Precision Drilling Trust Reports 2008 Third Quarter Financial Results

CALGARY, ALBERTA, Oct 23 (MARKET WIRE) --
(Canadian dollars)

This news release contains "forward-looking information and statements"
within the meaning of applicable securities laws. For a full disclosure
of the forward-looking information and statements and the risks to which
they are subject, see the "Cautionary Statement Regarding Forward-Looking
Information and Statements" later in this news release.

Precision Drilling Trust ("Precision" or "the Trust") reported net
earnings of $82 million or $0.65 per diluted unit for the quarter ended
September 30, 2008, an increase of $10 million or 13% compared to $73
million or $0.58 per diluted unit in the third quarter of 2007. The
increase marked the first time since the fourth quarter of 2006 where net
earnings were greater than the comparable quarter for the prior year.

Third quarter net earnings increased over prior year due to organic rig
expansion in the United States and a rebound in Canadian rig activity
that led to margin growth in Precision's contract drilling operations.
During the quarter, the fleet was 29% more active than the prior year
comparative quarter as deployments from Canada to active basins in the
United States and higher activity in Canada generated an increase of
2,440 operating days.

"The noteworthy year over year safety, earnings and revenue improvement
reflects the exceptional execution and performance by the people of
Precision. Our U.S. expansion, pricing discipline in Canada and activity
improvements across all business units contributed to this strong
performance. Currently we are operating 28 rigs in the U.S., up from 12
at the beginning of the year, all under term contracts. Our Canadian
drilling fleet is currently at 220 rigs with operating days up 14% from
last year. We will be adding an additional 19 new builds to the Precision
fleet, 17 of which are under term customer contracts. The recent
acquisition of six well service rigs in Manitoba brings our well service
fleet to 229 rigs," said Kevin Neveu, Precision's Chief Executive Officer.

"Of specific note during the third quarter was the increase in average
drilling days per well and the exceptionally high level of directional
and horizontal wells. Approximately 70% of our rigs in Canada and over
80% in the U.S. were drilling directional/horizontal wells. These
drilling trends coupled with Precision's excellent safety record and
strong margin performance clearly demonstrate the success and customer
recognition of our high performance high value strategy.

"While we are cautious regarding the near term impact of the global
banking crisis and ensuing economic uncertainty, we remain confident that
organizational changes and cost reduction measures we introduced late
last year position us well for this volatility.

"We are especially pleased to be a key provider of high performance high
value services to the rapidly emerging North American shale gas story. We
believe our intention to acquire Grey Wolf will accelerate this strategy
over the long-term, bringing growth and diversification to Precision
unitholders."

For the nine months ended September 30, 2008, net earnings were $210
million or $1.67 per diluted unit, a decrease of $46 million or 18%
compared to $256 million or $2.04 in the equivalent period of 2007. The
decrease in net earnings was due to lower first quarter industry demand
and pricing for both operating segments in Canada partially mitigated by
United States expansion, the emergence of international operations and
stronger Canadian activity in the third quarter. During the first nine
months, geographic diversification to United States natural gas resource
plays accelerated with 16 rigs deployed from Canada expanding the fleet
from 12 to 28. Precision's U.S. drilling rigs operated at near 100%
utilization and fleet growth led to a three and a half fold operating day
increase over the first nine months of 2007.

SELECT FINANCIAL AND OPERATING INFORMATION

(Stated in thousands Three months ended Nine months ended
of Canadian dollars, September 30, September 30,
except per diluted unit % %
amounts) 2008 2007 Change 2008 2007 Change
----------------------------------------------------------------------------
Revenue $ 285,639 $227,928 25.3 $ 766,842 $760,475 0.8
Operating earnings(1) 98,648 73,402 34.4 244,933 278,655 (12.1)
Earnings from
continuing operations 82,349 69,702 18.1 210,354 253,491 (17.0)
Net earnings 82,349 72,658 13.3 210,354 256,447 (18.0)
Cash provided by
operations 3,241 20,270 (84.0) 261,006 405,641 (35.7)
Net capital spending 73,578 39,653 85.6 124,944 144,937 (13.8)
Distributions declared 49,046 49,046 - 147,137 177,319 (17.0)
Per unit information:
Earnings from
continuing operations 0.65 0.55 18.2 1.67 2.02 (17.3)
Net earnings 0.65 0.58 12.1 1.67 2.04 (18.1)
Distributions declared $ 0.39 $ 0.39 - $ 1.17 $ 1.41 (17.0)

----------------------------------------------------------------------------
Contract Drilling Rig
Fleet 249 250 (0.4) 249 250 (0.4)
Operating days (spud
to release):
Canada 9,008 7,903 14.0 22,578 22,863 (1.2)
United States 1,868 533 250.5 4,111 1,032 298.4

International - - - 223 - n/m
Completion and
Production
Service Rig Fleet 229 239 (4.2) 229 239 (4.2)

Operating hours in
Canada 87,995 84,490 4.1 255,621 269,581 (5.2)
----------------------------------------------------------------------------
(1) Non-GAAP measure; see "NON-GAAP MEASURES AND RECONCILIATIONS".
n/m - calculation not meaningful

FINANCIAL POSITION AND RATIOS

(Stated in thousands of
Canadian dollars, except September 30, December 31, September 30,
ratios) 2008 2007 2007
----------------------------------------------------------------------------
Working capital $ 192,670 $ 140,374 $ 149,516
Working capital ratio 2.3 2.1 2.5
Long-term debt $ 231,784 $ 119,826 $ 123,773
Total assets $ 1,974,135 $ 1,763,477 $ 1,729,046
Long-term debt to
long-term debt plus
equity ratio 0.14 0.08 0.09
----------------------------------------------------------------------------

OVERVIEW

Precision's high performance high value customer service
offering advanced since the second quarter of 2008 through North American
and international developments that included the following:

- On August 25, 2008 Precision announced that it had entered into a
definitive merger agreement with Grey Wolf, Inc. ("Grey Wolf") pursuant
to which, if approved by Grey Wolf shareholders, Precision will acquire
Grey Wolf. Grey Wolf is the fourth largest onshore drilling contractor in
the United States with a fleet of 122 drilling rigs and on a combined
basis, Precision will be one of the largest land drillers in North
America with a combined drilling rig fleet of 371 rigs. The combined
Precision and Grey Wolf will have land drilling operations in most
conventional and unconventional oil and gas basins in the lower 48 United
States and in Canada with an emerging presence in Mexico. The transaction
will enhance Precision's leadership position in the North American oil
field services sector and represents an important milestone in
Precision's long-term strategy for diversification beyond Canada. The
transaction will position Precision as the lead shale gas driller in
North America.

Under the terms of the agreement, Grey Wolf shareholders will receive
US$5.00 in cash and 0.1883 Precision trust units ("Units") for each Grey
Wolf common share, for aggregate consideration of about US$1.12 billion
in cash and about 42 million Units. Grey Wolf shareholders will be able
to elect to receive cash or Units subject to proration.

On August 24, 2008 Precision entered into an arrangement to fund the
transaction and ongoing operating requirements through a US$1.6 billion
debt structure as outlined in a commitment letter with four lenders, the
Royal Bank, the Toronto Dominion Bank, Deutsche Bank and HSBC Bank.

The acquisition process for the transaction has progressed on schedule
with successful completion of key steps that include early termination of
the Hart-Scott-Rodino waiting period, determination by the Committee on
Foreign Investment in the United States ("CFIUS") that there are no
unresolved national security concerns and the receipt of prospective
credit ratings from Moody's and Standard & Poor's.

- On July 31, 2008 Precision closed the acquisition of six service rigs
from Rick's Well Servicing Ltd., a private company, for approximately $16
million. The assets are positioned in south-eastern Saskatchewan and
south-western Manitoba and strengthen Precision's capabilities in these
oil regions. Subsequent to closing, Precision moved an additional three
service rigs into these regions.

- August 31, 2008 marked the expiry of certain non-compete obligations
from a 2005 business divestiture that restricted Precision's growth
outside of North America and in certain business lines. Through its
international subsidiary Peritus International Oilfield Services Ltd.,
Precision can now fully pursue global contract drilling opportunities.

- Precision's organic growth in the United States accelerated with nine
rig moves from Canada during the third quarter representing fleet
expansion of 47%.

- The 2008 Super Series drilling rig build program is comprised of ten
Super Single rigs and nine Super Triple rigs, all are committed to
customers. Seventeen of these rigs are under signed term customer
contracts with letters of intent on the remaining two rigs. Twelve rigs
are for deployment to the United States, six for Canada and one has been
made available to a customer for international deployment. Precision's
revenue in the third quarter of 2008 was 25% higher than the prior year
period at $286 million, increasing 33% in the Contract Drilling Services
segment and 7% in the Completion and Production Services segment. Revenue
in Precision's United States operation grew by one half over the previous
quarter and by over two times the same quarter in the prior year. In
Canada, Precision realized a 14% increase in operating activity in the
Contract Drilling Services segment while service rig activity in the
Completion and Production Services segment increased 4%.

Precision's operating earnings in the third quarter of 2008 were 34%
higher than the prior year period at $99 million, increasing two
percentage points to 35% of revenue. The improvement was primarily
attributable to strong margins in the United States contract drilling
division. Precision's operating segments in Canada performed well and
returned to margins comparable to a year ago as internal manufacturing,
maintenance and supply-chain management contained operating costs at
levels relatively in line with prior year periods and customer pricing
stabilized.

In the Western Canada Sedimentary Basin ("WCSB"), Precision experienced
higher customer demand over the comparative year quarter due to the
improvement in underlying cash flow fundamentals for the oil and gas
industry. With significant improvement in natural gas pricing through the
first nine months of 2008, producers began to accelerate drilling plans
in the second quarter but the impact of spring break-up and wet weather
delayed any significant uplift in activity until the third quarter which
was up sharply over the prior year even though shallow gas drilling in
Alberta remained at lower levels. Customer demand in Canada improved and
Precision's operating days increased by 14% in the quarter compared to
the third quarter of 2007. Industry rig supply fundamentals in Canada
have also improved through a net reduction in capacity. Precision reduced
its Canadian drilling rig fleet by a net 22 rigs or 9% as a result of
deployments to the United States and fourth quarter 2007 retirements
partially offset by additions to the fleet from the 2007 rig-build
program.

For the third quarter of 2008, in both the Contract Drilling Services
segment and the service rig division of Precision's Completion and
Production Services segment, average daily or hourly rig rates were
essentially flat with prior year. With strengthened fundamentals, higher
demand in certain oil and natural gas markets, and a scarce labour supply
spot market pricing has firmed. Precision continued to benefit from term
contracts and strong customer relationships that place a premium on safe,
high performance oilfield services.

Average customer pricing for Precision's operations in the United States
held strong in the quarter as all drilling rigs are under term contracts.
An increased active industry rig count and a trend toward directional and
horizontal drilling programs continued to provide opportunities for
Precision's versatile high performing drilling rigs.

Precision continued on schedule with its 2008 capital expenditure program
estimated at $290 million with $75 million for upgrade capital and $215
million for expansionary initiatives. Most of the expansion capital
spending is for the 2008 rig-build program and Precision estimates that
an additional $130 million will be incurred during the first three
quarters of 2009 to complete this program.

Precision continued to invest in its high performance high value strategy
as energy commodity prices have reflected an underlying tight supply of
natural gas and oil. The third quarter of 2008 continued to support this
rationale, as AECO natural gas spot prices averaged $7.80 per MMBtu in
the third quarter of 2008, an increase of 50% over the third quarter 2007
average of $5.20 per MMBtu. In the United States, Henry Hub natural gas
spot prices averaged US$9.06 per MMBtu in the third quarter of 2008, an
increase of 47% over the third quarter 2007 average of US$6.16 per MMBtu.
West Texas Intermediate crude oil averaged US$118.68 per barrel during
the quarter compared to US$75.31 per barrel in the same period in 2007.
As always, significant economic and weather factors influence commodity
prices and the one-year forward price for North American natural gas
improved and traded within a wide range of about $7.50 to $13.00 on
Canadian and U.S. exchanges in the third quarter of 2008, compared to a
range of about $6.50 to $8.00 in the same quarter of 2007. On October 21,
2008 AECO spot natural gas closed at $7.17 per MMBtu and West Texas
Intermediate spot closed at US$70.89 per barrel.

OUTLOOK

Looking ahead to the fourth quarter of 2008 and into 2009 the unfolding
global financial crisis has created a high degree of uncertainty. While
mindful of recent commodity price volatility and its impact on industry
spending, Precision's North American oilfield service businesses carry
positive momentum established during the first half of 2008 through
higher energy prices and an increasing activity trend. The benefits of
these factors were demonstrated in third quarter performance and persist
early into the fourth quarter.

Rig bookings by customers for the 2008/2009 winter drilling season in
Canada remain ahead of year ago levels and Precision has increased its
personnel recruitment efforts and training for the expected seasonal
increase in drilling during the first quarter of 2009. In alignment with
current customer demand and the impact of last year's freeze on field
labour rates, substantial hourly wage rate increases were made to rig
crews by the industry to start the fourth quarter in Canada. These
increases were made to ensure competitiveness and to address an
industry-wide labour shortage. Precision expects to recoup these costs
through customer pricing adjustments effective October 1, 2008.

Precision's 2008 rig-build program is on schedule to deliver 19 drillings
rigs pursuant to term customer contracts over the next nine months with
up to four in the fourth quarter, six in the first quarter of 2009, eight
in the second and one rig in the third quarter. These Super Series rigs
will further expand Precision's operations in the United States land
drilling market and reinforce high performance high value assets in
Canada.

The autumn season in North America usually creates uncertainty in natural
gas markets as underground storage fills and pricing softens. This year,
fundamentals are reasonably firm with storage marginally less than a year
ago and commodity prices in the $6.00 to $8.00 range, comparable to prior
year levels. The North American land rig count drilling for natural gas
has more than doubled in the past seven years and production increases
are positive over the long term for the service sector given steep first
year production decline rates on many of these new wells.

Supply from producing U.S. land wells has been bolstered by recent
successful shale and tight gas drilling. Year-over-year production
response from shale gas plays such as the Barnett, Deep Bossier and
emerging plays such as the Marcellus and Canadian shales, Montney and
Horn River, give promise that continental natural gas will continue to be
part of the long-term energy solution for North America.

The significant rise in production from these wells has been a product of
long section horizontal drilling combined with multi-stage large
fracturing processes. These wells are service intensive and as a result
expensive to drill, but strong initial production rates facilitate early
payouts for producers. From a drillers perspective these wells also have
a steep rate of production decline in the first year of 50-80%,
necessitating additional drilling to replace rapidly depleting wells. The
complexity of these wells dictate the use of high performance rigs with
large capacity mud pumps, advanced drilling control systems and high
mobility capabilities. These rigs are often referred to as "fit for
purpose" as a significant percentage of the existing industry rig fleet
does not adequately address the need. Precision's Super Series rigs and a
large number of its "traditional" rigs have been upgraded to these high
performance requirements.

Looking ahead to 2009, industry fundamentals for Canada are supported by
the recent strengthening of the U.S. dollar versus the Canadian dollar, a
reduced industry drilling rig count and natural gas pricing in October
2008 that is up to 10% higher than a year ago. Precision will continue to
risk manage its business growth through strong margin term contracts and
existing operations with a highly variable operating cost structure to
match equipment utilization.

The current state of the global banking system is an overriding concern
as access to capital through the debt and equity markets is challenging.
The liquidity and capital contraction is expected to cause many producers
of oil and natural gas to demonstrate renewed focus on balance sheet
discipline and to work within their existing financing and cash flow
means. Subject to the coming winter heating season and demand levels for
natural gas in North America, the current economic slowdown could
moderate energy consumption growth and may result in lower producer
spending for marginal oil and natural gas programs.

For Precision, existing debt facilities provide access to about $500
million of undrawn debt capacity and the tenure on the facility was
renewed for a new three year term in the second quarter of 2008. In
conjunction with the proposed acquisition of Grey Wolf, Precision is
planning to replace existing facilities with a new debt structure of
US$1.6 billion pursuant to firm funding arrangements with four reputable
lenders.

Precision's resolve to acquire Grey Wolf remains rooted in strategy and
will position the combined entity as one of the largest North American
drillers with an asset base that is exceptionally well positioned in most
of North America's promising resource plays, especially shale gas. The
acquisition will bring significant benefit to Precision through immediate
access to customers, employees and a very well maintained fleet of deep
drilling rigs that round out Precision's predominantly shallow to medium
depth rated fleet. Combined, the companies will have opportunity to
leverage available rig capacity for international deployment, to access a
large and loyal list of North American customers and to gain operational
benefits by embracing optimal internal safety, supply chain, rig
manufacturing and upgrade, new rig technology and human resource systems.
Precision's strategic focus is on global contract drilling through United
States expansion, international diversification opportunities and
complementary product line expansion. Precision's strategy is centered on
value-based high performance services where customers recognize and
reward superior performance. This presents Precision with significant
opportunity to displace low performing rigs, especially in technically
demanding unconventional drilling applications. A greater proportion of
wells drilled in North America are seeking unconventional oil and natural
gas reserves and due to the complexity of these programs, high
performance drilling rigs and services are required. The differentiation
between underperforming rigs and high performing, highly mobile,
well-designed rigs with exceptional crews continues to emerge.

SEGMENTED FINANCIAL RESULTS

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

(Stated in Three months ended Nine months ended
thousands September 30, September 30,
of Canadian % %
dollars) 2008 2007 Change 2008 2007 Change
----------------------------------------------------------------------------
Revenue:
Contract Drilling
Services $212,567 $160,068 32.8 $547,938 $519,792 5.4
Completion and
Production Services 76,701 71,570 7.2 228,980 249,754 (8.3)
Inter-segment
eliminations (3,629) (3,710) 2.2 (10,076) (9,071) (11.1)
----------------------------------------------------------------------------
$285,639 $227,928 25.3 $766,842 $760,475 0.8
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Operating earnings:(1)
Contract Drilling
Services $81,486 $ 58,877 38.4 $206,062 $215,625 (4.4)
Completion and
Production Services 21,608 22,538 (4.1) 64,281 83,307 (22.8)
Corporate and other (4,446) (8,013) 44.5 (25,410) (20,277) (25.3)
----------------------------------------------------------------------------
$ 98,648 $ 73,402 34.4 $244,933 $278,655 (12.1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Non-GAAP measure; see "NON-GAAP MEASURES AND RECONCILIATIONS".

Financial information for the three months ended September 30, 2008:

- Precision's financial position remained strong with working capital of
$193 million, long-term debt of $232 million and a long-term debt to
long-term debt plus equity ratio of 0.14.

- Revenue was $286 million, an increase of $58 million or 25% from the
prior year quarter due primarily to growth in the United States and
higher equipment utilization in Canada.

- General and administrative costs were $12 million, an amount in-line
with the prior year comparative.

- Operating earnings were $99 million, an increase of $25 million or 34%
from the third quarter in 2007 or 35% of revenue, compared to 32% in 2007.

- Capital expenditures for the purchase of property, plant and equipment
were $75 million, an increase of $35 million over the same period in
2007. Capital spending for the third quarter of 2008 included $58 million
on expansionary capital initiatives and $17 million on the upgrade of
existing assets.

Financial information for the nine months ended September 30, 2008:

- Revenue was $767 million, an increase of $6 million or 1% from the
prior year period due primarily to growth in United States drilling
operations partially offset by lower rig utilization and customer pricing
in Precision's Canadian operations during the first quarter of 2008.

- General and administrative costs were $49 million, an increase of $11
million from the prior year due primarily to prior year expense
recoveries on the reversal of performance based long-term incentive
compensation plan obligations.

- Operating earnings were $245 million, a decrease of $34 million or 12%
from the first nine months of 2007 or 32% of revenue, compared to 37% in
2007. Operating margins were impacted by revenue trends noted above and
operating costs that were contained at prior year levels in the Canadian
Contract Drilling Services segment and marginally higher in the
Completion and Production Services segment due to fuel and repair cost
escalations.

- Capital expenditures for the purchase of property, plant and equipment
were $130 million, a decrease of $19 million over the same period in
2007. Capital spending for the first nine months of 2008 included $101
million on expansionary capital initiatives and $29 million on the
upgrade of existing assets.

- During March 2008 Precision paid $55 million to a provincial taxing
authority for the reassessment of income taxes relating to tax filing
positions taken in prior periods. The reassessments have been recorded as
long-term receivables. The income tax related portion of the
reassessments is $36 million and was included in the $300 million
contingent tax liability note disclosed in the December 31, 2007
financial statements. Precision is in the process of challenging these
reassessments.

SEGMENT REVIEW OF CONTRACT DRILLING SERVICES

(Stated in thousands Three months ended Nine months ended
of Canadian dollars, September 30, September 30,
except where % %
indicated) 2008 2007 Change 2008 2007 Change
----------------------------------------------------------------------------
Revenue $ 212,567 $160,068 32.8 $ 547,938 $519,792 5.4
Expenses:
Operating 112,121 85,951 30.4 288,559 260,062 11.0
General and
administrative 5,850 3,805 53.7 17,310 13,631 27.0
Depreciation 15,207 10,490 45.0 38,817 29,212 32.9
Foreign exchange (2,097) 945 n/m (2,810) 1,262 n/m
----------------------------------------------------------------------------
Operating earnings(1) $ 81,486 $ 58,877 38.4 $ 206,062 $215,625 (4.4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings as
a percentage of
revenue 38.3% 36.8% 37.6% 41.5%
----------------------------------------------------------------------------
Drilling rig revenue
per operating
day in Canada $ 17,062 $17,112 (0.3) $ 17,883 $ 19,276 (7.2)
----------------------------------------------------------------------------
(1) Non-GAAP measure; see "NON-GAAP MEASURES AND RECONCILIATIONS".
n/m - calculation not meaningful

Canadian drilling statistics for the three month periods ended September 30:

2008 2007
----------------------------------------------------------------------------
Precision Industry(1) Precision Industry(1)
----------------------------------------------------------------------------

Number of drilling
rigs (end of period) 220 879 242 887

Drilling rig operating
days (spud to release) 9,008 38,898 7,903 31,371
Drilling rig operating
day utilization 44% 48% 36% 39%
Number of wells drilled 1,444 5,270 1,455 5,488
Average days per well 6.2 7.4 5.4 5.7

Number of metres
drilled (000s) 1,786 6,826 1,592 6,293
Average metres per well 1,237 1,295 1,094 1,147
Average metres per day 198 175 201 201
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Canadian drilling statistics for the nine month periods ended September 30:

2008 2007
----------------------------------------------------------------------------
Precision Industry(1) Precision Industry(1)
----------------------------------------------------------------------------

Number of drilling
rigs (end of period) 220 879 242 887

Drilling rig operating
days (spud to release) 22,578 99,980 22,863 90,120
Drilling rig operating
day utilization 36% 41% 35% 38%
Number of wells drilled 3,307 11,964 3,594 13,126
Average days per well 6.8 8.4 6.4 6.9

Number of metres
drilled (000s) 4,334 16,060 4,305 15,973
Average metres per well 1,310 1,342 1,198 1,217
Average metres per day 192 161 188 177
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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

In the Contract Drilling Services segment, revenue for the third
quarter increased by 33% to $213 million while operating earnings
increased by 38% to $81 million compared to the same period in 2007. The
increase is the combined result of revenue growth in Precision's United
States operations and increased activity in Canadian operations. For the
third quarter average drilling operating day rates for Precision in
Canada remained almost unchanged from the same quarter of 2007 at
$17,062. After removing the effects of winterization revenue, average
drilling rates for Precision have stabilized through 2008 and remain
relatively unchanged from the first quarter. During the quarter in Canada
approximately 37% of operating days came from rigs under term or payout
contracts compared to 25% in 2007. In the United States contract drilling
operating rates continue to be strong as all drilling rigs are working
under term or payout contracts.

Drilling rig operating days in Canada, spud to rig release, during the
third quarter of 2008 were 9,008 an increase of 14% compared to 7,903 in
2007. Drilling rig operating days for Precision in the United States were
1,868 an increase of 250% over the third quarter of 2007 as the average
number of rigs operating during the third quarter of 2008 was 25 compared
to seven in the prior year quarter. Precision's Latin America based
drilling rig was racked and did not operate during the third quarter as
work under that contract had terminated.

Precision's geographic diversification outside Canada continues as nine
drilling rigs were moved to the United States from Canada during the
quarter, all under term contracts. The total number of Precision drilling
rigs operating in the United States at the end of the quarter was 28.
Precision's United States based drilling rigs are all working under term
contracts and had a combined utilization rate, including move days, near
100%. Drilling activity in the United States is not subject to seasonal
fluctuations to the same extent experienced in Canada.

Precision's camp and catering division experienced an activity increase
of 77% over the prior year third quarter with a greater number of days
realized from larger base camp activity and increased industry activity.

Operating expenses in the segment were 53% of revenue for the quarter
compared to 54% for the prior year quarter. On a per day basis, operating
costs for the Contract Drilling division in Canada were in-line with the
prior year.

Depreciation in the Contract Drilling Services segment in the third
quarter of 2008 was 45% higher than the prior year period due to a 29%
increase in activity and an increased capital asset base.

SEGMENT REVIEW OF COMPLETION AND PRODUCTION SERVICES

Three months ended Nine months ended
(Stated in thousands September 30, September 30,
of Canadian dollars, % %
except where indicated) 2008 2007 Change 2008 2007 Change
----------------------------------------------------------------------------
Revenue $ 76,701 $ 71,570 7.2 $ 228,980 $249,754 (8.3)
Expenses:
Operating 45,831 40,956 11.9 137,825 138,268 (0.3)
General and
administrative 2,643 1,940 36.2 7,935 7,193 10.3
Depreciation 6,623 6,129 8.1 18,943 20,973 (9.7)
Foreign exchange (4) 7 n/m (4) 13 n/m
----------------------------------------------------------------------------
Operating earnings(1) $ 21,608 $ 22,538 (4.1) $ 64,281 $ 83,307 (22.8)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating earnings
as a percentage of
revenue 28.2% 31.5% 28.1% 33.4%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------

Three months ended Nine months ended
September 30, September 30,
Well servicing % %
statistics: 2008 2007 Change 2008 2007 Change
----------------------------------------------------------------------------
Number of
service rigs
(end of period) 229 239 (4.2) 229 239 (4.2)
Service rig operating hours 87,995 84,490 4.1 255,621 269,581 (5.2)
Service rig operating hour
utilization 42% 38% 41% 42%
Service rig revenue per
operating hour $ 675 $ 679 (0.6) $ 699 $ 742 (5.8)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Non-GAAP measure; see "NON-GAAP MEASURES AND RECONCILIATIONS".
n/m - calculation not meaningful

In the Completion and Production Services segment, revenue for the
third quarter increased 7% from 2007 to $77 million while operating
earnings was down 4% to $22 million. The increase in revenue is
attributed to the acquisition of six service rigs during the quarter and
an increase in industry activity from strong commodity prices. Operating
rates per hour were in-line with the comparative quarter from the prior
year.

Service rig activity increased 4% from the prior year period, with the
fleet generating 87,995 operating hours in the third quarter of 2008
compared with 84,490 hours in 2007 for utilization of 42% and 38%,
respectively. The increase was a result of the acquisition of six service
rigs, higher production work in oil producing regions in the WCSB and the
performance of completion work from wells drilled in the first quarter of
2008. New well completions accounted for 32% of service rig operating
hours in the third quarter compared to 30% in the same quarter in 2007.

Operating expenses in the segment were 60% of revenue for the quarter
compared to 57% for the prior year quarter. On a per hour basis,
operating costs for the service rig division were 4% higher due to fuel
and other direct costs.

Depreciation in the Completion and Production Services segment in the
third quarter of 2008 was 8% higher than the prior year period due to a
4% increase in activity and an increased capital asset base.

SEGMENT REVIEW OF CORPORATE AND OTHER

Corporate and other expenses decreased by 45% to $4 million in the third
quarter of 2008 compared to $8 million in the same period of 2007. The
decrease was primarily due to the one-time costs, associated with hiring
the new Chief Executive Officer, incurred in the third quarter of 2007
offset by the difference in employee incentive compensation expense and
the revaluation of unit based long-term compensation expense. In 2007, as
a result of financial performance, Precision recorded a recovery of
long-term incentive accruals expensed in prior periods.

OTHER ITEMS

Net interest expense of $2 million for the third quarter of 2008 was
in-line with the prior year.

The Trust's effective tax rate on earnings before income taxes for the
third quarter of 2008 was 15% compared to 3%, before rate reductions, for
the same period in 2007. The effective tax rate for the nine month
periods ended September 30, 2008 and 2007 was 12% and 8% respectively.
The increase in the effective tax rate for the quarter and the nine month
period is a result of increased earnings in Precision's United States
operations. Compared to a corporate tax rate, the low effective tax rate
is primarily the result of the income trust structure shifting all or a
portion of the income tax burden of the Trust to its unitholders.

LIQUIDITY AND CAPITAL RESOURCES

Precision's liquidity and solvency position remained strong with
long-term debt exceeding working capital by only $39 million as at
September 30, 2008 compared to working capital exceeding long-term debt
by $21 million as at December 31, 2007.

During the first nine months of 2008 Precision generated cash from
continuing operations of $261 million. The cash was used to purchase
property, plant and equipment net of disposal proceeds and related
non-cash working capital of $114 million, complete a business acquisition
for $16 million, make cash distributions to unitholders of $167 million,
repay bank indebtedness of $14 million and pay assessed income taxes and
interest of $55 million and when combined with a net draw on long-term
debt facilities of $112 million resulted in a cash balance of $7 million.

The first nine months of 2008 were further highlighted by the following
financial developments:

- The Trust declared monthly distributions to unitholders of $0.13 per
diluted unit for aggregate distributions declared of $147 million or
$1.17 per diluted unit.

- Long-term debt increased by $112 million from December 31, 2007 to $232
million for a long-term debt to long-term debt plus equity ratio of 0.14.

- Working capital increased $52 million to $193 million as Precision
realized higher activity leading into September 30, 2008 compared to the
2007 year end.

On August 24, 2008 Precision entered into an arrangement to fund the
acquisition of Grey Wolf and ongoing operating requirements through a
US$1.6 billion debt structure as outlined in a commitment letter with
four lenders, the Royal Bank, the Toronto Dominion Bank, Deutsche Bank
and HSBC Bank. The new debt structure will replace existing debt
facilities.

DISTRIBUTIONS

Upon conversion to an income trust effective November 7, 2005 the Trust
adopted a policy of making monthly distributions to holders of Trust
units and holders of exchangeable LP units ("unitholders"). Precision has
a legal entity structure whereby the trust entity, Precision Drilling
Trust, effectively must flow its taxable income to unitholders pursuant
to its Declaration of Trust. Distributions, including special
distributions, may be declared in cash or "in-kind" or a combination of
both and reduced, increased or suspended entirely depending on the
operations of Precision, the performance of its assets, or legislative
changes in tax laws. The actual cash flow available for distribution to
unitholders is a function of numerous factors, including the Trust's:
financial performance; debt covenants and obligations; working capital
requirements; upgrade and expansion capital expenditure requirements for
the purchase of property, plant and equipment; and number of units
outstanding. In June 2007 the Government of Canada's Bill C-52 Budget
Implementation Act 2007 was enacted and included legislative provisions
that impose a tax on certain distributions from publicly traded specified
investment flow-through ("SIFT") trusts at a rate equal to the applicable
federal corporate tax rate plus a provincial SIFT tax factor. With
enacted federal tax rate reductions the combined SIFT tax will be 29.5%
in 2008, reducing to 25% in 2012. Precision will be a SIFT trust on the
earlier of January 1, 2011 or the first day after it exceeds the normal
growth guidelines announced by the federal Department of Finance on
December 15, 2006.

Key factors for consideration in determining actual cash flow available
for distribution, in an historical context, are disclosed within the
consolidated statements of cash flow. In calculating distributable cash
Precision makes the following adjustments to cash provided by continuing
operations:

- Deducts the purchase of property, plant and equipment for upgrade
capital as the minimum reinvestment required to maintain current
operating capacity;

- Deducts the purchase of property, plant and equipment for expansion
initiatives to grow capacity;

- Adds the proceeds on the sale of property, plant and equipment capital
which are incidental transactions occurring within the normal course of
operations; and

- Deducts long-term incentive plan changes as an unfunded liability
resulting from the operating activities in the current period with
payments beginning March 2009.

A quarterly two-year reconciliation of distributable cash from continuing
operations follows:

(Stated in thousands of
Canadian dollars, except
per diluted unit amounts) 2007 2008
----------------------------------------------------------------------------

Quarters ended December 31 March 31 June 30 September 30
----------------------------------------------------------------------------

Cash provided by
continuing operations $ 78,474 $ 57,307 $ 200,458 $ 3,241
Deduct:
Purchase of property, plant
and equipment for
upgrade capital (9,241) (2,814) (8,864) (17,270)
Purchase of property plant
and equipment for
expansion initiatives (28,264) (20,654) (22,480) (58,187)

Add:
Proceeds on the sale of
property, plant and
equipment 1,236 1,303 2,143 1,879
----------------------------------------------------------------------------
Standardized distributable
cash(1) 42,205 35,142 171,257 (70,337)
Unfunded long-term incentive
plan compensation (1,817) 469 (2,166) 93
----------------------------------------------------------------------------
Distributable cash from
continuing operations(1) $ 40,388 $ 35,611 $ 169,091 $ (70,244)
----------------------------------------------------------------------------
Cash distributions declared $ 69,166 $ 49,046 $ 49,045 $ 49,046
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Per diluted unit information:
Cash distributions declared $ 0.55 $ 0.39 $ 0.39 $ 0.39
Standardized distributable
cash(1) $ 0.33 $ 0.28 $ 1.36 $ (0.56)
Distributable cash from
continuing operations(1) $ 0.32 $ 0.28 $ 1.34 $ (0.56)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

2006 2007
----------------------------------------------------------------------------
Quarters ended December 31 March 31 June 30 September 30
----------------------------------------------------------------------------
Cash provided by continuing
operations $154,233 $156,298 $ 229,073 $ 20,270
Deduct:
Purchase of property, plant
and equipment for
upgrade capital (26,122) (17,583) (8,602) (10,544)
Purchase of property plant
and equipment for
expansion initiatives (46,211) (38,119) (44,238) (30,382)
Add:
Proceeds on the sale of
property, plant and
equipment 3,742 1,128 2,130 1,273
----------------------------------------------------------------------------
Standardized distributable
cash(1) 85,642 101,724 178,363 (19,383)
Unfunded long-term incentive
plan compensation (10,192) 2,461 4,167 3,685
----------------------------------------------------------------------------
Distributable cash from
continuing operations(1) $ 75,450 $104,185 $ 182,530 $ (15,698)
----------------------------------------------------------------------------
Cash distributions declared $116,912 $ 71,682 $ 56,591 $ 49,046
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Per diluted unit information:
Cash distributions declared $ 0.93 $ 0.57 $ 0.45 $ 0.39
Standardized distributable
cash(1) $ 0.68 $ 0.81 $ 1.42 $ (0.15)
Distributable cash from
continuing operations(1) $ 0.60 $ 0.83 $ 1.45 $ (0.12)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Non-GAAP measure; see "NON-GAAP MEASURES AND RECONCILIATIONS".

The quarterly distributable cash calculation over the past two years
demonstrates the wide variances from quarter to quarter and highlights
the need to consider seasonal and economic conditions for cumulative
quarters to assess performance and the reasonableness of distributions.

For the quarter ended September 30, 2008 cash provided by operations was
$3 million, a decrease of $17 million from the 2007 third quarter. The
decrease was due primarily to an increase in the non-cash working capital
balance of $48 million offset by an increase in operating earnings in the
current quarter compared to the prior year.

The Canadian drilling industry is subject to seasonality with activity
and earnings peaking during the winter months in the fourth and first
quarters. As temperatures rise in the spring, the ground thaws and
becomes unstable. Government road bans can restrict activity at any time
but are most typical for spring break-up during the second quarter before
equipment is able to move for summer drilling programs. As a result, in
combination with economic cycles, Precision's operating and financial
results can vary significantly by quarter. Working capital is typically
at its highest level at the end of the first quarter when accounts
receivable increases from winter activity and tends to be at its lowest
during the second quarter. The change in the non-cash working capital
balance has a direct impact on cash provided by operations.

Nine months ended Nine months ended Year ended
(stated in thousands September 30, September 30, December 31,
of Canadian dollars) 2008 2007 2007
----------------------------------------------------------------------------
Cash provided by
continuing operations (A) $ 261,006 $ 405,641 $ 484,115
----------------------------------------------------------------------------
Net earnings (B) $ 210,354 $ 256,447 $ 345,776
----------------------------------------------------------------------------
Distributions declared Copyright $ 147,137 $ 177,319 $
276,667
----------------------------------------------------------------------------
Excess of cash provided by
continuing operations over
distributions declared (A-C) $ 113,869 $ 228,322 $ 207,448
----------------------------------------------------------------------------
Excess of net earnings from
operating activities over
distributions declared (B-C) $ 63,217 $ 79,128 $ 69,109
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The Trust has maintained a strong financial position and has
sufficient debt facilities to manage short-term funding needs as well as
planned equipment additions. Part of the debt management strategy
involves retaining sufficient funds from available distributable cash to
finance upgrade capital expenditures as well as working capital needs.
Planned asset growth will generally be financed through existing debt
facilities or cash retained from continuing operations. Precision renewed
its $700 million three-year revolving syndicated loan facility during the
second quarter of 2008. Tenure has been renewed for most of the facility
and certain pricing terms were amended. A $150 million accordion clause
was added, enabling Precision to increase the size of the facility under
certain conditions.

Periodically, Precision enters into cash generating transactions that are
outside the normal course of operations and, while such transactions
increase the cash available for distribution, Precision does not rely on
these sources of cash for distributions.

QUARTERLY FINANCIAL SUMMARY

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

2007 2008
----------------------------------------------------------------------------
Quarters ended December 31 March 31 June 30 September 30
----------------------------------------------------------------------------Reve
ue $ 248,726 $ 342,689 $ 138,514 $ 285,639
Operating earnings(1) 77,696 124,238 22,047 98,648
Earnings from
continuing operations 89,329 106,266 21,739 82,349
Per diluted unit 0.71 0.84 0.17 0.65
Net earnings 89,329 106,266 21,739 82,349
Per diluted unit 0.71 0.84 0.17 0.65
Cash provided by
continuing operations 78,474 57,307 200,458 3,241
Distributions declared $ 99,348 $ 49,046 $ 49,045 $ 49,046
----------------------------------------------------------------------------
----------------------------------------------------------------------------

2006 2007
----------------------------------------------------------------------------
Quarters ended December 31 March 31 June 30 September 30
----------------------------------------------------------------------------
Revenue 328,049 $ 410,542 $ 122,005 $ 227,928
Operating earnings(1) 132,396 178,179 27,074 73,402
Earnings from
continuing operations 126,474 158,067 25,722 69,702
Per diluted unit 1.01 1.26 0.20 0.55
Net earnings 127,436 158,067 25,722 72,658
Per diluted unit 1.01 1.26 0.20 0.58
Cash provided by
continuing operations 154,233 156,298 229,073 20,270
Distributions declared $ 141,435 $ 71,682 $ 56,591 $ 49,046
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Non-GAAP measure; see "NON-GAAP MEASURES AND RECONCILIATIONS".

NON-GAAP MEASURES AND RECONCILIATIONS

Precision uses both Generally Accepted Accounting Principles ("GAAP") and
non-GAAP measures to assess performance and believes the non-GAAP
measures provide useful supplemental information to investors. Following
are the non-GAAP measures Precision uses in assessing performance:

- Operating Earnings: Management believes that in addition to net
earnings, operating earnings as derived from information reported in the
Consolidated Statements of Earnings and Deficit 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 or how the results are taxed.

The following table provides a reconciliation of net earnings under GAAP
as disclosed in the Consolidated Statements of Earnings and Deficit to
operating earnings.

Three months ended Nine months ended
(Stated in thousands of September 30, September 30,
Canadian dollars) 2008 2007 2008 2007
----------------------------------------------------------------------------
Net earnings $ 82,349 $ 72,658 $ 210,354 $ 256,447
Add (deduct):
Gain on disposal of
discontinued operations - (2,956) - (2,956)
Income taxes 14,011 2,136 28,008 19,558
Interest:
Long-term debt 2,367 1,623 6,711 5,802
Other 12 25 111 83
Income (91) (84) (251) (279)
----------------------------------------------------------------------------
Operating earnings $ 98,648 $ 73,402 $ 244,933 $ 278,655
----------------------------------------------------------------------------
----------------------------------------------------------------------------

- Standardized Distributable Cash, Distributable Cash from Continuing
Operations, Standardized Distributable Cash per Diluted Unit and
Distributable Cash from Continuing Operations per Diluted Unit:
Management believes that in addition to cash provided by continuing
operations, standardized distributable cash and distributable cash from
continuing operations are useful supplemental measures. They provide an
indication of the funds available for distribution to unitholders after
consideration of the impacts of capital expenditures and long-term
unfunded contractual operational obligations.

Precision's method of calculating these non-GAAP measures may differ from
other entities and, accordingly, may not be comparable to measures used
by other entities. Investors should be cautioned, however, that these
measures should not be construed as an alternative to measures determined
in accordance with GAAP as an indicator of Precision's performance.

CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2008 the Trust adopted new Canadian accounting
standards relating to inventories (Section 3031) and capital disclosures
(Section 1535). Section 3031 requires inventories to be measured at the
lower of cost or net realizable value and the reversal of previously
recorded write downs to realizable value when the circumstances that
caused the write down no longer exist. This new standard did not have a
material impact on the Trust's financial statements for the period ended
September 30, 2008. Section 1535 requires the Trust to provide additional
quantitative and qualitative information regarding its objectives,
policies and processes for managing its capital.

Effective for fiscal years starting on or after January 1, 2011, Canadian
Publicly Accountable Enterprises must report financial information using
International Financial Reporting Standards ("IFRS"). During the nine
month period ended September 30, 2008 Precision has initiated the
transition process with an identification and assessment of the primary
differences that would have an impact on Precision and has commenced
planning for the conversion.

Although many elements of Canadian GAAP and IFRS are similar, Precision
expects its transition to IFRS to take considerable effort.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to provide reasonable
assurance that information required to be disclosed in reports filed
with, or submitted to, securities regulatory authorities is recorded,
processed, summarized and reported within the time periods specified
under Canadian and United States securities laws. The information is
accumulated and communicated to management, including the principal
executive officer and principal financial and accounting officer, to
allow timely decisions regarding required disclosure.

As of September 30, 2008 an evaluation was carried out, under the
supervision of and with the participation of management, including the
principal executive officer and principal financial and accounting
officer, of the effectiveness of Precision's disclosure controls and
procedures as defined under the rules adopted by the Canadian securities
regulatory authorities and by the United States Securities and Exchange
Commission. Based on that evaluation, the principal executive officer and
principal financial and accounting officer concluded that the design and
operation of Precision's disclosure controls and procedures were
effective as at September 30, 2008.

During the quarter ended September 30, 2008 there have been no changes in
internal control over financial reporting that have materially affected,
or are reasonably likely to materially affect, Precision's internal
control over financial reporting.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS

Certain statements contained in this report, including statements that
contain words such as "could", "should", "can", "anticipate", "estimate",
"propose", "plan", "expect", "believe", "will", "may" and similar
expressions and statements relating to matters that are not historical
facts constitute "forward-looking information" within the meaning of
applicable Canadian securities legislation and "forward-looking
statements" within the meaning of the "safe harbor" provisions of the
United States Private Securities Litigation Reform Act of 1995
(collectively "forward-looking information and statements").

In particular, forward-looking information and statements include, but
are not limited to: plans to replace existing facilities with a new debt
structure of US$1.6 billion pursuant to a commitment letter with four
lenders; the anticipated closing and potential impact and benefits of the
Grey Wolf transaction; the opportunities stemming from a focus on global
contract drilling through United States expansion, international
diversification opportunities and complementary product line expansion;
that new drilling rigs are expected to be contracted with customers
before completion; the timing of completion of rigs in the 2008 rig build
program; that Precision will have opportunities from increased industry
rig counts and trend toward directional and horizontal drilling programs;
that improved commodity prices are expected to alleviate downward pricing
pressure; that an increase in labour rates will address labour shortage
issues; the impact of shale gas drilling in Canada and the United States;
that unconventional drilling applications will require high performance
drilling rigs; that continental natural gas will continue to be part of
the long-term energy solution for North America; these wells also have a
steep rate of production decline in the first year of 50-80%,
necessitating additional drilling to replace rapidly depleting wells; the
timing and results of international diversification opportunities; that
planned asset growth will generally be financed through existing debt
facilities or cash retained from continuing operations; and statements as
to seasonal and weather conditions affecting the Canadian oil and natural
gas industry and the demand for Precision's services all of which are
stated under the headings "Overview" and "Outlook" of this report. These
forward-looking information and statements are based on certain
assumptions and analysis made by the Trust in light of its experience and
its perception of historical trends, current conditions and expected
future developments as well as other factors it believes are appropriate
in the circumstances. However, whether actual results, performance or
achievements will conform to the Trust's expectations and predictions is
subject to a number of known and unknown risks and uncertainties which
could cause actual results to differ materially from the Trust's
expectations. Such risks and uncertainties include, but are not limited
to: fluctuations in the price and demand for oil and natural gas;
fluctuations in the level of oil and natural gas exploration and
development activities; fluctuations in the demand for well servicing,
contract drilling and ancillary oilfield services; the effects of
seasonal and weather conditions on operations and facilities; the
existence of competitive operating risks inherent in well servicing,
contract drilling and ancillary oilfield services; general economic,
market or business conditions; changes in laws or regulations, including
taxation, environmental and currency regulations; the lack of
availability of qualified personnel or management; failure to receive
approval of the proposed acquisition of Grey Wolf by the shareholders of
Grey Wolf and satisfaction of various other conditions to the completion
of the acquisition; failure to realize anticipated synergies; and other
unforeseen conditions which could impact the use of services supplied by
Precision.

Consequently, all of the forward-looking information and statements made
in this report are qualified by these cautionary statements and there can
be no assurance that the actual results or developments anticipated by
the Trust will be realized or, even if substantially realized, that they
will have the expected consequences to or effects on the Trust or its
business or operations. Readers are therefore cautioned not to place
undue reliance on such forward-looking information and statements. Except
as may be required by law, the Trust assumes no obligation to update
publicly any such forward-looking information and statements, whether as
a result of new information, future events or otherwise.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30, December 31,
(Stated in thousands of Canadian dollars) 2008 2007
----------------------------------------------------------------------------

ASSETS

Current assets:
Cash and cash equivalents $ 6,649 $ -
Accounts receivable 326,019 256,616
Income tax recoverable 3,274 5,952
Inventory 8,599 9,255
----------------------------------------------------------------------------
344,541 271,823

Income tax recoverable (note 4) 58,055 -
Property, plant and equipment, net of
accumulated depreciation 1,285,584 1,210,587
Intangibles, net of accumulated amortization 1,376 318
Goodwill 284,579 280,749
----------------------------------------------------------------------------
$ 1,974,135 $ 1,763,477
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES AND UNITHOLDERS' EQUITY

Current liabilities:
Bank indebtedness $ - $ 14,115
Accounts payable and accrued liabilities 135,522 80,864
Distributions payable 16,349 36,470
----------------------------------------------------------------------------
151,871 131,449

Long-term compensation plans 7,116 13,896
Long-term debt 231,784 119,826
Future income taxes 202,783 181,633
----------------------------------------------------------------------------
593,554 446,804
----------------------------------------------------------------------------
Contingencies and Commitments (notes 9 and 10)

Unitholders' equity:
Unitholders' capital 1,442,476 1,442,476
Contributed surplus 998 307
Deficit (62,893) (126,110)
----------------------------------------------------------------------------
1,380,581 1,316,673
----------------------------------------------------------------------------
$ 1,974,135 $ 1,763,477
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Units outstanding (000s) 125,758 125,758

See accompanying notes to consolidated financial statements

CONSOLIDATED STATEMENTS OF EARNINGS AND DEFICIT (UNAUDITED)

(Stated in thousands of
Canadian dollars,
except per unit amounts) Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
Revenue $ 285,639 $ 227,928 $ 766,842 $ 760,475

Expenses:
Operating 154,323 123,197 416,308 389,259
General and administrative 12,496 12,663 48,793 37,492
Depreciation and
amortization 22,798 17,535 60,559 53,045
Foreign exchange (2,626) 1,131 (3,751) 2,024
Interest:
Long-term debt 2,367 1,623 6,711 5,802
Other 12 25 111 83
Income (91) (84) (251) (279)
----------------------------------------------------------------------------
Earnings from continuing
operations before
income taxes 96,360 71,838 238,362 273,049

Income taxes: (note 4)
Current 2,121 (3) 6,818 (3,650)
Future 11,890 2,139 21,190 23,208
----------------------------------------------------------------------------
14,011 2,136 28,008 19,558
----------------------------------------------------------------------------

Earnings from continuing
operations 82,349 69,702 210,354 253,491
Gain on disposal of
discontinued operations,
net of tax - 2,956 - 2,956
----------------------------------------------------------------------------
Net earnings and
comprehensive earnings 82,349 72,658 210,354 256,447

Deficit, beginning of period (96,196) (139,703) (126,110) (195,219)
Distributions declared (49,046) (49,046) (147,137) (177,319)
----------------------------------------------------------------------------

Deficit, end of period $ (62,893) $ (116,091) $ (62,893) $ (116,091)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per unit from
continuing operations:
Basic $ 0.65 $ 0.55 $ 1.67 $ 2.02
Diluted $ 0.65 $ 0.55 $ 1.67 $ 2.02
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per unit:
Basic $ 0.65 $ 0.58 $ 1.67 $ 2.04
Diluted $ 0.65 $ 0.58 $ 1.67 $ 2.04
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Units outstanding (000s) 125,758 125,758 125,758 125,758
Weighted average units
outstanding (000s) 125,758 125,758 125,758 125,758
Diluted units outstanding
(000s) 125,794 125,758 125,785 125,758

See accompanying notes to consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)

Three months ended Nine months ended
(Stated in thousands of September 30, September 30,
Canadian dollars) 2008 2007 2008 2007
----------------------------------------------------------------------------

Cash provided by (used in):

Operations:
Net earnings $ 82,349 $ 69,702 $ 210,354 $ 253,491
Adjustments and other items
not involving cash:
Long-term compensation plans 93 (3,685) 1,790 (10,313)
Depreciation
and amortization 22,798 17,535 60,559 53,045
Future income taxes 11,890 2,139 21,190 23,208
Other (23) 3 (40) 8
Changes in non-cash working
capital balances (113,866) (65,424) (32,847)
86,202--------------------------------------------------------------------------
-
3,241 20,270 261,006 405,641

Investments:
Business acquisitions
(note 7) (15,519) - (15,519) -
Purchase of property, plant
and equipment (75,457) (40,926) (130,269) (149,468)
Proceeds on sale of
property, plant and equipment 1,879 1,273 5,325 4,531
Changes in income tax
recoverable - (55,148) -
Proceeds on disposal of
discontinued operations - 2,956 - 2,956
Changes in non-cash working
capital balances 7,598 406 10,669 (9,708)
----------------------------------------------------------------------------
(81,499) (36,291) (184,942) (151,689)

Financing:
Distributions paid (49,046) (49,046) (167,258) (199,955)
Repayment of long-term debt - - (108,559) (95,753)
Increase in long-term debt 126,836 71,836 220,517 78,646
Repayment of bank
indebtedness - (6,653) (14,115) (36,774)
----------------------------------------------------------------------------
77,790 16,137 (69,415) (253,836)

Change in cash and cash
equivalents (468) 116 6,649 116
Cash and cash equivalents,
beginning of period 7,117 - - -
----------------------------------------------------------------------------

Cash and cash equivalents,
end of period $ 6,649 $ 116 $ 6,649 $ 116
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to consolidated financial statements

Notes to Consolidated Financial Statements (UNAUDITED)

(Tabular amounts are stated in thousands of Canadian dollars except unit
numbers)

1. Basis of Presentation

These interim financial statements for Precision Drilling Trust
("Precision" or 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, 2007 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, 2007.

Effective January 1, 2008 the Trust adopted new Canadian accounting
standards relating to inventories (Section 3031) and capital disclosures
(Section 1535). Section 3031 requires inventories to be measured at the
lower of cost or net realizable value and the reversal of previously
recorded write downs to realizable value when the circumstances that
caused the write down no longer exist. This new standard did not have a
material impact on the Trust's financial statements for the period ended
September 30, 2008. Section 1535 requires the Trust to provide additional
quantitative and qualitative information regarding its objectives,
policies and processes for managing its capital.

In February 2008, the Canadian Institute of Chartered Accountants issued
Section 3064, goodwill and intangible assets, replacing Section 3062,
goodwill and other intangible assets and Section 3450, research and
development costs. The new Section establishes standards for the
recognition, measurement, presentation and disclosure of goodwill and
intangible assets. The new Section will be applicable to the Trust on
January 1, 2009. The Trust is currently evaluating the impact of this new
section on its consolidated financial statements.

2. Seasonality of Operations

The majority of the Trust's operations are carried on in Canada. The
ability to move heavy equipment in the Canadian oil and natural gas
fields is dependent on weather conditions. As warm weather returns in the
spring, the 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.

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, 2007 125,587,919 $ 1,440,543
Issued on retraction of exchangeable LP units 13,522 154
----------------------------------------------------------------------------
Balance September 30, 2008 125,601,441 $ 1,440,697
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Exchangeable LP units Number Amount
----------------------------------------------------------------------------
Balance, December 31, 2007 170,005 $ 1,933
Redeemed on retraction of exchangeable LP units (13,522) (154)
----------------------------------------------------------------------------
Balance September 30, 2008 156,483 $ 1,779
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Summary Number Amount
----------------------------------------------------------------------------
Trust units 125,601,441 $ 1,440,697
Exchangeable LP units 156,483 1,779
----------------------------------------------------------------------------
Unitholders' capital 125,757,924 $ 1,442,476
----------------------------------------------------------------------------
----------------------------------------------------------------------------

4. Income Taxes

Currently, the Trust incurs taxes to the extent that there are certain
provincial capital 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 is as follows:

Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
----------------------------------------------------------------------------
Earnings from continuing operations
before income taxes $ 96,360 $ 71,838 $ 238,362 $ 273,049
Federal and provincial statutory
rates 30% 33% 30% 33%
----------------------------------------------------------------------------
Tax at statutory rates $ 28,908 $ 23,706 $ 71,509 $ 90,106
Adjusted for the effect of:
Non-deductible expenses (213) 50 (410) 455
Income to be distributed to
unitholders, not subject to tax in
the Trust (17,000) (21,468) (48,569) (68,544)
Other 2,316 (152) 5,478 (269)
----------------------------------------------------------------------------
Income tax expense before tax rate
reductions $ 14,011 $ 2,136 $ 28,008 $ 21,748
Reduction of future tax balances
due to enacted tax rate reductions - - - (2,190)
----------------------------------------------------------------------------
Income tax expense $ 14,011 $ 2,136 $ 28,008 $ 19,558
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Effective income tax rate before
enacted tax rate reductions 15% 3% 12% 8%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The Trust received notices of reassessment 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
$36.1 million in taxes and $19.1 million in assessed interest during the
first quarter of 2008 and $1.6 million in taxes and $1.3 million in
assessed interest in 2007. The reassessments relate to the treatment of
interest deductions in certain provincial tax filings. The Trust is in
the process of challenging these reassessments. It is anticipated that
the dispute will not be resolved within one year and the amount paid has
been recorded as a long-term receivable. No amounts related to the $58.1
million in reassessments have been expensed. 5. Long-Term Debt

During the nine months ended September 30, 2008, Precision Drilling
Corporation, a subsidiary of the Trust, received approval from its
lenders to extend the maturity of the extendible revolving unsecured
credit facility until June 2011. In addition, a clause was added whereby
the facility may increase by $150 million and certain amendments were
made to pricing.

6. Unit Based Compensation Plans

(a) Officers and Employees

Eligible participants of Precision's Performance Savings Plan may 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 the receipt of the DTUs.

During 2008 Precision issued 28,567 DTUs, including additional DTUs
issued in lieu of cash distributions and redeemed 21,994 DTUs on employee
resignations and employee withdrawals. As at September 30, 2008 $1.5
million is included in accounts payable and accrued liabilities for
outstanding DTUs. Included in net earnings for the three months and nine
months ended September 30, 2008 is an expense recovery of $0.9 million
(2007- $0.5 million) and an expense of $0.2 million (2007- $0.6 million
expense recovery) respectively.

(b) 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
September 30, 2008 $1.1 million is included in accounts payable and
accrued liabilities and $1.1 million in long-term incentive plan payable
for the 129,645 currently outstanding DTUs. Included in net earnings for
the three and nine months ended September 30, 2008 is an expense recovery
of $1.5 million (2007 $3.4 million expense) and an expense of $1.0
million (2007- $3.4 million) respectively.

(c) 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 his or her 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 this unit based incentive plan is presented below:

Number
Outstanding
----------------------------------------------------------------------------
Balance, December 31, 2007 18,280
Granted 33,058
Issued as a result of distributions 1,188
----------------------------------------------------------------------------
Balance, September 30, 2008 52,526
----------------------------------------------------------------------------
----------------------------------------------------------------------------

For the three months and nine months ended September 30, 2008 the
Trust expensed $256,000 (2007 - $ nil) and $691,000 (2007 - $ nil)
respectively as unit based compensation, with a corresponding increase in
contributed surplus.

7. Acquisition

On July 31, 2008, Precision acquired six service rigs and related
equipment from Rick's Well Servicing Ltd. ("RWS") a privately owned well
servicing company based in Virden, Manitoba. The acquisition represented
all of the operating assets of RWS and Precision will maintain and
operate out of the RWS facility. The operations of RWS will be included
in the Completion and Production Services segment. The acquisition has
been accounted for by the purchase method with the results of operations
included in the financial statements from the date of acquisition. The
details of the acquisition are as follows:

----------------------------------------------------------------------------

Net assets acquired at assigned values:
Working capital $ 19
Property, plant and equipment 10,542
Intangible assets 1,128
Goodwill 3,830
----------------------------------------------------------------------------
$ 15,519
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Consideration:
Cash $ 15,519
----------------------------------------------------------------------------
----------------------------------------------------------------------------

8. Capital Management

The Trust's strategy is to carry a capital base to maintain investor,
creditor and market confidence and to sustain future development of the
business. The Trust seeks to maintain a balance between the level of
long-term debt and unitholders' equity to ensure access to capital
markets to fund growth and working capital given the cyclical nature of
the oilfield services sector. On an historical basis, the Trust has
maintained a conservative ratio of long-term debt to long-term debt plus
equity. The Trust may need to increase these levels to facilitate
acquisition or expansionary activities. As at September 30, 2008 and
December 31, 2007 these ratios were as follows:

September 30, December 31,
2008 2007
----------------------------------------------------------------------------
Long-term debt $ 231,784 $ 119,826
Unitholders' equity 1,380,581 1,316,673
----------------------------------------------------------------------------
Total capitalization $ 1,612,365 $ 1,436,499
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Long-term debt to long-term debt plus equity
ratio 0.14 0.08
----------------------------------------------------------------------------
----------------------------------------------------------------------------

On December 15, 2006 the Minister of Finance (Canada) issued
guidelines establishing "normal growth" limitations designed to limit the
ability of a trust to issue equity (including convertible debentures or
other equity substitutes) that exceeds certain specified percentages of
the market capitalization of a trust on October 31, 2006. The normal
growth limitation is cumulative in nature to the extent not taken and for
the year ended December 31, 2008 the Trust's normal growth limitation is
approximately $2.4 billion. Precision will be a specified investment
flow-through ("SIFT") trust, subject to the SIFT tax rules, on the
earlier of January 1, 2011 or the first day after it exceeds the normal
growth guidelines.

The Trust is bound by a debt covenant requiring the Trust to maintain a
ratio of total liabilities to total equity of less than 1:1.

There were no changes in the Trust's approach to capital management
during the quarter, however Precision has an acquisition pending (see
note 11) that will have an impact on capitalization.

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 tax
liabilities could be owed by the Trust and the amount owed, with
estimated interest but without penalties, could be up to $390 million,
including $58 million recorded as a long-term receivable (see note 4).

The Trust, through the performance of its services, product sales and
business arrangements, is sometimes named as a defendant in litigation.
The outcome of such claims against the Trust is not determinable at this
time, however, their ultimate resolution is not expected to have a
material adverse effect on the Trust. The Trust has been named in a
derivative lawsuit in regards to its proposed merger with Grey Wolf,
Inc.. The lawsuit alleges the Trust aided and abetted an alleged breach
of fiduciary duty by the Grey Wolf directors and seeks to enjoin the
proposed merger and ask for other relief including an award of attorneys'
and experts' fees. The Trust believes that this lawsuit is without merit
and intends to defend the lawsuit vigorously. 10. Commitments

Precision entered into a contract with a drilling rig manufacturer to
partially construct five Super Triple drilling rigs for an estimated cost
of US$75 million. The first drilling rig is scheduled to be delivered in
January 2009 with the remaining four at various times later in the first
half of 2009. At September 30, 2008, approximately US$15 million of the
expenditures incurred relating to this commitment had been recorded in
the financial statements and included in property, plant and equipment.
Depreciation will commence as the rigs are delivered and put in service.

11. Potential Acquisition

On August 24, 2008 Precision entered into a definitive merger agreement
pursuant to which Precision will acquire Grey Wolf, Inc. ("Grey Wolf").
Under the terms of the agreement, Grey Wolf shareholders will receive
US$5.00 in cash and 0.1883 Precision trust units for each Grey Wolf
common share. On a fully diluted basis aggregate consideration is
estimated to be US$1.12 billion in cash and 42.0 million trust units,
assuming the Grey Wolf convertible note holders elect to convert the
outstanding notes to Grey Wolf common shares prior to closing. Completion
of the transaction is subject to Grey Wolf shareholder approval and is
scheduled to close in the fourth quarter.

On August 24, 2008 Precision entered into an arrangement to fund the Grey
Wolf acquisition and ongoing operating requirements through a US$1.6
billion debt structure as outlined in a commitment letter with four
lenders. The new debt structure will replace existing debt facilities.

12. Segmented Information

The Trust operates primarily in Canada, 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.

Three months Completion
ended Contract and Corporate Inter
September 30, Drilling Production and -segment
2008 Services Services Other Eliminations Total
----------------------------------------------------------------------------

Revenue $ 212,567 $ 76,701 $ - $ (3,629) $ 285,639
Segment
profit
(loss)(1) 81,486 21,608 (4,446) - 98,648
Depreciation
and
amortization 15,207 6,623 968 - 22,798
Total assets 1,426,832 473,308 73,995 - 1,974,135
Goodwill 172,440 112,139 - - 284,579
Capital
expenditures 68,435 6,066 956 - 75,457
----------------------------------------------------------------------------

Three months Completion
ended Contract and Corporate Inter
September 30, Drilling Production and -segment
2007 Services Services Other Eliminations Total
----------------------------------------------------------------------------

Revenue $ 160,068 $ 71,570 $ - $ (3,710) $ 227,928
Segment
profit
(loss)(1) 58,877 22,538 (8,013) - 73,402
Depreciation
and
amortization 10,490 6,129 916 - 17,535
Total assets 1,241,666 460,116 27,264 - 1,729,046
Goodwill 172,440 108,309 - - 280,749
Capital
expenditures 31,603 8,885 438 - 40,926
----------------------------------------------------------------------------

Nine months Completion
ended Contract and Corporate Inter
September 30, Drilling Production and -segment
2008 Services Services Other Eliminations Total
----------------------------------------------------------------------------

Revenue $ 547,938 $ 228,980 $ - $ (10,076) $ 766,842
Segment
profit
(loss)(1) 206,062 64,281 (25,410) - 244,933
Depreciation
and
amortization 38,817 18,943 2,799 - 60,559
Total assets 1,426,832 473,308 73,995 - 1,974,135
Goodwill 172,440 112,139 - - 284,579
Capital
expenditures 113,247 15,247 1,775 - 130,269
----------------------------------------------------------------------------

Nine months Completion
ended Contract and Corporate Inter
September 30, Drilling Production and -segment
2007 Services Services Other Eliminations Total
----------------------------------------------------------------------------

Revenue $ 519,792 $ 249,754 $ - $ (9,071) $ 760,475
Segment
profit
(loss)(1) 215,625 83,307 (20,277) - 278,655
Depreciation
and
amortization 29,212 20,973 2,860 - 53,045
Total assets 1,241,666 460,116 27,264 - 1,729,046
Goodwill 172,440 108,309 - - 280,749
Capital
expenditures 127,169 21,330 969 - 149,468
----------------------------------------------------------------------------
(1) Segment profit (loss) is defined as revenue less operating, general
and administrative, depreciation and amortization and foreign exchange
expenses.

A reconciliation of segment profit (loss) to earnings from continuing
operations before income taxes is as follows:

Three months ended Nine months ended
September 30, September 30,
(Stated in thousands of Canadian
dollars) 2008 2007 2008 2007
----------------------------------------------------------------------------
Total segment profit (loss) $ 98,648 $ 73,402 $ 244,933 $ 278,655
Add (deduct):
Interest:
Long-term debt (2,367) (1,623) (6,711) (5,802)
Other (12) (25) (111) (83)
Income 91 84 251 279
----------------------------------------------------------------------------
Earnings from continuing
operations before income taxes $ 96,360 $ 71,838 $ 238,362 $ 273,049
----------------------------------------------------------------------------
----------------------------------------------------------------------------

THIRD QUARTER 2008 EARNINGS CONFERENCE CALL AND WEBCAST

Precision Drilling Trust ("Precision") has scheduled a conference call
and webcast to begin promptly at 12:00 Noon MT (2:00 p.m. ET) on
Thursday, October 23, 2008.

The conference call dial in numbers are 1-866-223-7781 or 416-641-6140

A live webcast of the conference call will be accessible on Precision's
website at www.precisiondrilling.com by selecting "Investor Centre", then
"Webcasts". Shortly after the live webcast, an archived version will be
available for approximately 30 days.

An archived recording of the conference call will be available
approximately one hour after the completion of the call until October 30,
2008 by dialing 1-800-408-3053 or 416-695-5800, passcode 3272722#.

Precision is a leading provider of safe, high performance energy services
to the North American oil and gas industry. Precision provides customers
with access to an extensive fleet of contract drilling rigs, service
rigs, camps, snubbing units, wastewater treatment units and rental
equipment backed by a comprehensive mix of technical support services and
skilled, experienced personnel.

Precision Drilling Trust is listed on the Toronto Stock Exchange under
the trading symbol "PD.UN" and on the New York Stock Exchange under the
trading symbol "PDS".

Contacts:
Doug Strong, Chief Financial Officer of
Precision Drilling Corporation, Administrator of the Trust
(403) 716-4500
(403) 264-0251 (FAX)

Precision Drilling Trust
4200, 150 - 6th Avenue S.W.
Calgary, Alberta T2P 3Y7
Website: www.precisiondrilling.com

Copyright 2008, Market Wire, All rights reserved.

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