PRECISION DRILLING TRUSTANNUAL INFORMATION FORM
 For the fiscal year ended December 31, 2009




---



##### 



TABLE OF CONTENTS
 CORPORATE STRUCTURE
    
    
    1the trust
    
    
    1INTERCORPORATE RELATIONSHIPS
    
    
    1Organizational Structure of the Trust
    
    
    1Precision Drilling Limited Partnership
    
    
    2Precision Drilling Corporation
    
    
    2Administration Agreement
    
    
    2GENERAL DEVELOPMENT OF THE BUSINESS
    
    
    3Recent Developments
    
    
    3Three-Year History
    
    
    3DESCRIPTION OF THE BUSINESS OF PRECISION
    
    
    7General
    
    
    7Contract Drilling Services Segment
    
    
    7Completion and Production Services Segment
    
    
    11Supplemental Operational Information
    
    
    13RECORD OF CASH DISTRIBUTIONS/PAYMENTS
    
    
    14DESCRIPTION OF CAPITAL STRUCTURE
    
    
    15Description Of Trust Units
    
    
    15Description Of Exchangeable Units
    
    
    21Material Debt
    
    
    23MARKET FOR SECURITIES
    
    
    26TRUSTEES, DIRECTORS AND EXECUTIVE OFFICERS
    
    
    27Board Of Trustees
    
    
    27CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS
    
    
    33AUDIT COMMITTEE INFORMATION
    
    
    34LEGAL PROCEEDINGS AND REGULATORY ACTIONS
    
    
    35INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
    
    
    35TRANSFER AGENT, REGISTRAR AND VOTING AND EXCHANGE TRUSTEE
    
    
    36MATERIAL CONTRACTS
    
    
    36INTERESTS OF EXPERTS
    
    
    36EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
    
    
    37INTERNAL CONTROL OVER FINANCIAL REPORTING
    
    
    37TRANSITION TO INTERNATIONAL FINANCING REPORTING STANDARDS
    
    
    37MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    38




---



##### 



- ii - ADDITIONAL INFORMATION
    
    
    38RISK FACTORS
    
    
    38Risks Relating To The Business Currently Conducted By Precision
    
    
    38Risks Relating To The Structure Of The Trust
    
    
    46CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
    
    
    54APPENDIX 1 AUDIT COMMITTEE CHARTER AND TERMS OF REFERENCE
    
    
    57




---



##### 



CORPORATE STRUCTURE
 
 The Trust
 Trust Declaration of Trust info@precisiondrilling.com www.precisiondrilling.com
 Board of Trustees Trustee
 Precision Income Tax Act Tax Act Trust Units Plan of Arrangement TSX NYSE
  
 INTERCORPORATE RELATIONSHIPS
 
 Organizational Structure of the Trust
  
 NOTES:
 (1)
    
    As of December 31, 2009, there were 125,639,104 PDLP A Units outstanding.(2)
    
    As of December 31, 2009, there were 118,820 Exchangeable Units outstanding.




---



##### 



(3)
    
    The interest of 1194312 Alberta Ltd. in PDLP is 0.001%.(4)
    
    Inter-company note owing by PDLP to the Trust.(5)
    
    Inter-company note owing by Precision to PDLP.
  Jurisdiction of Incorporation,Name of Subsidiary or Partnership
    
    
    Percent or Interest Owned
    
    
    
    Continuance or FormationPrecision Drilling Limited Partnership
    
    
    
    99.9
    %
    
    
    Manitoba1194312 Alberta Ltd.
    
    
    
    100
    %
    
    
    AlbertaPrecision Drilling Corporation
    
    
    
    99.9
    %
    
    
    AlbertaPrecision Drilling Oilfield Services Corporation
    
    
    
    99.9
    %
    
    
    TexasPrecision Limited Partnership
    
    
    
    99.9
    %
    
    
    AlbertaPrecision Drilling Canada Limited Partnership
    
    
    
    99.9
    %
    
    
    AlbertaPrecision Drilling Holdings Company
    
    
    
    99.9
    %
    
    
    NevadaPrecision Drilling Company, LP
    
    
    
    99.9
    %
    
    
    Texas
 
 Precision Drilling Limited Partnership
 PDLP Limited Partnership Agreement PDLP A Units Exchangeable Units General Partner info@precisiondrilling.com
 
 Precision Drilling Corporation
 Business Corporations Act info@precisiondrilling.com www.precisiondrilling.com
 
 Administration
Agreement
 Administration Agreement Trust Unitholders Exchangeable Unitholders Unitholders
 2




---



##### 



GENERAL DEVELOPMENT OF THE BUSINESS
  
 Recent Developments
 Conversion to a Corporation Conversion Business Corporations Act Meeting
 
 Three-Year History
  2009
 Integration of Grey Wolf. Grey Wolf Acquisition
 New Rig Builds.
 Rig Decommissioning.
 Directional Drilling Operations.
 Declining Commodity Prices.
 3




---



##### 



Reduced Drilling Activity.
 Customers.
 Utilization.
  As at December 31, 2009
    
    As at December 31, 2008Industry(1)
    
    Precision(2)
    
    Industry(1)
    
    Precision(2)Canada
    
    329
    
    72
    
    313
    
    68United States
    
    1,150
    
    76
    
    1,653
    
    120Total
    
    1,479
    
    148
    
    1,966
    
    188
 Notes:
 (1)
    
    Source: Canada  Canadian Association of Oilwell Drilling Contractors; United States  Baker
Hughes, Inc.(2)
    
    Includes idle but contracted rigs in the United States; does not include two active drilling
rigs in Mexico.
   4




---



##### 



Refinancing Activities.
 
    
    A Trust Unit offering completed on February 18, 2009 produced gross proceeds of US$172.5
million, for a total of 46 million additional Trust Units outstanding. The proceeds were used
to repurchase the outstanding convertible notes assumed in conjunction with the Acquisition.
    
    On April 22, 2009, the Trust completed a private placement of 35,000,000 Trust Units at a
price of $3.00 per Trust Unit and warrants to acquire 15,000,000 Trust Units at an exercise
price of $3.22 per Trust Unit (the Warrants) for aggregate proceeds of approximately $105
million. In addition, Precision completed a private placement of $175 million principal
amount of 10% senior unsecured notes (the Senior Notes). The purchaser of the Trust Units,
Warrants and Senior Notes was Her Majesty the Queen in Right of the Province of Alberta, as
represented by Alberta Investment Management Corporation (the Private Placement Investor).
The proceeds from the issuance of the Trust Units, Warrants and Senior Notes were used to
reduce the obligations of Precision under the Unsecured Facility.
    
    A rights offering that allowed Unitholders to purchase Trust Units at a price of $3.00 per
Trust Unit was completed on June 3, 2009, for gross proceeds of $103 million, for a total of
34,441,950 additional Trust Units outstanding.
 Debt Issued
 Debt Repayment.
 www.sedar.com www.sec.gov
  Other Events. Precision Drilling Rostel Industries Columbia Oilfield Supply
  5




---



##### 



2008
 Grey Wolf Acquisition. Merger Agreement Lobos
 www.sedar.com www.sec.gov
 Organic Growth.
 Other Acquisitions.
 Other Events. Precision Well Servicing Live Well Service Precision Rentals LRG Catering
  2007
    6




---



##### 



DESCRIPTION OF THE BUSINESS OF PRECISION
 
 General
   (in thousands of Canadian dollars)
 Years ended December 31,
    
    2009
    
    2008
    
    2007Contract Drilling Services
    
    $1,030,852
    
    $809,317
    
    $694,340Completion and Production Services
    
    176,422
    
    308,624
    
    327,471Inter-segment Eliminations
    
    (9,828)
    
    (16,050)
    
    (12,610)Total Revenue
    
    $1,197,446
    
    $1,101,891
    
    $1,009,201
 
 Contract Drilling Services Segment
  
    
    203 land drilling rigs in Canada;
    
    146 land drilling rigs in the United States;
    
    two land drilling rigs in Mexico;
    
    one land drilling rig in Chile;
    
    94 drilling camps and two base camps in Canada;
    
    engineering, manufacturing and repair services primarily for Precisions operations; and
    
    centralized procurement, inventory and distribution of consumable supplies primarily for
Precisions Canadian, United States and Mexico operations.
 Precision Drilling
 Overview.
   7




---



##### 



Drilling Contracts.
    Competition.
 Drilling Fleet Capabilities.
 Tier
    
    
    Canada
    
    
    United States
    
    
    Mexico
    
    
    Chile
    
    
    TotalI
    
    
    61
    
    
    48
    
    
    0
    
    
    0
    
    
    109II
    
    
    72
    
    
    65
    
    
    2
    
    
    1
    
    
    140III
    
    
    70
    
    
    33
    
    
    0
    
    
    0
    
    
    103Total
    
    
    203
    
    
    146
    
    
    2
    
    
    1
    
    
    352
 8




---



##### 



www.precisiondrilling.com
     Super Single Rigs.
 9




---



##### 



Grey Wolf International
  LRG Catering
  Rostel Industries
  Columbia Oilfield Supply and Grey Wolf Supply
   10




---



##### 



Completion And Production Services Segment
  
    
    200 well completion and workover service rigs;
    
    20 snubbing units;
    
    approximately 11,300 oilfield rental items including well control equipment, surface
equipment, specialty tubulars and wellsite accommodation units; and
    
    78 wastewater treatment units.
 Precision Well Servicing
   Rig Fleet.
 Type of Service Rig
    
    
    
    
    
    Horsepower
    
    
    
    TotalSingle
    
    
    Freestanding mobile
    
    
    
    150-400
    
    
    
    
    94Mobile
    
    
    
    250-550
    
    
    
    
    28Double
    
    
    Freestanding mobile
    
    
    
    200-550
    
    
    
    
    30Skid
    
    
    
    300-860
    
    
    
    
    30Slant
    
    
    Freestanding mobile
    
    
    
    250-400
    
    
    
    
    18Total
    
    
    
    
    
    
    
    
    
    
    
    200
 www.precisiondrilling.com
 Well
Service Types.
 11




---



##### 



Demand and Rates.
 Live Well Service
    Precision Rentals
   Terra Water Systems
   12




---



##### 



Supplemental Operational Information
 Health, Safety and Environment
     Employees
   13




---



##### 



RECORD OF CASH DISTRIBUTIONS/PAYMENTS
   Amount per TrustDistribution Type
    
    
    Record Date
    
    
    Payment Date
    
    
    Unit2007Regular Distribution
    
    
    January 31, 2007
    
    
    February 15, 2007
    
    
    $
    0.190Regular Distribution
    
    
    February 28, 2007
    
    
    March 15, 2007
    
    
    $
    0.190Regular Distribution
    
    
    March 30, 2007
    
    
    April 17, 2007
    
    
    $
    0.190Regular Distribution
    
    
    April 30, 2007
    
    
    May 15, 2007
    
    
    $
    0.190Regular Distribution
    
    
    May 31, 2007
    
    
    June 15, 2007
    
    
    $
    0.130Regular Distribution
    
    
    June 29, 2007
    
    
    July 17, 2007
    
    
    $
    0.130Regular Distribution
    
    
    July 31, 2007
    
    
    August 15, 2007
    
    
    $
    0.130Regular Distribution
    
    
    August 31, 2007
    
    
    September 18, 2007
    
    
    $
    0.130Regular Distribution
    
    
    September 28, 2007
    
    
    October 16, 2007
    
    
    $
    0.130Regular Distribution
    
    
    October 31, 2007
    
    
    November 15, 2007
    
    
    $
    0.130Regular Distribution
    
    
    November 30, 2007
    
    
    December 18, 2007
    
    
    $
    0.130Regular Distribution
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.130Special Year-end in cash Distribution
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.160Special Year-end in-kind Distribution(1)
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.2402008Regular Distribution
    
    
    January 31, 2008
    
    
    February 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    February 29, 2008
    
    
    March 18, 2008
    
    
    $
    0.130Regular Distribution
    
    
    March 31, 2008
    
    
    April 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    April 30, 2008
    
    
    May 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    May 30, 2008
    
    
    June 17, 2008
    
    
    $
    0.130Regular Distribution
    
    
    June 30, 2008
    
    
    July 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    July 31, 2008
    
    
    August 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    August 29, 2008
    
    
    September 16, 2008
    
    
    $
    0.130Regular Distribution
    
    
    September 30, 2008
    
    
    October 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    October 31, 2008
    
    
    November 18, 2008
    
    
    $
    0.130Regular Distribution
    
    
    November 28, 2008
    
    
    December 16, 2008
    
    
    $
    0.130Regular Distribution
    
    
    December 31, 2008
    
    
    January 15, 2009
    
    
    $
    0.130Special Year-end in-kind Distribution(1)
    
    
    December 31, 2008
    
    
    January 15, 2009
    
    
    $
    0.1502009Regular Distribution
    
    
    January 30, 2009
    
    
    February 17, 2009
    
    
    $
    0.040
 NOTE:
 (1)
    
    The special year-end distribution was settled in-kind through the issuance of Trust Units
rather than the payment of cash in order for Precision to minimize debt levels and retain
balance sheet strength. Immediately after the special in-kind distribution the outstanding
Trust Units were consolidated so that the number of Trust Units outstanding remained unchanged
from the number of Trust Units outstanding immediately before the special in-kind
distribution. See Risk Factors  The issuance of additional Trust Units in lieu of cash
distributions could negatively affect the value of the Trust Units and result in the payment
of taxes.
  Amount perPayment Type
    
    
    Record Date
    
    
    Payment Date
    
    
    Exchangeable Unit2007Regular Payment
    
    
    January 31, 2007
    
    
    February 15, 2007
    
    
    $
    0.190Regular Payment
    
    
    February 28, 2007
    
    
    March 15, 2007
    
    
    $
    0.190Regular Payment
    
    
    March 30, 2007
    
    
    April 17, 2007
    
    
    $
    0.190Regular Payment
    
    
    April 30, 2007
    
    
    May 15, 2007
    
    
    $
    0.190
 14




---



##### 



Amount perPayment Type
    
    
    Record Date
    
    
    Payment Date
    
    
    Exchangeable UnitRegular Payment
    
    
    May 31, 2007
    
    
    June 15, 2007
    
    
    $
    0.130Regular Payment
    
    
    June 29, 2007
    
    
    July 17, 2007
    
    
    $
    0.130Regular Payment
    
    
    July 31, 2007
    
    
    August 15, 2007
    
    
    $
    0.130Regular Payment
    
    
    August 31, 2007
    
    
    September 18, 2007
    
    
    $
    0.130Regular Payment
    
    
    September 28, 2007
    
    
    October 16, 2007
    
    
    $
    0.130Regular Payment
    
    
    October 31, 2007
    
    
    November 15, 2007
    
    
    $
    0.130Regular Payment
    
    
    November 30, 2007
    
    
    December 18, 2007
    
    
    $
    0.130Regular Payment
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.130Special Year-end in cash Payment
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.160Special Year-end in-kind Payment(1)
    
    
    December 31, 2007
    
    
    January 15, 2008
    
    
    $
    0.2402008Regular Payment
    
    
    January 31, 2008
    
    
    February 15, 2008
    
    
    $
    0.130Regular Payment
    
    
    February 29, 2008
    
    
    March 18, 2008
    
    
    $
    0.130Regular Payment
    
    
    March 31, 2008
    
    
    April 15, 2008
    
    
    $
    0.130Regular Payment
    
    
    April 30, 2008
    
    
    May 15, 2008
    
    
    $
    0.130Regular Payment
    
    
    May 30, 2008
    
    
    June 17, 2008
    
    
    $
    0.130Regular Payment
    
    
    June 30, 2008
    
    
    July 15, 2008
    
    
    $
    0.130Regular Payment
    
    
    July 31, 2008
    
    
    August 15, 2008
    
    
    $
    0.130Regular Payment
    
    
    August 29, 2008
    
    
    September 16, 2008
    
    
    $
    0.130Regular Payment
    
    
    September 30, 2008
    
    
    October 15, 2008
    
    
    $
    0.130Regular Payment
    
    
    October 31, 2008
    
    
    November 18, 2008
    
    
    $
    0.130Regular Payment
    
    
    November 28, 2008
    
    
    December 16, 2008
    
    
    $
    0.130Regular Payment
    
    
    December 31, 2008
    
    
    January 15, 2009
    
    
    $
    0.130Special Year-end in-kind Payment(1)
    
    
    December 31, 2008
    
    
    January 15, 2009
    
    
    $
    0.1502009Regular Payment
    
    
    January 30, 2009
    
    
    February 17, 2009
    
    
    $
    0.040
 NOTE:
 (1)
    
    The special year-end distribution was settled in-kind through the issuance of Trust Units
rather than cash in order for Precision to minimize debt levels and retain balance sheet
strength. Immediately after the payment of the special in-kind payment, the outstanding Trust
Units were consolidated so that the number of Trust Units outstanding after the special
in-kind payment remained unchanged from the number of Trust Units outstanding immediately
prior to the special in-kind payment. Exchangeable Unitholders received the economic
equivalent treatment. See Risk Factors  The issuance of additional Trust Units in lieu of
cash distributions could negatively affect the value of the Trust Units and result in the
payment of taxes.
 The historical distributions described above may not be reflective of future
distributions, which are subject to review by the Board of Trustees taking into account the
prevailing circumstances at the relevant time. See General Development of the Business  Recent
Developments  Conversion to a Corporation and Risk Factors  Distributions on the Trust Units
are variable and   Distributions on the Trust Units have been suspended and may not be
reinstated.
  
 DESCRIPTION OF CAPITAL STRUCTURE
 
 Description Of Trust Units
   15




---



##### 



The Trust Units are not deposits within the meaning of the Canada Deposit Insurance
Corporation Act (Canada) and are not insured under the provisions of that Act or any other
legislation. Furthermore, the Trust is not a trust company and, accordingly, is not registered
under any trust and loan company legislation, as it does not carry on or intend to carry on the
business of a trust company.
 The Trust is not a legally recognized entity within the relevant definitions of the Bankruptcy
and Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada) and, in some cases,
the Winding Up and Restructuring Act (Canada). As a result, in the event a restructuring of the
Trust were necessary, the Trust would not be able to access the remedies available thereunder. In
the event of a restructuring, the position of Unitholders may be different than that of the
shareholders of a corporation.
 Issuance of Trust Units
  Purchase of Trust Units
  Cash Distributions on Trust Units and Exchangeable Units
   16




---



##### 



Distribution Reinvestment Plan
 DRIP
 Trust Unit Redemption Right
  Cash Redemption
 Market Redemption Price
   
    
    the total amount payable by the Trust in respect of such Trust Units and all other Trust
Units tendered for redemption in the same calendar month exceeds $50,000; provided that the
Trustees may, in their sole discretion, waive such limitation in respect of all Trust Units
tendered for redemption in any calendar month. If this limitation is not so waived, the Trust
Units tendered for redemption in such calendar month
 17




---



##### 



shall be redeemed for cash based on the Market Redemption Price and, unless any applicable
regulatory approvals are required, by a distribution in specie of the Trusts assets, which
may include Redemption Notes (as defined below) or other assets held by the Trust, on a
pro-rata basis;
    
    at the time such Trust Units are tendered for redemption, the outstanding Trust Units are
not listed for trading on the Toronto Stock Exchange or traded or quoted on any stock exchange
or market which the Trustees consider, in their sole opinion, provides representative fair
market value prices for the Trust Units;
    
    the normal trading of the Trust Units is suspended or halted on any stock exchange on which
the Trust Units are listed for trading or, if not so listed, on any market on which the Trust
Units are quoted for trading, on the date that such Trust Units tendered for redemption were
tendered to the Trust for redemption or for more than five trading days during the ten day
trading period prior to the date on which such Trust Units were tendered for redemption; or
    
    the redemption of Trust Units will result in the delisting of the Trust Units on the
principal stock exchange on which the Trust Units are listed.
 In Specie Redemption
 Support Agreement Redemption Notes
     18




---



##### 



Meetings of Unitholders
  Special Voting Unit Voting and Exchange Trust
Agreement
   Limitation on Non-Resident Ownership
  
    
    if determined necessary or desirable by the Trustees, in their sole discretion, the Trust
may, from time to time, among other things, take all necessary steps to monitor the activities
of the Trust and ownership of the Trust Units. If at any time the Trust or the Trustees
become aware that the activities of the Trust and/or ownership of the Trust Units by
non-residents of Canada may threaten the status of the Trust under the Tax Act as a unit
trust or a mutual fund trust, the Trust, by or through the Trustees on the Trusts
behalf, is authorized to take such action as may be necessary in the opinion of the Trustees
to maintain the status of the Trust as a unit trust or a mutual fund trust including,
without limitation, the imposition of restrictions on the issuance by the Trust of Trust Units
or the transfer by any Unitholder of Trust Units to a non-resident of Canada and/or require
the sale of Trust Units by non-residents of Canada on a basis determined by the Trustees
and/or suspend distribution and/or other rights in respect of Trust Units held by
non-residents of Canada transferred contrary to the foregoing provisions or not sold in
accordance with the requirements thereof; and
    
    in addition to the foregoing, the transfer agent of the Trust Units, by or through the
Trustees may, if determined appropriate by the Trustees, establish operating procedures for,
and maintain, a reservation system which may limit the number of Trust Units that
non-residents of Canada may hold, limit the transfer
 19




---



##### 



of the legal or beneficial interest in any Trust Units to non-residents of Canada unless
selected through a process determined appropriate by the Trustees, which may either be a
random selection process or a selection process based on the first to register, or such
other basis as determined by the Trustees. The operating procedures relating to such
reservation system shall be determined by the Trustees and, prior to implementation, the
Trust shall publicly announce the implementation of the same. Such operating procedures
may, among other things, provide that any transfer of a legal or beneficial interest in any
Trust Units contrary to the provisions of such reservation system may not be recognized by
the Trust.
 Amendments to the Declaration of Trust
  
    
    for the purpose of ensuring the Trusts continuing compliance with applicable laws,
regulations or policies of any governmental authority having jurisdiction over the Trustees or
the Trust;
    
    in a manner which, in the opinion of the Trustees, provides additional protection for the
Unitholders;
    
    in a manner which, in the opinion of the Trustees, is necessary or desirable as a result of
changes in Canadian tax laws;
    
    to remove any conflicts or inconsistencies in the Declaration of Trust or to make minor
corrections which are, in the opinion of the Trustees, necessary or desirable and not
prejudicial to the Unitholders; or
    
    to change the situs of, or the laws governing, the Trust which, in the opinion of the
Trustees is desirable in order to provide Unitholders with the benefit of any legislation
limiting their liability.
 Term of the Trust
   Take-Over Bids
 Securities Act
 20




---



##### 



Special Voting Unit
 Voting and Exchange Trustee
 
 Description of Exchangeable Units
  
    
    they are exchangeable for Trust Units on a one-for-one basis at the option of the holder;
    
    each Exchangeable Unit entitles the holder thereof to receive (in the form of a
non-interest bearing loan) cash payments equal to cash payments made by the Trust on a Trust
Unit (and at the beginning of the next calendar year a special distribution will be made on
each Exchangeable Unit in an amount equal to the outstanding non-interest bearing loan
accumulated during the previous year which will be used to repay such accumulated debt);
    
    the Exchangeable Unitholder is entitled to direct the Voting and Exchange Trustee to vote
the Special Voting Unit at all meetings of Trust Unitholders;
    
    the Exchangeable Unitholders 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 Exchangeable
Unitholders 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 Exchangeable Unitholders; and
    
    there are certain restrictions on the transfer of Exchangeable Units.
  
    
    issue or distribute Trust Units to the holders of all, or substantially all, of the then
outstanding Trust Units by way of distribution; or
    
    issue or distribute rights, options or warrants to the holders of all, or substantially
all, of the then outstanding Trust Units entitling them to subscribe for or purchase Trust
Units (or securities exchangeable for or converting into or carrying rights to acquire Trust
Units); or
    
    issue or distribute to the holders of all, or substantially all, of the then outstanding
Trust Units:
 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 above; or
 21




---



##### 



o
    
    evidences of indebtedness of the Trust; oro
    
    other assets of the Trust,
  Payments on Exchangeable Units
      The General Partner
  Partnership Units
  22




---



##### 



Amendment and Approval
  
    
    the amendment provisions themselves may not be amended without the unanimous consent of the
holders of the PDLP A Units and Exchangeable Units (together, the PDLP Unitholders);
    
    no amendments shall be made to the Limited Partnership Agreement which would have the
effect of, among other things; (i) preventing the loans or distributions to the PDLP
Unitholders or adversely affecting the rights of the PDLP Unitholders under the Support
Agreement (as defined herein); (ii) changing the provisions in the Limited Partnership
Agreement requiring that the business of PDLP be conducted solely through its investment in
Precision or any associate or affiliate thereof, or in any other corporation, partnership,
trust or other person involved, directly or indirectly, in any business which involves the
provision of contract drilling, service rigs, snubbing, rentals and related services to oil
and gas exploration and production companies, (iii) changing the liability of a limited
partner; (iv) allowing any limited partner to exercise control over the business of PDLP; (v)
changing the right of a limited partner to vote on resolutions; (vi) changing PDLP from a
limited partnership to a general partnership, or (vii) causing the Trust to lose its status as
a mutual fund trust under the Tax Act, without such amendment being passed by way of an
extraordinary resolution;
    
    no amendment shall be made to the Limited Partnership Agreement which would have the effect
of adding, changing or removing any right, privilege, restriction or condition attaching to
the Exchangeable Units, or which would have an adverse impact on the Exchangeable Unitholders
unless such amendment is approved by class vote of 66-2/3% of the Exchangeable Unitholders;
and
    
    no amendment shall be made which would have the effect of adversely affecting the rights
and obligations of the General Partner becoming effective before 45 days after the resolution
approving such amendment.
  
 MATERIAL DEBT
 Secured Facility Commitment Banks Unsecured Facility
 23




---



##### 



Senior Notes
  www.sedar.com www.sec.gov
 Secured Facility
   
    
    a term loan A facility in an aggregate principal amount of $289 million (the Term Loan A
Facility);
    
    a term loan B facility in an aggregate principal amount of $422 million (the Term Loan B
Facility); and
    
    a revolving credit facility in the amount of US$260 million (the Revolving Credit
Facility).
    
    The terms of the Secured Facility include:
 o
    
    the requirement to enter into hedge arrangements to ensure that at least 50% of
total debt is subject to fixed interest rates;o
    
    covenants requiring the Trust and Precision to comply with certain financial
ratios;o
    
    limits on distributions based on 20% of the Trusts operating cash flow before
changes in working capital, provided that 50% of operating cash flow generated in
excess of certain base case projections will also be permitted to be paid as
distributions, subject to an overall cap of 30% of aggregate operating cash flow before
changes in working capital; ando
    
    covenants that will limit the Trusts capital expenditures above an agreed
base-case, allowing for certain exceptions.
     24




---



##### 



Subsidiary Guarantors
   
    
    a maximum total leverage ratio of 3.00 to 1.00 as at the last day of any period of four
consecutive fiscal quarters of the Trust beginning March 31, 2009, except that such maximum
ratio is 3.50 to 1.00 for any such period ending after December 31, 2009 and on or prior to
December 31, 2011;
    
    a minimum interest coverage ratio of 3.00 to 1.00 for any period of four consecutive fiscal
quarters of the Trust beginning March 31, 2009, except that such minimum ratio is 2.75 to 1.00
for any such period ending after December 31, 2009 and on or prior to December 31, 2011; and
    
    a minimum fixed charge coverage ratio for any period of four consecutive fiscal quarters of
the Trust beginning March 31, 2009 of: (i) 1.00 to 1.00 for any such period ending on or prior
to December 31, 2010; and (ii) 1.05 to 1.00 for any such period ending after December 31,
2010.
   25




---



##### 



Unsecured Senior Notes
 th th th
   General
   
 MARKET FOR SECURITIES
 Trading Price and Volume of Trust Units
 PD.UN PDS
 TSX
    
    NYSEPeriod
    
    High
    
    Low
    
    Volume
    
    High
    
    Low
    
    Volume($)
    
    ($)
    
    
    
    
    
    (US$)
    
    (US$)2009January
    
    
    10.44
    
    
    
    6.02
    
    
    
    14,506,658
    
    
    
    8.54
    
    
    
    4.92
    
    
    
    37,803,417February
    
    
    6.18
    
    
    
    2.51
    
    
    
    40,969,569
    
    
    
    4.98
    
    
    
    2.00
    
    
    
    84,452,445March
    
    
    3.95
    
    
    
    2.65
    
    
    
    37,071,585
    
    
    
    3.22
    
    
    
    2.03
    
    
    
    43,678,175April
    
    
    6.15
    
    
    
    3.30
    
    
    
    49,576,115
    
    
    
    5.15
    
    
    
    2.60
    
    
    
    56,965,147May
    
    
    7.13
    
    
    
    5.35
    
    
    
    49,844,427
    
    
    
    6.16
    
    
    
    4.55
    
    
    
    61,408,182June
    
    
    7.03
    
    
    
    4.91
    
    
    
    41,423,339
    
    
    
    6.50
    
    
    
    4.25
    
    
    
    46,661,007July
    
    
    6.49
    
    
    
    4.69
    
    
    
    25,012,332
    
    
    
    5.99
    
    
    
    4.01
    
    
    
    34,202,769August
    
    
    6.44
    
    
    
    5.89
    
    
    
    15,816,648
    
    
    
    6.05
    
    
    
    5.30
    
    
    
    24,243,789September
    
    
    8.06
    
    
    
    5.87
    
    
    
    28,096,283
    
    
    
    7.54
    
    
    
    5.30
    
    
    
    36,484,657October
    
    
    8.05
    
    
    
    6.36
    
    
    
    21,844,752
    
    
    
    7.66
    
    
    
    5.84
    
    
    
    46,422,797November
    
    
    7.65
    
    
    
    6.76
    
    
    
    16,224,533
    
    
    
    7.28
    
    
    
    6.29
    
    
    
    22,661,319December
    
    
    7.81
    
    
    
    6.92
    
    
    
    13,582,934
    
    
    
    7.40
    
    
    
    6.53
    
    
    
    28,264,269
 26




---



##### 



Prior Sales
  Number of Trust Units orDate
of Issuance
    
    Description of Transaction
    
    Securities
    
    Price per SecurityFebruary 18, 2009(1)
    
    Issued New Trust Units
    
    
    46,000,000
    
    
    
    US$3.75April 22, 2009(2)
    
    Private Placement
    
    
    35,000,000
    
    
    
    $3.00June 3, 2009(3)
    
    Rights Offering
    
    
    34,441,950
    
    
    
    $3.00
 Notes:(1)
    
    On February 18, 2009, the Trust issued 46 million Trust Units pursuant to a Trust Unit
offering. See General Development of the Business  Three  Year History  2009.(2)
    
    Private placement offering of $175 million aggregate principal amount of senior unsecured
notes and 35,000,000 Trust Units at a price of $3.00 per Trust Unit to the Private Placement
Investor for aggregate gross proceeds of approximately $280 million. See General Development
of the Business  Three-Year History  2009.(3)
    
    On June 3, 2009, a rights offering to Unitholders concluded with gross proceeds to the Trust
of $103.3 million and the issuance of 34,441,950 Trust Units.
 
 TRUSTEES, DIRECTORS AND EXECUTIVE OFFICERS
 
 Board Of Trustees
     PositionName, Municipality, Province or
    
    
    Presently
    
    
    Trustee/Director/Officer
    
    
    Principal OccupationState & Country of Residence
    
    
    Held
    
    
    Since(1)
    
    
    During the Preceding 5 YearsFrank M. Brown (3)
Anchorage, Alaska, USA
    
    
    Director
    
    
    December 2008
    
    
    Mr. Brown has served as Chief Executive
Officer of ZRB Resources, LLC, a private
exploration and production company in
Alaska since October 2006, and has been
a private consultant in the Alaskan oil
and gas industry since January 2006.
 27




---



##### 



PositionName, Municipality, Province or
    
    
    Presently
    
    
    Trustee/Director/Officer
    
    
    Principal OccupationState & Country of Residence
    
    
    Held
    
    
    Since(1)
    
    
    During the Preceding 5 YearsFrom September 2000 to 2005, Mr. Brown
served as President of Fairweather
International, Inc. He served as Senior
Vice President of ARCO Alaska, Inc. from
1994 until his retirement in 1999.
Prior to that, Mr. Brown was President
of ARCO Long Beach Company from 1992 to
1994 and served as President of THUMS
Long Beach Company from 1990 to 1992.
Mr. Brown was employed for 29 years by
ARCO and related companies, all of which
were engaged in the exploration and
production of oil and gas.
Mr. Brown served as Co-Chairman of the
Alaska Highway Natural Gas Policy
Council from 2001 to 2002. He was a
director of Grey Wolf, Inc. from May
2000 to December 2008, prior to its
acquisition by the Trust and his subsequent
appointment as director of Precision on
December 23, 2008.William T. Donovan(2)
North Palm Beach, Florida, USA
    
    
    Director
    
    
    December 2008
    
    
    Mr. Donovan has been Chairman of the
Board of Rockland Industrial Holdings,
LLC, a Wisconsin entity engaged in
manufacturing wood flooring products for
the truck trailer and domestic container
industries, since April 2006. He is
also a director for several private
companies in the United States, the
United Kingdom and Russia. Mr. Donovan
was a director of Grey Wolf, Inc. from
June 1997 to December 2008, prior to its
acquisition by the Trust and his
subsequent appointment as director of
Precision on December 23, 2008.
From 1997 to 2005, Mr. Donovan served as
President, Chief Executive Officer and a
director of Total Logistics, Inc., a
Wisconsin corporation engaged in various
operating and investment activities.
Mr. Donovan previously served as
President, Chief Financial Officer, and
was a director of Christiana Companies,
Inc. and Prideco Inc. prior to their
merger with Weatherford International,
Inc. in February 1999. From 1980 to
1998, Mr. Donovan was a Principal and
Managing Director of Lubar & Co., a
private investment and venture capital
firm. Prior to joining Lubar & Co., Mr.
Donovan was an officer with
Manufacturers Hanover Trust Company from
1976 until 1980, where he specialized in
merger and acquisition financing.W.C. (Mickey) Dunn(3)(4)
Calgary, Alberta, Canada
    
    
    Director
    
    
    September 1992
    
    
    Mr. Dunn is Chairman of the Board of
Bellatrix Exploration Inc., and a
founding shareholder and a director of
Cash Store Financial Services Inc.
From 1982-1999, Mr. Dunn was President
and Chief Executive Officer of Cardium
Service
 28




---



##### 



PositionName, Municipality, Province or
    
    
    Presently
    
    
    Trustee/Director/Officer
    
    
    Principal OccupationState & Country of Residence
    
    
    Held
    
    
    Since(1)
    
    
    During the Preceding 5 Yearsand Supply Limited, Cardium Tool
Services Inc. and Colorado Silica Sand
Inc., an international manufacturer and
service provider of specialty downhole
equipment and services, in addition to
developer, provider and marketer of high
grade silica sand products.Brian A. Felesky, CM, Q.C.(4)
Calgary, Alberta, Canada
    
    
    Director
    
    
    December 2005
    
    
    Mr. Felesky is counsel at Felesky Flynn
LLP, a law firm specializing in tax
matters. He is professionally involved
in acquisitions, mergers, financing and
restructuring of public and private
corporations, partnerships and trusts,
in Canada and internationally.
Mr. Felesky sits on several volunteer
boards including the Canada West
Foundation (vice-chair), Homefront (on
domestic violence, co-chair), the
Calgary Stampede Foundation and the
Senate of Athol Murray College of Notre
Dame and Awali (a teacher development
program in East Africa). He is a member
of the Order of Canada and has received
numerous awards, including an Honourary
Doctorate of Laws (University of
Calgary), the Distinguished Service
Award from the Law Society of Alberta
and Canadian Bar Association and a
Queens Counsel designation.Robert J.S. Gibson(2)(4)
Calgary, Alberta, Canada
    
    
    Trustee
Director
    
    

September 2005June 1996
    
    
    Mr. Gibson has been President of a
private investment firm, Stuart &
Company Limited, since 1973 and is also
Managing Director of Alsten Holdings
Ltd. He serves on the Board of Cash
Store Financial Services Inc.
Mr. Gibson serves as director for a
number of private companies. He is also
the Chairman and a director for the
Canadian Defence and Foreign Affairs
Institute.Allen R. Hagerman, FCA(2)
Calgary, Alberta, Canada
    
    
    Trustee
Director
    
    

September 2007December 2006
    
    
    Mr. Hagerman is Executive Vice President
of Canadian Oil Sands Limited and is
currently responsible for overseeing
crude oil marketing operations. Prior
to 2007, Mr. Hagerman was Chief
Financial Officer of Canadian Oil Sands
Limited.
Mr. Hagerman is lead director of Capital
Power Income LP and a director of the
Calgary Exhibition and Stampede. He is
also a member of the Financial
Executives Institute and is past
President of Financial Executives
Institute, Calgary Chapter, as well as
past Chair of the Alberta Childrens
Hospital Foundation.Stephen J.J. Letwin(3)
Houston, Texas, USA
    
    
    Director
    
    
    December 2006
    
    
    Mr. Letwin is currently Executive Vice
President of Gas Transportation &
International  Enbridge, Inc. with
responsibility for Enbridges natural
gas operations, including certain
natural gas pipelines, a gas
distribution company and its
 29




---



##### 



PositionName, Municipality, Province or
    
    
    Presently
    
    
    Trustee/Director/Officer
    
    
    Principal OccupationState & Country of Residence
    
    
    Held
    
    
    Since(1)
    
    
    During the Preceding 5 Yearsinternational business unit. He also
serves on the board of a private
corporation.
Mr. Letwin serves as Patron for UNICEF
Alberta, was a former director of YMCA
Calgary, served on the Board of
Governors at McMaster University, and is
an Honorary Director of Westpark
Hospital in Toronto.
Mr. Letwin is a member of the Financial
Executives Institute as well as a board
and executive committee member of the
Interstate Natural Gas Association of
America. He was also a director of the
Canadian and American Gas Association
and a past Governor for McMaster
University.Patrick M. Murray(2)
Dallas, Texas, USA
    
    
    Trustee
Director
    
    

September 2005
July 2002
    
    
    Mr. Murray retired as Chairman of the
Board and CEO of Dresser, Inc. in May,
2007. Dresser is a leading manufacturer
and marketer of highly engineered
equipment for the energy industry.
Prior to becoming Chairman of the Board
of Dresser, Inc., Mr. Murray served as
President and CEO. Previously, Mr.
Murray was President of Halliburton
Companys Dresser Equipment Group from
1998 to 2000 and Senior Vice President,
Strategic Initiatives of Dresser
Industries, Inc. in 1997.
Mr. Murray is on the Board of Directors
of Harvest Natural Resources, Inc.,
Wellstream Holdings, Plc, the Maguire
Energy Institute, the World Affairs
Council of Dallas/Fort Worth, and the
Board of Regents of Seton Hall
University. He is also a member of the
American Petroleum Institute (API) and
the Society of Petroleum Engineers
(SPE).Kevin A. Neveu
Calgary, Alberta, Canada
    
    
    President, Chief
Executive Officer
Director
    
    
    August 2007
    
    
    Mr. Neveu was appointed Chief Executive
Officer and a director of Precision in August
2007 and became President and Chief
Executive Officer in January 2009. Mr.
Neveu was previously President of the
Rig Solutions Group of National Oilwell
Varco in Houston, where he was
responsible for the companys drilling
equipment business. Over the past 25
years, Mr. Neveu has held senior
management positions with National
Oilwell Varco and its predecessor
companies in London, Moscow, Houston,
Edmonton and Calgary.Mr. Neveu holds a Bachelor of Science
degree and is a graduate of the Faculty
of Engineering at the University of
Alberta. Mr. Neveu is a Professional
Engineer, as designated by the
Association of Professional Engineers,
Geologists and Geophysicists of Alberta.
Mr. Neveu serves on the boards of RigNet
Inc., Houston, Texas (since 2004), the
Heart and Stroke Foundation of Alberta
(since 2009) and he was appointed a
Member of the Board of
 30




---



##### 



PositionName, Municipality, Province or
    
    
    Presently
    
    
    Trustee/Director/Officer
    
    
    Principal OccupationState & Country of Residence
    
    
    Held
    
    
    Since(1)
    
    
    During the Preceding 5 YearsDirectors and a
Member of the Executive Committee of the
International Association of Drilling
Contractors, Houston, Texas in January
2010.Frederick W. Pheasey(3)

Edmonton, Alberta, Canada
    
    
    Director
    
    
    July 2002
    
    
    Mr. Pheasey founded Dreco Energy
Services Ltd., a company which designs
and manufactures drilling rigs and
components and downhole tools. In 1997,
Dreco and its subsidiaries were merged
into National Oilwell, Inc. (now
National Oilwell Varco, Inc.), a company
that designs and manufactures systems
and components used in oil and gas
drilling and production. Mr. Pheasey
became Executive Vice President of
National Oilwell, Inc. following the
merger and continued in that position
until 2004. He was a director of
National Oilwell, Inc. from 1977 to 2005
and continues to be a director and
employee of Dreco Energy Services Ltd.

In 1999, Mr. Pheasey was made an
honourary member of the Canadian
Association of Oilwell Drilling
Contractors. In 2002, he was inducted
into the Canadian Petroleum Hall of
Fame.
Mr. Pheasey served on the leadership
committee of the City of Edmontons
Committee to End Homelessness and on the
Housing Subcommittee in 2008.Robert L. Phillips(2)(3)(4)
Vancouver, British Columbia, Canada
    
    
    Director
Chairman
    
    
    May 2004August 2007
    
    
    Mr. Phillips is an experienced senior
corporate executive having most recently
been the President and Chief Executive
Officer of BCR Group of Companies from
2001 to 2004. Within the oil and gas
exploration and production and oilfield
service sectors, he has served as Vice
President of Husky Oil Limited and as
President and Chief Executive Officer of
PTI Group Inc. and Dreco Energy Services
Ltd.
Mr. Phillips has served on the boards of
publicly-traded and private corporations
for more than twenty years, including
several oil and gas exploration and
production and oilfield service
companies. In addition to Precision, he
currently serves on the boards of
several major Canadian corporations.
Mr. Phillips is an active private
investor. He also practiced corporate
and securities law for over fifteen
years.Trevor M. Turbidy(4)
Houston, Texas, USA
    
    
    Director
    
    
    December 2008
    
    
    Mr. Turbidy has served as an Energy
Industry Advisor with Avista Capital
Partners since December 2007. From
August 2005 until July 2007, Mr. Turbidy
served as President and Chief Executive
Officer of Trico Marine Services, Inc.,
an international marine support and
transportation company. From August
2003 until August 2005, he served as
Vice President and Chief Financial
Officer of Trico.
 31




---



##### 



PositionName, Municipality, Province or
    
    
    Presently
    
    
    Trustee/Director/Officer
    
    
    Principal OccupationState & Country of Residence
    
    
    Held
    
    
    Since(1)
    
    
    During the Preceding 5 YearsFrom November 2000
until May 2002, Mr. Turbidy served as a
director in the Investment Banking
Department of Credit Suisse First
Boston. From 1991 until November 2000,
he held various positions in investment
banking covering the U.S. energy
industry with a focus on oilfield
services and equipment, exploration and
production and refining.
Mr. Turbidy was a Director of Grey Wolf,
Inc. from December 2005 to December
2008, prior to its acquisition by
the Trust and his subsequent
appointment as director of Precision on
December 23, 2008. Mr. Turbidy serves as
a director of a number of private energy
companies, including a European
exploration and production company
concentrating on the Southern North Sea;
a U.S. based jackup rig operator; a
European based exploration and
production company focused on onshore
Europe; and a U.S. based exploration and
production company with assets in Texas
and the Rocky Mountain region.Joanne L. Alexander
Calgary, Alberta, Canada
    
    
    Vice President,
General Counsel and
Corporate Secretary
    
    
    April 2008
    
    
    Vice-President, General Counsel and
Corporate Secretary since January 2009;
Vice President and General Counsel,
Precision Drilling Corporation from
April 2008 to January 2009; General
Counsel, Marathon Oil Canada Corporation
2007-2008; General Counsel, Western Oil
Sands Inc. 2007; General Manager,
Stakeholder Engagement and Regulatory
Affairs, ConocoPhillips Canada Ltd.
2006; Vice President, Legal and
Regulatory Affairs, Burlington Resources
Canada Ltd. 2000-2006.Kenneth J. Haddad
Houston, Texas, USA
    
    
    Vice President,
Business
Development
    
    
    March 2008
    
    
    Vice President, Business Development,
Precision Drilling Corporation since
March 2008; Director, Mergers and
Acquisitions, Halliburton Company
2002-2008.Darren J. Ruhr
Calgary, Alberta, Canada
    
    
    Vice President,
Corporate Services
    
    
    November 2005
    
    
    Vice-President, Corporate Services since
January 2009; Vice President, Corporate
Services and Corporate Secretary,
Precision Drilling Corporation from
November 2005 to January 2009; Director,
Information Technology, Real Estate &
Travel, Precision Drilling Corporation
2003-2005.Gene C. Stahl
Calgary, Alberta, Canada
    
    
    President, Drilling
Operations
    
    
    November 2005
    
    
    President, Drilling Operations since
December 2009; President, Canadian
Operations January 2009 to December
2009; President and Chief Operating
Officer, Precision Drilling Corporation
from November 2005 to January 2009; Vice
President, Precision Rentals 2003-2005.Douglas J. Strong
Calgary, Alberta, Canada
    
    
    Chief Financial
Officer
    
    
    November 2005
    
    
    Chief Financial Officer, Precision
Drilling Corporation since November
2005; Chief Financial Officer, Precision
Diversified Services Ltd.; 2001-2005,
Group Controller, Precision Drilling
2001-2005.
 32




---



##### 



PositionName, Municipality, Province or
    
    
    Presently
    
    
    Trustee/Director/Officer
    
    
    Principal OccupationState & Country of Residence
    
    
    Held
    
    
    Since(1)
    
    
    During the Preceding 5 YearsDavid W. Wehlmann

Katy, Texas, USA
    
    
    Executive Vice
President, Investor
Relations
    
    
    January 2009
    
    
    Executive Vice President, Investor
Relations since January, 2009; Executive
Vice President and Chief Financial
Officer, Grey Wolf 2003-2008.
 Notes:(1)
    
    Each Trustees or Directors term of office expires not later than the close of business at
the next annual meeting, or until successors are appointed or Trustees or Directors vacate
their office.(2)
    
    Member of the Audit Committee.(3)
    
    Member of the Compensation Committee.(4)
    
    Member of the Corporate Governance and Nominating Committee.
  
 CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS
 Corporate Cease Trade Orders
  Corporate Bankruptcies
  Trico
 Rancher
 Personal Bankruptcies
  33




---



##### 



Penalties or Sanctions
  
 AUDIT COMMITTEE INFORMATION
 Audit Committee Charter
 Audit Committee Charter
 Composition of the Audit Committee
 Audit Committees Sarbanes-Oxley Act of
2002
 Relevant Education and Experience
  Pre-approval Policies and Procedures
 de minimus
 34




---



##### 



Audit Fees
  (in thousands of Canadian dollars)
 Years ended December 31,
    
    
    2009
    
    
    
    2008Audit fees
    
    
    $
    2,308
    
    
    
    $
    2,248Audit-related fees
    
    
    
    -
    
    
    
    
    -Tax fees
    
    
    
    515
    
    
    
    
    442All other fees
    
    
    
    181
    
    
    
    
    40Total
    
    
    $
    3,004
    
    
    
    $
    2,730
   IFRS
 
 LEGAL PROCEEDINGS AND REGULATORY ACTIONS
  
 INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
  35




---



##### 



TRANSFER AGENT, REGISTRAR AND VOTING AND EXCHANGE TRUSTEE
  
 MATERIAL CONTRACTS
  Declaration of Trust
  Limited Partnership Agreement
  Voting and Exchange Trust Agreement
  Support Agreement
  Administration Agreement
  Merger Agreement
  Secured Facility and Senior Notes
  Amendments to Secured Facility
  www.sedar.com
 
 INTERESTS OF EXPERTS
  36




---



##### 



EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
 Exchange Act
  
 INTERNAL CONTROL OVER FINANCIAL REPORTING
 Canadian GAAP U.S. GAAP
    
 TRANSITION TO INTERNATIONAL FINANCING REPORTING STANDARDS
 IFRS  1
   37




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
  
 ADDITIONAL INFORMATION
 www.sedar.com www.precisiondrilling.com corporatesecretary@precisiondrilling.com
  
 RISK FACTORS
  
 Risks Relating To The Business Currently Conducted By Precision
 The operations of Precision are dependent on the price of oil and natural gas.
   38




---



##### 



The intense price competition and cyclical nature of the contract drilling industry could have an
adverse effect on revenue and profitability.
  
    
    the drilling capabilities and condition of drilling rigs;
    
    the quality of service and experience of rig crews;
    
    the safety record of the contractor and the particular drilling rig;
    
    the offering of ancillary services;
    
    the ability to provide drilling equipment adaptable to, and personnel familiar with, new
technologies and drilling techniques; and
    
    the mobility and efficiency of rigs.
   Deteriorating conditions in the credit markets may adversely affect business.
   39




---



##### 



The Secured Facility and the Senior Notes contain restrictive covenants.
   The Trust and its subsidiaries have incurred a level of debt which could have a material adverse
effect on its financial position and limit its future operations.
   
    
    increase the Trusts vulnerability to general adverse economic and industry
conditions and require it to dedicate a substantial portion of its cash flow from operations
to payments on its indebtedness, thereby reducing the availability of its cash flow to fund
working capital, capital expenditures, acquisitions, other debt service requirements,
distributions to Unitholders and other general corporate purposes;
    
    decrease the Trusts ability to satisfy its obligations under the Secured
Facility and the Senior Notes or other indebtedness and, if the Trust fails to comply with
these requirements, an event of default could result;
    
    increase the Trusts vulnerability to covenants relating to its indebtedness
which may limit the Trusts ability to obtain additional financing for working capital,
capital expenditures and other general corporate activities;
    
    increase the Trusts exposure to risks inherent in interest rate fluctuations and
changes in credit ratings or statements from rating agencies because certain of its borrowings
(including borrowings under the Secured Facility) are at variable rates of interest, which
would result in higher interest expense to the extent the Trust has not hedged these risks
against increases in interest rates;
 40




---



##### 




    
    increase the Trusts exposure to exchange rate fluctuations because a change in
the value of the Canadian dollar against the United States dollar will result in an increase
or decrease in the Trusts United States dollar denominated debt, as expressed in Canadian
dollars, as well as in the related interest expense;
    
    increase the Trusts vulnerability to covenants relating to its indebtedness that
may limit the Trusts flexibility in planning for, or reacting to, changes in its business or
the industry in which it operates;
    
    place the Trust at a competitive disadvantage compared to its competitors that
have less debt;
    
    limit the Trusts ability to borrow additional funds to meet its operating
expenses, to make acquisitions and for other purposes; and
    
    limit the Trusts ability to construct, purchase or acquire new rigs.
  Precision will need to generate sufficient cash to service indebtedness.
  Any difficulty Precision experiences retaining, replacing or adding personnel could adversely
affect its business.
    41




---



##### 



Customer merger and acquisition activity could lead to a decline in the demand for services.
  Capital overbuild in the drilling industry could lead to a decline in demand for Precisions
services.
  Business acquisitions entail numerous risks and may disrupt Precisions business or distract
management attention.
  
    
    unanticipated costs and liabilities;
    
    difficulty of integrating the operations and assets of the acquired business;
    
    the ability to properly access and maintain an effective internal control environment over
an acquired company in order to comply with public reporting requirements;
    
    potential loss of key employees and customers of the acquired companies; and
    
    an increase in Precisions expenses and working capital requirements.
  Poor safety performance could lead to a decline in the demand for services
  42




---



##### 



Precisions operations are subject to currency translation risk, which could cause results to
fluctuate significantly from period to period.
  
    
    Translation of United States Subsidiaries. Precisions United States operations are
considered self-sustaining operations and are translated into Canadian dollars using the
current rate method. Under this method, the assets and liabilities of Precisions operations
in the United States are recorded in the consolidated financial statements at the exchange
rate in effect at the balance sheet dates and the unrealized gains and losses are included in
other comprehensive income, a component of Unitholders equity. As a result, changes in the
Canadian to United States dollar exchange rates which could materially increase or decrease
Precisions United States dollar denominated net assets on consolidation which increase or
decrease Unitholders equity. In addition, under certain circumstances Canadian GAAP requires
foreign exchange gains and losses that are accumulated in other comprehensive income to be
recorded as a foreign exchange gain or loss in the statement of earnings. Precisions United
States operations generate revenue and incur expenses in United States dollars and the United
States dollar based earnings are converted into Canadian dollars for purposes of financial
statement consolidation and reporting. The conversion of the United States dollar based
revenue and expenses to a Canadian dollar basis does not result in a foreign exchange gain or
loss but does result in lower or higher net earnings from United States operations than would
have occurred had the exchange rate not changed. If the Canadian dollar strengthens versus
the United States dollar, the Canadian dollar equivalent of net earnings from United States
operations will be negatively impacted. Precision does not currently hedge any of its
exposure related to the translation of United States dollar based earnings into Canadian
dollars.
    
    Transaction Exposure. Precision has long-term debt denominated in United States dollars.
This debt is converted at the exchange rate in effect at the balance sheet dates with the
resulting gains or losses included in the statement of earnings as foreign exchange
gains/losses. If the Canadian dollar strengthens versus the United States dollar, Precision
will incur a foreign exchange gain from the translation of this debt. Currently, Precision
has not designated any of this debt as a hedge against the net asset position of its
self-sustaining United States operations. The vast majority of Precisions United States
operations are transacted in United States dollars. Transactions for Precisions Canadian
operations are primarily transacted in Canadian dollars. However, Precision occasionally
purchases goods and supplies in United States dollars for its Canadian operations. These
types of transactions and foreign exchange exposure would not typically have a material impact
on the Canadian operations financial results.
 The results of Precisions annual assessment of goodwill may result in a non-cash charge against
the consolidated net income of the Trust.
   43




---



##### 



Business in Precisions industry is seasonal and highly variable.
  The Trust and Precision may face potential unknown liabilities.
   There are risks associated with increased capital expenditures.
  The business of Precision is affected by governmental regulations and policies.
  Compliance with various environmental laws, rules, legislation and guidelines could impose greater
costs on Precisions business or lead to a decline in the demand for services.
  44




---



##### 



There are certain risks associated with Precisions dependence on third-party suppliers.
  Unexpected cost overruns on turnkey drilling jobs could adversely affect Precisions revenues.
  45




---



##### 



New technology could place Precision at a disadvantage versus competitors.
  Precision is subject to various risks from its operations outside Canada.
  Precisions operations face many risks of interruption and casualty losses.
  
 Risks Relating to the Structure of the Trust
 The price of Trust Units may experience volatility.
  Distributions on the Trust Units have been suspended and may not be reinstated.
  46




---



##### 



Asset valuation variability could negatively affect the value of the Trust Units.
  Precision may be unable to obtain access to additional financing.
  The Trust may not be able to obtain financing or obtain financing on acceptable terms because of
the deterioration of the credit and capital markets.
   47




---



##### 



The Trusts debt service obligations may limit the amount of cash available for distributions.
   Sales of additional Trust Units could negatively affect the value of the Trust Units.
  The Trust could face negative tax consequences for previous transactions.
  The Trust is dependent on Precision and its subsidiaries for the amount of cash available for
distributions.
   48




---



##### 



Risks associated with the taxation of the Trust and Precision could negatively affect the value of
the Trust Units.
    Proposed
Amendments
  Non-Canadian
Holders
 SIFT Rules SIFT
trust SIFT Conversion Rules
 49




---



##### 



Guidelines
  Business
Corporations Act
  If the Trust does not constitute a qualified foreign corporation for United States federal income
tax purposes, individual U.S. Holders (as defined below) may be taxed at a higher rate on
distributions.
  U.S. Holder
 
    
    an individual citizen or resident of the United States;
    
    a corporation or other entity treated as a corporation for federal income tax purposes,
created or organized in or under the laws of the United States or any State or the District of
Columbia;
    
    an estate that is subject to United States federal income tax on its income regardless of
is source; or
 50




---



##### 




    
    a trust, the substantial decisions of which are controlled by one or more United States
persons and which is subject to the primary supervision of a United States court, or a trust
that validly has elected under applicable Treasury regulations to be treated as a United
States person for United States federal income tax purposes.
 Changes in legislation may have an adverse effect on Unitholders.
  Precision has retained liabilities as a consequence of prior reorganizations.
  A successful challenge by the tax authorities of the expenses deducted by the Trust or its
subsidiaries could negatively affect the value of the Trust Units.
  A change in the structure of the Trust may have an adverse effect on Unitholders.
     Trust Units have certain risks not associated with traditional investments in the oil and natural
gas services industry.
  51




---



##### 



Canada Deposit Insurance
Corporation Act
 Bankruptcy
and Insolvency Act Companies Creditors Arrangement Act Winding Up and Restructuring Act
 The composition for Canadian federal income tax purposes of distributions on Trust Units may change
over time, and such changes could negatively affect the return on the Trust Units.
 Canadian Holders
 If the Trust ceases to qualify as a mutual fund trust under the Tax Act, the Trust Units will
cease to be qualified investments for a variety of plans, which could have negative tax
consequences.
 Exempt Plans
 Canadian withholding tax may exceed allowable United States foreign tax credits and reduce
effective yield to United States investors.
  52




---



##### 



The Trust expects to maintain its status as a foreign private issuer in the United States and
thus will be exempt from a number of rules under the Exchange Act and will be permitted to file
less information with the SEC than a company incorporated in the United States.
  Issuance of additional Trust Units in lieu of cash distributions could negatively affect the value
of the Trust Units and result in the payment of taxes.
  The distribution of assets on redemption or termination of the Trust may have adverse consequences.
  Distributions on the Trust Units are variable.
  53




---



##### 



There are risks associated with the indemnification of the limited partners of PDLP.
  The Trust may become a passive foreign investment company (PFIC), which could result in adverse
United States tax consequences to United States investors.
  Unitholders face a possibility of personal liability in connection with the obligations and affairs
of the Trust.
 Income Trusts Liability Act
 If an investor acquires 10% or more of the Trust Units it may be subject to taxation under the CFC
rules.
 CFC
 
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION AND STATEMENTS
 United States Private Securities Litigation Reform Act of 1995
 54




---



##### 



55




---



##### 



SEC SEDAR EDGAR
  56




---



##### 



APPENDIX 1 AUDIT COMMITTEE CHARTER AND TERMS OF REFERENCE
 General
 Committee Corporation Board of Directors Trust
  Business
Corporations Act Securities Act United States Securities Exchange Act of 1934 NYSE
 Committee Structure and Authority
 (a)
    
    Composition
    (b)
    
    Appointment and Replacement of Committee Members
  (c)
    
    Quorum
  (d)
    
    Review of Charter and Terms of Reference
 57




---



##### 



(e)
    
    Delegation
  (f)
    
    Reporting to the Board of Directors
  (g)
    
    Committee Chair Responsibilities
  (h)
    
    Other Authority
   Purpose
  
    
    the integrity of financial reporting to the holders of units of the Trust
(Unitholders) and the investment community;
    
    the integrity of the financial reporting process, including the audit process;
    
    the Corporations and the Trusts compliance with legal and regulatory requirements
as they relate to financial reporting matters;
    
    the external auditors qualifications and independence;
    
    the integrity of the system of internal accounting and financial reporting controls
implemented by management;
    
    the work and performance of the Corporations and the Trusts financial management,
internal audit function and its external auditor; and
    
    any other matter specifically delegated to the Committee by the Board of Directors.
 58




---



##### 



Committee Responsibilities
  
    
    review the interim and annual financial statements of the Corporation and make any
comments or recommendations to the Board of Directors;
    
    review the annual financial statements of the Trust and related notes and
managements discussion and analysis (MD&A) components and make recommendations to
the Board of Directors, and ultimately, once approved by the Board of Directors, to the
Board of Trustees, for their approval;
    
    review the interim financial statements of the Trust and related notes and MD&A
components prepared for distribution to the Unitholders and the investment community;
    
    be satisfied that adequate procedures are in place for the review of the Trusts
public disclosure of financial information extracted or derived from the Trusts
financial statements, other than the public disclosure referred to above, and must
periodically assess the adequacy of those procedures;
    
    report, through the Chair of the Committee, to the Board of Directors following each
meeting of the Committee, including an outline of the nature of discussions, major
decisions reached by the Committee, and its activities and compliance with this Charter
and Terms of Reference;
    
    approve the terms of the external auditors engagement letter as agreed between the
external auditor and financial management of the Corporation, and the compensation to
be paid by the Corporation to the external auditor;
    
    review the reasons for any proposed change in the external auditor which is not
initiated by the Committee or the Board of Directors and any other significant issues
related to the change, including the response of the incumbent external auditor, and
enquire as to the qualifications of the proposed external auditor before making its
recommendations to the Board of Directors;
    
    be directly responsible for overseeing the work of the external auditor engaged for
the purpose of preparing or issuing an auditors report or performing other audit or
review services for the Corporation or the Trust, including the resolution of
disagreements between management and internal or the external auditor regarding
financial reporting or the application of any accounting principles or practices;
    
    require the external auditor and internal auditor to report directly to the
Committee;
    
    provide the external auditor with notice of every meeting of the Committee and, at
the expense of the Corporation, the opportunity to attend and be heard thereat, and if
so requested by a member of the Committee, shall attend every meeting of the Committee
held during the term of the office of the external auditor. The external auditor of the
Corporation or any member of the Committee may call a meeting of the Committee;
 de minimus
 
    
    review the disclosure with respect to its pre-approval of audit and non-audit
services provided by the external auditors;
    
    review and discuss with management and the external auditor, as applicable, (a) all
critical accounting policies and practices to be used in the annual audit, (b) major
issues regarding accounting principles and financial statement presentations, including
any significant changes in the Trusts or the Corporations selection or application of
accounting principles, and major issues as to the adequacy of the Trusts or the
Corporations respective internal controls and any special audit steps adopted in light
of material control deficiencies; (c) analyses prepared by management or the external
auditor setting forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including analyses of the
effects of
 59




---



##### 



alternative Canadian Generally Accepted Accounting Principles (GAAP) methods on
the financial statements of the Trust and any other opinions sought by management
from an independent or other audit firm or advisor with respect to the accounting
treatment of a particular item; (d) any management letter or schedule of unadjusted
differences provided by the external auditor and the Trusts response to that letter
and other material written communication between the external auditor and
management; (e) any problems, difficulties or differences encountered in the course
of the audit work including any disagreements with management or restrictions on the
scope of the external auditors activities or on access to requested information and
managements response thereto; (f) the effect of regulatory and accounting
initiatives, as well as any off balance sheet structures on the financial statements
of the Trust and other financial disclosures; (h) any reserves, accruals, provisions
or estimates that may have a significant effect upon the financial statements of the
Trust; (i) the use of special purpose entities and the business purpose and economic
effect of off balance sheet transactions, arrangements, obligations, guarantees and
other relationships of the Trust or the Corporation and their impact on the reported
financial results of the Trust; and (j) the use of any pro forma or adjusted
information not in accordance with generally accepted accounting principles;
    
    reviewing earnings press releases (paying particular attention to any use of pro
forma or adjusted non-GAAP information) as well as financial information and
earnings guidance provided to analysts and rating agencies, it being understood that
such review may in the discretion of the Committee, be done generally (i.e., by
discussing the types of information to be disclosed and the type of presentation to be
made);
    
    review with the external auditor and management the general audit approach and scope
of proposed audits of the financial statements of the Trust, the objectives, staffing,
locations, co-ordination and reliance upon management in the audit, the overall audit
plans, the audit procedures to be used and the timing and estimated budgets of the
audits;
    
    review any legal matter, claim or contingency that could have a significant impact
on the financial statements of the Trust, the Corporations or the Trusts compliance
policies and any material reports, inquiries or other correspondence received from
regulators or governmental agencies and the manner in which any such legal matter,
claim or contingency has been disclosed in the Trusts financial statements;
    
    review the treatment for financial reporting purposes of any significant
transactions which are not a normal part of the Corporations operations;
    
    review the interim review engagement report of the external auditor before the
release of interim financial statements of the Trust;
    
    review and discuss with management the Corporations major financial risk exposures
and the steps management has taken to monitor and control such exposures, including the
Corporations risk assessment and risk management policies such as financial
derivatives and hedging activities;
    
    annually request and review a report from the external auditor regarding (a) the
external auditors quality control procedures, (b) any material issues raised by the
most recent quality control review. Canadian Public Accountability Board or Public
Company Accounting Oversight Board or other available peer review of the external
auditor, or by any inquiry or investigation by governmental or professional authorities
within the preceding five years respecting one or more independent audits carried out
by the firm, and (c) any steps taken to deal with any such issues;
    
    evaluate the qualifications and performance of the external auditor, including a
written review and evaluation of the lead partner of the external auditor, review and
approve hiring policies for partners, employees or former employees of the external
auditor and make recommendations to the Board of Directors as to the appointment or
reappointment of the external auditor to be proposed for approval by the Board of
Trustees and Unitholders;
    
    review the independence of the external auditor, annually request and review a
written report from the external auditor respecting its independence, including a list
of all relationships between the external auditor and each of the Corporation and the
Trust, and consider applicable auditor independence standards;
 60




---



##### 




    
    ensure that the lead audit partner of the external auditor and the audit partner
responsible for reviewing the audit are rotated at least every five years as required
by the Sarbanes-Oxley Act of 2002, and further consider rotation of the external
auditors firm itself;
    
    discuss with management and the external auditors any accounting adjustments that
were noted or proposed by the internal or external auditors but were not adopted (as
immaterial or otherwise);
    
    review the adequacy and effectiveness of the Corporations and the Trusts internal
accounting and financial controls based on recommendations from management and the
external auditor for the improvement of accounting practices and internal controls;
    
    establish and periodically review procedures for (a) the receipt, retention and
treatment of complaints received by the Corporation or the Trust regarding accounting,
internal controls or auditing matters, and (b) the confidential, anonymous submission
by employees of the Corporation of concerns regarding questionable accounting or
auditing matters or other matters that could negatively affect the Corporation or the
Trust such as violations of the Joint Code of Business Conduct and Ethics;
    
    review periodically with management and the external auditors any significant
complaints received;
    
    review other financial information included in the Trusts Annual Report to ensure
that it is consistent with the Board of Directors knowledge of the affairs of the
Corporation and the Trust and is unbiased and non-selective;
    
    if requested by the Board of Directors, receive from the Chief Executive Officer and
Chief Financial Officer of the Corporation a certificate certifying in respect of each
annual and interim report of the Trust the matters such officers are required to
certify in connection with the filing of such reports under applicable securities laws
and receive and review disclosures made by such officers about any significant
deficiencies in the design or operation of internal controls or material weaknesses
therein and any fraud involving management or persons who have a significant role in
the Corporations internal controls;
    
    prepare any report required by law, regulations or stock exchange requirement to be
included in the Trusts periodic reports;
    
    meet at least four times a year on a quarterly basis or more frequently as
circumstances require, with the Chief Financial Officer of the Corporation, the head of
the internal audit function of the Corporation, if other than the Chief Financial
Officer, and the external auditor in separate executive sessions to discuss any matters
that the Committee or each of these groups believes should be discussed privately;
    
    meet in separate, non-management, in camera sessions at each regularly scheduled
meeting;
    
    meet in separate, non-management, closed sessions with any other internal personnel
or outside advisors, as necessary or appropriate;
    
    review annually the Corporations insurance programs and pension plans, not
including the Directors and Officers insurance program;
    
    review the results of the annual external audit, including the audit report to the
Trusts Unitholders and any other reports prepared by the external auditors and the
informal reporting from the external auditor on accounting systems and internal
controls, including managements response;
    
    review and evaluate the scope, risk assessment, and nature of the internal audit
plan and any subsequent changes;
    
    consider and review the following issues with management and the head of the
internal audit group:
 
    
    significant findings of the internal audit group as well as managements
response to them;
    
    any difficulties encountered in the course of their internal audits,
including any restrictions on the scope of their work or access to required
information;
 61




---



##### 




    
    the internal auditing budget and staffing;
    
    the internal Audit Services Charter; and
    
    compliance with The Institute of Internal Auditors Standards for the
Professional Practice of Internal Auditing;
 
    
    approve the appointment, replacement or dismissal of the head of the internal audit
group; and
    
    direct the head of the internal audit group to review any specific areas the
Committee deems necessary; and
    
    ensure that the obligations of the Corporation pursuant to the Administration
Agreement are met and that good corporate governance procedures are used in connection
therewith.
   Limitation of Committees Role
     62