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Trinidad Drilling Ltd. reports record 2008 results; expanded operations and solid contracts back up strong performance
/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
    DISSEMINATION IN THE UNITED STATES/TSX SYMBOL: TDG and TDG.DB

    CALGARY, Feb. 26 /CNW/ - Trinidad Drilling Ltd. ("Trinidad" or the
"Company") reported strong operating and financial results for 2008. The
record levels of revenue, EBITDA (1) and cash flow from operations before
changes in non-cash working capital (1), were driven by the Company's growing
inventory of high-tech, deeper-capacity drilling rigs, expansion into less
seasonal markets and the ongoing commitment of Trinidad's customer base.
    "The year 2008 was an important year for Trinidad on many fronts," said
Lyle Whitmarsh, Trinidad's President and Chief Executive Officer. "Not only
did we have record financial and operational results but we grew our fleet
through our rig construction program, we expanded into new markets such as
Mexico and moved under-utilized equipment into more profitable areas. In
addition, we added value through select asset sales, renewal of long-term,
take-or-pay contracts and reduced our debt levels. We believe that 2009 will
be a challenging year for most companies and know that Trinidad is not immune
to these outside influences. However, we have prepared the Company for these
challenges and are confident that once the economy begins to recover, we are
well positioned to take advantage of opportunities and to continue our track
record of value-added growth."FOURTH QUARTER AND FISCAL 2008 HIGHLIGHTS
    (Quarter-over-quarter and full-year comparatives all relate to the
    comparable period in 2007)

    -   Revenue for the fourth quarter of 2008 was $205.3 million and
        contributed to a record revenue level of $757.9 million for the full
        year, up 40.8% and 20.4%, respectively, largely due to growth through
        acquisitions, internal rig construction programs, higher utilization
        rates and our successful expansion into the US and Mexican markets.

    -   Trinidad's fourth quarter 2008 drilling utilization rate of 61% in
        Canada continued to substantially exceed industry levels, which
        recorded an average utilization rate of 43%. The US and Mexico
        drilling operations segment reported strong activity levels, although
        down slightly from the previous quarters, with utilization of 80%.
        For 2008, Trinidad's Canadian drilling utilization rate was 57%
        compared to the industry average of 42%, while the US and Mexico
        operations utilization averaged 85%.

    -   Cash flow from operations before changes in non-cash working capital
        was $57.8 million ($0.60 per share (diluted)), in the fourth quarter
        of 2008 and $207.1 million ($2.28 per share (diluted)) for the full
        year, up 79.5% and 18.5%, respectively. These increased levels were
        achieved primarily through the increased rig fleet, the expanded US
        and Mexico operations and an ability to maintain gross margins(1)
        through stable dayrates and a continued focus on cost control.

    -   Net earnings in the fourth quarter of 2008 were $21.8 million ($0.23
        per share (diluted)) and $82.2 million ($0.90 per share (diluted))
        for the full year, up 21.8% and 3.3%, respectively. In 2008, Trinidad
        recorded a goodwill impairment charge of $38.2 million, due largely
        to the recent economic events impacting the Company's market
        capitalization. Net earnings before impairment of goodwill(1) for
        2008 were $120.3 million ($1.32 per share (diluted)) up 51.3%
        largely due to strong growth in revenue and a stable gross margin
        percentage. Net earnings before impairment of goodwill were also
        positively impacted by a gain recorded on the sale of a barge
        drilling rig and foreign exchange gains.

    (1) Please see the Non-GAAP Measures Definitions section of this MD&A for
        further details.MANAGEMENT'S DISCUSSION AND ANALYSIS

    The following management's discussion and analysis ("MD&A") of financial
condition and results of operations is intended to help the reader understand
the current and prospective financial position and operating results of
Trinidad Drilling Ltd. ("Trinidad" or the "Company"). This MD&A discusses the
operating and financial results for the three and twelve months ended December
31, 2008 and is dated February 20, 2009 and takes into consideration
information available up to that date. The MD&A is based on the annual
Consolidated Financial Statements of Trinidad for the year ended December 31,
2008, which were prepared in accordance with Canadian Generally Accepted
Accounting Principles ("GAAP"). The MD&A should be read in conjunction with
the annual Consolidated Financial Statements and the related notes contained
in this report. 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 Trinidad Energy Services Income
Trust (the "Trust") to a corporation, effective March 10, 2008, references to
the "Company", "shares", the "Incentive Options Plan", "options" and
"dividends" should be read as references to the "Trust", "units", "Unit Rights
Incentive Plan", "rights" and "distributions" respectively, for the periods
prior to March 10, 2008. All amounts are denominated in Canadian dollars
("CDN$") unless otherwise identified. All amounts are stated in thousands
unless otherwise identified.-------------------------------------------------------------------------
    FINANCIAL HIGHLIGHTS
    For the years ended December 31,
    ($ thousands except share and per
     share data)                              2008         2007         2006
    -------------------------------------------------------------------------
    Revenue                                757,900      629,675      579,855
    Gross margin(1)                        309,495      264,902      269,584
    EBITDA(1)                              287,470      206,254      210,319
      Per share (diluted)(2)                  3.16         2.43         2.48
    EBITDA before stock-based
     compensation(1)                       289,935      208,704      217,424
      Per share (diluted)(2)                  3.19         2.46         2.57
    Cash flow from operations before
     change in non-cash working
     capital(1)                            207,121      174,770      196,924
      Per share (diluted)(2)                  2.28         2.06         2.33
    Cash flow from operations              193,043      172,013      152,478
      Per share (diluted)(2)                  2.12         2.02         1.76
    Net earnings                            82,174       79,524      123,706
      Per share (basic)(2)                    0.90         0.95         1.49
      Per share (diluted)(2)                  0.90         0.94         1.46
    Net earnings before impairment of
     goodwill(1)                           120,328       79,524      123,706
      Per share (basic)(2)                    1.33         0.95         1.49
      Per share (diluted)(2)                  1.32         0.94         1.46
    Net earnings before stock-based
     compensation(1)                        84,639       81,974      130,811
      Per share (diluted)(2)                  0.93         0.96         1.55
    Shares outstanding - basic
     (weighted average)(2)              90,804,564   83,952,252   83,078,833
    Shares outstanding - diluted
     (weighted average)(2)              91,003,946   84,957,250   84,644,439
    -------------------------------------------------------------------------

    (1) Readers are cautioned that gross margin, EBITDA, EBITDA before stock-
        based compensation, cash flow from operations before change in non-
        cash working capital, net earnings before impairment of goodwill 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 EBITDA, EBITDA before stock-based
        compensation, cash flow from operations before change in non-cash
        working capital, cash flow from operations, net earnings, net
        earnings before impairment of goodwill and net earnings before stock-
        based compensation for the diluted per share calculation.


    -------------------------------------------------------------------------
    OPERATING HIGHLIGHTS
    For the years ended December 31,          2008         2007         2006
    -------------------------------------------------------------------------
    Land Drilling Market
    Operating days - drilling
      Canada                                12,196        9,835       12,531
      United States and Mexico(1)           15,076       12,112        7,046
    Rate per drilling day (CDN$)
      Canada                                23,827       24,042       24,191
      United States and Mexico(2)           23,098       23,603       23,724
    Utilization rate - drilling
      Canada                                    57%          43%          62%
      United States and Mexico                  85%          85%          84%
    CAODC industry average                      42%          38%          55%
    Number of drilling rigs
      Canada                                    57           64           60
      United States and Mexico                  56           46           31
    Utilization rate for service rigs           46%          49%          62%
    Number of service rigs                      23           20           18
    Number of coring and surface casing
     rigs                                       20           20           17

    Barge Drilling Market(3)
    Operating days                           1,285          704            -
    Rate per drilling day (CDN$)            44,387       49,720            -
    Utilization rate(4)                         93%          98%           -
    Number of barge drilling rigs                1            1            -
    Number of barge drilling rigs under
     Bareboat Charter Agreements                 3            3            -
    -------------------------------------------------------------------------

    (1) Trinidad commenced its operations in Mexico effective November 2008.
    (2) In US dollars, dayrates remained relatively static, increasing
        marginally from $21,867 in 2007 to $22,006 in 2008.
    (3) Trinidad commenced its operations in the barge drilling market with
        its acquisition of Axxis, effective July 5, 2007.
    (4) 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. The use
of any of the words "expect", "anticipate", "continue", "estimate",
"objective", "ongoing", "may", "will", "project", "should", "believe",
"plans", "intends", "confident", "might" and similar expressions are intended
to identify forward-looking information or statements. Various assumptions
were used in drawing the conclusions or making the projections contained in
the forward-looking statements throughout this MD&A. The forward-looking
information and statements included in this MD&A are not guarantees of future
performance and should not be unduly relied upon. Forward-looking statements
are based on current expectations, estimates and projections that involve a
number of risks and uncertainties, which could cause actual results to differ
materially from those anticipated and described in the forward-looking
statements. Such information and statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or events to
differ materially from those anticipated in such forward-looking information
or statements.
    In particular, but without limiting the foregoing, this MD&A may contain
forward-looking information and statements pertaining to the following:-   the completion of announced rig construction programs on a timely
        basis and on economical terms;
    -   the assumption that Trinidad's customers will honour their take-or-
        pay contracts;
    -   fluctuations in the demand for Trinidad's services;
    -   the ability for Trinidad to attract and retain qualified personnel,
        in particular field staff to crew the Company's rigs;
    -   the existence of competitors, technological changes and developments
        in the oilfield services industry;
    -   the existence of operating risks inherent in the oilfield services
        industry;
    -   assumptions respecting capital expenditure programs and other
        expenditures by oil and gas exploration and production companies;
    -   assumptions regarding commodity prices, in particular oil and natural
        gas;
    -   assumptions respecting supply and demand for commodities, in
        particular oil and natural gas;
    -   assumptions regarding foreign currency exchange rates and interest
        rates;
    -   the existence of regulatory and legislative uncertainties;
    -   the possibility of changes in tax laws; and
    -   general economic conditions including the capital and credit markets.Trinidad cautions that the foregoing list of assumptions, risks and
uncertainties is not exhaustive. The forward-looking information and
statements contained in this MD&A speak only as of the date of this MD&A and
Trinidad assumes no obligation to publicly update or revise them to reflect
new events or circumstances, except as may be required pursuant to applicable
securities laws.

    NON-GAAP MEASURES

    This MD&A contains references to certain financial measures and
associated per share data that do not have any standardized meaning prescribed
by Canadian GAAP and may not be comparable to similar measures presented by
other companies. These financial measures are computed on a consistent basis
for each reporting period and include gross margin, EBITDA, EBITDA before
stock-based compensation, cash flow from operations before change in non-cash
working capital, net earnings before impairment of goodwill, net earnings
before stock-based compensation and net debt. Please see the Non-GAAP Measures
Definitions section of this MD&A for details with respect to definitions of
these non-GAAP measures.

    RESPONSIBILITY OF MANAGEMENT AND THE BOARD OF DIRECTORS

    Management is responsible for the information disclosed in this MD&A and
the accompanying annual Consolidated Financial Statements, and has in place
appropriate information systems, procedures and controls to ensure that
information used internally by management and disclosed externally is
materially complete and reliable. In addition, Trinidad's Audit Committee, on
behalf of the Board of Directors, provides an oversight role with respect to
all public financial disclosures made by the Company, and has reviewed and
approved this MD&A and the accompanying annual Consolidated Financial
Statements.

    PROFILE

    Trinidad is a growth-oriented corporation whose common shares and
convertible debentures trade on the Toronto Stock Exchange ("TSX") under the
symbols TDG and TDG.DB respectively. Trinidad's divisions operate in the
drilling, well-servicing, coring and barge-drilling sectors of the North
American oil and natural gas industry. With the completion of the 2008/2009
rig construction program, Trinidad will have 120 land drilling rigs ranging in
depths from 1,000 - 6,500 metres and operations in Canada, the United States
and Mexico. In addition to its land drilling rigs, Trinidad has 23 service
rigs, 20 pre-set and coring rigs and 4 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.

    OVERVIEW

    Trinidad had another very successful year in 2008, as the Company
achieved record financial and operating results against a backdrop of
significant commodity price fluctuations and unprecedented market turbulence
in the latter part of the year. Trinidad demonstrated strong growth in 2008
and achieved record levels of revenue, gross margin, EBITDA and cash flow from
operations. This was driven by increases in the Company's operating days and
rig utilization while maintaining relatively stable dayrates as compared to
2007. In addition to the Company's record performance, management continued to
make strides on many of its strategic initiatives including; building upon its
base of long-term, take-or-pay contracts, reduction in overall debt levels,
expansion of its rig fleet and entry into new geographic markets. During 2008,
the Company redeployed seven rigs from Canada into the United States ("US")
and Mexican markets and made considerable progress on its 2008/2009 rig build
program by delivering three new technologically-innovative rigs into the US on
long-term, take-or-pay contracts. Subsequent to the 2008 year-end, Trinidad
announced its updated capital expenditure budget for 2009. The revised budget
lowers Trinidad's capital expenditure expectations for 2009, reflecting the
Company's prudent capital management planning and strong customer
relationships. The reduced budget includes changes to Trinidad's previously
announced rig construction programs, most notably; a 12-month delay in the
delivery of six new drilling rigs and the cancellation of four new service
rigs (see the Subsequent Events section of this MD&A for further details on
Trinidad's updated 2009 capital expenditure budget). In 2008, management
continued its focus on delivering industry-leading drilling solutions through
the acquisition of Victory Rig Equipment Corporation ("Victory") and the
expansion of its in-house manufacturing capabilities. These capabilities allow
Trinidad to build new rigs with better functionality, improved performance,
and an integrated top drive solution. These capabilities and the ownership of
this proprietary technology is what ultimately leads to customer cost savings
and enhanced crew safety. The Company also gained strategic entry into the oil
and natural gas market in Mexico through the mobilization of three drilling
rigs into the Chicontepec field in central eastern Mexico. This geographic
expansion reduces the impact of seasonality and provides increased stability
to the Company's cash flows and an entrance into a marketplace with relatively
strong demand for new and advanced drilling equipment. These initiatives, in
combination with the recently announced early renewal of Trinidad's revolving
credit facility (see the Subsequent Events section of this MD&A for further
details on Trinidad's early renewal of its revolving credit facility),
position the Company well to weather the inevitable cycles of the oil and
natural gas industry and to continue its strong track record for value-added
growth.
    Trinidad's revenue for the year grew by 20.4% or $128.2 million as
compared to 2007, which was a direct result of higher operating days, improved
rig utilization and maintaining relatively stable dayrates in both Canada and
the US and Mexico land drilling segments. Trinidad's total operating days
increased by 5,906 days or 26.1% for 2008 as compared to 2007 as a result of
increased customer demand and the redeployment of seven existing drilling rigs
from Canada to higher utilization markets in the US and Mexico. In Canada,
drilling rig utilization rose to 57% as strengthening oil and natural gas
prices throughout the first three quarters of 2008 led to higher demand for
contract drilling services. Trinidad's Canadian drilling rig utilization rate
continued to outperform the industry average, exceeding the industry rate of
42% or 35.7% for the year. In the US, the strength and stability of Trinidad's
long-term, take-or-pay contracts was apparent with utilization rates remaining
consistent with the prior year at 85%, despite weakening economic conditions
and extreme volatility in commodity prices experienced in the latter half of
2008. Higher dayrates associated with Trinidad's newer, deeper-capacity
equipment under long-term, take-or-pay contracts were offset by lower dayrates
from spot market activity and the extremely competitive markets in which
Trinidad operates.
    Strong growth in revenue and gross margin helped to drive a 51.3%
increase in net earnings before impairment of goodwill to $120.3 million or
$1.32 per share (diluted) for 2008 in comparison to $79.5 million or $0.94 per
share (diluted) in 2007. Given the recent economic events impacting the market
capitalization of Trinidad, the Company, in accordance with its annual
goodwill impairment testing procedures, recognized an impairment charge in
2008 of $38.2 million, specifically in relation to the Canadian drilling
segment. The net impact on earnings per share was a reduction of $0.42 per
share (diluted) for the year ended December 31, 2008. From the annual goodwill
impairment testing procedures, Trinidad's US and Mexico drilling segment,
along with the Company's Construction segment, did not have any goodwill or
intangible valuation impairments, and were therefore not subject to any
write-downs. Trinidad's net earnings during 2008 were also negatively impacted
by reorganization costs and higher income taxes as a result of the conversion
from an income trust into a corporation. Net earnings were also impacted by
increased maintenance and refurbishment costs on some of the older US rigs, as
well as higher interest and depreciation expenses. Interest expense increased
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. Helping to
offset these factors was a $33.5 million foreign exchange gain in comparison
to a loss of $12.4 million in the prior year due to changes in the Canadian/US
exchange rates as well as a gain of $29.0 million in relation to the sale of
the Company's newly constructed barge rig during the fourth quarter of 2008.
    During 2008, Trinidad made several strategic rig moves from Canada to the
US and Mexico. Trinidad redeployed four rigs from Canada to the US, two of
which were sent to the Deep Bossier play in Texas, one to the Haynesville
Shale in Louisiana and the other to the Bakken Shale in North Dakota. These
redeployments allow the Company to maximize utilization and to increase the
Company's foothold into the unconventional shale natural gas plays in the US.
All four rigs are under long-term, take-or-pay contracts with guaranteed 100%
utilization, adding further stability to the Company's cash flows. Following
the completion of the 2008/2009 rig construction program, Trinidad expects to
have approximately 45% of the Company's rig fleet working in the
unconventional shale plays in North America. As at February 20, 2009
approximately 45% of the Company's total fleet was under long-term contracts.
Additionally, in the fourth quarter of 2008 Trinidad redeployed three rigs
from Canada to Mexico. These rigs are operating in the Chicontepec basin in
Mexico, which is one of the country's largest certified hydrocarbon resource
plays, where drilling activity has been steadily increasing since the early
1970's. One of these rigs began operations in November 2008, the second
started drilling in December 2008, with the third starting operations in
January 2009. These rigs are contracted in US dollars with 100% utilization
for an initial term of six months; with a further six month extension at the
customer's option. Mobilization and de-mobilization costs are paid for by the
operator, however it is anticipated that these rigs will remain in Mexico for
the foreseeable future. This expansion into Mexico continues to demonstrate
Trinidad's ability to add value by redeploying rigs from a seasonal and
increasingly under-utilized capacity base to markets where higher utilization
rates are expected as demand for high-quality, deep-capacity drilling rigs is
expected to continue to be stable.
    Trinidad's continued focus is on creating growth and long-term
sustainability, in order to drive strong returns for its shareholders.
Trinidad has developed a strong platform as the third-largest Canadian
drilling company, one of the fastest growing in the US marketplace and has now
successfully expanded its reach internationally to Mexico and to the offshore
barge market. Trinidad's state-of-the-art rig fleet includes onshore, barge,
service and coring rigs which provide tangible competitive advantages in the
markets in which the Company conducts its business. Further advantages stem
from the Company's technically-advanced rig design and patented top drive
packages, reflective of its position as a technology leader with a dedicated
commitment to the needs of Trinidad's valued customers. Trinidad continues to
prove its ability to meet the needs of the ever-changing and demanding North
American drilling environment, by providing assets that can drill today's
tighter, more technically challenging reserves. Trinidad has been built with a
strategic vision and a commitment to executing the Company's business plan
over the long-term. The basis of our strategy has been and will continue to be
focused around maintaining one of the newest, deepest and most
technically-advanced fleet of drilling rigs in the industry; expanding our
operations geographically to provide additional profitability and
diversification to counter market weakness; and maintaining our
customer-focused approach which provides strong utilization levels and reduced
volatility in our revenue through long-term, take-or-pay contracts. This has
created a strong platform for continued profitability and expansion into new
markets, while at the same time providing the Company with stability during
these challenging and volatile economic times.RESULTS OF OPERATIONS
    Canadian Drilling Operations
    For the years ended December 31,
    ($ thousands except percentages and
     operating data)                          2008         2007     % Change
    -------------------------------------------------------------------------
    Revenue                                348,067      297,007         17.2
    Operating expense                      205,059      182,055         12.6
                                     ----------------------------------------
    Gross margin                           143,008      114,952         24.4
                                     ----------------------------------------
    Gross margin percentage                   41.1%        38.7%

    Operating days - drilling               12,196        9,835         24.0
    Rate per drilling day (CDN$)            23,827       24,042         (0.9)
    Utilization rate - drilling                 57%          43%        32.6
    CAODC industry average                      42%          38%        10.5
    Number of drilling rigs                     57           64        (10.9)

    Utilization rate for service rigs           46%          49%        (6.1)
    Number of service rigs                      23           20         15.0
    Number of coring and surface casing
     rigs                                       20           20            -
    -------------------------------------------------------------------------Entering 2008, the outlook for Trinidad's Canadian drilling segment was
uncertain as the Canadian oilfield services market was facing an over-supply
of equipment, the impact of the Alberta government's announced new royalty
rate structure, as well as weak natural gas prices and the effect a strong
Canadian dollar may have on the cash flows of Trinidad's customers. While
these factors contributed to a weak first quarter for the Company, gradual
market improvements over the second and third quarters of 2008 and a shift in
focus by customers on deeper, unconventional resource plays primarily
contributed to stronger than anticipated results for Trinidad's Canadian
drilling segment. As a result, 2008 revenue, gross margin, operating days and
drilling rig utilization rates all exceeded their respective levels in 2007.
    Trinidad's Canadian operations experienced higher customer demand in 2008
as compared to 2007 due to the improvement in underlying cash flow
fundamentals for deeper plays in the oil and natural gas industry in Canada.
Trinidad's rigs are better suited for the deeper, more technically-challenging
resource plays and this shift in focus by exploration and production companies
has further differentiated Trinidad from its peer group and the industry as a
whole. Historically, Trinidad has exceeded industry average rig utilization as
a result of its deeper drilling focus. Trinidad's young fleet, consisting of
high-quality, technically-advanced equipment, lowers drilling costs for the
Company's customers by providing better overall drilling performance. Trinidad
continued this trend in 2008 by outperforming the industry in terms of
utilization by 35.7%, achieving rig utilization in Canada of 57% as compared
to the industry average of 42%.
    Revenue increased in the Canadian operations by $51.1 million or 17.2%
from $297.0 million in 2007 to $348.1 million in 2008 as a result of higher
operating days and rig utilization. This was achieved with a lower number of
rigs available and at dayrates which were relatively static year-over-year.
Growth in revenue was also attributable to the longer-term duration of
Trinidad's 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 in
terms of both capital outlays and cash flows, which in turn renders deeper
drilling fleets more defensive in terms of utilization when commodity prices
decline. The impact to Trinidad, from the deeper plays, is that the Company
incurs less move days and less downtime; therefore generating higher
utilization.
    Overall dayrates remained relatively static in 2008 as compared to 2007,
declining marginally by 0.9% year-over-year. Trinidad's ability to maintain
relatively stable dayrates in a highly competitive environment reflects the
strength of the Company's long-term, take-or-pay contracts and the high
quality of its equipment. Trinidad reduced its Canadian drilling rig fleet by
seven rigs or 10.9% over the course of 2008 as a result of redeployments to
the Company's US and Mexico operations.
    In 2008, the industry realized increases in the average annual active
drilling rig count in the Western Canadian Sedimentary Basin ("WCSB").
According to the Canadian Association of Oilwell Drilling Contractors
("CAODC"), the average annual active rig count was 7.4% higher than the levels
witnessed in 2007. During the early stages of 2008, the active rig count in
the industry was below the already suppressed levels encountered in 2007, but
throughout the second, third and fourth quarters of 2008 this trend reversed
as the active rig count surpassed 2007 levels in all three quarters. Another
factor that produced positive results for Trinidad in 2008 was increased well
completion activity in the WCSB, which resulted in stronger year-over-year
activity. As per the CAODC, there were 20,729 wells drilled on a completion
basis during the year, representing an improvement of 8.2% from the levels
reported in 2007. Directional and horizontal drilling continued to be the
theme in the WCSB in 2008 with the number of non-vertical wells drilled
increasing by over 6% as compared to 2007, while the easier vertical wells
drilled were down by close to 18% year-over-year. Directional and horizontal
wells increased to 44% of the total wells drilled in 2008 compared to 38% in
2007, indicating the shift towards these more technically-challenging wells
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 and is one of the key factors
contributing to the achievement of higher utilization rates as compared to the
industry and Trinidad's strong year-over-year performance.
    Operating costs as a percentage of revenue decreased from 61.3% in 2007
to 58.9% in 2008, thus increasing Trinidad's Canadian drilling segment's gross
margin percentage year-over-year. Operating costs for 2008 were $205.1
million, which represents an increase of $23.0 million or 12.6% as compared to
2007. This increase was driven by stronger revenues during the year, thus
increasing overall operating expenses. Gross margin for the Canadian Drilling
segment increased 24.4% to $143.0 million or 41.1% margin as compared to
$115.0 million or 38.7% margin in 2007 as a result of higher utilization and
operating days. As well, the Company's Canadian division was extremely focused
during 2008 on overall cost management given the softer market outlook for
2009.
    Overall, the well servicing division had a strong year, especially given
the lower activity levels witnessed in the marketplace. Utilization rates for
Trinidad's well servicing division declined slightly from 49% in 2007 to 46%
in 2008. Lower activity levels and a surplus of equipment in the marketplace
reduced dayrates for 2008 resulting in slight declines in revenue and gross
margin as compared to 2007. Trinidad remains relatively optimistic on
prospects for its well servicing division in light of the increased
completion, work-over and abandonment activity expected over the next several
years, coupled with expected minor equipment expansion industry wide.
    Trinidad continued to generate positive cash flows from the Canadian
drilling segment in 2008 and the Company's focus on newer rigs with
deeper-drilling capacity and long-term contracts again proved its overall
value to shareholders. While the Company is cautious regarding the near-term
impact of the global financial crisis and ensuing economic uncertainty,
Trinidad believes that long-term fundamentals require continued exploration
and production in the WCSB to meet North American and world-wide demand for
oil and natural gas. Trinidad's assets and operations are built to help our
customers economically drill for oil and natural gas, including drilling in
the large, relatively undeveloped, unconventional resource areas of the WCSB.
With the anticipated return of stronger commodity prices helping to drive
overall exploration and production activity, these unconventional resource
areas of the WCSB should continue to grow from a rig activity and well
completion standpoint. Trinidad is well positioned to capitalize on this
opportunity, given the Company's technically-advanced asset base, its
proprietary drilling technology and overall drilling performance which lower
drilling costs for Trinidad's customers.United States and Mexico Drilling Operations
    For the years ended December 31,
    ($ thousands except percentages and
     operating data)                          2008         2007     % Change
    -------------------------------------------------------------------------
    Revenue                                366,803      298,777         22.8
    Operating expense                      207,523      155,401         33.5
                                     ----------------------------------------
    Gross margin                           159,280      143,376         11.1
                                     ----------------------------------------
    Gross margin percentage                   43.4%        48.0%

    Land Drilling Rigs
    Operating days - drilling               15,076       12,112         24.5
    Rate per drilling day (CDN$)(1)         23,098       23,603         (2.1)
    Utilization rate - drilling                 85%          85%           -
    Number of drilling rigs                     56           46         21.7

    Barge Drilling Rigs(2)
    Operating days - drilling                1,285          704         82.5
    Rate per drilling day (CDN$)            44,387       49,720        (10.7)
    Utilization rate - drilling(3)              93%          98%        (5.1)
    Number of barge drilling rigs                1            1            -
    Number of barge drilling rigs under
     Bareboat Charter Agreements                 3            3            -
    -------------------------------------------------------------------------

    (1) In US dollars, dayrates remained relatively static, increasing
        marginally from $21,867 in 2007 to $22,006 in 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.Commensurate with the expansion of operations into Mexico, Trinidad has
included the results of operations for Mexico with the operating results of
its US operations. Accordingly, this segment is named United States and Mexico
Drilling Operations.
    Trinidad's continued success in 2008 in the US and Mexico drilling
segment rests on the Company's carefully developed business approach. This
overall business approach has provided Trinidad's US and Mexico segment with
another record year in 2008 and will continue to be the Company's focus moving
forward. The key elements of Trinidad's business strategy in the US and Mexico
markets include:-   Offering modern, state-of-the-art drilling rigs, designed and
        manufactured in-house, that can help exploration and production
        companies achieve a high rate of drilling success in pursuing today's
        deeper, more technically demanding oil and natural gas wells;

    -   A focus on helping Trinidad's customer base drill productive wells in
        a cost effective manner;

    -   A focus on building customer relationships based on long-term, take-
        or-pay contracts, thereby anchoring Trinidad's rig build programs and
        securing returns; and

    -   A commitment to continuously looking for new technologies or new
        drilling methods which allow oil and natural gas producers to extract
        more oil or natural gas per dollar of capital spent.Revenue for the US and Mexico drilling operations segment increased by
$68.0 million or 22.8% for the year, up from $298.8 million in 2007 to $366.8
million for 2008. Growth in revenue resulted from the expansion of the US and
Mexico fleet, which increased by 21.7% or ten rigs year-over-year, inclusive
of an additional three rigs that were transferred from Trinidad's Canadian
drilling fleet to Mexico during the fourth quarter of 2008. The additional ten
rigs contributed to an increase in the number of operating days at relatively
consistent US dollar dayrates in comparison to the prior year. Furthermore,
the deployment of these additional rigs, which were committed under long-term,
take-or-pay contracts operating year-over-year, added growth to the overall
operations. Average dayrates in Canadian dollars declined 2.1% year-over-year
due entirely to foreign exchange as a result of the declining strength of the
US dollar during the first half of 2008. In US dollars, average dayrates
remained relatively static increasing marginally by 0.6% from US $21,867 for
2007 to US $22,006 for the same period in 2008.
    Average utilization for 2008 in the US and Mexico land drilling segment
was 85%, which was directly in line with levels achieved in 2007. Trinidad
experienced a decline in utilization on the Company's non-contracted rigs
given the change in market fundamentals over the latter part of 2008. However,
Trinidad's increased focus on long-term, take-or-pay contracts helped to
offset this softness and supported stable utilization levels year-over-year.
Moving forward in 2009, Trinidad expects utilization on the US non-contracted
rigs to continue to decline given the current market conditions that have
impacted the overall US economy and drilling market. Helping to offset this
over the course of 2009 will be the rig fleet booked under long-term,
take-or-pay contracts, which as of February 20, 2009 was approximately 60% of
the total US and Mexico fleet. Another factor that helped with utilization in
2008 was the growing level of directional and horizontal wells being drilled
in the US. This trend positively impacted utilization levels in 2008 and will
also be a key aspect of the US and Mexico segment's success moving forward.
According to Baker Hughes (a US based oilfield services company that provides
US drilling industry data), on average the number of rigs drilling directional
and horizontal wells in the US market increased by over 20% as compared to
2007, while the average rigs drilling the easier vertical wells were down by
close to 5% year-over-year. The total average rigs drilling directional and
horizontal wells increased to 49% of the total wells drilled in 2008 compared
to 43% in 2007, indicating the shift towards these more
technically-challenging wells and demonstrating the increasing amounts of
capital being deployed by producers towards the unconventional resource plays
in the US market. As in Canada, Trinidad is strongly positioned to capitalize
on this trend, as the Company's US and Mexico rig fleet is better suited for
the deeper, more technically-challenging wells.
    Operating expenses for the year increased by 33.5% from $155.4 million in
2007 to $207.5 million in 2008, reducing overall gross margins from 48.0% to
43.4%. The increase in operating expenses was partially attributable to higher
revenue for the year, however overall increases in operating costs exceeded
the growth in revenue, reducing gross margin as a percentage of revenue on a
year-over-year basis. The decline in gross margin as a percentage of revenue
was driven by refurbishment work completed on a number of Trinidad's older US
rigs, in order to make these rigs more attractive to prospective customers.
While these rigs were being refurbished they had to be temporarily taken out
of service during various parts of the year. Costs for these refurbishments
were charged to operating expenses with no associated revenue during the
downtime, ultimately reducing Trinidad's US gross margin as a percentage of
revenue. Total costs incurred on these refurbishments were approximately $4.4
million, negatively impacting gross margins by 1.2% for the year, without
taking into consideration the lost revenue during the downtime. Without the
impact of these refurbishments and excluding the loss on the Bareboat Charter,
the gross margin and gross margin percentage for 2008 would have been $168.3
million and 45.3%, respectively, as compared to $142.0 million and 47.7%,
respectively, for 2007. The expectation moving forward is that the Company
will see a future benefit from these refurbishments by way of improved
marketability and operating efficiency. In addition, expenses related to
start-up costs, employing additional field supervisors to manage the growing
US fleet and improved safety requirements led to increases in overall
operating expenses. Another factor negatively impacting gross margin was
Trinidad reclassifying costs associated with property taxes on the US rigs
into operating expenses from general and administrative expenses to better
align the Company with current industry standards and allow for increased
consistency amongst Trinidad's peer group. For comparative purposes property
taxes were also reclassified for 2007; however the impact of increased
property taxes on the growing US rig fleet in comparison with the prior year
drove margins down. Property taxes on US-based rigs are assessed annually on
January 1, therefore any rigs deployed later in the year would not have been
subject to these taxes in 2007. As Trinidad increased its US fleet by 15 rigs
during 2007 it resulted in higher property taxes in 2008 in comparison to the
prior year.
    During the second half of 2008, the demand for Trinidad's barge drilling
rigs showed signs of softening with operating days, rates per drilling day
(US$) and utilization all decreasing as compared to the same time frame of
2007. These declines were a direct result of the weakening US marketplace
which in turn suppressed commodity prices, reducing overall demand for barge
drilling activity. During the last few months of 2008, approximately one
quarter of the total available barge rigs in the market were working in the
Gulf of Mexico, demonstrating the significant impact the US economy and the
dramatic decline in commodity prices have had on the barge drilling market.
Given Trinidad's strong track record and quality customer relationships, the
Company was able to keep its utilization over 97% on three of the four barge
rigs during the fourth quarter of 2008. For January 2009, Trinidad had one
barge rig that was not drilling, while the remaining three barge rigs were
operating at an average utilization of 99%, with two of these rigs contracted
to work until the latter part of the third quarter in 2009. Moving forward,
Trinidad expects the barge rig segment to continue to be an important
component of the Company's business. This segment has added both asset and
geographical diversification to Trinidad and presents a strong opportunity to
expand into other jurisdictions following the return of more robust market
conditions. For 2008, Trinidad recorded a Bareboat Charter loss of $4.7
million, which was recorded as a decrease to the Company's revenue. This was
due to the decline in dayrates as compared to the original provisions in the
Bareboat Charters, and therefore Trinidad was exposed to the residual loss for
2008 (see the Commitments section of this MD&A for further details).
    Over the course of 2008, Trinidad moved four rigs from Canada into the
US, all 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. The first two rigs were moved during the first quarter of the
year at the request of one of Trinidad's customers and were sent to work in
the Deep Bossier play in Texas. The other two rigs were transferred during the
third quarter of 2008 and are operating in the Haynesville Shale, Louisiana
and the Bakken Shale, North Dakota. An additional three rigs were added to the
US fleet in the fourth quarter of 2008 from Trinidad's 2008/2009 rig build
program. Two of these rigs were put into operation in December 2008, while the
third commenced drilling in January 2009. All three of the rigs will be
operating in the Haynesville Shale, Louisiana. Trinidad has a growing presence
in the emerging Haynesville Shale play and following the completion of the
2008/2009 rig build program, the Company expects to have at least 22 rigs
operating in the area. The redeployment of an existing rig to the US side of
the Bakken play represented an expansion into a new area for Trinidad. The
Company has been successful in the Canadian portion of the Bakken Shale play
given the advanced technology and drilling techniques associated with its
drilling fleet, well positioning the Company 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
both the Canadian and US sides of the Bakken Shale play an area of potential
growth moving forward.
    During the fourth quarter of 2008, Trinidad moved three rigs from Canada
into the southern edge of the Chicontepec field in central eastern Mexico.
These three rigs represented Trinidad's initial entry into an international
market like Mexico, with one of the rigs operating in November 2008, the
second was drilling in December 2008, and the third rig was operational in
January 2009. 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 at the
customer's option. The operator 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
areas which are subject to the impacts of seasonality or where assets are
under-utilized.
    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 new technology and fit-for-purpose rigs that enable deep
horizontal drilling. Horizontal wells, while more expensive, result in higher
well productivity, by utilizing powerful multi-stage fracturing spreads.
Trinidad has the capability to drill horizontally and directionally at these
deeper requirements and has a strong presence in these key US emerging plays.
This, along with the Company's long-term, take-or-pay contracts, are expected
to provide stable returns from the US and Mexico drilling segment. Trinidad
continues to focus on expanding the Company's US and Mexico market share, with
the underlying fundamental premise that our customers continue to recognize
the benefits of Trinidad's new and technically advanced drilling equipment.
The wells being drilled in North America, as well as globally, require more
technically-advanced rigs to lower the overall drilling costs for exploration
and production companies. Trinidad's ability and reputation for improving the
financial returns for its customers is what will continue to provide
opportunities to grow the Company's US and Mexico drilling segment.Construction Operations
    For the years ended December 31,
    ($ thousands except percentage data)      2008         2007     % Change
    -------------------------------------------------------------------------
    Revenue(1)                             157,004       89,927         74.6
    Operating expense(1)                   149,797       83,353         79.7
                                     ----------------------------------------
    Gross margin                             7,207        6,574          9.6
                                     ----------------------------------------
    Gross margin percentage                    4.6%         7.3%

    (1) Includes inter-segment revenue and operating expenses of $114.0
        million and $56.0 million for the years ended December 31, 2008 and
        2007, respectively.Revenue from construction operations increased by 74.6% from $89.9
million in 2007 to $157.0 million in 2008, while operating expenses increased
79.7% from $83.4 million to $149.8 million over the same time period. Growth
in the manufacturing division was due to the completion of $114.0 million of
inter-segment construction work performed during the year as part of the
2008/2009 rig construction program, in comparison with $56.0 million in 2007,
as well as outside third party work. The increase of $58.0 million in
inter-segment revenue year-over-year was a result of the 2008/2009 drilling
rig construction program, of which Trinidad's Construction segment is
manufacturing seven of the ten rigs currently planned. Trinidad's Construction
segment completed the construction of one of these rigs in 2008 with the
remaining six rigs expected to be deployed throughout 2009. Modification work
completed on Trinidad's rigs that were relocated from Canada to the US and
Mexico also accounted for the increase in inter-segment revenue and operating
expenses. The gross margin percentage decreased from 7.3% last year to 4.6%
for 2008 due to the majority of revenue being generated from inter-segment
work, while third party revenues and associated gross margins remained
relatively static year-over-year.
    Effective August 18, 2008 Trinidad acquired all of the outstanding shares
of Victory Rig Equipment Corporation, a privately held oilfield equipment and
fabrication company, based in Red Deer, Alberta for consideration of $12.7
million. Victory provides a selection of patented and highly-effective
drilling equipment including the newly developed patented Victory 200-535 ton
top drive, AC drawworks and pump drive systems. These products, when combined
with the existing manufacturing divisions, will offer an extensive range of
drilling solutions including innovative and technically-advanced rigs capable
of meeting the growing challenges in the oil and natural gas industry. On
January 1, 2009 Trinidad combined all of its oilfield equipment manufacturing
and construction businesses into one segment retaining the name Victory Rig
Equipment Corporation, which combined Victory's and Trinidad's existing
construction operations. The integration of the businesses into one division
will provide a unique and seamless ability to deliver the complete cycle of
drilling solutions from equipment sales, rig design and engineering,
manufacturing, and after-market support services.GENERAL AND ADMINISTRATIVE EXPENSES
    For the years ended December 31,
    ($ thousands except percentage data)      2008         2007     % Change
    -------------------------------------------------------------------------
    General and administrative expenses     50,272       43,844         14.7
    % of revenue                               6.6%         7.0%General and administrative expenses increased 14.7% to $50.3 million in
2008 from $43.8 million in 2007, however as a percentage of revenue decreased
year-over-year from 7.0% to 6.6%. The continued expansion of Trinidad's
business within the US has led to higher overhead expenses, which is the main
driver for the increase in 2008 as compared to the prior year. Despite the
overall increase, Trinidad has continued to maintain general and
administrative expenses as a percentage of revenue at a relatively consistent
level with the prior year demonstrating its commitment to prudent
administration spending year-over-year.
    Effective January 1, 2008, Trinidad reclassified several costs associated
with field management, equipment insurance and property taxes on the US rigs
into operating expenses from general and administrative expenses to better
align the Company with current industry standards and allow for increased
consistency amongst Trinidad's peer group. Comparative figures for 2007 have
also been reclassified and do not impact previously reported net earnings or
retained earnings.INTEREST
    For the years ended December 31,
    ($ thousands)                             2008         2007     % Change
    -------------------------------------------------------------------------
    Interest on long-term debt              22,018       31,057        (29.1)
    Effective interest on deferred
     financing costs                         1,691        1,592          6.2
                                     ----------------------------------------
                                            23,709       32,649        (27.4)
                                     ----------------------------------------

    Interest on convertible debentures      27,457       13,467        103.9
    Effective interest on deferred
     financing costs                         2,641        1,312        101.3
    Accretion of convertible debenture       4,836        2,167        123.2
                                     ----------------------------------------
                                            34,934       16,946        106.1
                                     ----------------------------------------For most of 2007, Trinidad had a large portion of its debt facility drawn
in order 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 by 16.2% from $404.2 million at December 31, 2007 to $338.6
million on December 31, 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 12 months ended December
31, 2008, Trinidad recorded associated interest expense of $27.5 million. The
increase in interest on convertible debentures of $14.0 million or 103.9% as
compared to the same period of 2007 was attributable to the debentures being
outstanding for approximately six months of 2007 as compared to the full year
in 2008. 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 $1,000 after December 31, 2010
and before their maturity date on July 31, 2012, and on redemption or
maturity, Trinidad may elect to satisfy its obligation to repay the principal
by issuing shares.
    Total interest expense increased by 18.2% year-over-year as a result of
the convertible debentures being outstanding for the entire 2008 period versus
only a portion of the 2007 period. The funds raised from the convertible
debentures issuance as well as the cash drawn on the term facilities have both
continued to enhance cash flow stability, given the investment in long-term
capital assets that have been used to generate operating cash flow.STOCK-BASED COMPENSATION
    For the years ended December 31,
    ($ thousands)                             2008         2007     % Change
    -------------------------------------------------------------------------
    Stock-based compensation                 2,465        2,450        (0.6)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 for 2008
was $1.7 million which was driven by the issuance of 823,810 options during
the third quarter of 2008.
    During 2008, Trinidad established a Performance Share Unit Plan ("PSU")
to provide an opportunity for officers and employees of Trinidad and its
affiliates to promote further alignment of interests between employees and
shareholders and to participate in the growth and development of the Company.
Each PSU granted permits the holder to receive a cash payment equal to the
fair value of the volume weighted-average Trinidad share price for the five
days preceding payment. PSUs granted vest 50% on December 31, 2008 and the
remainder vest December 31, 2009.  When dividends are paid the value is
credited as additional PSUs on the dividend payment date. As at December 31,
2008, there were 237,000 PSUs outstanding, with a mark-to-market liability of
$0.6 million.

    During 2008, the Company established a Deferred Share Unit Plan ("DSU")
to provide a compensation system for the members of the Board of Directors
that is reflective of the responsibility, commitment and risk accompanying
Board membership. Each DSU granted permits the holder to receive a cash
payment equal to the fair value of the volume weighted-average share price for
the five days preceeding payment. DSUs granted are exercisable upon
resignation or termination from the Board of Directors. Dividends are credited
as additional DSUs when paid. As at December 31, 2008, there were 40,732 DSUs
outstanding, with a mark-to-mark liability of $0.2 million.FOREIGN EXCHANGE (GAIN) LOSS

    For the years ended December 31,
    ($ thousands)                             2008         2007     % Change
    -------------------------------------------------------------------------
    Foreign exchange (gain) loss           (33,478)      12,354       (371.0)Trinidad's US and Mexico operations have continued to grow throughout
2008 and have contributed significantly to the overall operations of the
Company. As a result, upon consolidation Trinidad's US and Mexico 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 2008, Trinidad recognized a gain of $33.5 million in
comparison with a loss of $12.4 million in 2007. The weakening of the Canadian
dollar in 2008, particularly in the fourth quarter of 2008, 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 Mexico and rig construction programs
that were funded through the Canadian revolving credit facility has caused
foreign exchange fluctuations to become more pronounced. The $33.5 million
gain corresponds to an equal and offsetting unrealized loss in the US and
Mexico subsidiary included in OCI.DEPRECIATION AND AMORTIZATION

    For the years ended December 31,
    ($ thousands)                             2008         2007     % Change
    -------------------------------------------------------------------------
    Depreciation                            94,130       72,260         30.3
    Amortization of intangible assets          212            -            -
                                     ----------------------------------------
                                            94,342       72,260         30.6
                                     ----------------------------------------
    (Gain) loss on sale of assets          (29,312)         355     (8,356.9)Depreciation increased 30.3% from $72.3 million in 2007 to $94.1 million
in 2008. Changes in the composition of Trinidad's capital 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 capital asset base. Depreciation rates per day in Canada
increased to $3,003 for 2008 as compared to $2,953 for 2007, a $49 per day or
1.7% increase year-over-year. Higher depreciation rates in 2008, along with
utilization rate increases of 32.6% year-over-year, has increased the Canadian
division's depreciation despite the reduction of its rig count by seven as
compared to last year. Depreciation in the US and Mexico markets also
increased year-over-year as the rates per drilling day increased by 8.6% or US
$278 from US $3,223 for 2007 to US $3,501 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 and Mexico land drilling division
has increased its rig count by ten over last year, which has driven a 24.5%
increase in operating days for the year, thus increasing overall depreciation
for the US operations. The Company expects the composition of its US
division's assets to continue to grow over the course of 2009, during which
time seven new rigs are expected to be introduced, which will contribute to
incremental depreciation expense and drilling days moving forward.
    With the acquisition of Victory, Trinidad acquired intangible assets of
$4.3 million, which were comprised of patent technology, customer
relationships, the Victory trade name and non-compete agreements. These
intangible assets were measured at fair value at the date of acquisition.
Following initial recognition, these intangible assets are measured at fair
value at the date of acquisition less any amortization and any impairment
losses. For 2008, the amortization of intangibles was $0.2 million.
    In 2008, Trinidad sold its newly constructed barge drilling rig for US
$53.5 million. The Company recorded a gain of $29.0 million on this sale,
which Trinidad plans to allocate to capital commitments under the 2008/2009
rig construction program. As well, an additional gain was recorded due to the
disposition of two properties owned by Trinidad in 2008 which were not fully
utilized, thereby allowing the associated operations to be consolidated into
other existing facilities.REORGANIZATION COSTS

    For the years ended December 31,
    ($ thousands)                             2008         2007     % Change
    -------------------------------------------------------------------------
    Reorganization costs                     2,766            -            -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 $2.8 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 has incurred the majority of the
charges in relation to this conversion as of December 31, 2008.IMPAIRMENT OF GOODWILL

    For the years ended December 31,
    ($ thousands)                             2008         2007     % Change
    -------------------------------------------------------------------------
    Impairment of goodwill                  38,154            -            -Goodwill represents the excess of the purchase price over the fair value
of the assets and liabilities purchased. Goodwill is not subject to
amortization, but is tested for impairment at least annually by applying
appropriate fair value based tests. On December 31, 2008, in conjunction with
Trinidad's annual goodwill impairment testing, management reviewed the
estimated fair value of goodwill for each of the Company's operating segments.
Management estimated the fair value using a number of industry accepted
valuation methodologies including capitalized cash flows, available industry
valuation multiples, recent trading activity and capital market pricing of
Trinidad's shares and other valuation considerations. The result of this
analysis indicated that the carrying value of the Canadian drilling operations
segment exceeded its fair value. In accordance with GAAP, the fair value of
this segment was compared to the fair value of its net assets, including
recognized and unrecognized intangibles. Management concluded that no
remaining amount should be attributed to goodwill for the Canadian drilling
operations segment. Accordingly, a goodwill impairment charge of $38.2 million
was recognized at December 31, 2008. The net impact on earnings per share was
a reduction of $0.42 per share (diluted) for the year ended December 31, 2008.
After this goodwill impairment charge the Company no longer has any goodwill
recorded for the Canadian drilling operations segment. Impairment tests
completed on Trinidad's US and Mexico Drilling segment along with the
Company's Construction segment indicated that the fair value exceeded the
carrying value of goodwill for these respective segments, and thus no
impairment charges were required.INCOME TAXES

    For the years ended December 31,
    ($ thousands)                             2008         2007     % Change
    -------------------------------------------------------------------------
    Current tax expense                      1,504        1,917        (21.5)
    Future tax expense                      41,965        2,603      1,512.2The current tax expense for the year ended December 31, 2008 has
decreased by 21.5% to $1.5 million over the prior year as a result of the
realization of a $1.3 million refund on the Texas Margins Tax, which was a
$1.3 million expense in 2007, given clearer interpretations of the rules
surrounding this calculation. Offsetting this $2.6 million decrease
year-over-year, are the increased revenues generated by a smaller
manufacturing division, whose taxable earnings surpassed the allowable
deductions creating a tax liability of $1.5 million versus $0.5 million in the
prior year. In addition, US withholding taxes of $1.4 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 of the Canadian operations at the end of the year the foreign
tax credit deduction created a further loss therefore triggering a future tax
recovery.
    Future income tax expenses increased significantly year-over-year by
$39.4 million, or 1,512.2% to $42.0 million. The increase in future income
taxes is primarily the result of the conversion from an income trust structure
to a corporation, which eliminated the deduction that the Company previously
had for distributions made to unitholders. These increases were slightly
offset as a result of the decreasing future tax rates due to changes in the
Federal Budget during 2007.
    Differences between tax depreciation and GAAP depreciation created larger
timing differences in Trinidad's capital asset base resulting in a greater
future tax liability on these assets at December 31, 2008.NET EARNINGS AND CASH FLOW

    For the years ended December 31,
    ($ thousands except per share data)       2008         2007     % Change
    -------------------------------------------------------------------------
    Net earnings                            82,174       79,524          3.3
      Per share (diluted)                     0.90         0.94         (4.3)
    Net earnings before impairment of
     goodwill                              120,328       79,524         51.3
      Per share (diluted)                     1.32         0.94         40.4
    Cash flow from operations              193,043      172,013         12.2
      Per share (diluted)                     2.12         2.02          5.0
    Cash flow from operations before
     change in non-cash working capital    207,121      174,770         18.5
      Per share (diluted)                     2.28         2.06         10.7For 2008, Trinidad's consolidated net earnings were $82.2 million ($0.90
per share (diluted)), an increase of $2.7 million or 3.3% from $79.5 million
($0.94 per share (diluted)) in 2007. The key factor impacting net earnings in
2008 was an impairment of goodwill charge of $38.2 million (see the Impairment
of Goodwill section of this MD&A for further details). Net earnings per share
(diluted) decreased by 4.3% due to an increase in the weighted average number
of shares outstanding in 2008, which was the result of Trinidad issuing
approximately 12.1 million shares in the second quarter of 2008 as part of a
$165.0 million bought deal equity financing. Net earnings before impairment of
goodwill increased by 51.3% to $120.3 million for 2008 as compared to $79.5
million in 2007. Net earnings before impairment of goodwill increased
year-over-year as a result of higher revenues due to increased Canadian
utilization and additional rigs operating in the US and Mexico segment. 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 a foreign exchange gain of $33.5 million due to
the strengthening of the US dollar over the course of 2008, whereas Trinidad
recorded a loss of $12.4 million in 2007. Offsetting these gains was a
decrease in gross margin as a percentage of revenue in the US and Mexico
segment given refurbishments and start-up costs for additional rigs being
added to the fleet during 2008, as well as an increase in depreciation given
the increased number of operating days in the period. In addition, incremental
interest expense on the convertible debentures, higher general and
administrative costs associated with the expansion of the US and Mexico
segment and the incurrence of costs associated with the reorganization of
Trinidad into a new corporate structure also negatively impacted net earnings
year-over-year. Lastly, income tax expense increased by $38.9 million in 2008
as compared to 2007 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.
    Cash flow from operations for 2008 increased by 12.2% from $172.0 million
($2.02 per share (diluted)) in 2007 to $193.0 million ($2.12 per share
(diluted)) in 2008. The increase is mainly the result of Trinidad generating
cash flow growth from both the Canadian and the US and Mexico operating
segments, given the increases in operating days while maintaining dayrates and
strong utilization. This was partly offset by movements in non-cash working
capital due to increases in both the Company's accounts receivable and
prepaids balances as well as increases in the accounts payable balance
year-over-year. The increase in accounts receivable and accounts payable are
due to overall increased activity for Trinidad during the year, while the
increases in prepaids are due to deposits made on equipment for the Company's
2008/2009 rig build construction program.
    Cash flow from operations before changes in non-cash working capital for
2008 increased by 18.5% from $174.8 million ($2.06 per share (diluted)) in
2007 to $207.1 million ($2.28 per share (diluted)) in 2008. Year-over-year
growth was primarily a result of increased revenue and gross margin given the
strong operating results that the Company experienced in 2008 with increased
operating days and utilization in Canada, along with increased operating days
and drilling fleet in the US.FOURTH QUARTER AND QUARTER BY QUARTER ANALYSIS

    ---------------------------------------------------------------
                                                2008
    ($ millions except
     per share data and
     operating data)              Q4        Q3        Q2        Q1
    ---------------------------------------------------------------
    Financial Highlights
    Revenue                    205.3     191.7     141.2     219.7
    Gross margin                84.2      73.1      53.8      98.4

    Net earnings                21.8(1)   20.4       1.1      38.9
    Depreciation and
     amortization               25.8      24.0      20.5      24.0
    (Gain) loss on sale
     of assets                 (29.0)        -      (0.2)     (0.1)
    Stock-based compensation     0.9       1.2       0.1       0.2
    Future income tax expense
     (recovery)                 19.8      10.3       2.5       9.4
    Effective interest on
     financing costs             1.1       1.1       1.1       1.1
    Accretion on convertible
     debentures                  1.2       1.2       1.2       1.1
    Unrealized foreign
     exchange (gain) loss      (22.0)     (6.6)      0.9      (4.1)
    Impairment of goodwill      38.2         -         -         -
                            ---------------------------------------
    Cash flow from operations
     before change in non-cash
     working capital            57.8      51.6      27.2      70.5

    Net earnings per share
     (diluted)                  0.23      0.21      0.01      0.44
    Cash flow from operations
     before change in non-cash
     working capital per share
     (diluted)                  0.60      0.53      0.31      0.75
    ---------------------------------------------------------------


    -------------------------------------------------------------------------
                                                2007                    2006

    ($ millions except
     per share data and
     operating data)              Q4        Q3        Q2        Q1        Q4
    -------------------------------------------------------------------------
    Financial Highlights
    Revenue                    145.8     162.2     115.5     206.2     161.9
    Gross margin                58.8      70.5      42.6      93.0      74.9

    Net earnings                17.9      15.0       4.7      41.9      31.3
    Depreciation and
     amortization               19.0      20.2      14.8      18.3      15.4
    (Gain) loss on sale
     of assets                   0.2         -       0.1       0.1       0.1
    Stock-based compensation     0.4       0.5       0.7       0.8       1.8
    Future income tax expense
     (recovery)                 (7.8)      3.3      (3.1)     10.2       6.2
    Effective interest on
     financing costs             1.1       1.1       0.4       0.3         -
    Accretion on convertible
     debentures                  1.2       1.0         -         -         -
    Unrealized foreign
     exchange (gain) loss        0.2       5.3       5.8       1.2      (0.1)
    Impairment of goodwill         -         -         -         -         -
                            -------------------------------------------------
    Cash flow from operations
     before change in non-cash
     working capital            32.2      46.4      23.4      72.8      54.7

    Net earnings per share
     (diluted)                  0.21      0.18      0.05      0.49      0.37
    Cash flow from operations
     before change in non-cash
     working capital per share
     (diluted)                  0.38      0.55      0.27      0.86      0.65
    -------------------------------------------------------------------------
    (1) Includes impairment of goodwill charge of $38.2 million.



    ---------------------------------------------------------------
                                                2008
    Operating Highlights          Q4        Q3        Q2        Q1
    ---------------------------------------------------------------
    Land Drilling Market
    Operating days
     - drilling
      Canada                   3,034     3,411     1,742     4,009
      United States and
       Mexico(2)               3,757     3,861     3,783     3,675
    Rate per drilling day
     (CDN$)
      Canada                  26,358    21,772    23,219    24,517
      United States and
       Mexico(3)              26,418    22,668    21,565    21,735
    Utilization rate
     - drilling
      Canada                     61%       63%       31%       72%
      United States and
       Mexico                    80%       85%       87%       87%
    CAODC industry average       43%       48%       20%       56%
    Number of drilling rigs
      Canada                      57        60        62        62
      United States and
       Mexico                     56        50        48        48
    Utilization for
     service rigs                45%       49%       29%       62%
    Number of service rigs        23        20        20        20
    Number of coring and
     surface casing rigs          20        20        20        20

    Barge Drilling Market(4)
    Operating days               347       305       361       272
    Rate per drilling day
     (CDN$)                   47,583    40,678    41,500    48,128
    Utilization rate             94%       83%      100%       98%(5)
    Number of barge drilling
     rigs                          1         1         1         1
    Number of barge drilling
     rigs under
      Bareboat Charter
       Agreements                  3         3         3         3
    ---------------------------------------------------------------


    -------------------------------------------------------------------------
                                                2007                    2006
    Operating Highlights          Q4        Q3        Q2        Q1        Q4
    -------------------------------------------------------------------------
    Land Drilling Market
    Operating days
     - drilling
      Canada                   2,135     2,718     1,165     3,817     3,163
      United States and
       Mexico(2)               3,399     3,305     2,944     2,464     2,105
    Rate per drilling day
     (CDN$)
      Canada                  23,631    21,746    23,527    26,063    26,328
      United States and
       Mexico(3)              21,404    23,265    24,927    25,506    24,621
    Utilization rate
     - drilling
      Canada                     37%       47%       20%       69%       61%
      United States and
       Mexico                    83%       85%       88%       85%       85%
    CAODC industry average       37%       39%       17%       59%       47%
    Number of drilling rigs
      Canada                      64        64        64        63        60
      United States and
       Mexico                     46        43        38        37        31
    Utilization for
     service rigs                57%       46%       23%       73%       64%
    Number of service rigs        20        20        21        20        18
    Number of coring and
     surface casing rigs          20        20        17        17        17

    Barge Drilling Market(4)
    Operating days               352       352         -         -         -
    Rate per drilling day
     (CDN$)                   47,536    51,904         -         -         -
    Utilization rate             96%      100%         -         -         -
    Number of barge drilling
     rigs                          1         1         -         -         -
    Number of barge drilling
     rigs under
      Bareboat Charter
       Agreements                  3         3         -         -         -
    -------------------------------------------------------------------------
    (2) Trinidad commenced its operations in Mexico effective
        November 2008.
    (3) In US dollars, 2008 dayrates remained relatively static and
        fluctuations
        are the result of changes in US currency rates.
    (4) Trinidad commenced its operations in the barge drilling market with
        its acquisition of Axxis, effective July 5, 2007.
    (5) 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.Fourth Quarter Analysis

    Overall results for the Canadian drilling operations segment for the
fourth quarter of 2008 were above expectations. Revenue increased by $25.9
million or 41.1% from $63.0 million for the fourth quarter of 2007 to $88.9
for the same time period of 2008. The Canadian operations' revenue in the
fourth quarter represented 43.3% of total revenues in 2008, compared to 43.2%
of overall revenues for the same period of 2007. Gross margin increased by
$15.6 million or 67.4% year-over-year for the quarter, and gross margin as a
percentage of revenue increased from 36.6% to 43.4% over the same time frame.
The increases in both revenue and gross margin as a percentage of revenue were
due to strong growth in operating days, utilization and dayrates during the
quarter all in relation to increased customer demand. The strength behind
commodity prices during the middle part of 2008 helped to solidify customer
capital budgets for the remainder of the year. Although the economy started to
soften in the latter stages of 2008, several of Trinidad's customers already
had plans in place to finalize their capital programs for the remainder of
2008. A stronger concentration of capital was deployed by producers on deeper
unconventional resource plays throughout 2008 and particularly in the fourth
quarter as compared to 2007. This trend benefits Trinidad with its deeper,
more technically-advanced drilling fleet and was a catalyst behind the strong
financial and operating performance for the Company in the fourth quarter of
2008. Trinidad generated a utilization rate of 61% for the fourth quarter of
2008, with dayrates and operating days growing 11.5% and 42.1%, respectively,
as compared to the same time period of 2007.
    The US and Mexico drilling segment generated $103.9 million in revenue
for the quarter, a $25.1 million or 31.8% increase as compared to 2007. The US
and Mexico revenue in the fourth quarter represented 50.6% of total revenues
in 2008, compared to 54.0% of overall revenues for the same time period of
2007. Although gross margin increased by 28.2%, gross margin as a percentage
of revenue decreased year-over-year for the fourth quarter from 45.1% in 2007
to 43.9% in 2008. The decrease in gross margin as a percentage of revenue was
driven by refurbishment work completed on a number of US rigs, in order to
make some of the segment's older rigs more attractive to prospective
customers. 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 start-up costs,
employing additional field supervisors to manage the growing US fleet and
improved safety requirements in this segment led to increases in overall
operating expenses. The US and Mexico operations deployed an additional six
rigs in the fourth quarter of 2008, three new rigs to the US from Trinidad's
2008/2009 rig build program, which are operating in the Haynesville Shale in
Louisiana and three rigs transferred from Canada into the southern edge of the
Chicontepec field in central eastern Mexico. These moves were in response to
the strong demand for quality drilling equipment and growth in drilling
programs planned for these areas and also allows Trinidad to strategically
redeploy rigs from a seasonal and increasingly under-utilized capacity base.
With a total fleet of 56 land rigs and four barge rigs, the US and Mexico
operations continued to generate growth and provide overall stability to
Trinidad's revenues and cash flow throughout the fourth quarter, with land and
barge drilling utilization rates of 80% and 94%, respectively. Utilization
rates dropped in the fourth quarter of 2008 given the state of the US economy
and the associated impacts on oil and natural gas commodity prices. The
strength of the Company's long-term, take-or-pay contracts on a portion of the
US rig fleet along with a lack of seasonal activity fluctuations in the US
have been a key factor behind Trinidad's continued success for each
consecutive quarter of 2008.
    The Construction segment generated revenue of $71.1 million for the
fourth quarter of 2008, representing a $57.9 million increase over 2007. The
Construction operations revenue net of inter-segment eliminations was $12.5
million or 6.1% of total revenue in the fourth quarter of 2008, compared to
revenue net of inter-segment eliminations of $4.0 million or 2.8% of total
revenue in the fourth quarter of 2007. The growth in revenue for the
construction segment year-over-year in the fourth quarter was driven by
inter-segment work performed as part of the 2008/2009 rig construction
program, of which Trinidad's Construction segment will be manufacturing seven
of the ten rigs currently planned. Revenue and operating expenses for the
quarter were essentially the same, thus generating minimal gross margin, which
was directly attributable to the internal rig build program accounting for the
majority of the work being conducted by Trinidad's Construction segment.
    Overall gross margin increased from 40.3% in the fourth quarter of 2007
to 41.0% in the comparable quarter of 2008 primarily due to increases in
dayrates and operating days in both Canada and the US year-over-year. Net
earnings in the fourth quarter of 2008 increased to $21.8 million from $17.9
million in the comparable quarter of 2007. The main driver behind the increase
was higher revenues and margins earned in both the Canadian and US operations
as well as the sale of Trinidad's newly constructed barge drilling rig. This
was partially offset by a goodwill impairment charge in the fourth quarter of
2008, as well as incremental depreciation and interest expense. As well, there
was an increase in future income taxes in relation to the conversion from an
income trust structure to a corporation.
    The following tables outline revenue, operating expenses, gross margin
and gross margin as a percentage of revenue for each of Trinidad's reporting
segments for the three month period ending December 31, 2008, with comparable
information for the same time period of 2007:Canadian Drilling Operations

                                             Three        Three
                                            months       months
                                             ended        ended
    ($ thousands except                December 31, December 31,
     percentage data)                         2008         2007     % Change
    -------------------------------------------------------------------------
    Revenue                                 88,942       63,016         41.1
    Operating expense                       50,308       39,944         25.9
                                      ---------------------------------------
    Gross margin                            38,634       23,072         67.4
                                      ---------------------------------------
    Gross margin percentage                  43.4%        36.6%



    United States and Mexico Drilling Operations

                                             Three        Three
                                            months       months
                                             ended        ended
    ($ thousands except                December 31, December 31,
     percentage data)                         2008         2007     % Change
    -------------------------------------------------------------------------
    Revenue                                103,859       78,772         31.8
    Operating expense                       58,292       43,242         34.8
                                      ---------------------------------------
    Gross margin                            45,567       35,530         28.2
                                      ---------------------------------------
    Gross margin percentage                  43.9%        45.1%



    Construction Operations

                                             Three        Three
                                            months       months
                                             ended        ended
    ($ thousands except                December 31, December 31,
     percentage data)                         2008         2007     % Change
    -------------------------------------------------------------------------
    Revenue(1)                              71,081       13,227        437.4
    Operating expense(1)                    71,073       12,926        449.8
                                      ---------------------------------------
    Gross margin                                 8          301        (97.3)
                                      ---------------------------------------
    Gross margin percentage                   0.0%         2.3%

    (1) Includes inter-segment revenue and operating expenses of
        $58.5 million and $9.2 million for the three months ended
        December 31, 2008 and 2007, respectively.Quarter by Quarter Analysis

    In 2008, Trinidad's revenue has continued to grow as a result of
acquisitions, the continued deployment of rigs under the 2008/2009 rig
construction program and the relatively strong market conditions. Net earnings
and the related per share data were strong in the first quarter of 2007 and
2008 as the market activities allowed for Trinidad 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. During the fourth quarter of 2007,
many of the Company's key customers started to shut down as their contract
commitments had been met for the year and went into an evaluation mode of the
impacts surrounding the Alberta royalty regime. In 2008, Trinidad rebounded
strongly from 2007 in both the western Canadian and US drilling markets as
dayrates and utilization levels improved. Upward momentum in Trinidad's
operations was evident throughout 2008 as reflected in the growth in the
Company's EBITDA; however, goodwill impairment charges, higher interest and
depreciation expense, reorganization costs and future income taxes negatively
impacted net earnings during the year.

    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 and Mexico markets 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 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.LIQUIDITY AND CAPITAL RESOURCES

    As at December 31,
    ($ thousands except percentage data)      2008         2007         2006
    -------------------------------------------------------------------------
    Working capital                         85,789       84,101       58,246

    Current portion of long-term debt       16,844        1,679        3,232
    Long-term debt(1)                      321,768      402,489      388,276
    Convertible debentures(2)              323,381      315,991            -
                                      ---------------------------------------
    Total debt                             661,993      720,159      391,508
                                      ---------------------------------------
    Total debt as a
     percentage of assets                    35.6%        48.1%        31.4%

    Net debt                               559,360      634,379      330,030
    Net debt as a percentage
     of assets                               30.0%        42.4%        26.5%

    Total assets                         1,862,064    1,497,156    1,245,633
    Total long-term liabilities            742,692      764,102      434,065
    Total long-term liabilities
     as a percentage of assets               39.9%        51.0%        34.8%

    Shareholders' equity                   919,471      634,502      698,092
    Total debt to shareholders' equity       72.0%       113.5%        56.1%
    Total debt to shareholders' equity
     - assuming debenture conversion         27.2%        42.5%            -
    Net debt to shareholders' equity         60.8%       100.0%        47.3%
    -------------------------------------------------------------------------
    (1) Long-term debt is reflected net of associated transaction costs.
    (2) Convertible debentures are reflected net of the related equity
        component and associated transaction costs.Trinidad's working capital increased in 2008 by $1.7 million or 2.0% as
compared to 2007 as a result of the overall growth of the Company, as well as
the improvements during the year in the drilling markets in which Trinidad
operates, leading to an increase in net earnings and cash flow. Given the
growth of the Company, accounts receivable and accounts payable balances
increased $82.2 million and $56.1 million, respectively, over 2007 year-end
balances. In addition, prepaids increased by $10.9 million as a result of
deposits placed on components required for Trinidad's 2008/2009 rig
construction program. There was also an increase in the current portion of
deferred revenue of $21.4 million, which pertains to customer deposits in our
construction operations for rigs under construction. This increased working
capital position provides Trinidad with increased financial flexibility and is
favourable for the Company given the current economic climate.
    Trinidad's long-term debt decreased by $65.6 million, or 16.2%, from
$404.2 million at the end of 2007 to $338.6 million at December 31, 2008. This
reduction is a result of the completion, in the second quarter of 2008, of an
equity financing deal whereby 12,132,353 common shares, including the
overallotment of 1,102,941 common shares, were issued for gross proceeds of
$165.0 million. The net proceeds from this issuance were used initially to
reduce debt with the expectation of subsequent use towards the 2008/2009 rig
construction program. Management expects Trinidad's 2009 total capital
expenditures to be approximately $165.0 million, which takes into account the
2008/2009 rig construction program (see the Subsequent Event section of this
MD&A for further details on Trinidad's updated 2009 capital expenditure
budget). As additional financing is required for these expenditures, they will
be funded through cash flow from operations and will be drawn from the
Company's credit facility. In the fourth quarter of 2008, Trinidad's long-term
debt increased by $54.9 million, or 19.3% from the September 30, 2008 balance
of $283.8 million. This increase was the result of increases on the revolving
credit facility to fund capital requirements on Trinidad's 2008/2009 rig
construction program in excess of cash flows. Trinidad expects cash flow from
operations and the Company's various sources of financing to be sufficient to
meet its debt repayments, future obligations and to fund anticipated capital
expenditures.
    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
details outlined below in this section of the MD&A). 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 exited 2008 with $31.2 million in cash and $338.6 million
outstanding on the Company's operating and long-term debt facilities compared
to $18.0 million in cash and $404.2 million outstanding in long-term debt at
December 31, 2007. In addition, at the end of 2008 Trinidad's obligation on
the convertible debentures was $354.3 million. On a net debt basis, long-term
debt less positive working capital, Trinidad's net debt decreased by 11.8%
from $634.4 million as at December 31, 2007 to $559.4 million at the end of
2008. 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. 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
2008 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 2008/2009 rig construction program as well as externally through
acquisition.
    During the fourth quarter of 2008, Trinidad received the remaining
balance owing of US $48.2 million in relation to the sale of its newly
constructed barge rig, which the Company allocated to capital commitments
under the 2008/2009 rig construction program. With the funds from the barge
rig sale and the proceeds from the equity issuance in June 2008 management
believes that these factors, as well as Trinidad's ability to generate
positive cash flow from operations combined with the Company's debt facilities
will be sufficient to finance the Company's current business operations and
revised capital expenditure plans. The Company's ability to generate positive
cash flow from operations will be a key factor to allowing Trinidad to be
successful during the current slowdown in industry activity and also allow
Trinidad to be in a position to potentially reduce indebtedness or take
advantage of growth opportunities that may present themselves over the course
of 2009.
    The increase in shareholders' equity of $285.0 million since the end of
2007 was 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 $82.2
million in net earnings for 2008. Further increases were noted in accumulated
other comprehensive income of $102.7 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.
    Despite the recent commodity, equity and financial market turbulence,
Trinidad remains comfortable with its capital structure (see the Subsequent
Events section of this MD&A for further details on Trinidad's early renewal of
its revolving credit facility). 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, at December 31, 2008 Trinidad's Canadian revolving credit facility had a
maximum capacity of $250.0 million and at the end of the year Trinidad had
drawn approximately $65.0 million or 26.0% of this facility. These three debt
facilities are held by a broad syndicate of major Canadian, US and
international financial institutions and is covered by a general set of
covenants that the Company was comfortably onside with at year-end.
    Trinidad's objectives when managing capital include; safeguarding the
Company's ability to continue as a going concern, so that it can continue to
provide returns for shareholders and applying capital efficiencies to achieve
financial objectives while focusing on operating within generated cash flows.
The Company manages the capital structure and makes adjustments to it in light
of changes in economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital structure, the
Company may adjust the amount of dividends paid to shareholders, repurchase or
issue new shares, sell assets, reduce indebtedness or take on additional
long-term debt.
    Trinidad's ability to access its debt facilities is directly dependent
on, among other factors, certain ratios, covenants and trailing cash flows.
Additionally, the ability of Trinidad to raise capital through the issuance of
equity could be restricted in the face of continuing volatility in worldwide
capital markets. Although Trinidad cannot anticipate all eventualities in this
regard, the Company makes every effort to ensure a balance between maximizing
returns for its shareholders over both the short and long-term, while managing
the Company's liquidity through the various activity levels in the oil and
natural gas services industry.

    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 February 20, 2009, there had been a conversion of $195,000
principle amount of convertible debentures which equated to 10,102 common
shares of Trinidad.

    COMMITMENTS

    Trinidad has several capital and operating lease agreements on buildings
and equipment. The future lease obligations for the next five years and
thereafter are summarized below:($ thousands)
    -------------------------------------------------------------------------
    2009                                                               3,746
    2010                                                               3,054
    2011                                                               7,827
    2012                                                                 702
    2013                                                                 603
    Thereafter                                                             -
    -------------------------------------------------------------------------Rig Construction Program

    Trinidad has announced its intent to further expand its existing drilling
fleet through the construction of an additional ten drilling rigs which are
expected to be deployed in the US. These drilling rigs will have depth
capacities ranging from 16,000 feet to 18,000 feet and are backed by three to
five year 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. Three rigs were deployed in the fourth quarter of 2008, with
the remaining seven rigs to be delivered throughout 2009 (see the Subsequent
Events section of this MD&A for further details on Trinidad's updated 2009
capital expenditure budget).

    Service Rig Construction Program

    In conjunction with the 2008/2009 drilling rig construction program,
Trinidad added two new well servicing rigs following a new rig design which
provides improved pressure control, enhanced safety features and lower
operating costs. Both of these rigs were delivered in the fourth quarter of
2008, with an additional service rig added to the fleet in conjunction with
the Victory acquisition. These three new service rigs all have depth
capacities of 2,800 metres (see the Subsequent Events section of this MD&A for
further details on Trinidad's updated 2009 capital expenditure budget).

    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 three years
subsequent to acquisition, 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.-------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY

    As at December 31,
    ($ thousands)                                          2008         2007
    -------------------------------------------------------------------------
    Shareholders' equity                                828,882            -
    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 $828.9 million as at December 31, 2008. The increase was mainly
attributable to an equity financing completed in the second quarter of 2008 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 241,634 options
($1.8 million) since the time of conversion and the conversion of convertible
debentures representing 4,921 common shares ($0.1 million) resulted in a
$150.6 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 2008, Trinidad acquired a total of 1,187,400 shares
at a cost of $5.9 million, at an average cost of $4.96 per share, of which
1,048,800 shares were cancelled as of December 31, 2008. The excess of the
purchase price over the carrying amount of the common shares acquired and
cancelled is recorded against retained earnings. However, if the purchase
price is lower than the carrying amount of the common shares acquired and
cancelled it is recorded as contributed surplus. Shareholders' equity on
February 20, 2009 was $819.5 million (94,216,262 shares).

    GOING CONCERN

    The Company's MD&A and financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. Trinidad's ability to
continue as a going concern is substantially dependent on, but not limited to,
the successful execution of the Company's objectives and strategies outlined
in this MD&A, as well as the Company's ability to be proactive in managing
these objectives and strategies in a timely manner. This financial information
does not include any adjustments relating to the recoverability and
classification of recorded asset amounts nor to the amounts and classification
of liabilities that may be necessary should Trinidad be unable to continue as
a going concern.

    CRITICAL ACCOUNTING ESTIMATES

    The preparation of the annual 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 annual Consolidated
Financial Statements may change as future events unfold, additional experience
is acquired or Trinidad's operating environment changes.

    Depreciation and Amortization

    The accounting estimates that have the greatest impact on Trinidad's
financial results are depreciation and amortization. Depreciation of
Trinidad's capital assets and intangible assets incorporate 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 a goodwill impairment
test at least annually and will conduct the test at an earlier date if
changing circumstances indicate a possible impairment exists. In accordance
with this, Trinidad performed its impairment test as at December 31, 2008, and
there was an impairment of goodwill charge recorded in the Canadian drilling
operations segment of $38.2 million (see the Impairment of Goodwill section of
this MD&A for further details).

    Fair value of interest rate swaps

    The fair value of the interest rate swaps is 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, reviews it for reasonability,
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 the Black-Scholes option pricing model and recorded as
equity on the Consolidated Balance Sheets.

    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 annual 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.
    The following is an outline of the key risks associated with Trinidad's
financial instruments:

    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.

    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.

    Goodwill and Intangible Assets

    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 has early adopted those for the year ended December 31,
2008. 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. There was no impact to Trinidad's financial
statements as a result of this adoption.

    FUTURE CHANGES IN ACCOUNTING POLICIES

    International Financial Reporting Standards

    In February 2008, the Canadian 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.
    Trinidad has started to determine the potential effects of the changeover
to IFRS by:-   Researching and documenting expected differences between its current
        accounting policies that are in accordance with Canadian GAAP and
        those to be adopted under IFRS;
    -   Considering financial statement presentation and disclosure options
        available to Trinidad upon initial changeover to IFRS;
    -   Developing a timeline for key milestones on the changeover project;
    -   Raising awareness of the change with accounting staff and the Audit
        Committee of Trinidad's Board of Directors;
    -   Considering the impacts on the Company's financial reporting systems,
        performance metrics, staff training, and internal/external
        communications; and
    -   Concluding that the Company will not early adopt IFRS.The changeover will affect the presentation and valuation of balances and
transactions presented in Trinidad's interim and annual consolidated financial
statements and related notes; however it is too early in the changeover
process for the Company to provide quantification of those effects.DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL
    REPORTINGTrinidad's Chief Executive Officer ("CEO") and Chief Financial Officer
("CFO") have designed or caused to be designed under their supervision,
disclosure controls and procedures ("DC&P") 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. An evaluation of the design and
operating effectiveness of the disclosure controls and procedures was
performed as at December 31, 2008. Trinidad's CEO and CFO have concluded,
based on these evaluations of the design and operating effectiveness at
December 31, 2008, that the Company's disclosure controls and procedures are
effective to provide reasonable assurance that material information related to
Trinidad, including its consolidated subsidiaries, is adequately disclosed.
    The CEO and CFO do not expect that the disclosure controls and procedures
will prevent or detect all errors, misstatements and fraud but are designed to
provide reasonable assurance of achieving their objectives. A control system,
no matter how well designed or operated, can only provide reasonable, not
absolute, assurance that the objectives of the control system are met.
    In addition to disclosure controls and procedures, the CEO and CFO are
responsible for designing internal controls over financial reporting ("ICFR"),
or causing them to be designed under their supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with Canadian
GAAP. Management, under the supervision of the CEO and CFO, has evaluated the
effectiveness of Trinidad's ICFR using the framework and criteria established
in Internal Control - Integrated Framework (COSO Framework), which is a
recognized and suitable framework developed by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The CEO and CFO have
concluded that the Company's internal controls over financial reporting, as of
the end of the period covered by the annual filings, are designed and
operating effectively to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with Canadian GAAP.
    The Company's internal controls over financial reporting may not prevent
or detect all errors, misstatements and fraud. The design of internal controls
must take into account cost-benefit constraints. A control system, no matter
how well designed or operated, can only provide reasonable, not absolute,
assurance that the objectives of the control system are met.
    There have been no significant changes in the Company's disclosure
controls and procedures and internal controls over financial reporting that
occurred during the year and no material weaknesses or significant
deficiencies have been identified in the design and operating effectiveness of
these controls, that could materially affect or are reasonably likely to
affect Trinidad's internal controls over financial reporting.
    In accordance with the provisions of section 3.3 of NI 52-109, in
relation to the acquisition of Victory effective August 18, 2008, Trinidad has
limited its assessment of the design of DC&P and ICFR to exclude controls,
policies and procedures of Victory. Management is in the process of aligning
Victory's systems, processes and controls with corporate standards and has not
concluded on the design of DC&P or ICFR for this subsidiary as at December 31,
2008.
    Also in accordance with the provision of section 3.3 of NI 52-109, given
that Trinidad has limited the design of DC&P and ICFR in relation to Victory,
the Company is disclosing summary financial information with respect to this
acquisition in the following tables:-------------------------------------------------------------------------
    VICTORY RIG EQUIPMENT CORPORATION
    For the years ended December 31,                                    2008
    ($ thousands)
    -------------------------------------------------------------------------
    Revenue                                                           16,291
    Net earnings                                                         195
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    VICTORY RIG EQUIPMENT CORPORATION
    As at December 31,                                                  2008
    ($ thousands)
    -------------------------------------------------------------------------
    Current assets                                                    17,631
    Non-current assets                                                16,785
    Current liabilities                                               16,621
    Non-current liabilities                                              587
    -------------------------------------------------------------------------RELATED PARTY TRANSACTIONS

    All related party transactions were incurred during the normal course of
operations on similar terms and conditions to those entered into with
unrelated parties. These transactions are measured at the exchange amount,
which is the amount of consideration established and agreed to by the related
parties.
    Effective August 18, 2008, Trinidad closed a $12.7 million acquisition of
an oilfield equipment fabrication company, which was substantially held by one
of Trinidad's executive officers.
    Trinidad engages Blake, Cassels & Graydon LLP, a law firm in which an
officer is a partner, to provide legal advice. During the year ended December
31, 2008, Trinidad incurred legal fees of $1.7 million (2007 - $0.9 million)
to Blake, Cassels & Graydon LLP. As of December 31, 2008, $0.1 million was due
to Blake, Cassels & Graydon LLP.

    BUSINESS RISKS

    The business of Trinidad Drilling Ltd. is subject to certain risks and
uncertainties. Prior to making any investment decision regarding Trinidad
investors should carefully consider, among other things, the risks described
herein (including the risks and uncertainties listed in the Forward-Looking
Statements section in this MD&A) and the risk factors set forth in the most
recently filed Annual Information Form of the Company which are incorporated
by reference herein. The Annual Information Form has been filed with SEADR and
can be accessed at www.sedar.com. Copies of the Annual Information Form may be
obtained, on request without charge, by contacting Trinidad at (403) 265-6525.

    SUBSEQUENT EVENTSEarly Renewal of Revolving Credit FacilitySubsequent to 2008 year-end, on February 12, 2009 Trinidad announced the
early renewal of the Company's revolving credit facility (the "Facility"). The
Facility has been resized from $250.0 million to $225.0 million. The Facility
is backed by a syndicate group which includes major Canadian, US and
international financial institutions. Trinidad chose to reduce its existing
facility level by $25.0 million due to current financial market conditions and
the costs associated with having access to funds the Company does not believe
it will need. At December 31, 2008, Trinidad had drawn approximately $65.0
million, or 29%, of its renewed $225.0 million Facility. Barring unforeseen
circumstances, the Company does not anticipate that it will need to access the
full capacity of this Facility in 2009 or 2010. The Facility is due for
renewal annually, with the next renewal scheduled for April 2010. Trinidad has
no indication that renewal would not be granted, but to the extent that it is
not granted, repayments of the outstanding balance would not be due until
April 2011. The terms adjusted by the renewal of the Facility were only those
associated with the terms of the revolving facility itself. All remaining
long-term debt facilities remain unchanged. The Facility requires monthly
interest payments at a specified spread over the Banker's Acceptance ("BA")
rate. Using current BA pricing, Trinidad does not expect that its 2009
effective interest rate will change significantly from its 2008 level of
approximately 7.5%. The Facility is covered by the same debt covenants as
Trinidad's other term debt. Trinidad is currently well within all debt
covenants and does not anticipate any concerns with respect to these
restrictions in the foreseeable future. More specific information regarding
the debt covenants is available in the credit facility agreement which has
been filed with SEDAR and can be accessed at www.sedar.com. Following the
renewal of the Facility, Trinidad has no significant term-debt repayment
required until April 2011.
    The following table summarizes Trinidad's existing term-debt facilities:Repayment
    Debt Facility    Currency    Amount      Maturity      requirements
    -------------------------------------------------------------------------
    Revolving                                Next          If not renewed,
     credit                      $225.0       renewal in    repayment due
     facility        CDN $        million     April 2010    364 days later

    Five-year                                              1% amortization,
     term                        $100.0                     balloon repayment
     facility        CDN $        million    May 1, 2011    at maturity

    Five-year                                              1% amortization,
     term                        $125.0                     balloon repayment
     facility        US $         million    May 1, 2011    at maturity

    The term debt mentioned above is secured by a general guarantee over the
    assets of the Company and its subsidiaries.

    Updated 2009 Capital Expenditure BudgetSubsequent to 2008 year-end, on February 19, 2009, Trinidad announced its
updated capital expenditure budget for 2009. The revised budget lowers
Trinidad's capital expenditure expectations for 2009, reflecting the Company's
prudent capital management planning and strong customer relationships. The
reduced budget includes changes to Trinidad's previously announced rig
construction programs, most notably a 12 month delay in the delivery of six
new drilling rigs and the cancellation of four new service rigs. Given the
uncertain economic environment, Trinidad believes that a reduction in capital
spending and lower expected debt levels for 2009 is the prudent direction to
take. The decision to delay the construction of six drilling rigs was reached
in conjunction with the Company's customers, reflecting the strength of these
relationships and their ongoing need for Trinidad's equipment.
    Trinidad anticipates spending approximately $165.0 million in capital
expenditures in 2009, a reduction of $165.0 million from its initial
expectations of $330.0 million. This reduction includes a combination of
capital for delayed drilling rigs and cancelled service rigs estimated to
total $90.0 million. In addition, Trinidad has removed $75.0 million in
optional planned capital expenditures aimed at improving and enhancing its
existing fleet. In light of the current financial markets, Trinidad has
delayed these capital expenditures until more robust market conditions return.
    The six delayed drilling rigs remain under long-term, take-or-pay
contract with the original customer and are expected to be completed in 2010,
assuming improved market conditions. A portion of the capital costs associated
with these rigs has been incurred due to the long lead times on receiving some
items of equipment. The customer for the rigs has agreed to pay Trinidad
interest on the capital it has spent to date until the rigs are completed.
Total capital costs incurred to date on these rigs total approximately $37.0
million. The remaining seven drilling rigs in the construction program are
expected to be delivered by the end of the third quarter of 2009. The
customers for these rigs have confirmed their commitment and the associated
long-term, take-or-pay contracts are unchanged. With the changes to the rig
construction program, Trinidad will have approximately 45% of its fleet under
long-term, take-or-pay contracts. Our customers continue to stand by their
contracts, providing Trinidad a high level of visibility around a significant
portion of its revenue stream.First Quarter 2009 Dividend DeclarationSubsequent to 2008 year-end, on February 19, 2009, the Board of Directors
of Trinidad declared a cash dividend for the first quarter of 2009 of $0.05
per common share to be paid April 15, 2009 to shareholders of record on March
31, 2009. The current dividend declaration represents a reduction from the
previous dividend level of $0.15 per share per quarter. On an annualized basis
and using current market prices, the revised dividend level provides a
cash-on-cash yield of approximately 7%. Given the current uncertain economic
conditions, Trinidad's Board of Directors determined that retaining a larger
portion of cash flow within the Company to provide the flexibility to reduce
debt levels and/or fund capital expenditures while continuing to provide a
reasonable cash yield was a prudent course of action for the long-term benefit
of the Company and its investors.

    OUTLOOK

    Trinidad was built with a long-term vision in mind, under a guiding
principle of long-term performance. 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. The key to our strategy is providing
fit-for-purpose equipment and exceptional performance for our customers. We
will continue our focus on value-based, high-performance services where
customers recognize and reward superior performance. We have assembled an
outstanding fleet of high-quality, modern rigs that are perfectly suited to
unconventional drilling where activity levels remain relatively 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 are evident in our results and have allowed Trinidad to continually
post strong utilization levels and record financial and operating results in
2008. Despite the current uncertainty in the financial and commodity markets,
we believe that Trinidad is well positioned for continued success in 2009
behind the strength of our technically-advanced asset base, our long-term,
take-or-pay contracts, our strong customer relationships and our dedicated and
valued employees. In our view, Trinidad's long-term, take-or-pay contracts
provide a solid platform during these highly volatile and strenuous market
conditions. The rigs that Trinidad has under contract are high-quality,
technically-advanced assets which are in limited supply in the North American
land drilling marketplace. We believe that the best defense to maintaining
stability in this market is for exploration and production companies to
operate the best performing equipment. As was evidenced in late 2006 and
throughout the majority of 2007 when Canada experienced a significant market
downturn, Trinidad, behind our technically-advanced fleet and our long-term,
take-or-pay contracts delivered utilization and dayrate performance that was
consistently above the Canadian industry average.
    This past year has proven to be one of the most turbulent in history for
oil and natural gas prices, and the associated impact has already been
significant on the North American drilling market. From the start of January
to the end of December 2008, oil prices (WTI) declined by close to 55% and
natural gas prices (Henry Hub) declined by over 25%. This deterioration of
commodity prices has been primarily driven by the significant weakening of the
global economic environment including the extreme volatility in the capital
and credit markets. Moving forward in 2009, we expect these factors will have
an adverse effect on our customers' capital spending plans for exploration,
production and development activities. Although the industry is uncertain with
respect to the pricing and demand for oil and natural gas in 2009, we believe
that Trinidad is well positioned with its high-quality, modern rig fleet as
well as a strong balance sheet to manage and capitalize on the challenging
conditions facing the oilfield services industry.
    On February 20, 2009 the CAODC released an updated forecast with respect
to the 2009 Canadian industry activity. The CAODC expects 11,176 wells to be
drilled in 2009, down over 30% from 2008. The CAODC has forecasted 95,000
operating days for 2009, which is a decline of close to 30% year-over-year and
are also projecting an average drilling utilization rate of 30%, down from a
2008 utilization rate of 42%. These forecasted activity levels speak directly
to the suppressed commodity markets and the reduced drilling plans for most
producers. Despite these projections and early 2009 industry results, Trinidad
expects its Canadian drilling segment to continue to maintain higher than
average market utilization rates and market share in both its drilling and
well servicing divisions in 2009. While Trinidad is certainly not immune to
pricing or utilization pressures caused by an industry slow-down, the Company
believes it is well positioned to deal with these factors. A positive factor
for Trinidad coming from the CAODC 2009 forecast is their expectation for a
continuation of higher drilling days per well. The significant focus on the
unconventional gas plays in the WCSB and deeper natural gas wells generally,
translates into higher drilling days per well. Given that wells are getting
deeper, the associated increase in operating days per well helps to offset the
impact from a lower number of wells being drilled. With the depletion of
conventional, easily accessible and relatively cheap-to-exploit reserves,
exploration and production companies have had to shift their focus towards
more unconventional plays that require deeper and directional drilling
techniques, to access technically-challenging reserves. As a result, the
proportion of wells being drilled either horizontally or directionally
continues to increase in both Canada and the US. 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 focus on growing both the US land drilling market and the
US Gulf Coast barge drilling market and expect overall contracted rig activity
for Trinidad to be stable in the US moving forward. However, we anticipate
that our non-contracted rig fleet in the US will show declines in both
utilization and dayrates in 2009, given the current market conditions
negatively impacting overall drilling activity in the US. Given the nature of
our long-term, take-or-pay contracts, as well as our strong customer
relationships, we are still comfortable with the Company's revenue and cash
flow stability in the US markets moving forward. 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 international markets like Mexico.
These are areas where we will continue to be opportunistic by moving assets
into these higher utilized areas under long-term, take-or-pay contracts. The
advanced technology that is incorporated within our rigs has helped to create
an economic benefit for our customers as compared to using conventional
drilling rigs. 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 we expect to 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,
generally 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 we anticipate to provide stable returns on an
ongoing basis.
    The current state of the global banking system is an overriding concern
for the economy, as access to capital through the debt and equity markets is
challenging. This 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 was pleased to
announce on February 12, 2009 the early renewal of its revolving credit
facility (see the Subsequent Events section of this MD&A for further details
on Trinidad's early renewal of its revolving credit facility). The facility
was resized from $250.0 million to $225.0 million and is backed by a syndicate
of financial institutions which include major Canadian, US and international
financial institutions. We chose to reduce our existing facility level by
$25.0 million due to the current financial market conditions and the costs
associated with having access to funds we do not believe we will need.
Following the renewal of the facility, Trinidad has no significant term-debt
repayment required until April 2011. At February 20, 2008, Trinidad had drawn
approximately $100.0 million or 44.4% on this new facility and does not
anticipate that it will need to access the full capacity of its revolving
credit facility in 2009 or 2010.
    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 an important success factor that allows the Company to meet
current market demands. Trinidad is in the early stages of its 2008/2009 rig
construction program, which will add ten drilling rigs to our fleet (three of
which have already been added) backed by long-term, take-or-pay contracts for
the US, and has already added two well servicing rigs with an additional
service rig added to the Canadian fleet in conjunction with the Victory
acquisition. Given the volatility of the commodity markets and the ongoing
global financial crisis, Trinidad in coordination with our customers has
delayed the construction of six drilling rigs and cancelled four well
servicing rigs (see the Subsequent Events section of this MD&A for further
details on Trinidad's updated 2009 capital expenditure budget). This delay
reflects Trinidad's prudent capital management planning and strong customer
relationships. With the full contingent of rigs built during the previous rig
construction programs over the past two years now at work and those in our
current construction program being deployed in late 2008 and throughout 2009,
we expect to be able to generate free cash flow to fund our ongoing expansion.
We believe the Company is well positioned with approximately 45% of our rigs
protected under long-term contracts allowing us to continue to outperform our
peers in terms of utilization rates on the back of strategic US expansion and
developing international opportunities.
    In an effort to preserve free cash flow, subsequent to year-end Trinidad
announced the reduction of its quarterly dividend to shareholders (see the
Subsequent Events section of this MD&A for further details on Trinidad's first
quarter 2009 dividend declaration). The Board of Directors of Trinidad
declared a cash dividend for the first quarter of 2009 of $0.05 per common
share, which represents a reduction from the previous dividend level of $0.15
per share per quarter. Given the current uncertain economic conditions,
Trinidad's Board of Directors determined that retaining a larger portion of
cash flow within the Company to provide the flexibility to reduce debt levels
and/or fund capital expenditures while continuing to provide a reasonable cash
yield was a prudent course of action for the long-term benefit of the Company
and its investors.
    It is in turbulent times such as this that companies with a long-term
vision demonstrate their value. Trinidad has, in the pursuit of this vision,
built a company that has diversified itself; a company that is agile; and a
company that can withstand the inevitable downturns in the market. Trinidad is
positioned for the long-term given our geographic diversification, our newer,
technologically-advanced and flexible rig fleet, and the stability of our
contracts. Unquestionably, 2009 will be a challenging year. Commodity prices,
specifically natural gas prices, are not expected to rebound until the latter
part of 2009. The combined impact of this decline in pricing and lower overall
drilling activity would suggest that the supply of natural gas will decline
sharply in 2009. This decrease in overall natural gas supply should translate
into stronger natural gas prices by the end of 2009, which when combined with
an improved economic outlook for the economy should provide better market
fundamentals for the oil and natural gas sector as a whole. Trinidad was built
on a foundation of a sustainable business model, allowing the Company to
continually outperform the broader market under any set of market conditions.
The challenges Trinidad faces today are not new to the Company or to
Trinidad's management. We have built the right assets, with the right
technology, designed to drill wells based on the challenging well profiles of
our clients. We are well positioned to continue to perform given these
challenging market conditions and look forward to an improvement in market
fundamentals in our ongoing pursuit of creating value for our investors.

    NON-GAAP MEASURES DEFINITIONS

    This MD&A contains references to certain financial measures and
associated per share data that do not have any standardized meaning prescribed
by Canadian GAAP and may not be comparable to similar measures presented by
other companies. These financial measures are computed on a consistent basis
for each reporting period and include gross margin, EBITDA, EBITDA before
stock-based compensation, cash flow from operations before change in non-cash
working capital, net earnings before impairment of goodwill, net earnings
before stock-based compensation and net debt. These non-GAAP measures are
identified and defined as follows:
    "Gross margin" is used by management to analyze overall and segmented
operating performance. Gross margin is not intended to represent operating
income nor should it be viewed as an alternative to net earnings or other
measures of financial performance calculated in accordance with Canadian GAAP.
Gross margin is calculated from the annual Consolidated Statements of
Operations and Retained Earnings and from the segmented information contained
in the Notes to the annual Consolidated Financial Statements and is defined as
revenue less operating expenses.
    "EBITDA" is a measure of the Company's operating profitability. EBITDA
provides an indication of the results generated by the Company's principal
business activities prior to how these activities are financed, assets are
depreciated, amortized and impaired, or how the results are taxed in various
jurisdictions.
    EBITDA is derived from the annual Consolidated Statements of Operations
and Retained Earnings and is calculated as follows:For the years ended December 31,
    ($ thousands)                             2008         2007         2006
    -------------------------------------------------------------------------
    Net earnings                            82,174       79,524      123,706
    Plus:
      Interest on long-term debt            23,709       32,649       20,724
      Interest on convertible debentures    34,934       16,946            -
      Depreciation and amortization         94,342       72,260       52,201
      Impairment of goodwill                38,154            -            -
      (Gain) loss on sale of assets        (29,312)         355       (1,879)
      Income taxes                          43,469        4,520       15,567
                                     ----------------------------------------
    EBITDA                                 287,470     206,254      210,319
                                     ----------------------------------------"EBITDA before stock-based compensation" is used by management to analyze
EBITDA (as defined above) prior to the effect of stock-based compensation.
    "Cash flow from operations before change in non-cash working capital" is
used to assist management and investors in analyzing Trinidad's liquidity and
ability to generate cash to finance investing and financing activities. Cash
flow from operations before change in non-cash working capital is derived from
the annual Consolidated Statements of Cash Flows and is defined as cash flow
from operating activities plus or minus the change in non-cash operating
working capital.
    "Net earnings before impairment of goodwill" and "net earnings before
stock-based compensation" are used by management to analyze net earnings prior
to the effect of goodwill impairment or stock-based compensation charges,
respectively, and are not intended to represent net earnings as calculated in
accordance with Canadian GAAP.
    Net earnings before impairment of goodwill is derived from the annual
Consolidated Statements of Operations and Retained Earnings and is calculated
as follows:For the years ended December 31,          2008         2007         2006
    ($ thousands)
    -------------------------------------------------------------------------

    Net earnings                            82,174       79,524      123,706
    Plus:
      Impairment of goodwill                38,154            -            -
                                     ----------------------------------------
    Net earnings before impairment
     of goodwill                           120,328       79,524      123,706
                                     ----------------------------------------

    Net earnings before stock-based compensation is derived from the annual
Consolidated Statements of Operations and Retained Earnings and is calculated
as follows:

    For the years ended December 31,          2008         2007         2006
    ($ thousands)
    -------------------------------------------------------------------------
    Net earnings                            82,174       79,524      123,706
    Plus:
      Stock-based compensation               2,465        2,450        7,105
                                     ----------------------------------------
    Net earnings before stock-based
     compensation                           84,639       81,974      130,811
                                     ----------------------------------------

    "Net debt" is used by management and the investment community to analyze
the amount of debt less the working capital of the Company.
    Net debt is derived from the annual Consolidated Balance Sheets and is
calculated as follows:

    For the years ended December 31,          2008         2007         2006
    ($ thousands)
    -------------------------------------------------------------------------
    Convertible debentures                 323,381      315,991            -
    Long-term debt                         321,768      402,489      388,276
    Less:
      Working capital:
        Current assets                     285,690      182,653      171,722
        Current liabilities               (199,901)     (98,552)    (113,476)
                                     ----------------------------------------
    Net debt                               559,360      634,379      330,030
                                     ----------------------------------------


    References to gross margin, EBITDA, EBITDA before stock-based
compensation, cash flow from operations before changes in non-cash working
capital, net earnings before impairment of goodwill, net earnings before
stock-based compensation and net debt throughout this MD&A have the meanings
set out above.Trinidad is a growth-oriented corporation whose common shares and
convertible debentures trade on the Toronto Stock Exchange ("TSX") under the
symbol TDG and TDG.DB, respectively. Trinidad's divisions operate in the
drilling, well-servicing, coring and barge-drilling sectors of the North
American oil and natural gas industry. With the completion of the 2008/2009
rig construction program, Trinidad will have 120 land drilling rigs ranging in
depths from 1,000 - 6,500 metres and operations in Canada, the United States
and Mexico. In addition to its land drilling rigs, Trinidad has 23 service
rigs, 20 pre-set and coring rigs and 4 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      Executive Vice President and
                                               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
fourth quarter and year end 2008 results on February 26, 2009 beginning at
9:00 a.m. MT (11:00 a.m. ET). To participate, please dial (800) 731-5319
(toll-free in North America) or (416) 644-3421 approximately 10 minutes prior
to the conference call. An archived recording of the call will be available
from approximately 12:00 p.m. MT on February 26 until midnight March 5, 2009
by dialling (877) 289-8525 or (416) 640-1917 and entering replay access code
21296299 followed by the pound sign.
    A live audio webcast of the conference call will also be available on the
Investor Relations page of Trinidad's website, www.trinidaddrilling.com.-------------------------------------------------------------------------
    CONSOLIDATED BALANCE SHEETS
    As at December 31,                                     2008         2007
    ($ thousands)
    -------------------------------------------------------------------------
                                                                 (restated -
                                                                      note 3)
    Assets
    Current assets
    Cash and cash equivalents                            31,202       18,021
    Accounts receivable                                 225,744      143,522
    Inventory (note 5)                                   14,834       18,231
    Prepaid expenses                                     13,811        2,879
    Future income taxes (note 11)                            99            -
                                                    -------------------------
                                                        285,690      182,653

    Deposits on capital assets                           11,581        3,458
    Capital assets (note 6)                           1,375,661    1,110,730
    Intangible assets (note 7)                           26,959       31,181
    Goodwill (note 8)                                   162,173      169,134
                                                    -------------------------
                                                      1,862,064    1,497,156
                                                    -------------------------

    Liabilities
    Current liabilities
    Accounts payable and accrued
     liabilities                                        134,764       78,649
    Dividends payable                                    14,305            -
    Accrued trust distributions                               -        9,616
    Current portion of deferred revenue                  28,241        6,890
    Current portion of long-term debt
     (note 9)                                            16,844        1,679
    Current portion of fair value of
     interest rate swaps                                  5,747        1,718
                                                    -------------------------
                                                        199,901       98,552

    Deferred revenue                                      1,572        4,038
    Long-term debt (note 9)                             321,768      402,489
    Convertible debentures, net of
     transaction costs (note 10)                        323,381      315,991
    Fair value of interest rate swaps                     7,144        4,211
    Future income taxes (note 11)                        88,827       37,373
                                                    -------------------------
                                                        942,593      862,654
    Shareholders' equity
    Shareholders' equity (note 12(a))                   828,882            -
    Unitholders' capital (note 12(b))                         -      675,728
    Exchangeable shares (note 13)                             -        2,477
    Convertible debentures (note 10)                     28,215       28,223
    Contributed surplus (note 12(c))                     19,043       13,843
    Accumulated other comprehensive
     income (loss)                                       40,932      (61,788)
    Retained earnings (deficit)                           2,399      (23,981)
                                                    -------------------------
                                                        919,471      634,502
                                                    -------------------------
                                                      1,862,064    1,497,156
                                                    -------------------------
    Commitments (note 17)
    (See Notes to the Consolidated Financial Statements)

    Michael Heier               Naveen Dargan
    Director                    Director



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
    For the years ended December 31,                      2008         2007
    ($ thousands except share and per share data)
    -------------------------------------------------------------------------
                                                                   (restated
                                                                    - note 3)
    Revenue
    Oilfield services                                   761,144      627,105
    Bareboat Charter (loss) gain (note 4)                (4,667)       1,400
    Other                                                 1,423        1,170
                                                    -------------------------
                                                        757,900      629,675
                                                    -------------------------

    Expenses
    Operating                                           448,405      364,773
    General and administrative                           50,272       43,844
    Interest on long-term debt (note 9)                  23,709       32,649
    Interest on convertible debentures
     (note 10)                                           34,934       16,946
    Stock-based compensation                              2,465        2,450
    Foreign exchange (gain) loss                        (33,478)      12,354
    Depreciation and amortization                        94,342       72,260
    Impairment of goodwill (note 8)                      38,154            -
    (Gain) loss on sale of assets                       (29,312)         355
    Reorganization costs                                  2,766            -
                                                    -------------------------
                                                        632,257      545,631
                                                    -------------------------

    Earnings before income taxes                        125,643       84,044

    Income taxes (note 11)
    Current tax expense                                   1,504        1,917
    Future tax expense                                   41,965        2,603
                                                    -------------------------
                                                         43,469        4,520
                                                    -------------------------

    Net earnings                                         82,174       79,524

    Dividends                                           (47,396)           -
    Trust distributions                                  (8,362)    (115,264)
    Charges for normal course issuer bid
     (note 12(a))                                           (36)           -

    Retained earnings (deficit)
     - beginning of year                                (23,981)      11,759
                                                    -------------------------
    Retained earnings (deficit)
     - end of year                                        2,399     (23,981)
                                                    -------------------------

    Earnings per share
      Basic                                                0.90         0.95
      Diluted                                              0.90         0.94

    Weighted average number of shares
      Basic                                          90,804,564   83,952,252
      Diluted                                        91,003,946   84,957,250

    (See Notes to the Consolidated Financial Statements)



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    For the years ended December 31,                       2008         2007
    ($ thousands)
    -------------------------------------------------------------------------

    Net earnings                                         82,174       79,524

    Other comprehensive income (loss)
      Change in fair value of derivatives
       designated as cash flow hedges, net of
       income tax (note 16)                              (3,217)         556

      Foreign currency translation adjustment           105,937      (57,894)
                                                     ------------------------
    Total other comprehensive income (loss)             102,720      (57,338)
                                                     ------------------------

    Comprehensive income                                184,894       22,186
                                                     ------------------------

    (See Notes to the Consolidated Financial Statements)



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
    For the years ended December 31,                       2008         2007
    ($ thousands)
    -------------------------------------------------------------------------

    Accumulated other comprehensive loss -
     beginning of year                                  (61,788)        (750)
    Adjust opening balance due to adoption of
     new accounting policies                                  -       (3,700)
    Other comprehensive income (loss) during the year   102,720      (57,338)
                                                     ------------------------
    Accumulated other comprehensive income (loss) -
     end of year                                         40,932      (61,788)
                                                     ------------------------

    (See Notes to the Consolidated Financial Statements)



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the years ended December 31,                       2008         2007
    ($ thousands)
    -------------------------------------------------------------------------

    Cash provided by (used in)
    Operating activities
    Net earnings for the year                            82,174       79,524
    Items not affecting cash
      Effective interest on financing costs (note 16)     4,332        2,904
      Accretion on convertible debentures (note 10)       4,836        2,167
      Stock-based compensation                            2,465        2,450
      Unrealized foreign exchange (gain) loss           (31,835)      12,507
      Depreciation and amortization                      94,342       72,260
      Impairment of goodwill (note 8)                    38,154            -
      (Gain) loss on sale of assets                     (29,312)         355
      Future income tax expense                          41,965        2,603
                                                     ------------------------
                                                        207,121      174,770
    Change in non-cash operating working capital        (14,078)      (2,757)
                                                     ------------------------
                                                        193,043      172,013
                                                     ------------------------

    Investing activities
    (Increase) decrease in deposits on capital assets    (6,992)      35,409
    Acquisition of Victory Rig Equipment Corporation
     (note 4)                                           (12,694)           -
    Acquisition of Axxis Drilling Inc. (note 4)               -     (124,411)
    Purchase of capital assets                         (261,207)    (261,631)
    Proceeds from dispositions                           68,740        1,209
    Change in non-cash working capital                  (12,666)     (11,003)
                                                     ------------------------
                                                       (224,819)    (360,427)
                                                     ------------------------

    Financing activities
    (Decrease) increase in long-term debt, net          (89,209)       6,813
    Proceeds on share issuance (note 12)                158,010            -
    Repurchased shares (note 12)                         (5,895)           -
    Proceeds from exercise of options (note 12)           1,911        2,515
    Proceeds from debenture issuance                          -      325,000
    Increase (decrease) in deferred revenue              17,739       (3,120)
    Dividends paid                                      (33,091)           -
    Debt financing costs                                   (600)     (14,202)
    Trust unit distribution (note 3)                    (17,978)    (115,191)
                                                     ------------------------
                                                         30,887      201,815
                                                     ------------------------
    Cash flow from operating, investing,
     and financing activities                              (889)      13,401
    Effect of translation of foreign currency cash       14,070       (4,793)
                                                     ------------------------
    Increase in cash for the year                        13,181        8,608

    Cash and cash equivalents - beginning of year        18,021        9,413
                                                     ------------------------
    Cash and cash equivalents - end of year              31,202       18,021
                                                     ------------------------

    Interest paid                                        50,011       45,362
    Interest received                                       523          701
    Taxes paid                                            3,568          258

    (See Notes to the Consolidated Financial Statements)



    NOTES TO THE 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.

        Trinidad is a growth-oriented corporation that trades on the Toronto
        Stock Exchange (TSX) under the symbols TDG and TDG.DB.

        Operations

        Trinidad operates in the drilling, well-servicing, coring and
        barge-drilling sectors of the North American oil and natural gas
        industry. Trinidad owns 113 land drilling rigs ranging in depths from
        1,000 - 6,500 metres and operates in Canada, the United States and
        Mexico. In addition to its land drilling rigs, Trinidad has 23
        service rigs, 20 pre-set and coring rigs and 4 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.

    2.  ACCOUNTING POLICIES AND ESTIMATES

        These Consolidated Financial Statements are prepared by management,
        in accordance with Canadian Generally Accepted Accounting Principles
        ("GAAP"), which requires management to make estimates and
        assumptions. These estimates and assumptions affect the reported
        amounts of assets and liabilities, disclosure of contingent amounts
        and the reported amounts of revenues and expenses. Actual results
        could differ from these estimates.

        ACCOUNTING STANDARDS ADOPTED IN 2008

        Inventories

        The Canadian Institute of Chartered Accountants' ("CICA") Section
        3031 - Inventories 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 5.

        Inventory consists of parts, materials and labour related to the
        construction, recertification and refurbishment of rigs and
        rig-related equipment. Inventory is valued at the lower of cost
        (principally on the specific identification method) or net realizable
        value.

        Capital disclosures

        CICA Section 1535 - Capital Disclosures 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 15.

        Goodwill and Intangible Assets

        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 has early adopted
        during the fourth quarter of the fiscal year ended December 31, 2008.
        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. There was no impact to
        Trinidad's financial statements as a result of this adoption.

        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 16.

        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.

        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.

        PREVIOUSLY ADOPTED ACCOUNTING POLICIES

        Principles of consolidation

        The consolidated financial statements include the accounts of
        Trinidad and its subsidiaries, all of which are wholly-owned at
        December 31, 2008. Any reference to Trinidad throughout these
        consolidated financial statements refers to Trinidad and its
        subsidiaries. All inter-company transactions have been eliminated.

        Cash and cash equivalents

        Cash and cash equivalents consists of cash and short-term investments
        with maturities of three months or less.

        Capital assets

        Capital assets are recorded at cost less accumulated amortization.
        Major renewals and improvements, which extend the future life of the
        asset, are capitalized, while repair and maintenance expenses are
        charged to operations as incurred. Disposals are removed at carrying
        costs less accumulated amortization with any resulting gain or loss
        reflected in operations. Any deposits or advances on Trinidad's build
        programs are held as deposits on capital assets. Any costs incurred
        internally on the construction of rig and rig-related equipment are
        recorded as assets under construction. These costs will be held as
        deposits on capital assets or assets under construction until the
        related asset is ready for use, at which time it will be capitalized
        and subject to depreciation. Useful lives and the depreciation
        methods are examined on an annual basis and adjustments, where
        applicable, are made on a prospective basis.

        Depreciation is based on the estimated useful lives of the assets and
        is as follows:

        ---------------------------------------------------------------------
        Barge drilling rigs         9,125 drill days     Unit-of-production
         and related equipment                            (10% salvage value)

        Drilling rigs and           4,200 drill days     Unit-of-production
         related equipment                                (10% salvage value)

        Drilling pipe and           1,300 drill days     Unit-of-production
         collars

        Well servicing rigs        24,000 hours          Unit-of-production
                                                          (20% salvage value)

        Coring and surface             15 years          Straight-line
         casing rigs                                      (20% salvage value)

        Construction equipment    5 to 20 years          Straight-line

        Buildings                      25 years          Straight-line

        Crew boats                     15 years          Straight-line

        Office furniture and            5 years          Straight-line
         other equipment

        Automotive equipment            4 years          Straight-line
                                                          (10% salvage value)
        ---------------------------------------------------------------------

        Intangible Assets

        Intangible assets acquired in a business combination are measured at
        fair value at the date of acquisition. Following initial recognition,
        intangible assets are measured at fair value at the date of
        acquisition less any amortization and any impairment losses.

        Intangible assets are amortized over their estimated useful lives as
        follows:

        ---------------------------------------------------------------------
        Customer Contracts              3 years          Straight-line

        Patents                        10 years          Straight-line

        Customer relationships          5 years          Straight-line

        Trade name                      5 years          Straight-line

        Non-compete agreements          3 years          Straight-line
        ---------------------------------------------------------------------

        Useful lives and the amortization methods are examined on an annual
        basis and adjustments, where applicable, are made on a prospective
        basis.

        Trinidad does not have any internally generated intangible assets,
        nor does it have any intangible assets with indefinite lives.

        Goodwill

        Goodwill represents the excess of the purchase price over the fair
        values of the assets purchased and liabilities assumed. Goodwill is
        not subject to amortization, but is tested for impairment at least
        annually, on December 31, by applying a fair value-based test. Any
        goodwill impairment will be recognized as an expense if the carrying
        amount of goodwill exceeds its fair value.

        Convertible debentures

        Trinidad's convertible unsecured subordinated debentures have been
        classified as debt with a portion of the proceeds representing the
        value of the conversion option bifurcated to equity. The debt balance
        accretes over time to the amount owing on maturity and such increases
        in the debt balance are reflected as non-cash interest expense in the
        Consolidated Statement of Operations. Upon conversion, portions of
        debt and equity are transferred into shareholders' equity.

        Income tax

        Trinidad follows the liability method of accounting for income tax.
        Under this method, income tax liabilities and assets are recognized
        for estimated tax consequences attributable to differences between
        the amounts reported in the financial statements and their respective
        tax basis, using substantively enacted income tax rates. The effect
        of a change in income tax rates on future tax liabilities and assets
        is recognized in income in the period that the change occurs.

        Revenue recognition

        Revenue from contract drilling services is valued based upon purchase
        orders or contracts with customers that specify fixed prices
        calculated on a daily or hourly base. Customer contracts do not
        include a provision for post-service delivery obligations. Revenue is
        recognized when services are performed and only when collectability
        is reasonably assured.

        Revenue from construction operations is recognized on a percentage-
        of-completion basis and only when collectability is reasonably
        assured. Losses are provided for, in full, when first determined.

        Deposits received on future contracts are recorded as deferred
        revenue and recognized as services are performed.

        Stock-based compensation

        Trinidad has established an Incentive Option Plan to provide an
        opportunity for officers, employees and consultants of Trinidad and
        its affiliates to participate in the growth and development of the
        Company.

        Compensation expense associated with options granted under the
        Incentive Option Plan is deferred and recognized into earnings over
        the vesting period of the options granted with a corresponding
        increase in contributed surplus. Trinidad applies the fair value
        method using the Black-Scholes model to calculate compensation
        expense.

        On March 11, 2008 the Company established a Deferred Share Unit Plan
       ("DSU") to provide a compensation system for members of the Board of
        Directors that is reflective of the responsibility, commitment and
        risk accompanying Board membership. Each DSU granted permits the
        holder to receive a cash payment equal to the fair value of the
        volume weighted-average share price for the five days preceeding
        payment. DSUs granted are exercisable upon resignation or
        termination from the Board of Directors. Dividends are credited as
        additional DSUs when paid.

        In addition, Trinidad has established a Performance Share Unit
        ("PSU") Plan to provide an opportunity for officers and employees of
        Trinidad and its affiliates to promote further alignment of interests
        between employees and the shareholders. The associated compensation
        expense is recognized as an accrued liability, over the vesting
        period, which is generally three years. The accrued liability is
        re-measured at the end of each reporting period based on the volume
        weighted average trading price of a Trinidad share for the five days
        immediately preceding period end. Dividends are credited as
        additional PSUs on the dividend payment date.

        Basic and diluted per share calculations

        Basic net earnings per share is computed by dividing the net earnings
        by the weighted average number of shares outstanding. Diluted net
        earnings per share amounts are computed by dividing net earnings plus
        interest on any dilutive convertible debentures by the dilutive
        shares outstanding. Dilutive shares are arrived at by taking the
        weighted average number of shares outstanding and giving effect to
        the potential dilution that would occur if in-the-money options were
        exercised under the treasury stock method and the dilution, if any,
        that would occur upon the conversion of the convertible debentures.
        The treasury stock method assumes that proceeds received from the
        exercise of in-the-money options and any unrecognized share incentive
        compensation are used to repurchase shares at the average market
        price.

        Exchangeable shares

        Exchangeable shares, which were issued by a subsidiary of the Trust,
        are convertible into trust units based on an exchange ratio, which is
        adjusted monthly to reflect the distributions paid on the Trust
        units. These exchangeable shares are not transferable to third
        parties and can only be disposed of by exchanging them for trust
        units. Upon conversion from a trust to a corporation (see note 3)
        these were fully exchanged.

        Foreign currency transactions

        Monetary items, including financial instruments, denominated in
        foreign currency are translated into Canadian dollars at exchange
        rates in effect at the balance sheet date and non-monetary items are
        translated at rates of exchange in effect when the assets were
        acquired or obligations incurred. Revenues and expenses denominated
        in foreign currency are translated at rates in effect at the time of
        the transactions. Foreign exchange gains and losses are included in
        earnings.

        Foreign currency translation

        Trinidad's United States ("US") and Mexico drilling operations are
        considered to be self-sustaining foreign operations and are
        translated using the current rate method, under which all revenues
        and expenses are translated at the average exchange rate for the
        period while assets and liabilities are translated at the current
        exchange rate in effect at the balance sheet date. Gains or losses
        resulting from these translation adjustments are included in the
        cumulative translation adjustment account in other comprehensive
        income.

        Financial instruments and hedge accounting

        Comprehensive Income

        Gains and losses resulting from the translation of the assets and
        liabilities of the Company's self-sustaining foreign operations into
        Canadian dollars are included in the Consolidated Statements of
        Comprehensive Income (Loss) as a separate component of Other
        Comprehensive Income ("OCI").

        Financial Instruments - Recognition and Measurement

        All financial instruments are measured at fair value upon initial
        recognition of the transaction and measurement in subsequent periods
        is dependant on whether the instrument is classified as "held-for-
        trading", "available-for-sale", or "held-to-maturity".

        Financial instruments classified as "held-for-trading" are
        subsequently re-valued to fair market value with changes in the fair
        value being recognized into earnings; financial instruments
        classified as "available-for-sale" are subsequently re-valued to fair
        market value with changes in the fair value being recognized to OCI
        and financial instruments designated as "held-to-maturity" are valued
        at amortized cost using the effective interest method of
        amortization.

        As a result of the adoption of the financial instrument standard,
        long-term debt is recognized at amortized cost, at each reporting
        period, net of transaction costs directly attributable to the
        issuance of the debt. Similarly, costs related to the issuance of
        Trinidad's convertible debentures are netted against the carrying
        value of the convertible debentures and amortized into earnings over
        the life of the convertible debentures using the effective interest
        rate method.

        Hedges

        Trinidad utilizes derivative financial instruments to manage economic
        exposure to market risks relating to fluctuations in interest rates
        on the amount of floating rate debt outstanding. The Company formally
        documents all relationships between hedging instruments and the
        hedged items, the risk management objective and the method for
        assessing the effectiveness of the hedge. The effectiveness of the
        hedge is assessed both at inception of the hedge and throughout its
        term.

        The application of hedge accounting to Trinidad's interest rate swaps
        has resulted in the designation of cash flow hedges whereby gains
        and losses resulting from changes in the fair value of the hedge are
        included in the Consolidated Statements of Comprehensive Income, to
        the extent that the hedge is effective

        Derivative financial instruments are not used for trading or
        speculative purposes.

        Financial instruments

        Trinidad's financial assets and liabilities consist of cash and cash
        equivalents, accounts receivable, accounts payable and accrued
        liabilities, fair value of interest rate swaps, convertible
        debentures, and long-term debt. The fair value of these
        financial assets and liabilities approximates their carrying value,
        unless otherwise noted. It is management's opinion that Trinidad is
        not exposed to significant interest or credit risks other than such
        risk relating to non-hedged floating rate debt.

        FUTURE CHANGES IN ACCOUNTING POLICIES

        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 design stage, including evaluation of key differences
        between Canadian GAAP and IFRS and creating new accounting policies.
        Trinidad cannot at this time reasonably estimate the impact of
        adopting IFRS on its 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", "options" and "dividends"
        should be read as references to "Unit Rights Incentive Plan",
        "rights" and "distributions", respectively, for periods prior to
        March 10, 2008.

    4.  ACQUISITIONS

        Acquisition of the outstanding shares of Victory Rig Equipment
        Corporation

        Effective August 18, 2008, Trinidad purchased all of the outstanding
        shares, operating assets and assumed all of the related obligations
        of Victory Rig Equipment Corporation ("Victory"), a Red Deer Alberta
        based, privately held fabrication company for consideration of
        $12.7 million. All earnings of Victory have been included in
        Trinidad's Consolidated Statements of Operations since August 18,
        2008.

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

        ($ thousands)                                                   2008
        ---------------------------------------------------------------------

        Purchase price allocated as follows:
          Capital assets                                               1,334
          Other long-term assets                                          73
          Intangible assets                                            4,290
          Goodwill                                                    11,901
          Working capital deficiency                                    (491)
          Long-term liabilities                                       (4,413)
                                                                 ------------
                                                                      12,694
                                                                 ------------
        Financed as follows:
          Cash                                                        12,694

        The purchase price allocation has not been finalized as it is subject
        to contingent payments. Contingency payments have been accrued based
        on conditions at December 31, 2008. Changes to the contingency
        payments in the future will be offset by changes in goodwill.

        Acquisition of assets of Axxis Drilling Inc.

        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
        three years subsequent to acquisition pertaining to provisions under
        the Bareboat Charters, discussed further in Note 17 - 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 subsequent to acquisition 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).

    5.  INVENTORY

        As at December 31,                                 2008         2007
        ($ thousands)
        ---------------------------------------------------------------------
        Parts and materials                              10,378        8,884
        Work-in-progress                                  4,456        9,347
                                                     ------------------------
        Total inventory                                  14,834       18,231
                                                     ------------------------

        All inventory balances are carried at the lower of cost or net
        realizable value. The construction operations regularly utilize
        inventory in the construction, modification and recertification of
        rigs and rig related equipment. For the year ended December 31, 2008,
        there were no material inventory write-downs or reversals of
        previously written-down amounts.

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

        As at December 31,                                 2008         2007
        ($ thousands)
        ---------------------------------------------------------------------
        Raw materials and consumables purchased         126,706       79,360
        Labour costs                                     18,935       14,412
        Other costs                                         759          361
        Net change in inventory                           3,397      (10,780)
                                                     ------------------------
        Amount of inventories expensed in period        149,797       83,353
                                                     ------------------------

    6.  CAPITAL ASSETS

        As at December 31,                               2008
                                                    Accumulated     Net Book
        ($ thousands)                        Cost  Depreciation        Value
        ---------------------------------------------------------------------

        Rigs and rig-related equipment   1,440,511      262,242    1,178,269
        Automotive equipment and
         other equipment                    28,266       13,020       15,246
        Construction equipment               1,776          326        1,450
        Building                            33,306        3,047       30,259
        Land                                12,740            -       12,740
        Assets under construction          137,697            -      137,697
                                        -------------------------------------
                                         1,654,296      278,635    1,375,661
                                        -------------------------------------

        As at December 31,                               2007
                                                    Accumulated     Net Book
        ($ thousands)                        Cost  Depreciation        Value
        ---------------------------------------------------------------------

        Rigs and rig-related equipment   1,176,314      156,759    1,019,555
        Automotive equipment and
         other equipment                    24,285        7,785       16,500
        Construction equipment                 763          141          622
        Building                            29,362        1,997       27,365
        Land                                12,820            -       12,820
        Assets under construction           33,868            -       33,868
                                        -------------------------------------
                                         1,277,412      166,682    1,110,730
                                        -------------------------------------

    7.  INTANGIBLE ASSETS

        As at December 31,                               2008
                                                    Accumulated     Net Book
        ($ thousands)                        Cost  Amortization        Value
        ---------------------------------------------------------------------

        Customer contracts                  30,964        8,083       22,881
        Patents                              3,000          111        2,889
        Customer relationships                 370           27          343
        Trade name                             790           58          732
        Non-compete agreements                 130           16          114
                                        -------------------------------------
                                            35,254        8,295       26,959
                                        -------------------------------------

        As at December 31,                               2007
                                                    Accumulated     Net Book
        ($ thousands)                        Cost  Amortization        Value
        ---------------------------------------------------------------------

        Customer contracts                  39,569        8,605       30,964
                                        -------------------------------------
                                            39,569        8,605       30,964
                                        -------------------------------------

        There are no internally developed intangible assets.

        The aggregate amortization expense for the intangible assets for the
        year ended December 31, 2008 is $8.4 million (2007 - $8.6 million)
        and is included in depreciation and amortization.

    8.  GOODWILL

        During the annual impairment test on goodwill balances, Trinidad
        concluded that decreases in the market, including declines in oil and
        natural gas drilling programs, resulted in reductions to the
        Company's financial budgets. Further review, on an individual segment
        basis, indicated that the carrying value of goodwill in the Canadian
        Drilling Operations exceeded its fair value.

        As a result, Trinidad recorded an impairment charge of $38.2 million
        in the Canadian operating segment and determined that there were no
        impairments in any other operating segments as their fair values
        exceeded carrying values.

        The changes in goodwill during the year are as follows:

        As at December 31,                                              2008
        ($ thousands)
        ---------------------------------------------------------------------
        Balance, beginning of year                                   169,134
        Additions due to acquisitions                                 11,901
        Impairment of goodwill                                       (38,154)
        Adjustments due to foreign exchange                           19,292
                                                                 ------------
        Balance, end of year                                         162,173
                                                                 ------------

    9.  LONG-TERM DEBT

        As at December 31,                                 2008         2007
        ($ thousands)
        ---------------------------------------------------------------------
        Credit facilities, net of transaction costs(a)  307,772      364,563
        Building loans(b)                                 7,921        8,349
        Other equipment loans(c)                             38          292
        Deferred purchase obligation(d)                  22,881       30,964
                                                     ------------------------
                                                        338,612      404,168
        Less: current portion of long-term debt         (16,844)      (1,679)
                                                     ------------------------
                                                        321,768      402,489
                                                     ------------------------

        a) Effective April 18, 2006, Trinidad entered into a syndicated loan
           facility comprised of a $250.0 million Canadian Revolving Credit
           Facility and a $100.0 million Canadian five-year term facility.
           The Canadian Revolving Credit Facility requires monthly interest
           payments and is renewable annually subject to the mutual consent
           of the lenders and Trinidad. To the extent that the facility is
           not renewed, the drawn-down principal would be due 364 days later.
           The Canadian term loan requires monthly interest payments based on
           a spread over the one, two or three-month Bankers' Acceptance (BA)
           rate and requires repayment based on 1% annual amortization and a
           balloon payment at its maturity date of May 1, 2011.

           Concurrently, a US subsidiary of the Company entered into a
           US$125.0 million five-year term facility to fund the US
           operations. This facility requires monthly interest payments based
           on a spread over the one, two or three-month LIBOR rate and
           requires repayment based on 1% annual amortization and a balloon
           payment at its maturity date of May 1, 2011.

           These facilities represent a combined Canadian dollar equivalent
           debt capacity of approximately $502.3 million and were structured
           by GE Energy Financial Services and syndicated by GE Capital
           Markets, Inc. The members of the syndicate group include major
           Canadian, United States and International financial institutions.
           This debt is secured by a general guarantee over the assets of
           Trinidad and its subsidiaries. Refer to note 22, Subsequent
           events, on "Early Renewal of Revolving Credit Facility".

           The effective interest rate on these facilities was 6.8% for the
           year ended December 31, 2008 (2007 - 7.4%).

        b) On December 15, 2005, Trinidad entered into a $9.1 million
           non-revolving credit facility with GE Canada on properties held
           by the Company. The facility requires monthly interest payments
           at a rate of 6.26% per annum, matures June 2011 and is secured by
           the respective properties.

        c) Other equipment loans are payable over various periods from two
           months to 28 months at interest rates varying from 0% to 8.3% per
           annum, and are secured by the related assets.

        d) In connection with the acquisition of the assets of Axxis on
           July 5, 2007, Trinidad committed to pay US$12.5 million annually
           to the former shareholders of Axxis for the three years subsequent
           to acquisition pertaining to provisions under the Bareboat
           Charters, discussed further in Note 17 - Commitments. The
           consideration will be paid annually and is contingent on the
           continued operation of the 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.

    10. CONVERTIBLE DEBENTURES

         For the year ended December 31,                   2008         2007
        ($ thousands)
        ---------------------------------------------------------------------
        Convertible debentures - opening balance        315,991            -
        Convertible debentures issued,
         net of transaction costs                             -      340,735
        Valuation of conversion feature                       -      (28,223)
                                                       ----------------------
        Debt component of convertible debentures        315,991      312,512
        Conversion of convertible debentures                (87)           -
        Amortization of discount                          4,836        2,167
        Effective interest on transaction costs           2,641        1,312
                                                       ----------------------
        Convertible debentures - ending balance         323,381      315,991
                                                       ----------------------

        On July 5, 2007, Trinidad issued $354.3 million in convertible
        unsecured subordinated debentures. The debentures are convertible
        into shares of the Company at the option of the holder at any time
        prior to maturity at a conversion price of $19.30, have a face value
        of $1,000, 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 between December 31, 2010 and their
        maturity date. Upon redemption or maturity, the Company may elect to
        satisfy its obligation to repay the principal by issuing shares.

        The value of the conversion feature was determined using the Black-
        Scholes fair value 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 in transaction costs. The debentures are being
        accreted such that the liability at maturity will equal the face
        value of $354.3 million. For the year ended December 31, 2008 there
        were conversions of 95 debentures into shares, reducing the overall
        convertible debenture balance by $0.1 million of which $0.1 million
        was allocated to debt.

        Interest on convertible debentures of $34.9 million represents coupon
        payments of $27.5 million, $4.8 million pertaining to the accretion
        of the convertible debenture and $2.6 million pertaining to the
        effective interest on financing costs for the year ended
        December 31, 2008.

    11. INCOME TAXES

        For the years ended December 31,                   2008         2007
        ($ thousands except percentages)
        ---------------------------------------------------------------------
        Net income before tax                           125,643       84,044
        Corporate tax rate                               30.19%       32.95%
                                                       ----------------------
        Tax expense at statutory rate                    37,932       27,692
          Tax reduction arising from trust
           income distribution                           (7,309)     (24,887)
          Non-deductible expenses                        12,555        1,013
          Statutory and other rate differences            3,300       (1,138)
          Effect of change in expected tax rate          (2,986)       1,470
          Large corporation tax expense                    (142)           -
          Texas margin tax                                    -          738
          Other                                             119         (368)
                                                       ----------------------
        Total tax expense                                43,469        4,520
                                                       ----------------------

        Trinidad's income is subject to Canadian federal and provincial
        taxes, US federal and state taxes, and Mexico federal taxes. For
        2008, $7.4 million pertains to Canadian entities; as Trinidad is
        subject to both federal taxes as well as provincial taxes in Alberta,
        British Columbia and Saskatchewan, as it operates in those
        jurisdictions. The remaining tax expense, with the exception of
        $0.5 million which pertains to the new Mexican entity, is driven from
        the US entities as taxes are calculated based on a blended rate made
        up of the federal rate and a pro-rata of the following states:
        Colorado, Kansas, Louisiana and Oklahoma.

        The liability and asset for future income taxes on Trinidad's balance
        sheet is comprised of the following temporary differences:

        As at December 31,                                 2008         2007
        ($ thousands)
        ---------------------------------------------------------------------
        Loss carry-forward                                   12            -
        Deferred costs                                       87            -
                                                       ----------------------
        Current future tax asset                             99            -
                                                       ----------------------

        Loss carry-forward                               88,406       44,235
        Capital and other intangible assets            (184,226)     (84,801)
        Interest rate swap                                6,250        3,087
        Financing costs                                     743          106
                                                       ----------------------
        Long-term future tax liability                  (88,827)     (37,373)
                                                       ----------------------

        Loss carry-forwards of $279.6 million have been recognized for income
        tax purposes and are due to expire between 2025 and 2027.

    12. SHAREHOLDERS' EQUITY AND CONTRIBUTED SURPLUS

        a) Shareholders' equity

        Authorized
        Unlimited number of common shares, voting, participating

        For the years ended December 31,
        ($ thousands except
         share data)                    2008                    2007
        ---------------------------------------------------------------------
                               Number of     Amount    Number of     Amount
                                Shares          $       Shares          $
                             ------------------------------------------------
        Shareholders' equity
         - opening balance             -           -           -           -
        Shares issued
         pursuant to the
         Arrangement
         (note 3)             84,035,873     678,282           -           -
        Shares issued
         for cash, net of
         transaction costs    12,132,353     158,010           -           -
        Shares issued on
         exercise of options     241,634       1,851           -           -
        Shares issued on
         conversion of
         convertible
         debentures                4,921          95           -           -
        Shares repurchased
         under normal course
         issuer bid           (1,048,800)     (9,122)          -           -
        Contributed surplus
         transferred on
         exercised options             -         279           -           -
                             ------------------------------------------------
                              95,365,981     829,395           -           -
        Shares repurchased,
         but not cancelled      (138,600)       (513)          -           -
                             ------------------------------------------------
        Shareholders' equity
         - closing balance    95,227,381     828,882           -           -
                             ------------------------------------------------

        Pursuant to the Arrangement (note 3), Trinidad exchanged all
        outstanding trust units for commons shares on March 10, 2008.

        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 2008, Trinidad acquired 1,187,400 shares, at an average cost
        of $4.96 per share, of which 1,048,800 shares were cancelled
        and 138,600 shares were held in treasury at the end of the year
        at a total cost of $5.9 million. The excess of the purchase price
        over the carrying amount of the common shares acquired and cancelled
        is recorded against retained earnings. However, if the purchase price
        is lower than the carrying amount of the common shares acquired and
        cancelled it is recorded as contributed surplus.

        Basic earnings per share is calculated using the weighted average
        number of common share outstanding for the year ended December 31,
        2008 of 90,804,564 (2007 - 83,952,252). For purposes of calculating
        diluted earnings per share, 199,382 shares related to the Incentive
        Option Plan for the year ended December 31, 2008 (2007 - 1,004,998)
        were added to the weighted average calculation.

        b) Unitholders' capital

        For the years ended December 31,
        ($ thousands except
         unit data)                      2008                    2007
        ---------------------------------------------------------------------
                               Number of     Amount    Number of     Amount
                                 Units          $        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
         (note 3)            (84,035,873)   (678,282)          -           -
                             ------------------------------------------------

        Unitholders' capital
        - ending balance               -           -  83,615,790     675,728
                             ------------------------------------------------

        Pursuant to the Arrangement (note 3), The Trust cancelled all trust
        units on March 10, 2008.

        c) Contributed surplus

        For the years ended December 31,                   2008         2007
        ($ thousands)
        ---------------------------------------------------------------------
        Contributed surplus - opening balance            13,843       11,722
        Stock-based compensation expense                  1,713        2,450
        Contributed surplus transferred on exercise
         of options                                        (289)        (329)
        Effect of NCIB                                    3,776            -
                                                       ----------------------
        Contributed surplus - ending balance             19,043       13,843
                                                       ----------------------

    13. EXCHANGEABLE SHARES

        Trinidad has the following exchangeable shares outstanding:

        For the years ended December 31,
        ($ thousands except
         share data)                    2008                    2007
        ---------------------------------------------------------------------
                               Number of     Amount    Number of     Amount
                                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 (note 3) 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.

    14. 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 subsidiaries 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.

        Options granted vest 50% immediately and 25% on the first and second
        anniversary of the date of grant (unless otherwise determined by the
        Board of Directors at the time of issuance) and shall be exercisable
        for a period of five years from the date of grant.

        The following summarizes the options that are outstanding under
        Trinidad's Incentive Option Plan as at December 31, 2008 and 2007 and
        the changes during these periods:

        For the years ended
         December 31,                  2008                    2007
        ---------------------------------------------------------------------
                                            Weighted                Weighted
                                             Average                 Average
                               Number of    Exercise   Number of    Exercise
                                 Options    Price ($)     Rights    Price ($)
                             ------------------------------------------------
        Outstanding -
         beginning of year     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                 (249,484)       7.69    (277,434)       9.06
        Forfeited during the
         period                 (280,501)      11.83     (67,221)      13.38
                             ------------------------------------------------
        Outstanding - end of
         year                  8,259,495       12.66   7,965,670       12.55
                             ------------------------------------------------

        The range of exercise prices for the options outstanding at
        December 31, 2008 is as follows:

        ---------------------------------------------------------------------
                             Total Options Outstanding   Exercisable Options
                                               Weighted
                                    Weighted    Average             Weighted
                                     Average  Remaining              Average
        Range of                    Exercise       Life             Exercise
        Exercise Prices     Number  Price ($)    (years)    Number  Price ($)
        ---------------------------------------------------------------------
        $7.21 - $9.50      842,910      8.31       0.45    842,909      8.31
        $9.51 - $12.00   1,949,985     10.60       2.48  1,538,080     10.24
        $12.01 - $14.00  3,440,023     12.39       2.06  3,424,152     12.39
        $14.01 - $16.83  2,026,577     16.76       2.03  2,026,577     16.76
        ---------------------------------------------------------------------
        $7.21 - $16.83   8,259,495     12.66       1.99  7,831,718     12.66
        ---------------------------------------------------------------------

        Trinidad uses the Black-Scholes option-pricing model to determine the
        estimated fair value of the options granted subsequent to January 1,
        2003. The per share weighted average fair value of options granted
        during the year ended December 31, 2008 was $2.47 (2007 - $1.49). For
        the year ended December 31, 2008, Trinidad recognized compensation
        expense included in the calculation of net earnings of $1.7 million
        (2007 - $2.5 million) using the following weighted average
        assumptions:

        For the years ended December 31,                    2008        2007
        ---------------------------------------------------------------------
        Expected volatility                                38.8%       31.9%
        Annual dividend yield                               5.0%       10.3%
        Risk-free interest rate                             3.0%        3.9%
        Expected life (years)                                3.0         3.0

        The options will have an exercise price not exceeding the closing
        trading price for the common shares on the TSX on
        the date immediately preceding the date of grant and not less than
        the price permitted by applicable securities law.

        On March 11, 2008 Trinidad established a Deferred Share Unit Plan
       ("DSU") to provide a compensation system for members of the Board of
        Directors of Trinidad that is reflective of the responsibility,
        commitment and risk accompanying Board membership. Each DSU granted
        permits the holder to receive a cash payment equal to the fair value
        of the volume weighted-average Trinidad share price for the five days
        preceeding payment. DSUs granted are exercisable upon resignation or
        termination from the Board of Directors. Dividends are credited as
        additional DSUs when paid.

        As at December 31, 2008, there were 40,732 Deferred Share Units
        outstanding, with a mark-to-market liability of $0.2 million, which
        is included in accounts payable and accrued liabilities. The expense
        related to the DSUs is recognized in stock-based compensation in
        the Consolidated Statement of Operations.

        Effective January 1, 2008 Trinidad established a Performance Share
        Unit Plan ("PSU") to provide an opportunity for officers and
        employees of Trinidad and its subsidiaries to promote further
        alignment of interests between employees and the shareholders and
        to participate in the growth and development of the Company. Each
        PSU granted permits the holder to receive a cash payment equal to
        the fair value of the volume weighted-average Trinidad share price
        for the five days preceding payment. PSUs granted vest 50% on
        December 31, 2008 and the remainder vest December 31, 2009.
        Dividends are credited as additional PSUs on the dividend payment
        date.

        As at December 31, 2008, there were 237,000 Performance Share Units
        outstanding, with a mark-to-market liability of $0.6 million, which
        is included in accounts payable and accrued liabilities. The expense
        related to the PSUs is recognized in stock-based compensation in the
        Consolidated Statement of Operations.

    15. 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:

        For the years ended December 31,                    2008        2007
        ($ thousands)
        ---------------------------------------------------------------------
        Long-term debt(1)                                316,564     407,786
        Convertible debentures(1)                        333,029     328,281
                                                       ----------------------
        Total debt                                       649,593     736,067
        Shareholders' equity                             919,471     634,502
        Less: cash and cash equivalents                  (31,202)    (18,021)
                                                       ----------------------
        Total capitalization                           1,537,862   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:

        a) 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;

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

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

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

        e) 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
        consolidated net earnings adjusted by interest on long-term debt,
        depreciation and amortization, income taxes, gain/loss on sale of
        asset and foreign exchange for the rolling four quarters, and must be
        maintained below 2.5:1. For the rolling four quarters ending
        December 31, 2008, this ratio was 1.43:1 (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 year
        Trinidad had drawn only $65.0 million or 26%. These three debt
        facilities are held by a broad syndicate of well-respected financial
        institutions and covered by a general set of covenants, which the
        Company comfortably met at year-end.

        As well, within the fourth quarter, 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 2008/2009 rig construction program.

    16. 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 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:

                                             December 31, 2008
                                                                       Total
                                Held for   Loans and       Other    Carrying
        ($ thousands)            Trading Receivables Liabilities       Value
        ---------------------------------------------------------------------
        Cash and cash
         equivalents              31,202           -           -      31,202
        Accounts receivable            -     225,744           -     225,744
        Accounts payable and
         accrued liabilities           -           -     134,764     134,764
        Interest rate swaps            -           -      12,891      12,891
        Long-term debt                 -           -     315,731     315,731
        Convertible debentures         -           -     351,596     351,596
                              -----------------------------------------------


                                             December 31, 2007
                                                                       Total
                                Held for   Loans and       Other    Carrying
        ($ thousands)            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:

                                December 31, 2008       December 31, 2007
                                            Carrying                Carrying
        ($ thousands)         Fair Value       Value  Fair Value       Value
        ---------------------------------------------------------------------
        Interest rate swaps       12,891      12,891       5,929       5,929
        Credit facilities(1)
          Canadian Revolving
           Credit Facility        62,980      65,000     147,256     148,000
          Canadian Term Facility  91,937      97,333      96,837      98,334
          US Term Facility       139,974     148,190     119,991     121,847
        Convertible
         debentures(1)           214,317     361,245     337,506     356,504
        Other debt                 6,168       7,959       8,509       8,641
                              -----------------------------------------------
                                 528,267     692,618     707,528     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 Consolidated Financial Statements. During the year ended
        December 31, 2008, Trinidad recorded a loss of $3.2 million (2007 -
        $0.6 million gain) in OCI, net of $1.8 million in taxes (2007 -
        $1.6 million), due to the change in fair value of the cash flow
        hedge. Trinidad has assessed 100% hedge effectiveness as the terms of
        the interest rate swap arrangements coincide with the US and Canadian
        term debt facilities; 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 $1.7 million for
        the year ended December 31, 2008 (2007 - $1.6 million) relating to
        costs under the debt facility. In addition, Trinidad also recognized
        interest expense of $2.6 million (2007 - $1.3 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:

        As at December 31,                                 2008         2007
        ($ thousands)
        ---------------------------------------------------------------------
        Opening reserve balance                           4,364        5,132
        Increase in reserve recorded in the Statement
        of Operations in the current period               2,534        3,929
        Working capital adjustments
         relating to acquisitions                             -       (4,455)
        Write-offs charged against the reserve           (1,122)        (149)
        Recoveries of amounts
         previously written-off                            (927)         (93)
                                                     ------------------------
        Reserve allowance at period end                   4,849        4,364
                                                     ------------------------

        As at December 31, 2008, Trinidad had accounts receivable of $17.6
        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. 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 between the US and Canadian
        entities. As at December 31, 2008, the Company did not have any
        foreign currency hedges in place. The Company may, however, hedge
        foreign currency rates in the future, depending on the business
        environment and growth opportunities.

        As at December 31, 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 year ended December 31, 2008, would have
        fluctuated by approximately $0.8 million, and OCI would have
        fluctuated by $3.6 million for the year ended December 31, 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 December 31, 2008, Trinidad had
        $310 million outstanding under the credit facilities. A change of one
        percent in the interest rates would cause a $1.9 million change in
        the interest expense for the year ended December 31, 2008.

        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
         December 31,
         2008                                                          There-
        ($ thousands)      2009     2010     2011     2012      2013   after
        ---------------------------------------------------------------------
        Accounts payable
         and accrued
         liabilities    134,764        -        -        -        -        -
        Interest
         rate swaps       5,747    5,228    1,916        -        -        -
        Canadian
         revolving
         debt(1)              -   65,000        -        -        -        -
        Canadian
         term debt        1,000    1,000   95,333        -        -        -
        US term debt      1,523    1,523  145,145        -        -        -
        Other debt          481      491    6,987        -        -        -
        Convertible
         debentures(2)        -        -        -        -        -        -
        Interest payments
         on contractual
         obligations     40,892   36,702   30,202   13,731        -        -
                       ------------------------------------------------------
        Total           184,407  109,944  279,583   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.

    17. COMMITMENTS

        Trinidad has several capital and operating lease agreements on
        buildings and equipment. The future lease obligations for the next
        five years are summarized below:

        ($ thousands)
        ---------------------------------------------------------------------
        2009                                                           3,746
        2010                                                           3,054
        2011                                                           7,827
        2012                                                             702
        2013                                                             603
        Thereafter                                                         -
        ---------------------------------------------------------------------

        Rig Construction Program

        Trinidad has announced its intent to further expand its existing
        drilling fleet through the construction of an additional ten drilling
        rigs which are expected to be deployed in the US. These drilling
        rigs will have depth capacities ranging from 16,000 feet to 18,000
        feet and are backed by three to five year 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. Three rigs were deployed in the fourth
        quarter of 2008, with the remaining seven rigs to be delivered
        throughout 2009.

        Service Rig Construction Program

        In conjunction with the 2008/2009 drilling rig construction program,
        Trinidad has added three new well servicing rigs following a new rig
        design which provides improved pressure control, better safety
        features and lower operating costs. The three new service rigs have
        depth capacities of 2,800 metres. Two rigs were delivered in the
        fourth quarter of 2008, with an additional service rig added to the
        fleet in conjunction with the Victory acquisition. Refer to note 22,
        Subsequent events, on "Updated 2009 Capital Expenditure Budget".

        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 shareholders of Axxis US $12.5 million
        per year for the three years subsequent to acquisition, 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.

    18. 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 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 US and the
        varying conditions between the Canadian and US markets have resulted
        in management evaluating Trinidad's drilling performance on a
        geographically segmented basis. Trinidad's newly established
        operations in Mexico have been combined with the US operations as
        these operations did not meet the requirement for disclosure as a
        separate segment.

        The acquisition of Mastco in 2006 and Victory in 2008 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.

        ---------------------------------------------------------------------
        For the                      United
         year ended                  States/               Inter-
         December 31,   Canadian     Mexico               segment
         2008           Drilling   Drilling Construction   Elimi-
        ($ thousands) Operations Operations   Operations  nations      Total
        ---------------------------------------------------------------------
        Revenue          348,067    366,803    157,004   (113,974)   757,900
        Operating
         expense         205,059    207,523    149,797   (113,974)   448,405
                        -----------------------------------------------------
        Gross margin     143,008    159,280      7,207          -    309,495

        Interest on
         long-term debt   13,719      9,969         21          -     23,709
        Interest on
         convertible
         debentures       34,934          -          -          -     34,934
        Depreciation and
         amortization     36,620     56,690      1,032          -     94,342
        (Gain) loss on
         sale of assets      (18)   (29,057)      (237)         -    (29,312)
        Impairment of
         goodwill         38,154          -          -          -     38,154
                        -----------------------------------------------------
        Income before
         corporate items  19,599    121,678      6,391               147,668
        General and
         administrative                                               50,272
        Stock-based
         compensation                                                  2,465
        Foreign exchange
         (gain) loss                                                 (33,478)
        Reorganization
         costs                                                         2,766
        Income taxes                                                  43,469
                        -----------------------------------------------------
        Net earnings                                                  82,174
                        -----------------------------------------------------
        Capital
         expenditures
         (including
         acquisitions
         and deposits)    39,051    239,197      2,645          -    280,893
        Total assets     634,499  1,184,827     42,738          -  1,862,064
        Goodwill               -    103,652     58,521          -    162,173
        Future income
         tax asset
         (liability)     (14,279)   (72,522)    (1,927)         -    (88,728)
        ---------------------------------------------------------------------


        For the
         year ended                  United                Inter-
         December 31,   Canadian     States               segment
         2007           Drilling   Drilling Construction   Elimi-
        ($ thousands) Operations Operations   Operations  nations      Total
        ---------------------------------------------------------------------
        Revenue          297,007    298,777     89,927    (56,036)   629,675
        Operating
         expense         182,055    155,401     83,353    (56,036)   364,773
                        -----------------------------------------------------
        Gross margin     114,952    143,376      6,574          -    264,902

        Interest on
         long-term debt   20,132     12,475         42          -     32,649
        Interest on
         convertible
         debentures       16,946          -          -          -     16,946
        Depreciation and
         amortization     29,050     42,553        657          -     72,260
        Loss on sale of
         assets              325         30          -          -        355
                        -----------------------------------------------------
        Income before
         corporate items  48,499     88,318      5,875          -    142,692
        General and
         administrative                                               43,844
        Unit-based
         compensation                                                  2,450
        Foreign exchange
         loss                                                         12,354
        Income taxes                                                   4,520
                        -----------------------------------------------------
        Net earnings                                                  79,524
                        -----------------------------------------------------
        Capital
         expenditures
         (including
         acquisitions
         and deposits)    54,435    295,057        141          -    350,633
        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)
        ---------------------------------------------------------------------

    19. SIGNIFICANT CUSTOMERS

        At December 31, 2008, Trinidad had long-term, take-or-pay contracts
        in place with multiple significant oil and natural gas producing
        companies. Trinidad has two customers that provided in excess of 10%
        of Trinidad's 2008 revenue. In management's assessment, the future
        viability of Trinidad is not dependent on these customers.

    20. RELATED PARTY TRANSACTIONS

        All related party transactions were incurred during the normal course
        of operations on similar terms and conditions to those entered into
        with unrelated parties. These transactions are measured at the
        exchange amount, which is the amount of consideration established and
        agreed to by the related parties.

        Effective August 18, 2008, Trinidad closed a $12.7 million
        acquisition of an oilfield equipment fabrication company, which was
        substantially held by one of Trinidad's executive officers.

        Trinidad engages Blake, Cassels & Graydon LLP, a law firm in which
        an officer is a partner, to provide legal advice. During the year
        ended December 31, 2008, Trinidad incurred legal fees of $1.7 million
        (2007 - $0.9 million) to Blake, Cassels & Graydon LLP. As of
        December 31, 2008, $0.1 million was due to Blake, Cassels & Graydon
        LLP.

    21. 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.

    22. SUBSEQUENT EVENTS

        Early Renewal of Revolving Credit Facility
        ------------------------------------------

        On February 12, 2009, Trinidad announced the early renewal of the
        Company's revolving credit facility (the "Facility"). The Facility
        has been resized from $250.0 million to $225.0 million. The Facility
        is backed by a syndicate group which includes major Canadian, US and
        International financial institutions. The terms adjusted by the
        renewal of the Facility were only those associated with the terms of
        the revolving facility itself. All remaining long-term debt
        facilities remain unchanged. The Facility requires monthly interest
        payments at a specified spread over the BA rate. The Facility is
        covered by the same debt covenants as Trinidad's other term debt. The
        term debt mentioned above is secured by a general guarantee over the
        assets of the Company and its subsidiaries.

        The following table summarizes Trinidad's existing term-debt
        facilities:

        Debt                                               Repayment
        Facility    Currency   Amount     Maturity         requirements
        ---------------------------------------------------------------------
        Revolving                                          If not renewed,
         credit                $225.0     Next renewal      repayment due
         facility   CDN $       million    in April 2010    364 days later

        Five-year                                          1% amortization,
         term                  $100.0                       balloon repayment
         facility   CDN $       million   May 1, 2011       at maturity

        Five-year                                          1% amortization,
         term                  $125.0                       balloon repayment
         facility   US $        million   May 1, 2011       at maturity


        Updated 2009 Capital Expenditure Budget
        ---------------------------------------

        On February 19, 2009, Trinidad announced its updated capital
        expenditure budget for 2009 which includes a 12 month delay in the
        delivery of six new drilling rigs and the cancellation of four new
        service rigs.

        The six delayed drilling rigs remain under long-term, take-or-pay
        contract with the original customer and are expected to be completed
        in 2010, assuming improved market conditions. A portion of the
        capital costs associated with these rigs has been incurred due to the
        long-lead times on receiving some items of equipment. The customer
        for the rigs has agreed to pay Trinidad interest on the capital it
        has spent to date until the rigs are completed. Total capital costs
        incurred to date on these rigs total approximately $37.0 million.

        First Quarter 2009 Dividend Declaration
        ---------------------------------------

        On February 19, 2009, Trinidad declared a cash dividend for the first
        quarter of 2009 of $0.05 per common share to be paid April 15, 2009
        to shareholders of record on March 31, 2009. The current dividend
        declaration represents a reduction from the previous dividend level
        of $0.15 per share per quarter.
For further information:
For further information: Lyle Whitmarsh, President and Chief Executive
Officer or Brent Conway, Executive Vice President and Chief Financial Officer
or Lisa Ciulka, Director of Investor Relations at: Phone: (403) 265-6525, Fax:
(403) 265-4168, E-mail: lciulka@trinidaddrilling.com