Precision Drilling Trust
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TSX : PD.U
NYSE : PDS

Precision Drilling Trust

October 26, 2006 07:00 ET

Precision Drilling Trust Reports Record Third Quarter Earnings From Continuing Operations

CALGARY, ALBERTA--(CCNMatthews - Oct. 26, 2006) -

(Canadian dollars unless stated otherwise)

This news release contains "forward-looking information and statements" within the meaning of applicable securities laws. For a full discussion of the forward-looking information and statements and the risks to which they are subject, see the "Forward-Looking Information and Statements Advisory" set forth below.

Precision Drilling Trust ("Precision" or the "Trust") today reports record results for the third quarter and nine months ended September 30, 2006. On the strength of improved pricing, both of Precision's business segments reported record revenues for the third quarter of 2006 with Contract Drilling Services increasing 13% to $246 million and Completion and Production Services increasing 23% to $106 million over the same quarter in 2005.

During the third quarter, Contract Drilling Services realized its first full quarter of operations in the United States with one rig working throughout. In Canada, Contract Drilling Services added to its organic growth with plans to build an additional two new drilling rigs. In Completion and Production Services, Precision closed the acquisition of Terra Water Group Ltd., a portable wastewater treatment business.

Leveraged by its strong balance sheet and cash flow, Precision maintained its previously announced capital expenditure program to facilitate organic growth and sustain existing equipment.



Financial Highlights



(stated in Three months Nine months
thousands of ended ended
Canadian dollars, September 30, September 30,
except per unit/ % %
share amounts) 2006 2005 Change 2006 2005 Change
---------------------------------------------------------------------------
Revenue $349,558 $300,016 17 $1,109,535 $841,318 32
Operating
earnings(1) 142,431 111,956 27 462,883 289,481 60
Earnings from
continuing
operations 133,552 2,382 5,507 446,038 99,971 346
Net earnings 139,667 1,382,648 (90) 452,153 1,547,017 (71)
Funds provided
by continuing
operations(2) 159,510 (54,747) N/A 494,711 95,301 419
Net capital
spending from
continuing
operations 76,128 38,950 95 165,102 102,114 62
Distributions
to unitholders
declared 116,785 - N/A 330,089 - N/A
Per unit/share
information:
Earnings from
continuing
operations 1.06 0.02 5,200 3.55 0.80 344
Net earnings 1.11 11.00 (90) 3.60 12.36 (71)
Distributions
declared $ 0.93 - N/A $ 2.63 - N/A
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(1) Operating earnings is not a recognized measure under Canadian generally
accepted accounting principles (GAAP). Management believes that in addition
to net earnings, operating 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 or how the results are taxed. Investors should be cautioned,
however, that operating earnings should not be construed as an alternative
to net earnings determined in accordance with GAAP as an indicator of
Precision's performance. Precision's method of calculating operating
earnings may differ from other entities and, accordingly, operating
earnings may not be comparable to measures used by other entities.

(2) Funds provided by continuing operations is not a recognized measure
under GAAP. Management believes that in addition to cash provided by
continuing operations, funds provided by continuing operations is a
useful supplemental measure. It provides an indication of the funds
generated by Precision's principal business activities prior to
consideration of the changes in non-cash working capital balances which
can vary from quarter to quarter given the seasonality of equipment
utilization in Precision's principal area of operation, Western Canada.


Earnings from continuing operations in the third quarter of 2006 were $134 million compared to $2 million for the comparable quarter in 2005, an increase of $1.04 per diluted unit to $1.06. As a result of business divestitures and the reorganization of Precision during the third quarter of 2005, a one-time charge of $65 million was incurred for the early retirement of debentures along with $20 million related to an unrealized loss in market value on the short-term investment in Weatherford International, Inc. The net impact of these changes decreased earnings per diluted unit by $0.50 in the third quarter of 2005. For the third quarter of 2006, Precision realized the impact of a lower effective tax rate as an income trust, which increased diluted earnings per unit from continuing operations by $0.32. Excluding the impact of these items, and on the strength of higher pricing, third quarter earnings from continuing operations increased 42% to $1.06 per unit.

For the nine months ended September 30, 2006, earnings from continuing operations were $446 million compared with $100 million in 2005, an increase of $2.75 per diluted unit. One-time charges in the third quarter of 2005 represented a decrease of $0.50 per diluted unit. The lower effective income tax rate as an income trust and enacted tax rate reductions contributed an increase of $1.12 per diluted unit in the first nine months of 2006 over the same period last year. Excluding the impact of these items and on the strength of higher pricing and activity, earnings from continuing operations increased 87% for the nine months ended September 30, 2006 to $3.55 per unit.

For the first nine months of 2006, West Texas Intermediate crude oil averaged US$68.17 per barrel and Henry Hub natural gas averaged US$6.76 MMBtu compared to US$55.31 per barrel and US$7.75 per MMBtu in the same period in 2005. Toward the end of the third quarter of 2006, the spot price of natural gas decreased sharply amid concerns over the high levels of gas in storage in North America. Oil prices also decreased in the quarter but remained at historically high levels. Henry Hub natural gas spot prices ranged from a quarterly high of US$8.65 per MMBtu to the quarterly low of US$3.62 per MMBtu on September 29, 2006. The one-year forward price for North American natural gas continued to trade within a price range of approximately $7.00 to $9.00 on Canadian and U.S. exchanges in the quarter. Increasingly, Precision's customers are adjusting drilling programs to position for relative near-term weakness in spot natural gas prices. Compared to the emphasis on shallow gas in 2005, Precision has continued to experience a more balanced equipment utilization load with a shift in activity to deeper natural gas, conventional oil and heavy oil production.

"Precision has a real down-to-earth business model. We can only do as well as our customers and we are working closely with them to ensure we respond to their needs in this market. We are concentrating on the basics -- customer focus, cost control and allocation of capital, and most importantly the welfare of our people," said Gene Stahl, President and Chief Operating Officer of Precision.

To close out the third quarter, 1,784 new well licenses were issued in September, the lowest industry total for that month since 2002.

Precision's drilling rig activity to this point in October is averaging 48% operating day utilization compared to 68% in the fourth quarter of 2005. Wet weather in October is contributing to the decline and the weakness in natural gas pricing has impacted the urgency with which customers are approaching their upcoming winter drilling programs. In contrast to last year, there is more rig availability for the spot market and bidding for contracts has become more competitive.

"Natural gas accounts for about 70% of Precision's activity in Canada and the drop in prices has slowed down drilling but the one-year forward strip on gas prices remains respectable," said Mr. Stahl. "What we are seeing is movement away from drilling shallow gas wells to deeper targets and a shift in our equipment utilization to our deeper rigs. It's a good example of how Precision can respond to the changing market."

Growth Initiatives

Along with Precision's previously announced organic growth initiatives, developments in the third quarter included:

- an additional $30 million was added to the capital plan for two 4,000-metre diesel electric AC drive light triple drilling rigs for the Canadian market, pursuant to a long term customer commitment;

- discussions with customers regarding well programs and the appropriate rig specifications for construction of the second set of five drilling rigs for the U.S. market;

- a moderate delay in maintenance capital activity may result in 2006 spending in the low end of the previously announced range at an estimated $100 million; and

- the Completion and Production segment closed the acquisition of Terra Water Group Ltd. for cash consideration of $16 million and planned to expand the wastewater treatment unit fleet by 38% by the end of the first quarter of 2007.

Precision continues to execute and build on planned organic growth initiatives. For the nine-month period ended September 30, 2006, Precision invested $125 million in expansion capital compared with $45 million for the same period in 2005. The majority of the spending relates to the addition of 35 new drilling rigs scheduled for completion in 2006 through 2008. A total of 15 rigs are expected to be commissioned in 2006, 14 in 2007 and six in 2008. Of the 15 rigs for 2006, nine have been put in service, including four in the third quarter.

Expansion of Precision's Contract Drilling Services segment in the United States is proceeding with full third quarter utilization for the Super Single® rig that started drilling in Texas in June. There are five new rigs under construction for the U.S. market with a long-term customer commitment. Precision is exploring opportunities with customers for the additional five drilling rigs. Precision expects to have a fleet of at least 11 drilling rigs operating in the U.S. by the end of the second quarter of 2008 and, if opportunities arise with existing customers, may deploy additional rigs into this market from Canada.

The previously announced $480 million capital expenditure program has been increased by an estimated $30 million for the two additional new drilling rigs for the Canadian market. The revised capital expenditure program is now estimated to be $510 million, with $320 million expected to be incurred during 2006 and the remainder planned over the following 18 months. The 2006 spending is estimated to be $100 million for maintenance capital expenditures and $220 million for expansion capital expenditures (including the business acquisition of Terra Water Group Ltd.).

Upon completion of the planned organic growth program in 2008, Precision expects to operate a drilling rig fleet of 265 -- with 254 rigs in Western Canada and 11 in the United States -- a 15% increase over the year-end 2005 fleet of 230. Over the next six months, the Completion and Production Services segment in Canada expects to add two new service rigs to bring the fleet to 239, add 15 new wastewater treatment units to bring the fleet to 55, and add four new stand-alone snubbing units to bring the total fleet to 30.

Financial Position

The third quarter of 2006 is further highlighted by the following financial developments:

- In its third full quarter as an income trust, Precision declared monthly per unit distributions to unitholders of $0.31 for aggregate cash distributions declared of $117 million or $0.93 per unit;

- In its first full quarter, Precision's distribution reinvestment plan generated cash of $4 million and a quarter-end participation rate of 4%;

- Through the annual renewal of its extendable, three-year, revolving term credit facility, Precision increased its borrowing capacity by $150 million to $700 million to be effective November 2, 2006;

- Long-term debt increased by $121 million during the quarter to $166 million for a long-term debt to long-term debt plus equity ratio of 12%; and

- Working capital increased by $81 million during the quarter to $217 million as the higher sequential level of activity and corresponding revenue in the quarter increased accounts receivable.

With Precision's conversion to an income trust on November 7, 2005, and consistent with the December 31, 2005 year-end audited financial statement reporting, Precision Drilling Trust, as the successor in interest to Precision Drilling Corporation, has been accounted for as a continuity of interest. Accordingly, the consolidated financial statements of Precision for the three and nine month periods ended September 30, 2006 and comparables for the three and nine month periods ended September 30, 2005 reflect the financial position, results of operations and cash flows as if Precision had always carried on the business formerly carried on by Precision Drilling Corporation.

Results of Continuing Operations

Revenue of $350 million and operating earnings of $142 million in the third quarter of 2006 represented increases of 17% and 27% respectively, compared to the same period in 2005. The increases were due to higher pricing for Precision's services. For the fifth successive quarter, all business segments performed exceptionally and contributed to record quarterly operating earnings. Strong pricing helped increase the operating earnings margin, as a percentage of revenue, to 41% in the third quarter of 2006 versus 37% for the third quarter of 2005. Activity for the quarter was essentially flat for service rigs and down 7% for drilling rigs from the prior year. The reduction is attributable to new rig capacity in the industry, lower industry well licensing brought about by the decline in natural gas prices and a decrease in shallow gas drilling. Lower activity was more than offset by higher pricing for Precision's services. Precision continued to benefit from pricing established in the fourth quarter of 2005 and other rate increases that have held through the first nine months of 2006.

Overall, Precision experienced solid equipment utilization through the summer of 2006. With good weather during July and August in Western Canada and the backlog of work from previous quarters, customer demand was firm. However, rain in the latter half of September lowered activity due to the inability to access some leases and move equipment.

Precision's continuing operations are reported in two segments. The Contract Drilling Services segment includes the contract 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. The following table contains important financial and operating statistics for Precision's drilling rig and service rig divisions.



Three months ended September 30, 2006 2005 % Change
---------------------------------------------------------------------------
Contract Drilling Services:
Number of drilling rigs (end of period) 239 229 4
Drilling operating days (excluding move
days) 11,687 12,539 (7)
Drilling revenue per operating day $ 19,626 $ 16,259 21
Drilling rig operating day utilization 54% 60%

Completion and Production Services:
Number of service rigs (end of period) 237 238 -
Service rig operating hours 123,783 122,620 1
Service revenue per operating hour $ 668 $ 551 21
Service rig operating hour utilization 57% 56%
---------------------------------------------------------------------------


Nine months ended September 30, 2006 2005 % Change
---------------------------------------------------------------------------
Contract Drilling Services:
Number of drilling rigs (end of period) 239 229 4
Drilling operating days (excluding move
days) 35,289 32,587 8
Drilling revenue per operating day $ 20,392 $ 17,300 18
Drilling rig operating day utilization 55% 52%

Completion and Production Services:
Number of service rigs (end of period) 237 238 -
Service rig operating hours 370,400 335,108 11
Service revenue per operating hour $ 695 $ 567 23
Service rig operating hour utilization 57% 52%
---------------------------------------------------------------------------


In Canada, industry drilling rig operating days decreased by approximately 2% to 41,585, industry wells drilled (on a rig release basis) decreased by 6% to 6,713 and the available rig count increased by 8% to approximately 795. For Precision, drilling operating days in the third quarter of 2006 decreased by 7% while service rig operating hours increased by 1% over the same period in 2005.

Contract Drilling Services drilling rig operating days during the third quarter of 2006 were 11,687 compared with 12,539 in 2005, a decrease of 852 days. In Canada, Precision's activity in the deep depth-rated triple rig market was 23% higher than in the prior year. This had a significant impact on Precision's average operating days per well, which increased 31% to 7.2 days for the third quarter of 2006 compared to 5.5 days in 2005. The camp and catering division achieved a third quarter record for activity with a 30% improvement in camp days to 3,828 over the prior year. Camp and catering activity benefited from a shift to deeper drilling and continued accommodation shortages in Western Canada.

Completion and Production Services well service rig operating hours during the third quarter of 2006 were 123,783 compared to 122,620 in 2005, an increase of 1,163 hours over the prior year. Well service rig operating hours were marginally higher despite a drop in overall drilling activity due to the greater emphasis on conventional oil wells and heavy oil well drilling which require completion work. Demand for rental equipment remained high as equipment utilization days exceeded last year by 8% due mainly to a higher demand for the tubular product line. For Precision's snubbing division, activity was down 13% in the quarter over the prior year due to lower activity in the southern Alberta shallow gas market.

Despite lower drilling activity, overall third quarter revenue increased 17% to $350 million as revenue per operating day for drilling was 21% higher than the same period last year while well servicing revenue per operating hour was 21% higher.

With the higher revenues, operating costs as a percentage of revenue were lower. Operating costs declined from 53% of revenue in the third quarter of 2005 to 48% in 2006. However, overall operating costs in the third quarter of 2006 increased 8% per operating day in contract drilling and 9% per operating hour in well servicing. Operating costs escalated as a result of crew wage increases of 7% implemented in the fourth quarter of 2005 and increases in third party labour and material costs associated with equipment maintenance programs. In addition, equipment repair and maintenance costs were higher on a per day and per hour basis as scheduled equipment maintenance was deferred from the second quarter due to a shortage of maintenance infrastructure. Also, lower activity in the third quarter of 2006 contributed to increased fixed operating costs on a per day basis in contract drilling.

General and administrative costs for the third quarter were $20 million, an increase of $4 million over the same period in 2005 and, as a percentage of revenue, were consistent with the prior year. The increase was due to higher incentive compensation expenses given Precision's favourable financial performance. The increase in incentive compensation expenses was offset by lower overhead costs as Precision adjusted for the 2005 divestiture of discontinued operations.

Depreciation and amortization expenses in the third quarter of 2006 were $19 million, an increase of 1% over the same period in 2005. Depreciation in the Contract Drilling segment was up slightly from the prior year due to a higher capital asset base partially offset by an increase in disposal gains and lower utilization. Depreciation in the Completion and Production segment was higher due to a slight increase in utilization.

Interest expense decreased by $6 million to $2 million in 2006 compared to the third quarter of 2005, and was attributable to the decrease in the net debt year over year.

The Trust's effective income tax rate on third quarter earnings from continuing operations before income taxes was 5% in 2006. The comparatively low effective income tax rate is primarily a result of the conversion to an income trust which has the effect of shifting all or a portion of the income tax burden of the Trust to its unitholders.

The $6 million gain, net of tax, on discontinued operations in the third quarter of 2006 related to additional funds received by Precision from the divestiture of certain businesses in prior years. During the third quarter of 2005, Precision executed two significant divestitures, realizing gains of $1.262 billion and $123 million. Results of operations from these divested businesses in the third quarter of 2005 were a loss of $5 million for a net result from discontinued operations in the quarter of $1.38 billion.

Distribution Policy of the Trust

With Precision Drilling Corporation's conversion to an income trust effective November 7, 2005, the Trust adopted a policy of making monthly cash distributions to unitholders. Distributions may be reduced, increased or suspended entirely depending on the operations of Precision and the performance of its assets. The actual cash flow available for distribution to holders of Trust units and holders of Exchangeable LP units is a function of numerous factors, including: Precision's financial performance; debt covenants and obligations; working capital requirements; maintenance and expansion capital expenditure requirements for the purchase of property, plant and equipment; and the number of trust units outstanding.

During the third quarter of 2006 the Trust declared cash distributions of $0.93 for each of the units outstanding, including Exchangeable LP units, for total declared distributions of $117 million. The weighted average Trust and Exchangeable LP units outstanding were 126 million in the quarter. For the nine month period ended September 30, 2006, total cash distributions declared were $330 million or $2.63 per unit.

Key factors for consideration in determining actual cash flow available for distribution, in a historical context, are disclosed within the consolidated statements of cash flow. The increase or decrease in cash is shown for each of the operating, investing and financing activities undertaken by the Trust. Certain activities related to operating and investing are noted below:

- Within operating activities, cash provided by continuing operations in the first nine months of 2006, was $466 million. Adjusted for cash used in changes in non-cash working capital balances of $29 million, funds of $495 million were provided from operations; and

- Within investing activities, in the first nine months of 2006, additions to property, plant and equipment were $191 million. Purchases included $125 million for capital expenditures to expand Precision's underlying asset base and $66 million for maintenance capital expenditures to sustain and upgrade existing property, plant and equipment.

The oilfield service industry in Canada can be extremely cyclical as commodity price fluctuations can be compounded by seasonal trends. Accordingly, there could be a wide fluctuation in financial performance from quarter to quarter, year over year and quarterly results should not be annualized. Seasonally, the first quarter is usually the most active and prosperous as winter ground conditions typically allow complete access to well locations. In the second quarter, spring weather softens ground conditions and can slow oilfield service activity dramatically. Subject to dry weather, activity resumes and will sequentially gain momentum in the third and fourth quarters.

Forward-Looking Information and Statements Advisory

Certain statements contained in this news release, including statements related to Precision's planned capital expenditures, planned expansion in the U.S., projected growth of Completion and Production Services, projected growth of Contract Drilling Services and statements that contain words such as "anticipate", "could", "should", "may", "expect", "believe", "will" and similar terms are not historical facts and constitute "forward-looking information" within the meaning of Canadian Securities laws and "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking information and statements involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of Precision to be materially different from any future results, performances or achievements expressed or implied by such forward-looking information and statements. Such factors include fluctuations in the market for oil and natural gas and related products and services; changes in commodity prices; competition; political and economic conditions in countries in which Precision does business; the demand for services provided by Precision; changes in laws and regulations, including environmental regulations, to which Precision is subject; and other factors, which are described in further detail in Precision's filings with Canadian securities regulators and the United States Securities and Exchange Commission.



PRECISION DRILLING TRUST
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (DEFICIT)

Three months Nine months
CDN $000's, except per ended ended
unit/share amounts September 30, September 30,
(unaudited) 2006 2005 2006 2005
---------------------------------------------------------------------------

Revenue $ 349,558 $ 300,016 $1,109,535 $ 841,318

Expenses:
Operating 167,810 158,581 532,474 449,694
General and administrative 20,168 16,486 58,967 56,495
Depreciation and
amortization 19,134 18,923 55,324 52,096
Foreign exchange 15 (5,930) (113) (6,448)
---------------------------------------------------------------------------
207,127 188,060 646,652 551,837
---------------------------------------------------------------------------

Operating earnings 142,431 111,956 462,883 289,481

Interest expense 1,702 7,226 6,156 29,567
Premium on redemption of bonds - 65,483 - 65,483
Unrealized loss in market value
of short-term investments - 20,262 - 20,262
Gain on disposal of investments - - (408) -
---------------------------------------------------------------------------
Earnings from continuing
operations before income
taxes 140,729 18,985 457,135 174,169
Income taxes:
Current 5,616 171,612 29,850 216,299
Future 1,561 (155,009) (18,753) (142,101)
---------------------------------------------------------------------------
7,177 16,603 11,097 74,198
---------------------------------------------------------------------------

Earnings from continuing
operations 133,552 2,382 446,038 99,971
Discontinued operations, net
of tax 6,115 1,380,266 6,115 1,447,046
---------------------------------------------------------------------------

Net earnings 139,667 1,382,648 452,153 1,547,017

Retained earnings (deficit),
beginning of period (204,102) 1,206,052 (303,284) 1,041,683
Adjustment on cash purchase
of employee stock options
(net of tax of $9,823 - 2005) - (18,741) - (18,741)
Distributions (116,785) - (330,089) -
---------------------------------------------------------------------------

Retained earnings (deficit),
end of period $ (181,220) $2,569,959 $ (181,220) $2,569,959
---------------------------------------------------------------------------
Earnings per unit/share from
continuing operations:
Basic $ 1.06 $ 0.02 $ 3.55 $ 0.81
Diluted $ 1.06 $ 0.02 $ 3.55 $ 0.80
---------------------------------------------------------------------------
Earnings per unit/share:
Basic $ 1.11 $ 11.22 $ 3.60 $ 12.60
Diluted $ 1.11 $ 11.00 $ 3.60 $ 12.36
---------------------------------------------------------------------------

Trust units/shares
outstanding (000's) 125,613 123,883 125,613 123,883
Weighted average units/shares
outstanding (000's) 125,557 123,285 125,497 122,778
Diluted units/shares
outstanding (000's) 125,557 125,686 125,497 125,145


PRECISION DRILLING TRUST
CONSOLIDATED BALANCE SHEETS

CDN $000's September 30, December 31,
(unaudited) 2006 2005
---------------------------------------------------------------------------

Assets

Current assets:
Cash and cash equivalents $ - $ -
Accounts receivable 391,389 500,655
Income taxes recoverable 914 -
Inventory 7,703 7,035
---------------------------------------------------------------------------
400,006 507,690

Property, plant and equipment, net of
accumulated depreciation 1,056,913 943,900
Intangibles, net of accumulated
amortization 398 465
Goodwill 280,724 266,827
---------------------------------------------------------------------------
$ 1,738,041 $ 1,718,882
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Liabilities and Unitholders' Equity

Current liabilities:
Bank indebtedness $ 3,987 $ 20,468
Accounts payable and accrued liabilities 139,877 134,303
Income taxes payable - 163,530
Distributions payable 38,940 36,635
---------------------------------------------------------------------------
182,804 354,936

Other long-term liabilities 12,507 -
Long-term debt 165,571 96,838
Future income taxes 174,782 192,517

Unitholders' equity:
Unitholders' capital 1,383,597 1,377,875
Deficit (181,220) (303,284)
---------------------------------------------------------------------------
1,202,377 1,074,591

---------------------------------------------------------------------------
$ 1,738,041 $ 1,718,882
---------------------------------------------------------------------------

Trust units outstanding (000's) 125,613 125,461


PRECISION DRILLING TRUST
CONSOLIDATED STATEMENTS OF CASH FLOW

Three months ended Nine months ended
CDN $000's September 30, September 30,
(unaudited) 2006 2005 2006 2005
---------------------------------------------------------------------------

Cash provided by (used in):
Continuing operations:
Earnings from continuing
operations $ 133,552 $ 2,382 $ 446,038 $ 99,971
Items not affecting cash:
Depreciation and
amortization 19,134 18,923 55,324 52,096
Incentive plan compensation 5,262 - 12,507 -
Stock-based compensation - 1,812 - 7,276
Future income taxes 1,561 (155,009) (18,753) (142,101)
Gain on disposal of
investments - - (408) -
Premium on redemption of
bonds - 65,483 - 65,483
Loss in market value of
short-term investments - 20,262 - 20,262
Amortization of deferred
financing costs - 457 - 1,374
Unrealized foreign exchange
gain on long-term monetary
items 1 (9,057) 3 (9,060)
Changes in non-cash working
capital balances (80,093) 97,106 (28,569) 156,542
---------------------------------------------------------------------------
79,417 42,359 466,142 251,843

Discontinued operations:
Funds provided by
discontinued operations - 53,330 - 195,877
Changes in non-cash working
capital balances of
discontinued operations - (21,286) - (69,550)
---------------------------------------------------------------------------
- 32,044 - 126,327

Investments:
Business acquisitions, net
of cash acquired (16,403) (30,421) (16,403) (30,421)
Purchase of property, plant
and equipment (80,379) (40,781) (190,697) (110,391)
Purchase of intangibles - - - (20)
Proceeds on sale of property,
plant and equipment 4,251 1,831 25,595 8,277
Purchase of property, plant
and equipment of
discontinued operations - (36,374) - (128,214)
Proceeds on sale of property,
plant and equipment of
discontinued operations - 7,110 - 17,785
Proceeds on disposal of
discontinued operations 7,337 1,306,280 7,337 1,306,280
Proceeds on sale of
investments - - 510 -
---------------------------------------------------------------------------
(85,194) 1,207,645 (173,658) 1,063,296

Financing:
Increase in long-term debt 120,574 - 248,338 -
Repayment of long-term debt (614) (3) (180,219) (12)
Distributions (116,752) - (327,784) -
Issuance of units 4,031 - 5,722 -
Issuance of common shares
on exercise of options - 15,405 - 40,522
Cash buy-out of employee
stock options - (28,564) - (28,564)
Changes in non-cash working
capital balances - 9,823 (22,060) 9,823
Change in bank indebtedness (1,462) - (16,481) -
---------------------------------------------------------------------------
5,777 (3,339) (292,484) 21,769

Increase in cash and cash
equivalents - 1,278,709 - 1,463,235
Cash and cash equivalents,
beginning of period - 306,538 - 122,012
---------------------------------------------------------------------------

Cash and cash equivalents,
end of period $ - $ 1,585,247 $ - $ 1,585,247
---------------------------------------------------------------------------
---------------------------------------------------------------------------


PRECISION DRILLING TRUST

SEGMENT INFORMATION

Three months
ended September Completion
30, 2006 Contract &
CDN $000's Drilling Production Corporate Inter-segment
(unaudited) Services Services & Other Eliminations Total
---------------------------------------------------------------------------
Revenue $ 246,364 $ 106,173 $ - $ (2,979) $ 349,558
Operating
earnings 114,552 39,015 (11,136) - 142,431
Depreciation
and
amortization 9,968 8,323 843 - 19,134
Total assets 1,184,581 491,954 61,506 - 1,738,041
Goodwill 172,440 108,284 - - 280,724
Capital
expenditures 68,005 11,385 989 - 80,379
---------------------------------------------------------------------------

Three months
ended September Completion
30, 2005 Contract &
CDN $000's Drilling Production Corporate Inter-segment
(unaudited) Services Services & Other Eliminations Total
---------------------------------------------------------------------------
Revenue $ 218,006 $ 86,520 $ - $ (4,510) $ 300,016
Operating
earnings 90,118 25,974 (4,136) - 111,956
Depreciation
and
amortization 9,854 7,815 1,254 - 18,923
Total assets 1,033,070 488,244 3,699,788 - 5,221,102
Goodwill 172,440 94,387 - - 266,827
Capital
expenditures 27,969 9,903 2,909 - 40,781
---------------------------------------------------------------------------


Nine months
ended September Completion
30, 2006 Contract &
CDN $000's Drilling Production Corporate Inter-segment
(unaudited) Services Services & Other Eliminations Total
---------------------------------------------------------------------------
Revenue $ 786,659 $ 333,102 $ - $ (10,226) $1,109,535
Operating
earnings 369,708 123,364 (30,189) - 462,883
Depreciation
and
amortization 29,410 24,139 1,775 - 55,324
Total assets 1,184,581 491,954 61,506 - 1,738,041
Goodwill 172,440 108,284 - - 280,724
Capital
expenditures 157,443 30,294 2,960 - 190,697
---------------------------------------------------------------------------

Nine months
ended September Completion
30, 2005 Contract &
CDN $000's Drilling Production Corporate Inter-segment
(unaudited) Services Services & Other Eliminations Total
---------------------------------------------------------------------------
Revenue $ 608,280 $ 245,771 $ - $ (12,733) $ 841,318
Operating
earnings 248,908 70,810 (30,237) - 289,481
Depreciation
and
amortization 27,847 20,127 4,122 - 52,096
Total assets 1,033,070 488,244 3,699,788 - 5,221,102
Goodwill 172,440 94,387 - - 266,827
Capital
expenditures 71,318 27,509 11,564 - 110,391
---------------------------------------------------------------------------


PRECISION DRILLING TRUST

CANADIAN DRILLING OPERATING STATISTICS

Three months ended September 30,
2006 2005
------------------------------------------------------------
Market Market
Precision Industry(i) Share % Precision Industry(i) Share %
------------------------------------------------------------
Number of
drilling
rigs 238 795 30 229 738 31
Number of
operating
days (spud
to release) 11,606 41,585 28 12,539 42,595 29
Wells drilled 1,606 6,713 24 2,279 7,162 32
Average days
per well 7.2 6.2 5.5 5.9
Metres drilled
(000's) 2,194 7,907 28 2,479 7,957 31
Average metres
per day 189 190 198 187
Average metres
per well 1,366 1,178 1,088 1,111
Rig utilization
rate 53.5% 57.2% 59.5% 63.2%


Nine months ended September 30,
2006 2005
------------------------------------------------------------
Market Market
Precision Industry(i) Share % Precision Industry(i) Share %
------------------------------------------------------------
Number of
drilling
rigs 238 795 30 229 738 31
Number of
operating
days (spud
to release) 35,200 122,734 29 32,587 109,477 30
Wells drilled 4,881 17,236 28 5,783 17,288 33
Average days
per well 7.2 7.1 5.6 6.3
Metres drilled
(000's) 6,138 20,802 30 6,414 19,655 33
Average metres
per day 174 169 197 180
Average metres
per well 1,258 1,207 1,109 1,137
Rig utilization
rate 55.2% 57.8% 52.1% 55.6%


(i) Excludes non-CAODC rigs and non-reporting CAODC members and has been
compiled with estimates by Precision.


A conference call to review the third quarter results is scheduled for 12:00 noon MT on Thursday, October 26, 2006.

The conference call dial in number is 1-877-888-4210 or 416-695-5261

A live webcast of the conference call will be accessible on Precision's website at www.precisiondrilling.com by selecting "Investor Relations", then "Webcasts".

An archived recording of the conference call will be available approximately one hour after the completion of the call until November 2, 2006 by dialing 1-888-509-0081 or 416-695-5275, passcode 632237.

Precision is Canada's largest energy services trust. Headquartered in Calgary, Alberta, Precision is the leading provider of energy services to the Canadian 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 in U.S. dollars "PD.U" and on the New York Stock Exchange under the trading symbol "PDS".


Contact Information

  • Doug Strong, Chief Financial Officer
    Precision Drilling Corporation, Administrator of the Trust
    (403) 716-4500
    (403) 264-0251 (FAX)
    or
    Precision Drilling Trust
    4200, 150 - 6th Avenue S.W.
    Calgary, Alberta T2P 3Y7
    Website: www.precisiondrilling.com