EX-99.2 5 ex99_2.htm CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 2009

Exhibit 99.2

Precision Drilling Trust |  |  |  |  |  |  |
CONSOLIDATED BALANCE SHEETS (UNAUDITED) |  |  |  |  |  |  |
|  |  | June 30, |  |  | December 31, |
(Stated in thousands of Canadian dollars) |  |  | 2009 |  |  | 2008 |
ASSETS |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |
Cash and cash equivalents |  |  | $ | 179,979 |  |  | $ | 61,511 |
Accounts receivable |  |  |  | 213,281 |  |  |  | 601,753 |
Income tax recoverable |  |  |  | 11,863 |  |  |  | 13,313 |
Inventory |  |  |  | 8,924 |  |  |  | 8,652 |
|  |  |  | 414,047 |  |  |  | 685,229 |
Income tax recoverable | (note 4) |  |  | 58,055 |  |  |  | 58,055 |
Property, plant and equipment, net of accumulated depreciation |  |  |  | 3,231,628 |  |  |  | 3,243,213 |
Intangibles |  |  |  | 4,421 |  |  |  | 5,676 |
Goodwill |  |  | 813,279 |  |  |  | 841,529 |
|  |  | $ | 4,521,430 |  |  | $ | 4,833,702 |
LIABILITIES AND UNITHOLDERS' EQUITY |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |
Accounts payable and accrued liabilities |  |  | $ | 122,887 |  |  | $ | 270,122 |
Distributions payable |  |  |  | - |  |  |  | 20,825 |
Current portion of long-term debt | (note 5) |  |  | 37,497 |  |  |  | 48,953 |
|  |  |  | 160,384 |  |  |  | 339,900 |
Long-term liabilities |  |  |  | 24,836 |  |  |  | 30,951 |
Long-term debt | (note 5) |  |  | 868,933 |  |  |  | 1,368,349 |
Future income taxes |  |  |  | 729,196 |  |  |  | 770,623 |
|  |  |  | 1,783,349 |  |  |  | 2,509,823 |
Contingencies | (note 9) |  |  |  |  |  |  |  |
Unitholders’ equity: |  |  |  |  |  |  |  |  |
Unitholders’ capital | (note 3) |  |  | 2,771,159 |  |  |  | 2,355,590 |
Contributed surplus |  |  |  | 2,023 |  |  |  | 998 |
Retained earnings (deficit) |  |  |  | 60,416 |  |  |  | (48,068 | )
Accumulated other comprehensive income | (note 6) |  |  | (95,517 | ) |  |  | 15,359 |
|  |  |  | 2,738,081 |  |  |  | 2,323,879 |
|  |  | $ | 4,521,430 |  |  | $ | 4,833,702 |
See accompanying notes to consolidated financial statements |  |  |  |  |  |  |  |  |

20 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Precision Drilling Trust
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (DEFICIT) (UNAUDITED)

|  |  | Three months ended June 30, |  |  | Six months ended June 30, |
(Stated in thousands of Canadian dollars, except per unit amounts) |  | 2009 |  |  | 2008 |  |  | 2009 |  |  | 2008 |
Revenue |  |  | $ | 209,597 |  |  | $ | 138,514 |  |  | $ | 658,042 |  |  | $ | 481,203 |
Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating |  |  |  | 125,591 |  |  |  | 85,795 |  |  |  | 379,352 |  |  |  | 261,985 |
General and administrative |  |  |  | 24,746 |  |  |  | 17,145 |  |  |  | 50,043 |  |  |  | 36,297 |
Depreciation and amortization |  |  |  | 28,222 |  |  |  | 13,394 |  |  |  | 72,171 |  |  |  | 37,761 |
Foreign exchange |  |  |  | (74,060 | ) |  |  | 133 |  |  |  | (41,569 | ) |  |  | (1,125 | )
Finance charges | (note 8) |  |  | 44,881 |  |  |  | 2,087 |  |  |  | 83,551 |  |  |  | 4,283 |
Earnings before income taxes |  |  |  | 60,217 |  |  |  | 19,960 |  |  |  | 114,494 |  |  |  | 142,002 |
Income taxes: | (note 4) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  |  | (497 | ) |  |  | 2,045 |  |  |  | 8,164 |  |  |  | 4,697 |
Future (reduction) |  |  |  | 3,239 |  |  |  | (3,824 | ) |  |  | (8,562 | ) |  |  | 9,300 |
|  |  |  | 2,742 |  |  |  | (1,779 | ) |  |  | (398 | ) |  |  | 13,997 |
Net earnings |  |  |  | 57,475 |  |  |  | 21,739 |  |  |  | 114,892 |  |  |  | 128,005 |
Retained earnings (deficit), beginning of period |  |  | 2,941 |  |  |  | (68,890 | ) |  |  | (48,068 | ) |  |  | (126,110 | )
Distributions declared |  |  |  | - |  |  |  | (49,045 | ) |  |  | (6,408 | ) |  |  | (98,091 | )
Retained earnings (deficit), end of period |  |  | $ | 60,416 |  |  | $ | (96,196 | ) |  | $ | 60,416 |  |  | $ | (96,196 | )
Earnings per unit: | (note 10) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | $ | 0.23 |  |  | $ | 0.16 |  |  | $ | 0.51 |  |  | $ | 0.95 |
Diluted |  |  | $ | 0.22 |  |  | $ | 0.16 |  |  | $ | 0.50 |  |  | $ | 0.95 |

See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

|  | Three months ended June 30, |  |  | Six months ended June 30, |
(Stated in thousands of Canadian dollars) |  | 2009 |  |  | 2008 |  |  | 2009 |  |  | 2008 |
Net earnings |  | $ | 57,475 |  |  | $ | 21,739 |  |  | $ | 114,892 |  |  | $ | 128,005 |
Unrealized loss recorded on translation of assets and liabilities of self-sustaining operations denominated in foreign currency |  |  | (163,709 | ) |  |  | - |  |  |  | (110,876 | ) |  |  | - |
Comprehensive income (loss) |  | $ | (106,234 | ) |  | $ | 21,739 |  |  | $ | 4,016 |  |  | $ | 128,005 |

P R E C I S I O N D R I L L I N G T R U S T 21

Precision Drilling Trust |  |  |  |  |  |  |  |  |  |  |  |  |
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) |  |  |  |  |  |  |
|  |  | Three months ended June 30, |  |  | Six months ended June 30, |
(Stated in thousands of Canadian dollars) |  |  | 2009 |  |  | 2008 |  |  | 2009 |  |  | 2008 |
Cash provided by (used in): |  |  |  |  |  |  |  |  |  |  |  |  |
Operations: |  |  |  |  |  |  |  |  |  |  |  |  |
Net earnings |  |  | $ | 57,475 |  |  | $ | 21,739 |  |  | $ | 114,892 |  |  | $ | 128,005 |
Adjustments and other items not involving cash: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term compensation plans |  |  |  | 652 |  |  |  | 2,166 |  |  |  | (1,872 | ) |  |  | 1,697 |
Depreciation and amortization |  |  |  | 28,222 |  |  |  | 13,394 |  |  |  | 72,171 |  |  |  | 37,761 |
Future income taxes |  |  |  | 3,239 |  |  |  | (3,824 | ) |  |  | (8,562 | ) |  |  | 9,300 |
Amortization of debt issue costs |  |  |  | 16,782 |  |  |  | - |  |  |  | 23,063 |  |  |  | - |
Foreign exchange on long-term monetary items |  |  | (85,680 | ) |  |  | 5 |  |  |  | (50,998 | ) |  |  | (17 | )
Changes in non-cash working capital balances |  |  | 191,864 |  |  |  | 166,978 |  |  |  | 265,456 |  |  |  | 81,019 |
|  |  |  | 212,554 |  |  |  | 200,458 |  |  |  | 414,150 |  |  |  | 257,765 |
Investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of property, plant and equipment |  |  | (90,323 | ) |  |  | (31,344 | ) |  |  | (165,245 | ) |  |  | (54,812 | )
Proceeds on sale of property, plant and equipment |  |  | 1,887 |  |  |  | 2,143 |  |  |  | 7,829 |  |  |  | 3,446 |
Change in income tax recoverable | (note 4) |  |  | - |  |  |  | 37 |  |  |  | - |  |  |  | (55,148 | )
Changes in non-cash working capital balances |  |  | (9,513 | ) |  |  | 3,975 |  |  |  | (21,888 | ) |  |  | 3,071 |
|  |  |  | (97,949 | ) |  |  | (25,189 | ) |  |  | (179,304 | ) |  |  | (103,443 | )
Financing: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Increase in long-term debt |  |  |  | 267,272 |  |  |  | - |  |  |  | 408,893 |  |  |  | 93,681 |
Repayment of long-term debt |  |  |  | (518,499 | ) |  |  | (108,559 | ) |  |  | (881,038 | ) |  |  | (108,559 | )
Financing costs on long-term debt |  |  |  | (6,201 | ) |  |  | - |  |  |  | (20,954 | ) |  |  | - |
Distributions paid |  |  |  | - |  |  |  | (49,045 | ) |  |  | (27,233 | ) |  |  | (118,212 | )
Issuance of trust units, net of issue costs |  |  | 206,866 |  |  |  | - |  |  |  | 413,756 |  |  |  | - |
Change in non-cash working capital balances |  |  | (1,269 | ) |  |  | - |  |  |  | 431 |  |  |  | - |
Change in bank indebtedness |  |  |  | - |  |  |  | (10,548 | ) |  |  | - |  |  |  | (14,115 | )
|  |  |  | (51,831 | ) |  |  | (168,152 | ) |  |  | (106,145 | ) |  |  | (147,205 | )
Effect of exchange rate changes on cash and cash equivalents |  |  |  | (12,628 | ) |  |  | - |  |  |  | (10,233 | ) |  |  | - |
Increase in cash and cash equivalents |  |  |  | 50,146 |  |  |  | 7,117 |  |  |  | 118,468 |  |  |  | 7,117 |
Cash and cash equivalents, beginning of period |  |  | 129,833 |  |  |  | - |  |  |  | 61,511 |  |  |  | - |
Cash and cash equivalents, end of period |  | $ | 179,979 |  |  | $ | 7,117 |  |  | $ | 179,979 |  |  | $ | 7,117 |
See accompanying notes to consolidated financial statements. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

22 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Precision Drilling Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Tabular amounts are stated in thousands of Canadian dollars except unit numbers)
NOTE 1. BASIS OF PRESENTATION
These interim financial statements for Precision Drilling Trust (the “Trust”) were prepared using accounting policies and methods of their application consistent with those used in the preparation of the Trust's consolidated audited financial statements for the year ended December 31, 2008 except as noted below. These interim financial statements conform in all material respects to the requirements of generally accepted accounting principles in Canada for annual financial statements with the exception of certain note disclosures. As a result, these interim financial statements should be read in conjunction with the Trust's consolidated audited financial statements for the year ended December 31, 2008.
Effective January 1, 2009 the Trust adopted new Canadian accounting standards relating to goodwill and intangible assets (Section 3064). This new section establishes standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets. The new section did not have an impact on the consolidated financial statements.
Precision has a combination of equity based incentive compensation plans outstanding, some of which are settled in trust units and others that are settled in cash. Compensation cost associated with equity settled plans is recorded at fair value and expensed over the instruments vesting period. Under Precision's option plan the fair value of the option grant is calculated at the date of grant using the Black-Scholes option pricing model and that value is recorded as compensation expense over the grant's vesting period with an offsetting credit to contributed surplus. Forfeitures are estimated on the date of grant. Under the non-management director trust unit plan the fair value is based on the trading price of a Precision unit on the date of grant. Compensation cost associated with cash settled compensation plans is recorded at intrinsic value over the instruments vesting period. Intrinsic value is determined by the unit price at the period end applied to the units that have vested under the plan. The associated liability is included in accounts payable or long-term liabilities as appropriate.
NOTE 2. SEASONALITY OF OPERATIONS
The Trust has operations that are carried on in Canada which represent approximately 37% (2008 - 88%) of consolidated total assets as at June 30, 2009 and 43% (2008 - 87%) of consolidated revenue for the six months ended June 30, 2009. The ability to move heavy equipment in Canadian oil and natural gas fields is dependent on weather conditions. As warm weather returns in the spring, the winter's frost comes out of the ground rendering many secondary roads incapable of supporting the weight of heavy equipment until they have thoroughly dried out. The duration of this "spring break-up" has a direct impact on the Trust's activity levels. In addition, many exploration and production areas in northern Canada are accessible only in winter months when the ground is frozen hard enough to support equipment. The timing of freeze up and spring break-up affects the ability to move equipment in and out of these areas. As a result, late March through May is traditionally the Trust’s slowest time.
NOTE 3. UNITHOLDERS’ CAPITAL

(a) | Authorized | - unlimited number of voting Trust units - unlimited number of voting exchangeable LP units

(b) | Units issued: |

Trust units |  | Number |  |  | Amount |
Balance, December 31, 2008 |  |  | 160,042,065 |  |  | $ | 2,353,843 |
Issued on retraction of exchangeable LP units |  |  | 32,021 |  |  |  | 369 |
Issued February 18, 2009 |  |  | 46,000,000 |  |  |  | 217,281 |
Issued pursuant to private placement |  |  | 35,000,000 |  |  |  | 70,181 |
Issued upon the exercise of rights on June 4, 2009 |  |  | 34,441,950 |  |  |  | 103,326 |
Unit issue costs, net of related tax effect of $1.8 million |  |  | - |  |  |  | (10,038 | )
|  |  | 275,516,036 |  |  | $ | 2,734,962 |
Warrants issued pursuant to private placement |  |  | - |  |  |  | 34,819 |
Balance, June 30, 2009 |  |  | 275,516,036 |  |  | $ | 2,769,781 |

P R E C I S I O N D R I L L I N G T R U S T 23

Exchangeable LP units |  | Number |  |  | Amount |
Balance, December 31, 2008 |  |  | 151,583 |  |  | $ | 1,747 |
Redeemed on retraction of exchangeable LP units |  |  | (32,021 | ) |  |  | (369 | )
Balance, June 30, 2009 |  |  | 119,562 |  |  | $ | 1,378 |

Summary |  | Number |  |  | Amount |
Trust units |  |  | 275,516,036 |  |  | $ | 2,769,781 |
Exchangeable LP units |  |  | 119,562 |  |  |  | 1,378 |
Unitholders’capital |  |  | 275,635,598 |  |  | $ | 2,771,159 |

(c) Warrants:
On April 22, 2009 the Trust issued 15,000,000 purchase warrants pursuant to a private placement. Each warrant is exercisable into a unit of the Trust at a price of $3.22 per Trust unit for a period of five years from the date of issue.
NOTE 4. INCOME TAXES
Currently, the Trust incurs taxes to the extent that there are certain provincial capital taxes or state franchise taxes, as well as taxes on any taxable income, of its underlying subsidiaries. Future income taxes arise from the differences between the accounting and tax basis of the Trust's and its subsidiaries' assets and liabilities.
The provision for income taxes differs from that which would be expected by applying statutory Canadian income tax rates. A reconciliation of the difference at June 30 is as follows:

|  | Three months ended June 30, |  |  | Six months ended June 30, |
|  | 2009 |  |  | 2008 |  |  | 2009 |  |  | 2008 |
Earnings before income taxes |  | $ | 60,217 |  |  | $ | 19,960 |  |  | $ | 114,494 |  |  | $ | 142,002 |
Federal and provincial statutory rates |  |  | 29 | % |  |  | 30 | % |  |  | 29 | % |  |  | 30 | %
Tax at statutory rates |  | $ | 17,463 |  |  | $ | 5,988 |  |  | $ | 33,203 |  |  | $ | 42,601 |
Adjusted for the effect of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-deductible expenses |  |  | (1,504 | ) |  |  | 29 |  |  |  | 2,182 |  |  |  | (197 | )
Income taxed at lower rates |  |  | (12,605 | ) |  |  | – |  |  |  | (35,424 | ) |  |  | – |
Income to be distributed to unitholders, not subject to tax in the Trust |  |  | (879 | ) |  |  | (8,685 | ) |  |  | (2,323 | ) |  |  | (31,569 | )
Other |  |  | 267 |  |  |  | 889 |  |  |  | 1,964 |  |  |  | 3,162 |
Income tax expense (reduction) |  | $ | 2,742 |  |  | $ | (1,779 | ) |  | $ | (398 | ) |  | $ | 13,997 |
Effective income tax rate |  |  | 5 | % |  |  | (9 | )% |  |  | – | % |  |  | 10 | %

The Trust received Notices of Reassessment in 2008 from a provincial taxing authority related to certain subsidiaries' taxation years ending in 2001 through 2004. As a result of the notices, the Trust was required to pay $37.7 million in taxes and $20.4 million in assessed interest. The reassessments relate to the treatment of interest in certain provincial tax filings. The Trust is in the process of challenging these reassessments. The Trust anticipates that the dispute will not be resolved within one year and has recorded the amount paid as a long-term receivable. No amounts related to the $58.1 million in reassessments have been expensed.
24 N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

NOTE 5. LONG-TERM DEBT

|  | June 30, |  |  | December 31, |
|  | 2009 |  |  | 2008 |
Secured facility: |  |  |  |  |  |
Term Loan A |  | $ | 357,038 |  |  | $ | 489,215 |
Term Loan B |  |  | 531,582 |  |  |  | 489,840 |
Revolving credit facility |  |  | - |  |  |  | 107,981 |
Unsecured facility |  |  | - |  |  |  | 168,352 |
Unsecured senior notes |  |  | 175,000 |  |  |  | - |
Unsecured convertible notes: |  |  |  |  |  |  |  |
3.75% notes (US $137.5 million) |  |  | - |  |  |  | 168,413 |
Floating rate notes (US $124.8 million) |  |  | - |  |  |  | 152,801 |
|  |  | 1,063,620 |  |  |  | 1,576,602 |
Less net unamortized debt issue costs |  |  | (157,190 | ) |  |  | (159,300 | )
|  |  | 906,430 |  |  |  | 1,417,302 |
Less current portion |  |  | (37,497 | ) |  |  | (48,953 | )
|  | $ | 868,933 |  |  | $ | 1,368,349 |

As at June 30, 2009 Precision had borrowed $1,063.6 million comprised of US$745.5 million, under secured facilities and $175 million under an unsecured facility. Precision had available a further US$260.0 million under the secured revolving credit facility, of which none was drawn. Availability of the revolving credit facility was reduced by outstanding letters of credit of US$28.0 million.
During the second quarter Precision entered into an interest rate swap arrangement to fix the libor rate at 1.7% on US$250.0 million of the Term A-1 facility (with scheduled reductions in the balance through September 2013) and paid US$2.1 million for an interest rate cap of 3.25% on US$350.0 million of the Term B facilities (with scheduled reductions in the balance through December 2013). The net amount owing under the interest rate derivative contract is settled quarterly.
During the second quarter, Precision fully repaid and cancelled the outstanding balance of the unsecured facility and completed syndication of the Secured Facility.
On April 22, 2009, the Trust completed a private placement of $175.0 million principal amount of 10% senior unsecured notes (the "Senior Notes") which have an eight-year term, with one-third of the initial outstanding principal amount payable on each of the sixth, seventh and eighth anniversaries of the closing date of the private placement. The Senior Notes are unsecured and have been guaranteed by the Trust and each subsidiary of the Trust that guaranteed the Secured Facility. The terms of the Senior Notes requires Precision to maintain certain affirmative and negative covenants.
During the first quarter, holders of 3.75% Notes and Floating Rate Notes representing US$137.5 million and US$124.8 million, respectively accepted the purchase offer made pursuant to change in control provisions in the indenture agreements governing the notes. Precision was required to purchase these notes on March 24, 2009 at the principal balance plus accrued interest.
At June 30, 2009 principal repayments are as follows:

For the twelve month periods ended June 30, |  |  |
2010 |  | $ | 37,497 |
2011 |  |  | 65,794 |
2012 |  |  | 75,427 |
2013 |  |  | 85,061 |
2014 |  |  | 229,562 |
Thereafter |  |  | 570,279 |

P R E C I S I O N D R I L L I N G T R U S T 25

NOTE 6. ACCUMULATED OTHER COMPREHENSIVE INCOME |  |  |
Balance, December 31, 2008 |  | $ | 15,359 |
Unrealized foreign currency translation gains |  |  | (110,876 | )
Balance, June 30, 2009 |  | $ | (95,517 | )

NOTE 7. UNIT BASED COMPENSATION PLANS
(a) Option plan
During the quarter the Trust implemented a unit option plan under which a combined total of 11,103,500 options to purchase units are reserved to be granted to employees. Of the amount reserved, 1,920,100 options have been granted. Under this plan, the exercise price of each option equals the fair market of the option at the date of grant determined by the weighted average trading price for the five days preceding the grant. The options vest over a period of three years from the date of grant as employees render continuous service to the Trust and have a term of seven years.

A summary of the status of the equity incentive plan as at June 30, 2009 is presented below: |  |  |  |
|  |  |  |  |  |  |  | Weighted |  |  |  |
|  | Options |  |  | Range of |  |  | average |  |  | Options |
|  | Outstanding |  |  | exercise price |  |  | exercise price |  |  | exercisable |
Outstanding as at December 31, 2008 |  |  | – |  |  |  | – |  |  |  | – |  |  |  | – |
Granted |  |  | 1,920,100 |  |  | $ | 5.80 – 5.85 |  |  | $ | 5.83 |  |  |  | – |
Outstanding as at June 30, 2009 |  |  | 1,920,100 |  |  | $ | 5.80 – 5.85 |  |  | $ | 5.83 |  |  |  | – |

The per unit weighted average fair value of the unit options granted during the quarter ended June 30, 2009 was $2.54 based on the date of grant valuation using the Black-Scholes option pricing model with the following assumption: average risk-free interest rate 2%, average expected life of four years and expected volatility of 56%. Unit based compensation of $0.2 million was expensed during the three and six months ended June 30, 2009.
(b) Officers and employees
During the quarter Precision introduced two new unit based incentive plans to replace the Performance Saving Plan and the Long-Term Incentive Plan. Under the Restricted Trust Unit incentive plan units granted to eligible employees vest annually over a three year term. Vested units are automatically paid out in cash in the first quarter of the year following vesting at a value determined by the fair market value of the units as at December 31 of the vesting year. Under the Performance Trust Unit incentive plan units granted to eligible employees vest at the end of a three year term. Vested units are automatically paid out in cash in first quarter following the vested term based on the number of performance units held multiplied by a performance factor that ranges from zero to two times. The performance factor is based on Precision’s returns compared to a peer group. Included in net earnings for the three and six months ended June 30, 2009 is an expense of $0.3 million (2008 - $nil) and $2.4 million (2008 - $nil), respectively.
Certain liabilities under the Performance Savings Plan continue to exist as eligible participants were able to elect to receive a portion of their annual performance bonus in the form of deferred trust units ("DTUs"). These notional units are redeemable in cash and are adjusted for each distribution to unitholders by issuing additional DTUs based on the weighted average trading price on the Toronto Stock Exchange for the five days immediately following the ex-distribution date. All DTUs must be redeemed within 60 days of ceasing to be an employee of Precision or by the end of the second full calendar year after receipt of the DTUs. A summary of the DTUs outstanding under this unit based incentive plan is presented below:

Deferred Trust Units |  | Outstanding |
Balance, December 31, 2008 |  |  | 83,435 |
Issued, including as a result of distributions |  |  | 211,156 |
Redeemed on employee resignations and withdrawals |  |  | (4,395 | )
Balance, June 30, 2009 |  |  | 290,196 |

26 N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

As at June 30, 2009 $1.6 million is included in accounts payable and accrued liabilities for outstanding DTUs. Included in net earnings for the three and six months ended June 30, 2009 is an expense of $ 0.7 million (2008 - $0.5 million) and $0.3 million (2008 - $1.1 million), respectively.
The Trust has a Unit Appreciation Rights ("UAR") plan. Under the plan eligible participants were granted UAR's that entitle the rights holder to receive cash payments calculated as the excess of the market price over the exercise price per unit on the exercise date. The exercise price of the UAR is reduced by the aggregate unit distributions paid or payable on Trust units from the grant date to the exercise date. The UAR's vest over a period of five years and expire 10 years from the date of grant. No amounts relating to the UAR plan have been recorded as compensation expense or accrued liability as at June 30, 2009 as the intrinsic value of the awards was nil.
(c) Executive
In 2007 the Trust instituted a Deferred Signing Bonus Unit Plan for its Chief Executive Officer. Under the plan 178,336 notional DTUs were granted on September 1, 2007. The units are redeemable one-third annually beginning September 1, 2008 and are settled for cash based on the Trust unit trading price on redemption. The number of notional DTUs is adjusted for each distribution to unitholders by issuing additional notional DTUs based on the weighted average trading price on the Toronto Stock Exchange for the five days immediately following the ex-distribution date. As at June 30, 2009 $0.4 million is included in accounts payable and accrued liabilities and $0.4 million in long-term incentive plan payable for the 136,500 outstanding DTUs. Included in net earnings for the three and six months ended June 30, 2009 is an expense of $0.3 million (2008 - $0.8 million) and a recovery of $0.6 million (2008 - $2.5 million expense), respectively.
(d) Non-management directors
In 2007 a deferred trust unit plan was established for non-management directors. Under the plan fully vested deferred trust units are granted quarterly based upon an election by the non-management director to receive all or a portion of their compensation in deferred trust units. Distributions to unitholders declared by the Trust prior to redemption are reinvested into additional deferred trust units on the date of distribution. These deferred trust units are redeemable into an equal number of Trust units any time after the director's retirement. A summary of deferred trust units outstanding under this unit based incentive plan is presented below:

|  | Number |
|  | Outstanding |
Balance, December 31, 2008 |  |  | 54,543 |
Granted |  |  | 161,450 |
Issued as a result of distributions |  |  | 2,051 |
Balance, June 30, 2009 |  |  | 218,044 |

Included in net earnings for the three and six months ended June 30, 2009 as unit based compensation with a corresponding increase in contributed surplus, is $270,000 (2008 - $240,000) and $815,000 (2008 - $435,000), respectively.
NOTE 8. FINANCE CHARGES
The following table provides a summary of the finance charges:

|  | Three months ended June 30, |  |  | Six months ended June 30, |
|  | 2009 |  |  | 2008 |  |  | 2009 |  |  | 2008 |
Interest: |  |  |  |  |  |  |  |  |  |  |  |
Long-term debt |  | $ | 28,151 |  |  | $ | 2,109 |  |  | $ | 60,569 |  |  | $ | 4,344 |
Other |  |  | 57 |  |  |  | 53 |  |  |  | 120 |  |  |  | 99 |
Income |  |  | (110 | ) |  |  | (75 | ) |  |  | (201 | ) |  |  | (160 | )
Amortization of debt issue costs |  |  | 6,884 |  |  |  | – |  |  |  | 13,164 |  |  |  | – |
Loss on settlement of unsecured facility (note 5) |  |  | 9,899 |  |  |  | – |  |  |  | 9,899 |  |  |  | – |
Finance charges |  | $ | 44,881 |  |  | $ | 2,087 |  |  | $ | 83,551 |  |  | $ | 4,283 |

P R E C I S I O N D R I L L I N G T R U S T 27

NOTE 9. CONTINGENCIES
The business and operations of the Trust are complex and the Trust has executed a number of significant financings, business combinations, acquisitions and dispositions over the course of its history. The computation of income taxes payable as a result of these transactions involves many complex factors as well as the Trust’s interpretation of relevant tax legislation and regulations. The Trust’s management believes that the provision for income tax is adequate and in accordance with generally accepted accounting principles and applicable legislation and regulations. However, there are a number of tax filing positions that can still be the subject of review by taxation authorities who may successfully challenge the Trust’s interpretation of the applicable tax legislation and regulations, with the result that additional taxes could be payable by the Trust and the amount owed, with estimated interest but without penalties, could be up to $391 million, including $58 million recorded as a long-term receivable.
NOTE 10. PER UNIT AMOUNTS
The following tables reconcile the net earnings and weighted average units outstanding used in computing basic and diluted earnings per unit:

|  | Three months ended June 30, |  |  | Six months ended June 30, |
|  | 2009 |  |  | 2008 |  |  | 2009 |  |  | 2008 |
Net earnings - basic |  | $ | 57,475 |  |  | $ | 21,739 |  |  | $ | 114,892 |  |  | $ | 128,005 |
Impact of assumed conversion of convertible debt, net of tax |  |  | – |  |  |  | – |  |  |  | 1,723 |  |  |  | – |
Net earnings - diluted |  | $ | 57,475 |  |  | $ | 21,739 |  |  | $ | 116,615 |  |  | $ | 128,005 |
Weighted average units outstanding |  |  | 242,573 |  |  |  | 125,758 |  |  |  | 211,861 |  |  |  | 125,758 |
Effect of rights offering |  |  | 11,733 |  |  |  | 9,007 |  |  |  | 12,354 |  |  |  | 9,007 |
Weighted average units outstanding - basic |  |  | 254,306 |  |  |  | 134,765 |  |  |  | 224,215 |  |  |  | 134,765 |
Effect of trust unit warrants |  |  | 5,344 |  |  |  | – |  |  |  | 2,672 |  |  |  | – |
Effect of stock options and other equity compensation plans |  |  | 172 |  |  |  | 27 |  |  |  | 124 |  |  |  | 23 |
Effect of convertible debt |  |  | – |  |  |  | – |  |  |  | 7,793 |  |  |  | - |
Effect of rights offering |  |  | 247 |  |  |  | 2 |  |  |  | 684 |  |  |  | 2 |
Weighted average units outstanding - diluted |  |  | 260,069 |  |  |  | 134,794 |  |  |  | 235,488 |  |  |  | 134,790 |

28 N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

NOTE 11. SEGMENTED INFORMATION
The Trust operates primarily in Canada and the United States, in two segments; Contract Drilling Services and Completion and Production Services. Contract Drilling Services includes drilling rigs, procurement and distribution of oilfield supplies, camp and catering services and manufacture, sale, and repair of drilling equipment. Completion and Production Services includes service rigs, snubbing units, wastewater treatment units, and oilfield equipment rental.

|  | Contract |  |  | Completion and |  |  |  |  |  |  |  |  |  |
|  | Drilling |  |  | Production |  |  | Corporate |  | Inter-segment |  |  |  |
Three months ended June 30, 2009 |  | Services |  |  | Services |  |  | and Other |  |  | Eliminations |  |  | Total |
Revenue |  | $ | 185,226 |  |  | $ | 25,590 |  |  | $ | - |  |  | $ | (1,219 | ) |  | $ | 209,597 |
Segment profit (loss) |  |  | 43,520 |  |  |  | (681 | ) |  |  | (11,801 | ) |  |  | - |  |  |  | 31,038 |
Depreciation and amortization |  |  | 23,434 |  |  |  | 3,698 |  |  |  | 1,090 |  |  |  | - |  |  |  | 28,222 |
Total assets |  |  | 3,899,840 |  |  |  | 393,367 |  |  |  | 228,223 |  |  |  | - |  |  |  | 4,521,430 |
Goodwill |  |  | 701,140 |  |  |  | 112,139 |  |  |  | - |  |  |  | - |  |  |  | 813,279 |
Capital expenditures |  |  | 88,529 |  |  |  | 97 |  |  |  | 1,697 |  |  |  | - |  |  |  | 90,323 |

|  | Contract |  |  | Completion and |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Drilling |  |  | Production |  |  | Corporate |  | Inter-segment |  |  |  |  |
Three months ended June 30, 2008 |  | Services |  |  | Services |  |  | and Other |  |  | Eliminations |  |  | Total |
Revenue |  | $ | 93,006 |  |  | $ | 47,559 |  |  | $ | - |  |  | $ | (2,051 | ) |  | $ | 138,514 |
Segment profit (loss)(1) |  |  | 23,816 |  |  |  | 8,810 |  |  |  | (10,446 | ) |  |  | - |  |  |  | 22,180 |
Depreciation and amortization |  |  | 8,442 |  |  |  | 4,044 |  |  |  | 908 |  |  |  | - |  |  |  | 13,394 |
Total assets |  |  | 1,252,737 |  |  |  | 432,896 |  |  |  | 70,669 |  |  |  | - |  |  |  | 1,756,302 |
Goodwill |  |  | 172,440 |  |  |  | 108,309 |  |  |  | - |  |  |  | - |  |  |  | 280,749 |
Capital expenditures |  |  | 25,209 |  |  |  | 5,409 |  |  |  | 726 |  |  |  | - |  |  |  | 31,344 |

|  | Contract |  |  | Completion and |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Drilling |  |  | Production |  |  | Corporate |  | Inter-segment |  |  |  |  |
Six months ended June 30, 2009 |  | Services |  |  | Services |  |  | and Other |  |  | Eliminations |  |  | Total |
Revenue |  | $ | 575,105 |  |  | $ | 88,565 |  |  | $ | - |  |  | $ | (5,628 | ) |  | $ | 658,042 |
Segment profit (loss) |  |  | 161,052 |  |  |  | 12,875 |  |  |  | (17,451 | ) |  |  | - |  |  |  | 156,476 |
Depreciation and amortization |  |  | 61,397 |  |  |  | 8,691 |  |  |  | 2,083 |  |  |  | - |  |  |  | 72,171 |
Total assets |  |  | 3,899,840 |  |  |  | 393,367 |  |  |  | 228,223 |  |  |  | - |  |  |  | 4,521,430 |
Goodwill |  |  | 701,140 |  |  |  | 112,139 |  |  |  | - |  |  |  | - |  |  |  | 813,279 |
Capital expenditures |  |  | 159,907 |  |  |  | 521 |  |  |  | 4,817 |  |  |  | - |  |  |  | 165,245 |

|  | Contract |  |  | Completion and |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Drilling |  |  | Production |  |  | Corporate |  | Inter-segment |  |  |  |  |
Six months ended June 30, 2008 |  | Services |  |  | Services |  |  | and Other |  |  | Eliminations |  |  | Total |
Revenue |  | $ | 335,371 |  |  | $ | 152,279 |  |  | $ | - |  |  | $ | (6,447 | ) |  | $ | 481,203 |
Segment profit (loss)(1) |  |  | 123,863 |  |  |  | 42,673 |  |  |  | (21,376 | ) |  |  | - |  |  |  | 145,160 |
Depreciation and amortization |  |  | 23,610 |  |  |  | 12,320 |  |  |  | 1,831 |  |  |  | - |  |  |  | 37,761 |
Total assets |  |  | 1,252,737 |  |  |  | 432,896 |  |  |  | 70,669 |  |  |  | - |  |  |  | 1,756,302 |
Goodwill |  |  | 172,440 |  |  |  | 108,309 |  |  |  | - |  |  |  | - |  |  |  | 280,749 |
Capital expenditures |  |  | 44,812 |  |  |  | 9,181 |  |  |  | 819 |  |  |  | - |  |  |  | 54,812 |

(1) Amounts have been restated to effect the removal of foreign exchange expense which is now excluded from the calculation of segment profit.
P R E C I S I O N D R I L L I N G T R U S T 29

A reconciliation of segment profit to earnings before income taxes is as follows:

|  | Three months ended June 30, |  |  | Six months ended June 30, |
(Stated in thousands of Canadian dollars) |  | 2009 |  |  | 2008 |  |  | 2009 |  |  | 2008 |
Total segment profit |  | $ | 31,038 |  |  | $ | 22,180 |  |  | $ | 156,476 |  |  | $ | 145,160 |
Add (deduct): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign exchange |  |  | 74,060 |  |  |  | (133 | ) |  |  | 41,569 |  |  |  | 1,125 |
Finance charges |  |  | (44,881 | ) |  |  | (2,087 | ) |  |  | (83,551 | ) |  |  | (4,283 | )
Earnings before income taxes |  | $ | 60,217 |  |  | $ | 19,960 |  |  | $ | 114,494 |  |  | $ | 142,002 |

The Trust's operations are carried on in the following geographic locations:

|  |  |  |  |  |  |  |  |  |  | Inter-segment |  |  |  |
Three months ended June 30, 2009 |  | Canada |  | United States |  |  | International |  |  | Eliminations |  |  | Total |
Revenue |  | $ | 73,884 |  |  | $ | 131,567 |  |  | $ | 5,337 |  |  | $ | (1,191 | ) |  | $ | 209,597 |
Total Assets |  |  | 1,656,793 |  |  |  | 2,807,998 |  |  |  | 56,639 |  |  |  | - |  |  |  | 4,521,430 |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Inter-segment |  |  |  |  |
Three months ended June 30, 2008 |  | Canada |  | United States |  |  | International |  |  | Eliminations |  |  | Total |
Revenue |  | $ | 105,961 |  |  | $ | 31,189 |  |  | $ | 1,750 |  |  | $ | (386 | ) |  | $ | 138,514 |
Total Assets |  |  | 1,548,475 |  |  |  | 203,006 |  |  |  | 4,821 |  |  |  | - |  |  |  | 1,756,302 |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Inter-segment |  |  |  |  |
Six months ended June 30, 2009 |  | Canada |  | United States |  |  | International |  |  | Eliminations |  |  | Total |
Revenue |  | $ | 284,297 |  |  | $ | 363,875 |  |  | $ | 12,479 |  |  | $ | (2,609 | ) |  | $ | 658,042 |
Total Assets |  |  | 1,656,793 |  |  |  | 2,807,998 |  |  |  | 56,639 |  |  |  | - |  |  |  | 4,521,430 |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Inter-segment |  |  |  |  |
Six months ended June 30, 2008 |  | Canada |  | United States |  |  | International |  |  | Eliminations |  |  | Total |
Revenue |  | $ | 420,363 |  |  | $ | 57,733 |  |  | $ | 3,831 |  |  | $ | (724 | ) |  | $ | 481,203 |
Total Assets |  |  | 1,548,475 |  |  |  | 203,006 |  |  |  | 4,821 |  |  |  | - |  |  |  | 1,756,302 |

NOTE 12. FINANCIAL INSTRUMENTS
(a) Interest rate risk
As at June 30, 2009 approximately 82% of Precision’s $1.06 billion of long-term debt is subject to fixed interest rates after taking into consideration the interest rate derivatives that have been entered into by Precision. As a result, Precision is not exposed to significant fluctuations in interest expense as a result of changes in interest rates. Applying a 100 basis points change in interest rates to the Trust's long-term debt balance at June 30, 2009, with all other variables held constant, would impact earnings from continuing operations, on a go forward basis, by approximately $0.9 million.
(b) Liquidity risk
The following are the contractual maturities of the Trust's long-term debt obligations as at June 30, 2009:

(Stated in thousands) |  | 2009 |  |  | 2010 |  |  | 2011 |  |  | 2012 |  |  | 2013 |  |  | Thereafter |  |  | Total |
Long-term debt |  | $ | 14,193 |  |  | $ | 56,201 |  |  | $ | 65,794 |  |  | $ | 85,061 |  |  | $ | 258,462 |  |  | $ | 583,909 |  |  | $ | 1,063,620 |
Interest on long-term debt(1) |  |  | 43,303 |  |  |  | 84,238 |  |  |  | 79,789 |  |  |  | 74,848 |  |  |  | 69,146 |  |  |  | 87,171 |  |  |  | 438,495 |
Total |  | $ | 57,496 |  |  | $ | 140,439 |  |  | $ | 145,583 |  |  | $ | 159,909 |  |  | $ | 327,608 |  |  | $ | 671,080 |  |  | $ | 1,502,115 |

(1) Interest has been calculated based upon debt balances, interest rates and foreign exchange rates in effect as at June 30, 2009
30 N O T E S T O C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Precision Drilling Trust
UNITHOLDER INFORMATION

STOCK EXCHANGE LISTINGS | ACCOUNT QUESTIONS
Units of Precision Drilling Trust are listed on the Toronto Stock Exchange ("TSX") under the trading symbol PD.UN and on the New York Stock Exchange ("NYSE") under the trading symbol PDS. Q2 2009 TRADING PROFILE Toronto (TSX: PD.UN) High: $7.13 Low: $3.30 Close: $5.59 Volume Traded: 140,843,881 New York (NYSE: PDS) High: US$6.50 Low: US$2.60 Close: US$4.88 Volume Traded: 165,034,336 TRANSFER AGENT AND REGISTRAR Computershare Trust Company of Canada Calgary, Alberta TRANSFER POINT Computershare Trust Company NA Denver, Colorado | Precision’s Transfer Agent can help you with a variety of unitholder related services, including: • Change of address • Lost unit certificates • Transfer of units to another person • Estate settlement You can contact Precision’s Transfer Agent at: Computershare Trust Company of Canada 100 University Avenue, 9th Floor, North Tower Toronto, Ontario M5J 2Y1 Canada Telephone: 1-800-564-6253 (toll free in Canada and the United States) 1-514-982-7555 (international direct dialing) Email: service@computershare.com ONLINE INFORMATION To receive news releases by email, or to view this interim report online, please visit the Trust’s website at www.precisiondrilling.com and refer to the Investor Relations section. Additional information relating to the Trust, including the Annual Information Form, Annual Report and Management Information Circular has been filed with SEDAR and is available at www.sedar.com.

P R E C I S I O N D R I L L I N G T R U S T 31

Precision Drilling Trust
CORPORATE INFORMATION

HEAD OFFICE | OFFICERS
Precision Drilling Trust | Kevin A. Neveu
4200, 150 - 6th Avenue SW | President and Chief Executive Officer
Calgary, Alberta, Canada T2P 3Y7 |
Telephone: 403-716-4500 | Joanne L. Alexander
Facsimile: 403-264-0251 | Vice President, General Counsel and Corporate Secretary
Email: info@precisiondrilling.com |
www.precisiondrilling.com | David J. Crowley
| President, U.S. Operations
| Kenneth J. Haddad
| Vice President, Business Development
TRUSTEES |
Robert J. S. Gibson | Darren J. Ruhr
Allen R. Hagerman, FCA | Vice President, Corporate Services
Patrick M. Murray |
| Gene C. Stahl
| President, Canadian Operations
DIRECTORS | Douglas J. Strong
Frank M. Brown | Chief Financial Officer
William T. Donovan |
W.C. (Mickey) Dunn | David W. Wehlmann
Brian A. Felesky, CM, Q.C. | Executive Vice President, Investor Relations
Robert J. S. Gibson |
Allen R. Hagerman, FCA | LEAD BANK
Stephen J.J. Letwin | Royal Bank of Canada
Patrick M. Murray | Calgary, Alberta
Kevin A. Neveu |
Frederick W. Pheasey | AUDITORS
Robert L. Phillips | KPMG LLP
Trevor M. Turbidy | Calgary, Alberta