                      |               |
                                      v               |
                                ------------------    |
                                Precision Drilling <--
                                   Corporation
                                ------------------


NOTES:
(1)    As of December 31, 2005 there were 124,352,921 PDLP A Units
       outstanding.
(2)    As of December 31, 2005 there were 1,108,382 Exchangeable Units
       outstanding.
(3)    The interest of 1194312 Alberta Ltd. in PDLP is 0.001%. (4)
       Inter-company note owing by Precision to PDLP (the "Participating
       Debt").


                      GENERAL DEVELOPMENT OF THE BUSINESS

THREE YEAR HISTORY

       During  2005,  Precision  made a  significant  shift  in its  strategic
business  direction.  Until early 2005,  Precision  had an  aggressive  global
growth strategy directed toward the supply of oilfield and industrial services
to customers in Canada and internationally. Precision grew through a series of
acquisitions of related  businesses in 2003 and 2004 and through  reinvestment
in  its  core  businesses  to  become  one  of  the  largest   Canadian  based
international oilfield and industrial services contractors.

       Precision's  growth  strategy  changed with its decision to realize the
value in the international  contract drilling,  energy services and industrial
services segments of Precision's business. This value was realized through the
divestiture of three  business  lines in the third quarter of 2005:  Precision
Energy  Services which was the technology  services group providing cased hole
and  open  hole  wireline  services,  drilling  and  evaluation  services  and
production   services;   Precision   Drilling   International   which  was  an
international  land rig  contractor;  and CEDA  International  which  provided
industrial   cleaning,   catalyst  handling  and  mechanical   services.   The
dispositions provided shareholders of Precision with proceeds in the form of a
special  cash  payment  of $844  million  and  almost  26  million  shares  of
Weatherford International Ltd. ("Weatherford") valued at $2.0 billion.


                                                                             3
<PAGE>


       Those dispositions  returned Precision to its original focus on oil and
gas field drilling and service rig and related  operations in western  Canada.
The  continuing  business  represents  Precision's  core expertise and marks a
return to  Precision's  original  business roots which date back 20 years as a
publicly traded company and 50 years in terms of operational experience.

       In  Canada,  Precision  has been the  leading  provider  of land  based
contract  drilling  services to oil and natural gas exploration and production
companies,  based on the  number  of wells  and  metres  drilled.  Precision's
continuing  business services during 2005 comprised:  contract drilling;  well
servicing;  snubbing;  procurement and distribution of oilfield supplies; camp
and  catering;  manufacture  and  refurbishment  of  drilling  and service rig
equipment; as well as rental of surface oilfield equipment,  tubulars and well
control equipment, and wellsite office accommodations.

       With the  conversion  to an income trust,  Precision  moved from a cash
retention  business model to a cash flow-through model and adopted a policy to
make  regular cash  distributions.  Precision  is a mature  organization  that
operates in a cyclical  industry with seasonal swings in revenue  levels.  The
actual cash flow available for  distribution is a function of numerous factors
including  financial  performance,  debt  covenants and  obligations,  working
capital  requirements as well as maintenance and expansion capital expenditure
requirements for the purchase of property, plant and equipment.

       Over the last three years, significant  acquisitions,  dispositions and
reorganizations consisted of the following:

SIGNIFICANT ACQUISITIONS

o   On May 21,  2004,  Precision  acquired all of the land  drilling  business
    carried on by Global SantaFe  Corporation for an aggregate  purchase price
    of US$316.5 million.  That land drilling business consisted of 31 drilling
    rigs, then located in Kuwait, Saudi Arabia, Egypt, Oman and Venezuela.

o   Pursuant to an agreement dated May 8, 2004, Precision purchased all of the
    issued and  outstanding  shares of Reeves  Oilfield  Services  Ltd. for an
    aggregate  purchase price of (pound)92.4  million (Great Britain  Pounds).
    Reeves Oilfield  Services Ltd. was an international  provider of open hole
    wireline  logging services to the oil and natural gas industry and carried
    out field operations in the western and Appalachian  regions of the United
    States, western Canada, Australia,  Great Britain,  Colombia,  Europe, the
    Middle East and Africa.

SIGNIFICANT DISPOSITIONS

o   On August 31, 2005,  Precision sold its Energy Services and  International
    Contract   Drilling   divisions   to   Weatherford    International   Ltd.
    ("Weatherford")  for a purchase  price  consisting  of 26  million  common
    shares of Weatherford  and $1.13 billion cash pursuant to a stock purchase
    agreement  dated  June 6, 2005  between  Precision  and  Weatherford  (the
    "Weatherford Sale  Agreement").  The Energy Services division of Precision
    consisted of three main  business  segments:  wireline  logging  services;
    drilling  and  evaluation  services;  and  production  services.  Wireline
    services included open hole logging, cased hole logging and completion and
    slick  line   services.   Drilling  and   evaluation   services   included
    measurement-while-drilling,  logging-while-drilling,  directional drilling
    and rotary steerable  services.  Production services included well testing
    and controlled  pressure  drilling (which included under balanced drilling
    services).   Precision's  International  Contract  Drilling  division  was
    comprised of 48 land  drilling  rigs  operating in Kuwait,  Saudi  Arabia,
    Oman, Iran, Egypt, India, Mexico and Venezuela.

o   On  September  13,  2005,  Precision  sold  100%  of the  shares  of  CEDA
    International  Corporation ("CEDA") to an investment entity of the Ontario
    Municipal  Employees  Retirement  System for  approximately  $274  million
    pursuant to an agreement  dated  September 13, 2005 between  Precision and
    1191678  Alberta  Inc.  (the  "CEDA Sale  Agreement").  CEDA was a leading
    provider  of  industrial   maintenance,   turnaround  services  and  other
    specialized  services to various  production  industries in Canada and the
    USA. Its main areas of operation included  industrial  cleaning,  catalyst
    handling and mechanical  services  usually carried out in large facilities
    operating  in the oil and natural gas,  petro-chemical  and pulp and paper
    industries.

SIGNIFICANT REORGANIZATIONS

o   On  July  31,  2005,  Precision  Limited  Partnership  (which  carried  on
    Precision's   Canadian  contract   drilling,   service  rig  and  snubbing
    businesses)  completed a re-organization  whereby substantially all of the
    assets of the Precision Drilling and Precision Well Servicing divisions of
    Precision  Limited   Partnership  were  transferred  to  its  wholly-owned
    subsidiary  Precision  Drilling Ltd.  Precision  Limited  Partnership also


                                                                             4
<PAGE>

    transferred  its  ownership in LRG  Catering  Ltd.  (Precision's  camp and
    catering business) to Precision Drilling Ltd.

o   On August 25, 2005, Precision Limited Partnership was dissolved,  with the
    partners Precision Diversified Services Ltd. and Precision being allocated
    their pro rata share of the net assets of Precision  Limited  Partnership.
    Precision  Diversified  Services Ltd. and Precision  transferred these net
    assets to Live Well Service Ltd.

o   On October 31, 2005, the  shareholders  of Precision  approved the Plan of
    Arrangement  which  became  effective  on  November  7, 2005.  The Plan of
    Arrangement resulted in the following:

    o  the former holders of common shares of Precision received, for each
       share of Precision they owned, at their option, either a Trust Unit or
       an Exchangeable Unit, in addition to 0.2089 of a Weatherford share and
       a special cash payment of $6.83;

    o  Precision amalgamated with the following wholly-owned subsidiaries:
       Columbia Oilfield Supply Ltd., Rostel Industries Ltd., Precision
       Diversified Services Ltd., LRG Catering Ltd., Precision Rentals Ltd.,
       1181177 Alberta Ltd. and Precision Drilling Ltd., to form Precision
       Drilling Corporation;

    o  1195309 Alberta ULC, a wholly-owned subsidiary of PDLP, became indebted
       to PDLP;

    o  all of the issued and outstanding options issued pursuant to
       Precision's various stock option plans were converted into New Options
       (as defined in the Plan of Arrangement) which became fully vested and
       were exercisable up to and including November 22, 2005; and

    o  all of the PDLP A Units were issued to the Trust, representing 99.12%
       of the total number of limited partnership units of PDLP (the "Limited
       Partnership Units") outstanding, 0.88% Limited Partnership Units
       represented by Exchangeable Units were issued to certain former
       shareholders of Precision, and 1194312 Alberta Ltd. (the "General
       Partner") holds a nominal interest in PDLP.

o   On November 23, 2005,  Precision  amalgamated  with 1195309 Alberta ULC to
    form Precision Drilling Corporation.

o   On January 1, 2006, Precision amalgamated with Live Well Service Ltd. As a
    result of such amalgamation (and the previous amalgamations carried out in
    2005)  all of the  operating  businesses  of  Precision  are now  operated
    directly through and by Precision.

CASH FLOW

       The Trust holds PDLP A Units and PDLP holds participating debt owing by
Precision (the  "Participating  Debt").  Cash generated from the operations of
Precision  flow to PDLP in settlement  of principal and interest  owing on the
Participating  Debt.  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.

CASH DISTRIBUTIONS ON TRUST UNITS

       The Trust's  board of  trustees  (the  "Board of  Trustees"  and each a
"Trustee")  adopted a policy of making  regular cash  distributions  which are
made on or about  the 15th day  following  the end of each  calendar  month to
holders of Trust Units and  Exchangeable  Units  (together  "Unitholders")  of
record on the last business day of each such calendar month or such other date
as  determined  from time to time by the Board of Trustees.  In addition,  the
Declaration of Trust provides that, an amount equal to net income of the Trust
not already paid to holders of Trust Units in the year will become  payable on
December 31 of each year,  such that the Trust will not be liable for ordinary
income taxes for such year.  Please refer to "CERTAIN  CANADIAN FEDERAL INCOME
TAX  CONSIDERATIONS - TAXATION OF THE TRUST" on pages 46 and 47 of the Special
Meeting  Information  Circular which are  incorporated  by reference into this
Annual Information Form.

       The Board of Trustees reviews the Trust's distribution policy from time
to time.  The actual  amount  distributed  is  dependent  on various  economic
factors  and  distributions  are  declared at the  discretion  of the Board of
Trustees.  The cash flow available for  distribution is a function of numerous
factors,  including  Precision's  financial  performance,  debt  covenants and
obligations, working capital requirements, future capital requirements and the
number of Trust Units and Exchangeable Units  outstanding.  As a result of the
aforementioned  factors,  distributions may be reduced or suspended  entirely.


                                                                             5
<PAGE>

The market  value of the Trust Units may  deteriorate  if the Trust  decreases
cash  distributions  in the  future.  Refer  to  the  heading  "RISK  FACTORS"
commencing on page 14 hereof.

PAYMENTS ON EXCHANGEABLE UNITS

       Holders of  Exchangeable  Units will be entitled  to receive,  and PDLP
will,  subject to applicable  law, on each date on which the Board of Trustees
declares a  distribution  on the Trust  Units,  make a loan in respect of each
Exchangeable Unit in an amount in cash for each Exchangeable Unit equal to the
distribution  declared  on each Trust Unit;  or in the case of a  distribution
declared on the Trust Units in securities or property other than cash or Trust
Units,  by a loan in the amount  equal to the value of such type and amount of
securities or property  which is the same as, or  economically  equivalent to,
the type and amount of property declared as a distribution on each Trust Unit.

       Any amount loaned in respect of  Exchangeable  Units  pursuant to these
distribution  entitlements  will not constitute a  distribution  of profits or
other  compensation  by way of income in respect of such  Exchangeable  Units,
rather, will constitute a non-interest  bearing loan of the amount thereof, or
in the case of  property,  a loan in the amount equal to the fair market value
thereof as  determined  in good faith by the board of directors of the General
Partner,  which loan is  repayable on the first day of January of the calendar
year  next  following  the  date of the  loan or such  earlier  date as may be
applicable  as more  particularly  described in paragraph 3.7 of Appendix D of
the Special  Meeting  Information  Circular  which is  incorporated  into this
Annual Information Form by reference.

       On  the  date  on  which  the  loan  is  repayable,  PDLP  will  make a
distribution in respect of each  Exchangeable  Unit equal to the amount of the
loan outstanding in respect thereof. PDLP will set off and apply the amount of
any  such  distribution  payment  against  the  obligation  of any  holder  of
Exchangeable Units under any loan outstanding in respect thereof.

DISTRIBUTION REINVESTMENT PLAN

       A distribution reinvestment plan (the "DRIP") was approved by the Board
of Trustees on February 14,  2006.  Upon  implementation,  the DRIP will allow
certain  holders of Trust Units,  at their  option,  to reinvest  monthly cash
distributions to acquire additional Trust Units at the average market price as
defined  in the  DRIP.  Unitholders  who are not  resident  in  Canada or hold
Exchangeable Units are not eligible to participate in the DRIP. Generally,  no
brokerage fees or commissions will be payable by participants for the purchase
of Trust  Units  under  the DRIP,  but  holders  of Trust  Units  should  make
inquiries  with  their  broker,  investment  dealer or  financial  institution
through which their Trust Units are held as to any policies that may result in
any fees or  commissions  being  payable.  The Trust has reserved the right to
amend or  terminate  the DRIP at any time  provided  that  such  amendment  or
termination  does not  prejudice  the  interests  of holders  of Trust  Units.
Details  of the DRIP are  described  more  fully  in the  DRIP  plan  document
available on the Trust's website at www.precisiondrilling.com.

BOARD OF TRUSTEES

       Pursuant  to the  terms  of the  Declaration  of  Trust,  the  Board of
Trustees  consists of three members who are  responsible  for  supervising the
activities and managing the affairs of the Trust.

       The  Declaration  of Trust  provides  that,  subject  to its  terms and
conditions,  the Board of Trustees  has full,  absolute and  exclusive  power,
control,  authority and discretion over the Trust assets and the management of
the affairs of the Trust to the same  extent as if the Board of Trustees  were
the sole and absolute legal and beneficial owners of the Trust assets.

       Any  one or more of the  Board  of  Trustees  may  resign  upon 30 days
written  notice to the Trust and may be removed by an ordinary  resolution and
the vacancy created by such removal may be filled at the same meeting, failing
which it may be  filled  by the  affirmative  vote of a quorum of the Board of
Trustees.

       Trustees  are elected at each  annual  meeting of  Unitholders  to hold
office for a term expiring at the close of the next annual  meeting.  A quorum
of the Board of Trustees is a majority of the Trustees then holding office.  A
majority of the Trustees may fill a vacancy in the Board of Trustees, except a
vacancy resulting from an increase in the number of Trustees or from a failure
of the Unitholders to elect the required number of Trustees. In the absence of
a quorum of  Trustees,  or if the  vacancy  has  arisen  from a failure of the
Unitholders  to elect the required  number of Trustees,  the Board of Trustees
will promptly call a special  meeting of the  Unitholders to fill the vacancy.
If the Board of Trustees fail to call that meeting or if there are no Trustees
then in office,  any  Unitholder  may call the  meeting.  Except as  otherwise
provided  in the  Declaration  of Trust,  the Board of Trustees  may,  between


                                                                             6
<PAGE>

annual  meetings of Unitholders,  appoint one or more  additional  Trustees to
serve  until  the next  annual  meeting  of  Unitholders,  but the  number  of
additional  Trustees  will not at any time exceed  one-third  of the number of
Trustees who held office at the expiration of the immediately preceding annual
meeting of Unitholders.

ADMINISTRATION AGREEMENT


       The Trust and  Precision  are  parties to an  administration  agreement
entered into on November 7, 2005 (the "Administration  Agreement").  Under the
terms of the Administration  Agreement,  Precision provides administrative and
support services to the Trust including,  without limitation,  those necessary
to:

o   ensure  compliance  by the Trust with  continuous  disclosure  obligations
    under applicable securities legislation;

o   provide investor relations services;

o   provide or cause to be provided to  Unitholders  all  information to which
    Unitholders  are  entitled  under  the  Declaration  of  Trust,  including
    relevant information with respect to financial reporting and income taxes;

o   call and hold meetings of Unitholders and distribute  required  materials,
    including notices of meetings and information circulars, in respect of all
    such meetings;

o   assist the Board of Trustees in calculating distributions to Unitholders;

o   ensure compliance with the Trust's limitations on non-resident  ownership,
    if applicable; and

o   generally  provide  all other  services as may be  necessary  or as may be
    requested by the Board of Trustees.

                   DESCRIPTION OF THE BUSINESS OF PRECISION

GENERAL

       Precision's  continuing  operations  are  carried  out in two  segments
consisting  of  Contract  Drilling  Services  and  Completion  and  Production
Services.  The Contract  Drilling  Services  segment  includes  land  drilling
services, camp and catering services, procurement and distribution of oilfield
supplies and the  manufacture  and  refurbishment  of drilling and service rig
equipment.  The  Completion  and  Production  Services  segment  includes well
completion and workover services, snubbing services and the rental of oilfield
surface   equipment,   tubulars  and  well  control   equipment  and  wellsite
accommodations.  As at December 31, 2005,  Precision had  approximately  6,500
employees.

       Precision's  revenue by business segment from continuing  operations is
illustrated in the following table:

<TABLE>
<CAPTION>
(IN THOUSANDS $)
YEARS ENDED DECEMBER 31,                       2005            2004           2003
========================================================================================
<S>                                       <C>             <C>             <C>
Contract Drilling Services                $   916,221     $   727,710     $  663,619
Completion and Production Services            369,667         313,386        263,218
Inter-segment Eliminations                    (16,709)        (12,608)       (11,667)
----------------------------------------------------------------------------------------
TOTAL REVENUE                             $  1,269,179    $  1,028,488    $  915,170
</TABLE>

       In Canada,  the  economics of oilfield  services  align with global and
regional  fundamentals.  Important  regional  drivers  include the  underlying
hydrocarbon  make-up of the Western Canada  Sedimentary Basin (the "WCSB") and
the existence of an established,  competitive and efficient  oilfield  service
infrastructure.  Increasingly,  natural gas  production  is driving  economics
within the WCSB as  approximately  75 percent of new well  completions in 2005
were targeted toward natural gas. In general, drilling activity in the WCSB is
split  between the  provinces  with  approximately  75 percent in Alberta,  15
percent in British Columbia and 10 percent in Saskatchewan.  Areas in Canada's
north  hold  significant  promise  for the  expansion  of the need for oil and
natural  gas  services  as  pipelines  and  local   community   relations  are


                                                                             7
<PAGE>

established.  The Canadian  oilfield  service industry dates back to the 1940s
and has given  Canada  the means to  develop  its  reserves  to meet  domestic
consumption and to provide export capacity, primarily to the United States.

       The  hydrocarbon  structures  of the WCSB are diverse and  conventional
sources of oil and natural gas  reservoirs  exist at a variety of depths which
are comparatively shallow by global standards.  These conventional sources are
accompanied  by more costly and  challenging  reservoirs  associated  with oil
sands,  heavy oil, natural gas in coal (coal bed methane),  as well as natural
gas in deeper formations.

       As a result of the divestiture of its energy  services  segment and its
international  drilling  business,  Precision  now  derives 100 percent of its
revenue from the Canadian  market.  The ability to move heavy equipment in the
Canadian  oil and natural gas fields is dependent  on weather  conditions.  As
warm  weather  returns in the spring,  the thawing of ground  frost  typically
renders  secondary roads incapable of supporting the weight of heavy equipment
until such time as they have thoroughly  dried. The duration of spring breakup
has a  direct  impact  on  Precision's  activity  levels.  In  addition,  many
exploration  and production  areas in northern  Canada are accessible  only in
winter when the ground is frozen enough to support the transportation of heavy
equipment.  The timing of freeze-up  and spring  breakup  affects  Precision's
ability to move  equipment in and out of these areas.  Wet weather can further
defer  commencement  of drilling or servicing  operations  on any given day or
well location.

       Providing oilfield services  incorporates three main elements:  people,
technology  and  equipment.  At this time  attracting,  training and retaining
qualified  employees is the single  greatest  challenge for oilfield  services
providers.  Exploration and production  activities are taking place in an ever
increasing variety of surface and subsurface conditions. Developing technology
and building equipment that can withstand  increasing  physical challenges and
operate more  efficiently is required to maintain and improve the economics of
crude oil and natural gas  production.  The primary  economic  risk assumed by
oilfield service  providers relates to the volatility in activity levels which
affect utilization rates,  investment in people,  technology and equipment and
cost controls.

       The economics of oilfield services  providers are largely driven by the
current and expected  price of crude oil and natural gas which are  determined
by supply and demand.  Crude oil and natural gas prices have historically been
volatile. The upward trend of those prices since 2002 has endured and resulted
in high oil and  natural  gas price  levels  during  2005.  In addition to the
upward  trend in oil and natural gas pricing  there were also price  spikes in
2005 arising from natural disasters such as Katrina and other hurricanes,  and
political and social unrest in various  countries  which  highlight the narrow
tolerance  that  oil  and  natural  gas  pricing  has  to  such  events.  This
demonstrates  that the oil and natural gas supply and demand balance is narrow
and  significant  industry  reinvestment is likely required to add and replace
reserves and replace aging infrastructure.

CONTRACT DRILLING SERVICES

Precision's Contract Drilling Services segment is comprised of the following
divisions:

o   Precision Drilling - 230 drilling rigs - 30 percent of industry

o   LRG  Catering  ("LRG") - 92 drilling  camps  representing  - 20 percent of
    industry

o   Rostel Industries  ("Rostel") - manufactures and refurbishes  drilling rig
    components

o   Columbia Oilfield Supply ("Columbia") - centralized procurement, inventory
    and distribution of consumable supplies


PRECISION DRILLING

       The Precision  Drilling division owns and operates the largest fleet of
land drilling rigs in Canada with 230 actively  marketed drilling rigs located
throughout the WCSB, accounting for approximately 30 percent of the industry's
fleet of 770 drilling rigs in Canada at December 31, 2005.

       Oil and natural gas well drilling contracts are carried out on either a
daywork, meterage or turnkey basis. Under daywork contracts, Precision charges
the customer a fixed rate per day  regardless  of the number of days needed to
drill the well. In addition,  daywork  contracts usually provide for a reduced
day  rate  (or a lump  sum  amount)  for  mobilization  of the rig to the well
location  and for both  assembly and  dismantling  of the rig.  Under  daywork
contracts,  Precision  ordinarily  bears  no part of the  costs  arising  from
downhole risks (such as time delays for various reasons,  including a stuck or
broken drill string or blowouts). Other contracts could provide for payment on
a meterage  basis,  whereby  Precision  is paid a fixed  charge for each metre


                                                                             8
<PAGE>

drilled  regardless  of the  time  required  or the  problems  encountered  in
drilling the well.  Some  contracts  are carried out on a meterage  basis to a
specified  depth  and  on  a  daywork  basis  thereafter.   Turnkey  contracts
contemplate  the  drilling  of a well for a fixed  price.  Compared to daywork
contracts,  meterage and turnkey  contracts involve a higher degree of risk to
Precision and, accordingly, normally provide greater profit or loss potential.
Over the last five years,  Precision's  contracts have been carried out almost
exclusively on a daywork basis.

       Contracts  with customers vary in duration from a few days for a single
well to multiple  year,  multiple well drilling  programs.  Precision's  newly
built drilling rigs tend to have a three to five year payout contract in place
at the time construction commences.

       Precision's drilling rigs have varying  configurations and capabilities
which enable  Precision to provide services in virtually all areas of drilling
activity in the WCSB. Precision's rigs have drilling depth capacities of up to
6,700 metres. All of Precision's drilling rigs can be winterized, allowing for
operations  in the harsh  weather  conditions  faced in the Canadian  drilling
environment.  Conventional  rigs are  configured  to handle either one, two or
three joints of range 2 drill pipe at one time and are categorized as singles,
doubles or triples  based on this  capability.  As well,  Precision has coiled
tubing  drilling  rigs which  utilize a single  strand of pipe coiled around a
reel. As a coil tubing  drilling rig drills,  the tubing is unwound and as the
bit  returns  to  surface  the  tubing is  rewound  onto the reel.  Except for
connecting the bottomhole assembly, which usually includes the drill bit and a
drilling  fluid  powered motor which  provides the rotation for  drilling,  no
other connections are necessary.

       Single, double and coiled tubing rigs are generally used in the shallow
drilling market, while triple rigs, which have greater hoisting capacity,  are
used in deeper  exploration and development  drilling,  usually carried out in
western Canada's foothills and Rocky Mountain regions.  Precision's triple rig
fleet  includes  specialized  rigs for deep sour natural gas well drilling and
that can also operate in very cold climates.

       Rounding out  Precision's  fleet are Super Single(R) rigs, the majority
of which have slant rig capability.  The Super Single(R) rigs are manufactured
by Precision and are equipped with top drive drilling systems, range 3 jointed
drill pipe and an automated  pipe handling  system.  Slant  drilling  involves
tilting a rig mast  from  vertical  and is  primarily  used to drill  multiple
directional  wells from one location.  Super Single(R) rigs allow for drilling
to be carried  out on a more cost  effective  basis  than  using  conventional
drilling  techniques.  Drilling multiple wells from one location for instance,
improves  the   economics  of   developing   shallow   hydrocarbon   reserves.
Additionally,  the same technique can allow for the  exploitation  of reserves
located in environmentally  sensitive areas or inaccessible  locations and can
eliminate the cost of building access roads for multiple  drilling  locations.
Precision  believes the Super  Single(R)  rig category  will continue to offer
significant  revenue growth.  In addition to conventional  wells,  Precision's
Super Single(R) rigs have been adapted to meet a variety of operational  needs
such as heavy oil, oil sands  production and steam assisted  gravity  drainage
("SAGD") projects. These multiple well programs are drilled efficiently from a
single pad using a  centralized  mud system  and other  innovative  rig design
features.  SAGD techniques are used extensively in the production of heavy oil
reserves and oil sands in-situ bitumen reserves.

       The Super Single(R) Light is a smaller capacity, specialized version of
the Super Single(R).  These rigs have been built for drilling shallow wells up
to 1,200  metres  in depth.  Using  jointed  range 3 drill  pipe,  the  design
incorporates proven technology and reliability in a light weight, easily moved
load configuration. The Super Single(R) Light competes with coiled tubing rigs
and  offers  greater   drilling   capability   over  a  wider  range  of  well
configurations  than coiled tubing rigs. During 2005,  Precision  designed and
built a  self-propelled  version of the Super  Single(R)  Light which  reduces
transportation costs for customers.

       A total of 45 of Precision's drilling rigs are diesel-electric powered,
with the remaining rigs  mechanically  powered.  Diesel-electric  powered rigs
provide more precise  control of drilling  components and are considered  more
power  efficient than  mechanical  rigs and are well suited for horizontal and
directional drilling.  Many of Precision's  mechanically powered rigs are also
capable of horizontal and directional  drilling by reconfiguring the rigs with
additional   equipment  which  Precision  has  readily  available.   Precision
continually seeks to upgrade and modify its rig fleet to maximize performance.
During  2005,  one light  triple  rig and one  double  rig were  converted  to
electric power with a complete retrofit and design change which extended their
depth rating to 4,000 metres.  Precision  works hard to remain abreast of, and
in many cases, lead advances in specialized drilling techniques and technology
in order to maximize rig efficiency and minimize environmental impact.

       To  facilitate  customer  requirements  Precision  owns 16  mobile  top
drives.  A top drive is used to rotate the drill string and  provides  greater
efficiency in the drilling of a well compared to the traditional  rotary table


                                                                             9
<PAGE>

and kelly.  A top drive is  suspended  in the mast of the  drilling rig and is
powered by a hydraulic or electric motor.  All Super  Single(R)  drilling rigs
are equipped with an integrated top drive as part of the rig inventory.

       The following table lists the drilling depth  capability of Precision's
drilling rigs and the total Canadian land drilling industry's rigs in the WCSB
as at December 31, 2005:

<TABLE>
<CAPTION>
                                                   PRECISION FLEET                       INDUSTRY FLEET (1)
----------------------------------------  --------------------------------   ----------------------------------------
                                                                 MARKET
                              MAXIMUM       NUMBER    % OF        SHARE      NUMBER OF       % OF
  TYPE OF DRILLING RIG     DEPTH RATING    OF RIGS    TOTAL       % (3)        RIGS          TOTAL      CHANGE (4)
=====================================================================================================================
<S>                        <C>             <C>       <C>         <C>         <C>            <C>         <C>
Single                        1,200m         17        7%          14%           124          16%           13
---------------------------------------------------------------------------------------------------------------------
Super Single(R) (2)           3,000m         21        9%          88%            24           3%            0
---------------------------------------------------------------------------------------------------------------------
Double                        3,000m         94        41%         27%           344          45%           14
---------------------------------------------------------------------------------------------------------------------
Light triple                  3,600m         44        19%         39%           114          15%           (4)
---------------------------------------------------------------------------------------------------------------------
Heavy triple                  6,700m         43        19%         40%           107          14%            6
---------------------------------------------------------------------------------------------------------------------
Coiled tubing                 1,500m         11        5%          19%            57           7%           21
---------------------------------------------------------------------------------------------------------------------
TOTAL                                        230      100%         30%           770          100%          50
---------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:
(1)    Source: Daily Oil Bulletin - Rig Locator Report as of January 4, 2006.
       Precision has allocated the industry rig fleet by rig type.
(2)    Super Single(R) excludes single rigs that do not have automated pipe
       handling systems, or do not have a self contained top drive, or cannot
       run range 3 drill pipe/casing.
(3)    Market share means Precision's rigs as a percentage of the industry's
       rigs.
(4)    Change in number of industry rigs as compared to the prior year.

       There were 50 new drilling  rigs added to the Canadian  industry  fleet
during 2005, a seven percent  increase over 2004. Of these additional rigs, 68
percent had a depth  rating of less than 1,500  metres with new coiled  tubing
rigs  leading the way with 21 and singles  with 13.  Customer  demand to drill
conventional  oil  and  natural  gas  wells,  in  combination  with  improving
commercialization of coal bed methane, oil sands, heavy oil and deeper natural
gas formations is driving demand for rigs to record levels.

       Precision  has a balanced  drilling  rig  offering,  with a  particular
weighting in deep drilling.  As customers turn to deeper wells to discover new
reserves,  Precision's  40 percent  market share in rigs with a depth capacity
greater than 3,600 metres is noteworthy.  Drilling  opportunities  for natural
gas in deeper  reservoirs  is a market  where  Precision  has an advantage - a
market many expect to emerge in Canada.

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

<TABLE>
<CAPTION>
            UTILIZATION RATES (%)             METRES DRILLED (000S)                       WELLS DRILLED(1)
------------------------------------  ------------------------------------    ----------------------------------------
                                                                   % OF                                        % OF
            PRECISION   INDUSTRY(2)   PRECISION   INDUSTRY(2)    INDUSTRY      PRECISION     INDUSTRY(2)     INDUSTRY
======================================================================================================================
<S>         <C>         <C>           <C>         <C>            <C>           <C>           <C>             <C>
  2005        56.2         59.6         8,901       28,143         31.6         7,766           24,351         31.9
  2004        50.3         52.9         8,021       23,526         34.1         7,525           21,793         34.5
  2003        52.0         53.1         8,604       21,802         39.5         8,451           20,694         40.8
  2002        38.3         39.4         6,222       15,708         39.6         6,315           14,920         42.3
  2001        51.6         53.0         7,384       18,855         39.2         6,907           17,359         39.8
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:
(1)      The number of wells drilled is reported on a rig release basis.
(2)      Industry numbers exclude drilling rigs not registered with the
         Canadian Association of Oilwell Drilling Contractors ("CAODC") and
         non-reporting CAODC member contractors.


                                                                            10
<PAGE>

       Precision  has   consistently   been  the  most  active  land  drilling
contractor in Canada in terms of wells and metres drilled,  sustaining,  since
1997,  a market  share of greater  than 31  percent.  During  2005,  Precision
achieved a  utilization  rate of 56 percent for its drilling  rigs compared to
the  average  industry  utilization  rate in Canada of 60  percent.  Precision
strives to obtain  high  utilization  of its fleet and  optimal  profitability
given competitive  pricing and Canada's seasonal  reduction in drilling demand
during the second and third quarters.

       In 2005,  Precision  drilled 7,766  exploration and development  wells,
accounting for 32 percent of industry wells drilled in western Canada.

       The  drilling  industry  in  Canada  requires   specialized  skill  and
knowledge which, due to increased utilization levels over the past decade, has
been in short  supply.  A drilling  rig crew is  comprised  of a rig  manager,
driller, derrickman,  motorman, floorhands and leasehands. The traditional rig
crewing configuration is three crews working rotating shifts, two weeks in and
one week out,  allowing  the rig to keep  working with one crew off. The floor
and leasehand  positions are entry level,  with the motorman,  derrickman  and
driller positions being more advanced.  Each position has certain prerequisite
qualifications  and training.  Well control,  H2S, first aid, fall protection,
work place  hazardous  materials and various  aspects of  Precision's  health,
safety and environment management systems are all key training components.

       The  provision  of  an  experienced  competent  crew  is a  competitive
strength,  highly valued by  Precision's  customers.  In order to  continually
recruit rig employees,  Precision has a centralized  personnel  department and
orientation  program. In 2005, there were approximately 1,500 candidates given
pre-employment rig orientation training.  Precision is also active as a member
of the CAODC in implementing a designated trade certification for drilling rig
workers in Alberta,  the first jurisdiction to recognize the specialized skill
and  knowledge  a  driller   possesses.   The  compulsory   journeyman   trade
certification is called "Rig Technician".  The apprenticeship program requires
the successful  completion of three training  levels and the  accumulation  of
6,750  hours of  experience  with at least  1,000  hours as a driller.  In the
long-term, this initiative should foster individual career opportunities, high
quality  training,  consistent use of industry  recommended  practices and the
retention of experienced  workers.  Precision was the first in the industry to
participate in the mandatory  Alberta Rig Technician  trade, and by the end of
2005, had 427 employees registered in the program.

       While the shortage of labour in the oilfield service industry is widely
known,  emphasis  must be placed on  retention  of  experienced  employees  in
derrickman,  driller  and rig  manager  positions.  A shortage  occurs in high
activity  periods when most of the rig fleet is working.  The service industry
loses  experienced  employees  to  customers,   competitors,   other  oilfield
businesses and to other  industries due to the cyclical nature of the work and
the resulting  uncertainty of continuing  employment.  Precision's  ability to
work an entire  fleet of rigs,  given  Canadian  seasonality,  arises from its
ability to retain experienced employees in low activity periods, orientate new
employees and effectively administer personnel and payroll functions.

LRG CATERING

       LRG Catering provides camp and catering services to the oil and natural
gas  industry  in western  Canada.  LRG  provides  food and  accommodation  to
personnel working at the well site, typically in remote locations.  LRG has 92
conventional  and base  camps,  representing  about 20 percent of the camp and
catering business in western Canada.  LRG's traditional five to six unit camps
can  lodge 25 field  employees  and feed up to 50  workers  daily.  Base  camp
modules can be expanded to feed and accommodate  larger groups of workers when
required.  LRG plans to  increase  its fleet in 2006 to 102 camps by adding 10
new camps.

ROSTEL INDUSTRIES

       Rostel Industries  manufactures and refurbishes custom drilling rig and
service rig components.  This uniquely  positions  Precision with in-house rig
manufacturing  capability.  In  addition  to quality  construction  and repair
services,  Rostel  sustains high plant  utilization  by providing  specialized
services,   including   inspection  and  certification  of  critical  drilling
components  such as overhead  equipment,  well control  equipment and handling
tools. Rostel's expertise extends to having its own in-house engineering group
as well as an equipment  sales group that  specializes in the  distribution of
mud pumps and other imported products.  Strategically,  Rostel gives Precision
the ability to set its own priorities in controlling the work performed on its
equipment.  Precision  has direct  control over  scheduling  and sets delivery
objectives that meet customer requirements.  Rostel designs and builds over 60
percent of the components for Precision's Super Single(R) drilling rigs.

COLUMBIA OILFIELD SUPPLY

       Columbia  Oilfield  Supply is a general  supply  store  that  procures,
packages and distributes large volumes of consumable  oilfield supplies to the
contract  drilling and well servicing  industry.  Most of Columbia's  activity
supports  divisions  of  Precision,   making  it  an  essential  extension  of


                                                                            11
<PAGE>

Precision's purchasing process.  Columbia's key strengths, which contribute to
Precision's competitiveness,  are in inventory management, demand anticipation
and  distribution.  Precision and its customers  also benefit from  Columbia's
purchasing  power,   standardized  product  selection,   streamlined  business
processes  and  coordinated   distribution.   Strategically,   Columbia  gives
Precision  the  ability  to  set  its  own  service  level  priorities  and to
standardize products used on its equipment.  Precision has direct control over
supply distribution to field destinations and this enhances its reliability in
the execution of its operations.

COMPLETION AND PRODUCTION SERVICES

Precision's Completion and Production Services segment is comprised of the
following divisions:

o   Precision  Well  Servicing  ("PWS") - 237  service  rigs - 24  percent  of
    industry

o   Live Well  Service  ("Live  Well") - 26  snubbing  units - 30  percent  of
    industry

o   Precision  Rentals - 3,700 storage tanks,  8,000 joints of specialty drill
    pipe, 4,000 handling tools, 300 wellsite  accommodation units - 15 percent
    of the industry


PRECISION WELL SERVICING

       The Precision Well Servicing  division is Canada's  largest service rig
contractor,  providing  customers with a complete range of oil and natural gas
well services - completions,  workovers,  abandonments, well maintenance, high
pressure and critical  sour well work and  re-entry  preparation.  Precision's
service  rig fleet  completes  all types of new wells and works over  existing
wells to optimize customers' oil and natural gas production. The configuration
of Precision's Well Servicing fleet is illustrated in the following table:

TYPE OF SERVICE RIG                                  2005       2004     2003
==============================================================================
Freestanding mobile single                           88           86       75
------------------------------------------------------------------------------
Mobile single                                        17           19       30
------------------------------------------------------------------------------
Double                                               64           65       57
------------------------------------------------------------------------------
Freestanding mobile double                            8            9        6
------------------------------------------------------------------------------
Mobile double                                        44           42       46
------------------------------------------------------------------------------
Heavy double                                          1            2        9
------------------------------------------------------------------------------
Freestanding slant                                   15           16       16
------------------------------------------------------------------------------
TOTAL FLEET                                         237          239      239

       In 2005, PWS  maintained an industry  market share of almost 24 percent
based on an average  registered  CAODC industry fleet of  approximately  1,009
service rigs in western  Canada.  PWS  continued to upgrade its fleet  through
initiatives   that  included   freestanding   conversions  and  new  five  ton
transporters along with new pump trucks, engines, combination trailers and mud
pumps.  As at  December  31,  2005,  PWS had  111  freestanding  service  rigs
representing  47 percent of its service rig fleet. A freestanding  rig is more
efficient to set up,  minimizes  surface  disturbance and, as there is no need
for  anchors,  reduces  the  possibility  of striking  underground  utilities.
However,  a majority  of the mobile  double rigs are not  freestanding  as the
additional  weight to convert them would limit movement during restricted road
use  periods.  Skid double  rigs are ideal for deeper  natural gas wells which
require multi-zone completion or re-completion.  This type of work usually has
the service rig working for a greater  length of time so that the rig does not
need to be moved as often.

       Well service rigs are typically  operated by a crew of four workers and
a rig manager.  They also include  additional  equipment  such as  circulating
pumps,  tanks,  blowout  preventers  and tools.  These rigs are mobile to meet
industry  call-out demands and can be moved to new locations  quickly and with
relative  ease. In general,  well servicing  activities  are conducted  during
daylight  hours.  PWS  typically  charges its customers an hourly rate for its
services based on a number of  considerations  including  market demand in the
region, the type of rig and complement of equipment required. Service rigs are
typically used during the completion phase of a well, instead of larger,  more
expensive  drilling  rigs, in order to reduce the cost of completing the well.
The demand for well  completion  services  is related to the level of drilling
activity in a region whereas the demand for production or workover services is
based upon the total  number of active  wells,  their age and their  producing
characteristics.  Consequently,  demand for  completion  services is generally


                                                                            12
<PAGE>

more volatile than workover  services.  Completion  services  accounted for 41
percent of PWS's well servicing activity in 2005, as compared to 34 percent in
2004, due to higher drilling activity.

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

       Workover  services are  generally  provided  according to  preventative
maintenance  schedules or on a call-out  basis when a well needs major repairs
or  modifications.  This can  involve  operations  similar to those  conducted
during the initial completion of a well.  Workovers may also involve restoring
or  enhancing  production  in an existing  producing  zone,  changing to a new
producing zone,  converting the well for use as an injection well for enhanced
recovery  operations or plugging and  abandoning the well.  Workover  services
also include major  subsurface  repairs such as casing repair or  replacement,
recovery of tubing and removal of foreign  objects,  such as lost tools,  from
the well bore.  Workover activities may require a few days to several weeks to
complete.  During this time PWS may work  alongside  other  oilfield  services
providers on the well location  while other services are being directed by its
customer.

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

LIVE WELL SERVICE

       The Live Well Service division  currently markets 25 portable hydraulic
rig assist snubbing units and a freestanding unit in western Canada.  Snubbing
units are equipped  with  specialized  pressure  control  devices which allows
tubing to be moved in and out of a wellbore while a well is under pressure and
is intended to reduce  reservoir damage within a natural gas well. Live Well's
snubbing  operations  provide benefits to customers that enable increased well
production rates and higher recoverable  reserves.  A rig assist snubbing unit
requires  a rig  to be on  location  to  hoist  it  into  place.  Live  Well's
proprietary  freestanding  snubbing  unit does not  require a rig to be on the
well location.  It is designed to be  self-sufficient  with automated  tubular
handling and numerous control features to further enhance safe, cost effective
snubbing operations.

       Traditional well servicing operations require the pressure in a well to
be neutralized or killed, prior to performing such operations so that they can
be conducted  safely.  Certain  reservoirs  can be damaged if a well is killed
prior to workover operations,  as the fluids used in the process may cause the
flow characteristics of the reservoir to be impaired.  Consequently,  snubbing
units  have  been  developed  to  perform  certain   workover  and  completion
activities  without  killing  the  well.  Precision  believes  that the use of
snubbing units is increasing as oil and gas companies become more aware of the
potential  risks of  reservoir  damage  that can be avoided by using  snubbing
techniques.  Snubbing  is  typically  performed  on  natural  gas  wells.  The
escalating  trend  toward  higher  natural gas well  drilling and low pressure
production  in the WCSB is having a positive  effect on demand for Live Well's
services.

PRECISION RENTALS

       Precision  Rentals is a leading  provider of oilfield rental  equipment
from multiple operating centres  strategically located in the WCSB. The rental
equipment  offered  by  Precision  Rentals  covers a range of  customer  needs
throughout  the  oil and  natural  gas  drilling,  completion  and  production
process.  Equipment is marketed  through  three  product  categories:  surface
equipment; tubulars and well control equipment; and wellsite accommodations.

       The surface  equipment  category  is  primarily  associated  with fluid
handling and includes tanks, separators,  invert systems,  matting, valves and
other tools.  Tubulars and well control equipment are designed for unique well
specifications.  Tubular equipment is specialty-sized drill pipe; well control
equipment  is  blowout   preventers   and  associated   assemblies.   Wellsite
accommodations  provide offices and lodging for senior personnel and are built
with heavy-duty  skids to facilitate  frequent moves.  Precision  Rentals also


                                                                            13
<PAGE>

supplies the patented  Vapour  Tight Oil  Battery(TM),  which allows for safe,
single well productiOn of oil with H2S content through the use of a 500-barrel
vessel with gas metering and flaring capabilities.

       The inventory of the specialty  tubulars and well control line consists
of  approximately  8,000  joints of specialty  drill pipe and  collars,  4,000
handling tools and well control equipment  (including  blowout  preventers and
diverter  systems).  The wellsite  accommodation  portion of Precision Rentals
consists  of a  fleet  of  approximately  300  fully  equipped  and  furnished
accommodation units.

                                 RISK FACTORS

THE TRUST

       An  investment  in the Trust Units and  Exchangeable  Units  involves a
number of risks including those set forth below.

NATURE OF TRUST UNITS

       The Trust Units do not  represent a  traditional  investment in the oil
and natural gas land  drilling  services  business and should not be viewed as
shares of Precision.  The Trust Units  represent a fractional  interest in the
Trust.  Holders  of Trust  Units do not have  the  statutory  rights  normally
associated with ownership of shares of a corporation  including,  for example,
the right to bring  "oppression"  or  "derivative"  actions.  The Trust's sole
assets  are the  shares  of the  General  Partner,  the PDLP A Units and other
investments  in  securities.  The  price  per  Trust  Unit  is a  function  of
anticipated  distributable  cash,  the  underlying  assets  of the  Trust  and
management's  ability to effect long-term growth in the value of Precision and
other entities now or hereafter owned directly or indirectly by the Trust. The
market  price  of the  Trust  Units  are  sensitive  to a  variety  of  market
conditions  including,  but not limited to, interest rates,  the growth of the
general economy and the price of crude oil and natural gas.  Changes in market
conditions may adversely affect the trading price of the 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 DEPENDENT ON PRECISION FOR ALL CASH AVAILABLE FOR DISTRIBUTIONS

       The Trust is  dependent  on the  operations  and  assets  of  Precision
through its interest in PDLP,  which in turn owns 100 percent of the shares of
Precision and the  Participating  Debt.  Distributions to the holders of Trust
Units and Exchangeable Units are dependent on the ability of Precision to make
principal and interest payments on the  Participating  Debt. The actual amount
of cash available for distribution is dependent upon numerous factors relating
to the  business of  Precision  including  profitability,  changes in revenue,
fluctuations in working capital, capital expenditure levels,  applicable laws,
compliance  with  contracts,   contractual   restrictions   contained  in  the
instruments  governing its  indebtedness,  the impact of interest  rates,  the
growth  of the  general  economy,  the  price of crude  oil and  natural  gas,
weather,   future  capital  requirements,   the  number  of  Trust  Units  and
Exchangeable  Units  outstanding and potential tax liabilities  resulting from
any successful  reassessments of prior taxation years by taxation authorities.
Any reduction in the amount of cash  available for  distribution,  or actually
distributed,  by Precision will reduce or suspend  entirely the amount of cash
available  for  distributions  to the holders of Trust Units and  Exchangeable
Units.  The market  value of the Trust Units may  deteriorate  if the Trust is
unable to meet its distribution  targets in the future, and such deterioration
may be material.

POSSIBLE RESTRICTION ON GROWTH

       The payout of substantially all of Precision's operating cash flow will
make capital and operating  expenditures  dependent on increased  cash flow or
additional  financing  in the  future.  The lack of these  funds  could  limit
Precision's future growth and cash flow which in turn may affect the amount of
distributions.   In  addition,   Precision  may  be  precluded  from  pursuing
acquisitions or investments which may not be accretive on a short-term basis.

POTENTIAL SALES OF ADDITIONAL TRUST UNITS

       The Trust may issue additional Trust Units in the future to directly or
indirectly  fund  capital  expenditure  requirements  of  Precision  and other
entities now or hereafter owned directly or indirectly by the Trust, including
to finance acquisitions by those entities.  Such additional Trust Units may be
issued without the approval of  Unitholders.  Unitholders  have no pre-emptive


                                                                            14
<PAGE>

rights in connection with such additional  issues.  The Board of Trustees have
discretion  in  connection  with the price and the other terms of the issue of
such additional Trust Units.

NATURE OF DISTRIBUTIONS

       Unlike interest payments on an interest-bearing security, distributions
by income  trusts on trust  units  (including  those of the  Trust)  are,  for
Canadian tax purposes,  composed of different  types of payments  (portions of
which may be fully or partially taxable or may constitute non-taxable "returns
of capital"). The composition for tax purposes of those cash distributions may
change over time,  thus  affecting  the  after-tax  return to holders of Trust
Units.  Therefore,  the rate of return  for  holder's  of Trust  Units  over a
defined  period may not be comparable to the rate of return on a  fixed-income
security  that  provides a return on  capital  over the same  period.  This is
because a holder of Trust Units may receive  distributions  that  constitute a
return of capital  (rather than a return on capital) to some extent during the
relevant  period.  Returns on capital are generally taxed as ordinary  income,
dividends  or taxable  capital  gains in the hands of a holder of Trust Units,
while returns of capital are generally  non-taxable to a holder of Trust Units
(but reduce the adjusted cost base in a Trust Unit for tax purposes).

ISSUANCE OF ADDITIONAL TRUST UNITS

       The  Declaration  of Trust provides that an amount equal to the taxable
income of the Trust  will be payable  each year to  holders of Trust  Units in
order to reduce the  Trust's  taxable  income to zero.  Where in a  particular
year, the Trust does not have  sufficient  cash to distribute  such an amount,
the  Declaration  of  Trust  provides  that  additional  Trust  Units  may  be
distributed in lieu of cash payments. Holders of Trust Units will generally be
required to include an amount  equal to the fair  market  value of those Trust
Units in their  taxable  income,  notwithstanding  that  they do not  directly
receive  a  cash   payment.   See  "CERTAIN   CANADIAN   FEDERAL   INCOME  TAX
CONSIDERATIONS  --  TAXATION OF TRUST  UNITHOLDERS"  on pages 47 and 48 of the
Special Meeting Information  Circular which are incorporated by reference into
this Annual Information Form.

VARIABILITY OF DISTRIBUTIONS

       The cash flow  available  for  distribution  is a function  of numerous
factors including:  Precision's financial performance;  the impact of interest
rates; the growth of the general  economy;  the price of crude oil and natural
gas; weather;  debt covenants and obligations;  working capital  requirements;
future capital  requirements;  and the number of Trust Units and  Exchangeable
Units  issued and  outstanding.  Distributions  may be  reduced  or  suspended
entirely  depending  on  Precision's  operations  and the  performance  of its
assets.  The market value of the Trust Units may  deteriorate  if the Trust is
unable to meet its distribution  targets in the future, and that deterioration
may be material.

CHANGES IN LEGISLATION

       There can be no assurance  that income tax laws,  such as the status of
mutual fund trusts,  will not be changed in a manner which  adversely  affects
Trust Unit holders.

       Environmental and applicable operating  legislation may be changed in a
manner which adversely affects holders of Trust Units.

INVESTMENT ELIGIBILITY

       If the Trust ceases to qualify as a mutual fund trust,  the Trust Units
will cease to be  qualified  investments  for  registered  retirement  savings
plans,  registered  retirement  income funds and deferred profit sharing plans
("Exempt  Plans") which will have adverse tax  consequences to Exempt Plans or
their annuitants or beneficiaries. The INCOME TAX ACT (Canada) (the "Tax Act")
imposes  penalties or other tax consequences for the acquisition or holding of
non-qualified investments.

RISKS ASSOCIATED WITH TRUST UNITS FOR NON-RESIDENT HOLDERS OF TRUST UNITS

       For  non-resident  holders  of Trust  Units,  there are  certain  risks
associated  with  holding  Trust  Units.  Non-resident  holders of Trust Units
should  consult  their tax advisors  with respect to the tax  implications  of
holding Trust Units,  including any associated  filing  requirements  in their
particular tax  jurisdiction.  Except as provided  under the heading  "CERTAIN
UNITED  STATES  FEDERAL  INCOME TAX  Considerations"  on pages 51 to 54 of the
Special Meeting  Information  Circular which are incorporated into this Annual
Information  Form by  reference,  neither the Trust nor Precision is providing
any  representations  as to the tax  consequences to  non-residents of holding
Trust Units.


                                                                            15
<PAGE>

QUALIFIED DIVIDEND TREATMENT FOR INDIVIDUAL U.S. HOLDERS OF TRUST UNITS

       The  Trust  expects  that  distributions  it makes to  individual  U.S.
holders of Trust Units that are treated as dividends for U.S.  federal  income
tax purposes  will be treated as qualified  dividend  income  eligible for the
reduced  maximum rate to individuals  of 15% (5% for  individuals in lower tax
brackets).  However,  if the Trust does not  constitute a  "qualified  foreign
corporation"  for U.S.  federal  income  tax  purposes,  and as a result  such
dividends to individual  U.S.  holders of Trust Units, do not qualify for this
reduced maximum rate, such holders will be subject to tax on such dividends at
ordinary income rates (currently at a maximum rate of 35%). In addition, under
current law, the preferential tax rate for qualified  dividend income will not
be available for taxable years beginning after December 31, 2008.  Neither the
Trust  nor  Precision  is  providing  any  representation  as to the U.S.  tax
consequences of holding Trust Units.

DISTRIBUTION OF ASSETS ON REDEMPTION OR TERMINATION OF THE TRUST

       It is  anticipated  that a  redemption  right  will not be the  primary
mechanism for holders of Trust Units to liquidate their investment. Securities
which may be received as a result of a  redemption  of Trust Units will not be
listed on any stock exchange and no market for such  securities is expected to
develop.  The securities so distributed  may not be qualified  investments for
Exempt  Plans,  depending  upon the  circumstances  existing at that time.  On
termination of the Trust,  the Board of Trustees may distribute the securities
directly to holders of Trust Units,  subject to obtaining all of the necessary
regulatory approvals. In addition, there may be resale restrictions imposed by
applicable  law upon the  recipients  of  securities  pursuant to a redemption
right.

DEBT SERVICE

       Precision  and its  affiliates  may,  from  time  to  time,  finance  a
significant  portion  of its  growth  (either  from  acquisitions  or  capital
expenditure  additions)  through debt. Amounts paid in respect of interest and
principal  on debt  incurred  by  Precision  and  its  affiliates  may  impair
Precision's  ability to satisfy its obligations under its debt  instrument(s).
Variations in interest rates and scheduled  principal  repayments could result
in  significant  changes in the amount  required to be applied to service debt
before payment of  inter-entity  debt. This may result in lower levels of cash
for distribution by the Trust.  Ultimately,  subordination agreements or other
debt obligations could preclude distributions altogether.

TAXATION OF THE TRUST

       There can be no assurances  that Canadian  federal  income tax laws and
administrative  policies  respecting  the treatment of mutual fund trusts will
not be changed in a manner which adversely affects the holders of Trust Units.
For example, if the Trust ceases to qualify as a "mutual fund trust" under the
Tax Act, the income tax  considerations  described under the heading  "CERTAIN
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS - TAXATION OF TRUST UNITHOLDERS" on
pages  47  and  48 of the  Special  Meeting  Information  Circular  which  are
incorporated  by  reference  into  this  Annual  Information  Form,  would  be
materially and adversely different in certain respects.

       Currently,  under the Tax Act, a trust will not be  considered  to be a
mutual fund trust if it is  established  or is  maintained  primarily  for the
benefit of non-residents of Canada for the purposes of the Tax Act, unless all
or substantially  all of its property is property other than "taxable Canadian
property" as defined in the Tax Act.

       On September 16, 2004, the Minister of Finance (Canada)  released draft
amendments to the Tax Act including  draft  amendments  providing that a trust
will lose its status as a mutual fund trust if the aggregate fair market value
of all units issued by the trust held by one or more  non-residents  of Canada
or partnerships  that are not "Canadian  partnerships"  (as defined in the Tax
Act) is more  than 50% of the  aggregate  fair  market  value of all the units
issued by the trust  where more than 10% (based on fair  market  value) of the
trust's  property is certain types of "taxable  Canadian  property" or certain
other types of property. If the draft amendments are enacted as proposed,  and
if, at any time, more than 50% of the aggregate fair market value of the Trust
Units are held by non-residents of Canada and non-Canadian  partnerships,  the
Trust may thereafter  cease to be a mutual fund trust. The draft amendments do
not  currently  provide  any means of  rectifying  a loss of mutual fund trust
status.  On December 6, 2004, the Minister of Finance (Canada) tabled a Notice
of Ways and  Means  Motion  to  implement  certain  measures  proposed  in the
September 16, 2004 draft amendments.  However, such notice did not include the
proposal concerning mutual fund trusts maintained primarily for the benefit of
non-residents  of Canada.  In  addition,  the  Minister  of  Finance  (Canada)
announced  on December 6, 2004 as well as in the 2005  Budget  Proposals  that
further discussions would be pursued with the private sector in this respect.


                                                                            16
<PAGE>

       On September 8, 2005,  the  Department of Finance  (Canada)  released a
consultation  paper and launched public  consultations on tax and other issues
related  to  flow-through  entities  ("FTEs").  The focus of the paper was to,
among other things,  assess whether the tax system should be modified.  In the
consultation paper, the Department of Finance identified three possible policy
responses to issues relating to FTEs: (i) limiting  deductibility  of interest
expense  by  operating  entities,  (ii)  taxing  FTEs in a manner  similar  to
corporations,  or (iii) making the income tax system more neutral with respect
to all forms of business  organization by better  integrating the personal and
corporate  income tax system.  On November 23, 2005, the Department of Finance
announced that the  consultation  process was finished and tabled in the House
of  Commons a Notice of Ways and Means  Motion to  implement  a  reduction  in
personal  income tax on dividends with a view to establishing a better balance
between the integrated tax treatment of large  corporations and that of income
trusts.  No measures were  announced  with respect to the taxation of FTEs and
their investors.

       The Declaration of Trust restricts and provides mechanisms to limit the
number  of Trust  Units  held by  non-residents  of  Canada  and  non-Canadian
partnerships   such  that  the  Trust   expects  that  the  existing   imposed
non-resident  ownership  limitations set out in the Tax Act,  discussed above,
will be satisfied.

TAXATION OF PRECISION

       Income  fund   structures   often   involve   significant   amounts  of
inter-entity debt,  generating  substantial interest expense,  which serves to
reduce  earnings  and  therefore  income tax  payable.  The Board of  Trustees
expects this to be the case in respect of Precision  and its interest  expense
on the  Participating  Debt.  There  can be no  assurance  that  the  taxation
authorities  will  not  seek to  challenge  the  amount  of  interest  expense
deducted. If such a challenge were to succeed against Precision, it could have
a materially adverse affect on the amount of distributable cash available.

NET ASSET VALUE

       The net asset  value of the  assets of the Trust from time to time will
vary  depending  upon factors which are beyond the control of  Precision.  The
trading  price of the Trust Units also  fluctuates  due to factors  beyond the
control of Precision and such trading prices may be greater than the net asset
value of the Trust's assets.

RESIDUAL LIABILITY OF PRECISION

       Precision,   the  successor  entity  to  amalgamations   involving  its
predecessor  companies,  has  retained  all  liabilities  of  its  predecessor
companies, including liabilities relating to corporate and income tax matters.

UNITHOLDER LIMITED LIABILITY

       The Declaration of Trust provides that no holder of Trust Units will be
subject to any liability in connection  with the Trust or its  obligations and
affairs and, in the event that a court  determines that holders of Trust Units
are subject to any such liabilities,  the liabilities will be enforceable only
against, and will be satisfied only out of the Trust's assets. Pursuant to the
Declaration  of Trust,  the Trust will indemnify and hold harmless each holder
of Trust Units from any costs,  damages,  liabilities,  expenses,  charges and
losses  suffered by a holder  resulting from or arising out of such holder not
having such limited  liability.  The  Declaration  of Trust  provides that all
written  instruments  signed  by or on  behalf  of the  Trust  must  contain a
provision to the effect that obligations  under those  instruments will not be
binding upon holders of Trust Units personally. Personal liability may however
arise  in  respect  of  claims  against  the  Trust  that do not  arise  under
contracts,  including  claims in tort,  claims for taxes and possibly  certain
other statutory liabilities. The possibility of any personal liability of this
nature  arising is  considered  unlikely.  The  INCOME  TRUSTS  LIABILITY  ACT
(Alberta)  came into force on July 1, 2004.  The  legislation  provides that a
holder of Trust  Units  will not be,  as a  beneficiary,  liable  for any act,
default,  obligation  or  liability  of the  Trustee(s)  that arises after the
legislation came into force.  However, this legislation has not yet been ruled
upon by the Courts.  The  operations of the Trust will be conducted,  upon the
advice of counsel,  in such a way and in such jurisdictions as to avoid as far
as possible any  material  risk of liability to the holders of Trust Units for
claims against the Trust, including by obtaining appropriate insurance,  where
available and to the extent commercially feasible.

DEDUCTIBILITY OF EXPENSES

       Although the Trustees,  the General  Partner of PDLP and  management of
Precision are of the view that all of the expenses claimed by the Trust,  PDLP
and Precision, respectively will be reasonable and deductible, there can be no
assurance  that  the  taxation   authorities   will  agree.  If  the  taxation
authorities successfully challenge the deductibility of any such expenses, the
return to holders of Trust Units may be adversely affected.


                                                                            17
<PAGE>

PRECISION DRILLING LIMITED PARTNERSHIP

       The risks  applicable to holders of  Exchangeable  Units are similar to
those for holders of Trust  Units,  as  Exchangeable  Units are the voting and
economic  equivalent of the Trust Units. For a discussion of such risks, refer
to the heading "RISK FACTORS - THE TRUST" commencing on page 14 hereof.

RISKS ASSOCIATED WITH EXCHANGEABLE UNITS

       None of the Trust,  PDLP or Precision is providing any  representations
as to the tax consequences of holding Exchangeable Units.

INDEMNITY OF LIMITED PARTNERS

       While the  General  Partner  has  agreed  pursuant  to the terms of the
Limited  Partnership  Agreement of PDLP, to indemnify PDLP's limited partners,
including   holders  of  the  Class  A  Limited   Partnership  Units  and  the
Exchangeable  Units,  the General  Partner may not have  sufficient  assets to
honour the indemnity.

RISKS RELATING TO THE BUSINESS CURRENTLY CONDUCTED BY PRECISION

       Certain activities of Precision are affected by factors that are beyond
its control or  influence.  The  Canadian  drilling  rig,  camp and  catering,
service rig,  snubbing,  rentals and related service businesses and activities
of Precision are directly affected by fluctuations in exploration, development
and  production  activity  carried  on by its  customers  which,  in turn,  is
dictated by numerous  factors  including  world energy  prices and  government
policies.  The addition,  elimination or curtailment of government regulations
and  incentives  could have a  significant  impact on the oil and  natural gas
business in Canada.  These  factors  could lead to a decline in the demand for
Precision's services, resulting in a material adverse effect on revenues, cash
flows,  earnings  and cash  distributions  to  Unitholders.  The  majority  of
Precision's  operating costs are variable in nature which minimizes the impact
of downturns on Precision's operational results.

OPERATIONS DEPENDENT ON THE PRICE OF OIL AND NATURAL GAS

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

       Worldwide   military,   political   and  economic   events,   including
initiatives by the Organization of Petroleum Exporting Countries ("OPEC"), may
affect both the demand for,  and the supply of, oil and natural  gas.  Weather
conditions,  governmental regulation (both in Canada and elsewhere), levels of
consumer  demand,  the  availability of pipeline  capacity,  and other factors
beyond  Precision's  control  may also affect the supply of and demand for oil
and natural gas and thus lead to future price volatility.  Precision  believes
that any  prolonged  reduction in oil and natural gas prices would depress the
level of exploration  and production  activity.  This would likely result in a
corresponding  decline in the demand for Precision's services and could have a
material adverse effect on its revenues,  cash flows and profitability.  Lower
oil and natural gas prices could also cause  Precision's  customers to seek to
terminate,  renegotiate or fail to honour Precision's drilling contracts which
could  affect  the fair  market  value of its rig  fleet  which in turn  could
trigger a writedown for accounting  purposes;  which could affect  Precision's
ability to retain  skilled rig personnel;  and which could affect  Precision's
ability to obtain access to capital to finance and grow its businesses.  There
can be no assurance that the future level of demand for  Precision's  services
or  future  conditions  in the  oil and  natural  gas  and  oilfield  services
industries will not decline.


                                                                            18
<PAGE>

COMPETITIVE INDUSTRY

       The oilfield services industry in which Precision operates is, and will
continue to be, very competitive. There is no assurance that Precision will be
able to continue to compete  successfully or that the level of competition and
pressure on pricing will not affect its margins.

CAPITAL OVERBUILD IN THE DRILLING INDUSTRY

       Industry  indications suggest that an additional 100 drilling rigs will
be added by drilling contractors within the WCSB during 2006. This is expected
to increase the  industry  drilling  fleet to 870 rigs.  There is no assurance
that the level of demand for  drilling rig services in the future will be able
to support the  expected  increase in the size of the  industry  drilling  rig
fleet.  Any  decline  in demand for  drilling  services  within  the  services
industry, directly or indirectly related to the current drilling rig expansion
programs, could also lead to a decline in the demand for Precision's services,
resulting in a material  adverse effect on Precision's  revenues,  cash flows,
earnings and cash distributions to Unitholders.

WORKFORCE AVAILABILITY

       Precision's  ability to provide reliable services is dependent upon the
availability of  well-trained,  experienced  crews to operate field equipment.
Precision must also balance the  requirement  to maintain a skilled  workforce
with the need to  establish  cost  structures  that  fluctuate  with  activity
levels.  Within Precision the most  experienced  employees are retained during
periods of low  utilization by having them fill lower level positions on field
crews.  Precision has established  training  programs for employees new to the
oilfield service sector and works closely with industry associations to ensure
competitive  compensation  levels to attract  new  workers to the  industry as
required.  Many of Precision's  businesses are currently experiencing manpower
shortages.  These shortages are likely to be further  challenged by the number
of rigs being added to the industry  along with the entrance and  expansion of
newly formed oilfield service companies.

NEW TECHNOLOGY

       Technological innovation by oilfield service companies has improved the
effectiveness  of the  entire  exploration  and  production  sector  over  the
industry's  history.  Drilling  time has been reduced due to  improvements  in
drill bits,  logging-while-drilling and measurement-while-drilling  tools, and
innovation  changes  in  other  areas  such as mud  systems  and  top  drives.
Precision's ability to deliver services that are more efficient is critical to
continued success.

CUSTOMER MERGER AND ACQUISITION ACTIVITY

       Merger and acquisition  activity in the oil and natural gas exploration
and production sector can impact demand for our services as customers focus on
internal  reorganization  activities  prior to committing funds to significant
drilling and maintenance projects.

BUSINESS INTERRUPTION AND CASUALTY LOSSES

       Precision's  operations  are  subject to many  hazards  inherent in the
drilling,   workover  and  well-servicing   industries,   including  blowouts,
cratering,  explosions,  fires, loss of well control, loss of hole, damaged or
lost drilling  equipment and damage or loss from inclement  weather or natural
disasters.  Any of these  hazards  could  result in personal  injury or death,
damage  to  or  destruction  of  equipment  and   facilities,   suspension  of
operations,  environmental  damage  and  damage  to the  property  of  others.
Generally,  drilling  contracts  provide for the division of  responsibilities
between a drilling  company and its customer,  and  Precision  seeks to obtain
indemnification  from its customers by contract for certain of these risks. To
the extent that  Precision  is unable to transfer  such risks to  customers by
contract or  indemnification  agreements,  Precision seeks protection  through
insurance.   However,   Precision   cannot  ensure  that  such   insurance  or
indemnification  agreements will adequately  protect it against liability from
all of the  consequences of the hazards  described above. The occurrence of an
event not fully insured or indemnified  against,  or the failure of a customer
or insurer to meet its indemnification or insurance obligations,  could result
in substantial  losses.  In addition,  insurance may not be available to cover
any or all of  these  risks,  or,  even if  available,  may  not be  adequate.
Insurance  premiums or other costs may rise significantly in the future, so as
to  make  such  insurance  prohibitively  expensive  or  uneconomic.  This  is
particularly  of  concern  in the wake of the  September  11,  2001  terrorist
attacks in the U.S.  and the severe  hurricane  damage in the U.S.  Gulf Coast
region  in 2005,  both of  which  have  resulted  in  significantly  increased
insurance costs,  deductibles and coverage  restrictions.  In future insurance
renewals,  Precision may choose to increase its self insurance retentions (and
thus assume a greater degree of risk) in order to reduce costs associated with
increased insurance premiums.


                                                                            19
<PAGE>

ENVIRONMENTAL LEGISLATION

       Precision's  operations are subject to numerous laws,  regulations  and
guidelines governing the management,  transportation and disposal of hazardous
substances and other waste materials and otherwise  relating to the protection
of the  environment  and  health  and  safety.  These  laws,  regulations  and
guidelines  include  those  relating  to  spills,   releases,   emissions  and
discharges  of  hazardous   substances  or  other  waste  materials  into  the
environment,  requiring  removal or remediation of pollutants or  contaminants
and imposing civil and criminal  penalties for  violations.  Some of the laws,
regulations and guidelines that apply to Precision's operations also authorize
the recovery of natural resource damages by the government, injunctive relief,
and the imposition of stop,  control,  remediation and abandonment orders. The
costs arising from compliance  with such laws,  regulations and guidelines may
be material to Precision.

       The  trend  in  environmental   regulation  has  been  to  impose  more
restrictions  and limitations on activities  that may impact the  environment,
including  the  generation  and disposal of wastes and the use and handling of
chemical  substances.   These  restrictions  and  limitations  have  increased
operating costs for both Precision and its customers.  Any regulatory  changes
that impose additional environmental restrictions or requirements on Precision
or its customers could adversely affect Precision through increased  operating
costs and potential decreased demand for Precision's services.

       While Precision maintains liability insurance,  including insurance for
environmental  claims, the insurance is subject to coverage limits and certain
of  Precision's   policies  exclude   coverage  for  damages   resulting  from
environmental  contamination.  There can be no assurance  that  insurance will
continue to be available to Precision on commercially  reasonable  terms, that
the possible  types of  liabilities  that may be incurred by Precision will be
covered  by  Precision's  insurance,   or  that  the  dollar  amount  of  such
liabilities  will not  exceed  Precision's  policy  limits.  Even a  partially
uninsured  claim,  if  successful  and of sufficient  magnitude,  could have a
material  adverse  effect on Precision's  business,  results of operations and
prospects.

BUSINESS IS SEASONAL

       In Canada,  the level of activity in the oilfield  service  industry is
influenced by seasonal weather patterns. During the spring months, wet weather
and the spring thaw make the ground unstable. Consequently, municipalities and
provincial  transportation  departments  enforce  road bans that  restrict the
movement of rigs and other heavy equipment,  thereby reducing  activity levels
and placing an increased  level of importance on the location of our equipment
prior to  imposition of the road bans.  Additionally,  certain oil and natural
gas producing areas are located in sections of the WCSB that are inaccessible,
other than  during the  winter  months,  because  the  ground  surrounding  or
containing  the  drilling  sites in these areas  consists of terrain  known as
muskeg.  Until the  muskeg  freezes,  the rigs and other  necessary  equipment
cannot cross the terrain to reach the drilling site.  Moreover,  once the rigs
and other  equipment  have been  moved to a  drilling  site,  they may  become
stranded or  otherwise  unable to  relocate to another  site should the muskeg
thaw unexpectedly. Precision's business results depend, at least in part, upon
the severity and duration of the Canadian winter.

TAX CONSEQUENCES OF PREVIOUS TRANSACTIONS COMPLETED BY PRECISION

       The business and  operations  of Precision  prior to  completion of the
Plan of  Arrangement  had been complex and  Precision has executed a number of
significant financings,  business combinations,  acquisitions and dispositions
over the course of its history.  The  computation of income taxes payable as a
result of these  transactions,  and in particular  those completed  within the
past  five  years,  involves  many  complex  factors  as well  as  Precision's
interpretation  of  relevant  tax  legislation  and  regulations.  Precision's
management  believes  that the  provision  for income tax is  adequate  and in
accordance  with  generally  accepted  accounting  principles  and  applicable
legislation  and  regulations.  However,  there  are a  number  of tax  filing
positions that can still be the subject of review by taxation  authorities who
may successfully  challenge  Precision's  interpretation of the applicable tax
legislation and  regulations,  with the result that additional  taxes could be
payable by Precision and the amount  payable could be up to $300 million.  Any
increase in  Precision's  tax liability  would reduce the funds  available for
distributions on the Trust Units.

CREDIT RISK

       Precision's  accounts receivable are with customers involved in the oil
and natural gas industry,  whose revenues may be impacted by  fluctuations  in
commodity prices. Although collection of these receivables could be influenced
by economic factors affecting this industry,  management considers the risk of
a significant loss due to uncollectible receivables to be remote at this time.


                                                                            20
<PAGE>

POTENTIAL UNKNOWN LIABILITIES

       There may be  unknown  liabilities  assumed  by the Trust  through  its
direct and indirect  interests in Precision,  including those  associated with
prior  acquisitions  and  dispositions  by Precision as well as  environmental
issues or tax issues. Specifically, Precision has provided certain indemnities
to the respective purchasers under the Weatherford Sale Agreement and the CEDA
Sale  Agreement.  The  discovery  of any  material  liabilities  could have an
adverse  affect  on  the  financial  condition  and  results  of  discontinued
operations  of Precision  and, as a result,  the amount of cash  available for
distribution  to  Unitholders.  Precision  is not  aware  of  any  undisclosed
material liabilities.

CAPITAL EXPENDITURES

       The  timing  and  amount of  capital  expenditures  by  Precision  will
directly affect the amount of cash available for  distribution to Unitholders.
The cost of equipment  has  escalated  over the past several years as a result
of, among other things, high input costs. There is no assurance that Precision
will be able to recover  higher  capital costs  through rate  increases to its
customers, and in such event, cash distributions may be reduced.

ACCESS TO ADDITIONAL FINANCING

       Precision may find it necessary in the future to obtain additional debt
or equity  financing  through  the Trust to  support  ongoing  operations,  to
undertake capital expenditures or to undertake  acquisitions or other business
combination transactions.  There can be no assurance that additional financing
will  be  available  to  Precision  when  needed  or on  terms  acceptable  to
Precision.  Precision's  inability  to  raise  financing  to  support  ongoing
operations  or to  fund  capital  expenditures  or  acquisitions  could  limit
Precision's growth and may have a material adverse effect upon Precision.

                     RECORD OF CASH DISTRIBUTIONS/PAYMENTS

       The  following  table sets  forth the  distributions  paid or  declared
payable by the Trust on each Trust  Unit since the  completion  of the Plan of
Arrangement:

<TABLE>
<CAPTION>
                                                                                                AMOUNT
      DISTRIBUTION TYPE                RECORD DATE                PAYMENT DATE              PER TRUST UNIT
================================================================================================================
<S>                                 <C>                        <C>                         <C>
2005
Regular Distribution                November 30, 2005          December 15, 2005                $0.270
Regular Distribution                December 31, 2005           January 17, 2006                $0.270
Special Distribution                December 31, 2005           January 17, 2006                $0.022

2006
Regular Distribution                January 31, 2006           February 15, 2006                $0.270
Regular Distribution                February 28, 2006            March 15, 2006                 $0.270
Regular Distribution                 March 31, 2006              April 18, 2006                 $0.270
</TABLE>

       The  following  table sets forth the amount of payments paid or payable
on each Exchangeable Unit since the completion of the Plan of Arrangement:

<TABLE>
<CAPTION>
                                                                                               AMOUNT
         PAYMENT TYPE                 RECORD DATE                PAYMENT DATE           PER EXCHANGEABLE UNIT
================================================================================================================
<S>                                 <C>                        <C>                         <C>
2005
Regular Payment                    November 30, 2005          December 15, 2005                $0.270
Regular Payment                    December 31, 2005           January 17, 2006                $0.270
Special Payment                    December 31, 2005           January 17, 2006                $0.022

2006
Regular Payment                     January 31, 2006          February 15, 2006                $0.270
Regular Payment                    February 28, 2006            March 15, 2006                 $0.270
Regular Payment                      March 31, 2006             April 18, 2006                 $0.270
</TABLE>

       Historical  distributions  and payments may not be reflective of future
distribution  and  payments,  which  will be subject to review by the Board of
Trustees  taking into account the prevailing  financial  circumstances  of the
Trust at the relevant time. The actual amount  distributed or paid, if any, is
within the discretion of the Board of Trustees.

                                                                            21
<PAGE>

                            DESCRIPTION OF CAPITAL

GENERAL DESCRIPTION OF CAPITAL STRUCTURE

TRUST UNITS

       An unlimited  number of Trust Units may be created and issued  pursuant
to the  Declaration  of Trust.  Each Trust Unit entitles the holder thereof to
one vote at any  meeting of Trust Unit  holders,  or in respect of any written
resolution of Trust Unit holders, and represents an equal undivided beneficial
interest in any distribution from the Trust (whether from income, net realized
capital  gains or other  amounts)  and in any net  assets  of the Trust in the
event of  termination  or winding up of the Trust.  All Trust Units shall rank
among themselves  equally and rateably without  discrimination,  preference or
priority  whatsoever.  Each Trust Unit is transferable,  is not subject to any
conversion or  pre-emptive  rights and entitles the holder  thereof to require
the Trust to redeem any or all of the Trust Units held by such holder.

SPECIAL VOTING UNIT

       Pursuant  to the  provisions  of the  Declaration  of Trust a  "Special
Voting  Unit" was issued to  Computershare  Trust  Company  of Canada,  as the
initial  trustee  (the  "Voting  and  Exchange  Trustee")  under a Voting  and
Exchange Trust Agreement,  which allows the Special Voting Unit to be voted by
the  Voting  and  Exchange  Trustee  for  and  on  behalf  of the  holders  of
Exchangeable  Units.  The Voting and Exchange  Trustee is only entitled to the
number of votes at meetings of Trust Unit holders which is equal to the number
of Exchangeable Units registered and outstanding on the record date in respect
of each meeting. The Voting and Exchange Trustee will be obligated to vote the
Special Voting Unit at meetings of Trust Unit holders pursuant to instructions
of the holders of Exchangeable Units. However, if no instructions are provided
by  holders of  Exchangeable  Units,  the votes  associated  therewith  in the
Special Voting Unit will be withheld from voting.

       For a more  complete  description  of the Trust  Units and the  Special
Voting Unit please refer to pages 57 to 63 of the Special Meeting  Information
Circular  under the heading  "DECLARATION  OF TRUST AND  DESCRIPTION OF UNITS"
which are incorporated by reference into this Annual Information Form.

PRECISION DRILLING LIMITED PARTNERSHIP

       As a result of the Plan of Arrangement, PDLP issued 122,512,799 Class A
Limited Partnership Units to the Trust on November 7, 2005 (the effective date
of the  reorganization  of the  business  of  Precision  into the  Trust).  An
additional  1,840,122  Class A Limited  Partnership  Units were issued between
November 7 and November 22, 2005  inclusive (the last date on which holders of
New Options could exercise their options pursuant to the Plan of Arrangement).
As of  December  31, 2005 and March 30,  2006 there were  124,352,921  Class A
Limited Partnership Units issued to the Trust.

       Also,  as  part of the  Plan  of  Arrangement,  PDLP  issued  1,108,382
Exchangeable Units to certain shareholders of Precision who elected to receive
such  Exchangeable  Units instead of Trust Units. The Exchangeable  Units have
the economic  equivalence  of the Trust Units and the  principal  terms of the
Exchangeable Units are:

o   they are exchangeable for Trust Units on a one-for-one basis at the option
    of the holder;

o   each Exchangeable Unit entitles the holder thereof to receive (in the form
    of a non-interest  bearing loan) cash payments equal to cash distributions
    made by the  Trust  on a Trust  Unit  (and at the  beginning  of the  next
    calendar  year a special  distribution  will be made on each  Exchangeable
    Unit in an  amount  equal to the  outstanding  non-interest  bearing  loan
    accumulated  during  the  previous  year  which will be used to repay such
    accumulated debt);

o   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;

o   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

                                                                            22
<PAGE>

o   there are certain restrictions on the transfer of Exchangeable Units.


       A  more  detailed   description  of  the  attributes  and  restrictions
associated  with  Exchangeable  Units is  provided  on pages 68 through 73 and
Appendix D of the Special  Meeting  Information  Circular  and the  applicable
portions of those pages and that Appendix D are incorporated by reference into
this Annual Information Form.

       In addition to the foregoing, on November 7, 2005, the Trust, PDLP, the
General Partner and Precision  entered into a support  agreement (the "Support
Agreement") which requires the Trust or its affiliates to take all actions and
do all things as are  reasonably  necessary  or desirable to enable and permit
PDLP to meet all of its obligations with respect to the Exchangeable Units and
such  agreement  also  provides  that the Trust  will not,  without  the prior
approval of PDLP and holders of Exchangeable Units:

o   issue or  distribute  Trust Units to the holders of all, or  substantially
    all, of the then outstanding Trust Units by way of distribution; or

o   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

o   issue or  distribute to the holders of all, or  substantially  all, of the
    then outstanding Trust Units;

    o  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);
    o  rights, options or warrants other than those described in the second
       bullet above; or
    o  evidences of indebtedness of the Trust; or
    o  other assets of the Trust,

unless  the  economic  equivalent  on a per  Exchangeable  Unit  basis of such
rights, options,  warrants,  securities,  shares, evidences of indebtedness or
other assets is issued or loaned simultaneously to the holders of Exchangeable
Units.

       A more complete  description  of the Support  Agreement is set forth on
pages 74 and 75 of the Special Meeting Information  Circular under the heading
"Support  Agreement"  which is  incorporated  by  reference  into this  Annual
Information Form.

THE GENERAL PARTNER

       The General Partner of PDLP is a direct wholly-owned  subsidiary of the
Trust.  The  General  Partner  is the  managing  partner  of PDLP  and has the
exclusive  authority to manage the  business and affairs of PDLP,  to make all
decisions regarding the business of PDLP and to bind PDLP.


                             MARKET FOR SECURITIES

TRADING PRICE AND VOLUME OF TRUST UNITS

       The Trust Units were listed for trading on the Toronto  Stock  Exchange
(the "TSX") and the New York Stock  Exchange (the "NYSE") on November 7, 2005,
the date the  reorganization of the business of Precision into an income trust
became  effective.  The Trust Units trade under the trading  symbols PD.UN and
(in U.S.  dollars)  PD.U on the TSX,  and under the trading  symbol PDS on the
NYSE. The following tables set forth the monthly and quarterly price range and
volume traded for the Trust Units on the TSX and NYSE from November 2005 until
March 15, 2006.


                                                                            23
<PAGE>

<TABLE>
<CAPTION>
TSX- PD.UN(1)
(In Canadian dollars, except volume traded amounts)

PERIOD                                    HIGH               LOW               CLOSE           VOLUME TRADED
================================================================================================================
<S>                                      <C>                <C>                <C>             <C>
November                                 39.75              30.50              36.01            33,456,809
December                                 39.35              36.15              38.38            15,612,847
----------------------------------------------------------------------------------------------------------------
Q4 2005                                  39.75              30.50              38.38            49,069,656
----------------------------------------------------------------------------------------------------------------
January                                  40.75              38.00              38.00            13,417,702
February                                 38.95              34.00              35.53            15,792,850
March (2)                                36.50              33.56              35.82             8,121,209
----------------------------------------------------------------------------------------------------------------
Q1 2006                                  40.75              33.56              35.82            37,331,761
----------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:
(1)    Price and volume information is taken from the website maintained by
       the TSX.
(2)    For the period from March 1, 2006 to March 15, 2006.

<TABLE>
<CAPTION>
TSX - PD.U(1)
(In U.S. dollars, except volume traded amounts)

PERIOD                                    HIGH               LOW               CLOSE           VOLUME TRADED
================================================================================================================
<S>                                      <C>                <C>                <C>             <C>
November                                 32.50              25.00              31.34              21,472
December                                 34.41              31.13              32.85              25,202
----------------------------------------------------------------------------------------------------------------
Q4 2005                                  34.41              25.00              32.85              46,674
----------------------------------------------------------------------------------------------------------------
January                                  36.00              32.50              33.67              34,281
February                                 34.00              29.23              31.38              32,745
March (2)                                32.08              28.48              30.79              22,133
----------------------------------------------------------------------------------------------------------------
Q1 2006                                  36.00              28.48              30.79              89,159
----------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:
(1)    Price and volume information is taken from the website maintained by
       the TSX.
(2)    For the period from March 1, 2006 to March 15, 2006.


<TABLE>
<CAPTION>
NYSE - PDS(1)
(In U.S. dollars, except volume traded amounts)

PERIOD                                    HIGH               LOW               CLOSE           VOLUME TRADED
================================================================================================================
<S>                                      <C>                <C>                <C>             <C>
November                                 32.48              25.85              31.18             8,463,800
December                                 34.01              30.92              33.00             4,980,600
----------------------------------------------------------------------------------------------------------------
Q4 2005                                  34.01              25.85              33.00            13,444,400
----------------------------------------------------------------------------------------------------------------
January                                  35.13              33.10              33.53             6,633,100
February                                 34.12              29.79              31.49             9,138,800
March (2)                                32.14              28.84              30.84             4,827,400
----------------------------------------------------------------------------------------------------------------
Q1 2006                                  35.13              28.84              30.84            20,599,300
----------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:
(1)    Price and volume information is taken from the website maintained by
       the NYSE.
(2)    For the period from March 1, 2006 to March 15, 2006.


                                                                            24
<PAGE>

TRADING PRICE AND VOLUME OF THE COMMON SHARES OF PRECISION

       Prior to the  reorganization  of the  business  of  Precision  into the
Trust, the common shares of Precision were listed for trading on the TSX under
the trading  symbol PD and (in U.S.  dollars)  PD.U, and on the NYSE under the
trading symbol PDS. The following table sets forth the monthly price range and
trading  volumes  of the  common  shares  of  Precision  in 2005  prior to the
effective date of the Plan of Arrangement.

<TABLE>
<CAPTION>
TSX - PD(1)
(In Canadian dollars, except volume traded amounts)

PERIOD                                     HIGH              LOW               CLOSE           VOLUME TRADED
================================================================================================================
<S>                                       <C>               <C>                <C>             <C>
January                                   86.30             71.24              84.37             8,333,688
February                                  97.22             83.76              94.47             6,292,605
March                                     97.50             85.40              90.50             7,909,619
April                                     98.14             86.82              90.80             6,209,453
May (2)                                   97.85             44.86              49.30             8,646,055
June                                      52.06             47.30              48.29            28,567,329
July                                      52.00             46.31              51.82            13,915,249
August                                    56.47             50.97              55.67            17,604,880
September                                 60.98             55.68              57.21            31,600,603
October                                   58.00             47.43              54.30            34,585,128
November (3)                              55.45             51.83              54.50            19,546,749
----------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:
(1)    Price and volume information is taken from the website maintained by
       the TSX.
(2)    Precision common shares split on a two-for-one basis on May 18, 2005.
(3)    Ending November 7, 2005, the date on which the Plan of Arrangement
       creating the Trust became effective.

<TABLE>
<CAPTION>
TSX - PD.U(1)
(In U.S. dollars, except volume traded amounts)

PERIOD                                     HIGH             LOW               CLOSE           VOLUME TRADED
================================================================================================================
<S>                                       <C>              <C>                <C>             <C>
January                                   68.78            59.50              66.50                900
February                                  76.00            68.00              75.50                545
March                                     78.00            72.00              74.92               2,050
April                                     77.00            70.00              72.75                800
May (2)                                   78.29            37.00              38.50               1,000
June                                      40.56            38.50              40.00               1,200
July                                      42.10            39.00              41.50               1,700
August                                    46.85            42.50              46.85               1,140
September                                 52.00            47.50              49.00               2,615
October                                   46.00            42.00              42.64               1,025
November (3)                                -                -                  -                   0
----------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:
(1)    Price and volume information is taken from the website maintained by
       the TSX.
(2)    Precision common shares split on a two-for-one basis on May 18, 2005.
(3)    Ending November 7, 2005, the date on which the Plan of Arrangement
       creating the Trust became effective.


                                                                            25
<PAGE>

<TABLE>
<CAPTION>
NYSE - PDS(1)
(In U.S. dollars, except volume traded amounts)

PERIOD                                    HIGH              LOW               CLOSE           VOLUME TRADED
================================================================================================================
<S>                                       <C>              <C>                <C>             <C>
January                                   69.62            57.77              68.20             10,859,200
February                                  78.45            67.89              76.32             11,507,600
March                                     79.69            70.19              74.66             13,673,400
April                                     78.68            69.66              72.17             13,261,400
May (2)                                   39.80            34.64              39.75             13,537,200
June                                      41.64            37.95              39.48             18,147,500
July                                      42.65            38.08              42.06             11,177,700
August                                    47.58            41.80              47.15             16,206,000
September                                 51.72            46.87              49.20             20,784,000
October                                   49.76            40.46              46.00             17,646,600
November (3)                              47.14            45.36              45.98             2,875,400
----------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:
(1)    Price and volume information is taken from the website maintained by
       the NYSE.
(2)    Precision common shares split on a two-for-one basis on May 18, 2005.
(3)    Ending November 7, 2005, the date on which the Plan of Arrangement
       creating the Trust became effective.

                              ESCROWED SECURITIES

       To the  knowledge  of the Board of Trustees  and  Precision's  board of
directors (the "Board of Directors"  and each a "Director"),  no securities of
the Trust are held in escrow.

                  TRUSTEES, DIRECTORS AND EXECUTIVE OFFICERS

       The  following  table  sets  forth,  for each  Trustee of the Trust and
Director and officer of Precision: his name;  municipality,  province or state
and country of residence; all positions and offices now held by him; the month
and year in which he was first  elected a Director or officer;  his  principal
occupation  during the  preceding  five  years;  and the number and percent of
Trust Units and Exchangeable  Units that he has advised are beneficially owned
by him, directly or indirectly, as of the date hereof.

<TABLE>
<CAPTION>
================================================================================================================================
                                                                                                                TRUST UNITS /
                                                                                                            EXCHANGEABLE UNITS
  NAME, MUNICIPALITY,           POSITION        DIRECTOR/                                                    BENEFICIALLY OWNED,
 PROVINCE & COUNTRY OF          PRESENTLY       OFFICER                   PRINCIPAL OCCUPATION                 CONTROLLED OR
       RESIDENCE                 HELD(1)         SINCE                DURING THE PRECEDING 5 YEARS              DIRECTED (2)
================================================================================================================================
<S>                             <C>           <C>             <C>                                           <C>
W.C. (Mickey) Dunn(3)(4)(6)      Director      September      Chairman, True Energy Trust                       15,600 / nil
Edmonton, Alberta, Canada                        1992                                                           0.012% / nil
--------------------------------------------------------------------------------------------------------------------------------
Brian A. Felesky, CM, Q.C.       Director      December       Partner, Felesky Flynn LLP                        2,800 / nil
Calgary, Alberta, Canada                         2005                                                           0.002% / nil
--------------------------------------------------------------------------------------------------------------------------------
Robert J.S. Gibson(3)(4)(5)(6)    Trustee      June 1996      President, Stuart & Company Limited             63,200(7) / nil
Calgary, Alberta, Canada         Director                                                                       0.050% / nil
--------------------------------------------------------------------------------------------------------------------------------
Patrick M. Murray(4)(5)           Trustee      July 2002      Chairman and Chief Executive Officer,             40,000 / nil
Dallas, Texas, USA               Director                     Dresser, Inc.                                     0.032% / nil
--------------------------------------------------------------------------------------------------------------------------------
Frederick W. Pheasey(3)(4)(6)    Director      July 2002      Director of Dreco Energy Services Ltd.            44,000 / nil
Edmonton, Alberta, Canada
--------------------------------------------------------------------------------------------------------------------------------
Robert L. Phillips(3)(4)(6)      Director      May 2004       President and Chief Executive Officer, BCR       5,000(8) / nil
Vancouver, BC, Canada                                         Group of Companies, 2001-2004                     0.005% / nil
--------------------------------------------------------------------------------------------------------------------------------
Hank B. Swartout                 Chairman      July 1987      CEO of Precision since 1985, President of        1,413,579(9) /
Calgary, Alberta, Canada         Director                     Precision 1985-2005                               829,788(10)
                                    CEO                                                                       1.127% / 0.661%
--------------------------------------------------------------------------------------------------------------------------------
H. Garth Wiggins(4)(5)            Trustee      September      Principal, Kenway, Mack, Slusarchuk,              21,100 / nil
Calgary, Alberta, Canada         Director        1997         Stewart, Chartered Accountants                    0.017% / nil
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                            26
<PAGE>

<TABLE>
<CAPTION>
================================================================================================================================
                                                                                                                   TRUST UNITS /
                                                                                                               EXCHANGEABLE UNITS
  NAME, MUNICIPALITY,           POSITION        DIRECTOR/                                                       BENEFICIALLY OWNED,
 PROVINCE & COUNTRY OF          PRESENTLY       OFFICER                      PRINCIPAL OCCUPATION                 CONTROLLED OR
       RESIDENCE                 HELD(1)         SINCE                   DURING THE PRECEDING 5 YEARS              DIRECTED (2)
================================================================================================================================
<S>                             <C>           <C>             <C>                                              <C>
Gene C.  Stahl                  President &    November       Vice President, Precision Rentals 2003 -            28,000 / nil
Calgary, Alberta Canada            Chief         2005         2005, General Manager Ducharme Rentals/Big          0.022% / nil
                                 Operating                    D Rentals 2002 - 2003, Investor Relations
                                  Officer                     Officer, Precision Drilling Corporation
                                                                         2001 - 2002
-------------------------------------------------------------------------------------------------------------------------------
Doug J. Strong                     Chief       November       Chief Financial Officer, Precision                  24,000 / nil
Calgary, Alberta, Canada         Financial       2005         Diversified Services Ltd. 2001 - 2005,              0.019% / nil
                                  Officer                     Group Controller, Precision Drilling 2001 -
                                                              2005, Senior Controller, Precision Drilling
                                                                         1997 - 2001
-------------------------------------------------------------------------------------------------------------------------------
Darren J. Ruhr                     Vice        November       Director, Information Technology, Real              11,000 / nil
Calgary, Alberta, Canada        President,       2005         Estate & Travel, Precision Drilling                 0.009% / nil
                                 Corporate                    Corporation 2003 - 2005, Director,
                                Services &                    Information Technology, Precision Drilling
                                 Corporate                    Corporation 2000 - 2003
                                 Secretary
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:
(1)    Each Director's term of office expires not later than the close of
       business at the next annual meeting, or until successors are appointed
       or Directors vacate their office, and Directors are normally not
       renominated following the earlier of their fifteenth term or 69th
       birthday.
(2)    Percentage of Trust Units and Exchangeable Units beneficially owned is
       calculated based on an aggregate of 125,461,303 Trust Units and
       Exchangeable Units outstanding as of the Effective Date.
(3)    Member of the Corporate Governance and Nominating Committee.
(4)    Member of the Special Committee formed during fiscal 2005.
(5)    Member of the Audit Committee.
(6)    Member of the Compensation Committee.
(7)    8,000 of the Trust Units are held by Stuart & Company Limited, a
       company controlled by Mr. Gibson, and 10,000 Trust Units are held in a
       registered retirement savings plan for the benefit of Mr. Gibson.
(8)    2,000 Trust Units are held by R.L. Phillips Investments Inc., a company
       controlled by Mr. Phillips.
(9)    The Trust Units include 10,541 held in a registered retirement plan for
       the benefit of Mr. Swartout.
(10)   The Exchangeable Units are held by 1201112 Alberta Ltd., a company
       controlled by Mr. Swartout.

           CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS

       No Trustee or Director or officer of Precision has,  within the last 10
years,  been a director or officer of any  reporting  issuer that,  while such
person  was  acting in that  capacity,  was the  subject  of a cease  trade or
similar  order or an order that  denied  the  reporting  issuer  access to any
statutory  exemption  for a period  of more  than 30  consecutive  days or was
declared a bankrupt  or made a  voluntary  assignment  in  bankruptcy,  made a
proposal  under any  legislation  relating to bankruptcy or been subject to or
instituted any proceedings,  arrangement or compromise with creditors or had a
receiver, receiver-manager or trustee appointed to hold assets of that person.

       At March 15,  2006,  the  Trustees,  the  Directors  and the  executive
officers of Precision, as a group, beneficially owned, directly or indirectly,
or exercised control over 1,668,279 Trust Units and 829,788 Exchangeable Units
or  approximately  1.99%  of  the  issued  and  outstanding  Trust  Units  and
Exchangeable Units.

                          AUDIT COMMITTEE INFORMATION

AUDIT COMMITTEE CHARTER

       The  Audit  Committee  Charter  and  Terms  of  Reference  (the  "Audit
Committee  Charter")  of  Precision  is set forth in Appendix 1 of this Annual
Information Form.

COMPOSITION OF THE AUDIT COMMITTEE

       The  Audit  Committee  of  Precision  consists  of  Patrick  M.  Murray
(Chairman), H. Garth Wiggins and Robert J. S. Gibson. The Audit Committee is a
standing committee  appointed by the Board of Directors to assist the Board of
Directors  in  fulfilling  its  oversight  responsibilities  with  respect  to
financial reporting by Precision and the Trust, in its own capacity and in its
capacity as the administrator of the Trust. Each member of the Audit Committee
is independent  and none received,  directly or indirectly,  any  compensation
from  Precision  or the Trust other than for services as a member of the Board
of  Trustees  of the  Trust or the Board of  Directors  of  Precision  and its
committees.  All members of the Audit  Committee are  financially  literate as
defined  in  Multilateral  Instrument  52-110  (4.1)  - AUDIT  COMMITTEES.  In
addition,  the Board of Directors has determined that both Messrs.  Murray and
Wiggins qualify as "audit committee financial experts" as that term is defined
under the United States SARBANES-OXLEY ACT OF 2002.

                                                                            27
<PAGE>

RELEVANT EDUCATION AND EXPERIENCE

       In addition to each member's general business experience, the education
and  experience  of  each  Audit  Committee  member  that is  relevant  to the
performance  of his  responsibilities  as an  Audit  Committee  member  are as
follows:  Patrick M.  Murray  (Chair)  is the  Chairman,  President  and Chief
Executive  Officer of Dresser,  Inc.  Mr.  Murray  received a B.Sc.  degree in
Accounting in 1964 from Seton Hall  University  and an MBA in 1973. Mr. Murray
has been a member of Precision's  Audit  Committee  since April 2003. H. Garth
Wiggins received his Bachelor of Electrical Engineering from the University of
Saskatchewan  in 1970 and his Chartered  Accountant  designation  in 1974. Mr.
Wiggins  is a  Principal  at  Kenway,  Mack,  Slusarchuk,  Stewart,  Chartered
Accountants.  Mr.  Wiggins  has been a member  of the  Audit  Committee  since
September  1997.  Robert J.S. Gibson was educated at the University of Calgary
and the University of Alberta. Mr. Gibson is the President of Stuart & Company
Limited and has been a member of the Audit Committee since June 1997.

PRE-APPROVAL POLICIES AND PROCEDURES

       Under the Audit Committee  Charter,  the Audit Committee is required to
approve the terms of the annual audit  engagement and the  compensation  to be
paid to the external  auditor of the Trust for the annual audit.  In addition,
the Audit  Committee  is  required  to review and  pre-approve  all  permitted
non-audit  services to be provided to the Trust or any affiliated  entities by
the  external  auditors or any of their  affiliates  subject to any DE MINIMUS
exception  allowed by applicable  law. The Audit Committee may delegate to one
or more designated members of the Audit Committee the authority to pre-approve
non-audit services. Non-audit services that have been pre-approved by any such
delegate  must be  presented  to the Audit  Committee  at its first  scheduled
meeting following such pre-approval.

       The Audit  Committee  implemented  specific  procedures  regarding  the
pre-approval  of  services  to be provided  by  Precision's  external  auditor
commencing in 2003. These procedures specify certain prohibited  services that
are not to be performed by the external auditor. In addition, these procedures
require that at least annually,  prior to the period in which the services are
proposed to be provided,  Precision's management will, in conjunction with the
Trust's external auditor, prepare and submit to the Audit Committee a complete
list of all proposed services to be provided to Precision and the Trust by the
external auditor. Under the Audit Committee pre-approval procedures, for those
services  proposed to be provided by the  external  auditor that have not been
previously  approved  by the  Audit  Committee,  the  Chairman  of  the  Audit
Committee  has the  authority to grant  pre-approvals  of such  services.  The
decision to pre-approve a service  covered under this procedure is required to
be presented to the full Audit  Committee at the next  scheduled  meeting.  At
each of the Audit Committee's  regular meetings,  the Audit Committee is to be
provided with an update as to the status of services previously pre-approved.

       Pursuant to these procedures,  since their implementation in 2003, 100%
of each of the services  provided by the Trust's  external auditor relating to
the fees  reported  as  audit,  audit-related,  tax and all  other  fees  were
pre-approved by the Audit Committee or its delegate.

AUDIT FEES

       The following table provides information about fees billed to the Trust
and its affiliates for professional services rendered by KPMG LLP, the Trust's
external auditor, during fiscal 2005 and 2004:

       ============================================================
       (IN THOUSANDS $)
       YEARS ENDED DECEMBER 31,               2005            2004
       ============================================================
       Audit fees                          $ 2,108         $ 2,257
       Audit-related fees                        -              24
       Tax fees                                753             456
       All other fees                           54               5
       ------------------------------------------------------------
       TOTAL                               $ 2,915         $ 2,742
       ------------------------------------------------------------

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

       Audit-related  fees consist of fees for assurance and related  services
that are reasonably  related to the  performance of the audit or review of the
Trust's financial  statements and are not reported as audit fees. In 2004, the
services  provided in this category  related to due diligence  assistance with
respect to an acquisition.

                                                                            28
<PAGE>

       Tax fees consist of fees for tax  compliance  services,  tax advice and
tax  planning.  During  fiscal 2005 and 2004,  the  services  provided in this
category  included  assistance  and advice in relation to the  preparation  of
corporate  income tax returns for the Trust and its  subsidiaries,  tax advice
and planning, commodity tax and property tax consultation.

       In 2005, other fees related to translation of financial  statements and
information  and due diligence  assistance  with respect to a disposition.  In
2004,   other  fees  related  to  translation  of  financial   statements  and
information.

                               LEGAL PROCEEDINGS

       None  of the  Trust,  PDLP  or  Precision  is  involved  in  any  legal
proceedings  that it  believes  might  have a material  adverse  effect on its
business or results of operations of any of the Trust, PDLP or Precision.

          INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

       There were no material interests,  direct or indirect, of the Trustees,
Directors and executive officers of Precision, any Unitholder who beneficially
owns more than 10% of the outstanding  Trust Units or  Exchangeable  Units, or
any known associate or affiliate of such persons,  in any  transaction  within
the last  fiscal year and in any  proposed  transaction  which has  materially
affected or would materially affect the Trust, PDLP or Precision.

           TRANSFER AGENT, REGISTRAR AND VOTING AND EXCHANGE TRUSTEE

       Computershare Trust Company of Canada, located in Calgary,  Alberta, is
the transfer agent and registrar of the Trust Units and the Special Voting and
Exchange Trustee for the holders of Exchangeable  Units. In the United States,
the  co-transfer  agent for the Trust is  Computershare  Trust  Company,  Inc.
located in New York, New York.

                              MATERIAL CONTRACTS

       The only material  contracts  entered into by  Precision,  the Trust or
PDLP during the most  recently  completed  financial  year, or before the most
recently  completed  financial  year  that are  still in  effect,  other  than
contracts during the ordinary course of business, are as follows:

1. Weatherford Sale Agreement; 2. CEDA Sale Agreement; 3. Declaration of
Trust; 4. Limited Partnership Agreement; 5. Voting and Exchange Trust
Agreement; 6. Support Agreement; and 7. Administration Agreement.

       Copies of the material agreements  described as 1 and 2 above have been
filed by Precision  and the  remainder of the  material  agreements  described
above  have  been  filed by the  Trust on SEDAR  and are  available  online at
www.sedar.com.

                             INTERESTS OF EXPERTS

       KPMG LLP, the Trust's  external  auditor,  has prepared an opinion with
respect to the Trust's  consolidated  financial  statements  as at and for the
year ended  December 31,  2005.  In  connection  with the audit of the Trust's
annual financial statements for the year ended December 31, 2005, the auditors
confirmed  that  they are  independent  within  the  meaning  of the  Rules of
Professional Conduct of the Institute of Chartered Accountants of Alberta.

               EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

       As of the fiscal year ended  December 31, 2005,  an  evaluation  of the
effectiveness  of the Trust's  "disclosure  controls and  procedures" (as such
term is  defined  in  Rules  13a-15(e)  and  15d-15(e)  of the  United  States
Securities  Exchange Act of 1934, as amended (the "Exchange Act")) was carried
out by Precision's  Chief Executive  Officer and Chief  Financial  Officer for

                                                                            29
<PAGE>

Precision  on behalf of the  Trust.  Based  upon  that  evaluation,  the Chief
Executive  Officer and Chief  Financial  Officer have concluded that as of the
end of that fiscal year,  the Trust's  disclosure  controls and procedures are
effective to ensure that information  required to be disclosed by the Trust in
reports  that  it  files  or  submits  under  the  Exchange  Act is  recorded,
processed,  summarized and reported  within the time periods  specified in the
Securities and Exchange Commission rules and forms.

       During the fiscal year ended  December 31, 2005,  there were no changes
in the Trust's internal control over financial  reporting that have materially
affected,  or are reasonably likely to materially affect, the Trust's internal
control over financial reporting.

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

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

       Management's  Discussion  and  Analysis  relating  to the  consolidated
financial statements for the fiscal year ended December 31, 2005 forms part of
the Trust's 2005 Annual Report and is incorporated by reference in this Annual
Information Form.  Management's Discussion and Analysis appears on pages 47 to
72 of the 2005 Annual Report.

                            ADDITIONAL INFORMATION

       Additional  information  concerning the Trust is available  through the
Internet  on SEDAR  which may be  accessed  at  www.sedar.com.  Copies of such
information  may also be obtained  without  charge,  on the Trust's website at
www.precisiondrilling.com  or by  request  to the  Vice  President,  Corporate
Services and Corporate  Secretary,  at the offices of Precision at 4200, 150 -
6th  Avenue   S.W.,   Calgary,   Alberta,   Canada   T2P  3Y7;   by  email  at
info@precisiondrilling.com;  by telephone at 403.716.4500; and by facsimile at
403.264.0251.

       Additional  information,  including  information  regarding Precision's
Directors'  and  officers'  remuneration,   is  contained  in  the  Management
Information  Circular  of  the  Trust  provided  for  the  Annual  Meeting  of
Unitholders  of the  Trust  to be held on May 9,  2006.  Additional  financial
information  is  provided  in  the  Trust's  annual   consolidated   financial
statements  and  management's  discussion  and  analysis  for the  year  ended
December 31, 2005,  which are contained in the Annual  Report.  Copies of such
documents may be obtained in the manner set forth above.



                                                                            30
<PAGE>

                                  APPENDIX 1

                AUDIT COMMITTEE CHARTER AND TERMS OF REFERENCE

GENERAL

The purpose of this  document is to  establish  the terms of  reference of the
Audit  Committee  (the "Audit  Committee") of Precision  Drilling  Corporation
("Precision").  The Audit  Committee  is a standing  committee of the board of
directors  of  Precision  (the  "Board of  Directors"  and each a  "Director")
appointed  to assist  the  Board of  Directors  in  fulfilling  its  oversight
responsibilities with respect to financial reporting by Precision,  in its own
capacity  and as the  administrator  for the  Precision  Drilling  Trust  (the
"Trust").

It is critical that the external  audit  function,  a mechanism  that promotes
reliable,  accurate and clear financial  reporting to unitholders,  is working
effectively and efficiently,  and that financial  information is being relayed
to the Board of  Directors,  and  ultimately  by the Board of Directors to the
board of trustees of the Trust (the "Board of Trustees" and each a "Trustee"),
in a timely fashion.  The activities of the Audit Committee are fundamental to
the process.

STATUTORY AND REGULATORY REFERENCES

The  requirement  to have an Audit  Committee is established in Section 171 of
the BUSINESS CORPORATIONS ACT (Alberta) and, in addition, is required pursuant
to the SECURITIES ACT (Alberta) and the U.S.  Securities  Exchange Act of 1934
(the "U.S.  Exchange  Act") for issuers  listed on the New York Stock Exchange
(the "NYSE").

COMMITTEE STRUCTURE

The Board of  Directors  shall elect  annually,  from  members of the Board of
Directors,  an Audit Committee which shall be comprised of not less than three
members,  at least half of which are  resident  Canadians.  All members of the
Audit Committee must be independent  directors (as defined in the rules of the
SECURITIES  ACT (Alberta) and the U.S.  Exchange Act),  every Audit  Committee
member must be  financially  literate  and at least one of those  members must
qualify as a financial  expert as defined in the U.S.  Exchange  Act by having
accounting  or related  financial  management  expertise.  No Audit  Committee
member shall serve on the audit committee of more than three public  companies
without prior  determination by the Board of Directors that such  simultaneous
service does not impair the ability of such Director to serve  effectively  on
the Audit Committee.

Each  member of the Audit  Committee  shall serve  during the  pleasure of the
Board of  Directors  and, in any event only so long as that person  shall be a
Director.  The Directors may fill vacancies in the Audit Committee by election
from among their number.

The Audit  Committee shall have the power to fix its quorum at not less than a
majority of its members and to determine its own rules of procedure subject to
applicable regulatory requirements and any regulations imposed by the Board of
Directors from time to time.

The external  auditor of  Precision  and the Trust will be entitled to receive
notice  of every  meeting  of the  Audit  Committee  and,  at the  expense  of
Precision,  to attend and be heard thereat, and if so requested by a member of
the Audit  Committee,  shall attend every meeting of the Audit  Committee held
during the term of the office of the external auditor. The external auditor of
Precision  and the  Trust or any  member  of the  Audit  Committee  may call a
meeting of the Audit Committee.

PURPOSE

The Audit Committee shall have  responsibility  for overseeing the development
and   maintenance  of  Precision's  and  the  Trust's  systems  for  financial
reporting.  Accounting for  transactions  and internal  control over financial
reporting lies with senior management with oversight  responsibilities  vested
in the Board of Directors. The Audit Committee is a permanent committee of the
Board of  Directors  whose  purpose  is to assist  the Board of  Directors  by
dealing with specific issues including:

                                                                            31
<PAGE>

    o  those that may affect  the  integrity  of  financial  reporting  to the
       holders  of the  units of the  Trust  and  holders  of Class B  Limited
       Partnership Units of Precision Drilling Limited  Partnership  (together
       the  "Unitholders")  and  the  investment  community,   accounting  and
       internal controls;

    o  Precision's  and the  Trust's  compliance  with  legal  and  regulatory
       requirements as they relate to financial reporting matters;

    o  the external auditor's qualifications and independence;

    o  the performance of Precision's and the Trust's  internal audit function
       and its external auditor; and

    o  conducting an evaluation of the external  auditor's  qualifications and
       independence.

COMMITTEE RESPONSIBILITIES

The Audit Committee shall:

    o  review the annual  financial  statements of the Trust and related notes
       and management's  discussion and analysis  ("MD&A")  component 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;

    o  review the interim financial  statements of the Trust and related notes
       and MD&A component prepared for distribution to the Unitholders and the
       investment community;

    o  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 in the point above, and must periodically assess
       the adequacy of those procedures;

    o  assess the external auditor's  performance 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;

    o  report  through  the  Chairman of the Audit  Committee  to the Board of
       Directors  following  each meeting of the Audit  Committee.  The report
       would outline the nature of discussions and the major decisions reached
       by the Audit Committee;

    o  recommend  to  the  Board  of  Directors  the  external  auditor  to be
       appointed  as  the  auditor  of   Precision   and  the  Trust  and  the
       compensation of such external auditor;

    o  require the external auditor to report directly to the Audit Committee;

    o  pre-approve  all  non-audit  services  to be  provided  to  the  Trust,
       Precision or any subsidiary entities by the external auditor. The Audit
       Committee  may  delegate  to the  Chairman of the Audit  Committee  the
       authority to pre-approve  non-audit  services.  Non-audit services that
       have been  pre-approved  by the Chairman of the Audit Committee must be
       presented  to the  Audit  Committee  at  its  first  scheduled  meeting
       following such pre-approval;

    o  review  and  discuss  with  management  and the  external  auditor,  as
       applicable,  (a)  major  issues  regarding  accounting  principles  and
       financial statement  presentations including any significant changes in
       the Trust's  selection or  application  of accounting  principles,  and
       major  issues as to the adequacy of the Trust's  internal  controls and
       any  special  audit  steps   adopted  in  light  of  material   control
       deficiencies;  (b)  analyses  prepared by  management  or the  external
       auditor  setting  forth  significant  financial  reporting  issues  and
       judgments  made in  connection  with the  preparation  of the financial
       statements,  including analyses of the effects of alternative  Canadian
       Generally  Accepted  Accounting  Principles  ("GAAP")  methods  on  the
       financial  statements;  (c)  any  management  letter  provided  by  the
       external  auditor  and the  Trust's  response  to that letter and other
       material  written   communication  between  the  external  auditor  and


                                                                            33
<PAGE>

       management;  (d) 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;   (e)  the  effect  of  regulatory  and  accounting
       initiatives,  as  well  as  any  off-balance  sheet  structures  on the
       financial  statements  of the Trust;  and (f) 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  (generally on a case-by-case  basis) provided to analysts and
       rating agencies.

    o  discuss with management  Precision's major financial risk exposures and
       the steps  management has taken to monitor and control such  exposures,
       including Precision's risk assessment and risk management policies;

    o  annually  request  and  review  a  report  from  the  external  auditor
       regarding (a) the external auditor's  quality-control  procedures,  (b)
       any material issues raised by the most recent quality-control review or
       peer  review  of  the  firm,  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,  (c) any steps  taken to deal with any such  issues,  and (d) all
       relationships between the external auditor and Precision or the Trust;

    o  evaluate  the  qualifications,  performance  and  independence  of  the
       external auditor, including a review and evaluation of the lead partner
       of the external  auditor and set clear hiring policies for employees or
       former employees of the external auditor;

    o  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;

    o  discuss  with  management  and  the  external  auditor  any  accounting
       adjustments  that were noted or  proposed by the  external  auditor but
       were not adopted (as immaterial or otherwise);

    o  establish  procedures  for (a) the receipt,  retention and treatment of
       complaints  received  by  the  Trust  regarding  accounting,   internal
       controls  or  auditing  matters,  and (b) the  confidential,  anonymous
       submission by employees of Precision of concerns regarding questionable
       accounting or auditing matters;

    o  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  Precision  and the Trust is unbiased  and
       non-selective;

    o  review  the  MD&A  component  of the  Trust's  Annual  Report  and  the
       quarterly reports;

    o  take  steps to ensure  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  and
       periodically assessing the adequacy of those procedures;

    o  prepare any report required by law, regulations or exchange requirement
       to be included in the Trust's periodic reports;

    o  meet at least four times a year on a quarterly basis or more frequently
       as circumstances  require,  and at least annually with the internal and
       external auditor of Precision and the Trust;

    o  report regularly to the Board of Directors;

    o  review  planning for, and the results of, the annual external audit and
       solely approve:

       o   the  external  auditor's  engagement  letter as agreed  between the
           external  auditor and  financial  management  of Precision  and the
           Trust;

                                                                            33
<PAGE>

       o   the  reasonableness  of audit fees as agreed  between the  external
           auditor and corporate management;
       o   audit  scope,  including  locations  to be visited,  areas of audit
           risk,   materiality  as  it  affects  audit  judgment,   timetable,
           deadlines, coordination with internal audit;
       o   the audit report to Unitholders  and the  investment  community and
           any other reports prepared by the external auditor;
       o   the  informal  reporting  from the external  auditor on  accounting
           systems and internal controls, including management's response;
       o   non-audit related services provided by the external auditor;
       o   assessment of the external auditor's performance; and
       o   the   external   auditor's   appointment   or   re-appointment   or
           replacement;

    o  review and  evaluate  the  scope,  risk  assessment,  and nature of the
       internal audit plan and any subsequent changes;

    o  consider and review the following  issues with  management and the head
       of internal audit;

       o   significant  findings  of the  internal  audit  group  as  well  as
           management's response to them;
       o   any  difficulties  encountered  in the  course  of  their  internal
           audits,  including any  restrictions  on the scope of their work or
           access to required information;
       o   the internal auditing budget and staffing;
       o   the Audit Services Charter; and
       o   compliance with the Institute of Internal  Auditors'  Standards for
           the Professional Practice of Internal Auditing;

    o  approve the appointment,  replacement,  or dismissal of the head of the
       internal audit group; and

    o  direct the head of the  internal  audit  group to review  any  specific
       areas the Audit Committee deems necessary.

In  addition,   the  Audit  Committee  shall  hold  in-camera   meetings  with
representatives  of the external  and  internal  auditors to discuss the audit
related issues including the quality of accounting personnel.

The Audit  Committee  shall have such other powers and duties as may from time
to time by resolution be assigned to it by the Board of Directors.

The Audit Committee shall also carry out an annual  performance  evaluation of
such  committee  and review and reassess  annually the adequacy of the Charter
and Terms of Reference and recommend  changes,  as appropriate to the Board of
Directors.

COMMITTEE AUTHORITY

The Audit Committee shall have the authority, to the extent it deems necessary
or appropriate,  to retain special legal,  accounting or other  consultants to
advise  the Audit  Committee  and  carry out its  duties,  and to  conduct  or
authorize    investigations   into   any   matters   within   its   scope   of
responsibilities.  The Audit Committee shall have the authority to set and pay
the compensation for any advisors employed by the Audit Committee.

The Audit  Committee  may request any  officer or  employee  of  Precision  or
Precision's or the Trust's outside counsel or external or internal auditors to
attend a meeting of the Audit  Committee  or to meet with any  members  of, or
consultants to the Audit Committee.

The Audit  Committee  shall review its Charter and Terms of Reference  and, as
required, propose changes to the Board of Directors.

The Audit Committee shall have the authority to communicate  directly with the
internal and external auditor.

                                                                            34
<PAGE>

LIMITATION OF AUDIT COMMITTEE'S ROLE

While the Audit Committee has the responsibilities and powers set forth in its
Charter,  it is not the  duty of the  Audit  Committee  to  prepare  financial
statements,  plan or conduct audits or to determine that the Trust's financial
statements  and  disclosures  are complete and accurate and are in  accordance
with GAAP and applicable rules and regulations. These are the responsibilities
of management and the external auditor.

UPDATED AND APPROVED BY THE AUDIT COMMITTEE MARCH 7, 2006





                                                                            35
<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS

       The Management's Discussion and Analysis, prepared as at March 7, 2006,
focuses on key statistics  from the  Consolidated  Financial  Statements,  and
pertains to known risks and  uncertainties  relating to the oilfield  services
sector. This discussion should not be considered all-inclusive, as it excludes
changes  that may  occur in  general  economic,  political  and  environmental
conditions.  Additionally,  other  elements  may or may not occur  which could
affect Precision Drilling Trust (the "Trust" or "Precision") in the future. In
order to obtain the best overall  perspective,  this discussion should be read
in  conjunction  with the  material  contained  in other  parts of this annual
report,   including  the  "Cautionary   Statement  Regarding   Forward-looking
Information  and  Statements"  on page 2, the audited  Consolidated  Financial
Statements and the related notes.  The effects on the  Consolidated  Financial
Statements   arising  from  differences  in  generally   accepted   accounting
principles  (GAAP)  between Canada and the United States are described in Note
16 to the Consolidated  Financial Statements.  Additional information relating
to the Trust, including the Annual Information Form, has been filed with SEDAR
and is available  at  www.sedar.com.  With the  conversion  of the  continuing
assets and businesses of Precision Drilling  Corporation to an income trust on
November  7,  2005  pursuant  to a plan  of  arrangement,  the  Trust,  as the
successor in interest to Precision  Drilling  Corporation,  has been accounted
for as a continuity of interest.  Commencing  with the year ended December 31,
2005 and the  comparables  for the quarterly and annual  periods for the years
ended December 31, 2004 and 2003, the consolidated financial statements of the
Trust reflect the financial position,  results of operations and cash flows as
if the Trust  had  always  carried  on the  business  formerly  carried  on by
Precision Drilling Corporation.

HIGHLIGHTS

<TABLE>
<CAPTION>
(STATED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER UNIT/SHARE AMOUNTS, WHICH ARE PRESENTED ON A DILUTED BASIS)
----------------------------------------------------------------------------------------------------------------------------
                                                     INCREASE                             Increase
YEARS ENDED DECEMBER 31,                   2005    (DECREASE)    % CHANGE         2004   (Decrease)   % Change        2003
----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>           <C>          <C>         <C>          <C>         <C>          <C>
Revenue                               1,269,179       240,691          23    1,028,488      113,318         12     915,170
Operating earnings(1)                   465,378       134,065          40      331,313       78,864         31     252,449
Earnings from continuing operations     220,848        32,717          17      188,131       43,983         31     144,148
Discontinued operations               1,409,715     1,350,442       2,278       59,273       22,947         63      36,326
Net earnings                          1,630,563     1,383,159         559      247,404       66,930         37     180,474
Earnings per unit/share from
     continuing operations                 1.76          0.15           9         1.61         0.30         23        1.31
Net earnings per unit/share               13.00         10.89         516         2.11         0.48         29        1.63
Cash flow from continuing operations    203,101      (84,720)        (29)      287,821       86,900         43     200,921
Net capital spending from
     continuing operations              140,077        26,180          23      113,897       29,039         34      84,858
Distributions to unitholders             70,510        70,510         N/A            -            -          -           -
Distributions per unit                     0.56          0.56         N/A            -            -          -           -
============================================================================================================================
</TABLE>

(1) OPERATING  EARNINGS IS NOT A RECOGNIZED  MEASURE UNDER CANADIAN  GENERALLY
    ACCEPTED  ACCOUNTING  PRINCIPLES  (GAAP).   MANAGEMENT  BELIEVES  THAT  IN
    ADDITION TO NET  EARNINGS,  OPERATING  EARNINGS  IS A USEFUL  SUPPLEMENTAL
    MEASURE AS IT  PROVIDES AN  INDICATION  OF THE  RESULTS  GENERATED  BY THE
    TRUST'S PRINCIPAL BUSINESS  ACTIVITIES PRIOR TO CONSIDERATION OF HOW THOSE
    ACTIVITIES ARE FINANCED OR HOW THE RESULTS ARE TAXED.  INVESTORS SHOULD BE
    CAUTIONED,  HOWEVER, THAT OPERATING EARNINGS SHOULD NOT BE CONSTRUED AS AN
    ALTERNATIVE  TO NET  EARNINGS  DETERMINED  IN  ACCORDANCE  WITH GAAP AS AN
    INDICATOR OF PRECISION'S  PERFORMANCE.  PRECISION'S  METHOD OF CALCULATING
    OPERATING  EARNINGS  MAY DIFFER  FROM  OTHER  ENTITIES  AND,  ACCORDINGLY,
    OPERATING  EARNINGS  MAY NOT BE  COMPARABLE  TO  MEASURES  USED  BY  OTHER
    ENTITIES.

                                                                            36
<PAGE>

<TABLE>
<CAPTION>
FINANCIAL POSITION AND RATIOS
(STATED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT RATIOS)

Years ended December 31,                                           2005             2004              2003
-------------------------------------------------------------------------------------------------------------
<S>                                                         <C>              <C>               <C>
Working capital                                             $   152,754      $   557,311       $   248,994
Working capital ratio                                               1.4              2.5               1.6
Long-term debt(1)                                           $    96,838      $   718,850       $   399,386
Total assets                                                $ 1,718,882      $ 3,852,049       $ 2,932,030
Long-term debt to long-term debt plus equity(1)                    0.08             0.24              0.19
Long-term debt to cash flow from continuing operations(1)           0.5              2.5               2.0
Interest coverage(2)                                               15.9              7.2               7.4
=============================================================================================================
</TABLE>

(1)  EXCLUDES CURRENT  PORTION OF LONG-TERM  DEBT WHICH IS INCLUDED IN WORKING
     CAPITAL.
(2)  OPERATING EARNINGS DIVIDED BY NET INTEREST EXPENSE.

       The year 2005 was a period of significant  change at Precision.  In the
second  quarter,  Precision  entered  into an  agreement  to sell  its  Energy
Services  and  International   Contract  Drilling   divisions  to  Weatherford
International  Ltd.  ("Weatherford").  This  transaction  closed on August 31,
2005. As well,  Precision  sold its  industrial  plant  maintenance  business,
carried on by CEDA, on September 13, 2005.  In  conjunction  with funding from
the above transactions, Precision repaid its outstanding debentures on October
17, 2005.

       On November 7, 2005 Precision  completed its conversion  into an income
trust pursuant to a plan of arrangement. As part of this conversion, Precision
made a special cash payment of $844 million and transferred  almost 26 million
shares of Weatherford  valued at $2.0 billion to  shareholders.  The resulting
reduction to retained earnings was $2.9 billion.

       Underlying   all  this  change,   the  continuing   Canadian   business
operations, our foundation,  enjoyed a banner year. The continued world demand
for crude oil and the related high commodity prices in combination with record
high North American natural gas prices, manifested itself into a record 24,805
wells  being  drilled  in  the  Western  Canada  Sedimentary  Basin  ("WCSB").
Precision  was able to leverage  off this  demand  through  improved  pricing,
higher equipment  utilization and effective cost control,  resulting in a $134
million or 40 percent  increase in operating  earnings from 2004 to 2005. This
strong performance  followed a $79 million or 31 percent increase in operating
earnings from 2003 to 2004.

       Despite record setting  business  fundamentals  in 2005,  earnings from
continuing  operations  before  income  taxes  amounted to $293 million for an
increase  of just one  percent  over the  prior  year.  Results  for 2005 were
reduced by one time items in the amount of $72 million for the premium paid on
early bond redemption,  $71 million for the loss on disposal of the short-term
investment related to the 68-day holding period on the 26 million  Weatherford
shares and $18 million in reorganization  costs associated with the conversion
to an income  trust.  With the income  trust  conversion  on  November 7, 2005
subsequent  earnings  have  benefited  from a  lower  tax  rate  as the  trust
structure has the effect of shifting the income tax burden to unitholders.

       The strategic  decision to dispose of Energy Services and International
Contract  Drilling as well as CEDA has had a significant  impact on Precision.
First,  it  resulted  in a gain  on  disposal  of  $1.3  billion  within  2005
discontinued earnings.  Second,  Precision's underlying total asset base as at
December 31, 2005  contracted  by 55 percent from $3.9 billion in 2004 to $1.7
billion in 2005.  Third,  Precision's  employee  workforce  was  reduced  from
approximately  12,000  in more than 25  countries  to 6,500  employees  in one
country, Canada.

       Consistent  with the new  business  footprint,  Precision  appointed an
experienced management team at the executive and functional corporate level to
effectively  manage the business as it moves forward.  The new management team
was appointed from within the continuing business  divisions,  with transition
leadership  provided by the founding  Chairman and Chief Executive  Officer of
Precision, Mr. Hank Swartout.

       With the  conversion  to an income trust,  Precision  moved from a cash
retention  business model to a cash flow-through  model with the adoption of a
policy to make regular monthly cash distributions to unitholders. Precision is
a mature organization that operates in a cyclical industry with sharp seasonal
swings in revenue levels.  The actual cash flow available for  distribution to
unitholders is a function of numerous factors including financial performance,
debt  covenants  and  obligations,  working  capital  requirements  as well as
maintenance and expansion capital expenditure requirements for the purchase of
property, plant and equipment. The capital resources available to Precision as
at December 31, 2005 are strong, with positive working capital of $153 million
and long-term  debt of $97 million drawn on the $550 million  syndicated  loan
facility.

       The  Canadian  business  platform  has always  been the  foundation  of
Precision.   With  the  contraction  in  scope  to  our  business  roots,  our
operational  focus  is set on  Canada.  Strategically,  Precision  expects  to
maintain  and build upon our core group of people,  augment  the  services  we
provide our customers,  passionately  pursue our Target Zero safety vision and
continue to grow and be profitable. Precision has set its sights on the market
place,  with a view to participate in market growth  throughout  North America
and with a longer term  objective to consolidate  higher cost,  less efficient
competitors.

                                                                            37
<PAGE>

<TABLE>
<CAPTION>
SUMMARY OF INCOME STATEMENT
(STATED IN THOUSANDS OF CANADIAN DOLLARS)
Years ended December 31,                                           2005             2004              2003
----------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>               <C>
Operating earnings (loss)
         Contract Drilling Services                        $    404,385     $    282,315      $    218,012
         Completion and Production Services                     121,643           77,074            48,706
         Corporate and Other                                   (60,650)         (28,076)          (14,269)
----------------------------------------------------------------------------------------------------------
                                                                465,378          331,313           252,449
Interest, net                                                    29,270           46,280            34,066
Premium on redemption of bonds                                   71,885                -                 -
Loss on disposal of short-term investments                       70,992                -                 -
Gain on disposal of investments                                       -          (4,899)           (1,493)
----------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes         293,231          289,932           219,876
Income taxes                                                     72,383          101,801            75,728
----------------------------------------------------------------------------------------------------------
Earnings from continuing operations                             220,848          188,131           144,148
Discontinued operations                                       1,409,715           59,273            36,326
Net earnings                                               $  1,630,563     $    247,404      $    180,474
==========================================================================================================
</TABLE>

ECONOMIC DRIVERS OF THE GLOBAL OILFIELD SERVICES BUSINESS

       In Canada,  the  economics of an oilfield  service  company  align with
global and regional  fundamentals  as described in the paragraphs that follow.
Important regional drivers for the oilfield service business in Canada include
the  underlying  hydrocarbon  make-up  of the  WCSB  and the  existence  of an
established,   competitive  and  efficient  oilfield  service  infrastructure.
Increasingly,  natural gas production is driving  economics within the WCSB as
approximately 75 percent of new well completions in 2005 were targeted towards
natural gas. In general terms,  drilling activity in the WCSB is split between
the provinces with 75 percent in Alberta,  15 percent in British  Columbia and
the remaining 10 percent in Saskatchewan.  At present,  the activity levels in
northern  Canada and areas east are  relatively  low.  Areas in Canada's north
hold  significant  promise  for the  future as  pipeline  and local  community
relations are established.  The Canadian  oilfield service industry dates back
to the 1940s and has given  Canada the means to develop  its  reserves to meet
domestic  consumption and to provide large export  capacity,  primarily to the
United States.

       The hydrocarbon  structure of the WCSB is world class in its diversity.
Conventional  sources of oil and natural gas reservoirs  exist at a variety of
depths which are comparatively shallow by global standards. These conventional
sources are accompanied by more costly and challenging  reservoirs  associated
with oil sands,  heavy oil,  coal bed methane or natural gas in coal and tight
natural  gas in deeper  formations.  These  sources of energy  border with the
largest consumer of hydrocarbons in the world, the United States.

       Crude oil and  natural  gas are the  primary  sources  of energy in the
world.  As history has proven,  it takes  decades if not centuries to displace
energy sources.  As a result,  hydrocarbon  production will remain critical to
the world's energy needs for the foreseeable future, with demand forecasted by
many to continue to increase, as illustrated below.

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

       These  activities   include  acquiring  access  to  prospective  lands,
shooting  seismic to detect the  presence of  hydrocarbon-bearing  structures,
drilling  wells and measuring  the  characteristics  of subsurface  geological
formations.   Exploration  and  production  companies  hire  oilfield  service
companies  to perform  the  majority  of these  services.  The  revenue for an
oilfield  service company is part of an exploration  and production  company's
finding and development costs.

       Providing  these oilfield  services  incorporates  three main elements:
people, technology and equipment. Attracting, training and retaining qualified
employees is the single biggest  challenge for a service company.  Exploration
and production  activities are taking place in an ever  increasing  variety of
surface  and  subsurface   conditions.   Developing  technology  and  building

                                                                            38
<PAGE>

equipment that can withstand  increasing  physical challenges and operate more
efficiently is required to maintain and improve the economics of crude oil and
natural gas production. The primary economic risks assumed by oilfield service
companies  are  the   volatility  of  activity   levels  that  translate  into
utilization rates for its investment in people,  technology and equipment, and
cost control to maximize the margins earned.

       The  economics  of a service  company  are thus  largely  driven by the
current and expected  price of crude oil and natural gas, which are determined
by the  supply  and  demand  for  these  commodities.  Since  crude oil can be
transported  relatively  easily, it is priced in a worldwide market,  which is
influenced by a wide array of economic and political  factors.  Natural gas is
priced in more local markets due to the  requirement to transport this gaseous
product in pressurized  pipelines,  although this is changing  slowly with the
emergence of liquefied natural gas ("LNG"). North America will need to compete
on a global basis to secure access to LNG supplies as demand in other parts of
the world continues to rise.

       Although,  as  illustrated,  crude  oil and  natural  gas  prices  have
historically been quite volatile,  the upward trend since 2002 has endured and
resulted in very high commodity price levels to exit 2005. Certainly,  weather
was a factor in the Gulf of Mexico this past hurricane  season, as Katrina and
others  caused  tremendous  damage to production  infrastructure  and caused a
spike in commodity  pricing during  September 2005. These events highlight the
narrow tolerance and lack of surplus capacity to compensate for oil or natural
gas production that may suddenly go off-line. The supply and demand balance is
narrow and  significant  industry  reinvestment is required to add and replace
old  infrastructure.  Many industry observers believe that a new pricing floor
is being set due to the pace of production  decline in combination with demand
growth projections. Clearly, hydrocarbons are a non-renewable resource that is
more costly and  difficult to discover and  develop.  West Texas  Intermediate
(WTI) oil prices  averaged  US$56 per barrel  during  2005,  an increase of 37
percent over the 2004 average of US$41 per barrel.  Oil prices  continue to be
affected by  political  instability  in some OPEC member  nations  (Venezuela,
Iraq,  Nigeria and Iran) and from a  strengthening  world  economy with energy
demand growth particularly strong in China, India and Southeast Asia.

       Consistent with  commentary  over the past three years,  North American
natural  gas prices are also being  supported  by strong  fundamentals.  North
American  Henry Hub  natural  gas prices  surged 45 percent in 2005  averaging
US$8.96 per mmbtu,  an  increase  of US$2.78  per mmbtu over 2004.  Demand for
natural gas is increasing  with economic  growth while supply from  relatively
mature producing basins is continuing to gradually  decline.  The record North
American  drilling  levels  over the past three  years have served to slow the
decline in the production rate and this situation is not expected to change in
the near future.  High oil prices also serve to support  natural gas prices as
the economic benefits of switching between the two fuels is minimal. The graph
at left demonstrates decline rates in natural gas production in Alberta.

       The  graph at the top of page 52 shows  that the  number  of  producing
natural  gas wells has  dramatically  increased  over the past  decade.  This,
coupled  with the  previous  graph,  which  indicates  natural gas  production
remains flat with high decline rates, suggests that more wells are required to
be drilled in order to meet North American supply needs.  This situation could
be further  magnified if the demand for natural gas  continues to  strengthen.
The demand for crude oil and natural gas is forecast to increase over the next
two decades.

       Over the last  decade,  customers in North  America have shifted  focus
from crude oil and are pursuing  alternatives  such as natural  gas,  coal and
nuclear  power,  looking for cleaner  sources of energy.  The  parameters  for
natural gas, however, remain the strongest as it is a proven,  environmentally
efficient energy source with infrastructure in place. Other sources of natural
gas such as coal bed methane will be required in western Canada to replace the
production decline in sweet and sour natural gas wells in the WCSB.

       In  spite  of  record  drilling  activity,   production  levels  remain
relatively  flat.  The trend in recent years is for customers to drill shallow
gas wells within existing reservoirs to exploit reserves. This is supported by
the fact that over 75 percent of the  natural  gas wells  drilled in 2005 were
shallow wells.  The shallow wells are quick,  easy finds with relatively rapid
declines in production rate.

       Reserve to  production  ratios,  which are an indication of how quickly
reserves are  depleting,  are  beginning to flatten  after a period of decline
starting  in the  1990s.  The end  result  of these  trends  is that  drilling
activity must stay the same or increase to allow current  production levels to
be maintained.  This situation is leading  producers to drill deeper  resource
plays to extend their natural gas reserve life index.  Increasingly,  industry
is looking for the next big,  prolific natural gas field. This situation bodes
well for the oilfield  service  industry  and  Precision's  contract  drilling
services  segment,  in particular,  with respect to its  overweighting in deep
drilling rig capacity.

       The graph at left depicts the increase in natural gas completions  over
the past eleven years and its direct  correlation  to natural gas pricing.  To
begin  2006,  we are  experiencing  the  effects of having  record  amounts of
natural gas in storage as we close out the winter heating season.  Natural gas
prices are falling  because of the warmer  weather  that is being  experienced
throughout North America.  It is important to consider that natural gas prices
are still more than triple the US$2.00 per mmbtu average seen in the 1990s. We
also have to be  cognizant  of the fact that there is a lead time to drill and
tie-in new discoveries. Even with commodity price declines, it is questionable
whether customers in the short term will slow down exploration and development
given demand growth. Conversely, the lower natural gas prices will most likely
lead to additional consumption.

                                                                            39
<PAGE>

       Precision is the industry  leader in Canada for  providing a wide array
of oilfield  services.  The  Canadian  industry  is in a good  position as the
United  States,  the  largest  consumer  of energy,  is  looking  to  Canadian
production to help meet its energy needs.  The worldwide  demand for crude oil
looks to be ever  increasing.  China, the world's second largest oil consumer,
imports  more than 40 percent of its needs.  Additionally,  India,  the second
most  populated  country  and third  largest  consumer,  currently  imports 70
percent of its needs.

       In light of this,  the supply of drilling  rigs in Canada has  steadily
increased over the past 12 years to 770, an all-time high.  Customer demand as
measured by  operating  day  utilization  peaked at 71 percent in 1997 and has
ranged  between 38  percent  and 60 percent  since  that  time.  Rig  industry
utilization was 60 percent for 2005. The recent higher utilization levels have
caused the drilling contractors to add capacity.  During the year, 50 drilling
rigs were added and an additional  100 new rig builds are  anticipated  in the
coming year, many of which are without long-term contracts.  The bulk of these
new  builds  are  either  telescopic  doubles  or coil  tubing  units.  In the
short-term,  capacity is geared towards peak winter demand.  In the long-term,
it provides the capacity to drill more wells through better utilization during
the  remainder of a year. If commodity  prices weaken for a prolonged  period,
the  industry  may have a large  supply and  demand  imbalance.  Clearly,  the
industry  believes that the pace of drilling to sustain natural gas production
for domestic  Canadian use and export to the United States will keep equipment
utilization strong.

       There were 50 new drilling  rigs added to the Canadian  industry  fleet
during 2005, a seven percent  increase to the total. Of these additional rigs,
68 percent had a depth rating of less than 1,500 metres with new coiled tubing
rigs  leading the way with 21 and singles  with 13.  Customer  demand to drill
conventional  natural  gas  and  oil  wells,  in  combination  with  improving
commercialization  of natural  gas in coal,  oil sands and tight  natural  gas
formations are driving demand for rigs to record levels.

       Just as natural gas is a North American  commodity,  drilling rigs are,
although to a lesser  degree,  available  to work in the Canadian and lower 48
United  States  markets.  It is  interesting  to note that while the  Canadian
drilling rig count is at an all time high,  the count in the United  States is
one  third of the  capacity  that was in  existence  in the  early  1980s,  as
illustrated in the graph at left.

PRECISION'S DEVELOPMENT IN THE OILFIELD SERVICES BUSINESS

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

       Precision's  success is dependant on providing a complement of oilfield
services that are cost  effective to  exploration  and  production  companies,
enabling  them to find and develop  hydrocarbon  pools of  sufficient  size to
economically  produce.  Precision prides itself on providing quality equipment
operated by teams of highly  experienced  and well trained crews.  In order to
facilitate  customer needs and to optimally manage our business,  Precision is
divided into two operating segments:

       Contract Drilling Services is comprised of:

       o   Precision Drilling - 230 drilling rigs - 30 percent of industry
       o   LRG Catering ("LRG") - 92 drilling camps - 20 percent of industry
       o   Rostel   Industries   ("Rostel")  -  manufactures  and  refurbishes
           drilling rig components
       o   Columbia  Oilfield Supply  ("Columbia") - centralized  procurement,
           inventory and distribution of consumable supplies

       Completion and Production Services is comprised of:

       o   Precision Well Servicing ("PWS") - 237 service rigs - 24 percent of
           industry
       o   Live Well  Servicing  Ltd.  ("Live Well") - 26 snubbing  units - 30
           percent of industry
       o   Precision Rentals - 3,700 storage tanks,  8,000 joints of specialty
           drill pipe, 4,000 handling tools, 300 wellsite  accommodation units
           - 15 percent of the industry

       The following  graphs  illustrate  how the Contract  Drilling  Services
segment and the Completion and Production  Services segment have  historically
contributed to Precision's profitability and investment.

       Precision is tightly  integrated  in terms of  operational  management,
safety, engineering, information technology, accounting and senior management.
Each  division  has  experienced  asset growth and performs a lead market role
within Canada. Communication is a skill that has been refined and ingrained in
the operating culture.  Precision works closely with customers to ensure their

                                                                            40
<PAGE>

needs are being meet. The ability to successfully combine acquisitions through
vertical  integration  within and between related ancillary business units has
been developed over the past 20 years.

       While each  division  is at its own stage in the  business  life cycle,
Precision Well Servicing in particular has matured the most over the past four
years as it  follows  the  proven  Precision  Drilling  model.  The  remaining
divisions are in the process of following suit. Accordingly, each division has
developed   critical   equipment  mass  and  employee  depth.   Precision  has
implemented and is further developing  integrity-based systems that enable the
business to be  versatile  in order to meet  fundamental  industry  challenges
while delivering better profit and safety performance.

       While  safety and quality of service  continue  as our  primary  focus,
close  behind  are our  basic  and  simple  methods  of  controlling  costs in
conjunction with revenue  generation.  Canada is a market that has allowed the
segments to mature into an efficient and productive  business  model,  but not
without challenge. Due to the seasonal and economic cycles associated with our
industry,  our  fixed  support  infrastructure  is  required  to be lean  with
elasticity  to expand  direct  variable  costs to meet high  equipment  demand
periods  and  conversely,  to shrink  with  drops in  utilization.  Fixed cost
support  infrastructure relates to salaried office personnel and systems while
variable costs typically relate to employees that work directly with equipment
on the job, in the field.  The variable,  hourly paid field employees work and
are paid when associated equipment is generating revenue.

       The supply of  experienced  people yields profit  leverage for oilfield
service companies, not just the "iron". Employee retention and seasonal cycles
remain  manpower  challenges  for the  industry.  The already tight supply for
people is being  further  challenged  by the number of rigs being added to the
industry along with the expansion of newly formed oilfield service  companies.
Despite the above, in the fourth quarter of 2005,  Precision Drilling had only
15 of 230 rigs operating  without a full crew  complement.  Precision has been
cognizant of the need to hire,  train and retain  qualified  field  staff.  In
order to alleviate crew shortages  there are centralized  personnel  groups to
more  effectively  recruit  and  retain  employees.   In  addition,   we  have
pre-employment  rig  orientation  training  where in 2005 we put through 1,500
candidates, an increase of 43 percent over 2004.

       Precision  has  a  balanced  drilling  rig  offering,  with  particular
strength in deep  drilling.  As customers turn to deeper wells to discover new
reserves,  Precision's  40 percent  market share in rigs with a depth capacity
greater  than 3,600 meters is  noteworthy.  Drilling  opportunities  for tight
natural gas in deeper  reservoirs is a market where  Precision has  particular
advantage, a market many expect to emerge in Canada.



                                                                            41
<PAGE>

       The following  provides a summary of  Precision's  drilling and service
rig fleets:

<TABLE>
<CAPTION>
PRECISION DRILLING

                                                 Precision Fleet                 Industry Fleet(2)
-------------------------------------------------------------------------------------------------------------
                             Maximum     Number       % of      Market         Number      % of
Type of Drilling Rig    Depth Rating    of Rigs      Total    Share %(3)      of Rigs     Total     Change(4)
-------------------------------------------------------------------------------------------------------------
<S>                     <C>             <C>         <C>       <C>             <C>         <C>       <C>
Single                        1,200m         17          7         14             124        16         13
Super Single(R)(1)            3,000m         21          9         88              24         3          0
Double                        3,000m         94         41         27             344        45         14
Light triple                  3,600m         44         19         39             114        15         (4)
Heavy Triple                  6,700m         43         19         40             107        14          6
Coiled tubing                 1,500m         11          5         19              57         7         21
-------------------------------------------------------------------------------------------------------------
Total fleet                                 230        100         30             770       100         50
=============================================================================================================
</TABLE>

Notes:
(1)  Super  Single(R)  excludes  single rigs that do not have automated pipe
     handling systems,  or do not have a self contained top drive, or cannot
     run range-3 drill pipe/casing.
(2)  Source:  Daily Oil Bulletin's Rig Locator Report as of January 4, 2006.
     Precision has allocated the industry rig fleet by rig type.
(3)  Market share means  Precision's  rigs as a percentage of the industry's
     rigs.
(4)  Change in number of industry rigs as compared to prior year.


<TABLE>
<CAPTION>
                             Maximum
Type of Drilling Rig    Depth Rating        2005           2004          2003           2002          2001
-------------------------------------------------------------------------------------------------------------
<S>                     <C>                 <C>            <C>           <C>            <C>           <C>
Single                        1,200m          17             16            18             17            16
Super Single(R)               3,000m          21             21            15             16            17
Double                        3,000m          94             95            96             96            99
Light triple                  3,600m          44             45            47             47            48
Heavy Triple                  6,700m          43             41            39             39            38
Coiled tubing                 1,500m          11             11            10             11            11
-------------------------------------------------------------------------------------------------------------
Total fleet                                  230            229           225            226           229
=============================================================================================================


<CAPTION>
PRECISION WELL SERVICING

Type of Service Rig                         2005           2004          2003           2002          2001
-------------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>           <C>            <C>           <C>
Freestanding mobile single                    88             86            75             50            23
Mobile single                                 17             19            30             56            95
Double                                        64             65            57             58            60
Freestanding mobile double                     8              9             6              6             5
Mobile double                                 44             42            46             45            48
Heavy double                                   1              2             9              9             9
Freestanding slant                            15             16            16             16            16
Swab                                           -              -             -              -             1
-------------------------------------------------------------------------------------------------------------
Total fleet                                  237            239           239            240           257
=============================================================================================================
</TABLE>


                                                                            42
<PAGE>

<TABLE>
<CAPTION>
RESULTS OF OPERATIONS

CONTRACT DRILLING SERVICES SEGMENT
(STATED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT WHERE INDICATED)

                                                         % OF                      % of                  % of
YEARS ENDED DECEMBER 31,                    2005      REVENUE          2004     Revenue       2003    Revenue
-------------------------------------------------------------------------------------------------------------
<S>                                    <C>            <C>        <C>            <C>      <C>          <C>
Revenue                                $ 916,221                  $ 727,710              $ 663,619
Expenses:
         Operating                       448,930         49.0       382,886        52.6    379,842       57.2
         General and administrative       23,911          2.6        19,190         2.6     15,676        2.4
         Depreciation                     39,233          4.3        42,245         5.8     47,895        7.2
         Foreign exchange                  (238)            -         1,074         0.2      2,194        0.3
-------------------------------------------------------------------------------------------------------------
Operating earnings                     $ 404,385         44.1     $ 282,315        38.8  $ 218,012       32.9
=============================================================================================================

<CAPTION>
                                                                  % INCREASE            % Increase
                                                         2005      (DECREASE)     2004   (Decrease)      2003
-------------------------------------------------------------------------------------------------------------
<S>                                                   <C>         <C>          <C>       <C>       <C>
Number of drilling rigs (end of year)                     230           0.4        229          1.8       225
Drilling operating days                                46,937          12.8     41,625         (1.5)   42,275
Drilling revenue per operating day ($/day)             18,034           9.3     16,494         11.5    14,792
Number of wells drilled                                 7,766           3.2      7,525        (11.0)    8,451
Average days per well                                     6.0           9.1        5.5         10.0       5.0
Number of meters drilled (000s)                         8,901          11.0      8,021         (6.8)    8,604
Average meters per well                                 1,146           7.5      1,066          4.7     1,018
=============================================================================================================
</TABLE>

2005 COMPARED TO 2004

       THE CONTRACT  DRILLING  SERVICES  SEGMENT  generated  record  financial
results in 2005 on the strength of unprecedented  drilling activity in western
Canada and improved pricing for related  services.  Revenue  increased by $189
million or 26  percent  over 2004 to $916  million  while  operating  earnings
increased by $122 million or 43 percent to $404  million.  As a percentage  of
revenue,  operating earnings increased to 44 percent in 2005 as compared to 39
percent in 2004.  The margin  increase was primarily  attributable  to pricing
improvements.

       Operating  expenses were lower as a percentage of revenue  despite crew
wage rate  increases.  These costs declined from 53 percent of revenue in 2004
to 49 percent in 2005,  and on a per operating  day basis,  they have remained
flat. Higher equipment  utilization has lowered the daily cost associated with
fixed  operating  cost  components.  Variable  costs  are  controlled  through
extensive  analysis  and cost  awareness.  This  combined  with the ability to
mitigate cost escalations  through volume  purchasing and  relationships  with
suppliers further enhanced profitability.

       Oil and natural gas prices were the story of 2005.  Economic conditions
for  energy  continued  to show  significant  improvement  with  crude oil and
natural gas establishing  record pricing.  These commodity prices had Canada's
oil and gas companies  drilling a record 24,805 wells on a rig release  basis,
an increase of nine  percent over 2004.  In fact,  new record well counts have
been set for three  successive  years. As customers push to bring on-stream as
much production as possible during these times, oilfield service firms benefit
from this surge in spending.  Precision, the largest oilfield service provider
in Canada, was a direct benefactor.

       The Canadian  drilling  industry is subject to  seasonality,  with peak
activity levels during winter months from November through to March. Typically
during the latter half of March,  weather  conditions turn warmer to the point
that  thawing  occurs  and  causes  ground  conditions  to become too soft and
unstable.  These  unstable  ground  conditions  increase  operating  costs for
customers and cause seasonal road bans to be temporarily  imposed.  This event
can extend into June in certain areas, and is commonly  referred to as "spring
break-up".  In some areas of the  extreme  north,  where  there is only winter
access over ice bridges, this break-up period can span April through November.
Timing for these  northern rigs becomes  critical for  customers  that need to
migrate the equipment south to areas where summer drilling can occur.

       This rise in activity has been strengthening on a comparative quarterly
basis year over year for the past three  years.  This  demand has  enabled the
Contract Drilling Services segment to steadily increase revenue and underlying
operating  margins even though the overall  fleet of equipment  has  increased
just slightly.

       Drilling contractors in western Canada have increased the available rig
count to a level that will  require  the  industry  to drill more than  20,000
wells,  at an average of seven days per well,  to keep  annual  operating  day
utilization  above  50  percent.  For  2006,  indications  are  that  drilling
companies may add another 100 rigs,  which will raise the well count threshold
even higher.

                                                                            43
<PAGE>

       Capital expenditures for the Contract Drilling Services segment in 2005
were $107 million and  included $54 million to grow and expand the  underlying
asset base and $53  million to sustain  and upgrade  existing  equipment.  The
majority of the expansion capital expenditure was associated with new drilling
rig construction.

       THE  PRECISION  DRILLING  DIVISION  has once  again  set new  financial
benchmarks for 2005. Revenue increased by $160 million or 23 percent over 2004
to $846 million.  Just over half of this revenue  growth was  associated  with
increased  activity  and the  remainder  with  increased  rates.  The division
entered  the  year  with  great   anticipation  as  rig  demand  exceeded  rig
availability  by a wide margin.  Then came the March melt down as warm weather
in western  Canada  caused a  somewhat  premature  end to the winter  drilling
season.  Soon  after,  the June rains  rolled in and  thwarted  thoughts of an
exceptional second quarter.  Disappointing activity results for the first half
of the year were  strictly  weather  related.  These  activity  levels  caused
customer  drilling  programs to fall  behind and created a backlog.  As ground
conditions  dried  in  July,  the  impact  of this  pent-up  demand  led to an
outstanding third and fourth quarter.

       Rig demand  continued to build momentum through to the end of the year.
Overall,  the industry  benefited from the pricing  leverage  established from
strong third quarter activity. Accordingly,  increased pricing was established
in the fourth  quarter for the winter  drilling  season.  Rig  shortages  also
created a large spot market of operators who did not have equipment booked for
the winter, enabling the division to charge premium prices.

       Operating  earnings in the Precision  Drilling division increased by 46
percent due in part to the 13 percent increase in operating  activity combined
with the nine  percent  increase in revenue per  operating  day.  Depreciation
expense for the year was $11  million  lower due to the effects of a change in
the estimated life of rig assets to 5,000 utilization days from 4,150 in 2005.
Precision Drilling was able to maintain its cost per operating day at its 2004
rate.  Crew  labour  costs in 2005 were 52 percent of  operating  costs up two
percent from 2004.  The 2005 cost of drilling,  maintenance  and overhead on a
per day basis was consistent with 2004. An important  component of the success
of the division is the degree to which the cost structures have been developed
to be as variable as possible  with  activity  levels.  This  flexibility  has
allowed  the  division  to  respond  quickly to sudden  changes  in  equipment
utilization and produce  superior  returns in periods of high activity similar
to 2005.

       THE PRECISION DRILLING DIVISION is slightly larger than it was in 2004.
In the fourth quarter,  two Super Single(R) Light rigs were added to the fleet
and one rig was sold. The net addition is the start of Precision's strategy to
organically  expand through the addition of versatile rigs backed by long-term
customer  commitments.  Precision Drilling commenced 19 new rig builds in 2005
and expects that all but two will be field ready in 2006.  The  division's rig
fleet is expected to average 237 for 2006, exiting the year at 247 rigs.

       LRG CATERING DIVISION,  has been sized to support Precision's  drilling
rig fleet and also had an  outstanding  year. LRG camp days increased over the
prior year by 26 percent in 2005 leading to a revenue  increase of 40 percent.
The growing number of field personnel in the industry is putting  overwhelming
pressure on other accommodation sources, such as hotels. Customers compensated
by utilizing  camps in areas where crews would  normally have returned to town
for lodging. LRG operating expenses increased due to higher labour and grocery
costs and these  increases  were more than  offset by an  increase  in revenue
rates. In terms of capital expenditures, LRG grew its fleet by adding five new
six-unit camps.

       ROSTEL  INDUSTRIES AND COLUMBIA  OILFIELD SUPPLY DIVISIONS  continue to
provide  valuable  support  for  this  segment  and are best  measured  by the
efficiencies  and  contributions  made  to  Precision  through  cost  savings.
Rostel's core business is the manufacture and refurbishment of custom drilling
and service rig  components.  Columbia is a general supply store that procures
and  distributes  large  volumes  of  consumable  oilfield  supplies  for  the
Precision  divisions.  Columbia is an essential  extension  of the  purchasing
process that ensures all rigs are  provided  with timely and reliable  running
supplies  to  keep  them  operational.   More  importantly,   Columbia  allows
operations in Precision to standardize product use and quality.

2004 COMPARED TO 2003

       THE CONTRACT DRILLING SERVICES SEGMENT  generated  increased  financial
results in 2004 due to an improvement in oil and natural gas commodity prices,
which  led to  greater  customer  demand  for  all of the  segment's  oilfield
services and the leverage to increase revenue rates. Operational execution and
diligence allowed for the efficient  delivery of services and control over the
rate of operating and administrative cost escalations.

       The segment  reported  revenues of $728 million,  $64 million more than
2003,  an  increase  of 10  percent.  These  results  were  generated  with an
equipment  fleet  size that was  relatively  unchanged  from the  prior  year.
Revenue growth in 2004 was primarily  attributable  to revenue rate increases.
Operating earnings increased by $64 million or 29 percent to $282 million.  As
a percentage of revenue, operating earnings increased to 39 percent in 2004 as
compared to 33 percent in 2003. The margin increase was attributable to higher
pricing even though  operating day  utilization for the drilling rig fleet was
two percent lower in 2003.  The second half of the year  benefited from rising
commodity  prices  enabling the segment to increase  rates  commencing  in the
fourth quarter. However, poor weather conditions in the third quarter hampered
industry drilling activity.

       Operating expenses were lower as a percentage of revenue,  improving to
53 percent in 2004 from 57 percent in 2003. The improvement is attributable to
higher revenue rates partially offset by higher labour costs.

                                                                            44
<PAGE>

       Capital  expenditures  amounted  to  $75  million  in  2004.  This  was
comprised of $37 million in growth  initiatives  for the  construction  of new
rigs and camps and was matched by $38 million in  expenditures  to sustain and
upgrade existing equipment.

       FOR THE PRECISION DRILLING DIVISION revenue increased by $55 million or
nine  percent  over 2003 to $687  million.  The  majority of 2004  revenue was
attributable  to rate increases  that flowed through to operating  earnings as
overall  activity was very similar to 2003.  In 2004 winter  drilling  revenue
rates held firm  through  the second  quarter.  While  adverse  third  quarter
weather prevented some wells from being drilled,  it did add to the backlog of
work,  strengthening  spot  market  demand and  enabling  the  division to put
through an  additional  revenue  rate  increase  to start the fourth  quarter.
Although  industry  activity in Canada was  approximately  five percent higher
than  2003,  the  industry   supply  of  additional   drilling  rigs  hindered
opportunities  to gain  higher  utilization.  Precision  Drilling's  rig fleet
increased by four rigs in 2004,  ending the year at 229 rigs.  Operating costs
were  reasonably  well contained with a six percent fourth quarter labour rate
increase and static maintenance costs.

       LRG CATERING DIVISION experienced a seven percent increase in camp days
and a 16 percent increase in revenue. Much of the rate increase was due to the
impact of three new base camps commissioned in the fourth quarter.

<TABLE>
<CAPTION>
COMPLETION AND PRODUCTION SERVICES SEGMENT
(STATED IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT WHERE INDICATED)

                                                      % OF                       % of                    % of
YEARS ENDED DECEMBER 31,                  2005     REVENUE          2004      Revenue        2003     Revenue
-------------------------------------------------------------------------------------------------------------
<S>                                  <C>           <C>         <C>            <C>       <C>           <C>
Revenue                              $ 369,667                 $ 313,386                 $263,218
Expenses:
         Operating                     209,657        56.7       196,113         62.6     176,295        67.0
         General and administrative     11,021         3.0        12,708          4.0      12,447         4.7
         Depreciation                   27,402         7.4        27,508          8.8      25,720         9.8
         Foreign exchange                  (56)          -           (17)           -          50           -
-------------------------------------------------------------------------------------------------------------
Operating earnings                   $ 121,643        32.9     $  77,074         24.6   $  48,706        18.5
=============================================================================================================

<CAPTION>
                                                % INCREASE                 % Increase              % Increase
                                          2005  (DECREASE)          2004    (Decrease)       2003   (Decrease)
-------------------------------------------------------------------------------------------------------------
<S>                                        <C>       <C>             <C>   <C>                <C>   <C>
Number of service rigs (end of year)       237       (0.8)           239            -         239           -
Service rig operating hours            477,232         1.1       472,008          7.4     439,519        12.1
Revenue per operating hour ($/hr.)         600        17.0           513         11.0         462         3.6
=============================================================================================================
</TABLE>

2005 COMPARED TO 2004

       THE COMPLETION AND PRODUCTION  SERVICES SEGMENT,  also generated record
financial  results in 2005 on the  strength  of  industry  activity in western
Canada and improved pricing for services.  Revenue increased by $56 million or
18 percent over 2004 to $370 million while operating earnings increased by $45
million or 58 percent to $122 million.  As a percentage of revenue,  operating
earnings  increased  to 33 percent in 2005 as  compared to 25 percent in 2004.
The margin increase is attributable to the enhanced  operating  performance of
the service rig fleet as the  division was able to increase  rates  throughout
the year.  Equipment  demand has  provided  the ability to  establish  pricing
levels that are based on possession rather than just usage.

       Operating  expenses  declined  from 63 percent of revenue in 2004 to 57
percent in 2005 and, on a per operating hour basis,  increased  marginally due
to higher labour costs.  This segment  continues to strengthen its systems and
cost  controls  as it  follows  the proven  model  built  around the  drilling
business. Analytical tools are extensively used as we continue to benefit from
Precision's enterprise-wide  information system.  Centralization of personnel,
accounting,  purchasing,  and equipment  management has provided  economies of
scale and more effective deployment of the segment's resources.

       The  segment  is  beginning  to  benefit  from  unprecedented  industry
activity in 2005 which set records for the number of wells  completed  and the
number of producing wells in western Canada.  The 24,805 wells rig released in
2005 brings the total in the past three years to 69,365.  This has put extreme
pressure  on  equipment  demands as  customers  were eager to  increase  their
production levels to benefit from high commodity prices.

       The Completion and Production  segment is also affected by the cyclical
nature of the  seasons.  The first and fourth  quarters are the most active as
colder weather  conditions allow for unrestricted  movement of heavy equipment
on county and provincial roads. The first quarter  traditionally  produces the
highest  utilization  as  customers  are  able to  work  northern  areas  only
accessible  at this  time.  However,  the  fourth  quarter  of  2005  produced
exceptional  results as  customers  caught up on the backlog of work  deferred
from the first half of the year. This resulted from an early "spring break-up"
and an exceptionally wet second quarter.


                                                                            45
<PAGE>

       Service rig  contractors  in western  Canada have kept the industry rig
fleet  count  relatively  constant  over  the  past  five  years at a level of
approximately 1,000 service rigs.  Precision and the industry have adjusted to
the shift in focus from oil to natural gas by customers.  Recent growth in the
WCSB has been  associated  with natural gas  production  which is beginning to
increase demand for completion and production  services  providing  additional
opportunities for Precision's diverse service rig fleet.

       Surging oilfield  activity in the drilling sector has created shortages
in  both  equipment  and  manpower.  The  well  documented  manpower  shortage
continues to be a concern. Strong customer  relationships,  reliable equipment
and a safe working  environment are important aspects in employee  recruitment
and retention.

       The reinvestment in equipment over the last several years has helped to
position the Completion and Production segment as an industry leader.  Capital
spending in 2005  amounted to $35  million,  an increase of nine  percent over
2004.  This  included  expansion  capital  of $8  million  for a  freestanding
snubbing unit,  additional pump trucks,  wellsite  accommodations  and storage
tanks.  Maintenance  capital  to sustain  the  existing  asset  base  included
replacement trucks for transporters, snubbing units and pump trucks as well as
rental  drill  pipe,  snubbing  equipment  and a  facility  upgrade  in Grande
Prairie, Alberta.

       THE PRECISION WELL SERVICING DIVISION has set a new financial benchmark
in 2005.  Revenue  increased  $44  million  or 18  percent  over  2004 to $286
million.  A slight  increase in activity  combined with higher rates accounted
for the increase.  PWS achieved 55 percent utilization,  a nominal improvement
over the prior year.  Activity  levels were dampened in the first half of 2005
due to poor weather conditions, leading to a rebound in the latter half due to
the backlog of work. By the end of the year activity  levels had only exceeded
the prior year by 5,224  operating  hours or one percent.  The  opportunity to
make up  additional  hours in the last  half of the year was just a factor  of
calendar time as there was plenty of work available.  Rig rates therefore were
the major  contributor to the increased  revenue.  Traditional  winter pricing
takes affect on October 1 and coupled with record fourth  quarter  activity in
2005, the division  generated record  quarterly  results to exit the year. The
influx of junior oil and gas companies  created a spot market that allowed for
stronger pricing.

       Operating  earnings for this division improved by $38 million resulting
in a 79  percent  improvement  over  the  prior  year,  due  mainly  to  price
increases. In addition,  operating costs were marginally higher year over year
on a per operating  hour basis due to higher labour costs.  Cost  efficiencies
were  achieved by  consolidating  operating  centres in the latter part of the
prior year.

       Capital  expenditures  in 2005 continued to emphasize the upgrading and
standardization  of equipment.  This includes upgrades to rig carriers through
new  electronic  engines and design changes to adapt axle  configurations  for
lighter road weights. This design change allows for greater utilization during
periods when restrictive road bans are in effect.  The strategy is to optimize
service  availability to generate  revenue without having to increase the size
of the rig fleet. Today,  approximately 60 percent of the service rig fleet is
able to move year round.

       LIVE  WELL'S  activity  decreased  slightly  in 2005.  The  demand  for
snubbing,  while  finishing  strong,  paused early in the year.  Despite this,
revenue  increased by $4 million or 12 percent  over 2004 to $32 million.  The
improvement  was  attributable  to higher  hourly  operating and standby rates
established  in the last  half of the  year.  Strong  activity  in the  fourth
quarter  allowed  Live Well to exit 2005 with  strong  utilization.  Operating
earnings  increased  by  seven  percent  over  the  prior  year  due to  price
increases.

       Lower  utilization  was due, in part,  to the  industry's  challenge to
modify and improve  recommended  industry  practices.  Snubbing  services  are
associated with producing natural gas wells and involves safety risks that can
be  greater  than  other  oilfield  services.  Live Well is  working  with its
industry partners and customers to bring about constructive change.

       In terms of  capital  expenditures,  Live  Well  upgraded  its fleet of
hydraulic  rig  assist   snubbing  units  through   scheduled   truck  chassis
replacement  and  introduced  its  first  freestanding   snubbing  unit.  This
proprietary,  automated  design  includes a pipe handling system that sets new
standards for safety and efficiency.

       PRECISION  RENTALS  reported  a revenue  increase  of $8  million or 19
percent  over 2004 to $51  million.  The  increase is  attributable  to higher
drilling activity which led to higher demand for rental equipment. This demand
enabled the division to benefit from higher  utilization and improved  pricing
for each of its three product categories: surface equipment; tubulars and well
control equipment; and wellsite accommodations. This accretion was established
in the fourth quarter, consistent with Precision's other divisions.  Operating
earnings increased by 37 percent over the prior year.

       The  operation  has been  restructured  and now  consists  of  multiple
operating centres strategically located in the WCSB. This new structure allows
Precision  Rentals to  logistically  manage all product  categories  from each
location and is supported by a new  enterprise-wide  information  system. This
initiative  has brought  about  improvements  in service  delivery,  equipment
standardization and a more structured pricing regime.

       In  terms of  capital  expenditures,  Precision  Rentals  continues  to
reinvest in each of its product  categories  to keep its  equipment in premium
condition and achieve the most efficient design available in the industry. The
division  expanded its wellsite  accommodation  fleet in 2005 by eight percent
with the purchase of 24 units.

                                                                            46
<PAGE>

2004 COMPARED TO 2003

       THE  COMPLETION  AND  PRODUCTION  SEGMENT  generated  revenues  of $313
million,  which is $50  million or 19 percent  higher  than  revenues  of $263
million in 2003.  Operating earnings increased by $28 million or 58 percent to
$77 million. The increase in revenue is attributable to a balanced mix of rate
increases  and higher  equipment  utilization.  The Precision  Well  Servicing
division  contributed 78 percent of the revenue increase.  Operating  expenses
were lower as a percentage of revenue,  showing an improvement from 67 percent
of revenue in 2003 to 63 percent in 2004.  Continued  reinvestment  as well as
the  streamlining  of operations  has enabled the  Completion  and  Production
segment to provide  premium  equipment  and  services  to  customers.  Capital
spending in 2004 amounted to $32 million and included  expansion capital of $7
million for additional pump trucks,  storage tanks and initial construction of
a freestanding snubbing unit. Maintenance capital in the amount of $25 million
was incurred to sustain the existing asset base through upgrades that included
transporters, pump trucks, wellsite units, surface tanks and facilities.

       FOR THE  PRECISION  WELL  SERVICING  DIVISION,  revenue  increased  $39
million  or 19  percent  over  2003  to $242  million.  Service  rig  activity
increased by 32,489 hours to 472,008 in 2004,  for  utilization of 54 percent.
This higher  demand  enabled the  division  to  increase  average  revenue per
operating hour by 11 percent over the prior year.  Although  upstream drilling
activity was marginally lower year over year, Precision's service rig division
was able to increase  revenue and began to capitalize on the  commitment  made
toward the  reinvestment  in its people and  equipment.  Operating  costs were
marginally  higher year over year on a per  operating  hour basis.  The higher
service rig activity  provided  better  coverage of lower fixed overhead costs
but not  enough to offset  higher  major  maintenance  costs  associated  with
equipment  repair  and  certification.   Precision's  service  rig  fleet  was
unchanged  in 2004 at 239  rigs,  representing  an  industry  market  share of
approximately 26 percent.

       LIVE WELL'S snubbing unit activity  increased  approximately 10 percent
over 2003 as demand for snubbing  continued to gain  momentum in line with the
industry's emphasis on natural gas production. Revenue increased $7 million or
33 percent  over 2003 to $28  million.  With the  acquisition  of two snubbing
units in  December  2003,  the fleet  size  increased  to 25 units.  Operating
earnings  rose by 63  percent  over 2003 due to the  growth in fleet  size and
higher pricing.

       PRECISION RENTAL'S revenue increased $4 million or 10 percent over 2003
to $43 million.  Operating earnings rose by 13 percent over 2003 despite a one
percent  decline in industry  drilling  activity.  Precision  Rentals was more
profitable  as a  result  of  pricing  improvements  on a  number  of  product
categories. In 2004, the division began to realize benefits and synergies from
the restructuring process to take advantage of a consolidated  marketing group
and the centralization of certain business functions.

OTHER ITEMS

2005 COMPARED TO 2004

       CORPORATE AND OTHER EXPENSES  Corporate and other expenses increased by
$33  million or 116  percent in 2005 as  compared  to 2004.  Included in these
expenses are $18 million in costs  associated with the conversion to an income
trust  comprising  a one-time  severance  payment  of $13  million to a senior
executive and $5 million in legal,  accounting  and advisory  fees.  Excluding
those  costs,  corporate  and other  expenses  increased  by $15 million or 53
percent year over year of which $6 million is  attributable  to a reduction in
foreign exchange gains and the remaining $9 million to severance and retention
bonus  payments,  increased  legal and advisory fees related to other internal
reorganization activities, examining strategic and financing alternatives, and
increased internal and external audit costs to comply with financial reporting
requirements.

       INTEREST  EXPENSE Net  interest  expense of $29 million  declined by 37
percent in 2005  compared  to 2004.  This  reduction  is  attributable  to the
repayment of the outstanding bonds (debentures) in October 2005 and from being
in a surplus cash position,  to the date of trust conversion,  which generated
$10 million in interest income.

       PREMIUM ON REDEMPTION OF BONDS In October 2005, the  outstanding  bonds
were repaid, resulting in a charge of $72 million that was absent in 2004.

       LOSS ON  DISPOSAL  OF  SHORT-TERM  INVESTMENTS  Precision  received  26
million shares of Weatherford  International Ltd. as part of the consideration
for the disposal of the Energy Services and  International  Contract  Drilling
divisions. Substantially all of the shares were transferred to shareholders in
conjunction  with the November 7, 2005 plan of  arrangement  and a $71 million
loss was incurred.

       DISCONTINUED  OPERATIONS  During the third  quarter of 2005,  Precision
completed two significant business divestitures.  These businesses contributed
$74  million  in  net  earnings  which  have  been  included  in  discontinued
operations.  Combined  with the  gains on  disposition  in the  amount of $1.3
billion,  discontinued  operations  contributed  net  earnings of $1.4 billion
towards the financial results in fiscal 2005.

       First,  Precision  disposed of its Energy  Services  and  International
Contract Drilling divisions to Weatherford,  resulting in an after tax gain of
$1.2 billion.  Precision has recorded a $20 million  receivable in conjunction
with a working capital calculation  pursuant to the agreement.  This amount is
subject to change  depending  on the outcome of ongoing  discussions  with the

                                                                            47
<PAGE>

purchaser and could result in an  adjustment  to the proceeds on  disposition.
Management  estimates  that ultimate  settlement of this issue will not have a
material impact on the recorded gain on disposal of discontinued operations.

       Second,  Precision disposed of the industrial services business carried
on by CEDA for an after tax gain of $132 million.

       INCOME TAXES Precision's effective tax rate on earnings from continuing
operations  before  income taxes was 25 percent in 2005 compared to 35 percent
in 2004.  The decrease in the tax rate is primarily a result of the conversion
to an income  trust in  November  2005  which has the effect of  shifting  the
income tax burden of the Trust to the  unitholders.  The Trust incurs taxes to
the extent that there are federal  large  corporation  and certain  provincial
capital  taxes,  as well as taxes on any  taxable  income,  of its  underlying
subsidiaries, not distributed to unitholders. In addition, future income taxes
arise from  differences  between the accounting and tax basis of the operating
entities assets and liabilities.

2004 COMPARED TO 2003

       CORPORATE AND OTHER EXPENSES  Corporate and other expenses increased by
$14  million  or 97  percent  in 2004 as  compared  to 2003.  These  costs are
primarily associated with the corporate executive,  human resources,  internal
audit,   information  technology,   treasury,  tax,  and  financial  reporting
functions.   Expenses   increased  in  conjunction  with  the  growth  of  the
organization  and with the  complexities  associated with  Precision's  former
strategy  to  globalize  its  business.  In  addition,  heightened  regulatory
requirements, in particular those associated with the Sarbanes-Oxley Act, have
resulted in increased personnel requirements.

       INTEREST  EXPENSE Net interest  expense of $46 million  increased by 36
percent in 2004  compared to 2003.  Average net debt  outstanding  (borrowings
less cash on hand)  increased nine percent as  acquisitions  made in 2004 were
partially financed by additional  borrowings.  The combination of the issuance
of common shares and long-term  debentures to finance  acquisitions and strong
cash flow from  operations  resulted in a change in the make up of Precision's
net debt  outstanding.  In the first half of 2004,  a portion of net debt took
the form of  short-term  borrowings on its bank  facilities at relatively  low
interest  rates.  These  short-term  borrowings  were replaced with  long-term
debentures at higher  interest  rates.  Interest  expense was inflated by fees
related  to  bridge  financing  facilities  put in place in  conjunction  with
acquisitions completed during the year.

       INCOME TAXES Precision's effective tax rate on earnings from continuing
operations before income taxes was 35 percent in 2004 consistent with the rate
of 34 percent experienced in 2003.

LIQUIDITY AND CAPITAL RESOURCES

       In 2005, dispositions of the Energy Services and International Contract
Drilling divisions and CEDA provided proceeds of $1.3 billion.  Cash flow from
operations was $203 million,  while the exercise of share purchase options and
increases in long-term debt and sources of funds through financing  activities
added $227 million.  An  additional  $15 million was provided from the sale of
Weatherford  shares  that  were  not  distributed  as  part  of  the  plan  of
arrangement.   Precision   incurred  capital   expenditures   from  continuing
operations, net of dispositions of capital assets, of $140 million and capital
spending for discontinued  operations of $110 million. In conjunction with the
CEDA  disposition,  Precision  purchased all the  outstanding  shares of CASCA
Electric Ltd. and CASCA Tech Inc. for $30 million. A total of $844 million was
paid to shareholders  as part of the plan of  arrangement,  while $704 million
was used to repay the  outstanding  public debt. In addition,  $43 million was
used  to   repurchase   and  cancel  the  common  shares  held  by  dissenting
shareholders and $64 million was used in settlement of share purchase options.
On December 15, 2005, the initial  monthly cash  distribution of the Trust for
November, 2005 in the amount of $34 million, was paid to unitholders.

       The Trust  exited 2005 with a  long-term  debt to  long-term  debt plus
equity ratio of eight percent and a ratio of long-term  debt to cash flow from
operations of 48 percent.

       In 2006,  Precision  expects cash  provided by  continuing  operations,
before an  estimated  use of funds in the amount of $200  million  for working
capital changes,  to be approximately $550 million.  Net capital  expenditures
are expected to be $285 million with $165  million  directed  towards  organic
growth  initiatives to expand  equipment fleets and the remaining $120 million
towards  sustaining  and  upgrading  existing  property,  plant and  equipment
assets.  There was bank indebtedness and long-term debt in the combined amount
of $117  million at December 31,  2005.  On the basis that the Trust  sustains
cash  distributions  at a monthly rate of $0.27 per unit  throughout the year,
total cash distributions in the amount of $407 million are expected to be paid
to unitholders  assuming an average of 125.5 million units outstanding  during
the year.  Given these  estimates  and  forecast  amounts,  Precision  expects
long-term debt to increase by  approximately  $340 million to exit 2006 with a
balance  close to $435  million.  The  application  of funds  towards the $200
million  estimated  change in working  capital  balances  and a partial use of
funds for  growth-oriented  capital  expenditures  is  expected  to weaken the
long-term  debt to long-term debt plus equity ratio from eight percent in 2005
to  approximately  27 percent in 2006. There was working capital in the amount
of $153  million on December  31, 2005 and  Precision  expects  this amount to
increase to approximately $350 million to exit 2006.

                                                                            48
<PAGE>

       Precision  has a number of committed  and  uncommitted  lines of credit
available to finance its  activities.  The committed  facilities  consist of a
$550 million three-year  revolving  unsecured credit facility with a syndicate
led by a Canadian  chartered bank. The facility  matures in November 2008, and
is  extendible  annually  with the consent of lenders.  The facility has three
financial covenants which are tested quarterly: total liabilities to equity of
less than 1:1,  total debt to the trailing  four  quarters'  cash flow of less
than 2.75:1 and total distributions to unitholders of less than 100 percent of
consolidated  cash flow, as defined in the credit  facility  agreement.  As at
December 31, 2005,  Precision was well within the financial  covenant  levels,
and is expected to remain so for 2006. There was $97 million outstanding under
the  committed  facilities  at December 31, 2005. In addition to the committed
facilities,  Precision also has a number of uncommitted  operating  facilities
which total  approximately $66 million equivalent and are utilized for working
capital management and the issuance of letters of credit.

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

<TABLE>
<CAPTION>
                                                                   Payments Due by Period
                                                      Less Than                                      After
(STATED IN THOUSANDS OF CANADIAN DOLLARS) Total          1 Year   1 - 3 Years    4 - 5 Years       5 Years
-------------------------------------------------------------------------------------------------------------
<S>                                     <C>           <C>         <C>            <C>               <C>
Long-term debt                           96,838               -        96,838              -            -
Operating leases                         27,900           7,362        10,167          7,334        3,037
-------------------------------------------------------------------------------------------------------------
Total contractual obligations           124,738           7,362       107,005          7,334         3,037
=============================================================================================================

<CAPTION>
OUTSTANDING UNIT/SHARE DATA
                                                            February 28      December 31       December 31
                                                                   2006             2005              2004
-------------------------------------------------------------------------------------------------------------
<S>                                                         <C>              <C>              <C>
Trust units/common shares                                   124,352,921      124,352,921      121,580,424
Exchangeable LP units                                         1,108,382        1,108,382                -
Options to purchase common shares                                     -                -         6,695,120
=============================================================================================================
</TABLE>

DISTRIBUTIONS

       Upon  Precision's  conversion to an income trust effective  November 7,
2005, the Trust adopted a policy of making regular monthly cash  distributions
to  unitholders.  As  previously  disclosed  in the  Information  Circular  of
Precision  Drilling  Corporation  dated October 3, 2005,  distributions may be
reduced,  increased  or suspended  entirely  depending  on the  operations  of
Precision and the  performance  of its assets.  The actual cash flow available
for  distribution  to holders of Trust  units and holders of  Exchangeable  LP
units is a function of numerous  factors,  including  the  Trust's:  financial
performance;  debt covenants and  obligations;  working capital  requirements;
maintenance and expansion capital expenditure requirements for the purchase of
property, plant and equipment; and number of units outstanding.

       The Trust considers these factors on a monthly basis and made its first
payment in December in the amount of $34 million at the rate of $0.27 for each
outstanding  unit including  Exchangeable LP units. At December 31, 2005 there
were 125,461,303 Trust and Exchangeable LP units outstanding.  In December,  a
distribution of $0.27 per unit plus a special  distribution of $0.022 per unit
was declared by the Trust with a payment of $37 million  being made on January
17, 2006.

       The declaration of trust, the governing  document of Precision Drilling
Trust,  provides  that, if necessary,  on December 31 of each year,  the Trust
will make an additional  amount payable such that the Trust will not be liable
for  ordinary  income taxes for such year.  Reference  can be made to "Certain
Canadian  Federal Income Tax  Considerations - Taxation of the Trust" on pages
46 to 47 of the Special Meeting Information Circular dated October 3, 2005.

<TABLE>
<CAPTION>
QUARTERLY FINANCIAL SUMMARY
(STATED IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER UNIT/SHARE AMOUNTS, WHICH ARE PRESENTED ON A DILUTED BASIS)

---------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2005                              Q1          Q2          Q3          Q4          YEAR
---------------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>        <C>          <C>          <C>
Revenue                                              383,407     157,895     300,016     427,861     1,269,179
Operating earnings                                   153,020      24,505     111,956     175,897       465,378
Earnings from continuing operations                   88,281       9,308       2,382     120,877       220,848
         Per unit/share                                 0.71        0.07        0.08        0.96          1.76
Net earnings                                         138,518      25,851   1,382,648      83,546     1,630,563
         Per unit/share                                 1.11        0.21       11.00        0.66         13.00
Cash provided by (used in) continuing operations      91,762     117,722      42,359    (48,742)       203,101
</TABLE>

                                                                            49

<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2004                         Q1            Q2           Q3            Q4          Year
---------------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>         <C>         <C>          <C>
Revenue                                              361,524     134,963     218,023     313,978     1,028,488
Operating earnings                                   131,570      24,065      61,799     113,879       331,313
Earnings from continuing operations                   80,427      10,127      36,995      60,582       188,131
         Per unit/share                                 0.71        0.09        0.31        0.49          1.61
Net earnings                                         100,519      15,995      42,707      88,183       247,404
         Per unit/share                                 0.89        0.14        0.36        0.71          2.11
Cash provided by continuing operations                48,657     186,709      21,536      30,919       287,821
===============================================================================================================
</TABLE>

FOURTH QUARTER DISCUSSION

       Sustained  high crude oil and  natural  gas prices  generated  a strong
environment for the oilfield  services  business in Canada.  The unusually wet
spring and early  summer  caused many of the oil and natural gas  customers to
delay  drilling  programs.  This,  along with high customer cash flows set the
stage for the  extremely  busy fourth  quarter  which had activity  levels not
normally seen until the middle of the winter season.  This left customers with
an abundance of wells to be drilled in order to meet production targets.  This
demand,  coupled with the weather  pattern that occurred in the fourth quarter
of  2005  created  an  almost  perfect  scenario.  Unseasonably  warm  weather
temperatures  and dry  conditions  were ideal after  exiting an extremely  wet
second  quarter.  Customers were able to extend summer  drilling  programs and
mitigate land expiry issues.  It was also  beneficial to customers who did not
have rigs reserved for the winter and required windows to complete projects as
rigs were delayed moving north.

       Contract  Drilling  Service's  revenue of $308  million  and  operating
earnings of $155 million  increased by 36 percent and 57 percent in the fourth
quarter of 2005  compared  to the same  period of 2004,  respectively.  Record
fourth quarter activity and the impact of increased winter dayrates which took
effect during the quarter were the primary reasons for this change. Rig demand
in the quarter remained extremely strong and reached unprecedented levels.

       Completion  and  Production  Service's  revenue  of  $124  million  and
operating  earnings of $51 million  increased  by 35 percent and 87 percent in
the fourth quarter of 2005 compared to the same period of 2004,  respectively.
Precision Well Servicing also set new highs for activity and  profitability in
the  fourth  quarter.  Completion  work was  abundant  due to record  drilling
activity combined with pent-up demand from weather delays in the first half of
the year. Workover demand was high as customers scheduled wells for production
maintenance to take advantage of strong commodity prices.  Winter pricing took
effect October 1, 2005. Live Well's  snubbing  revenues for the fourth quarter
increased year over year even though activity  decreased slightly as customers
were  reluctant to release the rig assist units into the market place and were
charged  standby  fees.  Precision  Rentals had record  revenue and  operating
earnings due to increased utilization and pricing on select product categories
as a result of continued strong demand for equipment throughout the quarter.

       Precision   Drilling  and  Precision   Well  Servicing  rig  operations
experienced  an activity  level  increase  of 19 percent  and 11 percent  with
utilization  of 68 percent and 65 percent in the  quarter,  respectively.  The
drilling rig fleet  achieved  14,350  operating  days in the fourth quarter of
2005 and the service rig fleet generated  142,122  operating hours.  Continued
favourable  commodity  prices and good weather  conditions set the environment
for these results. Traditional winter pricing rate increases were addressed to
start  the  fourth  quarter  and  benefited  from an  equipment  supply/demand
shortfall carried over from the third quarter. As a result, Precision Drilling
was able to increase  revenue per drilling rig  operating day by an average of
12 percent  during the fourth  quarter  and PWS was able to raise  service rig
rates per operating hour by 23 percent.

       Fourth  quarter  operating  costs were lower as a percentage of revenue
despite crew wage rate  increases of  approximately  seven  percent  effective
October 1, 2005. Operating expenses declined from 51 percent of revenue in the
fourth  quarter  of 2004 to 45  percent  in 2005.  Consistent  with the  third
quarter 2005 results,  equipment repair and maintenance expenses were lower on
a per day basis as scheduled  costs were spread over a higher  activity  level
relative to the last year. In addition,  operating expenses have not increased
to the same magnitude as customer pricing.

       Corporate and other costs,  after  excluding one time trust  conversion
costs of $18  million  were up $1 million to $13  million  from $12 million in
2004. This increase was a result of an increase in foreign exchange expense of
$3  million  offset  by lower  general  and  administrative  costs  due to the
resizing of the corporate  function to meet the needs of the smaller  business
organization.

       In the fourth quarter,  capital expenditures amounted to $45 million of
which $17 million was for the  construction  of new drilling  rigs. Two of the
scheduled 19 new builds were completed and commenced  drilling in the quarter.
The remaining $28 million was for maintenance capital  expenditures to sustain
and upgrade existing equipment.

CRITICAL ACCOUNTING ESTIMATES

       This  Management's  Discussion  and Analysis of  Precision's  financial
condition  and results of operations  is based on its  consolidated  financial
statements which are prepared in accordance with Canadian  generally  accepted
accounting  principles.   The  Trust's  significant  accounting  policies  are

                                                                            50
<PAGE>

described in Note 1 to its consolidated financial statements.  The preparation
of these financial statements requires that certain estimates and judgments be
made that affect the reported  assets,  liabilities,  revenues  and  expenses.
These  estimates  and  judgments  are based on  historical  experience  and on
various  other  assumptions  that are  believed  to be  reasonable  under  the
circumstances.  Anticipating  future  events  cannot be done  with  certainty,
therefore,  these estimates may change as new events occur, more experience is
acquired and as the Trust's operating environment changes.

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

ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

       Precision  performs  ongoing  credit  evaluations  of our customers and
grants  credit  based  upon past  payment  history,  financial  condition  and
anticipated industry conditions. Customer payments are regularly monitored and
a  provision  for  doubtful   accounts  is  established  based  upon  specific
situations and overall industry  conditions.  Precision's  history of bad debt
losses has been within expectations and generally limited to specific customer
circumstances,  however,  given the cyclical nature of the oil and natural gas
industry and the inherent risk of successfully finding hydrocarbon reserves, a
customer's ability to fulfill its payment  obligations can change suddenly and
without notice.

BUSINESS DIVESTITURE RECEIVABLE

       In   conjunction   with   disposition   of  the  Energy   Services  and
International Contract Drilling divisions,  Precision estimated and recorded a
$20 million  receivable  regarding a working  capital and property,  plant and
equipment  adjustment.  This  amount is  subject  to change  depending  on the
outcome of  ongoing  discussions  with the  purchaser  and could  result in an
adjustment to the proceeds on disposition.  Management estimates that ultimate
settlement of this issue will not have a material  impact on the recorded gain
on disposal of discontinued operations.

IMPAIRMENT OF LONG-LIVED ASSETS

       Long-lived  assets,  which  include  property,   plant  and  equipment,
intangibles  and goodwill,  comprise the majority of Precision's  assets.  The
carrying  value of these assets is  periodically  reviewed for  impairment  or
whenever  events or  changes in  circumstances  indicate  that their  carrying
amounts may not be  recoverable.  This requires  Precision to forecast  future
cash flows to be  derived  from the  utilization  of these  assets  based upon
assumptions about future business  conditions and technological  developments.
Significant,  unanticipated  changes  to these  assumptions  could  require  a
provision  for  impairment in the future.  During the fourth  quarter of 2005,
Precision  completed its goodwill  assessment  and concluded that there was no
impairment of the carrying value.

DEPRECIATION AND AMORTIZATION

       Precision's property, plant and equipment and its intangible assets are
depreciated  and  amortized  based upon  estimates of useful lives and salvage
values.  These  estimates  may change as more  experience  is  gained,  market
conditions shift or new technological advancements are made.

       Effective  January 1, 2005,  Precision  changed  the useful life of its
drilling  rigs for  purposes  of  determining  depreciation  expense  to 5,000
utilization  days from 4,150  utilization days (3,650 operating days), and its
drill strings to 1,500 from 1,100  operating  days.  Utilization  days include
both operating and rig move days. This change in accounting  estimate has been
applied prospectively and resulted in an $11 million reduction of depreciation
expense or $0.09 per unit for the year ended December 31, 2005.

INCOME TAXES

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

       The business and  operations of Precision are complex and Precision has
executed  a  number  of   significant   financings,   business   combinations,
acquisitions and dispositions over the course of its history.  The computation
of income taxes payable as a result of these  transactions,  and in particular
those completed  within the last five years,  involves many complex factors as
well  as  Precision's   interpretation   of  relevant  tax   legislation   and
regulations. Precision's management believes that the provision for income tax
is adequate.

       However,  there are a number of tax filing  positions that can still be
the subject of review by taxation  authorities who may successfully  challenge
Precision's  interpretation of the applicable tax legislation and regulations,
with the result that  additional  taxes could be payable by Precision  and the
amount payable could be up to $300 million.

                                                                            51
<PAGE>

BUSINESS RISKS

       The  discussion of risk that follows is not a complete  representation.
Refer to the "Cautionary Statement Regarding  Forward-looking  Information and
Statements" on page 2.

       Certain activities of Precision are affected by factors that are beyond
its control or  influence.  The  Canadian  drilling  rig,  camp and  catering,
service rig,  snubbing,  rentals and related service businesses and activities
of  Precision  are  directly   affected  by  fluctuations  in  the  levels  of
exploration,  development and production  activity carried on by its customers
which, in turn, is dictated by numerous factors, including world energy prices
and  government  policies.   The  addition,   elimination  or  curtailment  of
government  regulations and incentives could have a significant  impact on the
oil and gas business in Canada.  These  factors could lead to a decline in the
demand for  Precision's  services,  resulting in a material  adverse effect on
revenues,  cash flows,  earnings and cash  distributions  to unitholders.  The
majority of Precision's operating costs are variable in nature which minimizes
the impact of downturns on our operational results.

CRUDE OIL AND NATURAL GAS PRICES

       Precision's revenue, cash flow and earnings are substantially dependent
upon, and affected by, the level of activity  associated  with oil and natural
gas exploration and  production.  Both short-term and long-term  trends in oil
and natural gas prices affect the level of such activity.  Oil and natural gas
prices and,  therefore,  the level of  drilling,  exploration  and  production
activity  have been  volatile over the past few years and likely will continue
to be volatile. Crude oil prices in 2005 ranged from a low of US$43 per barrel
to a high of nearly  US$70  per  barrel.  Worldwide  military,  political  and
economic  events,  including  initiatives  by the  Organization  of  Petroleum
Exporting  Countries,  may affect both the demand for,  and the supply of, oil
and natural gas. North American  oilfield  service activity is largely focused
on natural gas.  Natural gas in 2005 averaged almost US$9 per mmbtu and ranged
from an  approximate  low and high of US$7 and US$16  per mmbtu  respectively.
Weather  conditions,  governmental  regulation (both in Canada and elsewhere),
levels of consumer demand,  the availability of pipeline  capacity,  and other
factors  beyond  Precision's  control may also affect the supply of and demand
for oil and natural gas and thus lead to future  price  volatility.  Precision
believes  that any  prolonged  reduction  in oil and natural gas prices  would
depress  the  level of  exploration  and  production  activity.  Lower oil and
natural  gas  prices  could  also  cause  Precision's  customers  to  seek  to
terminate, renegotiate or fail to honour Precision's drilling contracts; which
could  affect  the fair  market  value of its rig  fleet  which in turn  could
trigger a write-down for accounting  purposes;  which could affect Precision's
ability to retain  skilled rig personnel;  and which could affect  Precision's
ability to obtain access to capital to finance and grow its businesses.  There
can be no assurance that the future level of demand for  Precision's  services
or future conditions in the oil and natural gas industry will not decline.

WORKFORCE AVAILABILITY

       Precision's  ability to provide reliable services is dependent upon the
availability  of  well-trained,   experienced   crews  to  operate  our  field
equipment.  Precision must also balance the  requirement to maintain a skilled
workforce  with the need to establish  cost  structures  that  fluctuate  with
activity levels.

       Within  Precision,  the most  experienced  people are  retained  during
periods of low  utilization by having them fill lower level positions on field
crews.  Precision has established  training  programs for employees new to the
oilfield service sector and works closely with industry associations to ensure
competitive  compensation  levels and attract  new workers to the  industry as
required.  Many of Precision's  businesses are currently experiencing manpower
shortages.  These shortages are likely to be further  challenged by the number
of rigs being added to the industry  along with the entrance and  expansion of
newly formed oilfield service companies.

BUSINESS IS SEASONAL

       In Canada,  the level of activity in the oilfield  service  industry is
influenced by seasonal weather patterns. During the spring months, wet weather
and the spring thaw make the ground unstable. Consequently, municipalities and
provincial  transportation  departments  enforce  road bans that  restrict the
movement of rigs and other heavy equipment,  thereby reducing  activity levels
and placing an increased  level of importance on the location of our equipment
prior to  imposition of the road bans.  Additionally,  certain oil and natural
gas producing areas are located in sections of the WCSB that are inaccessible,
other than  during the  winter  months,  because  the  ground  surrounding  or
containing  the  drilling  sites in these areas  consists of terrain  known as
muskeg.  Until the  muskeg  freezes,  the rigs and other  necessary  equipment
cannot cross the terrain to reach the drilling site.  Moreover,  once the rigs
and other  equipment  have been  moved to a  drilling  site,  they may  become
stranded or  otherwise  unable to  relocate to another  site should the muskeg
thaw unexpectedly. Precision's business results depend, at least in part, upon
the severity and duration of the Canadian winter.

TECHNOLOGY

       Technological innovation by oilfield service companies has improved the
effectiveness  of the  entire  exploration  and  production  sector  over  the
industry's   140-year   history.   Drilling  time  has  been  reduced  due  to
improvements in drill bits,  logging and measurement  while drilling tools, as

                                                                            52
<PAGE>

well as innovative  changes in other areas such as mud systems and top drives.
Precision's ability to deliver services that are more efficient is critical to
continued success.

CUSTOMER MERGER AND ACQUISITION ACTIVITY

       Merger and acquisition  activity in the oil and natural gas exploration
and production sector can impact demand for our services as customers focus on
internal  reorganization  activities  prior to committing funds to significant
drilling and maintenance projects.

DISCLOSURE CONTROLS AND PROCEDURES

       The Chief  Executive  Officer  and the  Chief  Financial  Officer  have
evaluated the effectiveness of Precision's  disclosure controls and procedures
as of December 31, 2005 and have concluded that such  disclosure  controls and
procedures  were  effective  to provide  reasonable  assurance  that  material
information relating to the Trust or its divisions is made known to them.

OUTLOOK

       Global macro energy  fundamentals  remain positive as worldwide  energy
demand  continues  to be firm,  supported  to a large  extent  by the  growing
economies of China,  southeast Asia and India.  OPEC has remained  disciplined
and  rational  with  respect  to  managing  the  supply  dynamics  for oil and
worldwide production capacity is challenged to meet growing needs. Natural gas
fundamentals  are also  strong in the face of  healthy  industrial  demand and
ongoing production  challenges.  These factors,  which analysts are predicting
will not change in the  foreseeable  future,  have led to the  sustainment  of
historically high crude oil and natural gas prices. As a result, the financial
capabilities of Precision's  customers have been greatly strengthened over the
past year and the returns they are generating are compelling  them to increase
their exploration and development spending.

       Macro energy  fundamentals  for  Precision's  Canadian  businesses  are
expected to be largely driven by North American natural gas prices, production
and consumption. Increasingly, oilfield service activity in Canada is weighted
towards natural gas production.  Short-term  natural gas fundamentals  will be
impacted by industrial and  residential  consumption  associated with seasonal
heating and air  conditioning  demand.  Accordingly,  weather  patterns play a
large role in natural  gas  storage  levels and impact  near-term  natural gas
pricing.  Warm weather  conditions  throughout North America during the fourth
quarter  of 2005  resulted  in lower  natural  gas  pricing  to close  out the
2005/2006 winter.

       With these medium to long-term fundamentals as the backdrop,  Precision
anticipates  demand  for its  oilfield  services  to be  robust  in 2006.  The
Canadian  Association of Oilwell Drilling Contractors is forecasting just over
26,000 wells to be drilled,  on a rig release  basis,  in the WCSB in 2006, an
all time high. A recurring  challenge Precision faces in filling the increased
demand for its services is attracting  employees with sufficient expertise and
training. Precision is focused on recruiting, training and retaining people so
that it can continue to respond to customers needs.

       The first quarter of 2006 has provided an excellent  start to the year.
Precision  began the year at high  levels as  customers  were  extremely  well
prepared to pursue their winter drilling,  completion and production programs.
To the extent that warm weather was an issue, customers were prepared to shift
well locations to ensure high equipment  utilization,  thereby avoiding costly
standby charges or loss of equipment use. With industry's  growing emphasis on
spreading drilling activity throughout the year, load levelling practices bode
well for the seasonally soft second and third quarters.  Given that there is a
healthy  inventory of wells to be drilled,  completed and  maintained,  second
quarter slow downs  caused by weather  could  heighten  demand and allow for a
repeat of last year,  which led to a sharp rebound in third  quarter  activity
and provided pricing  leverage to start the winter drilling  season.  The most
important  factor,  however,  would be a repeat of the record  upward trend in
natural gas prices.

       During  the  fourth  quarter  of  2005,  Precision  announced  a growth
initiative  to construct  19 new  drilling  rigs that will expand the fleet by
eight  percent  over the  following  12 to 15 months.  These new rigs are of a
versatile design and are being built to meet customer  specifications.  Ten of
the new builds will be of Precision's proprietary Super Single(R) design, with
the remaining  nine rigs being diesel  electric light triples rated to a depth
of 4,000 metres.  Customer  commitments  on many of these rigs are symbolic of
the current  strength in demand for drilling in Canada,  as the contract  term
from the date of rig  commission  will carry  through to the first  quarter of
2011.  Industry  indications suggest that an additional 100 drilling rigs will
be added by  drilling  contractors  within the WCSB  during  2006.  This would
increase  the  industry  drilling  fleet  to  870  rigs  to a  level  that  is
unprecedented.  In the event that  demand  softens,  the  additional  industry
capacity  could put the market in an  oversupply  position.  This would impact
pricing and lower  profitability  for drilling  contractors and other oilfield
service businesses.

       Precision  has  and  will  continue  to  apply  conservative  financial
principles  in managing its balance sheet and to remain  opportunistic  in its
pursuit of North American growth opportunities.

                                                                            53
<PAGE>


MANAGEMENT'S REPORT TO THE UNITHOLDERS

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

       Management has prepared  Management's  Discussion and Analysis  (MD&A).
The MD&A is based upon the Trust's  financial  results  prepared in accordance
with Canadian  GAAP. The MD&A compares the audited  financial  results for the
years  ended  December  31,  2005 to  December  31,  2004 and the years  ended
December 31, 2004 to December 31, 2003. Note 16 to the consolidated  financial
statements  describes the impact on the consolidated  financial  statements of
significant differences between Canadian and United States GAAP.

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

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

       The Audit  Committee of the Board of  Directors,  which is comprised of
three  independent  directors  who are not  employees  of the Trust,  provides
oversight to the financial reporting process.  Integral to this process is the
Audit  Committee's  review and  discussion  with  management  and the external
auditors of the quarterly and annual financial statements and reports prior to
their  respective  release.  The  Audit  Committee  is  also  responsible  for
reviewing and  discussing  with  management  and the external  auditors  major
issues as to the adequacy of the Trust's internal  controls.  The consolidated
financial  statements  have  been  approved  by the Board of  Trustees  on the
recommendation of the Board of Directors of Precision Drilling Corporation and
its Audit Committee.

<TABLE>
<S>                                                 <C>
/s/ Hank B. Swartout                                /s/ Doug J. Strong
-----------------------------------                 -------------------------------
CHAIRMAN AND CHIEF EXECUTIVE OFFICER                CHIEF FINANCIAL OFFICER
PRECISION DRILLING CORPORATION,                     PRECISION DRILLING CORPORATION,
ADMINISTRATOR TO PRECISION DRILLING TRUST           ADMINISTRATOR TO PRECISION DRILLING TRUST


MARCH 7, 2006                                       MARCH 7, 2006
</TABLE>




                                                                            54
<PAGE>

AUDITORS' REPORT TO THE UNITHOLDERS

       We have audited the consolidated  balance sheets of Precision  Drilling
Trust as at December  31,  2005 and 2004 and the  consolidated  statements  of
earnings and retained  earnings  (deficit) and cash flow for each of the years
in the three-year period ended December 31, 2005. These consolidated financial
statements   are  the   responsibility   of  the   Trust's   management.   Our
responsibility  is to  express  an  opinion  on these  consolidated  financial
statements based on our audits.

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

       In our opinion, these consolidated financial statements present fairly,
in all material  respects,  the financial position of the Trust as at December
31, 2005 and 2004 and the results of its operations and its cash flow for each
of the years in the  three-year  period ended  December 31, 2005 in accordance
with Canadian generally accepted accounting principles.


/s/ KPMG LLP

Chartered Accountants
CALGARY, ALBERTA
MARCH 2, 2006



                                                                            55
<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS

(STATED IN THOUSANDS OF DOLLARS)
As at December 31,                                                                  2005              2004
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>
ASSETS
Current assets:
         Cash and cash equivalents                                          $          -      $    122,012
         Accounts receivable (NOTE 19)                                           500,655           309,292
         Inventory                                                                 7,035             7,734
         Assets of discontinued operations (NOTE 21)                                   -           497,036
-------------------------------------------------------------------------------------------------------------
                                                                                 507,690           936,074

Property, plant and equipment, net of accumulated depreciation (NOTE 4)          943,900           897,584
Intangibles, net of accumulated amortization of $413 (2004 - $380)                   465               498
Goodwill                                                                         266,827           266,827
Deferred financing costs                                                               -             9,116
Assets of discontinued operations (NOTE 21)                                            -         1,741,950
-------------------------------------------------------------------------------------------------------------
                                                                            $ 1,718,882       $  3,852,049
=============================================================================================================

LIABILITIES AND UNITHOLDERS' EQUITY

Current liabilities:
         Bank indebtedness (NOTE 6)                                         $     20,468      $          -
         Accounts payable and accrued liabilities (NOTE 19)                      134,303           120,432
         Incomes taxes payable                                                   163,530            13,624
         Distributions payable (NOTE 5)                                           36,635                 -
         Liabilities of discontinued operations (NOTE 21)                              -           244,707
-------------------------------------------------------------------------------------------------------------
                                                                                 354,936           378,763
Long-term debt (NOTE 7)                                                           96,838           718,850
Future income taxes (NOTE 12)                                                    192,517           354,268
Liabilities of discontinued operations (NOTE 21)                                       -            78,427
Unitholders' equity:
         Unitholders' capital (NOTE 8)                                         1,377,875         1,274,967
         Contributed surplus (NOTE 8)                                                  -            26,024
         Cumulative translation adjustment (NOTE 18)                                   -          (20,933)
         Retained earnings (deficit)                                           (303,284)         1,041,683
-------------------------------------------------------------------------------------------------------------
                                                                               1,074,591         2,321,741

Commitments and contingencies (NOTES 11 AND 20)
-------------------------------------------------------------------------------------------------------------
                                                                            $ 1,718,882       $  3,852,049
=============================================================================================================
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


Approved by the Board:

/s/ Robert J.S. Gibson                          /s/ Patrick M. Murray
---------------------------                     --------------------------
Robert J.S. Gibson                              Patrick M. Murray
TRUSTEE                                         TRUSTEE



                                                                            56
<PAGE>


<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (DEFICIT)

(STATED IN THOUSANDS OF DOLLARS, EXCEPT PER UNIT/SHARE AMOUNTS)
Years ended December 31,                                           2005             2004              2003
-------------------------------------------------------------------------------------------------------------
<S>                                                         <C>              <C>               <C>
Revenue                                                     $ 1,269,179      $ 1,028,488       $   915,170
Expenses:
         Operating                                              641,805          566,297           544,163
         General and administrative                              76,397           64,149            42,662
         Depreciation and amortization                           71,561           74,829            78,112
         Foreign exchange                                        (3,474)          (8,100)           (2,216)
         Reorganization costs (NOTE 9)                           17,512                -                 -
-------------------------------------------------------------------------------------------------------------
                                                                803,801          697,175           662,721
-------------------------------------------------------------------------------------------------------------
Operating earnings                                              465,378          331,313           252,449
Interest:
         Long-term debt (NOTE 7)                                 38,735           46,575            34,492
         Other                                                      558              246               115
         Income                                                 (10,023)            (541)             (541)

Premium on redemption of bonds (NOTE 7)                          71,885                -                 -
Loss on disposal of short-term investments (NOTE 21)             70,992                -                 -
Gain on disposal of investments                                       -           (4,899)           (1,493)
-------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes         293,231          289,932           219,876
Income taxes: (NOTE 12)
         Current                                                241,402           53,698            40,828
         Future                                                (169,019)          48,103            34,900
-------------------------------------------------------------------------------------------------------------
                                                                 72,383          101,801            75,728
-------------------------------------------------------------------------------------------------------------
Earnings from continuing operations                             220,848          188,131           144,148
Gain (loss) on disposal of discontinued operations,
         net of tax (NOTE 21)                                 1,335,382             (616)           17,460
Discontinued operations, net of tax (NOTE 21)                    74,333           59,889            18,866
-------------------------------------------------------------------------------------------------------------
Net earnings                                                  1,630,563          247,404           180,474
Retained earnings, beginning of year (NOTE 3)                 1,041,683          794,279           613,805
Adjustment on cash purchase of employee stock options,
         net of tax of $22,060 (NOTE 8)                         (42,087)               -                 -
Reclassification from contributed surplus on cash
         buy-out of employee stock options (NOTE 8)              23,215                -                 -
Distribution of disposal proceeds (NOTE 21)                   (2,851,784)              -                 -
Repurchase of common shares of dissenting
         shareholders (NOTE 8)                                  (34,364)               -                 -
Distributions (NOTE 5)                                          (70,510)               -                 -
-------------------------------------------------------------------------------------------------------------
Retained earnings (deficit), end of year                    $  (303,284)     $ 1,041,683       $   794,279
=============================================================================================================
Earnings per unit/share from continuing
operations: (NOTE 13)
         Basic                                              $      1.79      $      1.63       $      1.33
         Diluted                                            $      1.76      $      1.61       $      1.31
-------------------------------------------------------------------------------------------------------------
Earnings per unit/share: (NOTE 13)
         Basic                                              $     13.22      $      2.14       $      1.66
         Diluted                                            $     13.00      $      2.11       $      1.63
=============================================================================================================
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                                            57
<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW

(STATED IN THOUSANDS OF DOLLARS)
Years ended December 31,                                               2005           2004            2003
-------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>            <C>
Cash provided by (used in):
Continuing operations:
         Earnings from continuing operations                   $    220,848      $ 188,131      $  144,148
         Items not affecting cash:
         Depreciation and amortization                               71,561         74,829          78,112
         Stock-based compensation                                    11,229          8,190           6,366
Future income taxes                                                (169,019)        48,103          34,900
              Write-off of deferred financing costs                   7,664              -               -
              Loss in market value of short-term investments         70,992              -               -
              Gain on disposal of investments                             -         (4,899)         (1,493)
              Amortization of deferred financing costs                1,453          1,579           1,286
              Unrealized foreign exchange gain on long-term
                   monetary items                                    (4,740)        (4,284)            (42)
         Changes in non-cash working capital balances (NOTE 19)      (6,887)       (23,828)        (62,356)
-------------------------------------------------------------------------------------------------------------
                                                                    203,101        287,821         200,921
Discontinued operations (NOTE 21):
         Funds provided by discontinued operations                  183,330        187,018          89,051
         Changes in non-cash working capital balances
              of discontinued operations                            (86,310)       (26,797)        (31,545)
-------------------------------------------------------------------------------------------------------------
                                                                     97,020        160,221          57,506
Investments:
         Business acquisitions, net of cash acquired (NOTE 15)      (30,421)      (679,814)         (6,800)
         Purchase of property, plant and equipment                 (155,231)      (122,692)        (96,193)
         Purchase of intangibles                                        (20)             -              (6)
         Proceeds on sale of property, plant and equipment           15,174          8,795          11,341
         Purchase of property, plant and equipment
              of discontinued operations                           (128,214)      (159,532)       (218,728)
         Purchase of intangibles of discontinued operations               -           (320)              -
         Proceeds on sale of property, plant and equipment
              of discontinued operations                             17,785         21,145          13,082
         Proceeds on disposal of investments                              -          8,665          10,966
         Proceeds on disposal of short-term investments              14,569              -               -
         Investments                                                      -            (90)         (1,080)
         Proceeds on disposal of discontinued operations          1,306,799         49,299          67,274
-------------------------------------------------------------------------------------------------------------
                                                                  1,040,441       (874,544)       (220,144)
Financing:
         Increase in long-term debt                                  96,826        522,136          85,228
         Repayment of long-term debt                               (703,970)      (173,260)       (145,657)
         Deferred financing costs on long-term debt                       -         (5,612)              -
         Distribution of disposal proceeds (NOTE 21)               (844,334)             -               -
         Distributions (NOTE 5)                                     (33,875)             -               -
         Issuance of common shares, net of costs                          -        276,428               -
         Issuance of common shares on exercise of options            73,930         55,361          23,613
         Repurchase of common shares of dissenting shareholders     (43,299)             -               -
         Cash buy-out of employee stock options                     (64,147)             -               -
         Issuance of trust units on exercise of options               8,263              -               -
         Issuance of trust units on purchase of options               5,504              -               -
         Changes in non-cash working capital balances                22,060              -               -
         Change in bank indebtedness                                 20,468       (147,909)          2,588
-------------------------------------------------------------------------------------------------------------
                                                                 (1,462,574)       527,144         (34,228)
-------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                   (122,012)       100,642           4,055
Cash and cash equivalents, beginning of year                        122,012         21,370          17,315
-------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                         $          -      $ 122,012      $   21,370
=============================================================================================================
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                                            58
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

       Precision  Drilling  Trust  (the  "Trust")  is a provider  of  contract
drilling,   service  rig  and  ancillary  services  to  oil  and  natural  gas
exploration and production companies in Canada.

       The Trust is an unincorporated, open-ended investment trust governed by
the laws of Alberta  and  created  pursuant  to a  declaration  of trust dated
September  22, 2005.  On September  29, 2005,  the Trust,  Precision  Drilling
Limited Partnership ("PDLP"),  1194312 Alberta Ltd., 1195309 Alberta ULC., and
Precision  Drilling  Corporation  ("Precision")  entered  into an  Arrangement
Agreement ("Plan of Arrangement" or "Plan") to convert  Precision to an income
trust.  As part of the Plan of  Arrangement,  on November  7, 2005,  Precision
Drilling  Corporation  and certain of its  subsidiaries  were  amalgamated and
continued as one  corporation  ("PDC").  After  giving  effect to the Plan and
related  transactions,  all of the  shares  of  PDC  are  owned  by  PDLP  and
indirectly by the Trust.

       Prior to the Plan of  Arrangement  effective  date of November 7, 2005,
the consolidated financial statements included the accounts of Precision,  its
subsidiaries   and  its   partnerships,   substantially   all  of  which  were
wholly-owned. The conversion to a trust has been accounted for on a continuity
of interest  basis and  accordingly,  the  consolidated  financial  statements
reflect the financial position, results of operations and cash flows as if the
Trust had always carried on the business formerly carried on by Precision. Due
to the conversion to a trust, certain information included in the consolidated
financial  statements  for prior periods may not be directly  comparable.  For
purposes of these consolidated financial statements,  the share capital of PDC
is  reported  under  Unitholders'  capital  (Note 8).  Pursuant to the Plan of
Arrangement,   shareholders  ultimately  received  either  trust  units  or  a
combination  of trust units and  exchangeable  LP units of PDLP for previously
held common  shares of  Precision  (other than  dissenting  shareholders,  who
received cash equal to the fair value of their shares). After giving effect to
the Plan of Arrangement,  the consolidated  financial  statements  include the
accounts of the Trust, its subsidiaries and its partnerships.

       The  beneficiaries  of the Trust are the holders of Trust units and the
partners of PDLP are the holders of exchangeable  LP units and the Trust.  The
monthly  distributions made by the Trust are determined by the Trustees.  PDLP
earns interest income from a promissory note issued by its subsidiary PDC at a
rate  which  is  determined  by the  terms  of the  promissory  note.  PDLP in
substance pays  distributions  to holders of  exchangeable LP units in amounts
equal  to  the  distributions   paid  to  the  holders  of  Trust  units.  All
distributions  are made to  unitholders  of record on the last business day of
each calendar month.

1. SIGNIFICANT ACCOUNTING POLICIES:

CONTINUING OPERATIONS

(a)    PRINCIPLES OF CONSOLIDATION:

       The  consolidated  financial  statements  include  the  accounts of the
Trust, its subsidiaries and its  partnerships,  substantially all of which are
wholly-owned at December 31, 2005.

(b)    CASH AND CASH EQUIVALENTS:

       Cash and cash  equivalents  consist of cash and short-term  investments
with original maturities of three months or less.

(c)    INVENTORY:

       Inventory is primarily  comprised of operating supplies and spare parts
and is  carried at the lower of average  cost,  being the cost to acquire  the
inventory, and replacement cost. Inventory is charged to operating expenses as
items are sold or consumed at the amount of the average cost of the item.

(d)    PROPERTY, PLANT AND EQUIPMENT:

       Property,  plant and equipment are carried at cost,  including costs of
direct material,  labor, and indirect overhead for manufactured  items.  Where
costs are incurred to extend the useful life of property,  plant and equipment
or to increase its  capabilities,  the amounts are  capitalized to the related
asset. Costs incurred to repair or maintain property,  plant and equipment are
expensed as incurred.

       Drilling rig equipment is depreciated by the unit-of-production  method
based  on 5,000  utilization  days  (3,650  drilling  days for the year  ended
December 31, 2004 - see Note 2) with a 20 percent  salvage  value.  Drill pipe
and drill collars are  depreciated  over 1,500  drilling days (1,100  drilling
days for the year ended  December  31,  2004 - see Note 2) and have no salvage
value. Service rig equipment is depreciated by the  unit-of-production  method
based on 24,000  hours for single and double  rigs and 48,000  hours for heavy
double rigs. Service rigs have a 20% salvage value.

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

                                                                            59
<PAGE>

       Light duty vehicles are  depreciated by the  straight-line  method over
four years.  Heavy-duty  vehicles are depreciated by the straight-line  method
over periods ranging from seven to ten years.

       Buildings  are  depreciated  by the  straight-line  method over periods
ranging from 10 to 20 years.

(e)    INTANGIBLES:

       Intangibles,  which are comprised primarily of patents, are recorded at
cost and amortized by the straight-line method over their useful lives ranging
from 10 to 12 years. The weighted average amortization period is 12 years, and
amortization over the next five years is anticipated to be $75,000 per year.

(f)    GOODWILL:

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

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

(g)    LONG LIVED ASSETS:

       On a periodic  basis,  management  assesses the carrying  value of long
lived assets for indications of impairment.  Indications of impairment include
items such as an ongoing  lack of  profitability  and  significant  changes in
technology.  When an indication of impairment is present,  the Trust tests for
impairment by comparing the carrying value of the asset to its net recoverable
amount. If the carrying amount is greater than the net recoverable amount, the
asset is written down to its estimated fair value.

(h)    INVESTMENTS:

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

(i)    DEFERRED FINANCING COSTS:

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

(j)    INCOME TAXES:

       Income  earned  directly by PDLP is not subject to income  taxes as its
income is taxed directly to the PDLP  partners.  The Trust is a taxable entity
under the Income Tax Act  (Canada)  and income  earned is taxable  only to the
extent it is not distributed or distributable to its unitholders. As the Trust
distributes all of its taxable income to its respective  unitholders  pursuant
to the requirements of the trust  indenture,  it does not make a provision for
future income taxes.

       PDC and its subsidiaries  follow the liability method of accounting for
future income taxes. Under the liability method,  future income tax assets and
liabilities  are  determined  based on  "temporary  differences"  (differences
between the accounting basis and the tax basis of the assets and liabilities),
and are measured using the currently enacted,  or substantively  enacted,  tax
rates and laws expected to apply when these differences reverse. The effect of
a change  in  income  tax  rates on  future  tax  liabilities  and  assets  is
recognized in income in the period in which the change occurs.

(k)    REVENUE RECOGNITION:

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

(l)    EMPLOYEE BENEFIT PLANS:

       At December  31,  2005,  approximately  52% (2004 - 33%) of the Trust's
employees were enrolled in the Trust's defined contribution retirement plans.

                                                                            60
<PAGE>

       Employer  contributions to defined  contribution  plans are expensed as
employees earn the entitlement and contributions are made.

       The  Trust  had  entered  into an  employment  agreement  with a senior
officer, which provided for a one-time payment upon retirement.  The amount of
this retirement allowance increased by a fixed amount for each year of service
over a ten year period  commencing  April 30, 1996. The estimated cost of this
benefit was being  accrued and  charged to earnings on a  straight-line  basis
over the ten year period.  This retirement  allowance was paid during the year
ended December 31, 2005 (see Note 10).

(m)    FOREIGN CURRENCY TRANSLATION:

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

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

(n)    STOCK-BASED COMPENSATION PLANS:

       The Trust had equity  incentive  plans,  which are described in Note 8.
The fair value of common share purchase  options was calculated at the date of
grant using the Black-Scholes option pricing model and that value was recorded
as  compensation  expense on a  straight-line  basis over the grant's  vesting
period with an offsetting credit to contributed surplus.  Upon exercise of the
equity  purchase  option,   the  associated   amount  was  reclassified   from
contributed surplus to unitholders'  capital.  Consideration paid by employees
upon exercise of equity purchase options was credited to unitholders' capital.

(o)    EXCHANGEABLE SHARES:

       Exchangeable  shares  are  presented  as  equity  of the Trust as their
features make them economically equivalent to trust units.

(p)    PER UNIT AMOUNTS:

       Basic per unit amounts are calculated using the weighted average number
of trust  units  outstanding  during the year.  Diluted  per unit  amounts are
calculated based on the treasury stock method, which assumes that any proceeds
obtained on exercise of options  would be used to purchase  trust units at the
average market price during the period.  The weighted  average number of units
outstanding  is then  adjusted by the  difference  between the number of units
issued from the  exercise of options  and units  repurchased  from the related
proceeds.

       Share and per share amounts  prior to the trust  conversion on November
7,  2005 are  referred  to as unit or per  unit  amounts  in the  consolidated
financial statements.

(q)    MEASUREMENT UNCERTAINTY:

       Certain items recognized in the consolidated  financial  statements are
subject to measurement  uncertainty as they are based on management's estimate
using  current  information  and  judgment.  The  effect  on the  consolidated
financial  statements  of changes in such  estimates  in future years could be
significant.

DISCONTINUED OPERATIONS

(a)    EMPLOYEE BENEFIT PLANS:

       At December 31, 2004,  approximately  36% of employees of  discontinued
operations  were enrolled in retirement  plans. Of that,  approximately  6% of
participating  employees  were  enrolled  in  the  defined  benefit  plan  and
approximately 94% in the defined contribution plan.

       Employer  contributions to defined  contribution plans were expensed as
employees earned the entitlement and contributions were made.

       The Trust  accrued the cost of pensions  earned by employees  under its
defined  benefit plan,  which was actuarially  determined  using the projected
benefit  method  pro-rated  on  services  and  management's  best  estimate of
expected plan investment performance, salary escalation and retirement ages of
employees.  For the purpose of calculating the expected return on plan assets,
those assets were valued at quoted market value at the balance sheet date. The
discount  rate used to  calculate  the  interest  cost on the accrued  benefit
obligation  was the  long-term  market  rate at the balance  sheet date.  Past
service costs from plan  amendments  were amortized on a  straight-line  basis
over the average  remaining  service period of employees active at the date of
amendment (EARSL). The excess of the net cumulative unamortized actuarial gain
or loss over 10% of the  greater of the  accrued  benefit  obligation  and the
market value of plan assets was amortized over EARSL.

(b)    FOREIGN CURRENCY TRANSLATION:

       Accounts of the Trust's  self-sustaining  operations were translated to
Canadian  dollars  using average  exchange  rates for the year for revenue and
expenses.  Assets and  liabilities  were  translated  at the year-end  current
exchange rate.

                                                                            61
<PAGE>

       Gains or losses  resulting  from  these  translation  adjustments  were
included in the cumulative translation account in unitholders' equity.

       Gains and losses arising on translation of long-term debt designated as
a hedge of  self-sustaining  foreign  operations were deferred and included in
the  cumulative  translation  account in  unitholders'  equity on a net of tax
basis.

(c)    HEDGING RELATIONSHIPS:

       The  Trust  utilized  foreign  currency  long-term  debt to  hedge  its
exposure to changes in the carrying  values of the Trust's net  investment  in
certain  self-sustaining  foreign operations as a result of changes in foreign
exchange rates.

       To be accounted for as a hedge,  the foreign  currency  long-term  debt
must be  designated  and  documented  as a  hedge,  and must be  effective  at
inception and on an ongoing basis. The documentation  defined the relationship
between the foreign  currency  long-term  debt and the net  investment  in the
foreign  operations,  as well as the Trust's  risk  management  objective  and
strategy for undertaking the hedging transaction. The Trust formally assessed,
both at the hedge's inception and on an ongoing basis,  whether the changes in
fair value of the  foreign  currency  long-term  debt is highly  effective  in
offsetting  changes in the fair  value of the net  investment  in the  foreign
operations.  If the  hedging  relationship  was  terminated  or  ceased  to be
effective, hedge accounting was not applied to subsequent gains or losses. Any
previously deferred amounts were carried forward and recognized in earnings in
the same period as the hedged item.

(d)    RESEARCH AND ENGINEERING:

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

2.     ACCOUNTING ESTIMATES:

       Effective  January 1, 2005,  the Trust  changed  the useful life of its
drilling  rigs for  purposes  of  determining  depreciation  expense  to 5,000
utilization  days from 4,150  utilization  days (3,650 drilling days), and its
drill string to 1,500 from 1,100 drilling days.  Utilization days include both
operating  and rig move days.  This  change in  accounting  estimate  has been
applied   prospectively   and  resulted  in  a  $10.7  million   reduction  in
depreciation  expense,  or $0.09 per  diluted  unit/share,  for the year ended
December 31, 2005.

3.     ACCOUNTING CHANGES:

       STOCK-BASED COMPENSATION PLANS

       Effective  January 1, 2004,  the Trust  adopted  the  revised  Canadian
accounting standards with respect to accounting for stock-based  compensation.
Under those  standards,  the fair value of common  share  purchase  options is
calculated at the date of the grant and that value is recorded as compensation
expense over the vesting period of those grants.  Under the previous standard,
no  compensation  expense was recorded when stock options were issued with any
consideration received upon exercise credited to share capital.

       The Trust has retroactively applied this standard,  with restatement of
prior years,  to all common share  purchase  options  granted since January 1,
2002.  This  has  resulted  in a charge  to net  earnings  for the year  ended
December  31, 2004 of $13.8  million  (2003 - $8.2  million) or $0.11  diluted
earnings per share (2003 - $0.08) and a reduction to opening retained earnings
of $14.5 million at January 1, 2004 ($6.3 million at January 1, 2003).


                                                                            62
<PAGE>

4. PROPERTY, PLANT AND EQUIPMENT:

<TABLE>
<CAPTION>
                                                                             ACCUMULATED          NET BOOK
2005                                                               COST     DEPRECIATION             VALUE
-------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>               <C>
Rig equipment                                              $  1,163,970     $    386,191      $    777,779
Rental equipment                                                 81,099           35,307            45,792
Other equipment                                                 102,727           62,852            39,875
Vehicles                                                         68,911           20,703            48,208
Buildings                                                        32,830            9,580            23,250
Land                                                              8,996                -             8,996
-------------------------------------------------------------------------------------------------------------
                                                           $  1,458,533     $    514,633      $   943,900
=============================================================================================================


<CAPTION>
                                                                             Accumulated          Net Book
2004                                                               Cost     Depreciation             Value
-------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>               <C>
Rig equipment                                              $  1,070,428     $    341,827      $    728,601
Rental equipment                                                 77,246           32,117            45,129
Other equipment                                                 111,820           63,939            47,881
Vehicles                                                         58,391           16,359            42,032
Buildings                                                        32,901            8,715            24,186
Land                                                              9,755                -             9,755
-------------------------------------------------------------------------------------------------------------
                                                           $  1,360,541     $    462,957      $    897,584
=============================================================================================================
</TABLE>

5.     DISTRIBUTIONS PAYABLE:

       Distributions were declared on trust and exchangeable LP units of $0.27
per unit for the  month  ended  November  30,  2005 and $ 0.27 per unit plus a
special distribution of $0.022 per unit for the month ended December 31, 2005.
Total  distributions  were $70.5  million,  of which $33.9 million was paid on
December 15, 2005 and $36.6 million was paid on January 17, 2006.

6.     BANK INDEBTEDNESS:

       At December 31, 2005, the Trust has available  $60.0 million  (December
31, 2004 - $63.0  million)  and US$5.0  million  (December  31, 2004 - US$30.7
million)  under  uncommitted,  unsecured  credit  facilities,  of which  $20.5
million  had been drawn  (December  31,  2004 - $nil).  Availability  of these
facilities was reduced by outstanding  letters of credit in the amount of $8.4
million (December 31, 2004 - $33.3 million,  of which $29.2 million related to
discontinued  operations).  Advances under the facilities are available at the
bank's prime lending rate, U.S. base rate,  U.S. Libor plus applicable  margin
or  Banker's  Acceptance  plus  applicable  margin,  or  in  combination.  The
applicable  margin is dependent on the Trust's  consolidated  debt to cashflow
ratio.

7.     LONG-TERM DEBT:

<TABLE>
<CAPTION>
                                                                                    2005              2004
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>
Extendible revolving unsecured facility                                     $     96,838      $          -
Unsecured debentures - Series 1                                                        -           200,000
Unsecured debentures - Series 2                                                        -           150,000
Unsecured notes, US$300.0 million                                                      -           368,850
-------------------------------------------------------------------------------------------------------------
                                                                            $     96,838      $    718,850
=============================================================================================================
</TABLE>

EXTENDIBLE REVOLVING UNSECURED FACILITY:

       At December 31, 2005,  PDC, a subsidiary of the Trust,  has available a
three-year revolving unsecured facility of $550.0 million (or U.S. equivalent)
with a syndicate led by a Canadian  chartered  bank which is guaranteed by the
Trust. The facility matures November 2, 2008 and is renewable  annually at the
option of the  lenders.  Advances  are  available  to PDC under this  facility
either at the bank's prime  lending  rate,  U.S.  base rate,  U.S.  Libor plus
applicable  margin  or  Bankers'  Acceptance  plus  applicable  margin  or  in
combination.  The applicable  margin is dependent on the Trust's  consolidated
debt to cashflow ratio and the  percentage of the total facility  outstanding,
which at December 31, 2005 was 75 basis points. The facility requires that the
Trust  maintain a ratio of total  liabilities to total equity of less than 1:1
and a trailing 12 month ratio of  consolidated  debt to cash flow of less than
2.75:1.

       The above facility replaces those facilities  available and outstanding
as at December 31, 2004 which were cancelled as follows:

                                                                            63
<PAGE>

       For the year  ended  December  31,  2004,  the Trust  had a  three-year
revolving  unsecured  facility of $335.0 million (or U.S.  equivalent)  with a
syndicate led by a Canadian  chartered  bank. The facility was to have matured
August 31,  2007 and was  renewable  annually  at the  option of the  lenders.
Advances were available to the Trust under this facility  either at the bank's
prime  lending rate,  U.S. base rate,  U.S.  Libor plus  applicable  margin or
Bankers' Acceptance plus applicable margin, or in combination.  The applicable
margin was dependent on the Trust's  credit  rating and the  percentage of the
total facility outstanding. The facility was extendable annually at the option
of the  lenders  and  required  that  the  Trust  maintain  a ratio  of  total
liabilities  to total equity of less than 1:1 and a ratio of debt to cash flow
of less than 2.75:1.  No amounts  were drawn on this  facility at December 31,
2004.

       Also for the year  ended  December  31,  2004,  the Trust had a US$50.0
million unsecured  facility with Export  Development  Canada (EDC) that was to
have  matured on December 8, 2005 and bore  interest at six-month  U.S.  Libor
plus  applicable  margin.  The margin was dependent upon the Trust's margin on
its $335.0 million three-year  revolving  unsecured credit facility,  which at
December 31, 2004  resulted in a margin of 0.8%.  The facility was  extendable
upon mutual agreement between the Trust and EDC, or could be converted, at the
Trust's option, to a term loan repayable in two equal semi-annual instalments.
No amounts were drawn on this facility at December 31, 2004.

UNSECURED DEBENTURES:

       During  the  fourth  quarter  of  2005,  Precision  repaid  all  of its
outstanding  debentures and notes pursuant to the early redemption  provisions
of  the  related  agreements.   The  difference  between  the  $766.7  million
redemption  price and the  carrying  value of the  debentures  was  charged to
income.

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

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

UNSECURED NOTES:

       o   The US$300.0  million 5.625%  unsecured  notes were to have matured
           June 1,  2014 and had an  effective  interest  rate of 5.71%  after
           taking  into  account  deferred  financing  costs.  The notes  were
           redeemable at any time at the option of Precision upon payment of a
           redemption price equal to the greater of an amount  calculated with
           reference to the yield on a United  States  treasury  security with
           the same maturity, and par.

OTHER:

       o   The $3.5 million unsecured term financing facility with EDC matured
           on January 20, 2004 and bore interest at six-month  U.S. Libor plus
           applicable margin. The margin was dependent upon Precision's credit
           rating, which at December 31, 2003 resulted in a margin of 0.8%.

       o   The $26.2 million  unsecured term  financing  facility with EDC was
           repaid and  cancelled in 2004 and bore  interest at six-month  U.S.
           Libor  plus  applicable  margin.  The  margin  was  dependent  upon
           Precision's credit rating, which at December 31, 2003 resulted in a
           margin of 0.9%.

       Principal repayments after 2005 are as follows:

------------------------------------------------------------------------------
2006                                                                 $      -
2007                                                                        -
2008                                                                   96,838
Thereafter                                                                  -
------------------------------------------------------------------------------
2008                                                                 $ 96,838
==============================================================================

8.    UNITHOLDERS' CAPITAL:

         On November 7, 2005, Precision converted to an unincorporated,
open-ended investment trust pursuant to a Plan of Arrangement. The Plan
resulted in shareholders receiving one trust unit or one exchangeable LP unit
or a combination thereof, for previously held common shares. Common shares
held by shareholders who dissented to the Plan were repurchased and cancelled
on the effective date of the Plan. All outstanding common share purchase
options were converted to options to acquire trust units. The holder then had
three options: exercise the options, have the Trust repurchase them for cash
using the closing market price of the Trust one day prior to cash-out, or have
the Trust repurchase the options as set-out above and use the proceeds to
purchase an equivalent number of trust units.

                                                                            64
<PAGE>

(a)    AUTHORIZED - unlimited number of voting trust units.
                  - unlimited number of voting exchangeable LP units

(b)    COMMON SHARES:

<TABLE>
<CAPTION>
                                                                                  NUMBER            AMOUNT
-------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>             <C>
Balance, December 31, 2002                                                    54,066,753      $    913,087
         Options exercised - cash consideration                                  778,925            23,613
                           - reclassification from contributed surplus                 -                44
-------------------------------------------------------------------------------------------------------------
Balance, December 31, 200                                                     54,845,678      $    936,744
         Issuance of common shares, net of costs and related tax effect        4,400,000           280,783
         Options exercised - cash consideration                                1,544,534            55,361
                           - reclassification from contributed surplus                 -             2,079
-------------------------------------------------------------------------------------------------------------
Balance, December 31, 2004                                                    60,790,212      $  1,274,967
         Options exercised - cash consideration                                  578,346            24,516
                           - reclassification from contributed surplus                 -             1,521
-------------------------------------------------------------------------------------------------------------
Balance, May 18, 2005                                                         61,368,558      $  1,301,004
         Issued on 2:1 stock split                                            61,368,558                 -
         Options exercised - cash consideration                                1,679,110            49,414
                           - reclassification from contributed surplus                 -            10,284
         Adjustment to number of shares outstanding                               21,960                 -
         Cancellation of shares owned by dissenting shareholders                (817,005)           (8,936)
-------------------------------------------------------------------------------------------------------------
BALANCE, NOVEMBER 7, 2005                                                    123,621,181      $  1,351,766
=============================================================================================================
</TABLE>

       Pursuant to the Plan, any  shareholders  of Precision could dissent and
be paid the fair value of the shares,  being the trading price at the close of
business  on  the  last   business  day  prior  to  the  Special   Meeting  of
Securityholders  on October 31, 2005. As a result,  the Trust  repurchased for
cancellation a total of 817,005  shares for $43.3 million,  of which a premium
of $34.4 million over the stated capital was charged to retained earnings.

       In the third quarter of 2004, the Trust issued  4,400,000 common shares
at US$49.80 for net proceeds of approximately $276.5 million.  Proceeds of the
offering were primarily used to repay indebtedness incurred in connection with
the acquisition of all of the issued and outstanding shares of Reeves Oilfield
Services Ltd.

(c)    TRUST UNITS:

<TABLE>
<CAPTION>
                                                                                  NUMBER            AMOUNT
-------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>
Balance, November 7, 2005                                                              -      $          -
         Issued pursuant to the Plan                                         122,512,799         1,339,646
         Options exercised - cash consideration                                1,676,616             8,263
                           - reclassification from contributed surplus                 -            12,342
         Issued for cash                                                         163,506             5,504
-------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2005                                                   124,352,921      $  1,365,755
=============================================================================================================
</TABLE>

       Trust units are  redeemable at the option of the holder,  at which time
all rights with  respect to such units are  cancelled.  Upon  redemption,  the
unitholder  is entitled to receive a price per unit equal to the lesser of 90%
of the average  market price of the Trust's units for the 10 trading days just
prior to the date of  redemption,  and the closing market price of the Trust's
units on the  date of  redemption.  The  maximum  value  of units  that can be
redeemed for cash is $50,000 per month. Redemptions, if any, in excess of this
amount are  satisfied  by issuing a note from PDC to the  unitholder,  payable
over 15  years  and  bearing  interest  at a market  rate set by the  Board of
Directors.

                                                                            65
<PAGE>

<TABLE>
<CAPTION>
                                                                                NUMBER            AMOUNT
-------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                  <C>
Exchangeable LP units
Balance, November 7, 2005                                                              -      $          -
         Issued pursuant to the Plan                                           1,108,382            12,120
-------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2005                                                     1,108,382      $     12,120
=============================================================================================================
</TABLE>

       Exchangeable  LP units have voting rights and are  exchangeable,  after
May 6,  2006,  for trust  units on a  one-for-one  basis at the  option of the
holder. Holders are entitled to monthly cash distributions equal to those paid
to holders of trust units.

<TABLE>
<CAPTION>
                                                                                  NUMBER            AMOUNT
-------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>
SUMMARY:
         TRUST UNITS                                                         124,352,921      $  1,365,755
         EXCHANGEABLE LP UNITS                                                 1,108,382            12,120
-------------------------------------------------------------------------------------------------------------
UNITHOLDERS' CAPITAL                                                         125,461,303      $  1,377,875
-------------------------------------------------------------------------------------------------------------

(d)    CONTRIBUTED SURPLUS:
-------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002                                                                    $      6,108
Stock-based compensation expense                                                                     8,202
Reclassification to common shares on exercise of options                                              (44)
-------------------------------------------------------------------------------------------------------------
Balance, December 31, 2003                                                                    $     14,266
Stock-based compensation expense                                                                    13,837
Reclassification to common shares on exercise of options                                           (2,079)
-------------------------------------------------------------------------------------------------------------
Balance, December 31, 2004                                                                    $     26,024
Stock-based compensation expense                                                                    13,077
Accelerated vesting of options on disposal of discontinued operations                                5,205
Reclassification to common shares on exercise of options prior to the Plan                        (11,805)
Accelerated vesting of options pursuant to the Plan                                                  3,056
Reclassification to trust units on exercise of options                                            (12,342)
Reclassification to retained earnings on cash buy-out of options                                  (23,215)
-------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2005                                                                    $          -
=============================================================================================================
</TABLE>

(e)    EQUITY INCENTIVE PLANS:

       Prior to  conversion to a Trust,  Precision  Drilling  Corporation  had
equity  incentive plans under which the exercise price of each option equalled
the market  value of  Precision's  stock on the date of grant and an  option's
maximum term was 10 years.  Options  vested over a period of one to four years
from the date of grant as employees or directors  rendered  continuous service
to Precision.

       Options  held by employees  of the Energy  Services  and  International
Contract  Drilling  Divisions  and of CEDA  became  fully  vested  when  these
businesses were sold during the third quarter of 2005 (see Note 21).  Pursuant
to the Plan, the remaining outstanding options were exchanged for newly vested
options to acquire trust units.  The exercise prices of the options to acquire
trust units were  adjusted  downward  to reflect the value of the  transfer of
certain  assets to  shareholders  as part of the Plan.  The options to acquire
trust units expired on November 22, 2005.

       Upon acceleration of the vesting of options, options holders were given
the choice to pay the exercise price and receive a common share or trust unit,
as  applicable,  or to surrender  their option for a cash payment equal to the
difference  between the closing market value of the common share or trust unit
one day prior to cash-out and the exercise price. All outstanding options were
exercised prior to December 31, 2005.

       A summary of the equity  incentive  plans,  adjusted  retroactively  to
reflect the 2 for 1 stock split on May 18, 2005, as at December 31, 2003, 2004
and 2005 and changes during the periods then ended is presented below:

                                                                            66
<PAGE>

<TABLE>
<CAPTION>
COMMON SHARE PURCHASE OPTIONS:

                                                                                        Weighted
                                                                          Range of       Average
Options                                               Exercise            Exercise       Options
                                                   Outstanding               Price         Price    Exercisable
-----------------------------------------------------------------------------------------------------------------
<S>                                                <C>              <C>                <C>          <C>
Outstanding at December 31, 2002                     8,238,656      $ 6.75 - 32.95     $ 19.47        3,255,554
         Granted                                       832,000       24.64 - 25.52       25.31
         Exercised                                  (1,557,850)       6.75 - 25.50       15.17
         Cancelled                                    (726,418)      15.53 - 32.95       22.45
-----------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2003                     6,786,388      $ 6.75 - 32.95     $ 20.85        4,076,396
         Granted                                     3,381,000       20.13 - 36.32       31.77
         Exercised                                  (3,089,068)       6.75 - 28.78       17.92
         Cancelled                                    (383,200)      15.53 - 32.95       25.68
-----------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2004                     6,695,120      $15.53 - 36.32     $ 27.44        2,580,302
         Granted                                       696,200       37.76 - 48.29       41.42                -
         Exercised                                  (2,835,802)      15.53 - 48.29       26.07                -
         Cancelled                                    (141,650)      15.53 - 31.87       30.26                -
         Purchased                                  (1,105,018)      15.53 - 45.25       31.30                -
         Exchanged for trust unit purchase options  (3,308,850)      15.53 - 48.29       30.14                -
-----------------------------------------------------------------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 2005                             -      $            -      $    -                -
=================================================================================================================

<CAPTION>
TRUST UNIT PURCHASE OPTIONS:

<S>                                                <C>              <C>                <C>           <C>
Granted in exchange for Common share
         purchase options pursuant to the Plan       3,308,850      $  nil - 27.25     $  9.16        3,308,850
Granted on repricing of common share options             5,600                 nil         nil
Exercised                                          (1,676,616)         nil - 27.25        4.93
Purchased                                          (1,637,834)         nil - 27.25       13.46
-----------------------------------------------------------------------------------------------------------------
OUTSTANDING AT DECEMBER 31, 2005                             -      $            -     $     -                -
=================================================================================================================
</TABLE>

       In  accordance  with the Trust's  stock option  plans,  options have an
initial  exercise  price equal to the market  price at date of grant.  The per
share  weighted  average fair value of stock options  granted  during the year
ended  December  31, 2005 was $8.30 (2004 - $7.83;  2003 - $9.74) based on the
date of grant valuation using the Black-Scholes  option pricing model with the
following assumptions: average risk-free interest rate of 3.28% (2004 - 3.44%;
2003 - 3.47%),  average expected life of 2.92 years (2004 - 2.97 years; 2003 -
3.42 years) and expected volatility of 28.04% (2004 - 32.33%; 2003 - 47.00%).

       For the year ended December 31, 2005,  stock-based  compensation  costs
included in net earnings totalled $21.3 million (2004 - $13.8 million;  2003 -
$8.2  million),  of which  $10.1  million  (2004 - $5.6  million;  2003 - $1.8
million) relates to discontinued operations.

9.     REORGANIZATION PURSUANT TO PLAN OF ARRANGEMENT

       To effect the reorganization  into a trust, for the year ended December
31, 2005, the Trust incurred $17.5 million of  reorganization  costs comprised
as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>
Severance                                                                                     $     12,600
Legal, accounting, financial advisory services and other                                             4,912
-------------------------------------------------------------------------------------------------------------
                                                                                              $     17,512
=============================================================================================================
</TABLE>


                                                                            67
<PAGE>

10.    EMPLOYEE BENEFIT PLANS:

       The Trust has registered pension plans covering a significant number of
its  employees.  Of  participating  employees in  continuing  operations,  all
participate in the defined  contribution  plan. Of participating  employees in
discontinued  operations,   approximately  94%  participated  in  the  defined
contribution  plan and  approximately  6%  participated in the defined benefit
plan.

(a)    DEFINED CONTRIBUTION PLAN

       Under the  defined  contribution  plan,  the Trust  matches  individual
contributions up to 5% of the employee's compensation. Total expense under the
defined contribution plan in 2005 was $8.5 million (2004 - $7.3 million;  2003
- $7.5  million),  of which $3.2  million  (2004 - $3.0  million;  2003 - $3.3
million) relates to discontinued operations.

(b)    DEFINED BENEFIT PLANS

       The defined  benefit plans were acquired as part of the Reeves Oilfield
Services  Ltd.  acquisition  in 2004  (see  Note  15) and  was  closed  to new
employees since the date of acquisition.  The latest  actuarial  valuations of
the defined  benefit  pension plans were at December 31, 2004. The measurement
date used to determine plan assets and accrued benefit obligation was December
31, 2004.  Significant  actuarial assumptions adopted in measuring the Trust's
accrued  benefit  obligation  at the  measurement  date  included a  liability
discount rate of between 5.5% and 6.0%, an expected  long-term  rate of return
on plan assets of between 5.8% and 6.4% and a rate of compensation increase of
between 3.8% and 5.0%,  excluding  promotions.  At the  measurement  date, the
plans  had an  unfunded  deficit  of  $13.5  million  as the  accrued  benefit
obligation  of $41.5  million  exceeded  plan  assets  of $28.0  million.  The
unfunded  deficit  liability  was  included  in  accounts  payable and accrued
liabilities in discontinued operations.

       Expense under the defined benefit plans in 2004 totalled $1.1 million.

(c)    RETIREMENT ALLOWANCE

         With respect to the retirement allowance described in Note 1(l), the
Trust charged $201,000 to earnings in 2005 (2004 - $335,000; 2003 - $351,000),
and during the year ended December 31, 2005 paid $2.9 million as settlement of
this liability. As at December 31, 2004, the Trust had accrued a total of $2.7
million, which amount is included in accounts payable and accrued liabilities.

11.    COMMITMENTS:

       The Trust has commitments for operating lease agreements, primarily for
vehicles and office space, in the aggregate amount of $27.9 million.  Payments
over the next five years are as follows:

Total
------------------------------------------------------------------------------
2006                                                           $     7,362
2007                                                                  5,832
2008                                                                  4,335
2009                                                                  3,674
2010                                                                  3,660
==============================================================================


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


                              Continuing     Discontinued
                              Operations       Operations             Total
------------------------------------------------------------------------------
2005                        $      2,679     $     11,983      $     14,662
2004                               5,874           17,284           23,158
2003                               5,258           18,666            23,924
==============================================================================


                                                                            68
<PAGE>

12.    INCOME TAXES:

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

<TABLE>
<CAPTION>
                                                                   2005             2004              2003
-------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>               <C>
Earnings from continuing operations before income taxes    $    293,231     $    289,932      $    219,876
Income tax rate                                                     34%              36%               36%
-------------------------------------------------------------------------------------------------------------
Expected income tax provision                              $     99,699     $    104,375      $     79,155
Add (deduct):
         Non-deductible expenses                                  2,795            4,965             1,234
         Non-deductible stock-based compensation                  3,216            2,948             2,292
         Income of the Trust                                   (23,980)                -                 -
         Utilization of losses and surcharge credits           (10,550)                -                 -
         Non-taxable disposition of investment                        -                -           (2,327)
         Other                                                    1,203          (7,600)           (1,948)
-------------------------------------------------------------------------------------------------------------
                                                                 72,383          104,688            78,406
Reduction of future tax balances due to
         substantively enacted tax rate reductions                    -         (2,887)            (2,678)
-------------------------------------------------------------------------------------------------------------
                                                           $     72,383     $    101,801      $     75,728
-------------------------------------------------------------------------------------------------------------
Effective income tax rate                                           25%              35%               34%
=============================================================================================================
</TABLE>

         In 2004, the Province of Alberta enacted a 1.0% reduction in tax
rates (2003 and 2002 - 0.5%). This reduction was reflected as a reduction in
future tax expense in the respective years.

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

<TABLE>
<CAPTION>
                                                                                    2005              2004
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>
Liabilities:
         Property, plant and equipment and intangibles                      $    232,277      $    232,770
         Operations of a partnership with different tax year                           -           124,251
         Deferred financing costs                                                      -             1,584
-------------------------------------------------------------------------------------------------------------
                                                                            $    232,277      $    358,605
-------------------------------------------------------------------------------------------------------------
Assets:
         Bond redemption premium                                            $     20,820      $          -
         Losses carried forward                                                   14,586                 -
         Share issue costs                                                         3,039                 -
         Accrued liabilities                                                      1,910              4,337
         Valuation allowance                                                       (595)                 -
-------------------------------------------------------------------------------------------------------------
                                                                            $    39,760       $      4,337
-------------------------------------------------------------------------------------------------------------
                                                                            $    192,517      $    354,268
=============================================================================================================
</TABLE>

       PDC and its subsidiaries have available capital losses of $42.4 million
of which,  after valuation  allowances,  the benefit of $40.7 million has been
recognized. These capital losses can be carried forward indefinitely.

       During 2004, $7.5 million,  representing  future tax expense on foreign
exchange gains associated with the Trust's US$300 million  unsecured notes was
charged to the cumulative  translation  account in unitholders'  equity.  This
amount was related to the Trust's discontinued operations.

                                                                            69
<PAGE>

13.    PER UNIT/SHARE AMOUNTS:

       The following table summarizes the units, adjusted  retroactively for a
2 for 1  stock  split  on May  18,  2005,  used in  calculating  earnings  per
unit/share:

<TABLE>
<CAPTION>
For the years ended December 31,                                   2005             2004              2003
-------------------------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>               <C>
Weighted average units/shares outstanding - basic               123,304          115,654           108,860
Effect of unit/share purchase options                             2,108            1,556             1,738
-------------------------------------------------------------------------------------------------------------
Weighted average units/shares outstanding - diluted             125,412          117,210           110,598
=============================================================================================================
</TABLE>

14.    SIGNIFICANT CUSTOMERS:

       During  the year  ended  December  31,  2005 no  customers  (2004 - one
customer;  2003 - two  customers)  accounted  for more than 10% of the Trust's
revenue.

15.    ACQUISITIONS:

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

       On July 29, 2005, the Trust completed the acquisition of all the issued
and  outstanding  shares of CASCA  Electric Ltd. and CASCA Tech Inc. for $30.4
million.  No value was assigned to intangibles or goodwill.  These  operations
have been included in discontinued operations.

       During the year ended December 31, 2004, in accordance with the Trust's
globalization  and  technology  advancement  strategies,  the Trust  completed
several acquisitions, the most significant of which were:

       a) On  May  14,  2004,  the  Trust  acquired  all  of  the  issued  and
outstanding  shares of Reeves  Oilfield  Services Ltd.  (Reeves),  including a
56.5% interest in Allegheny Wireline Services,  Inc.  (Allegheny).  On October
14, 2004, the Trust acquired the remaining 43.5% interest in Allegheny. In the
intervening  period from the date of acquisition of Reeves to the  acquisition
of  the   remaining   interest  in   Allegheny,   earnings   attributable   to
non-controlling  interest totalled $1.3 million. Reeves provides open hole and
cased hole logging  services to the oil and gas industry  with  operations  in
Canada,  the United  States,  Australia,  Africa,  Europe and the Middle East.
Intangible  assets  acquired relate  entirely to  intellectual  property.  The
Reeves operations have been included in discontinued operations.

       b) On May 21, 2004, the Trust acquired land drilling assets, located in
Venezuela and the Middle East, from GlobalSantaFe Corporation (GlobalSantaFe).
Intangible assets acquired relate to  non-competition  agreements and customer
contracts.  The Global SantaFe  operations  have been included in discontinued
operations.

<TABLE>
<CAPTION>
                                                     Reeves     GlobalSantaFe            Other             Total
-----------------------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>                 <C>               <C>
Net assets acquired at assigned values:
         Working capital                        $    23,000(a)     $   12,463       $       60        $   35,523
         Intangible assets                          106,900            33,138                -           140,038
         Property, plant and equipment               41,730           296,655            1,547           339,932
         Goodwill (no tax basis)                    118,531           103,956              130           222,617
         Non-controlling interest in earnings
            of intervening period                     1,298                 -                -             1,298
Future income taxes                                 (37,732)           (9,720)               -           (47,452)
-----------------------------------------------------------------------------------------------------------------
                                                $   253,727        $  436,492       $    1,737        $  691,956
-----------------------------------------------------------------------------------------------------------------
Consideration:
         Cash                                   $   253,727        $  436,492       $    1,737        $  691,956
=================================================================================================================
(a) Includes cash of $12,142
</TABLE>

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


                                                                            70
<PAGE>

16.    UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:

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

(a)    INCOME TAXES

       In 2000 the Trust adopted the liability method of accounting for future
income  taxes  without  restatement  of prior  years.  As a result,  the Trust
recorded an  adjustment  to retained  earnings and future tax liability in the
amount of $70.0 million at January 1, 2000.  U.S. GAAP required the use of the
liability method prescribed in the Statement of Financial Accounting Standards
(SFAS) No. 109, which  substantially  conforms to the Canadian GAAP accounting
standard  adopted in 2000.  Application  of U.S.  GAAP in years  prior to 2000
would have resulted in $70.0 million of additional  goodwill being  recognized
at  January 1, 2000 as opposed to an  implementation  adjustment  to  retained
earnings  allowed under  Canadian  GAAP.  Prior to 2002 goodwill was amortized
under Canadian and U.S. GAAP. As a result,  $7.0 million of  amortization  was
recorded on the additional goodwill in 2000 and 2001 under U.S. GAAP. In 2003,
2004 and 2005, the U.S. GAAP financial statements would reflect an increase in
goodwill of $63.0 million and a corresponding increase in retained earnings.

(b)    STOCK-BASED COMPENSATION

       In 2004,  under  Canadian  GAAP,  the Trust  adopted  the fair value of
accounting for stock-based  compensation  with  restatement of prior years for
share purchase options granted after January 1, 2002. U.S. GAAP allows the use
of either the intrinsic method,  as prescribed by Accounting  Principles Board
(APB) Opinion 25, or the fair value method as  prescribed  by SFAS 123.  Where
companies elect to use the intrinsic method, disclosure of the impact of using
the fair value method is required.

       Application of the intrinsic  method in accordance  with APB Opinion 25
would have  resulted in an increase in net earnings of $21.3  million for 2005
(2004 - $13.8 million; 2003 - $8.2 million) and with a corresponding  increase
in unitholders'  equity.  Had the Trust determined  compensation  based on the
fair value at the date of grant for its options  under SFAS 123,  net earnings
in accordance with U.S. GAAP would have decreased to $1,588.5  million in 2005
(2004 decreased to $247.8 million;  2003 decreased to $180.7  million).  Basic
earnings per unit/share  would have been $12.88 in 2005 (2004 - $2.14;  2003 -
$1.66).

       Under Financial Accounting Standards Board ("FASB")  Interpretation No.
44 (FIN 44") ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION,
compensation expense is required to be recognized on certain  modifications to
stock-based  compensation  plans.  During the year ended  December  31,  2005,
employee stock options  ("options")  were subjected to a variety of changes or
restructurings which included  accelerated  vesting,  repricing on the date of
conversion   to  an  income   trust  to  reflect  the   transfer  of  disposal
consideration  to  Precision's  shareholders  just  prior  to  conversion,  or
repurchase for cash depending on elections made by the option  holders.  Under
Canadian  GAAP,  even with the  repricing,  the options were treated as equity
awards and were not accounted for under a variable accounting method. However,
under U.S. GAAP, the accelerated  vesting  represents a  restructuring  in the
form of a modification  that would result in a new measurement of compensation
expense on the date of the modification  using the intrinsic method. For award
repricing, this restructuring only results in additional expense provided that
the aggregate  intrinsic value of the awards  immediately  after the change is
not greater than that immediately  before, and the ratio of exercise price per
unit/share to the market value per  unit/share  is not reduced.  To the extent
that both the  criteria are not met,  the awards are  accounted  for under ABP
Opinion 25 as a variable award from the date of  restructuring to the date the
award was  exercised.  For  restructuring  in the form of cash  buy-out of the
options,  the intrinsic value was charged to retained  earnings under Canadian
GAAP, however, under U.S. GAAP the amount was charged to earnings.

(c)    REDEMPTION OF TRUST UNITS

       Under the trust  indenture,  trust units are  redeemable at any time on
demand by the unitholder for cash and notes (see Note 8). Under U.S. GAAP, the
amount  included on the  consolidated  balance sheet for  unitholders'  equity
would be moved to  temporary  equity and  recorded  at an amount  equal to the
redemption  value of the trust  units as at the balance  sheet date.  The same
accounting  treatment would be applicable to the  exchangeable  LP units.  The
redemption  value  of the  trust  units  and  the  exchangeable  LP  units  is
determined  with  respect to the  trading  value of the trust units as at each
balance sheet date,  and the amount of the  redemption  value is classified as
temporary  equity.  Changes  (increases and decreases) in the redemption value
during a period results in a change to temporary  equity and is reflected as a
reduction in earnings available to unitholders for the year.


                                                                            71
<PAGE>

(d)    ACQUISITIONS

       Under  U.S.  GAAP,  when   significant   acquisitions   have  occurred,
supplemental  disclosure  is  required  on a pro forma basis of the results of
operations  for the current prior  periods as though the business  combination
had occurred at the beginning of the period unless it is not practicable to do
so.  At  December  31,  2005,  the Trust  did not have  access  to  sufficient
information to provide this disclosure for acquisitions completed in 2004.

(e)    RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

       On December  16, 2004,  FASB issued SFAS 123R SHARE BASED  PAYMENT - AN
AMENDMENT  OF FASB  STATEMENT  NO. 123 AND 95.  The  Statement  addresses  the
accounting for transactions in which an enterprise  receives employee services
in exchange for (a) equity  instruments of the  enterprise or (b)  liabilities
that are based on the fair value of the  enterprise's  equity  instruments  or
that may be settled by the issuance of such equity instruments. Companies will
be required to recognize an expense for compensation cost related  stock-based
compensation on a basis  consistent with SFAS 123 for periods  beginning on or
after June 15, 2005.

       In December  2004,  FASB issued  Statement 153 Exchanges of Nonmonetary
Assets - An Amendment of APB Opinion 29. This  Statement  amends Opinion 29 to
eliminate the exception for nonmonetary exchanges or similar productive assets
and replaces it with a general  exception for exchanges of nonmonetary  assets
that do not have commercial  substance.  A nonmonetary exchange has commercial
substance  if the  future  cash flows of the  entity  are  expected  to change
significantly  as  a  result  of  the  exchange.  Application  is  prospective
beginning  after June 15, 2005, and management  does not expect this statement
to have a material impact on the consolidated financial statements.

       As of January 1, 2006,  the Trust will be required  to adopt,  for U.S.
GAAP  purposes,  SFAS  154  Accounting  Changes  and  Error  Corrections  -  A
Replacement   of  APB  Opinion  20  and  SFAS  3.  This   Statement   requires
retrospective  application  of  voluntary  changes in  accounting  principles,
unless it is impracticable. Management does not expect this standard to have a
material impact on the consolidated financial statements.

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

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended December 31,                                                            2005         2004         2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>           <C>          <C>
Earnings from continuing operations under Canadian GAAP                      $   220,848   $  188,131   $  144,148
Adjustments under U.S. GAAP:
         Stock-based compensation expense                                         11,229        8,190        6,366
         Cash buy-out of options                                                 (22,119)           -            -
         Intrinsic value recognized on options exercised and/or repriced          (2,270)           -            -
-------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations under U.S. GAAP                              207,688      196,321      150,514
-------------------------------------------------------------------------------------------------------------------
Earnings from discontinued operations under Canadian GAAP                      1,409,715       59,273       36,326
Adjustments under U.S. GAAP:
         Stock-based compensation expense                                         10,109        5,647        1,836
         Cash buy-out of options                                                 (19,968)           -            -
         Intrinsic value recognized on options exercised and/or repriced         (11,796)           -            -
-------------------------------------------------------------------------------------------------------------------
Earnings from discontinued operations under U.S. GAAP                          1,388,060       64,920       38,162
-------------------------------------------------------------------------------------------------------------------
Net earnings under U.S. GAAP                                                 $ 1,595,748   $  261,241   $  188,676
Cumulative translation adjustment                                                      -      (20,933)           -
-------------------------------------------------------------------------------------------------------------------
Comprehensive income under U.S. GAAP                                         $ 1,595,748   $  240,308   $  188,676
===================================================================================================================

Net earnings under U.S. GAAP                                                 $ 1,595,748   $  261,241   $  188,676
Change in redemption value of unitholders' capital                              (378,456)           -            -
-------------------------------------------------------------------------------------------------------------------
Net earnings available to unitholders under U.S. GAAP                        $ 1,217,292   $  261,241   $  188,676
===================================================================================================================
</TABLE>


                                                                            72
<PAGE>

<TABLE>
<S>                                                                  <C>           <C>          <C>
Earnings from continuing operations per unit/share under U.S. GAAP:

           Basic                                                     $      1.68   $     1.70   $     1.38
           Diluted                                                   $      1.66   $     1.67   $     1.36

Earnings per unit/share under U.S. GAAP before change in redemption
value of unitholders' capital:

           Basic                                                     $     12.94   $     2.26   $     1.73
           Diluted                                                   $     12.72   $     2.23   $     1.71

Earnings per unit/share under U.S. GAAP after change in
redemption value of unitholders' capital:

           Basic                                                     $      9.87   $     2.26   $     1.73
           Diluted                                                   $      9.71   $     2.23   $     1.71
=============================================================================================================

<CAPTION>
BALANCE SHEETS

                                                      DECEMBER 31, 2005                  December 31, 2004
-------------------------------------------------------------------------------------------------------------
                                          AS REPORTED         U.S. GAAP      As reported         U.S. GAAP
-------------------------------------------------------------------------------------------------------------
<S>                                       <C>               <C>              <C>               <C>
Current assets                            $   507,690       $   507,690      $   936,074       $   936,074
Property, plant and equipment                 943,900           943,900          897,584           897,584
Intangibles                                       465               465              498               498
Goodwill                                      266,827           329,856          266,827           329,856
Other assets                                        -                 -            9,116             9,116
Long-term assets of discontinued operations         -                 -        1,741,950         1,741,950
-------------------------------------------------------------------------------------------------------------
                                          $ 1,718,882       $ 1,781,911      $ 3,852,049       $ 3,915,078
=============================================================================================================

Current liabilities                       $   354,936       $   354,936      $   378,763       $   378,783
Long-term debt                                 96,838            96,838          718,850           718,850
Future income tax liability                   192,517           192,517          354,268           354,268
Liabilities of discontinued operations              -                 -           78,427            78,407
Temporary equity                                    -         4,304,665                -                 -
Unitholders' equity (deficit)  1,074,591                     (3,167,045)       2,321,741         2,384,770
-------------------------------------------------------------------------------------------------------------
                                          $ 1,718,882       $ 1,781,911      $ 3,852,049       $ 3,915,078
=============================================================================================================
</TABLE>

17.    SEGMENTED INFORMATION:

         The Trust operates primarily in Canada, in two industry segments;
Contract Drilling Services and Completion and Production Services. Contract
Drilling Services includes drilling rigs, procurement and distribution of
oilfield supplies, camp and catering services, and manufacture, sale and
repair of drilling equipment. Completion and Production Services includes
service rigs and hydraulic well assist snubbing units, and oilfield equipment
rental.

<TABLE>
<CAPTION>
                                    Contract       Completion and    Corporate  Inter-segment
2005                       Drilling Services  Production Services    and Other   Eliminations        Total
------------------------------------------------------------------------------------------------------------
<S>                               <C>                <C>            <C>            <C>         <C>
Revenue                           $  916,221          $   369,667    $       -     $ (16,709)  $ 1,269,179
Operating earnings                   404,385              121,643      (60,650)            -       465,378
Depreciation and amortization         39,233               27,402        4,926             -        71,561
Total assets                       1,159,687              486,701       72,494             -     1,718,882
Goodwill                             172,440               94,387            -             -       266,827
Capital expenditures*                106,986               34,576       13,689             -       155,251
============================================================================================================

<CAPTION>
                                    Contract       Completion and    Corporate  Inter-segment
2004                       Drilling Services  Production Services    and Other   Eliminations        Total
-------------------------------------------------------------------------------------------------------------
<S>                               <C>                <C>            <C>            <C>         <C>
Revenue                            $ 727,710          $   313,386    $       -     $ (12,608)  $ 1,028,488
Operating earnings                   282,315               77,074     (28,076)             -       331,313
Depreciation and amortization         42,245               27,508        5,076             -        74,829
Total assets                         971,863              461,191      180,009             -     1,613,063
Goodwill                             172,440               94,387            -             -       266,827
Capital expenditures*                 74,975               31,759       15,958             -       122,692
=============================================================================================================
</TABLE>

                                                                            73

<PAGE>

<TABLE>
<CAPTION>
                                    Contract       Completion and    Corporate  Inter-segment
2003                       Drilling Services  Production Services    and Other   Eliminations        Total
-------------------------------------------------------------------------------------------------------------
<S>                               <C>                <C>            <C>            <C>         <C>
Revenue                            $ 663,619          $   263,218    $       -     $ (11,667)   $  915,170
Operating earnings                   218,012               48,706     (14,269)             -       252,449
Depreciation and amortization         47,895               25,720        4,497             -        78,112
Total assets                         919,383              448,067       90,984             -     1,458,434
Goodwill                             172,440               94,387            -             -       266,827
Capital expenditures*                 47,918               25,410       22,871             -        96,199
=============================================================================================================
* EXCLUDES BUSINESS ACQUISITIONS
</TABLE>

18.    FINANCIAL INSTRUMENTS:

(a)    FAIR VALUE

       The carrying value of cash and cash equivalents,  accounts  receivable,
bank  indebtedness,  accounts  payable  and  accrued  liabilities,  income tax
payable  and  distributions  payable  approximate  their fair value due to the
relatively  short  period to  maturity of the  instruments.  The fair value of
long-term  debt  approximates  its  carrying  value  as it bears  interest  at
floating rates.

       The fair  values  of the  unsecured  debentures  and  notes  have  been
calculated  with  reference  to the year end  prevailing  interest and foreign
exchange rates and are as follows:

<TABLE>
<CAPTION>
                                                               DECEMBER 31, 2005         December 31, 2004
-------------------------------------------------------------------------------------------------------------
($ millions)                             CARRYING VALUE      FAIR VALUE     Carrying Value      Fair Value
-------------------------------------------------------------------------------------------------------------
<S>                                      <C>                 <C>            <C>                 <C>
Unsecured debentures - Series 1                       -               -              200.0           215.4
Unsecured debentures - Series 2                       -               -              150.0           174.5
Unsecured notes, US$300.0 million                     -               -              368.9           384.8
=============================================================================================================
</TABLE>

(b)    CREDIT RISK

       Accounts  receivable includes balances from a large number of customers
primarily operating in the oil and gas industry. The Trust assesses the credit
worthiness  of its  customers on an ongoing  basis as well as  monitoring  the
amount  and age of  balances  outstanding.  Accordingly,  the Trust  views the
credit risks on these amounts as normal for the  industry.  As at December 31,
2005 the Trust's  allowance for doubtful  accounts was $5.1 million  (December
31,  2004 - $13.7  million,  of which $8.5  million  related  to  discontinued
operations).

(c)    INTEREST RATE RISK

       The Trust is exposed to  interest  rate risk with  respect to  interest
expense on its extendible revolving credit facilities.

(d)    FOREIGN CURRENCY RISK

       The Trust was exposed to foreign  currency  fluctuations in relation to
its international  operations prior to their disposal (see Note 21). To manage
a portion of this exposure, the Trust designated the U.S. $300.0 million notes
as a  hedge  against  foreign  currency  fluctuations  of  its  investment  in
self-sustaining  foreign  operations.  A net  foreign  exchange  gain of $10.1
million associated with these notes was included in the cumulative translation
account during 2005 (2004 - gain of $43.1 million). The cumulative translation
account  at  August  31,  2005 of $24.8  million  was  charged  to the gain on
disposal of discontinued operations.


19.    SUPPLEMENTAL INFORMATION:

<TABLE>
<CAPTION>
                                                                   2005             2004              2003
-------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>               <C>
Interest paid:
         - continuing operations                           $     43,232     $    45,338       $     34,917
         - discontinued operations                                  304              997             1,804
-------------------------------------------------------------------------------------------------------------
                                                           $     43,536     $     46,335      $     36,721
=============================================================================================================
Income taxes paid:
         - continuing operations                           $     91,496     $    38,759       $     25,842
         - discontinued operations                              35,176            35,935            18,152
-------------------------------------------------------------------------------------------------------------
                                                           $    126,672     $     74,694      $     43,994
=============================================================================================================
</TABLE>


                                                                            74
<PAGE>

<TABLE>
<CAPTION>
Components of change in non-cash working capital balances:
<S>                                                        <C>              <C>               <C>
         Accounts receivable                               $  (171,363)     $  (42,714)       $   (98,501)
         Inventory                                                  699          (2,017)             1,269
         Accounts payable and accrued liabilities                13,871            5,964            19,890
         Income taxes payable                                   149,906           14,939            14,986
-------------------------------------------------------------------------------------------------------------
                                                           $    (6,887)     $   (23,828)      $   (62,356)
=============================================================================================================
</TABLE>

         The components of accounts receivable are as follows:


<TABLE>
<CAPTION>
                                                                                    2005              2004
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>
Trade                                                                       $   306,264       $    203,976
Accrued trade                                                                    148,537            88,746
Prepaids and other                                                                45,854            16,570
-------------------------------------------------------------------------------------------------------------
                                                                            $   500,655       $    309,292
=============================================================================================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                    2005              2004
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>
Accounts payable                                                            $    71,027       $     25,658
Accrued liabilities
         Payroll                                                                  30,351            30,048
         Other                                                                    32,925            64,726
-------------------------------------------------------------------------------------------------------------
                                                                            $    134,303      $   120,432
=============================================================================================================
</TABLE>

20.    CONTINGENCIES:

       The business and  operations of the Trust are complex and the Trust has
executed  a  number  of   significant   financings,   business   combinations,
acquisitions and dispositions over the course of its history.  The computation
of income taxes payable as a result of these  transactions,  and in particular
those completed  within the last five years,  involves many complex factors as
well  as  the  Trust's   interpretation   of  relevant  tax   legislation  and
regulations. The Trust's management believes that the provision for income tax
is adequate and in accordance with generally  accepted  accounting  principles
and applicable legislation and regulations. However, there are a number of tax
filing  positions  that  can  still  be the  subject  of  review  by  taxation
authorities who may successfully  challenge the Trust's  interpretation of the
applicable tax  legislation and  regulations,  with the result that additional
taxes  could be  payable by the Trust and the  amount  payable  could be up to
$300.0 million.

       The Trust,  through the performance of its services,  product sales and
business  arrangements,  is sometimes named as a defendant in litigation.  The
outcome of such  claims  against the Trust is not  determinable  at this time,
however,  their ultimate resolution is not expected to have a material adverse
effect on the Trust.

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

21.    DISCONTINUED OPERATIONS:

       On  August  31,   2005,   the  Trust  sold  its  Energy   Services  and
International  Contract Drilling  divisions to Weatherford  International Ltd.
("Weatherford")  for  proceeds  of  approximately  $1.13  billion  cash and 26
million common shares of Weatherford,  valued at $2.1 billion.  In conjunction
with the Plan of  Arrangement,  the  Trust  then  transferred  a total of $2.9
billion of this consideration to unitholders, being $844.3 million in cash and
25.7  million  Weatherford  common  shares,   valued  at  $2.0  billion  which
represents  the fair value of the shares at the date of transfer.  Included in
the  statement of earnings  for the year ended  December 31, 2005 is a loss on
disposal of these shares of $71.0 million.  In  conjunction  with this sale, a
working capital  adjustment has been included as part of the purchase and sale
agreement.  This adjustment is calculated  based on the period January 1, 2005
to August 31,  2005 (the  closing  date of the sale) and is subject to certain
interpretations  and  assessments  as to the  working  capital  balances as at
August 31, 2005 and December 31, 2004. As at December 31, 2005,  the Trust has
included as part of the gain on disposal of discontinued  operations an amount
of $20.0  million  owing to it,  representing  its best  estimate of the final
working  capital  adjustment.  However,  this  amount  is  subject  to  change
depending on the outcome of ongoing  discussion and possible  arbitration  and
could  adjust  the  disposal  proceeds.  Management  estimates  that  ultimate
settlement of this issue will not have a material  impact on the recorded gain
on disposal of discontinued operations.

       On September 13, 2005, the Trust sold its industrial plant  maintenance
business carried on by CEDA to Borealis Investments Inc., an investment entity
of  the  Ontario  Municipal  Employees  Retirement  System,  for  proceeds  of
approximately $274.0 million.  Included in the CEDA proceeds was $26.8 million


                                                                           75
<PAGE>

for the purchase of all the issued and  outstanding  shares of CASCA  Electric
Ltd. and CASCA Tech Inc., a  transaction  undertaken by CEDA on July 29, 2005.
The Energy  Services,  International  Contract  Drilling  and CEDA assets were
included in the Energy Services,  Contract  Drilling and Rental and Production
segments  respectively  and were  disposed  in  accordance  with an  extensive
process  undertaken  by the Trust's  board of directors to explore  avenues of
valuation creation for the Trust's unitholders.

       On February 12, 2004, the Trust sold substantially all of the assets of
Fleet Cementers, Inc. for proceeds of $25.7 million. On May 7, 2004, the Trust
sold the  assets of the  Polar  Completions  division  for  proceeds  of $15.0
million, subject to working capital adjustments. On August 31, 2004, the Trust
sold its 65% interest in United  Diamond  Ltd.  for proceeds of $8.5  million.
Additional  proceeds in the amount of up to $9.5 million are  receivable  with
respect  to the sale of United  Diamond  Ltd.,  contingent  upon the extent of
future  business  undertaken  between  the Trust and United  Diamond  Ltd.  No
portion of the $9.5 million of contingent proceeds has been recognized.  These
assets were  included in the Energy  Services  segment and were disposed of as
they  were  not a  core  component,  at  that  time,  to the  energy  services
globalization strategy.

       Effective  January 1, 2003,  the Trust sold Energy  Industries  Inc., a
wholly-owned subsidiary for $60.0 million cash. Energy Industries designed and
manufactured  modularized natural gas compression packages.  These assets were
included in the Rental and  Production  segment  and were  disposed of as they
were not a core component, at that time, to the globalization strategy.

       In May  2003,  the Trust  sold its 50%  interest  in  Energy  Equipment
Rentals General partnership ("EER") and Oil Drilling  Exploration  (Argentina)
SA ("OD&E") for cash proceeds of $6.9 million,  net of transaction costs. Both
entities were components of the Contract Drilling segment and were disposed of
as they were not a core  component,  at that time,  to the  contract  drilling
globalization strategy.

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

<TABLE>
<CAPTION>
                                                                   2005             2004              2003
-------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>               <C>
Revenue
         Energy services                                   $    689,319     $    898,199      $    762,536
         International contract drilling                        204,987          246,612           114,691
         Industrial plant maintenance                           149,371          175,802           174,246
-------------------------------------------------------------------------------------------------------------
                                                           $  1,043,677     $  1,320,613      $  1,051,473
=============================================================================================================
Gain on disposal of Energy Industries                      $          -     $          -      $     13,071
Gain on disposal of EER and OD&E                                      -                -             4,389
Loss on disposal of Fleet Cementers' assets                           -             (362)                -
Loss on disposal of United Diamond                                    -             (254)                -
Gain on disposal of Energy services and
         International contract drilling                      1,203,309                -                 -
Gain on disposal of Industrial plant maintenance                132,073                -                 -
-------------------------------------------------------------------------------------------------------------
                                                           $  1,335,382     $      (616)      $     17,460
=============================================================================================================
Results of operations before income taxes
         Energy services                                   $     76,607     $     33,060      $    (12,631)
         International contract drilling                         41,171           65,043            42,959
         Industrial plant maintenance                            18,135           19,658            20,683
         Other                                                  (22,298)         (20,251)          (29,210)
         Writedown of assets held for sale                            -           (6,117)          (10,799)
=============================================================================================================
                                                                113,615           91,393            11,002
Income tax expense (recovery)                                    39,282           28,824            (9,616)
-------------------------------------------------------------------------------------------------------------
Results of operations, before non-controlling interest           74,333           62,569            20,618
         Non-controlling interest                                     -            2,680             1,752
-------------------------------------------------------------------------------------------------------------
                                                                 74,333           59,889            18,866
-------------------------------------------------------------------------------------------------------------
Discontinued operations                                    $  1,409,715     $     59,273      $     36,326
=============================================================================================================
</TABLE>

       The following  table provides  additional  information  with respect to
amounts   included  in  the  balance  sheet  as  assets  and   liabilities  of
discontinued operations:

                                                                            76
<PAGE>

<TABLE>
<CAPTION>
                                                                                    2005              2004
-------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>
Accounts receivable                                                         $          -      $    381,707
Inventory                                                                              -           106,618
Future income tax asset                                                                -             8,711
Other                                                                                  -                 -
-------------------------------------------------------------------------------------------------------------
                                                                            $          -      $    497,036
=============================================================================================================
Property, plant and equipment                                               $          -      $  1,047,937
Intangibles                                                                            -           191,167
Goodwill                                                                               -           468,586
Future income tax asset                                                                -            34,260
-------------------------------------------------------------------------------------------------------------
                                                                            $          -      $  1,741,950
=============================================================================================================
Accounts payable and accrued liabilities                                    $          -      $    219,940
Income taxes payable                                                                   -            17,479
Future income tax liability                                                            -             7,270
Other                                                                                  -                18
-------------------------------------------------------------------------------------------------------------
                                                                            $          -      $    244,707
=============================================================================================================
Future income tax liability                                                 $          -      $     78,407
Other                                                                                  -                20
-------------------------------------------------------------------------------------------------------------
                                                                            $          -      $     78,427
=============================================================================================================
</TABLE>


         The following table provides additional information with respect to
amounts included in the statements of cash flow related to discontinued
operations:

<TABLE>
<CAPTION>
                                                                   2005             2004              2003
-------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>               <C>
Net earnings of discontinued operations                    $  1,409,715     $     59,273      $     36,326
Items not affecting cash:
         Loss (gain) on disposal of discontinued
              operations                                     (1,335,382)             616           (17,460)
         Depreciation and amortization                           95,794          130,163           101,016
         Writedown of assets of discontinued operations               -            3,293            10,799
         Stock-based compensation                                10,109            5,647             1,836
         Future income taxes                                     (1,735)         (17,383)          (26,965)
         Gain on disposal of investments                              -                -            (1,862)
         Unrealized foreign exchange loss (gain)
              on long-term monetary items                         4,829            2,729           (16,391)
         Non-controlling interest                                     -            2,680             1,752
-------------------------------------------------------------------------------------------------------------
Funds provided by discontinued operations                  $    183,330     $    187,018      $     89,051
=============================================================================================================
</TABLE>

         Components of changes in non-cash working capital balances of
discontinued operations:

<TABLE>
<CAPTION>
                                                                   2005             2004              2003
-------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>               <C>
Accounts receivable                                        $  (60,912)      $   (93,743)      $   (12,175)
Inventory                                                      (23,463)            5,725           (4,370)
Accounts payable and accrued liabilities                          1,688           52,861          (15,327)
Income taxes payable                                            (3,623)            8,360               327
-------------------------------------------------------------------------------------------------------------
                                                           $  (86,310)      $  (26,797)       $   (31,545)
=============================================================================================================
</TABLE>

22.    GUARANTEES:

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

23.    RELATED PARTY TRANSACTIONS:

       A director  of PDC is a partner at a law firm used by PDC and the Trust
for various legal matters.  During the year ended December 31, 2005, the Trust
incurred  a total of $6.1  million  in legal  fees.  These  transactions  were
incurred in the normal  course of business  and were  recorded at the exchange
amounts.


                                                                            77
<PAGE>

CERTIFICATIONS AND DISCLOSURE REGARDING CONTROLS AND PROCEDURES.

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

(b)     DISCLOSURE  CONTROLS AND PROCEDURES.  As of the end of the Registrant's
       fiscal year ended December 31, 2005, an evaluation of the effectiveness
       of the Registrant's  "disclosure controls and procedures" (as such term
       is defined in Rules 13a-15(e) and 15d-15(e) of the Securities  Exchange
       Act of 1934,  as amended (the  "Exchange  Act")) was carried out by the
       Registrant's   principal  executive  officer  and  principal  financial
       officer.  Based  upon  that  evaluation,   the  Registrant's  principal
       executive  officer and principal  financial officer have concluded that
       as of the end of that fiscal year, the Registrant's disclosure controls
       and procedures are effective to ensure that information  required to be
       disclosed by the  Registrant  in reports that it files or submits under
       the Exchange Act is (i) recorded,  processed,  summarized  and reported
       within the time periods specified in Securities and Exchange Commission
       rules  and  forms  and  (ii)   accumulated  and   communicated  to  the
       Registrant's management,  including its principal executive officer and
       principal  financial  officer,  to  allow  timely  decisions  regarding
       required disclosure.

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

(c)    CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. During the fiscal
       year ended December 31, 2005, there were no changes in the Registrant's
       internal   control  over  financial   reporting  that  have  materially
       affected,   or  are  reasonably  likely  to  materially   affect,   the
       Registrant's internal control over financial reporting.


NOTICES PURSUANT TO REGULATION BTR.

None.

AUDIT COMMITTEE FINANCIAL EXPERT.

Precision Drilling Corporation ("Precision"), administrator of the Registrant,
has  determined  that  Patrick  M.  Murray and H.  Garth  Wiggins,  members of
Precision's  audit  committee  of the board of  directors,  both qualify as an
"audit  committee  financial  expert"  (as such term is defined in Form 40-F).
Precision's  board of directors has determined that each of Mr. Murray and Mr.
Wiggins  is  "independent"  as such  term is  defined  in the New  York  Stock
Exchange ("NYSE") listing standards.

CODE OF ETHICS.

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

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

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The  following  table  provides  information  about  the  fees  billed  to the
Registrant  and its for  professional  services  rendered  by KPMG LLP  during
fiscal 2005 and 2004:

(CANADIAN $000)                                   2005                    2004
------------------------------------------------------------------------------
Audit Fees                                     $ 1,806                 $ 2,100
Audit-Related Fees                             $   252                 $   147
Tax Fees                                       $   753                 $   456
All Other Fees                                 $   104                 $    39
------------------------------------------------------------------------------
TOTAL                                          $ 2,915                 $ 2,742
==============================================================================


                                                                            78

<PAGE>

AUDIT FEES.

Audit Fees consist of fees for the audit of the Registrant's  annual financial
statements and quarterly reviews of interim financial statements.

AUDIT-RELATED FEES.

Audit-related fees consist of fees for assurance and related services that are
reasonably  related  to  the  performance  of  the  audit  or  review  of  the
Registrant's  financial  statements and are not reported as Audit Fees such as
services  provided in  connection  with  statutory and  regulatory  filings or
engagements.

In 2005 and 2004, the services  provided in this category  relate to statutory
and regulatory filings.

TAX FEES.

Tax fees  consist  of fees for tax  compliance  services,  tax  advice and tax
planning.  During fiscal 2005 and 2004, the services provided in this category
included  assistance  and advice in relation to the  preparation  of corporate
income  tax  returns  for  Precision  and its  subsidiaries,  tax  advice  and
planning, commodity tax and property tax consultation.

ALL OTHER FEES.

In 2005,  other fees  related  to  translation  of  financial  statements  and
information,  consultation  regarding  compliance  with  reporting on internal
controls required by the Sarbanes-Oxley Act and due diligence  assistance with
respect  to a  disposition.  In  2004,  other  fees  included  translation  of
financial statements and information and due diligence assistance with respect
to an acquisition.

PRE-APPROVAL POLICIES AND PROCEDURES.

Under the Audit Committee Charter,  the Audit Committee is required to approve
the  terms  of  engagement  and the  compensation  to be paid to the  external
auditor of the  Registrant.  In addition,  the Audit  Committee is required to
review and pre-approve all permitted  non-audit services to be provided to the
Registrant or any affiliated entities by the external auditors or any of their
affiliates  subject to any de minimus exception allowed by applicable law. The
Audit  Committee may delegate to one or more  designated  members of the Audit
Committee the authority to pre-approve non-audit services.  Non-audit services
that have been  pre-approved  by any such  delegate  must be  presented to the
Audit Committee at its first scheduled meeting following such pre-approval.

The Audit Committee implemented specific procedures regarding the pre-approval
of services to be provided by Precision's external auditor commencing in 2003.
These  procedures  specify  certain  prohibited  services  that  are not to be
performed by the external auditor. In addition,  these procedures require that
at least  annually,  prior to the period in which the services are proposed to
be provided, Precision's management will, in conjunction with the Registrant's
external auditor, prepare and submit to the Audit Committee a complete list of
all proposed  services to be provided to Precision  and the  Registrant by the
external auditor. Under the Audit Committee pre-approval procedures, for those
services  proposed to be provided by the  external  auditor that have not been
previously  approved  by the  Audit  Committee,  the  Chairman  of  the  Audit
Committee  has the  authority to grant  pre-approvals  of such  services.  The
decision to pre-approve a service  covered under this procedure is required to
be presented to the full Audit  Committee at the next  scheduled  meeting.  At
each of the Audit Committee's  regular meetings,  the Audit Committee is to be
provided with an update as to the status of services previously pre-approved.

Pursuant to these procedures, since their implementation in 2003, 100% of each
of the services provided by the Registrant's  external auditor relating to the
fees  reported  as  audit,   audit-related,   tax  and  all  other  fees  were
pre-approved by the Audit Committee or its delegate.

OFF-BALANCE SHEET ARRANGEMENTS.

The Registrant has no off-balance sheet arrangements.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS.

The  required   disclosure  is  included  on  page  66  of  the   Registrant's
Management's  Discussion  and Analysis of Financial  Condition  and Results of
Operations  for the fiscal  year ended  December  31,  2005,  included in this
Annual Report on Form 40-F.


                                                                            79
<PAGE>

IDENTIFICATION OF THE AUDIT COMMITTEE.

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

DISCLOSURE PURSUANT TO THE REQUIREMENTS OF THE NEW YORK STOCK EXCHANGE.

LEAD DIRECTOR AT MEETINGS OF NON-MANAGEMENT DIRECTORS.

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

COMMUNICATION WITH NON-MANAGEMENT DIRECTORS.

The  Registrant's   unit  holders  may  send   communications  to  Precision's
non-management  directors  by writing to the Lead  Director,  c/o Darren Ruhr,
Vice President  Corporate  Services and Corporate  Secretary,  4200, 150 - 6th
Avenue  S.W.,  Calgary,  Alberta,  Canada,  T2P  3Y7.  Communications  will be
referred  to the Lead  Director  for  appropriate  action.  The  status of all
outstanding  concerns  addressed to the Lead  Director will be reported to the
board of directors as appropriate.

CORPORATE GOVERNANCE GUIDELINES.

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

BOARD COMMITTEE MANDATES.

The Registrant's board of trustees mandate and Precision's board of directors'
mandate,  audit  committee  charter  and  terms  of  reference,   compensation
committee  mandate and corporate  governance and nominating  committee mandate
are   each   available   for   viewing   on  the   Registrant's   website   at
www.precisiondrilling.com,  and are  available in print to any unit holder who
requests  them.  Requests  for  copies  of these  documents  should be made by
contacting:  Darren Ruhr,  Vice  President  Corporate  Services and  Corporate
Secretary, 4200, 150-6th Avenue S.W., Calgary, Alberta, Canada T2P 3Y7.



                                                                            80
<PAGE>

                 UNDERTAKING AND CONSENT TO SERVICE OF PROCESS



A.     Undertaking.

       The Registrant undertakes to make available, in person or by telephone,
       representatives  to respond to  inquiries  made by the  Securities  and
       Exchange Commission (the "Commission")  staff, and to furnish promptly,
       when requested to do so by the Commission staff,  information  relating
       to: the securities  registered pursuant to Form 40-F; the securities in
       relation to which the  obligation to file an annual report on Form 40-F
       arises; or transactions in said securities.


B.     Consent to Service of Process.

       The Registrant has previously  filed a Form F-X in connection  with the
       class of  securities  in relation to which the  obligation to file this
       report arises.

       Any change to the name or  address of the agent for  service of process
       of the Registrant shall be communicated  promptly to the Securities and
       Exchange  Commission  by an amendment to the Form F-X  referencing  the
       file number of the relevant registration statement.


SIGNATURES

       Pursuant  to the  requirements  of the  Exchange  Act,  the  Registrant
       certifies that it meets all of the requirements for filing on Form 40-F
       and has duly caused  this  annual  report to be signed on its behalf by
       the undersigned, thereunto duly authorized, on March 31, 2006.



PRECISION DRILLING CORPORATION, AS AGENT FOR
AND ON BEHALF OF PRECISION DRILLING TRUST


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




                                                                            81
<PAGE>


EXHIBIT INDEX


Exhibit       Description
-------       -----------

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

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

 99.3         Certification of Chief Executive Officer pursuant to 18
              U.S.C. 1350

 99.4         Certification of Chief Financial Officer pursuant to 18
              U.S.C. 1350

 99.5         Consent of KPMG LLP