PRECISION DRILLING CORPORATION
 ANNUAL INFORMATION FORM
 For the fiscal year ended December 31, 2010




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TABLE OF CONTENTS
 CORPORATE STRUCTURE
    
    
    1The Corporation
    
    
    1INTERCORPORATE RELATIONSHIPS
    
    
    1organizational structure of the corporation
    
    
    1GENERAL
DEVELOPMENT OF THE BUSINESS
    
    
    2recent developments
    
    
    2three-year history
    
    
    2DESCRIPTION OF THE BUSINESS OF PRECISION
    
    
    6general
    
    
    6contract drilling services segment
    
    
    6completion and production services segment
    
    
    10supplemental operational information
    
    
    12RECORD OF CASH PAYMENTS
    
    
    13DESCRIPTION OF CAPITAL STRUCTURE
    
    
    14description of common shares
    
    
    14description of preferred shares
    
    
    15material debt
    
    
    16MARKET FOR SECURITIES
    
    
    20DIRECTORS AND EXECUTIVE OFFICERS
    
    
    20board of directors
    
    
    20CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS
    
    
    23AUDIT COMMITTEE INFORMATION
    
    
    24LEGAL PROCEEDINGS AND REGULATORY ACTIONS
    
    
    26INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
    
    
    26TRANSFER AGENT AND REGISTRAR
    
    
    26MATERIAL CONTRACTS
    
    
    26INTERESTS OF EXPERTS
    
    
    26EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
    
    
    27INTERNAL CONTROL OVER FINANCIAL REPORTING
    
    
    27TRANSITION TO INTERNATIONAL FINANCING REPORTING STANDARDS
    
    
    27MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    28ADDITIONAL INFORMATION
    
    
    28RISK FACTORS
    
    
    28CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND
STATEMENTS
    
    
    37APPENDIX 1 AUDIT COMMITTEE CHARTER AND TERMS OF REFERENCE
    
    
    39




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CORPORATE STRUCTURE
 THE CORPORATION
 Precision Corporation Business Corporations Act Arrangement Trust TSX NYSE
 www.precisiondrilling.com
   INTERCORPORATE RELATIONSHIPS
 ORGANIZATIONAL STRUCTURE OF THE CORPORATION




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Percentage of voting securities
    
    
    Jurisdiction of Incorporation,Name of Subsidiary or Partnership
    
    
    (directly or indirectly)
    
    
    Continuance or Formation (as applicable)Precision Limited Partnership
    
    
    100% (Directly and Indirectly)
    
    
    AlbertaPrecision Drilling Canada Limited Partnership
    
    
    100% (Directly and Indirectly)
    
    
    AlbertaPrecision Diversified Oilfield Services Corp.
    
    
    100% (Directly)
    
    
    AlbertaPrecision Drilling Oilfield Services Corporation
    
    
    100% (Directly)
    
    
    TexasPrecision Drilling Holdings Company
    
    
    100% (Indirectly)
    
    
    NevadaPrecision Drilling Company, LP
    
    
    100% (Indirectly)
    
    
    Texas
 GENERAL DEVELOPMENT OF THE BUSINESS
  RECENT DEVELOPMENTS
 2011 Senior Note Offering. 2011 Note Offering 6.50% Senior Notes
 Repayment of the 10% Senior Note. 10% Senior Note
 International Expansion.
 Transition to International Financial Reporting Standards. IFRS
 Tax Reassessment
 THREE-YEAR HISTORY
  - 2 -




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2010
 2010 Senior Note Offering. 2010 Note Offering 6.625% Senior Notes
 New Credit Facility. 2010 Revolving Credit Facility
 The Arrangement. Trust Unitholders Exchangeable LP Unitholders Unitholders PDLP Common Share Trust Unit Exchangeable LP Unit Board of
Directors
 New Rig Builds.
 Commodity Prices.
 Increased Drilling Activity.
 Customers.
 Utilization.
 - 3 -




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As at December 31, 2010
    
    
    As at December 31, 2009Industry(1)
    
    
    Precision(2)
    
    
    Industry(1)
    
    
    Precision(2)Canada
    
    
    245
    
    
    
    96
    
    
    
    329
    
    
    
    72United States
    
    
    1,670
    
    
    
    98
    
    
    
    1,150
    
    
    
    76Total
    
    
    1,915
    
    
    
    194
    
    
    
    1,479
    
    
    
    148
 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; excludes rigs on standby in the United States and two active drilling rigs in Mexico.
   Directional Drilling.
 Turnkey Drilling.
 2009
 Integration of Grey Wolf. Grey
Wolf Acquisition
 Rig Decommissioning.
 - 4 -




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Directional Drilling.
 Refinancing Activities.
 
    
    An offering of 46 million Trust Units was completed on February 18, 2009
which provided gross proceeds of US$172.5 million. 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 the 10% Senior Note. The purchaser of the Trust Units, Warrants
and the 10% Senior Note was the Private Placement Investor. The proceeds from the
issuance of the Trust Units, Warrants and the 10% Senior Note were used to reduce the
obligations of Precision under the Unsecured Facility. See Description of Capital
Structure  Material Debt.
    
    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 Repayment.
  Other Events. Precision Drilling Rostel Industries Columbia Oilfield Supply
  2008
 Grey Wolf Acquisition. Merger Agreement Lobos Texas
Business Corporations Act Texas Corporation Law
 - 5 -




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www.sedar.com www.sec.gov
 Organic Growth.
 Other Acquisitions.
 Other Events. Precision Well
Servicing Live Well
Service Precision Rentals LRG Catering
  DESCRIPTION OF THE BUSINESS OF PRECISION
 GENERAL
   Years ended December 31,Stated in thousands of Canadian dollars
    
    2010
    
    2009
    
    2008Contract Drilling Services
    
    $1,212,656
    
    $1,030,852
    
    $809,317Completion and Production Services
    
    227,835
    
    176,422
    
    308,624Inter-segment Eliminations
    
    (10,838)
    
    (9,828)
    
    (16,050)Total Revenue
    
    $1,429,653
    
    $1,197,446
    
    $1,101,891
 CONTRACT DRILLING SERVICES SEGMENT
  - 6 -




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
    
    202 land drilling rigs in Canada;
    
    150 land drilling rigs in the United
States;
    
    two land drilling rigs in Mexico;
    
    one land drilling rig in Colombia;
    
    80 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.
    Drilling Contracts.
    - 7 -




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Competition.
 Drilling Fleet Capabilities.
 Tier
    
    
    Canada
    
    
    United States
    
    
    Mexico
    
    
    Colombia
    
    
    Total1
    
    
    66
    
    
    54
    
    
    0
    
    
    0
    
    
    1202
    
    
    65
    
    
    58
    
    
    2
    
    
    1
    
    
    1263
    
    
    71
    
    
    38
    
    
    0
    
    
    0
    
    
    109Total
    
    
    202
    
    
    150
    
    
    2
    
    
    1
    
    
    355
 SCR
    www.precisiondrilling.com
   - 8 -




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Super Single Rigs.
 Grey Wolf International
   LRG Catering
  Rostel Industries
  - 9 -




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Columbia Oilfield Supply and Grey Wolf Supply
   COMPLETION AND PRODUCTION SERVICES SEGMENT
  
    
    200 well completion and workover service rigs in Canada;
    
    20 snubbing units in Canada;
    
    approximately 11,050 oilfield rental items including well control equipment, surface
equipment, specialty tubulars and wellsite accommodation units in Canada and the United
States;
    
    77 wastewater treatment and three potable water production units in Canada; and
    
    one drilling camp and 11 wellsite accommodation units in the United States.
 Precision Well Servicing
   Rig Fleet. www.precisiondrilling.com
 - 10 -




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Type of Service Rig
    
    
    
    
    
    
    
    Horsepower

    
    
    TotalSingle
    
    
    
    Freestanding mobile
    
    
    
    150-400
    
    
    
    
    94Mobile
    
    
    
    250-550
    
    
    
    
    25Double
    
    
    
    Freestanding mobile
    
    
    
    200-550
    
    
    
    
    35Skid
    
    
    
    300-860
    
    
    
    
    28Slant
    
    
    
    Freestanding mobile
    
    
    
    250-400
    
    
    
    
    18Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    200
 Types of Activities.
 Demand and Rates.
 Snubbing Services.
   Precision Rentals
   Terra Water Systems
   - 11 -




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Precision Completion and Production Services
  SUPPLEMENTAL OPERATIONAL INFORMATION
 Health, Safety and Environment
      Employees
  - 12 -




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RECORD OF CASH PAYMENTS
    Amount per TrustDistribution Type
    
    
    Record Date

    
    
    Payment Date

    
    
    Unit2008Regular Distribution
    
    
    January 31, 2008
    
    
    February 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    February 29, 2008
    
    
    March 18, 2008
    
    
    $
    0.130Regular Distribution
    
    
    March 31, 2008
    
    
    April 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    April 30, 2008
    
    
    May 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    May 30, 2008
    
    
    June 17, 2008
    
    
    $
    0.130Regular Distribution
    
    
    June 30, 2008
    
    
    July 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    July 31, 2008
    
    
    August 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    August 29, 2008
    
    
    September 16, 2008
    
    
    $
    0.130Regular Distribution
    
    
    September 30, 2008
    
    
    October 15, 2008
    
    
    $
    0.130Regular Distribution
    
    
    October 31, 2008
    
    
    November 18, 2008
    
    
    $
    0.130Regular Distribution
    
    
    November 28, 2008
    
    
    December 16, 2008
    
    
    $
    0.130Regular Distribution
    
    
    December 31, 2008
    
    
    January 15, 2009
    
    
    $
    0.130Special Year-end in-kind Distribution(1)
    
    
    December 31, 2008
    
    
    January 15, 2009
    
    
    $
    0.1502009Regular Distribution
    
    
    January 30, 2009
    
    
    February 17, 2009
    
    
    $
    0.040
 
 Note:(1)
    
    The special year-end distribution was settled
in-kind through the issuance of Trust Units rather than the payment of cash in order for the Trust 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.  Amount perExchangeable LPPayment Type
    
    
    Record Date

    
    
    Payment Date

    
    
    Unit2008Regular 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
    
    
    $
    0.130
 - 13 -




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Amount perExchangeable LPPayment Type
    
    
    Record Date
    
    
    Payment Date
    
    
    UnitRegular 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 payment was settled in-kind through  the issuance of Trust Units rather than cash in order for the Trust 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 LP Unitholders received the economic equivalent treatment.  DESCRIPTION OF CAPITAL STRUCTURE
 DESCRIPTION OF COMMON SHARES
  Shareholders
  Issuance of Common Shares
  Purchase of Common Shares
  - 14 -




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Cash Dividends on Common Shares
    Warrants
  Shareholder Rights Plan
 Shareholder Rights Plan Right
 Meetings of Shareholders
     DESCRIPTION OF PREFERRED SHARES
 Preferred Shares
 - 15 -




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MATERIAL DEBT
 Secured Facility Unsecured Facility
    Registration Rights Agreement 6.625% Note Indenture 6.50% Note Indenture www.sedar.com www.sec.gov
 2010 Revolving Credit Facility
 Overview.
 - 16 -




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Material Subsidiaries
 Amount and Term.
 Letters of Credit.
 Interest Rates and Fees. Margin Ratio
  Repayment.
 Guarantees and Security.
  Certain Covenants and Events of Default.
   - 17 -




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6.625% Senior Notes
 United States Securities Act
    6.50% Senior Notes
    - 18 -




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General
  Credit Ratings
   Moodys Investors Service
    
    Standard & Poors Ratings(Moodys)
    
    Services (S&P)Corporate Family Rating
    
    Ba1
    
    BB+Senior Secured Bank Credit Facility Rating
    
    Ba1
    
    Not ratedSenior Unsecured Credit Rating (6.625% Senior
    
    Ba2
    
    BB+Notes and 6.5% Senior Notes)
    The credit ratings assigned by the rating agencies are not recommendations to purchase, hold
or sell the debt nor do the ratings comment on market price or suitability for a particular
investor. There is no assurance that any rating will remain in effect for any given period or that
any rating will not be revised or withdrawn entirely by a rating agency in the future if, in its
judgment, circumstances so warrant. Each agencys rating should be evaluated independently of any
other agencys rating.
 - 19 -




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MARKET FOR SECURITIES
 Trading Price and Volume of Common Shares
  TSX
    
    
    NYSEPeriod
    
    High
    
    
    Low
    
    
    Volume
    
    
    High
    
    
    Low
    
    
    Volume($)
    
    
    ($)
    
    
    
    
    
    
    (US$)
    
    
    (US$)2010January
    
    
    9.73
    
    
    
    7.65
    
    
    
    26,960,807
    
    
    
    9.34
    
    
    
    7.32
    
    
    
    41,879,295February
    
    
    9.00
    
    
    
    8.02
    
    
    
    15,656,093
    
    
    
    8.51
    
    
    
    7.51
    
    
    
    28,774,296March
    
    
    8.94
    
    
    
    7.34
    
    
    
    25,209,477
    
    
    
    8.72
    
    
    
    7.16
    
    
    
    31,984,881April
    
    
    8.28
    
    
    
    7.29
    
    
    
    21,445,215
    
    
    
    8.26
    
    
    
    7.15
    
    
    
    39,541,615May
    
    
    7.74
    
    
    
    5.99
    
    
    
    29,075,215
    
    
    
    7.66
    
    
    
    5.54
    
    
    
    35,904,259June
    
    
    8.03
    
    
    
    7.02
    
    
    
    28,590,819
    
    
    
    7.92
    
    
    
    6.60
    
    
    
    34,016,960July
    
    
    8.00
    
    
    
    6.73
    
    
    
    12,643,486
    
    
    
    7.68
    
    
    
    6.31
    
    
    
    21,551,830August
    
    
    7.83
    
    
    
    6.46
    
    
    
    6,261,482
    
    
    
    7.86
    
    
    
    6.07
    
    
    
    13,547,137September
    
    
    7.11
    
    
    
    6.22
    
    
    
    10,817,134
    
    
    
    6.91
    
    
    
    6.02
    
    
    
    16,322,202October
    
    
    8.09
    
    
    
    7.04
    
    
    
    12,633,800
    
    
    
    7.95
    
    
    
    6.88
    
    
    
    18,225,341November
    
    
    8.91
    
    
    
    7.62
    
    
    
    22,653,665
    
    
    
    8.69
    
    
    
    7.61
    
    
    
    19,494,787December
    
    
    9.95
    
    
    
    8.83
    
    
    
    15,534,581
    
    
    
    9.89
    
    
    
    8.67
    
    
    
    16,537,763
 DIRECTORS AND EXECUTIVE OFFICERS
 BOARD OF DIRECTORS
     Directors of the Corporation
 William T. Donovan (2)(4)
 - 20 -




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W.C. (Mickey) Dunn (3)(4)(5)
 Brian A. Felesky (4)(6)
 Robert J.S. Gibson (2)(4)
 Allen R. Hagerman (2)
 Stephen J.J. Letwin (3)(5)
 Patrick M. Murray (2)
 - 21 -




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Kevin A. Neveu
 Frederick W. Pheasey (3)
 Robert L. Phillips (2)(3)(4)
 Trevor M. Turbidy (3)(4)
 Executive Officers of the Corporation
 Kevin A. Neveu
 Joanne L. Alexander
 - 22 -




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Kenneth J. Haddad
 Robert J. McNally
 Darren J. Ruhr
 Gene C. Stahl
 Douglas J. Strong
 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.(2)
    
    Member of the Audit Committee.(3)
    
    Member of the Compensation Committee.(4)
    
    Member of the Corporate Governance and Nominating Committee.(5)
    
    Mr. Dunn will not be standing for re-election as a Director at
the next annual meeting.(6)
    
    Mr. Felesky resigned as Director
effective February 14, 2011.
  CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS
 Corporate Cease Trade Orders
  Corporate Bankruptcies
  Trico
 - 23 -




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358427
 IUSI Companies Creditors Arrangement Act CCAA
 GDL GDLP Bankruptcy and Insolvency Act
 Rancher
 Personal Bankruptcies
  Penalties or Sanctions
  AUDIT COMMITTEE INFORMATION
 Audit Committee Charter
 Audit
Committee Charter
 Composition of the Audit Committee
 Audit Committees Sarbanes-Oxley Act of 2002
 - 24 -




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Relevant Education and Experience
  Pre-approval Policies and Procedures
    Audit Fees
  Years ended December 31,Stated in thousands of Canadian dollars
    
    
    2010
    
    
    

    2009Audit fees
    
    
    $
    2,038
    
    
    
    $
    2,308Audit-related fees
    
    
    
    -
    
    
    
    
    -Tax fees
    
    
    
    528
    
    
    
    
    515All other fees
    
    
    
    178
    
    
    
    
    181Total
    
    
    $
    2,744
    
    
    
    $
    3,004
  - 25 -




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LEGAL PROCEEDINGS AND REGULATORY ACTIONS
  INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
  TRANSFER AGENT AND REGISTRAR
  MATERIAL CONTRACTS
  The Arrangement Agreement
 Business Corporations Act
 The 2010 Revolving Credit Facility, the 6.625% Note Indenture and Registration Rights Agreement and
the 6.50% Note Indenture
  Shareholder Rights Plan Agreement
  www.sedar.com www.sec.gov
 INTERESTS OF EXPERTS
  - 26 -




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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
 Securities Exchange Act of 1934 Exchange Act
  INTERNAL CONTROL OVER FINANCIAL REPORTING
 Canadian GAAP United States GAAP
    TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS
 IFRS
    - 27 -




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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  ADDITIONAL INFORMATION
 www.sedar.com www.precisiondrilling.com
  RISK FACTORS
  Precisions operations are dependent on the price of oil and natural gas.
   - 28 -




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The intense price competition and cyclical nature of the contract drilling industry could have an
adverse effect on revenue and profitability.
    Any difficulty Precision experiences retaining, replacing or adding personnel could adversely
affect Precisions business.
    - 29 -




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Poor safety performance could lead to a decline in the demand for Precisions services.
  Unexpected cost overruns on turnkey drilling jobs could adversely affect Precisions revenues.
  Business in Precisions industry is seasonal and highly variable.
  Precision is subject to various environmental, health and safety laws, rules, legislation and
guidelines which can impose material liability or greater costs on Precisions business or lead to
a decline in the demand for Precisions services.
   - 30 -




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There are certain risks associated with Precisions dependence on third-party suppliers.
  New technology could place Precision at a disadvantage versus competitors.
  Business acquisitions entail numerous risks and may disrupt Precisions business or distract
management attention from operating Precisions business.
   - 31 -




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Precisions operations face many risks of interruption and casualty losses.
  Precisions business is affected by governmental regulations and policies.
  Precision could face negative tax consequences for previous transactions.
  Precision will require sufficient cash flows to service and repay its indebtedness.
  - 32 -




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##### 



The 2010 Revolving Credit Facility contains restrictive covenants.
  A successful challenge by the tax authorities of the expenses deducted by Precision or its
subsidiaries could negatively affect the value of the Common Shares.
  Precision has retained liabilities as a consequence of prior reorganizations.
  There are risks associated with increased capital expenditures.
  The results of Precisions assessment of goodwill and/or capital assets for impairment may result
in a non-cash charge against Precisions consolidated net income.
   - 33 -




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Precisions 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 and Mexico 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 and Mexico 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 shareholders equity. As a result,
changes in the Canadian to United States dollar exchange rates could materially increase or
decrease Precisions United States dollar denominated net assets on consolidation which would
increase or decrease, as applicable, shareholders 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 and Mexico 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 and Mexico 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 and Mexico operations will be
negatively impacted.
    
    Transaction Exposure.Precision has long-term debt denominated in United States dollars.
Precision has designated its United States dollar denominated unsecured senior notes as a
hedge against the net asset position of its self-sustaining United States operations. 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 comprehensive income. If the Canadian dollar
strengthens versus the United States dollar, Precision will incur a foreign exchange gain from
the translation of this debt. The vast majority of Precisions United States and Mexico
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
Precisions Canadian operations financial results.
 Precision may be unable to obtain access to additional financing.
  Conditions in the credit markets in the future may adversely affect business.
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Sales of additional Common Shares could negatively affect the value of the Common Shares.
  The price of Common Shares may experience volatility.
  Asset valuation variability could negatively affect the value of the Common Shares.
  Precision will be required to adopt International Financial Reporting Standards.
  Precision 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.
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Precision may become a passive foreign investment company (PFIC), which could result in adverse
United States tax consequences to United States investors.
  If an investor acquires 10% or more of the Common Shares it may be subject to taxation under the
CFC rules.
 CFC
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
 forward-looking information and statements
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www.sedar.com www.sec.gov
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APPENDIX 1
AUDIT COMMITTEE
CHARTER AND TERMS OF REFERENCE
 General
   Business
Corporations Act Securities Act Securities Exchange Act of 1934
 Committee Structure and Authority
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Purpose
  
    
    the integrity of financial reporting to the holders of shares of the Corporation
(Shareholders) and the investment community;
    
    the integrity of the financial reporting process, including the audit process;
    
    the Corporation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 financial management, internal audit function
and its external auditor; and
    
    any other matter specifically delegated to the Committee by the Board of Directors.
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Committee Responsibilities
  
    
    review the interim and annual earnings releases, financial statements of the Corporation and
related notes and managements discussion and analysis (MD&A) and make recommendations to
the Board of Directors, for their approval;
    
    be satisfied that adequate procedures are in place for the review of the Corporations public
disclosure of financial information extracted or derived from the Corporations financial
statements, other than the public disclosure referred to above, and 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;
    
    oversee 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, including
the resolution of disagreements between management and the 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, require the external auditor to 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;
    
    pre-approve all permitted non-audit services to the Corporation or any affiliated entities by
the external auditor or any of their affiliates subject to any de minimus exception allowed by
applicable law. The Committee may delegate to one or more designated members of the Committee
the authority to pre-approve non-audit services, however any non-audit services that have been
pre-approved by any such delegate of the Committee must be presented to the Committee at its
first scheduled meeting following such pre-approval;
    
    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 Corporations selection or application of accounting principles, and major issues as to
the adequacy of the Corporations 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
alternative Generally Accepted Accounting Principles (GAAP) methods on the financial
statements of the Corporation 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 Corporation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
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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 Corporation and other financial disclosures; (h) any reserves, accruals, provisions or
estimates that may have a significant effect upon the financial statements of the Corporation;
(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
Corporation and their impact on the reported financial results of the Corporation; and (j) the
use of any pro forma or adjusted information not in accordance with generally accepted
accounting principles;
    
    review 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 Corporation, 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 for the audits;
    
    review any legal matter, claim or contingency that could have a significant impact on the
financial statements of the Corporation, the Corporation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 Corporation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 Corporation;
    
    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 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 Shareholders;
    
    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 the Corporation, and consider applicable auditor independence
standards;
    
    ensure that the lead audit partner of the external auditor and the audit partner responsible
for reviewing the audit are rotated periodically 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 internal accounting and financial
controls based on recommendations from management and the external auditor for the improvement
of accounting practices and internal controls;
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
    
    establish and periodically review procedures for (a) the receipt, retention and treatment of
complaints received by the Corporation 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 such as violations of the Joint Code of Business Conduct and
Ethics;
    
    review periodically with management and with the internal and external auditors any
significant complaints received;
    
    review other financial information included in the Corporations Annual Report to ensure that
it is consistent with the Board of Directors knowledge of the affairs of the Corporation 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 Corporation 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;
    
    cause to be prepared any report required by law, regulations or stock exchange requirement to
be included in the Corporation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
Corporations Shareholders and any other reports prepared by the external auditors and the
informal reporting from the external auditor on accounting systems and internal controls,
including managements response;
    
    review and evaluate the scope, risk assessment, and nature of the internal audit plan and any
subsequent changes;
    
    consider and review the following issues with management and the head of the internal audit
group:
 
    
    significant findings of the internal audit group as well as managements response to them;
    
    any difficulties encountered in the course of their internal audits, including any
restrictions on the scope of their work or access to required information;
    
    the internal auditing budget and staffing;
    
    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.
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Limitation of Committees Role
     - 44 -