See “NON-GAAP MEASURES”.In the Completion and Production Services segment revenue for thefirst quarter decreased by 40% from 2008 to $63 million while EBITDAdeclined by 56% to $19 million. The decrease in revenue is attributed tothe decline in industry activity as customers reduced spending inresponse to lower commodity prices.Service rig activity declined 42% from the prior year period, with theservice rig fleet generating 64,854 operating hours in the first quarterof 2009 compared with 111,995 hours in 2008 for utilization of 31% and55%, respectively. The reduction was a result of lower service rig demanddue to decreased drilling activity and spending on production maintenanceof existing wells. New well completions accounted for 32% of service rigoperating hours in the first quarter compared to 36% in the same quarterin 2008.

There were 4,439 well completions in Canada in the firstquarter, an 8% decline from 4,980 wells in the same quarter in 2008.Average service revenue per operating hour decreased $12 per hour overthe prior year which represents EBITDA margin compression given labourcost increases of about $30 per hour during the fourth quarter of 2008.Higher variable operating expenses, fixed costs spread over a loweractivity base and lower revenue rates led to an increase in operatingexpenses as a percent of revenue from 57% in the first quarter of 2008 to67% for the same period in 2009. Operating costs per operating hour haveincreased over the comparable period in 2008 due primarily to increasedwages and maintenance costs.Depreciation in the Completion and Production Services segment in thefirst quarter of 2009 was 40% lower than the prior year period due tolower equipment utilization.SEGMENT REVIEW OF CORPORATE AND OTHERCorporate and other expenses decreased by 53% to $5 million in the firstquarter of 2009 compared to $10 million in the same period of 2008. Thedecrease was primarily due to the difference in employee incentivecompensation expense.OTHER ITEMSNet interest expense of $39 million for the first quarter of 2009 was upsubstantially on the prior year comparative. The increase is attributableto interest associated with the new credit facilities resulting from theacquisition of Grey Wolf.The Trust had a non-cash foreign exchange loss of $32 million during thefirst quarter of 2009 due to the decline in the Canadian dollar versusthe United States dollar, in which the majority of the Trust’s creditfacilities are denominated.The Trust’s effective tax rate on earnings before income taxes for thefirst three months of 2009 was a tax recovery of 7% compared to a 13%expense for the same period in 2008. The income tax recovery is primarilya result of tax deductions available in excess of taxable earnings.Compared to a corporate tax rate, the low effective tax rate is primarilythe result of the income trust structure shifting all or a portion of theincome tax burden of the Trust to its unitholders and due to a portion ofthe Trust’s taxable income being taxed at lower rates than the Canadiancorporate tax rate.At March 31, 2009 Precision reported goodwill of $858 million of which$573 million relates to the United States contract drilling businessunit.

With specific reference to goodwill impairment, Precision willcontinue to monitor the business climate for a significant adverse changefrom December 31, 2008 and may test for impairment during 2009, betweencustomary annual tests.LIQUIDITY AND CAPITAL RESOURCESIn connection with the acquisition of Grey Wolf, Precision entered into anew US$1.2 billion senior secured credit facility (the “SecuredFacility”) with a syndicate of lenders that is guaranteed by the Trustand is comprised of US$800 million of term loans and a US$400 millionrevolving facility (the “Revolver”). Precision also entered into a US$400million unsecured credit facility with certain of the lenders (the”Unsecured Facility” and, together with the secured facility, the “CreditFacilities”) that is also guaranteed by the Trust. Duringthe quarter US$69 million of long-term debt was reallocated from the TermLoan A Facility to the Term Loan B Facility resulting in an additional$13 million in original issue discount fees.On February 18, 2009 the Trust issued 46 million Trust units at US$3.75per unit for gross proceeds of $217 million and proceeds net of fees andexpenses of $209 million. The proceeds were used to repurchase theoutstanding convertible notes assumed in conjunction with the Grey Wolfacquisition. The Grey Wolf convertible notes had a provision whereby uponthe occurrence of a change in control the acquirer was required toprovide holders of the notes with an offer to purchase all or a portionof their notes at the principal amount plus accrued but unpaid interestto the date of purchase, payable in cash. All of the note holders withthe exception of US$10,000 exercised the repurchase option.As at March 31, 2009 the Credit Facilities carry a blended interest rateof approximately 11% per annum before original issue discounts andupfront fees.

This relativepriority of payments could result in a temporary or permanentinterruption of distributions to unitholders.As at March 31, 2009, approximately $1,104 million was outstanding underthe Secured Facility and approximately $296 million was outstanding underthe Unsecured Facility. Subsequent to quarter end, Precision announced aseries of financing transactions to raise up to approximately $380million which will be used to strengthen the Trust’s balance sheet byrefinancing and restructuring the debt incurred in the acquisition ofGrey Wolf. The cashgenerated was used to purchase property plant and equipment net ofdisposal proceeds and related non-cash working capital of $81 million,repay long-term debt of $221 million and pay additional fees associatedwith the debt of $15 million, and make cash distributions to unitholdersof $27 million leaving an increase in the cash balance as at March 31,2009 of $68 million.As at March 31, 2009 the Trust had a long-term debt to long-term debtplus equity ratio of 0.31 compared to 0.13 as at the comparable period in2008 and 0.37 as at December 31, 2008. The significant increase over theprior year is due to the additional debt arising from the acquisition ofGrey Wolf. Precision has made debt reduction a priority and is employinginitiatives to deleverage from current levels.In addition to the Secured Facility and Unsecured Facility, Precisionalso has uncommitted operating facilities which total approximately $25million equivalent and are utilized for working capital management andthe issuance of letters of credit.During the first quarter of 2009, working capital increased by $22million to $367 million as Precision realized higher activity andcorresponding revenue in the current quarter compared to the fourthquarter of 2008.DISTRIBUTIONSUpon Precision’s conversion to an income trust effective November 7, 2005the Trust adopted a policy of making monthly distributions to holders ofTrust units and holders of exchangeable LP units (together”unitholders”). Precision has a legal entity structure whereby the trustentity, Precision Drilling Trust, effectively must flow its taxableincome to unitholders pursuant to its Declaration of Trust.Distributions, including special distributions, may be declared in cashor “in-kind” or a combination of both and reduced, increased or suspendedentirely depending on the operations of Precision, the performance of itsassets, or legislative changes in tax laws. The actual cash flowavailable for distribution to unitholders is a function of numerousfactors, including the Trust’s: financial performance; debt covenants andobligations; working capital requirements; upgrade and expansion capitalexpenditure requirements for the purchase of property, plant andequipment; and number of units outstanding.