ex99_1.htm

Exhibit 99.1

Management's Discussion and Analysis

Management's Discussion and Analysis for the three month and six month periods ended June 30, 2012 of Precision Drilling Corporation ("Precision" or the "Corporation") prepared as at July 24, 2012 focuses on the unaudited Interim Consolidated Financial Statements and related notes and pertains to known risks and uncertainties relating to the oilfield services sector. This discussion should not be considered all inclusive as it does not include all changes regarding general economic, political, governmental and environmental events. This discussion should be read in conjunction with the Corporation's 2011 Annual Report, Annual Information Form, the unaudited June 30, 2012 Interim Consolidated Financial Statements and related notes and the cautionary statement regarding forward-looking information and statements on page 11 of this report.

Select financial and operating information

	Three months ended June 30,									Six months ended June 30,
(Stated in thousands of Canadian
dollars, except per share amounts)	2012			2011			% Change			2012			2011			% Change
Revenue	$	381,966		$	345,325			10.6		$	1,022,032		$	870,675			17.4
EBITDA (1)		97,192			92,566			5.0			342,766			278,977			22.9
Net earnings		18,261			16,403			11.3			129,342			81,963			57.8
Cash provided by operations		275,346			176,312			56.2			437,786			293,634			49.1
Funds provided by operations (1)		62,373			70,766			(11.9	)		310,112			263,103			17.9
Capital spending:
Expansion capital
expenditures		158,876			61,943			156.5			295,348			97,516			202.9
Upgrade capital expenditures		29,962			27,336			9.6			84,221			48,114			75.0
Maintenance and
infrastructure capital
expenditures		32,236			24,615			31.0			63,188			33,064			91.1
Proceeds from sale		(3,730	)		(3,349	)		11.4			(8,809	)		(4,084	)		115.7
Net capital spending		217,344			110,545			96.6			433,948			174,610			148.5
Business acquisitions (net of
cash acquired)		25			34			(26.5	)		25			33,177			(99.9	)

Net earnings - per share:
Basic		0.07			0.06			16.7			0.47			0.30			56.7
Diluted		0.06			0.06			-			0.45			0.28			60.7

Contract drilling rig fleet		352			360			(2.2	)		352			360			(2.2	)
Drilling rig utilization days:
Canada		4,005			4,200			(4.6	)		16,375			16,742			(2.2	)
United States		8,827			9,316			(5.2	)		18,278			18,337			(0.3	)
International		398			173			130.1			583			353			65.2
Service rig fleet		211			220			(4.1	)		211			220			(4.1	)
Service rig operating hours		50,560			46,533			8.7			144,602			142,681			1.3
(1) See "ADDITIONAL GAAP MEASURES".

Precision Drilling Corporation 1

Financial Position and Ratios

	June 30,		December 31,
(Stated in thousands of Canadian dollars, except ratios)	2012		2011
Working capital	$	446,820	$	610,429
Long-term debt (1)	$	1,242,993	$	1,239,616
Total long-term financial liabilities	$	1,267,091	$	1,267,040
Total assets	$	4,481,139	$	4,427,874
Long-term debt to long-term debt plus equity ratio (1)		0.35		0.37

(1) Net of unamortized debt issue costs.

Revenue for the second quarter of 2012 was $382 million compared to $345 million for the same period of 2012. Precision reported net earnings of $18 million or $0.06 per diluted share for the three months ended June 30, 2012 compared to net earnings of $16 million or $0.06 per diluted share for the second quarter of 2011.

Revenue in the second quarter of 2012 was $37 million higher than the prior year period. The increase was mainly due to a year-over-year increase in rates partially offset by slightly lower drilling utilization days in both Canada and the United States. Revenue in Precision's Contract Drilling Services segment increased by 11% while revenue increased 10% in the Completion and Production Services segment in the second quarter of 2012 compared to the prior year.

Earnings before finance charges, income taxes, depreciation, amortization and foreign exchange ("EBITDA") were $97 million for the second quarter of 2012 compared to $93 million for the second quarter of 2011 (see "Additional GAAP Measures" in this report). Second quarter 2012 revenue and EBITDA were lower than the first quarter of 2012 due to the seasonality of oilfield service activity in Canada known as "spring break-up". This is a time in Canada where heavy equipment movement is restricted due to road bans and normally occurs in March to June of each year. Spring break-up was extended this year due to significant rainfall in western Canada.

EBITDA margin (EBITDA as a percentage of revenue) was 25% for the second quarter of 2012 compared to 27% for the same period in 2011. The decrease in EBITDA margin for the quarter was primarily attributable to lower utilizations and higher costs offset partially by higher average dayrates in both Canada and the United States. Higher operating costs in the quarter were the result of start-up costs internationally, increased maintenance costs in the United States and costs associated with directional drilling in Canada in a period of seasonally low activity. Precision's term contract position with customers, a highly variable operating cost structure and economies achieved through vertical integration of the supply chain continue to support EBITDA margins.

In the Contract Drilling Services segment, average drilling rig revenue per day increased by US$1,065 to US$23,145 in Precision's United States operations and by $2,188 to $20,649 in the Canadian operations in the second quarter of 2012 over the comparable quarter in 2011. Average revenue per day in the second quarter of 2012 decreased over the first quarter by US$80 and $442 in the United States and Canadian operations, respectively. The rate decreases from the first quarter in the United States and Canada are primarily the result of declines in the spot market rate, while in Canada the decrease is also due to winter related revenue received in the first quarter.

Management's Discussion and Analysis 2

For the six months ended June 30, 2012, Precision reported net earnings of $129 million or $0.45 per diluted share compared to net earnings of $82 million or $0.28 per diluted share for the same period of 2011. Revenue for the first half of 2012 was $1,022 million compared to $871 million for the corresponding period of 2011. EBITDA totalled $343 million for the first half of 2012 compared to $279 million in the first half of 2011. The year-over-year improvement resulted from higher pricing in the Contract Drilling Services and Completion and Production Services segments partially offset by lower drilling activity levels. Activity for Precision, as measured by drilling utilization days, decreased 2% in Canada and remained flat in the United States for the first six months of the year compared with the same period in 2011.

Precision had updated its 2012 capital expenditure plan and announced five additional new build Super Series drilling rigs for Precision's North American operations backed by long-term contracts. Precision has reduced its adjusted 2012 capital expenditure plan from $975 million to $875 million. The reduction in the plan has occurred in accordance with normal budgetary procedures and reflects lower than originally forecasted industry activity levels for 2012.

In the Contract Drilling Services segment, Precision currently owns 353 contract drilling rigs, including 198 in Canada, 147 in the United States and eight rigs in international locations and the capacity to run concurrently 81 directional drilling jobs. Precision's Completion and Production Services segment includes 190 service rigs, 19 snubbing units, two coil tubing units, 106 wastewater treatment units, 66 drilling and base camps and a broad mix of rental equipment.

During the quarter, an average of 44 drilling rigs worked in Canada, 97 worked in the United States and four worked internationally totalling an average of 145 rigs. This compares with an average of 150 rigs in the second quarter a year ago.

Oil and natural gas prices were lower during the second quarter of 2012 compared with the year ago period. For the second quarter of 2012, West Texas Intermediate crude oil averaged US$93.43 per barrel, 9% lower when compared to US$102.55 per barrel in the same period in 2011. AECO natural gas spot prices averaged $1.90 per MMBtu, 51% lower than the second quarter 2011 average of $3.88 per MMBtu. In the United States, Henry Hub natural gas spot prices averaged US$2.28 per MMBtu in the second quarter of 2012, a decrease of 48% over the second quarter 2011 average of US$4.35 per MMBtu.

Summary for the three months ended June 30, 2012:

Operating earnings were $31 million and 8% of revenue, compared to $40 million and 12% of revenue in the second quarter of 2011. Operating earnings were negatively impacted by start-up costs internationally, costs associated with directional drilling in Canada in a period of seasonally low activity and the decrease in activity in Precision's United States and Canadian drilling operations. In general, activity in Canada was down from the prior year due to unusually wet weather in the western Canada sedimentary basin. In addition, Precision recorded depreciation on certain Tier 3 rigs based on four years straight-line amortization which resulted in approximately $8 million of additional depreciation expense over what would have been booked using the unit of production method.

General and administrative expenses were $25 million, a decrease of $5 million from the second quarter of 2011, primarily because incentive compensation costs tied to the price of Precision's common shares decreased over the comparable quarter partially offset by incremental costs associated with growth in international and directional drilling activity.

·	Finance charges were $22 million, an increase of $6 million from the second quarter of 2011 due to an increase in the long-term debt balance partially offset by $1 million in debt amendment fees in 2011.

Capital expenditures for the purchase of property, plant and equipment were $221 million in the second quarter, an increase of $107 million over the same period in 2011. Capital spending for the second quarter of 2012 included $159 million for expansion capital, $30 million for upgrade capital and $32 million for the maintenance of existing assets and infrastructure.

Precision Drilling Corporation 3

Average revenue per utilization day for contract drilling rigs increased in the second quarter of 2012 to US$23,145 from the prior year second quarter of US$22,080 in the United States and increased in Canada to $20,649 in the second quarter of 2012 from $18,461 for the second quarter of 2011. The increase in revenue rates for the second quarter in Canada reflects the stronger industry rates for Tier 1 and 2 rigs carried over from the winter drilling season while in the United States the improvement in the average rate was due to a greater proportion of new build rigs working. In the United States, for the second quarter of 2012, 72% of Precision's active rigs were working under term contracts compared to 80% in the 2011 comparative period. Turnkey revenue for the second quarter of 2012 was US$15 million compared with US$21 million in 2011. Within Precision's Completion and Production Services segment, average hourly rates for service rigs were $728 in the second quarter of 2012 compared to $643 in the second quarter of 2011.

Average operating costs per utilization day for drilling rigs increased in the second quarter of 2012 to US$14,548 from the prior year second quarter of US$13,110 in the United States and increased in Canada to $12,799 in the second quarter of 2012 from $11,897. The cost increase in the United States was primarily due to a labour rate increase that became effective in December 2011 and higher repairs and maintenance costs. The cost increase in Canada was primarily due to a labour rate increase that became effective in the fourth quarter of 2011. Within Precision's Completion and Production Services segment, average hourly operating costs for service rigs increased to $610 in the second quarter of 2012 as compared to $560 in the second quarter of 2011, primarily due to a labour rate increase and higher fuel costs. Typically labour rate increases are recovered in dayrate increases.

·	Precision realized revenue from directional services of $23 million in the second quarter of 2012 compared with $13 million in the prior year.

·	Funds provided by operations in the second quarter of 2012 were $62 million, a decrease of $9 million from the prior year comparative quarter of $71 million.

Summary for the six months ended June 30, 2012

·	Revenue for the first half of 2012 was $1,022 million, an increase of 17% from the 2011 period.

·	Operating earnings were $201 million, an increase of $38 million or 23% from 2011. Operating earnings were 20% of revenue in 2012 compared to 19% in 2011.

General and administrative costs were $63 million, a decrease of $2 million over the first half of 2011 primarily as a result of the decrease in incentive compensation costs tied to the performance of Precision's common shares in 2012 partially offset by incremental costs associated with the growth in international and directional activity.

·	Finance charges were $44 million, a decrease of $15 million from the first half of 2011 due to the 2011 charge of $27 million for the make-whole premium from refinancing a previously outstanding debt partially offset by higher interest costs from an increased debt balance.

·	Funds provided by operations in the first half of 2012 were $310 million, an increase of $47 million from the prior year comparative period of $263 million.

Capital expenditures for the purchase of property, plant and equipment were $443 million in the first half of 2012, an increase of $264 million over the same period in 2011. Capital spending for 2012 to date included $296 million for expansion capital, $84 million for upgrade capital and $63 million for the maintenance of existing assets and infrastructure.

Management's Discussion and Analysis 4

Outlook

Precision has a strong portfolio of long-term customer contracts that provides a base level of activity and revenue. Precision has an average of 122 rigs committed under term contracts for the third quarter of 2012, an average of 113 rigs contracted for the fourth quarter of 2012 and 92 for the first quarter of 2013. In Canada, term contracted rigs normally generate 250 utilization days per rig year due to the seasonal nature of well access, whereas in the United States and internationally they usually generate 365 utilization days per rig year in most regions.

Capital expenditures are expected to be approximately $875 million for 2012, of which $443 million was expended during the first half of 2012. The expected 2012 total includes $132 million for sustaining and infrastructure expenditures and is based upon currently anticipated activity levels for 2012. Additionally, $613 million is slated for expansion capital and includes the cost to complete the drilling rigs from the 2011 new build rig program and the new build rigs for 2012. The total capital expenditures also include an estimated $130 million to upgrade approximately 14 rigs in 2012 and to purchase long lead time items for the Corporation's capital inventory. These long lead time items include top drives, masts and engines, that can be used for North American or international new build rig opportunities and rig tier upgrades. Precision expects that the $875 million will be split $751 million for the Contract Drilling segment and $124 million for the Completion and Production Services segment. An additional $44 million of committed expansion capital is expected to carry forward to 2013.

Demand remains solid for existing Tier 1 Super Series rigs for both Canada and the United States and customers continue to show interest in contracting new build Super Series rigs. Precision believes it will have opportunities to contract additional new build and upgraded rigs in the second half of 2012, although the number of contracts is likely to be significantly lower than the 42 rigs contracted during 2011. According to industry sources, as at July 20, 2012, the United States active land drilling rig count was flat with the prior year period while the Canadian drilling rig count had decreased about 13%.

Natural gas production in the United States has remained strong despite reduced drilling activity. United States natural gas storage levels as at July 13, 2012 were 17% above the five-year average and 19% above storage levels of a year ago. This also strongly influences Canadian activity since Canada has historically exported a significant portion of its natural gas production to the United States. The increase in oil and liquids rich natural gas drilling in areas like the Permian Basin, Bakken and Eagle Ford has been strong and the U.S. oil rig count as at July 20, 2012 was 39% higher than it was a year ago. On average, Precision has more equipment working in oil related plays than at any time in its history with approximately 80% of Precision's active rig count drilling for oil targets.

With high storage levels, consistent production and the view that North America has an oversupply of natural gas, gas prices have remained at very low levels. To date, customer changes in natural gas drilling plans are reflected in a decline in the rig count targeting dry gas plays. If low natural gas prices continue, Precision and the North American drilling industry could see continued weak demand for natural gas drilling.

Precision Drilling Corporation 5

Segmented Financial Results

Precision's operations are reported in two segments; the Contract Drilling Services segment includes the drilling rig, directional drilling, oilfield supply and manufacturing divisions; and the Completion and Production Services segment includes the service rig, snubbing, coiled tubing, rental, camp and catering and wastewater treatment divisions.

	Three months ended June 30,								Six months ended June 30,

(Stated in thousands of
Canadian dollars)	2012			2011			% Change		2012			2011			% Change
Revenue:
Contract Drilling Services	$	332,181		$	298,482		11.3		$	863,247		$	724,509		19.1
Completion and Production
Services		52,263			47,578		9.8			163,348			151,807		7.6
Inter-segment eliminations		(2,478	)		(735	)	237.1			(4,563	)		(5,641	)	(19.1	)
	$	381,966		$	345,325		10.6		$	1,022,032		$	870,675		17.4
EBITDA: (1)
Contract Drilling Services	$	103,476		$	104,169		(0.7	)	$	331,032		$	276,719		19.6
Completion and Production
Services		8,985			8,233		9.1			48,189			42,684		12.9
Corporate and other		(15,269	)		(19,836	)	(23.0	)		(36,455	)		(40,426	)	(9.8	)
	$	97,192		$	92,566		5.0		$	342,766		$	278,977		22.9
(1) See "Additional GAAP Measures".

Segment Review of Contract Drilling Services
	Three months ended June 30,									Six months ended June 30,

(Stated in thousands of Canadian
dollars, except where noted)		2012			2011		% Change				2012			2011		% Change
Revenue	$	332,181		$	298,482			11.3		$	863,247		$	724,509			19.1
Expenses:
Operating		222,059			187,379			18.5			513,193			431,078			19.0
General and administrative		6,646			6,934			(4.2	)		19,022			16,712			13.8
EBITDA (1)		103,476			104,169			(0.7	)		331,032			276,719			19.6
Depreciation		58,672			45,946			27.7			126,007			100,473			25.4
Operating earnings (1)	$	44,804		$	58,223			(23.0	)	$	205,025		$	176,246			16.3
Operating earnings as a
percentage of revenue		13.5	%		19.5	%					23.8	%		24.3	%
Drilling rig revenue per utilization
day in Canada	$	20,649		$	18,461			11.9		$	20,983		$	17,981			16.7
Drilling rig revenue per utilization
day in the United States (2)	US$	23,145		US$	22,080			4.8		US$	23,186		US$	21,451			8.1

(1)	See "ADDITIONAL GAAP MEASURES".

(2)	Includes revenue from idle but contracted rig days and lump sum payments.

				Three months ended June 30,
Canadian onshore drilling statistics: (1)	2012						2011
	Precision			Industry (2)			Precision			Industry (2)
Number of drilling rigs (end of period)		197			817			202			800
Drilling rig operating days (spud to release)		3,580			15,129			3,780			15,884
Drilling rig operating day utilization		20	%		20	%		21	%		22	%
Number of wells drilled		403			1,314			396			1,426
Average days per well		8.9			11.5			9.5			11.1
Number of metres drilled (000s)		688			2,750			622			2,754
Average metres per well		1,708			2,093			1,570			1,931
Average metres per day		192			182			165			173

Management's Discussion and Analysis 6

				Six months ended June 30,
Canadian onshore drilling statistics: (1)	2012						2011
	Precision			Industry (2)			Precision			Industry (2)
Number of drilling rigs (end of period)		197			817			202			800
Drilling rig operating days (spud to release)		14,622			63,250			14,906			63,345
Drilling rig operating day utilization		42	%		43	%		41	%		44	%
Number of wells drilled		1,275			4,333			1,487			5,033
Average days per well		11.5			14.6			10.0			12.6
Number of metres drilled (000s)		2,307			9,160			2,342			9,265
Average metres per well		1,809			2,114			1,575			1,841
Average metres per day		158			145			157			146

(1)	Canadian operations only.

(2)	Canadian Association of Oilwell Drilling Contractors ("CAODC") and Precision - excludes non-CAODC rigs and non-reporting CAODC members.

United States onshore drilling statistics: (1)	2012				2011
	Precision		Industry (2)		Precision		Industry (2)
Average number of active land rigs for quarters ended:
March 31		104		1,947		100		1,695
June 30		97		1,924		102		1,803
Year to date average		100		1,935		101		1,749

(1)	United States lower 48 land operations only.

(2)	Baker Hughes rig counts.

Contract Drilling Services segment revenue for the second quarter of 2012 increased by 11% to $332 million and EBITDA decreased by 1% to $103 million compared to the same period in 2011. The increase in revenue was due to higher average rates per day for both Canada and the United States partially offset by lower activity. The decrease in EBITDA in a period of increased revenue was the result of start-up costs internationally, lower margin in the United States as a result of increased maintenance costs and costs associated with directional drilling in Canada in a period of seasonally low activity.

Activity in North America was centered on oil and liquids rich natural gas related drilling activity. In the second quarter, drilling rig revenue per utilization day over the prior year was up 12% in Canada and 5% in the United States as a result of increased rates for rigs working on well-to-well contracts and new rig builds. During the quarter, 44% of Precision's utilization days in Canada were generated from rigs under term contract compared with 33% in 2011 while in the United States 72% of utilization days were generated from rigs under term contract as compared to 80% in the prior year period. At the end of the quarter, Precision had 69 drilling rigs working under term contracts in the United States and 54 in Canada.

Drilling rig utilization days in Canada (drilling days plus move days) during the second quarter of 2012 were 4,005, a decrease of 5% compared to 4,200 in 2011 due to the unseasonably wet spring. Drilling rig utilization days for Precision in the United States were 5% lower than the same quarter of 2011 due to a reduction in natural gas targeted drilling. On average, Precision had four rigs working internationally as the Saudi Arabia based business ramped up and Precision mobilized three additional rigs into Mexico.

Contract Drilling Services segment operating costs were 67% of revenue for the quarter which is four percentage points higher than the prior year period. Higher operating costs in the quarter were the result of start-up costs internationally, increased maintenance costs in the United States and costs associated with directional drilling in Canada in a period of seasonally low activity. In addition, crew wage increases in Canada and the United States in October contributed to the year-over-year increase.

Quarterly depreciation in the Contract Drilling Services segment increased 28% from the prior year. As discussed in Management's Discussion and Analysis for the year ended December 31, 2011, Precision changed its depreciation policy on certain Tier 3 rigs from the unit of production method to straight-line over four years resulting in approximately $8 million in additional depreciation in the quarter. Additional increases in depreciation are the result of an increased asset base and new business lines. With the exception of certain Tier 3 equipment and directional drilling equipment, contract drilling operations use the unit of production method of calculating depreciation.

Precision Drilling Corporation 7

Segment Review of Completion and Production Services

	Three months ended June 30,									Six months ended June 30,
(Stated in thousands of Canadian
dollars, except where noted)	2012			2011			% Change			2012			2011			% Change
Revenue	$	52,263		$	47,578			9.8		$	163,348		$	151,807			7.6
Expenses:
Operating		39,932			35,930			11.1			107,469			101,462			5.9
General and administrative		3,346			3,415			(2.0	)		7,690			7,661			0.4
EBITDA (1)		8,985			8,233			9.1			48,189			42,684			12.9
Depreciation		6,101			5,083			20.0			14,135			12,154			16.3
Operating earnings (1)	$	2,884		$	3,150			(8.4	)	$	34,054		$	30,530			11.5
Operating earnings as a
percentage of revenue		5.5	%		6.6	%					20.8	%		20.1	%
Well servicing statistics:
Number of service rigs
(end of period)		211			220			(4.1	)		211			220			(4.1	)
Service rig operating hours		50,560			46,533			8.7			144,602			142,681			1.3
Service rig operating hour
utilization		26	%		23	%					39	%		36	%
Service rig revenue per
operating hour	$	728		$	643			13.2		$	751		$	695			8.1
(1) See "Additional GAAP Measures".

Completion and Production Services segment revenue for the second quarter increased by 10% from the second quarter of 2011 to $52 million and EBITDA increased by 9% to $9 million. The increase in revenue and EBITDA is attributed to an increase in service rig rates, oil well production activity and service line growth, partially offset by lower results from rental and camp and catering operations.

Well servicing and snubbing activity increased 9% from the prior year period, with the fleet generating 50,560 operating hours in the second quarter of 2012 compared with 46,533 hours in the prior year quarter for utilization of 26% and 23%, respectively. The increase was a result of higher service rig activity performing workover and production work on oil wells, the start-up of new coil tubing service rigs and expansion of services into the northern United States. Approximately 98% of the second quarter service rig activity was oil related. New well completions were 30% lower than the prior year quarter and accounted for 4% of service rig operating hours in the second quarter compared to 6% in the same quarter in 2011. Precision's rental division benefitted from new equipment additions in the quarter, but utilization for some equipment decreased in conjunction with lower drilling and completion activity in the industry.

Average service rig revenue increased $85 per operating hour to $728 from the prior year period due to rig mix and increased labour and operating costs passed through to customers.

Operating costs as a percentage of revenue in the second quarter of 2012 was 76%, unchanged compared to the same period of 2011. Operating costs per service rig hour increased over the comparable period in 2011 primarily due to higher wages and fuel prices.

Depreciation in the Completion and Production Services segment in the second quarter of 2012 was 20% higher than the prior year due to the addition of new assets and higher well servicing activity. The well servicing division uses the unit of production method of calculating depreciation while the other operating divisions within the Completion and Production Services segment use the straight-line method.

Management's Discussion and Analysis 8

Segment Review of Corporate and Other

Precision views its corporate segment as support functions that provide assistance to more than one segment. The Corporate and other segment had an EBITDA loss of $15 million for the second quarter of 2012, $5 million lower than the prior year comparative period due to decreased costs associated with share based performance incentive plans partially offset by incremental costs associated with increasing activity.

Other Items

Net financial charges for the quarter were $22 million, an increase of $6 million from the second quarter of 2011 primarily due to higher long-term debt interest expense.

The Corporation had a foreign exchange gain of $5 million during the second quarter of 2012 due to the strengthening of the U.S. dollar versus the Canadian dollar and the impact thereof on the net U.S. dollar denominated monetary position in the Canadian dollar based companies.

Precision's effective tax rate on earnings before income taxes for the first half of 2012 was 18%.

Liquidity and Capital Resources

The oilfield services business is inherently cyclical in nature. Precision employs a disciplined approach to minimize costs through operational management practices and a variable cost structure, and to maximize revenues through term contract positions with a focus of maintaining a strong balance sheet. This operational discipline provides Precision with the financial flexibility to capitalize on strategic acquisitions and internal growth opportunities at all points in the business cycle.

Operating within a highly variable cost structure, Precision's maintenance capital expenditures are tightly governed by and highly responsive to activity levels with additional cost savings leverage provided through Precision's internal manufacturing and supply divisions. Expansion capital for new build rig programs require two to five year term contracts in order to mitigate capital recovery risk.

Liquidity remains sufficient as Precision had a cash balance of $398 million and the US$550 million senior secured revolver ("Secured Facility") remains undrawn except for US$27 million in outstanding letters of credit as at June 30, 2012. In addition to the Secured Facility, Precision has available $40 million in operating facilities which remains undrawn except for $10 million in outstanding letters of credit as at June 30, 2012.

As at June 30, 2012, the Corporation was in compliance with the covenants under the Secured Facility and expects to remain in compliance with such covenants and have complete access to credit lines during the remainder of 2012.

The current blended cash interest cost of Precision's debt is approximately 6.6%.

Precision has designated its U.S. dollar denominated long-term debt as a hedge of its investment in its United States operations. To be accounted for as a hedge, the foreign currency denominated long-term debt must be designated and documented as such and must be effective at inception and on an ongoing basis.

Precision Drilling Corporation 9

Quarterly Financial Summary

(Stated in thousands of Canadian dollars, except per share amounts)

	2011				2012
Quarters ended	September 30		December 31		March 31		June 30
Revenue	$	492,944	$	587,408	$	640,066	$	381,966
EBITDA (1)		186,248		229,839		245,574		97,192
Net earnings:		83,468		28,046		111,081		18,261
Per basic share		0.30		0.10		0.40		0.07
Per diluted share		0.29		0.10		0.39		0.06
Funds provided by operations (1)		73,182		256,103		247,739		62,373
Cash provided by operations		20,281		218,857		162,440		275,346

		2010					2011
Quarters ended	September 30		December 31			March 31		June 30
Revenue	$	359,152	$	435,537		$	525,350	$	345,325
EBITDA (1)		112,607		144,518			186,411		92,566
Net earnings (loss):		56,286		(250	)		65,560		16,403
Per basic share		0.20		-			0.24		0.06
Per diluted share		0.20		-			0.23		0.06
Funds provided by operations (1)		126,811		133,903			192,337		70,766
Cash provided by operations		67,575		75,064			117,322		176,312
(1) See "Additional GAAP Measures".

ADDITIONAL GAAP MEASURES

Precision uses certain additional GAAP measures that are not defined terms under International Financial Reporting Standards to assess performance and believes these measures provide useful supplemental information to investors. The following are the measures Precision uses in assessing performance.

EBITDA

Management believes that in addition to net earnings, EBITDA, as derived from information reported in the Interim Consolidated Statements of Earnings, is a useful supplemental measure as it provides an indication of the results generated by Precision's principal business activities prior to consideration of how those activities are financed, the impact of foreign exchange, how the results are taxed or how depreciation and amortization charges affect results.

Operating Earnings

Management believes that in addition to net earnings, operating earnings as reported in the Interim Consolidated Statements of Earnings is a useful supplemental measure as it provides an indication of the results generated by Precision's principal business activities prior to consideration of how those activities are financed, the impact of foreign exchange or how the results are taxed.

Funds Provided by Operations

Management believes that in addition to cash provided by operations, funds provided by operations, as reported in the Interim Consolidated Statements of Cash Flow is a useful supplemental measure as it provides an indication of the funds generated by Precision's principal business activities prior to consideration of working capital, which is primarily made up of highly liquid balances.

Management's Discussion and Analysis 10