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Trinidad Drilling Ltd. reports strong third quarter and year-to-date 2008 results; high utilization and growing fleet drive record revenue and EBITDA

    TSX SYMBOL:  TDG and TDG.DB

    CALGARY, Nov. 6 /CNW/ - Trinidad Drilling Ltd. ("Trinidad" or the
"Company") reported strong operating and financial results for the third
quarter and first nine months of 2008. The Company maintained its record
breaking trend with revenue, net earnings before interest, taxes, depreciation
and gain or loss on sale of long-term assets (EBITDA) and cash flow from
operations before changes in non-cash working capital all reaching record
levels in the third quarter, following record results recorded in the first
two quarters of 2008. The combination of Trinidad's growing inventory of
drilling rigs, geographically diversified operations and high-tech,
deeper-capacity fleet provided the foundation for these strong operational and
financial results.
    "We built Trinidad with a long-term vision in mind. We understand the
cyclical nature of our environment and have built a company that is agile
enough to identify and capture opportunities when they arise, but that can
also withstand the inevitable downturns in the market," said Lyle Whitmarsh,
Trinidad's President and Chief Executive Officer. "The key to our strategy is
providing the right equipment and exceptional performance for our customers.
We have assembled an outstanding fleet of high-quality, modern rigs that are
perfectly suited to unconventional drilling where activity levels remain
strong. Our customers are eager to have access to this equipment and have
contracted a significant portion of our fleet with long-term, take-or-pay
contracts. These strengths show through in our results and have allowed
Trinidad to continually post industry-leading utilization levels and record
financial results to-date in 2008. Despite the current uncertainty in the
financial and commodity markets, we believe that Trinidad is well positioned
to perform strongly and activity levels in both Canada and the US continue to
look encouraging."THIRD QUARTER AND YEAR-TO-DATE HIGHLIGHTS

    (Quarter-over-quarter and year-to-date comparatives all relate to the
    comparable period in 2007)

    -   Revenue reached record levels of $191.7 million for the third quarter
        of 2008 and $552.5 million year-to-date, up 18.2% and 14.2%,
        respectively, largely due to growth through acquisitions, internal
        rig construction programs, higher utilization rates and our
        successful expansion into the US.

    -   Trinidad's third quarter 2008 drilling utilization rate of 63% in
        Canada substantially exceeded the industry average of 48%. The US
        drilling operations continued to report strong activity levels with
        utilization of 85%. Year-to-date, Trinidad's Canadian drilling
        utilization rate was 55% compared to the industry average of 41%,
        while the US operation's utilization averaged 86%.

    -   Cash flow from operations before changes in non-cash working capital
        was $51.5 million ($0.53 per share (diluted)), in the third quarter
        of 2008 and $149.3 million ($1.67 per share (diluted)) year-to-date,
        up 10.9% and 4.6%, respectively. These record levels were achieved
        primarily through the increased rig fleet, the expanded US operations
        and a continued focus on cost control.

    -   Net earnings in the third quarter of 2008 were $20.4 million ($0.21
        per share (diluted)) and $60.4 million ($0.68 per share (diluted))
        year-to-date, up 35.4% for the quarter and down 1.9% on a year-to-
        date basis, largely due to higher recertification costs incurred in
        the period, interest expense and depreciation costs.

    -   During the third quarter, Trinidad laid the foundation for the
        redeployment of five existing Canadian rigs into higher dayrate and
        utilization areas. A new operating area was established into the
        Chicontepec field in central eastern Mexico, where three rigs will be
        moved in the fourth quarter of 2008. In addition, two rigs were moved
        into the US, one to the Bakken play in North Dakota and one to add to
        the Company's growing fleet in the Haynesville Shale in Louisiana.
        All rigs are under contract to work at 100% utilization during the
        period of their respective contracts.The following is management's discussion and analysis ("MD&A") concerning
the operating and financial results for the three and nine months ended
September 30, 2008, and its outlook based on information available as at
October 31, 2008. The MD&A is based on the Trinidad Drilling Ltd. ("Trinidad"
or the "Company") unaudited interim consolidated financial statements for the
period ended September 30, 2008, which were prepared in accordance with
Canadian Generally Accepted Accounting Principles ("GAAP"). The MD&A should be
read in conjunction with the audited consolidated financial statements of
Trinidad Energy Services Income Trust (the "Trust") for the year ended
December 31, 2007. Additional information is available on Trinidad's website
(www.trinidaddrilling.com) and all previous public filings, including the most
recently filed Annual Report and Annual Information Form, are available
through SEDAR (www.sedar.com). As a result of Trinidad's conversion from an
income trust to a corporation, effective March 10, 2008, references to the
"Company", "shares", the "Incentive Options Plan" and "options" should be read
as references to the "Trust", "units", "Unit Rights Incentive Plan" and
"rights", respectively, for the periods prior to March 10, 2008. All amounts
are denominated in Canadian dollars unless otherwise identified.-------------------------------------------------------------------------
    FINANCIAL HIGHLIGHTS
    ($ thousands except share and per share data)

                                  Three months ended       Nine months ended
                                        September 30,           September 30,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Revenue                      191,687     162,183     552,517     483,888
    Gross margin(1)               73,093      70,443     225,286     205,999
    EBITDA(1)                     67,150      54,299     195,703     161,390
      Per share (diluted)(1)        0.69        0.64        2.19        1.56
    EBITDA before stock-based
     compensation(1)              68,347      54,807     197,202     163,344
      Per share (diluted)(1)        0.71        0.64        2.20        1.58
    Cash flow from operations
     before change in non-cash
     working capital(1)           51,538      46,456     149,250     142,619
      Per share (diluted)(1)        0.53        0.55        1.67        1.42
    Cash flow from operations     17,754      48,388     149,703     122,450
      Per share (diluted)           0.18        0.57        1.67        1.23
    Net earnings                  20,373      15,043      60,426      61,627
      Per share (basic)             0.21        0.18        0.68        0.73
      Per share (diluted)           0.21        0.18        0.67        0.65
    Net earnings before stock-
     based compensation(1)        21,570      15,551      61,925      63,581
      Per share (diluted)(1)        0.22        0.18        0.69        0.66
    Shares outstanding - basic
     (weighted average)(2)    96,289,155  83,989,145  89,021,557  83,917,739
    Shares outstanding -
     diluted (weighted
     average)(2)              96,869,702  85,140,262  89,551,403 103,605,851
    -------------------------------------------------------------------------
    (1) Readers are cautioned that gross margin, EBITDA, EBITDA before stock-
        based compensation, cash flow from operations before change in
        non-cash working capital and net earnings before stock-based
        compensation and the related per share information do not have a
        standardized meaning prescribed by GAAP - See "Non-GAAP Measures".
    (2) Basic shares include the weighted average number of shares
        outstanding over the period. Diluted shares include the weighted
        average number of shares outstanding over the period and the dilutive
        impact, if any, of the deemed conversion of convertible debentures
        and the number of shares issuable pursuant to the Incentive Option
        Plan. Interest expense incurred on the dilutive convertible
        debentures is added back to net earnings, net earnings before stock-
        based compensation, cash flow from operations and cash flow from
        operations before change in non-cash working capital for the diluted
        per share calculation.


    -------------------------------------------------------------------------
    OPERATING HIGHLIGHTS
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Land Drilling Market

    Operating days - drilling
      Canada                       3,411       2,718       9,162       7,699
      United States                3,861       3,305      11,319       8,713
    Rate per drilling day (CDN$)
      Canada                      21,772      21,746      22,989      24,156
      United States(1)            22,668      23,265      21,996      24,460
    Utilization rate - drilling
      Canada                         63%         47%         55%         45%
      United States                  85%         85%         86%         86%
    CAODC industry average           48%         39%         41%         38%
    Number of drilling rigs
      Canada                          60          63          60          63
      United States                   50          43          50          43
    Utilization rate for
     service rigs                    49%         46%         46%         35%
    Number of service rigs            20          20          20          20
    Number of coring and surface
     casing rigs                      20          20          20          20

    Barge Drilling Market(2)

    Operating days                   305         352         938         352
    Rate per drilling day (CDN$)  40,678      51,904      43,208      51,904
    Utilization rate(3)              83%        100%         93%        100%
    Number of barge drilling rigs      1           1           1           1
    Number of barge drilling rigs
     under Bareboat Charter
     Agreements                        3           3           3           3
    -------------------------------------------------------------------------
    (1) In US dollars, dayrates remained relatively static, increasing
        marginally from $21,978 in the third quarter of 2007 to $22,049 in
        the third quarter of 2008.
    (2) Trinidad commenced its operations in the barge drilling market with
        its acquisition of Axxis, effective July 5, 2007.
    (3) During the first quarter of 2008, Trinidad completed significant work
        to one of its barge rigs and as a result it was removed from service
        and not included in the utilization calculation.FORWARD-LOOKING STATEMENTS

    The MD&A contains certain forward-looking statements relating to
Trinidad's plans, strategies, objectives, expectations and intentions.
Expressions such as "anticipate", "expect", "project", "believe", "estimate",
and "forecast" should be used to identify these forward-looking statements.
Trinidad believes that the expressions reflected in those forward-looking
statements are reasonable; however, such statements are subject to a number of
known and unknown risks, uncertainties and other factors that may cause actual
results to differ materially from those anticipated in our forward-looking
statements. These statements speak only as of the date of the MD&A and
Trinidad does not intend, and does not assume any obligation, to update these
forward-looking statements, subject to its obligations under appropriate
regulations.

    NON-GAAP MEASURES

    This MD&A contains references to the terms "cash flow from operations
before change in non-cash working capital" to provide information for
shareholders regarding Trinidad's liquidity and ability to generate cash to
finance operations and assist management in assessing Trinidad's ability to
finance operational and capital expenditures; "EBITDA" to refer to net
earnings before interest, taxes, depreciation and gain or loss on sale of
long-term assets; "EBITDA before stock-based compensation" to refer to EBITDA
plus stock-based compensation; "gross margin" to refer to revenue less
operating expenses; "net earnings before stock-based compensation" to refer to
net earnings plus stock-based compensation; and "net debt" to refer to
Trinidad's long-term debt less its working capital position which is
indicative of the overall indebtedness of the Company, all of which Trinidad
believes are measures followed by the investment community and therefore
provide useful information. The terms "cash flow from operations before change
in non-cash working capital", "EBITDA", "EBITDA before stock-based
compensation", "gross margin", "net earnings before stock-based compensation",
"net debt" and associated per share data are not measures recognized by GAAP
and do not have standardized meaning prescribed by GAAP and accordingly may
not be comparable to similar measures presented by other companies. However,
Trinidad computes "cash flow from operations before change in non-cash working
capital", "EBITDA", "EBITDA before stock-based compensation", "gross margin",
"net earnings before stock-based compensation" and "net debt" on a consistent
basis for each reporting period.
    The following is a reconciliation of net earnings to EBITDA:Three months ended       Nine months ended
                                        September 30,           September 30,
    ($ thousands)                   2008        2007        2008        2007
    -------------------------------------------------------------------------
    Net Earnings                  20,373      15,043      60,426      61,627
    Plus:
      Interest on long-term debt   4,810       7,174      18,200      25,284
      Interest on convertible
       debentures                  8,819       8,302      26,158       8,302
      Depreciation                23,970      20,190      68,471      53,279
      (Gain) loss on sale of
       assets                         (3)         31        (320)        238
      Income taxes                 9,181       3,559      22,768      12,660
                                ---------------------------------------------
    EBITDA                        67,150      54,299     195,703     161,390
                                ---------------------------------------------OVERVIEW

    Despite the significant commodity and financial market turbulence
subsequent to quarter-end, during the third quarter of 2008 Trinidad achieved
strong operational performance and meaningful signs of momentum for the
drilling industry became evident for the first time in nearly two years. Even
with fluctuating oil and natural gas prices over the quarter, rig utilization
in both Canada and the United States ("US") showed encouraging results. Many
oil and natural gas exploration and production companies were able to leverage
general commodity price strength into positive impacts on their drilling
programs as project economics showed continued stability, which resulted in
higher activity levels for Trinidad in both Canada and the US as compared to
the same time period of 2007.
    Trinidad's revenue for the quarter grew by 18.2% and year-to-date by
14.2% as compared to 2007, which was directly attributable to increased
operating days, rig utilization and stability in dayrates in both Canada and
the US land drilling segments. These factors helped to drive incremental net
earnings of 35.4% for the quarter to $20.4 million or $0.21 per share
(diluted) in comparison to $15.0 million or $0.18 per share (diluted) in the
same period of 2007. On a year-to-date basis, net earnings for Trinidad were
$60.4 million or $0.67 per share (diluted), down by 1.9% as compared to last
year. However, the 1.9% decline shows the significant improvement and the
strength of the third quarter given that net earnings year-over-year were down
14.0% at the end of the second quarter. Despite the top-line revenue increases
year-to-date, in 2008 overall net earnings declined mainly as a result of
higher recertification costs and higher interest, depreciation, and
reorganization expenses. Recertifications required on Trinidad's Canadian
fleet were shifted into the third quarter of 2008, in comparison with the
second quarter in 2007, and $2.5 million of refurbishment work completed on
some of the older US rigs had a negative impact on both gross margin and net
earnings for the period. Additionally, increased interest expense was due to
the issuance of convertible debentures in connection with the Axxis
acquisition in the second half of 2007 and depreciation increased as a result
of growth in the number of drilling days in both Canada and the US.
Furthermore, one-time reorganization costs for Trinidad's conversion from an
income trust to a corporation were incurred in 2008. These increases were
partly offset by an unrealized foreign exchange gain of $10.4 million on US
denominated intercompany balances in comparison to the loss of $12.3 million
in the prior year.
    During the quarter, Trinidad made two key announcements in relation to
rig moves from Canada to the US and Mexico. Trinidad redeployed two rigs from
Canada to the US, one to the Haynesville Shale in Louisiana and the other to
the Bakken Shale in North Dakota, representing a continuation of our strategy
in terms of expanding our reach and gaining exposure into new markets. Both
rigs were operational in August 2008, and are under long-term, take-or-pay
contracts with guaranteed 100% utilization, adding to our secured revenue base
with approximately 45% of the Company's fleet now under long-term contracts.
As well, Trinidad announced that three rigs will be redeployed from Canada to
Mexico. These rigs will operate in the Chicontepec basin in Mexico, which is
the country's largest certified hydrocarbon resource play where drilling
activity has been steadily increasing since the early 1970's. These three
initial rigs are expected to be operational by the end of November 2008, and
are contracted in US dollars for 100% utilization for an initial term of six
months, with an option for a six month extension. The operator has agreed to
pay the costs associated with relocating the rigs into Mexico and returning
the rigs to Canada at the end of the contracted period, if required. It is
however anticipated that these rigs will remain in Mexico for the foreseeable
future. This expansion into Mexico continues to demonstrate Trinidad's
commitment to redeploy rigs from a highly seasonal and increasingly
under-utilized capacity base to markets where higher utilization rates are
expected to be realized as demand for high quality deep capacity rigs is
strong.
    Trinidad's overall strategy to diversify its operations to include rigs
of deeper depths, as well as its continued expansion within the US market, has
continued to add stability to the Company's overall cash flow. Trinidad has a
newer fleet, a strong pipeline of new rigs coming mostly from our own
manufacturing segment and over half of the Company's cash flow is derived from
the US market, which provides a balanced and steady platform for Company
operations. Trinidad continues to grow through its active drilling rig
construction programs and deployment into the US and international markets
where contracts are predominantly three to five years with 100% utilization.
In Canada, the contracts have enabled Trinidad to maintain utilization levels
of 55% year-to-date, exceeding industry utilization levels by 34.1%, and in
the US utilization levels have been maintained at 86% thus far in 2008. Upon
completion of our announced rig build programs, Trinidad will have 126 land
drilling rigs, with just over half located in the US, four inland barge
drilling rigs based in the Gulf of Mexico, 26 well servicing rigs, 20 preset
and coring rigs and three rigs based in Mexico, all in service by the end of
2009. Growth and sustainability continue to be Trinidad's primary focus by
driving strong returns for our shareholders.QUARTERLY ANALYSIS
    ($ millions except               2008                    2007
     per share and
     operating data)           Q3     Q2     Q1     Q4     Q3     Q2     Q1
    -------------------------------------------------------------------------
    Financial Highlights
    Revenue                  191.7  141.2  219.7  145.8  162.2  115.5  206.2
    Gross margin              73.1   53.8   98.4   58.8   70.5   42.6   93.0

    Net earnings              20.4    1.1   38.9   17.9   15.0    4.7   41.9
    Depreciation              24.0   20.5   24.0   19.0   20.2   14.8   18.3
    (Gain) loss on sale
     of assets                   -   (0.2)  (0.1)   0.2      -    0.1    0.1
    Stock-based
     compensation              1.2    0.1    0.2    0.4    0.5    0.7    0.8
    Future income tax
     expense (recovery)       10.3    2.5    9.4   (7.8)   3.3   (3.1)  10.2
    Effective interest
     on financing costs        1.1    1.1    1.1    1.1    1.1    0.4    0.3
    Accretion on
     convertible debentures    1.2    1.2    1.1    1.2    1.0      -      -
    Unrealized foreign
     exchange (gain) loss     (6.6)   0.9   (4.1)   0.2    5.3    5.8    1.2
    Other                        -      -      -      -      -      -      -
                           --------------------------------------------------
    Cash flow from
     operations before
     change in non-cash
     working capital          51.6   27.2   70.5   32.2   46.4   23.4   72.8

    Net earnings per
     share (diluted)          0.21   0.01   0.44   0.21   0.18   0.05   0.49
    Cash flow from
     operations before
     change in non-cash
     working capital per
     share (diluted)          0.53   0.31   0.75   0.38   0.55   0.27   0.86
    -------------------------------------------------------------------------


    ($ millions except          2006
     per share and
     operating data)           Q4     Q3
    --------------------------------------
    Financial Highlights
    Revenue                  161.9  150.6
    Gross margin              74.9   66.9

    Net earnings              31.3   31.6
    Depreciation              15.4   14.0
    (Gain) loss on sale
     of assets                 0.1   (2.0)
    Stock-based
     compensation              1.8    0.7
    Future income tax
     expense (recovery)        6.2    4.6
    Effective interest
     on financing costs          -      -
    Accretion on
     convertible
     debentures                  -      -
    Unrealized foreign
     exchange (gain) loss     (0.1)     -
    Other                        -    0.1
                           ---------------
    Cash flow from
     operations before
     change in non-cash
     working capital          54.7   49.0

    Net earnings per
     share (diluted)          0.37   0.38
    Cash flow from
     operations before
     change in non-cash
     working capital per
     share (diluted)          0.65   0.57
    --------------------------------------


                                 2008                        2007
                          Q3      Q2      Q1      Q4      Q3      Q2      Q1
    -------------------------------------------------------------------------
    Operating
     Highlights
    Land Drilling
     Market
    Operating days -
     drilling
      Canada           3,411   1,742   4,009   2,135   2,718   1,165   3,817
      United States    3,861   3,783   3,675   3,399   3,305   2,944   2,464
    Rate per drilling
     day (CDN$)
      Canada          21,772  23,219  24,517  23,631  21,746  23,527  26,063
      United
       States(1)      22,668  21,565  21,735  21,404  23,265  24,927  25,506
    Utilization
     rate - drilling
      Canada             63%     31%     72%     37%     47%     20%     69%
      United States      85%     87%     87%     83%     85%     88%     85%
    CAODC industry
     average             48%     20%     56%     37%     39%     17%     59%
    Number of
     drilling rigs
      Canada              60      62      62      64      64      64      63
      United States       50      48      48      46      43      38      37
    Utilization for
     service rigs        49%     29%     62%     57%     46%     23%     73%
    Number of
     service rigs         20      20      20      20      20      21      20
    Number of coring
     and surface
     casing rigs          20      20      20      20      20      17      17

    Barge Drilling
     Market(2)
    Operating days       305     361     272     352     352       -       -
    Rate per drilling
     day (CDN$)       40,678  41,500  48,128  47,536  51,904       -       -
    Utilization rate     83%    100%   98%(3)    96%    100%       -       -
    Number of barge
     drilling rigs         1       1       1       1       1       -       -
    Number of barge
     drilling rigs
     under Bareboat
     Charter
     Agreements            3       3       3       3       3       -       -
    -------------------------------------------------------------------------


                             2006
                          Q4      Q3
    ---------------------------------
    Operating
     Highlights
    Land Drilling
     Market
    Operating days -
     drilling
      Canada           3,163   3,358
      United States    2,105   1,891
    Rate per drilling
     day (CDN$)
      Canada          26,328  23,083
      United
       States(1)      24,621  24,042
    Utilization
     rate - drilling
      Canada             61%     64%
      United States      85%     85%
    CAODC industry
     average             47%     57%
    Number of
     drilling rigs
      Canada              60      59
      United States       31      26
    Utilization for
     service rigs        64%     68%
    Number of
     service rigs         18      18
    Number of coring
     and surface
     casing rigs          17      17

    Barge Drilling
     Market(2)
    Operating days         -       -
    Rate per drilling
     day (CDN$)            -       -
    Utilization rate       -       -
    Number of barge
     drilling rigs         -       -
    Number of barge
     drilling rigs
     under Bareboat
     Charter
     Agreements            -       -
    ----------------------------------
    (1) In US dollars, dayrates remained relatively static and fluctuations
        are the result of changes in US currency rates.
    (2) Trinidad commenced its operations in the barge drilling market with
        its acquisition of Axxis, effective July 5, 2007.
    (3) During the first quarter of 2008, Trinidad completed significant work
        to one of its barge rigs and as a result it was removed from service
        and not included in the utilization calculation.Trinidad's revenue has continued to grow since 2006 as a result of
acquisitions, the continued deployment of rigs under rig construction programs
that were initiated in 2005 and the strong market conditions that were present
in early 2006. Net earnings and per share data were strong throughout 2006 and
the first quarter of 2007 as the market activities allowed for the Company to
realize growth through its expansion into new markets and its rig
diversification. Towards the end of 2006 and throughout 2007, Canadian
drilling operations faced declining market conditions as a result of lower
commodity prices and concerns over high natural gas storage levels. Canadian
dayrates decreased due to these conditions and the industry experienced lower
utilization levels from the second quarter of 2007 onwards, in comparison to
the same period in the prior year. The market downturn in Canadian drilling
during the second quarter of 2007, as well as unrealized foreign exchange
losses throughout the period due to declines in the US currency, caused a
decrease in net income and the related per share data to the end of 2007. The
third quarter of 2008 has continued to show signs of improvement in both the
western Canadian and US drilling markets as dayrates and utilization levels
continued to improve. Upward momentum in Trinidad's operations has been
evident throughout 2008 as reflected in the growth in the Company's EBITDA;
however, higher interest expense, depreciation expense, reorganization costs
and future income taxes have negatively impacted earnings this year.
    Quarterly revenues continued to be impacted by the seasonal conditions
present in the western Canadian drilling operations as a result of a
significant portion of the overall drilling fleet operating in this market.
This seasonality resulted in strong Canadian revenue in the first quarters as
oil and natural gas companies took advantage of frozen conditions, slower
second quarters due to spring break-up conditions and third and fourth
quarters which were more representative of normal operating conditions. The
expansion into the US market which has been ongoing since the end of 2005 has
partially mitigated the impact of the seasonal conditions on the overall
results of the Company.RESULTS FROM OPERATIONS

    Canadian Drilling Operations

    ($ thousands except    Three months ended           Nine months ended
     percentages and         September 30,                 September 30,
     operating data)  2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Revenue         82,680    67,656      22.2   259,125   233,991      10.7
    Operating
     expense        52,100    40,999      27.1   154,751   142,111       8.9
                    ---------------------------------------------------------
    Gross margin    30,580    26,657      14.7   104,374    91,880      13.6
                    ---------------------------------------------------------
    Gross margin
     percentage      37.0%     39.4%               40.3%     39.3%

    Operating days
     - drilling      3,411     2,718      25.5     9,162     7,699      19.0
    Rate per
     drilling
     day (CDN$)     21,772    21,746       0.1    22,989    24,156      (4.8)
    Utilization
     rate - drilling   63%       47%      34.0       55%       45%      22.2
    CAODC industry
     average           48%       39%      23.1       41%       38%       7.9
    Number of drilling
     rigs               60        63      (4.8)       60        63      (4.8)

    Utilization rate
     for service rigs  49%       46%       6.5       46%       35%      31.4
    Number of service
     rigs               20        20         -        20        20         -
    Number of coring
     and surface
     casing rigs        20        20         -        20        20         -Following the seasonably softer second quarter, Canadian drilling
operations rebounded strongly with third quarter revenues, gross margin,
operating days and utilization rates increasing as compared to both the prior
quarter and the same period of 2007. Despite Trinidad decreasing the number of
drilling rigs available within its Canadian segment, strong overall
utilization drove incremental revenue and gross margin for the quarter. Market
fundamentals including commodity prices showed relative strength over the
period increasing overall demand which allowed Trinidad to successfully
utilize its modern rig fleet to meet customers' growing demand. However,
volatility witnessed in the marketplace over the past few months in relation
to commodity prices could have significant impact on the oil and natural gas
industry moving forward with respect to project economics and 2009 capital
budget spending.
    Higher operating days and rig utilization in Trinidad's Canadian
operations in the third quarter increased revenue by $15.0 million or 22.2%
from $67.7 million in 2007 to $82.7 million in 2008, despite the reduction in
the number of rigs available at relatively static dayrates. Furthermore,
year-to-date revenue also increased by $25.1 million or 10.7%, driven through
a 19.0% increase in operating days along with a 22.2% increase in utilization
as compared to the nine months ended September 30, 2007. Moving from the
seasonal lows encountered in the second quarter, the third quarter saw overall
increases in the active drilling rig count in the Western Canadian Sedimentary
Basin ("WCSB"). Active rig count was 23.1% higher than the levels seen in the
third quarter of 2007, and Trinidad exceeded the industry by 31.2%. In
addition, the Company also surpassed 2007 utilization levels by 34.0% as a
result of stronger commodity pricing in the quarter strengthening the demand
for drilling activities. Earlier in the year, the active rig count in the
industry was in line with the relatively low levels encountered in 2007, but
since the second quarter of 2008, the active rig count has since surpassed
2007 levels and was 19% higher in September 2008 as compared to the same month
in 2007. Trinidad believes this to be a positive sign for the industry moving
forward into the fourth quarter of this year; however, the Company continues
to maintain a conservative outlook given the current economic conditions.
    Another factor that produced positive results for Trinidad was the
increased well completion activity in the WCSB, which resulted in stronger
year-over-year activity in the third quarter for the first time in the past
seven quarters. As per the CAODC, there were 4,683 wells reported as completed
in the third quarter this year, representing a 13.4% improvement from the
4,128 wells reported as completed in the comparable period of 2007.
Additionally, the year-over-year decline of 3% in natural gas well completions
was more than offset by a 31% increase in oil well completions. Directional
and horizontal drilling continued to be the theme in the WCSB in the third
quarter of 2008 with the number of non-vertical wells drilled increasing by
over 20% as compared to the same time period of 2007, while the easier
vertical wells drilled were down over 10% year-over-year. These more
technically challenging wells increased to 45% of the total wells drilled in
the quarter compared to 37% in the third quarter of 2007 indicating the shift
towards directional drilling and demonstrating the increasing amounts of
capital being deployed by producers towards the unconventional resource plays
in the WCSB. This trend bodes well for Trinidad, as the Company's Canadian rig
fleet offers customers these complex and deep-drilling capabilities. This
trend has allowed Trinidad to outperform industry utilization by 31.3% for the
quarter and 34.1% through the first nine months of 2008. Finally, growth in
revenue is also attributable to the longer-term duration of our deeper
drilling projects, which are not as subject to the short-term fluctuations in
commodity prices as shallow drilling projects tend to be. Producers operating
in deeper plays typically have longer timelines both in terms of capital
outlays as well as cash flows, which in turn renders deeper drilling fleets
more defensive in terms of utilization when commodity prices retreat.
    Operating costs for the quarter were $52.1 million, which represents an
increase of $11.1 million or 27.1% as compared to the same time period of
2007. This increase was the result of stronger revenues as well as a larger
number of recertification projects completed during the quarter, thus
increasing overall operating expense. In 2007, the majority of
recertifications were completed during the first-half of the year,
predominately in the second quarter. However, in 2008, a significant portion
of this maintenance was delayed as rigs were under contract and maintenance
was not yet required, inevitably shifting these expenses into the third
quarter. This is consistent with the year-over-year trend where revenues
increased by 10.7% in comparison with only an 8.9% increase in operating
expenses. As well, fuel costs also increased overall operating costs over the
period; however, the majority of these costs were recovered from the
operators, allowing Trinidad to maintain year-to-date margins at a level
comparable with the prior period. Currently, Trinidad records third-party
revenue and fuel costs on a gross basis; however, if these costs and
subsistence were reported net of revenue the gross margin percentages would be
42.8% for the three months ended September 30, 2008 and 45.7% year-to-date.
    The well servicing division also had a strong quarter with utilization
rates increasing to 49% from 46% in the prior year. Higher commodity prices
and increased activity in Canadian drilling facilitated stronger results in
this division. However, increased competition has also reduced rates on a
year-to-date basis resulting in slight declines in revenue and margins in
comparison with 2007. Overall, industry activity levels have remained
moderately stable during the period relative to the prior year and Trinidad
remains bullish on prospects for its well servicing division in light of
increased completion, work-over and abandonment activity expected over the
next several years, coupled with minor equipment expansion industry wide.United States Drilling Operations

    ($ thousands except    Three months ended           Nine months ended
     percentages and         September 30,                 September 30,
     operating data)  2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Revenue         92,661    83,771      10.6   262,944   220,005      19.5
    Operating
     expense        53,350    42,798      24.7   149,231   112,159      33.1
                    ---------------------------------------------------------
    Gross margin    39,311    40,973      (4.1)  113,713   107,846       5.4
                    ---------------------------------------------------------
    Gross margin
     percentage      42.4%     48.9%               43.2%     49.0%

    Land Drilling Rigs

    Operating days
     - drilling      3,861     3,305      16.8    11,319     8,713      29.9
    Rate per
     drilling
     day
     (CDN$)(1)      22,668    23,265      (2.6)   21,996    24,460     (10.1)
    Utilization
     rate
     - drilling        85%       85%         -       86%       86%         -
    Number of
     drilling
     rigs               50        43      16.3        50        43      16.3

    Barge Drilling Rigs(2)

    Operating days
     - drilling        305       352     (13.4)      938       352     166.5
    Rate per
     drilling
     day (CDN$)     40,678    51,904     (21.6)   43,208    51,904     (16.8)
    Utilization
     rate
     - drilling(3)     83%      100%     (17.0)      93%      100%      (7.0)
    Number of barge
     drilling rigs       1         1         -         1         1         -
    Number of barge
     drilling rigs
     under Bareboat
     Charter
     Agreements          3         3         -         3         3         -

    (1) In US dollars, dayrates remained relatively static, increasing
        marginally from $21,978 in the third quarter of 2007 to $22,049 in
        the third quarter of 2008.
    (2) Trinidad commenced its operations in the barge drilling market with
        its acquisition of Axxis, effective July 5, 2007.
    (3) During the first quarter of 2008, Trinidad completed significant work
        to one of its barge rigs and as a result it was removed from service
        and not included in the utilization calculation.Trinidad's US drilling operations had another successful quarter, posting
strong growth in revenue and operating days for both the three and nine months
ending September 30, 2008. One of the key strategies implemented by Trinidad
over the past few years has been to diversify the Company's business segments
and geographical base. With the continued expansion into the US marketplace,
along with the recent announcement pertaining to additional rig deployments
into Mexico, Trinidad has been successful with this risk mitigation strategy.
Trinidad's growing US operations have allowed the Company to gain traction
with its customers and make meaningful strides in establishing a high quality
reputation through its assets, people and commitment to clients' highly
specific requirements. This coupled with a less seasonal drilling environment
in the US, has provided Trinidad and its shareholders with strong financial
results in this marketplace, which will continue to be an area of stability
and growth for Trinidad moving forward.
    Revenue for the third quarter of 2008 increased by 10.6% to $92.7 million
from $83.8 million in the comparable period of 2007 and year-to-date increased
to $262.9 million, a 19.5% increase as compared to the nine months ending
September 30, 2007. Growth in revenue resulted from the expansion of the US
fleet, which increased by seven rigs year-over-year, inclusive of an
additional two rigs that were transferred from Trinidad's Canadian drilling
fleet to the US fleet during the quarter. These seven additional rigs
contributed to an increase in the number of operating days at relatively
consistent US dollar dayrates in comparison to the prior year. In addition,
the deployment of more rigs committed under long-term, take-or-pay contracts
operating year-over-year added to the overall operations. Average dayrates in
Canadian dollars declined 2.6% quarter-over-quarter and 10.1% year-to-date due
entirely to foreign exchange as a result of the declining strength of the US
dollar. In US dollars, average dayrates remained relatively static increasing
marginally from US$21,978 for the third quarter of 2007 to US$22,049 for the
same period in 2008.
    Operating expenses for the quarter increased from $42.8 million to
$53.4 million, reducing overall gross margins from 48.9% to 42.4% and
year-to-date increased 33.1% to $149.2 million, reducing gross margins to
43.2% from 49.0%. The growth in operating expenses was partially attributable
to increases in revenue throughout the first nine months of 2008, but overall
increases in operating costs exceeded the growth in revenue, reducing gross
margin percentage on both a quarter-over-quarter and year-to-date basis. The
decline in gross margin is primarily a result of several US rigs being
temporarily taken out of service in the quarter due to refurbishment work
completed over the period. Costs for these refurbishments were charged to
operating expenses and there was no associated revenue for this downtime,
ultimately reducing Trinidad's US gross margin. Total costs incurred for these
refurbishments were approximately $2.5 million which ultimately reduced gross
margins by 2.7% for the quarter and 0.9% year-to-date. Without the impact of
these refurbishments gross margin and gross margin percentage for the quarter
would have been $43.1 million and 45.9%, respectively, excluding the loss on
the Bareboat Charter, as compared to $40.0 million and 48.3%, respectively,
for the same time period of 2007. The expectation moving forward is that the
Company will see a future benefit from these refurbishments by way of improved
marketability and operating efficiency. In addition, expenses related to
employing additional field supervisors to manage the growing US fleet and
improved safety requirements in this segment also increased overall operating
expenses.
    Trinidad's barge drilling rigs had a softer quarter with operating days,
rates per drilling day and utilization all decreasing as compared to the same
period of 2007. Overall softening in the barge market over the course of 2008
has continued to drive dayrates down by 16.8% year-to-date; however, the
decline in dayrates has allowed Trinidad to continue to preserve market share
and maintain valuable relationships with key customers placing the Company in
a favourable position for when market conditions improve. Operating days for
the quarter were impacted by a permit issue on one rig as the operator
experienced delays in getting the appropriate permit necessary to move the rig
onto location. Additionally, another key factor that impacted this market for
the quarter was the hurricane season within the US Gulf of Mexico. Hurricanes
Gustav and Ike impacted both drilling and production during the quarter in the
Gulf of Mexico as barge drilling rigs needed to be shut down or stacked to
weather the storms. Trinidad was specifically impacted by this given that it
was in the midst of moving a barge rig onto another location, and the move was
interrupted by hurricane Ike. As a result the new location was not accessible
until subsequent to the storm, which therefore reduced the number of drilling
days and prohibited Trinidad from charging the customer for this downtime.
Moving forward, the impact from these hurricanes on the drilling market could
have a favourable impact in relation to natural gas prices due to production
shutdowns decreasing the deliverability of gas. Natural gas pricing in the US
started to stabilize near the end of the quarter, which was caused by
production outages as a result of the hurricanes keeping significant natural
gas production off the market. Moving forward, we expect the barge rig segment
to continue to be a key component of our success as this segment has added
both asset and geographical diversification to Trinidad and continues to
present a significant opportunity to expand into other jurisdictions.
    During the quarter, Trinidad moved two rigs from Canada into the US under
long-term, take-or-pay contracts for periods of three and five years, with
guaranteed utilization rates of 100% during their respective contract terms.
These rigs are expected to operate in the Haynesville Shale, Louisiana and the
Bakken Shale, North Dakota. Trinidad has a growing presence in the emerging
Haynesville Shale play and following the completion of its rig build program,
the Company expects to have at least 21 rigs operating in the area. Trinidad
has been successful in the Canadian portion of the Bakken Shale play given the
advanced technology and drilling techniques associated with its drilling
fleet, positioning the Company well to drill in this market. This advanced
technology has helped our customers with overall drilling efficiency and made
their associated drilling programs more economically viable making this area
an area of expected growth moving forward. Both rigs were operational in their
new areas in August 2008. In addition, Trinidad announced the move of three
existing rigs from Canada into the southern edge of the Chicontepec field in
central eastern Mexico. These rigs represent Trinidad's initial entry into
Mexico and are expected to be in place and operational by the end of November
2008. The rigs are contracted to work at a utilization rate of 100% for an
initial term of six months, with a further six month extension option. The
operator has agreed to pay the costs associated with relocating the rigs into
Mexico and returning the rigs to Canada at the end of the contracted period,
if required. It is anticipated that these rigs will remain in Mexico for the
foreseeable future. This move into Mexico follows Trinidad's overall strategy
of initially moving a small number of rigs into new areas of opportunity,
developing a strong reputation locally through high performance and a
customer-focused approach, and then expanding its operations. Trinidad's
expansion into Mexico is in response to the strong demand for quality drilling
equipment and growth in drilling programs planned for the area and also allows
Trinidad to strategically redeploy rigs from a highly seasonal and
increasingly under-utilized capacity base.
    The focus in the US has been on several shale gas plays, including the
Barnett, Bakken, Fayetteville, and Haynesville areas. Most of the US shale
plays require state-of-the-art technology and fit-for-purpose rigs that enable
deep horizontal drilling. Horizontal wells, while more expensive, result in
higher well productivity utilizing powerful multi-stage fracturing spreads
employed by pressure pumping companies. Trinidad has the capability to drill
horizontally and directionally at these deeper requirements and has a strong
presence in these key US emerging plays, which will help to provide strong
returns from this market on an ongoing basis.Construction Operations

    ($ thousands except    Three months ended           Nine months ended
     percentage              September 30,                 September 30,
     data)            2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Revenue(1)      44,791    19,507     129.6    85,923    76,700      12.0
    Operating
     expense(1)     41,589    16,694     149.1    78,724    70,427      11.8
                    ---------------------------------------------------------
    Gross margin     3,202     2,813      13.8     7,199     6,273      14.8
                    ---------------------------------------------------------
    Gross margin
     percentage       7.1%     14.4%                8.4%      8.2%

    (1) Includes inter-segment revenue and operating expenses of
        $28.4 million and $8.8 million for the three months ended
        September 30, 2008 and 2007, respectively and $55.5 million and
        $46.8 million for the nine months ended September 30, 2008 and 2007,
        respectively.Revenue from construction operations increased by 129.6% from
$19.5 million in the third quarter of 2007 to $44.8 million in 2008 and is
currently 12.0% ahead of the prior year for the nine months ending
September 30, 2008. Growth in the manufacturing division is due to the
completion of $28.4 million of inter-segment construction work performed in
the quarter as part of the current rig construction programs, in comparison
with only $8.8 million in the same quarter of the prior year, as well as
ongoing third party work. The increase of $19.6 million in inter-segment
revenue quarter-over-quarter was as a result of the commencement of the 2008
drilling rig construction programs, of which Mastco will be constructing 13 of
the 16 rigs currently planned. Trinidad is expecting to have three rigs
available by the end of 2008, with the other 13 rigs to be deployed throughout
2009. Gross margin percentage decreased from 14.4% last year to 7.1% for the
third quarter of 2008 due to the majority of revenue being generated from
inter-segment work. Year-to-date revenue and gross margins have increased by
12.0% and 14.8%, respectively; however, variations are the result of
fluctuations in the amount of inter-segment work performed over the respective
periods, and third party revenues and gross margins remain static
year-over-year.
    Trinidad recently announced the acquisition of Victory Rig Equipment
Corporation, a privately held oilfield equipment fabrication company, based in
Red Deer, Alberta. Trinidad plans to combine all of its oilfield equipment
manufacturing and construction businesses into one business that will retain
the name Victory Rig Equipment Corporation ("Victory"), which will combine
Victory's and Trinidad's existing construction operations. Victory provides an
unmatched selection of patented and highly-effective drilling equipment
including the newly developed Victory 200-535 ton top drive, which when
combined with the existing manufacturing facilities will offer an extensive
range of drilling solutions including innovative and technically-advanced rigs
capable of meeting the growing challenges in the oil and natural gas industry.
The integration of the businesses into one division will provide a unique and
seamless ability to deliver the complete cycle of drilling solutions from
design, manufacturing and installation through to after-market services.
Victory has designed and created some of the industry's most progressive
oilfield equipment and this acquisition will allow Trinidad to bring these
innovative and effective designs into its control allowing for a continued
focus on first-class performance and results for its customers.GENERAL AND ADMINISTRATIVE EXPENSE

    ($ thousands except    Three months ended           Nine months ended
     percentage              September 30,                 September 30,
     data)            2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    General and
     administrative
     expenses       11,557    10,242      12.8    35,729    30,372      17.6
    % of revenue      6.0%      6.3%                6.5%      6.3%General and administrative expenses increased 12.8% to $11.6 million in
the third quarter of 2008 from $10.2 million for the same period in 2007 and
increased 17.6% to $35.7 million from $30.4 million for the nine months ending
September 30, 2008 and 2007, respectively. As a percentage of revenue, general
and administrative expenses for the quarter decreased from 6.3% to 6.0% and
increased slightly as a percentage of revenue to 6.5% on a year-to-date basis.
The continued expansion of Trinidad's business within the US has led to higher
overhead expenses, which is the main driver for the increase for both the
quarter and nine months ending September 30, 2008. However, despite the
overall increase, Trinidad has continued to maintain general and
administrative expenses as a percentage of revenue at relatively consistent
levels with the prior year demonstrating its commitment and conservative focus
on maintaining fixed administration spending year-over-year. Trinidad will
continue to ensure growth for shareholders by creating internal efficiencies,
centralizing certain required functions and integrating its management team.
    Effective January 1, 2008, Trinidad reclassified several costs associated
with field management, equipment insurance and property taxes on the US rigs
into operating expenses from general and administrative expenses to better
align the Company with current industry standards and allow for increased
consistency amongst Trinidad's peer group. Comparative figures for 2007 have
also been reclassified.INTEREST

                           Three months ended           Nine months ended
                             September 30,                 September 30,
    ($ thousands)     2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Interest on
     long-term debt  4,390     6,749     (35.0)   16,940    24,107     (29.7)
    Effective
     interest on
     deferred
     financing costs   420       425      (1.2)    1,260     1,177       7.1
                    ---------------------------------------------------------
                     4,810     7,174     (33.0)   18,200    25,284     (28.0)

    Interest on
     convertible
     debentures      6,937     6,621       4.8    20,595     6,621     211.1
    Effective
     interest on
     deferred
     financing costs   661       653       1.2     1,979       653     203.1
    Accretion on
     convertible
     debentures      1,221     1,028      18.8     3,584     1,028     248.6
                    ---------------------------------------------------------
                     8,819     8,302       6.2    26,158     8,302     215.1During the first three quarters of 2007, Trinidad had a large portion of
its debt facility drawn to fund its rig construction programs, which required
intensive capital expenditures. The convertible debenture offering effective
July 2007, proceeds from the equity financing completed June 2008 and cash
flow from operations were used in the later part of 2007 and throughout 2008
to reduce the overall indebtedness of the Company. These cash sources reduced
long-term debt levels significantly from $366.1 million on September 30, 2007
to $283.8 million on September 30, 2008, which in addition to reductions in
the BA and LIBOR rates in 2008 as compared to 2007, has further reduced the
interest on both the term and revolving facilities. Effective July 5, 2007,
Trinidad completed the issuance of $354.3 million in convertible unsecured
subordinated debentures in order to complete the acquisition of Axxis.
Interest on the convertible debentures is paid semi-annually at a coupon rate
of 7.75% and for the three months ended September 30, 2008, Trinidad recorded
associated interest expense of $6.9 million. This is slightly higher than the
three months ended September 30, 2007 as the convertible debentures were not
outstanding for the entire period in 2007. The fixed interest rate on the
convertible debentures has reduced Trinidad's exposure to interest rate
fluctuations and further enhances cash flow stability. Additionally, Trinidad
has the option to redeem the debentures in whole or in part at a redemption
price of $1,000 after December 31, 2010 and before their maturity date, but on
redemption or maturity, Trinidad may elect to satisfy its obligation to repay
the principal by issuing shares.
    Total interest expense, inclusive of interest on long-term debt and
interest on convertible debentures, has increased 32.1% year-over-year as a
result of the convertible debentures being outstanding for the entire 2008
period versus only a portion of the 2007 period. Interest on the convertible
debentures and the term facilities has continued to enhance cash flow
stability as the cash drawn on these facilities has been invested in long-term
capital assets that have been used to generate operating cash flow.
Furthermore, repayment of the convertible debentures will not be required
until July 2012 and at that time, at Trinidad's election, can be satisfied
through the issuance of equity. Interest on the revolving facility is expected
to rise as funds are drawn from the facility to fulfill the capital needs of
the rig construction programs that were announced on May 20, 2008 and July 17,
2008, which will add a total of 16 land drilling rigs and six well servicing
rigs.STOCK-BASED COMPENSATION

                           Three months ended           Nine months ended
                             September 30,                 September 30,
    ($ thousands)     2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Stock-based
     compensation    1,197       508     135.6     1,499     1,954     (23.3)On March 10, 2008, Trinidad converted from a growth-oriented income trust
to a growth-oriented, dividend-paying corporation. As a result of this
arrangement, Trinidad's former Unit Rights Incentive Plan was rolled into the
Incentive Option Plan (the "Plan"), which is used to assist officers,
employees and consultants of Trinidad and its affiliates to participate in the
growth and development of the Company. Trinidad uses the fair value method to
calculate compensation expense associated with options granted under the Plan.
Compensation expense is then recognized in earnings over the vesting period of
the options granted with a corresponding increase in contributed surplus. As a
result of applying the fair value method, stock-based compensation increased
135.6% from $0.5 million to $1.2 million as a result of the issuance of
823,810 options during the third quarter of 2008. The increase
quarter-over-quarter is a result of no options being issued in the comparable
period of 2007. Year-to-date, stock-based compensation expense was $1.5
million, representing a decline of 23.3% as compared to 2007, due to fewer
options being issued in 2008.FOREIGN EXCHANGE (GAIN) LOSS

                           Three months ended           Nine months ended
                             September 30,                 September 30,
    ($ thousands)     2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Foreign exchange
     (gain) loss    (6,835)    5,394    (226.7)  (10,358)   12,283    (184.3)Trinidad's US operations have continued to grow and contributed
significantly to the overall operations of the Company. As a result, upon
consolidation Trinidad's US operations are considered to be self-sustaining
and therefore, gains and losses due to fluctuations in the foreign currency
exchange rates are recorded in Other Comprehensive Income ("OCI") on the
balance sheet as a component of equity. However, gains and losses in the
Canadian entity on US denominated intercompany balances continue to be
recognized in the statement of operations. For the first nine months of 2008,
Trinidad recognized a gain of $10.4 million in comparison with a loss of
$12.3 million in 2007. The weakening of the Canadian dollar in the current
period, in comparison with its strengthening over the same period in 2007, has
resulted in Trinidad's Canadian division recognizing significant foreign
exchange gains on intercompany balances with Trinidad's US operations.
Further, significant growth in these intercompany balances as a result of the
rig transfers that were completed from Canada to the US and rig construction
programs that were funded through the Canadian revolving credit facility has
caused foreign exchange fluctuations to become more pronounced. The
$10.4 million gain corresponds to an equal and offsetting unrealized loss in
the US subsidiary included in OCI.DEPRECIATION

                           Three months ended           Nine months ended
                             September 30,                 September 30,
    ($ thousands)     2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Depreciation    23,970    20,190      18.7    68,471    53,279      28.5
    (Gain) loss on
     sale of
     assets             (3)       31    (109.7)     (320)      238    (234.5)Depreciation increased 18.7% from $20.2 million in the third quarter of
2007 to $24.0 million in the same quarter of 2008. On a year-to-date basis
depreciation expense also increased to $68.5 million, representing a 28.5%
increase from the same time period of 2007. Changes in the composition of
Trinidad's asset base through rig construction programs have resulted in the
addition of drilling rigs with increased drilling depth; therefore
incrementally adding to the capital cost of Trinidad's asset base. The change
in the composition of the fleet has increased the depreciation rates per day
in Canada to $2,982 year-to-date for 2008 as compared to $2,866 year-to-date
for 2007, a $116 per day or 4.1% increase year-over-year. Higher depreciation
rates on a year-to-date basis, coupled with utilization rate increases of
34.0% quarter-over-quarter and 22.2% year-over-year, has significantly
increased the Canadian divisions depreciation despite the reduction of its rig
count by three as compared to last year.
    Depreciation in the US market also increased year-over-year as the rates
per drilling day increased by 11.4% or US$347 from US$3,051 for the first
nine months of 2007 to US$3,398 in 2008 as a result of higher cost of capital
on the rigs released under the rig construction programs and the Axxis
acquisition. As well, Trinidad's US land drilling division has increased its
rig count by seven over last year, which has driven incremental drill days,
thus increasing depreciation expense. The increased US dollar depreciation
rate per drilling day year-over-year was offset almost entirely by decreasing
Canadian / US foreign currency rates, resulting in the rates per drilling day
in Canadian dollars remaining relatively static. However, despite the static
depreciation rates in Canadian dollars the 29.9% increase in drill days
year-to-date and 16.8% increase quarter-over-quarter did increase overall
depreciation for the US operations. The Company expects the composition of its
US division's assets to grow significantly over the next year, during which
time 16 new rigs will be introduced, which will contribute to incremental
depreciation expense and drill days moving forward.
    The gain on sale of assets for the nine months ended September 30, 2008
was the result of the disposition of two properties owned by Trinidad which
were not fully utilized, thereby allowing operations to be consolidated into
other existing facilities. These gains were offset by smaller losses on the
disposition of assets that were no longer being utilized, consistent with the
prior period.REORGANIZATION COSTS

                           Three months ended           Nine months ended
                             September 30,                 September 30,
    ($ thousands)     2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Reorganization
     costs              24         -         -     2,713         -         -On January 10, 2008, the Trust announced its intent to convert from a
growth-oriented income trust to a growth-oriented, dividend-paying
corporation, subject to unitholder and regulatory approval. On March 10, 2008,
unitholders and holders of the exchangeable shares voted, and overwhelmingly
approved, the conversion of the Trust into a public oil and natural gas
services corporation retaining the name "Trinidad Drilling Ltd.". As a result
of this reorganization Trinidad incurred one-time costs of $2.7 million
relating to this conversion which included charges for shareholder
communication, legal counsel, development and execution of fairness opinions
and charges in relation to revising and updating necessary legal documents for
Trinidad's new corporate structure. Trinidad believes it has incurred the
majority of the charges in relation to the above conversion as of
September 30, 2008.INCOME TAXES

                           Three months ended           Nine months ended
                             September 30,                 September 30,
    ($ thousands)     2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Current tax
     expense
     (recovery)     (1,122)      299    (475.3)      575     2,283     (74.8)
    Future tax
     expense        10,303     3,260     216.0    22,193    10,377     113.9The year-to-date current income tax expense of $0.6 million decreased by
74.8% from the same period in the prior year as a result of the reorganization
completed at the beginning of 2008 to amalgamate the Company's surface casing
and coring division into its drilling division. This amalgamation ultimately
increased the tax shield the Company had on earnings from this smaller
division allowing higher tax pools in the Canadian drilling division to shield
earnings from drilling activity in the oil sands. As a result, no current
taxes were recorded on these earnings in 2008, in comparison to approximately
$1.0 million recorded in the same period of 2007. These savings were partially
offset by increased revenues generated by a smaller manufacturing division,
whose taxable earnings surpassed the allowable deductions creating a tax
liability of $0.9 million in 2008 versus only $0.3 million over the same
period in 2007. In addition, US withholding taxes of $0.8 million were paid on
interest payments submitted from the US operations to Canada creating a
current tax that will be used to offset the taxability of the Canadian
operations through triggering a foreign tax credit. However, due to the tax
loss position in the current period this deduction has created a further loss
therefore triggering a future tax recovery. Furthermore, in the current
quarter there was a significant decrease in current taxes from the US as a
result of clearer interpretations of the rules surrounding the calculation of
the Texas Margins Tax. This resulted in the reversal of $1.3 million of
previously recognized taxes in the current quarter as it was determined that
it was no longer appropriate, which caused the decrease of 475.3% in the
current quarter over the same period in the prior year.
    Future income tax expense increased year-over-year by $11.8 million or
113.9% and quarter-over-quarter by $7.0 million or 216.0%. The increase in
future tax expenses is primarily as a result of the change from an income
trust structure to a corporation, which eliminated the deduction that the
Company previously had for distributions made to unitholders, subjecting the
consolidated earnings of Trinidad to greater future tax liabilities. These
increases were offset as a result of the decreasing future tax rates due to
changes in the Federal Budget between the second quarter of 2007 and the
current period.NET EARNINGS AND CASH FLOW

                           Three months ended           Nine months ended
    ($ thousands except      September 30,                 September 30,
     per share data)  2008      2007  % Change      2008      2007  % Change
    -------------------------------------------------------------------------
    Net earnings    20,373    15,043      35.4    60,426    61,627      (1.9)
    Per share
     (diluted)        0.21      0.18      16.7      0.67      0.65       3.1
    Cash flow from
     operations
     before change
     in non-cash
     working
     capital        51,538    46,456      10.9   149,250   142,619       4.6
    Per share
     (diluted)        0.53      0.55      (3.6)     1.67      1.42      17.6
    Cash flow from
     operations     17,754    48,388     (63.3)  149,703   122,450      22.3
    Per share
     (diluted)        0.18      0.57     (68.4)     1.67      1.23      35.8For the three months ended September 30, 2008, Trinidad's consolidated
net earnings were $20.4 million, an increase of $5.3 million or 35.4% from
$15.0 million in 2007. Net earnings increased quarter-over-quarter as a result
of higher revenues due to increased Canadian utilization and additional rigs
placed in service in the US. Both of these factors drove increases in
operating days, which were accompanied by stable dayrates and helped to drive
incremental gross margin and higher net earnings. As well, there was an
unrealized foreign exchange gain due to strengthening of the US dollar during
the quarter of $6.8 million, whereas in 2007 Trinidad recognized a loss of
$5.4 million. Offsetting these gains was a decrease in gross margin given
refurbishments completed on Trinidad rigs during the quarter in both Canada
and the US, as well as an increase in depreciation given the increased number
of operating days and rigs in the period. Lastly, income tax expense increased
by $5.6 million quarter-over-quarter as a result of the elimination of the
income trust tax structure, which has resulted in a higher effective tax rate
and therefore increased tax expense.
    Year-to-date, Trinidad recorded consolidated net earnings of
$60.4 million, representing a decrease of $1.2 million or 1.9% as compared to
the same period in 2007. This slight decline was primarily the result of
reduced dayrates in the Canadian drilling segment during the first quarter of
2008 in comparison with 2007, as dayrates in the first quarter of 2007
represented a continuation of the stronger drilling market present in 2006.
Incremental interest expense on the convertible debentures, higher
depreciation and the incurrence of costs associated with the reorganization of
Trinidad into a new corporate structure also contributed to the reduction
year-over-year. However, these reductions were substantially offset through
the overall growth in the Company's US operations, as well as the unrealized
foreign exchange gain due to strengthening of the US dollar.
    Cash flow from operations for the third quarter decreased by 63.3% from
$48.4 million ($0.57 per share (diluted)) in 2007 to $17.8 million ($0.18 per
share (diluted)) in 2008 and increased year-to-date by $27.3 million to
$149.7 million. These fluctuations are the result of movements in non-cash
working capital given increases in both the Company's accounts receivable and
prepaids balances which were offset by increases in the accounts payable
balance year-over-year. The increase in accounts receivable and accounts
payable are due to increased activity for Trinidad during the quarter, while
the increases in prepaids are due to deposits made on equipment for our
current rig build construction program.
    Cash flow from operations before changes in non-cash working capital for
the third quarter increased by 10.9% from $46.5 million ($0.55 per share
(diluted)) in 2007 to $51.5 million ($0.53 per share (diluted)) in 2008.
Year-to-date cash flow from operations before changes in non-cash working
capital also increased by $6.6 million, or 4.6%, to $149.3 million ($1.67 per
share (diluted)) from $142.6 million ($1.42 per share (diluted)) for the same
period in 2007. Growth on both a quarterly and year-to-date basis was
primarily a result of increased revenue and gross margin given the strong
quarter the Company had with increased operating days and utilization in
Canada, along with increased operating days and drilling fleet in the US.-------------------------------------------------------------------------
    LIQUIDITY AND CAPITAL RESOURCES               September 30,  December 31,
    ($ thousands except percentage data)                  2008          2007
    -------------------------------------------------------------------------
    Working capital                                     93,698        84,101

    Current portion of long-term debt                    1,426         1,679
    Convertible debentures(1)                          321,467       315,991
    Long-term debt(1)                                  282,333       402,489
                                                 ----------------------------
    Total debt                                         605,226       720,159
                                                 ----------------------------
    Total debt as a percentage of assets                 36.6%         48.1%

    Net debt                                           510,102       634,379
    Net debt as a percentage of assets                   30.9%         42.4%

    Total assets                                     1,652,301     1,497,156
    Total long-term liabilities                        673,438       764,102
    Total long-term liabilities as a
     percentage of assets                                40.8%         51.0%

    Shareholders' equity                               847,021       634,502
    Total debt to shareholders' equity                   71.5%        113.5%
    Total debt to shareholders' equity - assuming
     debenture conversion                                24.3%         42.5%
    Net debt to shareholders' equity                     60.2%        100.0%
    -------------------------------------------------------------------------
    (1) Convertible debentures and long-term debt are reflected net of
        associated transaction costs.Working capital increased $9.6 million as a result of the overall growth
of Trinidad, as well as the improvements throughout the quarter in the
drilling markets in which Trinidad operates, leading to increased net earnings
and cash flow. Given both the growth of the Company and the cyclical nature of
the drilling industry, accounts receivable and accounts payable increased
17.7% and 23.9%, respectively, over the year-end balances. In addition,
prepaids increased by $13.1 million as a result of deposits placed on
components required for Trinidad's ongoing rig construction programs. These
increases were partially offset by the increase in the current portion of
deferred revenue of $8.8 million, which pertain to customer deposits on rigs
under construction. This increased working capital positions Trinidad
favourably given the recent economic conditions.
    Trinidad's long-term debt decreased by $120.4 million, or 29.8%, from
$404.2 million at the end of 2007 to $283.8 million at September 30, 2008.
This reduction is a result of the completion, in the second quarter of 2008,
of an equity financing deal whereby 12,132,353 shares, including the
overallotment of 1,102,941, were issued for gross proceeds of $165.0 million.
The net proceeds earned from this issuance were used initially to reduce debt
with the expectation of subsequent use towards the 2008 rig construction
programs. It is currently anticipated that the costs of these rig construction
programs will be $258.0 million, of which $49.7 million had been spent as at
September 30, 2008 and as additional financing is required, it will be drawn
from the existing credit facility and cash flow from operations. In the
current quarter, Trinidad's long-term debt increased by $30.9 million, or
12.2% from the June 30, 2008 balance of $252.9 million. This increase is the
direct result of increases on the revolving credit facility to fund capital
requirements on Trinidad's current rig construction programs in excess of cash
flows.
    In order to fund the acquisition of Axxis in the third quarter of 2007,
Trinidad completed the issuance of $354.3 million convertible debentures (see
below). The classification of the convertible debentures as debt on the face
of the balance sheet has resulted in the Company's leverage appearing higher
than some of its peers. However, at maturity or redemption, to the extent the
convertible debentures have not previously been converted by the holders, the
Company may elect to satisfy its obligation to repay the principal by issuing
shares at a price equal to 95.0% of the weighted average trading price of the
shares. As a result, Trinidad has the ability, at its option, to eliminate any
cash requirements in respect of the principal amount owing on the convertible
debentures.
    Trinidad has continued to see declines in debt and net debt balances
overall, as well as declines in net debt as a percentage of assets and total
debt to shareholders' equity (assuming debenture conversion). This improved
leverage position is due to Trinidad positioning itself strategically through
its investment in drilling rigs with increased depth capabilities that are
more technologically advanced, its geographical diversification, and a capital
management strategy which has allowed Trinidad to benefit from the improved
market conditions in Canada in the third quarter and achieve consistency in
the US operations. The equity financing in the second quarter of 2008 has
further allowed Trinidad to focus on its continued expansion into diversified
markets through both internal growth as a result of the rig construction
programs as well as externally through acquisition.
    Despite recent commodity, equity and financial market turbulence,
Trinidad remains comfortable with its existing capital structure. Long-term
debt is made up of three components, two five-year term facilities that mature
in May 2011 and a revolving credit facility that is renewed annually in April.
The term facilities are comprised of a $100.0 million Canadian facility and a
US$125.0 million US facility. As well, Trinidad's Canadian revolving credit
facility has a maximum capacity of $250.0 million and at the end of the
quarter Trinidad had drawn only $28.0 million or 11.2%. These three debt
facilities are held by a broad syndicate of well-respected financial
institutions and covered by a general set of covenants that the Company was
comfortably onside with at quarter-end.
    As well, subsequent to quarter-end Trinidad received the remaining
balance owing of US$48.2 million in relation to the sale of the barge rig
completed in July 2008, which the Company plans to allocate to capital
commitments under the rig construction programs. With the funds from the barge
rig sale, the proceeds from the equity issuance in June 2008 and cash flow
from operations, Trinidad does not expect it will need to utilize the full
capacity of its revolving credit facility in the next 12 months. Although the
revolving credit facility is subject to renewal in April 2009, the Company
currently has no indication that the renewal would not be granted and to the
extent that it is not granted, repayment of the outstanding balance would not
be due for 364 days.
    The increase in shareholders' equity of $212.5 million since year end is
the result of the equity financing deal, which closed in the second quarter of
2008, for gross proceeds of $165.0 million, as well as $60.4 million in net
earnings for the nine months ended September 30, 2008. Further increases were
noted in accumulated other comprehensive income of $32.7 million, which is
made up of gains on the translation of Trinidad's foreign entities offset
marginally by unrealized losses on the interest rate swaps due to reductions
in future expected interest rates.

    Convertible Debentures

    In connection with the acquisition of Axxis, Trinidad issued
$354.3 million in unsecured subordinated convertible debentures, of which
$325.0 million was issued through a public offering and $29.3 million was
issued to the former owners of Axxis. The debentures are convertible into
shares of Trinidad at the option of the holder at any time prior to maturity
at a conversion price of $19.30 per share. They have a face value of $1,000, a
coupon rate of 7.75%, and mature July 31, 2012, with interest being paid
semi-annually on June 30 and December 31. Trinidad has the option to redeem
the debentures in whole or in part at a redemption price of $1,000 after
December 31, 2010 and before their maturity date. On redemption or maturity,
Trinidad may elect to satisfy its obligation to repay the principal by issuing
common shares. The value of the conversion feature at the time of issuance was
determined using the Black-Scholes pricing model to be $28.2 million and has
been recorded as equity with the remaining $326.1 million allocated to
long-term debt, net of $13.6 million of transaction costs. The debentures are
being accreted such that the liability at maturity will equal the face value
of the debt.
    As at September 30, 2008, there had been a conversion of $95,000
convertible debentures which equated to 4,921 common shares of Trinidad
Drilling Ltd.-------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY                          September 30,  December 31,
    ($ thousands)                                         2008          2007
    -------------------------------------------------------------------------
    Shareholders' equity                               837,709             -
    Unitholders' capital                                     -       675,728
    Exchangeable shares                                      -         2,477
    -------------------------------------------------------------------------On January 10, 2008, the Trust announced its intent to convert from a
growth-oriented income trust to a growth-oriented, dividend-paying
corporation. On March 10, 2008, unitholders and holders of the exchangeable
shares voted, and overwhelmingly approved, the conversion of the Trust into a
public oil and natural gas services corporation retaining the name "Trinidad
Drilling Ltd.". As a result of this conversion unitholders and holders of the
exchangeable shares received shares in the newly created corporation on a
one-for-one basis, after giving effect to the exchange ratio on the
exchangeable shares at the time of conversion. As a result, unitholders'
capital was transferred into shareholders' equity during the first quarter of
2008.
    Shareholders' equity increased from $678.3 million at the time of
conversion to $837.8 million as at September 30, 2008. The increase was mainly
attributable to equity financing in the second quarter at which time a total
of 12,132,353 common shares, which included the overallotment of 1,102,941
common shares, were issued for gross proceeds of $165.0 million. This
offering, in addition to the exercise of 141,724 options ($1.3 million) since
the time of conversion and the conversion of convertible debentures
representing 4,921 common shares ($0.1 million), resulted in the
$159.5 million increase of shareholders' equity. Unitholders' capital also
increased prior to the conversion to a corporation by $2.6 million as a result
of the conversion of 253,430 Series A exchangeable shares ($2.0 million) to
352,328 trust units, the conversion of 47,169 Series C exchangeable shares
($0.5 million) to 59,905 trust units and 7,850 shares issued for options
exercised ($0.1 million).
    Effective September 2, 2008, Trinidad announced its intent to acquire for
cancellation up to 10% (9,373,221 common shares) of the Company's public float
by way of normal course issuer bid ("NCIB") commencing September 4, 2008 and
extending to the earlier of September 3, 2009 or the date upon which the
Company acquires the maximum number of common shares to be purchased pursuant
to the NCIB through ITG Canada Corporation. The Board of Directors of Trinidad
believes the underlying value of the Company's common shares may not be
reflected in the current or future market price and therefore has decided to
undertake the NCIB. During the third quarter of 2008, Trinidad acquired a
total of 33,500 shares at a cost of $0.2 million, of which 4,300 shares were
cancelled. The excess of the purchase price over the carrying amount of the
common shares acquired and cancelled is recorded as a reduction to retained
earnings.

    Shareholders can obtain a copy of the Notice of Intention to make a
normal course issuer bid, without charge, by contacting Trinidad at (403)
265-6525.

    Shareholders' equity on October 31, 2008 was $836.0 million
(96,093,771 shares).

    SEASONALITY

    Trinidad operates a substantial number of rigs in western Canada, and
therefore operations are heavily dependent upon the seasons. The winter
season, which incorporates the first quarter, is a busy period as oil and
natural gas companies take advantage of frozen conditions to move drilling
rigs into regions which might otherwise be inaccessible to heavy equipment due
to swampy conditions. The second quarter normally encompasses a slow period
referred to as spring break-up. During this period, melting conditions result
in temporary municipal road bans that effectively prohibit the movement of
drilling rigs. The third and fourth quarters are usually representative of
average activity levels.
    Trinidad's expansion to the US market has reduced its overall exposure to
the seasonal factors that are present in its Canadian operations. These
seasonal conditions typically limit Canadian drilling activity, whereas in the
United States operators have more flexibility to work throughout the year.
This increased number of operating days throughout the year has allowed
Trinidad to better manage its business with more sustainable cash flow
throughout the annual cycle.

    CRITICAL ACCOUNTING ESTIMATES

    The preparation of the unaudited interim consolidated financial
statements requires that certain estimates and judgements be made with regard
to the reported amount of revenues and expenses and the carrying values of
assets and liabilities. These estimates are based on historical experience and
management judgement. Anticipating future events involves uncertainty and
consequently the estimates used by management in the preparation of the
unaudited interim consolidated financial statements may change as future
events unfold, additional experience is acquired or Trinidad's operating
environment changes.

    Depreciation

    The accounting estimate that has the greatest impact on Trinidad's
financial results is depreciation. Depreciation of Trinidad's property and
equipment incorporates estimates of useful lives and residual values. These
estimates may change as more experience is obtained or as general market
conditions change impacting the operation of Trinidad's capital assets.

    Stock-based compensation

    Compensation expense associated with options at grant date are estimates
based on various assumptions such as volatility, annual dividend yield, risk
free interest rate and expected life using the Black-Scholes methodology to
produce an estimate of the fair value of such compensation.

    Allowance for doubtful accounts receivable

    Trinidad performs credit evaluations of its customers and grants credit
based on past payment history, financial conditions and anticipated industry
conditions. Customer payments are regularly monitored and a provision for
doubtful accounts is established based on specific situations and overall
industry conditions. Trinidad's history of bad debt losses has generally been
limited to specific customer circumstances; however, given the cyclical nature
of the oil and natural gas industry, the credit risks can change suddenly and
without notice.

    Goodwill

    In accordance with Canadian GAAP, Trinidad performs an annual goodwill
impairment each fiscal year and sooner when changing circumstances indicate a
possible impairment exists. In accordance with this, Trinidad performed its
impairment test as at December 31, 2007, and no goodwill impairment existed.
As at September 30, 2008, no changes in circumstances indicate that this
assessment should be re-performed.

    Fair value of interest rate swaps

    The fair value of the interest rate swaps are estimated based on future
projected interest rates and adjusted on a quarterly basis for monthly
settlements and changes in projections. Trinidad receives the valuation from
the contract counterparty on a quarterly basis and records the associated
change in fair value at each reporting period.

    Convertible debentures

    The proceeds from the offering have been bifurcated into separate
liability and equity components. The value of the conversion feature has been
determined based on an option pricing model and recorded as equity on the
Consolidated Balance Sheet.

    Future Income Taxes

    The recording of future income tax involves the use of various
assumptions to estimate the amounts and timing of the reversals of temporary
differences between assets and liabilities recognized for accounting and tax
purposes. It also involves the estimation of the effective tax rates for
future fiscal years. The assumptions used, which include, but are not limited
to, estimated results of operations, tax pool claims and accounting
deductions, are based on management's current estimates and will likely change
in future periods based on actual results and accordingly so will the
estimates.

    CHANGES IN ACCOUNTING POLICY

    Effective January 1, 2008, Trinidad adopted the following new accounting
standards issued by the Canadian Institute of Chartered Accountants ("CICA"),
as described further in note 2 of the notes to the unaudited interim
consolidated financial statements.

    Capital Disclosures

    CICA Section 1535 establishes both qualitative and quantitative
disclosure requirements about an entity's capital and how it is managed. As a
result of adopting this section, Trinidad is now required to disclose
qualitative information about its objectives, policies and processes for
managing capital, such that users of the financial statements will be able to
evaluate the Company's management of capital.

    Inventories

    CICA Section 3031 provides guidance on the measurement of inventory, by
providing several appropriate valuation techniques to be used in the
determination of the cost of inventory, based on the type of inventory held.
The adoption of this new standard had no impact on the measurement of
inventories; however, further disclosure was required, including the carrying
value of each classification of inventory, a reconciliation of the expenses
related to inventory used during the period and the disclosure of the amount
of any write-downs or reversals of previously written-down amounts, if any.

    Financial Instruments

    The CICA issued two new accounting standards with respect to financial
instruments: Section 3862 - Financial Instruments - Disclosure and Section
3863 - Financial Instruments - Presentation. Section 3862, adopted by Trinidad
in conjunction with Section 3863, emphasizes disclosures regarding the nature
and extent of the risks arising from financial instruments and how those risks
are managed. Following the requirements of Section 3855 - Financial
Instruments - Recognition and Measurement, adopted January 1, 2007; this new
section recommends additional disclosures, including qualitative analysis of
the financial instrument risks faced by Trinidad, as well as a quantitative
analysis of the effect of changes to these risks, based on market conditions,
and their potential impact on Trinidad.
    Section 3863 establishes recommendations for the presentation of
financial instruments and non-financial derivatives in the financial
statements. There was no impact of the adoption of this section as it is
substantially similar to the previously adopted Section 3861 - Financial
Instruments - Disclosure and Presentation.

    FUTURE CHANGES IN ACCOUNTING POLICIES

    The CICA issued a new accounting standard, Section 3064 - Goodwill and
Intangible Assets, which replaces Sections 3062 - Goodwill and Other
Intangible Assets and 3450 - Research and Development Costs; and amended
Section 1000 - Financial Statement Concepts. These accounting standards
updates will be effective for fiscal years beginning on or after October 1,
2008 and Trinidad plans to adopt them effective January 1, 2009. Section 3064
recommends standards for the recognition, measurement and disclosure of
goodwill and intangible assets, including research and development costs, and
Section 1000 has been amended to clarify the criteria for recognition of an
asset. Trinidad is in the process of evaluating the impact of these standards.

    International Financial Reporting Standards

    In February 2008, Canada's Accounting Standards Board ("AcSB") announced
that Canadian public reporting issuers will be required to report under
International Financial Reporting Standards ("IFRS") beginning January 1,
2011. Consequently, the transition date of January 1, 2011 will require
restatement for comparative purposes of amounts reported by the Company for
the year ended December 31, 2010. The adoption of IFRS is intended to increase
transparency and bring a higher degree of global comparability as IFRS has
been adopted in more than 100 countries. Management is currently evaluating
the effects of adopting IFRS on its consolidated financial statements and is
in the planning stage, including assessment and evaluation of key differences
between Canadian GAAP and IFRS. We cannot at this time reasonably estimate the
impact of adopting IFRS on our consolidated financial statements.

    DISCLOSURE CONTROLS & PROCEDURES

    Disclosure controls and procedures are designed to provide reasonable
assurance that all information required to be disclosed by Trinidad is
recorded, processed, summarized and reported to senior management, including
the CEO and CFO, in an appropriate manner to allow timely decisions regarding
required disclosure as defined under Multilateral Instrument 52-109,
Certification of Disclosures in Annual and Interim Filings.
    Management of Trinidad has evaluated the effectiveness of the design of
disclosure controls and procedures, under the supervision of the CEO and the
CFO. Internal controls over financial reporting are designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
Canadian GAAP. There have been no changes in the Company's internal controls
over financial reporting or disclosure controls and procedures that occurred
since the year ended December 31, 2007 and no material weaknesses or
significant deficiencies have been identified in the design of these controls,
except as noted below, that could materially affect or are reasonably likely
to affect the Company's internal controls over financial reporting.
    Trinidad is continuing to complete an assessment of the business process
controls of Mastco and Axxis and has not concluded on the design effectiveness
as at September 30, 2008. As a result, Trinidad has relied on management's
review procedures to assess the accuracy of the financial statements at the
reporting date.

    SUBSEQUENT EVENTS

    Subsequent to quarter-end, Trinidad received the remaining balance owing
of US$48.2 million in relation to the proceeds on the sale of its newly
constructed barge drilling rig to an international third party. The sale was
expected to be completed at the end of the third quarter of 2008; however, due
to the customizations requested by the purchaser and testing, the sale did not
close until October 10, 2008.

    OUTLOOK

    The volatility of the commodity markets and the unfolding global
financial crisis have created a high degree of uncertainty moving through the
latter stages of 2008 and into 2009. Understanding that certain risks still
exist, including a prolonged slowdown in the US and global economies, the
potential burden that Alberta's New Royalty Framework could bring in 2009 and
the impact of recent commodity price fluctuations on capital spending budgets,
we continue to believe that industry fundamentals heading into the winter
drilling season carry positive momentum. This momentum was established during
the first nine months of 2008 supported by higher energy prices which
increased industry activity. Trinidad is positioned very well to deal with
these turbulent market conditions given the nature of our customer contracts,
our technically superior assets, geographical diversification, growth profile,
and the strength of our balance sheet. We anticipate the 2008/2009 winter
drilling season will be fuelled by declining well productivity in the mature
WCSB, revised producer capital spending budgets driven by 2008 operating cash
flow surpluses and a focus on unconventional resource shale plays. With a
significant portion of our rigs contracted for the winter drilling season in
Canada, our outlook remains optimistic for continuing strong performance for
the last quarter of 2008 and moving into the first quarter of 2009.
    The WCSB, a mature basin predominantly focused on natural gas, has been
facing production declines for several years. With the depletion of
conventional, easily accessible and relatively cheap-to-exploit reservoirs,
exploration and production companies have had to shift their focus towards
directional drilling techniques, augmented by multi-fracture completion
technology, to access technically challenging reservoirs. As a percentage of
total wells drilled, horizontal and directional well composition has increased
from less than 20% in 1999 to 45% through September 2008. Over approximately
the same time period, the one year moving average of true measured depth per
completed well has also increased by over 15%. Given that wells are getting
deeper, in 2009 it is expected that overall operating days will either
increase or stay at 2008 levels despite potentially lower well counts. This
trend is consistent with production companies exploring for hydrocarbons in
hard-to-access reservoirs including unconventional plays that require rigs
capable of drilling deeper and/or directionally. Both of these trends benefit
Trinidad as the Company's asset base has been built to service these markets
and our positive track record proves our ability to help our customers drill
these more complex and deeper wells.
    We continue to see opportunities in both the US land drilling market and
the US Gulf Coast barge drilling market and expect overall rig activity for
Trinidad to be stable in the US moving forward. Given the nature of our
long-term, take-or-pay contracts, as well as our strong customer
relationships, we are optimistic with respect to the Company's revenue and
cash flow stability in these markets. In addition, in an effort to avert some
of the fiscal and seasonal risks associated with operating in the WCSB,
Trinidad has strategically migrated a portion of its fleet to the US and has
started the process of moving into Mexico. These are areas where we will
continue to be opportunistic, if needed, by moving assets to these higher
utilized areas under long-term, take-or-pay contracts. The advanced technology
that is incorporated within our rigs has helped to create a more economically
viable drilling platform for our customers as compared to where the industry
has been historically. This is a key aspect of Trinidad's success and we will
continue to focus on creating efficiencies for our clients to both maintain
and grow our strong customer base, which will drive continued profitability
for the Company. In the US the focus remains on several shale gas plays, most
of which require state-of-the-art technology and fit-for-purpose rigs that
enable deep horizontal drilling capabilities. Horizontal wells, while more
expensive, result in higher well productivity and Trinidad has the capability
to drill horizontally and directionally and has the rig capacity in these key
US emerging shale plays, which will help to provide strong returns from this
market on an ongoing basis.
    In relation to commodity prices over the medium to long-term, many
analysts and experts believe the secular trend of rapidly rising energy prices
is likely to resume as industrialization continues to drive global oil demand
growth while new supplies remain increasingly more expensive to produce. As
well, their long-term view for natural gas prices remains intact. A rising
demand trend is expected to continue given the relatively lower cost that
natural gas represents and the improved impact to the environment that burning
natural gas can offer when compared to other fossil-fuel based technologies.
In addition, natural gas will become an increasingly important source of
supply to feed rapidly growing oil sands demand, especially in light of the
declining production in western Canada. These market forecasts present a
favourable outlook for Trinidad in the long-term, predicting continued demand
for drilling activities.
    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 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. Despite recent
commodity, equity and financial market turbulence, Trinidad remains
comfortable with its existing capital structure. The debt markets have
tightened; however, a significant portion of the Company's long-term debt is
for a fixed-term period and does not mature until May 2011. The revolving
credit facility is renewed annually in April each year and the Company
currently has no indication that the renewal would not be granted, but to the
extent that it is not granted, repayment of the outstanding balance would not
be due for 364 days. At September 30, 2008, Trinidad had only drawn
$28.0 million or 11.2% on this facility and does not expect it will need to
utilize the full capacity of its revolving credit facility in the next 12
months.
    Trinidad's focus on the deeper segment of the drilling market has allowed
it to secure an enviable position in key resource plays in North America. This
continues to be a key success factor and allows the Company to meet current
market demands. Trinidad is in the early stages of two rig construction
programs, which will add 16 drilling rigs to our fleet, backed by long-term,
take-or-pay contracts for the US, and six well servicing rigs for Canada. With
the full contingent of rigs built during the previous rig construction
programs over the past two years now at work, we expect to be able to generate
significant free cash flow to fund our ongoing expansion and maximize our
current capital structure. We believe the Company is in an excellent position
with approximately 45% of our rigs protected under long-term contracts
allowing us to continue to outperform our peers in terms of utilization rates,
average day rates, and operating margins on the back of aggressive US
expansion and developing international opportunities.

    Trinidad is a growth-oriented corporation that trades on the TSX under
the symbol TDG. Trinidad's divisions operate in the drilling, well servicing
and barge drilling sectors of the North American oil and natural gas industry.
With the completion of the current rig construction programs, Trinidad will
have 126 drilling rigs ranging in depths from 1,000 - 6,500 metres. In
addition to its drilling rigs, Trinidad will have 26 well servicing rigs, 20
pre-set and coring rigs and four barge rigs currently operating in the Gulf of
Mexico. Trinidad is focused on providing modern, reliable, expertly designed
equipment operated by well-trained and experienced personnel. Trinidad's
drilling fleet is one of the most adaptable, technologically advanced and
competitive in the industry."signed" Lyle C. Whitmarsh                 "signed" Brent J. Conway
    ----------------------------               --------------------------
    President and Chief Executive Officer      Chief Financial Officer

    The Toronto Stock Exchange has neither approved nor disapproved the
    information contained herein.Trinidad will be holding a conference call and webcast to discuss its
third quarter 2008 results on November 6, 2008 beginning at 9:00 a.m. MT
(11:00 a.m. ET). To participate, please dial (800) 594-3615 (toll-free in
North America) or (416) 644-3425 approximately 10 minutes prior to the
conference call. An archived recording of the call will be available from
approximately 11:00 a.m. MT on November 6 until midnight November 13, 2008 by
dialing (877) 289-8525 or (416) 640-1917 and entering replay access code
21286000 followed by the number sign.
    A live audio webcast of the conference call will also be available via
Trinidad's website, www.trinidaddrilling.com.-------------------------------------------------------------------------
    CONSOLIDATED BALANCE SHEETS

    ($ thousands - Unaudited)
                                                  September 30,  December 31,
                                                          2008          2007
    -------------------------------------------------------------------------

    Assets
    Current assets
    Cash and cash equivalents                           21,398        18,021
    Accounts receivable                                168,875       143,522
    Inventory (note 6)                                  17,131        18,231
    Prepaid expenses                                    15,999         2,879
    Future income taxes                                  2,137             -
                                                  ---------------------------
                                                       225,540       182,653

    Deposit on capital assets                           20,819         3,458
    Capital assets                                   1,207,300     1,110,730
    Goodwill                                           175,338       169,134
    Other long-term assets                              23,304        31,181
                                                  ---------------------------
                                                     1,652,301     1,497,156
                                                  ---------------------------

    Liabilities
    Current liabilities
    Accounts payable and accrued liabilities            97,414        78,649
    Dividends payable                                   14,447             -
    Accrued trust distributions                              -         9,616
    Current portion of deferred revenue                 15,673         6,890
    Current portion of long-term debt                    1,426         1,679
    Current portion of fair value of
     interest rate swap                                  2,882         1,718
                                                  ---------------------------
                                                       131,842        98,552

    Deferred revenue                                       963         4,038
    Long-term debt                                     282,333       402,489
    Convertible debentures, net of transaction
     costs                                             321,467       315,991
    Fair value of interest rate swaps                    4,014         4,211
    Future income taxes                                 64,661        37,373
                                                  ---------------------------
                                                       805,280       862,654
    Shareholders' equity
    Shareholders' equity (note 7(a))                   837,709             -
    Unitholders' capital (note 7(b))                         -       675,728
    Exchangeable shares (note 8)                             -         2,477
    Convertible debentures                              28,215        28,223
    Contributed surplus (note 7(c))                     15,154        13,843
    Accumulated other comprehensive loss               (29,040)      (61,788)
    Retained earnings (deficit)                         (5,017)      (23,981)
                                                  ---------------------------
                                                       847,021       634,502
                                                  ---------------------------
                                                     1,652,301     1,497,156
                                                  ---------------------------

    (See notes to the unaudited interim consolidated financial statements)

    Commitments (note 12)



    CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
    ($ thousands except share and per share data - Unaudited)

                                  Three months ended       Nine months ended
                                        September 30,           September 30,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------

    Revenue
    Oilfield services            192,162     160,980     555,038     482,128
    Bareboat Charter (loss)
     gain (note 12)               (1,330)      1,021      (3,635)      1,021
    Other                            855         182       1,114         739
                              -----------------------------------------------
                                 191,687     162,183     552,517     483,888
                              -----------------------------------------------

    Expenses
    Operating                    118,594      91,740     327,231     277,889
    General and administrative    11,557      10,242      35,729      30,372
    Interest on long-term
     debt (note 11)                4,810       7,174      18,200      25,284
    Interest on convertible
     debentures (note 11)          8,819       8,302      26,158       8,302
    Stock-based compensation       1,197         508       1,499       1,954
    Foreign exchange (gain)
     loss                         (6,835)      5,394     (10,358)     12,283
    Depreciation                  23,970      20,190      68,471      53,279
    (Gain) loss on sale
     of assets                        (3)         31        (320)        238
    Reorganization costs              24           -       2,713           -
                              -----------------------------------------------
                                 162,133     143,581     469,323     409,601
                              -----------------------------------------------

    Earnings before income
     taxes                        29,554      18,602      83,194      74,287

    Income taxes
    Current tax expense
     (recovery)                   (1,122)        299         575       2,283
    Future tax expense            10,303       3,260      22,193      10,377
                              -----------------------------------------------
                                   9,181       3,559      22,768      12,660
                              -----------------------------------------------

    Net earnings                  20,373      15,043      60,426      61,627

    Dividends                    (14,447)          -     (33,091)          -
    Trust distributions                -     (28,843)     (8,362)    (86,416)
    Charges for normal
     course issuer bid
     (note 7)                         (9)          -          (9)          -

    Retained earnings
     (deficit) - beginning
     of period                   (10,934)        770     (23,981)     11,759
                              -----------------------------------------------
    Retained earnings
     (deficit) - end of period    (5,017)    (13,030)     (5,017)    (13,030)
                              -----------------------------------------------

    Earnings per share
      Basic                         0.21        0.18        0.68        0.73
      Diluted                       0.21        0.18        0.67        0.65

    Weighted average number
     of shares
      Basic                   96,289,155  83,989,145  89,021,557  83,917,739
      Diluted                 96,869,702  85,140,262  89,551,403 103,605,851


    (See notes to the unaudited interim consolidated financial statements)



    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
    ($ thousands - Unaudited)

                                  Three months ended       Nine months ended
                                        September 30,           September 30,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------

    Net earnings                  20,373      15,043      60,426      61,627

    Other comprehensive
     income
      Change in fair value of
       derivatives designated
       as cash flow hedges,
       net of income tax
       (note 11)                    (265)       (264)       (510)      1,474
      Foreign currency
       translation adjustment     20,698     (29,510)     33,258     (56,196)
                              -----------------------------------------------
    Total other comprehensive
     income (loss)                20,433     (29,774)     32,748     (54,722)

                              -----------------------------------------------
    Comprehensive income
     (loss)                       40,806     (14,731)     93,174       6,905
                              -----------------------------------------------


    (See notes to the unaudited interim consolidated financial statements)


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

    CONSOLIDATED STATEMENT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
    ($ thousands - Unaudited)

                                  Three months ended       Nine months ended
                                        September 30,           September 30,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive loss
     - beginning of period       (49,473)    (29,398)    (61,788)       (750)
    Adjust opening balance
     due to adoption of
     new accounting policies           -           -           -      (3,700)
    Other comprehensive
     income (loss) during
     the period                   20,433     (29,774)     32,748     (54,722)
                              -----------------------------------------------
    Accumulated other
     comprehensive loss
     - end of period             (29,040)    (59,172)    (29,040)    (59,172)
                              -----------------------------------------------

    (See notes to the unaudited interim consolidated financial statements)




    CONSOLIDATED STATEMENTS OF CASH FLOWS
    ($ thousands - Unaudited)

                                  Three months ended       Nine months ended
                                        September 30,           September 30,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Cash provided by
     (used in)
    Operating activities
    Net earnings for the period   20,373      15,043      60,426      61,627
    Items not affecting cash
       Depreciation               23,970      20,190      68,471      53,279
       (Gain) loss on sale
        of assets                     (3)         31        (320)        238
       Stock-based
        compensation               1,197         508       1,499       1,954
       Future income
        tax expense               10,303       3,260      22,193      10,377
       Effective interest
        on financing
        costs (note 11)            1,081       1,078       3,239       1,830
       Accretion on
        convertible
        debentures (note 11)       1,221       1,028       3,584       1,028
       Unrealized foreign
        exchange (gain) loss      (6,604)      5,318      (9,842)     12,286
                              -----------------------------------------------
                                  51,538      46,456     149,250     142,619
    Net change in non-cash
     operating working capital   (33,784)      1,932         453     (20,169)
                              -----------------------------------------------
                                  17,754      48,388     149,703     122,450
                              -----------------------------------------------

    Investing activities
    (Increase) decrease
     in deposits on capital
     assets                      (15,358)        278     (16,276)     37,242
    Acquisition of Axxis
     Drilling Inc. (note 5)            -    (124,370)          -    (124,370)
    Purchase of capital assets   (65,664)    (44,703)   (122,579)   (233,958)
    Proceeds from dispositions         3         532       3,263       1,021
    Change in non-cash
     working capital              (5,092)    (20,773)    (16,575)     10,521
                              -----------------------------------------------
                                 (86,111)   (189,036)   (152,167)   (309,544)
                              -----------------------------------------------

    Financing activities
    Increase (decrease)
     in long-term debt, net       27,288    (146,745)   (122,265)    (34,450)
    Proceeds (costs) on
     share issuance (note 7)         (28)          -     158,010           -
    Proceeds from exercise
     of options (note 7)             188         199       1,377       2,501
    Proceeds from debenture
     issuance                          -     325,000           -     325,000
    Repurchased shares
     (note 7(a))                    (175)          -        (175)          -
    Increase (decrease)
     in deferred revenue           6,828      (2,812)      5,203      (1,311)
    Trust unit distribution            -     (28,841)    (17,978)    (86,344)
    Dividends paid               (14,442)          -     (18,644)          -
    Debt financing costs               -     (13,593)       (600)    (14,193)
                              -----------------------------------------------
                                  19,659     133,208       4,928     191,203
                              -----------------------------------------------

    Cash flow from operating,
     investing and financing
     activities                  (48,698)     (7,440)      2,464       4,109
    Effect of translation on
     foreign currency cash           679         449         913      (3,409)
                              -----------------------------------------------
    Increase (decrease) in
     cash for the period         (48,019)     (6,991)      3,377         700

    Cash - beginning of period    69,417      17,104      18,021       9,413
                              -----------------------------------------------
    Cash - end of period          21,398      10,113      21,398      10,113
                              -----------------------------------------------

    Interest paid                  4,430       7,503      31,193      24,421
    Taxes paid                     2,122          38       4,222         185

    (See notes to the unaudited interim consolidated financial statements)



    NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

    1.  STRUCTURE OF THE CORPORATION

        Organization

        Trinidad Drilling Ltd. ("Trinidad" or the "Company") is incorporated
        under the laws of the Province of Alberta. The Company was formed by
        way of an arrangement under the Business Corporations Act of Alberta
        pursuant to an arrangement agreement dated January 9, 2008 between
        the Company and Trinidad Energy Services Income Trust (the "Trust").
        The Arrangement involved the exchange, on a one-for-one basis of
        trust units and exchangeable shares, after accounting for the
        conversion factor applicable to the exchangeable shares, for common
        shares of Trinidad. The effective date of the Arrangement was
        March 10, 2008 - see note 3.

    2.  ACCOUNTING POLICIES AND ESTIMATES

        These unaudited interim consolidated financial statements are
        prepared by management, in accordance with Canadian Generally
        Accepted Accounting Principles, and follow the same accounting
        policies and methods as the audited consolidated financial statements
        for the year ended December 31, 2007, except as noted below, and
        therefore do not contain all of the disclosures required for the
        annual financial statements. As a result, the unaudited interim
        consolidated financial statements should be read in conjunction with
        the audited consolidated financial statements of the Trust contained
        in the annual report for the year ended December 31, 2007.

        Adoption of New Accounting Standards

        Effective January 1, 2008, Trinidad adopted the following new
        accounting standards issued by the Canadian Institute of Chartered
        Accountants ("CICA"):

        Capital Disclosures

        CICA Section 1535 establishes both qualitative and quantitative
        disclosure requirements about an entity's capital and how it is
        managed. As a result of adopting this section, Trinidad is now
        required to disclose qualitative information about its objectives,
        policies and processes for managing capital, such that users of the
        financial statements will be able to evaluate the Company's
        management of capital - see note 10.

        Inventories

        CICA Section 3031 provides guidance on the measurement of inventory,
        by providing several appropriate valuation techniques to be used in
        the determination of the cost of inventory, based on the type of
        inventory held. The adoption of this new standard had no impact on
        the measurement of inventories; however, further disclosure was
        required, including the carrying value of each classification of
        inventory, a reconciliation of the expenses related to inventory used
        during the period and the disclosure of the amount of any write-downs
        or reversals of previously written-down amounts, if any - see note 6.

        Financial Instruments

        The CICA issued two new accounting standards with respect to
        financial instruments: Section 3862 - Financial Instruments -
        Disclosure and Section 3863 - Financial Instruments - Presentation.
        Section 3862, adopted by Trinidad in conjunction with Section 3863,
        emphasizes disclosures regarding the nature and extent of the risks
        arising from financial instruments and how those risks are managed.
        Following the requirements of Section 3855 - Financial Instruments -
        Recognition and Measurement, adopted January 1, 2007; this new
        section recommends additional disclosures, including qualitative
        analysis of the financial instrument risks faced by Trinidad, as well
        as a quantitative analysis of the effect of changes to these risks,
        based on market conditions, and their potential impact on Trinidad -
        see note 11.

        Determination of Fair Market Value

        The fair value of Trinidad's long-term debt was determined using
        current market price indicators and the fair-value of the convertible
        debentures was calculated at the quoted market price.

        Section 3863 establishes recommendations for the presentation of
        financial instruments and non-financial derivatives in the financial
        statements. There was no impact of the adoption of this section as it
        is substantially similar to the previously adopted Section 3861 -
        Financial Instruments - Disclosure and Presentation.

        There are no other material impacts on the unaudited interim
        consolidated financial statements for the adoption of these new
        standards.

        FUTURE CHANGES IN ACCOUNTING POLICIES

        The CICA issued a new accounting standard, Section 3064 - Goodwill
        and Intangible Assets, which replaces Sections 3062 - Goodwill and
        Other Intangible Assets and 3450 - Research and Development Costs;
        and amended Section 1000 - Financial Statement Concepts. These
        accounting standards updates will be effective for fiscal years
        beginning on or after October 1, 2008 and Trinidad plans to adopt
        them effective January 1, 2009. Section 3064 recommends standards for
        the recognition, measurement and disclosure of goodwill and
        intangible assets, including research and development costs, and
        Section 1000 has been amended to clarify the criteria for recognition
        of an asset. Trinidad is in the process of evaluating the impact of
        these standards.

        International Financial Reporting Standards

        In February 2008, Canada's Accounting Standards Board ("AcSB")
        announced that Canadian public reporting issuers will be required to
        report under International Financial Reporting Standards ("IFRS")
        beginning January 1, 2011. Consequently, the transition date of
        January 1, 2011 will require restatement for comparative purposes of
        amounts reported by the Company for the year ended December 31, 2010.
        The adoption of IFRS is intended to increase transparency and bring a
        higher degree of global comparability as IFRS has been adopted in
        more than 100 countries. Management is currently evaluating the
        effects of adopting IFRS on its consolidated financial statements and
        is in the planning stage, including assessment and evaluation of key
        differences between Canadian GAAP and IFRS. We cannot at this time
        reasonably estimate the impact of adopting IFRS on our consolidated
        financial statements.

    3.  THE ARRANGEMENT

        On March 10, 2008, unitholders of the Trust and holders of the
        exchangeable shares (the "Securityholders") voted, and overwhelmingly
        approved, reorganizing the Trust, by way of a plan of arrangement
        under the Business Corporations Act (Alberta), into a corporation
        (the "Arrangement") pursuant to an arrangement agreement dated
        January 9, 2008 between Trinidad and the Trust. The purpose of the
        Arrangement was to convert the Trust back into a corporate structure
        that was better suited to its core business model of growth and
        capital appreciation for its Securityholders. Management and the
        Board of Directors believe that the best opportunity for creating
        value is by reinvesting a significant portion of overall cash flow
        back into the business and to focus on increasing overall per share
        earnings, cash flow, net asset value, as well as overall debt
        reduction and they believe that a corporate structure better
        positions Trinidad to pursue these initiatives. For financial
        reporting presentation purposes, these changes are being treated as
        if they occurred on January 1, 2008.

        The Arrangement resulted in: (i) unitholders receiving Trinidad
        shares in exchange for their trust units on a one-for-one basis; and
        (ii) exchangeable shareholders receiving Trinidad shares on the same
        basis as unitholders based on the number of trust units into which
        such shares were exchangeable into on the effective date of the
        Arrangement.

        Effective March 10, 2008, Trinidad established an Incentive Option
        Plan under which incentive options will be granted to officers,
        employees and consultants to provide an opportunity for these
        individuals to participate in the growth and development of the
        Company. The Incentive Option Plan was developed to replace the Unit
        Rights Incentive Plan of the Trust and, in accordance with the
        Arrangement, participants received incentive options on a one-for-one
        basis for the incentive rights held at the time of conversion.
        References to the "Incentive Options Plan" and "options" should be
        read as references to "Unit Rights Incentive Plan" and "rights",
        respectively, for periods prior to March 10, 2008.

    4.  SEASONALITY

        Trinidad operates a substantial number of rigs in western Canada, and
        therefore operations are heavily dependent upon the seasons. The
        winter season, which incorporates the first quarter, is a busy period
        as oil and natural gas companies take advantage of frozen conditions
        to move drilling rigs into regions which might otherwise be
        inaccessible to heavy equipment due to swampy conditions. The second
        quarter normally encompasses a slow period referred to as spring
        break-up. During this period, melting conditions result in temporary
        municipal road bans that effectively prohibit the movement of
        drilling rigs. The third and fourth quarters are usually
        representative of average activity levels.

        Trinidad's expansion to the US market has reduced its overall
        exposure to the seasonal factors that are present in its Canadian
        operations. These seasonal conditions typically limit Canadian
        drilling activity, whereas in the US operators have increased
        flexibility to work throughout the year. This increased number of
        operating days throughout the year has allowed Trinidad to better
        manage its business with more sustainable cash flows throughout the
        annual cycle.

    5.  ACQUISITION

        Acquisition of assets of Axxis

        Effective July 5, 2007, a subsidiary of Trinidad purchased
        substantially all of the assets of US-based Drilling Productivity
        Realized, L.L.C., P.C. Axxis, L.L.C., DPR International, L.L.C. and
        DPR Rentals, L.L.C. (collectively, "Axxis") for consideration of
        $148.1 million. Additionally, Trinidad acquired a commitment to
        construct an additional barge rig for approximately US$28.5 million,
        of which $5.6 million had been spent at the time of acquisition and
        was reimbursed to the former owners and included in the purchase
        price. The acquisition was funded through the issuance of
        $29.3 million of convertible debentures to the former shareholders of
        Axxis and $124.4 million in cash proceeds raised through a public
        issuance of 325,000 convertible debentures for gross proceeds of
        $325.0 million. Earnings of Axxis have been included in consolidated
        earnings since the closing date of July 5, 2007.

        The consideration paid for this acquisition has been allocated under
        the purchase method as follows:

        ($ thousands)                                                   2007
        ---------------------------------------------------------------------

        Purchase price allocated as follows:
          Capital assets                                              96,488
          Assets under construction                                    5,624
          Intangible assets                                           39,569
          Goodwill                                                    51,636
          Long-term liabilities                                      (39,569)
                                                                    ---------
                                                                     153,748
                                                                    ---------

        Financed as follows:
          Convertible debentures                                      29,337
          Cash                                                       124,411
                                                                    ---------
                                                                     153,748
                                                                    ---------

        As a result of the acquisition of Axxis, Trinidad is obligated to pay
        US$12.5 million annually to the former shareholders of Axxis for the
        next three years following the acquisition pertaining to provisions
        under the Bareboat Charters, discussed further in note 12 -
        Commitments. The consideration will be paid annually and is
        contingent on the continued operation of three barge rigs currently
        under contract. To the extent that these contracts are terminated
        prior to the end of the three years no further payments will be
        required. The amount paid under this commitment is considered a cost
        of the purchase and has been included in the purchase price and will
        be accrued and recorded against the associated revenue earned from
        the rigs and reported net as Bareboat Charter income (loss).

    6.  INVENTORY

                                                  September 30,  December 31,
        ($ thousands)                                     2008          2007
        ---------------------------------------------------------------------
        Parts and materials                             11,544         8,884
        Work-in-progress                                 5,587         9,347
                                                  ---------------------------
        Total inventory                                 17,131        18,231
                                                  ---------------------------

        All inventory balances are carried at the lower of cost or net
        realizable value. The construction operations regularly utilizes
        inventory in the construction and recertification of rigs and rig
        related equipment. For the three and nine months ended September 30,
        2008, there were no material write-downs or reversals of previously
        written-down amounts.

        Throughout the period the amount of inventories recognized as an
        expense were:

                                  Three months ended       Nine months ended
                                        September 30,           September 30,
        ($ thousands)               2008        2007        2008        2007
        ---------------------------------------------------------------------
        Raw materials and
         consumables purchased    37,372      18,109      64,659      67,010
        Labour costs               5,240       3,715      12,548      10,779
        Other costs                  199          95         417         241
        Net change in inventory   (1,222)     (5,225)      1,100      (7,603)
                                 --------------------------------------------
        Amount of inventories
         expensed in period       41,589      16,694      78,724      70,427
                                 --------------------------------------------

    7.  SHAREHOLDERS' EQUITY AND CONTRIBUTED SURPLUS

        a)  Shareholders' equity

        Authorized
        Unlimited number of common shares, voting, participating

        ($ thousands except
         share data)            September 30, 2008      December 31, 2007
        ---------------------------------------------------------------------

                              Number of     Amount    Number of     Amount
                                Shares         $        Shares         $
                              -----------------------------------------------
        Shareholders' equity
         - opening balance             -           -           -           -
        Shares issued
         pursuant to the
         Arrangement          84,035,873     678,282           -           -
        Shares issued for
         cash, net of
         transaction costs    12,132,353     158,010           -           -
        Shares issued on
         exercise of options     141,724       1,310           -           -
        Shares issued on
         conversion of
         convertible debentures    4,921          95           -           -
        Shares repurchased
         under normal course
         issuer bid               (4,300)        (37)          -           -
        Contributed surplus
         transferred on
         exercised options             -         178           -           -
                              -----------------------------------------------


                              96,310,571     837,838           -           -
        Shares repurchased,
         but not cancelled       (29,200)       (129)          -           -
                              -----------------------------------------------
        Shareholders'
         equity  - closing
         balance              96,281,371     837,709           -           -
                             ------------------------------------------------

        Effective September 2, 2008, Trinidad announced its intent to acquire
        for cancellation up to 10% (9,373,221 common shares) of the Company's
        public float by way of normal course issuer bid ("NCIB")
        commencing September 4, 2008 and extending to the earlier of
        September 3, 2009 or the date upon which the Company acquires the
        maximum number of common shares to be purchased pursuant to the NCIB.
        During the third quarter of 2008, Trinidad acquired 4,300 shares
        which were cancelled and 29,200 shares which were held in treasury at
        the end of the quarter at a cost of $0.2 million. The excess of the
        purchase price over the carrying amount of the common shares acquired
        and cancelled is recorded as a reduction to retained earnings.

        b)  Unitholders' capital

        ($ thousands except
          unit data)             September 30, 2008      December 31, 2007
        ---------------------------------------------------------------------
                                Number      Amount      Number       Amount
                               of Units        $       of Units        $
                              -----------------------------------------------
        Unitholders' capital
         - opening balance    83,615,790     675,728  82,981,952     669,584
        Trust units issued
         on conversion of
         exchangeable shares     412,233       2,477     356,404       3,300
        Trust units issued
         on exercise of rights     7,850          67     277,434       2,515
        Contributed surplus
         transferred on
         exercised rights              -          10           -         329
        Trust units cancelled
         under the
         Arrangement         (84,035,873)   (678,282)          -           -
                              -----------------------------------------------
        Unitholders' capital
         - closing balance             -           -  83,615,790     675,728
                              -----------------------------------------------

        c)  Contributed surplus

        ($ thousands)                  September 30, 2008  December 31, 2007
        ---------------------------------------------------------------------
        Contributed surplus -
         opening balance                           13,843             11,722
        Stock-based
         compensation expense                       1,499              2,450
        Contributed surplus
         transferred on
         exercise of options                         (188)              (329)
                              -----------------------------------------------
        Contributed surplus -
         ending balance                            15,154             13,843
                              -----------------------------------------------

    8.  EXCHANGEABLE SHARES

        Trinidad has the following exchangeable shares outstanding:

        ($ thousands except
         share data)            September 30, 2008      December 31, 2007
        ---------------------------------------------------------------------
                                Number       Amount    Number of     Amount
                              of Shares        $         Shares        $
                              -----------------------------------------------
        Exchangeable shares
         - opening balance       300,599       2,477     611,966       5,777
        Exchangeable shares
         exchanged, Initial
         Series                 (253,430)     (1,977)          -           -
        Exchangeable shares
         exchanged, Series C     (47,169)       (500)   (311,367)     (3,300)
                              -----------------------------------------------
        Exchangeable shares
         - ending balance              -           -     300,599       2,477
                              -----------------------------------------------

        Pursuant to the Arrangement all the exchangeable shares of Trinidad
        were converted based on the exchange ratio in effect at the time of
        conversion to trust units and subsequently exchanged on a one-for-one
        basis for common shares. The initial series exchangeable shares were
        exchanged at a ratio of 1.39024 providing for 352,328 trust units
        upon conversion. The Series C exchangeable shares were exchanged at a
        ratio of 1.27001 providing for 59,905 trust units upon conversion.

    9.  INCENTIVE OPTION PLAN

        On May 2, 2003, the Trust established the Unit Rights Incentive Plan
        and pursuant to the Arrangement on March 10, 2008, all outstanding
        incentive rights were exchanged, on a one-for-one basis, for
        incentive options under the new Incentive Option Plan. The Incentive
        Option Plan was created to assist officers, employees and
        consultants of Trinidad and its affiliates to participate in the
        growth and development of the Company. The Incentive Option Plan is
        substantially identical to the Unit Rights Incentive Plan; however,
        does not include an exercise price reduction mechanism.

        The following table sets out options that are outstanding under
        Trinidad's Incentive Option Plan:

                                  September 30, 2008       December 31, 2007
        ---------------------------------------------------------------------
                                           Weighted                Weighted
                                           Average                 Average
                                Number of  Exercise    Number of   Exercise
                                Options     Price ($)  Rights       Price ($)
        ---------------------------------------------------------------------
        Outstanding - opening
         balance               7,965,670       12.55   8,246,839       12.43
        Granted during
         the period              823,810       11.95      63,486       13.44
        Exercised during
         the period             (149,574)       9.21    (277,434)       9.06
        Forfeited during
         the period             (145,750)      14.80     (67,221)      13.38
                              -----------------------------------------------
        Outstanding
         - ending balance      8,494,156       12.51   7,965,670       12.55
                              -----------------------------------------------

        Trinidad uses the Black-Scholes option-pricing model to determine the
        estimated fair value of options issued subsequent to January 1, 2003.
        The per share weighted average fair value of options granted during
        the period ended September 30, 2008 was $2.47 (2007 - $1.49).

    10. CAPITAL MANAGEMENT

        Trinidad's capital is comprised of debt, convertible debentures and
        shareholders' equity, less cash and cash equivalents. Management
        regularly monitors total capitalization to ensure flexibility in the
        pursuit of ongoing initiatives, while ensuring that shareholder
        returns are being maximized. The overall capitalization of the
        Company is outlined below:

                                                  September 30,  December 31,
        ($ thousands)                                     2008          2007
        ---------------------------------------------------------------------
        Long-term debt(1)                              286,796       407,786
        Convertible debentures(1)                      331,778       328,281
                                                    -------------------------
        Total debt                                     618,574       736,067
        Shareholders' equity                           847,021       634,502
        Less: cash and cash equivalents                (21,398)      (18,021)
                                                    -------------------------
        Total capitalization                         1,444,197     1,352,548

        (1) Balance outstanding without consideration of transaction costs.

        Management is focused on several objectives while managing the
        capital structure of the Company. Specifically:

          i.   Ensuring Trinidad has the financing capacity to continue to
               execute on opportunities to increase overall market share
               through strategic acquisitions and fleet construction programs
               that add value for our shareholders;

          ii.  Maintaining a strong capital base to ensure that investor,
               creditor and market confidence is secured;

          iii. Maintaining balance sheet strength, ensuring Trinidad's
               strategic objectives are met, while retaining an appropriate
               amount of leverage;

          iv.  Providing shareholder return through dividends to ensure that
               income-oriented investors are provided a cash yield; and

          v.   Safeguarding the entity's ability to continue as a going
               concern, such that it continues to provide returns for
               shareholders and benefits for other stakeholders.

        Trinidad manages its capital structure based on current economic
        conditions, the risk characteristics of the underlying assets, and
        Trinidad's planned capital requirements, within guidelines approved
        by its Board of Directors. Total capitalization is maintained or
        adjusted by drawing on existing debt facilities, issuing new debt or
        equity securities when opportunities are identified and through the
        disposition of underperforming assets to reduce debt or equity when
        required. On March 10, 2008, Trinidad converted from a growth-
        oriented income trust to a growth-oriented, dividend-paying
        corporation. As a result of this conversion the capital focus of the
        Company was shifted to realign with prior objectives of aggressive
        growth in its business and increasing returns to shareholders. Prior
        to the conversion Trinidad was subject to the "Normal Growth"
        provisions enacted under Bill C-52, which effectively limited the
        growth the Company could pursue. No longer constrained by these
        provisions, under the new corporate structure, management will be
        better positioned to pursue identified growth opportunities.

        The Company's syndicated loan facility is subject to five financial
        covenants, which are reported to the bank on either a monthly or
        quarterly basis. These covenants are used by management to monitor
        capital, with increased focus on the Consolidated Leverage Ratio.
        This ratio is calculated as the consolidated debt balance divided by
        adjusted consolidated EBITDA for the rolling four quarters, and must
        be maintained below 2.5:1. For the rolling four quarters ending
        September 30, 2008, this ratio was 1.33:1 (December 31, 2007 -
        1.85:1), which remains in compliance with all of the banking
        syndicate's financial covenants.

        Despite recent commodity, equity and financial market turbulence,
        Trinidad remains comfortable with its existing capital structure.
        Long-term debt is made up of three components, two five-year term
        facilities that mature in May 2011 and a revolving credit facility
        that is renewed annually in April. The term facilities are comprised
        of a $100.0 million Canadian facility and a US$125.0 million US
        facility. As well, Trinidad's Canadian revolving credit facility has
        a maximum capacity of $250.0 million and at the end of the quarter
        Trinidad had drawn only $28.0 million or 11.2%. These three debt
        facilities are held by a broad syndicate of well-respected financial
        institutions and covered by a general set of covenants that the
        Company was comfortably onside with at quarter-end.

        As well, subsequent to quarter-end Trinidad received the remaining
        balance owing of US$48.2 million in relation to the sale of the barge
        rig completed in July 2008, which the Company plans to allocate to
        capital commitments under the rig construction programs. With the
        funds from the barge rig sale, the proceeds from the equity issuance
        in June 2008 and cash flow from operations, Trinidad does not expect
        it will need to utilize the full capacity of its revolving credit
        facility in the next 12 months. Although the revolving credit
        facility is subject to renewal in April 2009, the Company currently
        has no indication that the renewal would not be granted and to the
        extent that it is not granted, repayment of the outstanding balance
        would not be due for 364 days.

    11. FINANCIAL INSTRUMENTS

        Carrying Value and Fair Value Disclosures on Financial Instruments

        Trinidad's financial instruments include cash and cash equivalents,
        accounts receivable, accounts payable and accrued liabilities,
        interest rate swaps, long-term debt, and the convertible debentures.
        The carrying amounts of these financial instruments, reported on the
        Company's unaudited interim consolidated balance sheets, approximates
        their fair values due to their short-term nature, with the exception
        of the long-term debt and the convertible debentures. The carrying
        values of Trinidad's financial instruments are as follows:

                                               September 30, 2008
                                                                       Total
                                Held for   Loans and       Other    Carrying
        ($ thousands)            Trading Receivables Liabilities       Value
        ---------------------------------------------------------------------
        Cash and cash
         equivalents              21,398           -           -      21,398
        Accounts receivable            -     168,875           -     168,875
        Accounts payable and
         accrued liabilities           -           -      97,414      97,414
        Interest rate swaps            -           -       6,896       6,896
        Long-term debt                 -           -     260,455     260,455
        Convertible debentures         -           -     349,682     349,682
                              -----------------------------------------------

                                                December 31, 2007
                                                                       Total
        ($ thousands)           Held for   Loans and       Other    Carrying
                                 Trading Receivables Liabilities       Value
        ---------------------------------------------------------------------
        Cash and cash
         equivalents              18,021           -           -      18,021
        Accounts receivable            -     143,522           -     143,522
        Accounts payable and
         accrued liabilities           -           -      78,649      78,649
        Interest rate swaps            -           -       5,929       5,929
        Long-term debt                 -           -     373,204     373,204
        Convertible debentures         -           -     344,214     344,214
                              -----------------------------------------------

        The fair values and carrying values of Trinidad's financial
        instruments are as follows:

                                  September 30, 2008       December 31, 2007
                                            Carrying                Carrying
        ($ thousands)         Fair Value       Value  Fair Value       Value
        ---------------------------------------------------------------------
        Interest rate swaps        6,896       6,896       5,929       5,929
        Credit facilities(1)
          Canadian Revolving
           Credit Facility        30,939      28,000     148,744     148,000
          Canadian Term
           Facility              107,827      97,583      99,831      98,334
          US Term Facility       143,437     129,810     123,703     121,847
        Convertible
         debentures(1)           343,261     359,993     337,506     356,504
        Other debt                 8,948       8,098       8,773       8,641
                              -----------------------------------------------
                                 641,308     630,380     724,486     739,255
                              -----------------------------------------------

        (1) The convertible debentures and credit facilities are recorded at
            their gross amounts and do not include transaction costs incurred
            on their issuance and the convertible debentures carrying value
            includes both the debt and equity components.

        Trinidad has estimated the fair value amounts using appropriate
        valuation methodologies and information available to management as of
        the valuation dates. The following methods and assumptions were used
        to estimate the fair value of each class of financial instrument for
        which it was practicable to estimate that value:

          -  Cash and cash equivalents, accounts receivable and accounts
             payable and accrued liabilities - The carrying amounts
             approximate fair value because of the short maturity of these
             instruments.

          -  Interest rate swaps - The fair value of the interest rate swaps
             is based on the quoted market prices at the date of valuation.

          -  Long-term debt - The fair value of the various pieces of long-
             term debt are based on values quoted from third-party financial
             institutions using current market price indicators.

          -  Convertible debentures - The fair value is based on the closing
             market price on the date of valuation.

        Interest rate swap

        Trinidad entered into two cash flow hedges using interest rate swap
        arrangements to hedge the floating interest rate on 50% of the
        outstanding balance of the US and Canadian term debt facilities.
        These contracts have been recorded at their fair value on the
        Company's unaudited interim consolidated financial statements. During
        the three and nine months ended September 30, 2008, Trinidad recorded
        a loss of $0.3 million and $0.5 million, respectively, (Trinidad
        recorded a loss of $0.3 million and gain of $1.5 million,
        respectively, for the three and nine months ended September 30, 2007)
        in Other Comprehensive Income ("OCI"), net of taxes of $0.2 million
        for each period ($0.6 million and $1.4 million for the three
        and nine months ended September 30, 2007, respectively), due to the
        change in fair value of the cash flow hedge. Trinidad has assessed
        100% hedge effectiveness; hence the entire change in fair value has
        been recorded in OCI.

        Financing costs

        The carrying value of the long-term debt and convertible debentures
        was recorded net of debt issuance costs. Under the effective interest
        rate method Trinidad recorded interest expense of $0.5 million and
        $1.3 million (2007 - $0.3 million and $1.1 million, respectively) for
        the three and nine months ended September 30, 2008 relating to costs
        under the debt facility. In addition, Trinidad also recognized
        interest expense of $0.7 million and $2.0 million (2007 - $0.7
        million) relating to costs associated with the convertible debentures
        for the same period using the effective interest method.

        Nature and Extent of Risks Arising from Financial Instruments

        Trinidad is exposed to a number of market risks arising through the
        use of financial instruments in the ordinary course of business.
        Specifically, Trinidad is subject to credit risk, currency risk,
        interest rate risk and liquidity risk.

        Credit Risk

        Trinidad is exposed to credit risk as a result of extending credit to
        customers prior to receiving payment for services to be performed,
        creating exposure on accounts receivable balances with trade
        customers. This exposure to credit risk is managed through a
        corporate credit policy whereby upfront evaluations are performed on
        all customers and credit is granted based on payment history,
        financial conditions and anticipated industry conditions. In the
        instance that a customer does not meet initial credit evaluations,
        work may be performed subject to a prepayment of services. Customer
        payments are continuously monitored to ensure the creditworthiness of
        all customers with outstanding balances and when collectability
        becomes questionable a provision for doubtful accounts has been
        established. The following is a reconciliation of the change in the
        reserve balance:

                                        Nine months ended         Year ended
        ($ thousands)                  September 30, 2008  December 31, 2007
        ---------------------------------------------------------------------
        Opening reserve balance                     4,364              5,132
        Increase in reserve recorded in the
         income statement in the current period     1,559              3,929
        Working capital adjustments relating
         to acquisitions                                -             (4,455)
        Write-offs charged against the reserve     (1,200)              (149)
        Recoveries of amounts previously
         written-off                                 (844)               (93)
                                               ------------------------------
        Reserve allowance at period end             3,879              4,364
                                               ------------------------------

        As at September 30, 2008, Trinidad had accounts receivable of
        $8.2 million that were greater than 90 days for which no provision
        had been established, as the Company believes that these amounts will
        be collected.

        Currency Risk

        Trinidad's operations are affected by fluctuations in currency
        exchange rates due to the Company's expansion into the US marketplace
        and reliance on US suppliers to deliver components used by its
        manufacturing subsidiaries. Over the last two years, the Canadian
        dollar has experienced significant volatility, ranging from an
        exchange low of $0.84 US/Canadian to an exchange high of $1.09
        US/Canadian. The exposure to realized foreign currency fluctuations
        from its US subsidiaries is mitigated due to the independence of
        the US operations from its Canadian parent for cash flow requirements
        to satisfy daily operations, creating a natural hedge. However, upon
        consolidation, Trinidad is exposed to unrealized fluctuations in the
        gains and losses on consolidation and US dollar-denominated
        intercompany balances with the Canadian entities. As at September 30,
        2008, the Company did not have any foreign currency hedges in place
        and does not intend to enter into any new currency hedges. The
        Company may, however, hedge foreign currency rates in the future,
        depending on the business environment and growth opportunities.

        As at September 30, 2008, portions of Trinidad's cash and cash
        equivalents, accounts receivable, accounts payable and accrued
        liabilities were denominated in US dollars. In addition, Trinidad's
        US subsidiary is subject to translation gains and losses upon
        consolidation. Based on these US dollar financial instrument closing
        balances, net income for the three and nine months ended September
        30, 2008, would have fluctuated by approximately $0.1 million and
        $0.3 million, respectively, and OCI would have fluctuated by $3.5
        million for the quarter ended September 30, 2008, for every $0.01
        variation in the value of the US/Canadian exchange rate.

        Interest Rate Risk

        Trinidad is subject to risk exposure related to changes in interest
        rates on borrowings under the credit facilities which are subject to
        floating interest rates. In order to hedge this overall risk exposure
        Trinidad entered into interest rate swaps on 50% of the outstanding
        borrowings under the US and Canadian term credit facilities,
        rendering them partially fixed. As at September 30, 2008, Trinidad
        had $255.4 million outstanding under the credit facilities. A change
        of one percent in the interest rates would cause a $0.2 million and a
        $1.5 million change in the interest expense for the three and nine
        months ended September 30, 2008, respectively.

        Liquidity Risk

        Liquidity risk is the risk that Trinidad will not be able to meet its
        financial obligations as they become due. The Company actively
        manages its liquidity through daily, weekly and longer-term cash
        outlook and debt management strategies. Trinidad's policy is to
        ensure that sufficient resources are available either from cash
        balances, cash flows or undrawn committed bank facilities, to ensure
        all obligations are met as they fall due. To achieve this objective,
        the Company:

        -  Maintains cash balances and liquid investments with highly-rated
           counterparties;

        -  Limits the maturity of cash balances; and

        -  Borrows the bulk of its debt needs under committed bank lines or
           other term financing.

        The following maturity analysis shows the remaining contractual
        maturities for Trinidad's financial liabilities:

        As at
        September 30, 2008                                            There-
        ($ thousands)        2008     2009    2010     2011    2012    after
        ---------------------------------------------------------------------
        Accounts payable
         and accrued
         liabilities       97,414        -       -        -       -        -
        Interest rate
         swaps                663    2,962   2,474      797       -        -
        Canadian
         revolving debt(1)      -   28,000       -        -       -        -
        Canadian term debt    250    1,000   1,000   95,333       -        -
        US term debt          333    1,330   1,330  126,817       -        -
        Other debt            144      459     484    6,982       -        -
        Convertible
         debentures(2)          -        -       -        -       -        -
        Interest payments
         on contractual
         obligations       10,228   40,535  39,422   30,375  13,731        -
                         ----------------------------------------------------
        Total             109,032   74,286  44,710  260,304  13,731        -
                         ----------------------------------------------------

        (1) The revolving debt facility is renewable annually, subject to the
            mutual consent of the lenders. To the extent that it is not
            renewed, the drawn-down balance would become due 364 days later.
            Trinidad anticipates this debt facility to be renewed into the
            future.

        (2) At maturity or redemption, the Company may elect to satisfy its
            obligation through the issuance of common shares and therefore no
            commitment has been recorded.

    12. COMMITMENTS

        Rig Construction Program

        In conjunction with the acquisition of the assets of Axxis in July
        2007, Trinidad assumed the remaining construction commitments of a
        barge rig, of which $5.6 million had been spent as at the date of
        the acquisition and was reimbursed to the former owners of Axxis.
        Total costs of construction are expected to be US$28.5 million of
        which US$28.0 million had been spent as of September 30, 2008.
        Effective July 10, 2008, Trinidad entered into an agreement to sell
        this rig to an international third party - see note 14. As part of
        the arrangement Trinidad was obligated to complete the construction
        of the barge rig and any further modifications required will be
        adjusted as part of the final purchase price. The completion and sale
        of the barge rig was completed in October 2008 and all proceeds were
        received.

        In May and July 2008, Trinidad announced its intent to further expand
        its existing drilling fleet through the construction of an additional
        16 drilling rigs expected to be deployed in the United States. These
        drilling rigs will have depth capacities ranging from 16,000 feet to
        18,000 feet and are backed by long-term, take-or-pay contracts with
        three major North American oil and natural gas exploration and
        production companies which provides Trinidad with a guaranteed
        utilization rate of 100% on these rigs over their respective contract
        terms. The total construction costs for the 16 rigs are expected to
        be approximately $240.0 million, of which $48.6 million had been
        spent as at September 30, 2008. Three rigs are expected to be
        deployed in the fourth quarter of 2008, with the remainder to be
        delivered throughout 2009.

        Service Rig Construction Program

        In conjunction with the drilling rig construction program, Trinidad
        announced its intent to build six new well servicing rigs following a
        new rig design which provides improved pressure control, better
        safety features and lower operating costs. The new rigs will have
        depth capacities ranging from 2,400 to 3,500 metres. The capital cost
        of this construction program is anticipated to be approximately $18.0
        million, of which $1.1 million had been spent as at September 30,
        2008. One rig was delivered October 10, 2008 and two more are
        expected in the fourth quarter of 2008.

        Bareboat Charters

        As a part of the Axxis acquisition, Trinidad entered into an
        Assignment Agreement in which the contracts to operate three barge
        rigs (the "Bareboat Charters" or "Charter") were transferred to
        Trinidad. Under the Bareboat Charters, Trinidad is committed to
        operate the rigs on behalf of a third party. In turn, as the owners
        of the rigs, this third party is entitled to receive 25% of the net
        operating revenues (gross revenue minus $1,200 per day general and
        administrative cost) and 50% of the net margin earned under each
        charter. Under the original agreement any earnings in excess of this
        payment were to be retained as compensation for the operation of the
        barge rigs; however, as part of the purchase agreement Trinidad
        committed to pay the former owners of Axxis US$12.5 million per year
        for the next three consecutive years, of which one-third of the
        payment, or US$4.2 million, shall be attributable to each of the
        three Bareboat Charters.

        This payment is contingent on the continued operation of the rigs and
        to the extent that the contract is terminated by the rigs' owner, no
        further payments will be required. This fixed payment was structured
        to represent the residual earnings in excess of the payment to the
        third party; hence Trinidad is exposed to minimal risk and rewards of
        the arrangement. In the instance that dayrates or expenses fluctuate
        from the original provisions in the Bareboat Charters, Trinidad is
        exposed to the residual gain or loss; however, it was determined the
        impact would not be significant in relation to the contracted
        amounts. Trinidad has disclosed all transactions pertaining to the
        Bareboat Charters on a net basis. Trinidad does not bear the
        significant risks and rewards of the arrangement nor does it absorb
        the associated credit risk or asset risk.

    13. SEGMENTED INFORMATION

        Since Trinidad announced its intention to expand operations into the
        US marketplace in 2005, its operations have been diversified from its
        primary geographical focus in western Canada to include various
        locations in the United States, such that a significant proportion of
        Trinidad's operations now occur in the US marketplace. The
        acquisitions of Cheyenne Drilling and Axxis, as well as Trinidad's
        rig construction programs have provided additional rigs of varying
        depths and capabilities for the US operations, which complemented the
        drilling fleet operating in the Canadian market and expanded
        Trinidad's overall drilling operations. Despite the similarities in
        the assets acquired, the increased management depth in the United
        States and the varying conditions between the Canadian and United
        States markets have resulted in management evaluating Trinidad's
        drilling performance on a geographically segmented basis. In
        addition, the acquisition of Mastco in 2006 further broadened the
        operations of Trinidad to include the capability to design,
        manufacture, sell and refurbish drilling rigs and related equipment.
        The unique characteristics of this subsidiary, which are different
        from Trinidad's core drilling operations, have resulted in
        management's separate evaluation of its results. Transactions between
        the segments are recorded at cost and have been eliminated upon
        consolidation.

        ---------------------------------------------------------------------
        Three months ended September 30, 2008
        ($ thousands)
                                     United                Inter-
                        Canadian     States     Const-    segment
                        Drilling   Drilling    ruction    Elimin-
                      Operations Operations Operations     ations      Total
        ---------------------------------------------------------------------
        Revenue           82,680     92,661     44,791    (28,445)   191,687
        Operating
         expense          52,100     53,350     41,589    (28,445)   118,594
                      -------------------------------------------------------
        Gross margin      30,580     39,311      3,202          -     73,093

        Interest on
         long-term debt    2,461      2,341          8          -      4,810
        Interest on
         convertible
         debentures        8,819          -          -          -      8,819
        Depreciation       9,627     14,160        183          -     23,970
        (Gain) loss on
         sale of assets        -         (3)         -          -         (3)
                      -------------------------------------------------------
        Income before
         corporate items   9,673     22,813      3,011          -     35,497
        General and
         administrative                                               11,557
        Stock-based
         compensation                                                  1,197
        Foreign exchange
         (gain) loss                                                  (6,835)
        Reorganization costs                                              24
        Income taxes                                                   9,181
                      -------------------------------------------------------
        Net earnings                                                  20,373
                      -------------------------------------------------------

        Capital expenditures
         (including
         acquisitions and
         deposits)        27,658     52,441        923          -     81,022
                      -------------------------------------------------------


        ---------------------------------------------------------------------
        Three months ended September 30, 2007
        ($ thousands)
                                     United                Inter-
                        Canadian     States     Const-    segment
                        Drilling   Drilling    ruction    Elimin-
                      Operations Operations Operations     ations      Total
        ---------------------------------------------------------------------
        Revenue           67,656     83,771     19,507     (8,751)   162,183
        Operating
         expense          40,999     42,798     16,694     (8,751)    91,740
                      -------------------------------------------------------
        Gross margin      26,657     40,973      2,813          -     70,443

        Interest on
         long-term debt    4,051      3,107         16          -      7,174
        Interest on
         convertible
         debentures        8,302          -          -          -      8,302
        Depreciation       8,074     11,946        170          -     20,190
        (Gain) loss
         on sale of
         assets               35         (4)         -          -         31
                      -------------------------------------------------------
        Income before
         corporate items   6,195     25,924      2,627          -     34,746
        General and
         administrative                                               10,242
        Stock-based
         compensation                                                    508
        Foreign exchange
         (gain) loss                                                   5,394
        Reorganization
         costs                                                             -
        Income taxes                                                   3,559
                      -------------------------------------------------------
        Net earnings                                                  15,043
                      -------------------------------------------------------

        Capital
         expenditures
         (including
         acquisitions
         and deposits)    11,324    186,745         63          -    198,132
                      -------------------------------------------------------


        ---------------------------------------------------------------------
        Nine months ended September 30, 2008
        ($ thousands)
                                     United                Inter-
                        Canadian     States     Const-    segment
                        Drilling   Drilling    ruction    Elimin-
                      Operations Operations Operations     ations      Total
        ---------------------------------------------------------------------

        Revenue          259,125    262,944     85,923    (55,475)   552,517
        Operating
         expense         154,751    149,231     78,724    (55,475)   327,231
                      -------------------------------------------------------
        Gross margin     104,374    113,713      7,199          -    225,286

        Interest on
         long-term debt   10,971      7,222          7          -     18,200
        Interest on
         convertible
         debentures       26,158          -          -          -     26,158
        Depreciation      27,320     40,634        517          -     68,471
        (Gain) loss on
         sale of assets      (60)       (17)      (243)         -       (320)
                      -------------------------------------------------------
        Income before
         corporate items  39,985     65,874      6,918          -    112,777
        General and
         administrative                                               35,729
        Stock-based
         compensation                                                  1,499
        Foreign exchange
         (gain) loss                                                 (10,358)
        Reorganization
         costs                                                         2,713
        Income taxes                                                  22,768
                      -------------------------------------------------------
        Net earnings                                                  60,426
                      -------------------------------------------------------

        Capital
         expenditures
         (including
         acquisitions
         and deposits)    37,448    100,230      1,177          -    138,855
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
        Nine months ended September 30, 2007
        ($ thousands)
                                     United                Inter-
                        Canadian     States     Const-    segment
                        Drilling   Drilling    ruction    Elimin-
                      Operations Operations Operations     ations      Total
        ---------------------------------------------------------------------
        Revenue          233,991    220,005     76,700    (46,808)   483,888
        Operating
         expense         142,111    112,159     70,427    (46,808)   277,889
                      -------------------------------------------------------
        Gross margin      91,880    107,846      6,273          -    205,999

        Interest on
         long-term debt   15,559      9,683         42          -     25,284
        Interest on
         convertible
         debentures        8,302          -          -          -      8,302
        Depreciation      22,068     30,730        481          -     53,279
        (Gain) loss on
         sale of assets      212         26          -          -        238
                      -------------------------------------------------------
        Income before
         corporate items  45,739     67,407      5,750          -    118,896
        General and
         administrative                                               30,372
        Stock-based
         compensation                                                  1,954
        Foreign exchange
         (gain) loss                                                  12,283
        Reorganization costs                                               -
        Income taxes                                                  12,660
                      -------------------------------------------------------
        Net earnings                                                  61,627
                      -------------------------------------------------------

        Capital
         expenditures
         (including
         acquisitions
         and deposits)    71,702    278,616        105          -    350,423
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
        As at September 30, 2008
        ($ thousands)
                                     United                Inter-
                        Canadian     States     Const-    segment
                        Drilling   Drilling    ruction    Elimin-
                      Operations Operations Operations     ations      Total
                      -------------------------------------------------------
        Total assets     698,755    910,608     42,938          -  1,652,301
        Goodwill          38,154     90,564     46,620          -    175,338
        Future income
         tax asset
         (liability)      (5,552)   (57,762)       790          -    (62,524)
                      -------------------------------------------------------

        ---------------------------------------------------------------------
        As at December 31, 2007
        ($ thousands)
                                     United                Inter-
                        Canadian     States     Const-    segment
                        Drilling   Drilling    ruction    Elimin-
                      Operations Operations Operations     ations      Total
                      -------------------------------------------------------
        Total assets     679,390    786,982     30,784          -  1,497,156
        Goodwill          38,154     84,360     46,620          -    169,134
        Future income
         tax asset
         (liability)      (3,525)   (35,324)     1,476          -    (37,373)
        ---------------------------------------------------------------------

    14. SUBSEQUENT EVENTS

        Subsequent to quarter-end, Trinidad received the remaining balance
        owing of US$48.2 million in relation to the proceeds on the sale of
        its newly constructed barge drilling rig to an international third
        party. The sale was expected to be completed at the end of the third
        quarter of 2008; however, due to the customizations requested by the
        purchaser and testing, the sale did not close until October 10, 2008.

    15. RELATED PARTY TRANSACTIONS

        Effective August 18, 2008, Trinidad closed a $16.3 million
        acquisition of an oilfield equipment fabrication company at fair
        market value which was substantially held by one of Trinidad's
        executive officers.

    16. COMPARATIVE FIGURES

        Certain of the comparative figures have been reclassified to conform
        to current year's presentation. Such reclassification did not impact
        previously reported net earnings or retained earnings.
For further information:
For further information: Lyle Whitmarsh, President & Chief Executive
Officer or Brent Conway, Chief Financial Officer or Lisa Ciulka, Director of
Investor Relations at: Phone: (403) 265-6525, Fax: (403) 265-4168, E-mail:
lciulka@trinidaddrilling.com