Trinidad Drilling Ltd. reports 2009 results; strong operating results and
expanded US and international exposure

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

TSX SYMBOL: TDG and TDG.DB

CALGARY, March 3 /CNW/ - Trinidad Drilling Ltd. ("Trinidad" or the "Company") reported operating and financial results for 2009 reflecting strong gross margins, improved financial flexibility and expanded US and international operations.

"This past year has been a year of challenges across most industries and for most countries around the world, but it has also been a year of opportunity for Trinidad. These challenging times have given us an opportunity to demonstrate the strength of our business strategy and an opportunity to outperform our competitors," said Lyle Whitmarsh, Trinidad's President and Chief Executive Officer. "Trinidad's fleet of modern, deep rigs has positioned it as a leader in the unconventional shale plays across North America. Having the right style of equipment coupled with extensive long-term contract coverage has allowed us to keep our operations busy during an extremely competitive period. In addition, our unwavering focus on executing our business strategy has enabled us to expand our operations on several fronts in 2009."

Trinidad generated solid Adjusted net earnings(1) and Adjusted EBITDA(1) in 2009, a significant achievement given the challenging operating environment within which the Company was working. Adjusted net earnings were $29.8 million in 2009 while Adjusted EBITDA(1) was $193.5 million, compared to $89.3 million and $256.5 million in 2008, respectively.

    
    (1) Please see the Non-GAAP Measures Definitions section of this MD&A for
        further details.
    

2009 OPERATING HIGHLIGHTS

    
    (Quarter-over-quarter and full-year comparatives all relate to the
    comparable period in 2008)

    -   Trinidad's average Canadian drilling utilization rate in 2009 was
        35%, down from 57% in the previous year due to weak industry
        conditions. The Company continued its track record of substantially
        exceeding Canadian industry utilization which averaged 24% in 2009.
        In the fourth quarter, Trinidad's average Canadian drilling
        utilization rate was 44%, up from 36% in the third quarter and above
        Canadian industry utilization of 32% for the fourth quarter of 2009,
        but below the 61% recorded in the fourth quarter of 2008.

    -   The US and International drilling operations utilization levels
        averaged 63% in 2009 compared to 85% in 2008, reflecting the
        significant slowdown in drilling activity in the US during 2009. US
        industry land rig counts for 2009 averaged 1,036 rigs, down 42.2%
        from 1,791 rigs in 2008. Similar to Canada, utilization levels
        improved slightly in the fourth quarter, averaging 63% compared to
        61% in the third quarter. However, utilization rates remained below
        the 80% level recorded in the fourth quarter of 2008.

    -   During 2009, Trinidad added six new high-tech, deep-capacity drilling
        rigs to its fleet. The rigs are all under long-term, take-or-pay
        contracts and are operating in the US unconventional shale plays.

    -   In 2009, Trinidad expanded its Latin American presence by redeploying
        five existing, under-utilized rigs from its Canadian and US
        operations to higher-dayrate and higher-utilization areas in Mexico
        and Chile; bringing this to a total of 8 rigs operating in Latin
        America.
    

2009 FINANCIAL HIGHLIGHTS

    
    -   Revenue for the full year in 2009 was $582.6 million and
        $148.2 million for the fourth quarter, down 23.1% and 27.8%
        respectively. Reduced revenue levels in 2009 reflected weak industry
        conditions present throughout the year and lower utilization levels
        across Trinidad's fleet.

    -   Trinidad maintained a strong gross margin percentage(1) in 2009
        through a combination of cost reduction initiatives and contracted
        dayrates. In 2009, gross margin percentage was 42.4% compared to
        40.8% in 2008. In the fourth quarter, gross margin percentage
        remained stable at 40.3% compared to 41.0% for the same period in
        2008.

    -   Adjusted EBITDA(1) was $47.4 million in the fourth quarter of 2009
        and $193.5 million in the full year, down 31.9% and 24.5%,
        respectively. Lower revenues were the main factor causing the decline
        in 2009. The decline in revenues was partly offset by lower operating
        costs.

    -   Adjusted net earnings(1) were $29.8 million ($0.28 per share
        (diluted)) compared to $89.3 million ($0.98 per share (diluted)) in
        2008, a decrease of 67.0%. In addition to lower revenues, this
        decrease was also impacted by lower depreciation costs, a loss
        recorded on the sale of assets, partly offset by lower interest
        expenses.

    -   Net earnings in the fourth quarter of 2009 was $3.9 million ($0.03
        per share (diluted)) and a net loss of $22.4 million (($0.21) per
        share (diluted)) for the full year, a decrease in earnings of 82.1%
        and 127.3%, respectively. In 2009, Trinidad recorded an intangible
        asset impairment charge of $23.2 million, due to weak industry
        conditions in the barge drilling market. Net earnings before
        impairment of intangible assets(1) for 2009 was $0.1 million ($0.01
        per share (diluted)) down 99.4% from 2008's net earnings before
        impairment of goodwill. These lower earnings were a result of items
        mentioned above.

    -   At December 31, 2009, Trinidad's net debt(1) was $456.9 million, down
        18.3% from the previous year. Net debt levels decreased largely due
        to the application of proceeds raised through a $140.0 million equity
        offering in June of 2009.

    (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, 2009 and is dated March 2, 2010 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, 2009, 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)             2009        2008  Change*      2007  Change*
    -------------------------------------------------------------------------
    Revenue                582,591     757,900    (23.1)    629,675     (7.5)
    Gross margin(1)        246,742     309,495    (20.3)    264,902     (6.9)
    Gross margin
     percentage(1)           42.4%       40.8%      3.9       42.1%      0.7
    EBITDA(1)              164,507     287,470    (42.8)    206,254    (20.2)
      Per share
       (diluted)(2)           1.52        3.16    (51.9)       2.43    (37.4)
    Adjusted EBITDA(1)     193,511     256,457    (24.5)    221,058    (12.5)
      Per share
       (diluted)(2)           1.79        2.82    (36.5)       2.60    (31.2)
    Cash flow from
     operations            107,080     210,782    (49.2)    172,013    (37.7)
      Per share
       (basic)(2)             0.99        2.32    (57.3)       2.05    (51.7)
      Per share
       (diluted)(2)           0.99        2.32    (57.3)       2.02    (51.0)
    Cash flow from
     operations before
     change in non-cash
     working capital(1)    144,526     207,121    (30.2)    174,770    (17.3)
      Per share
       (diluted)(2)           1.34        2.28    (41.2)       2.06    (35.0)
    Net earnings (loss)    (22,439)     82,174   (127.3)     79,524   (128.2)
      Per share
       (basic)(2)            (0.21)       0.90   (123.3)       0.95   (122.1)
      Per share
       (diluted)(2)          (0.21)       0.90   (123.3)       0.94   (122.3)
    Net earnings before
     impairment of
     intangible assets
     and goodwill(1)           750     120,328    (99.4)     79,524    (99.1)
      Per share
       (basic)(2)             0.01        1.33    (99.2)       0.95    (98.9)
      Per share
       (diluted)(2)           0.01        1.32    (99.2)       0.94    (98.9)
    Adjusted net
     earnings(1)            29,754      89,315    (67.0)     94,328    (68.5)
      Per share
       (diluted)(2)           0.28        0.98    (71.4)       1.11    (74.8)
    Capital expenditures
     (including
     acquisitions)         162,563     277,901    (41.5)    386,042    (57.9)
    Net debt(1)            456,849     559,360    (18.3)    634,379    (28.0)
    Shares outstanding
     - basic
     (weighted
     average)(2)       107,915,093  90,804,564     18.8  83,952,252     28.5
    Shares outstanding
     - diluted
     (weighted
     average)(2)       107,915,093  91,003,946     18.6  84,957,250     27.0
    -------------------------------------------------------------------------

    * Represents the change from 2009.

    (1) Readers are cautioned that gross margin, gross margin percentage,
        EBITDA, Adjusted EBITDA, cash flow from operations before change in
        non-cash working capital, net earnings before impairment of
        intangible assets and goodwill, Adjusted net earnings, and net debt
        and the related per share information do not have standardized
        meanings 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.


    -------------------------------------------------------------------------
    OPERATING HIGHLIGHTS
    For the years ended                             %                    %
     December 31,            2009        2008  Change*      2007  Change*
    -------------------------------------------------------------------------
    Land Drilling Market
    Operating days
     - drilling
      Canada                 7,066      12,196    (42.1)      9,835    (28.2)
      United States and
       International(1)     13,889      15,076     (7.9)     12,112     14.7
    Rate per drilling day
      Canada (CDN$)         23,315      23,827     (2.1)     24,042     (3.0)
      United States and
       International
       (CDN$)(1)            23,336      23,098      1.0      23,603     (1.1)
      United States and
       International
       (US$)(1)             20,189      22,006     (8.3)     21,867     (7.7)
    Utilization rate
     - drilling
      Canada                   35%         57%    (38.6)        43%    (18.6)
      United States and
       International           63%         85%    (25.9)        85%    (25.9)
    CAODC industry average     24%         42%    (42.9)        38%    (36.8)
    Number of drilling
     rigs at year end
      Canada                    52          57     (8.8)         64    (18.8)
      United States and
       International            66          56     17.9          46     43.5
    Utilization rate for
     service rigs              30%         46%    (34.8)        49%    (38.8)
    Number of service
     rigs at year end           22          23     (4.3)         20     10.0
    Number of coring and
     surface casing rigs
     at year end                20          20        -          20        -

    Barge Drilling Market(2)
    Operating days           1,136       1,285    (11.6)        704     61.4
    Rate per drilling
     day (CDN$)             29,971      44,387    (32.5)     49,720    (39.7)
    Rate per drilling
     day (US$)              25,614      42,358    (39.5)     48,520    (47.2)
    Utilization rate(3)        78%         93%    (16.1)        98%    (20.4)
    Number of barge
     drilling rigs at
     year end                    1           1        -           1        -
    Number of barge
     drilling rigs under
     Bareboat Charter
     Agreements at
     year end                    3           3        -           3        -
    -------------------------------------------------------------------------

    * Represents the change from 2009.

    (1) Trinidad commenced its operations in Mexico effective November 2008
        and expanded its international operations into Chile effective August
        2009.
    (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 for that quarter.
    

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 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, gross margin percentage, EBITDA (as defined in Non-GAAP Measures Definitions section), Adjusted EBITDA, cash flow from operations before change in non-cash working capital, net earnings before impairment of intangible assets and goodwill, Adjusted net earnings, net debt and working capital. 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 2010 rig construction program, Trinidad will have 125 land drilling rigs ranging in depths from 1,000 - 6,500 metres and operations in Canada, the United States, Mexico and Chile. In addition to its land drilling rigs, Trinidad has 22 service rigs, 20 pre-set and coring rigs and 4 barge rigs 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 performed well in 2009 given the weak economic conditions and low industry activity levels present throughout the year. The Company remained focused on running its business efficiently, maintaining stable gross margins through a combination of cost control and contracted dayrates. Revenue, EBITDA and cash flow from operations were negatively impacted by lower utilization levels across the Company's fleet and reached lower levels than the previous year, while net earnings were also impacted by non-cash charges related to asset sales, impairment of intangible assets and unrealized foreign exchange losses. Despite this challenging environment, Trinidad did not lose sight of its long-term strategy and grew its business on several fronts; adding to its US operations, expanding its fleet in Mexico and adding a new area of operations in Chile. In addition, the Company extended the average term on its long-term, take-or-pay contracts and improved its financial flexibility by reducing net debt balances by 18.3% year over year.

During 2009, Trinidad completed the construction of six new high-tech rigs and delivered them into the Company's operations in the US. All six rigs are operating in the unconventional shale plays under three-to-five-year, take-or-pay contracts. Initially the Company had planned to construct an additional seven rigs destined for its US operations; however, given the extremely weak industry conditions and tight capital markets, Trinidad, in conjunction with its customers, decided to delay six rigs and cancel one rig. As market conditions have now improved, construction on the six delayed rigs has resumed and delivery is expected throughout 2010.

In addition to constructing new equipment, Trinidad also expanded geographically in 2009, redeploying existing, under-utilized equipment to higher-dayrate, higher-utilization areas. Strong performance from the initial three rigs moved into Mexico in 2008 led to a further four rigs being relocated from Canada, bringing the total Mexican fleet to seven by the end of 2009. All rigs in the Mexican fleet remain under contract. In the third quarter of 2009, Trinidad expanded further into Latin America. The Company moved an existing rig from its US operations to work in Chile where it is drilling geothermal wells under a two-year contract.

Trinidad's revenue for the year was down by 23.1% or $175.3 million compared to 2008, which was a direct result of lower operating days in both the Canadian and the US and International land drilling segments. Trinidad's total operating days decreased by 6,317 days or 23.2% for 2009 compared to 2008 as a result of lower customer demand, partly offset by the addition of six new rigs during the year and the redeployment of five rigs to higher utilization markets in Mexico and Chile. In Canada, Trinidad's rig utilization was 35.0% for the year as industry activity levels dropped to very low levels, particularly in the second and third quarters of the year. Despite the weak drilling activity levels, Trinidad's Canadian drilling rig utilization rate of 35.0% continued to outperform the industry average, exceeding the industry rate of 24.0% by 45.8% for the year. In the US and International land drilling operations, utilization rates averaged 63.0% in 2009 compared to 85.0% in the previous year. Trinidad's relatively high proportion of long-term, take-or-pay contracts in this segment helped maintain stronger utilization rates while industry average active rig counts in the US dropped by more than 42.2% year over year. Average dayrates in both segments remained relatively stable in Canadian dollars in 2009 compared to 2008. In the US and International segment, dayrates were down 8.3% year over year in US dollars reflecting the extremely competitive conditions and downward pricing pressure present during 2009.

While revenue levels were lower in 2009, gross margin percentage increased from 40.8% in 2008 to 42.4% in 2009. Trinidad was able to achieve strong gross margins during weak industry conditions due to its flexible cost structure and a change in rig mix. During 2009, Trinidad had a higher proportion of its deep-capacity, high-tech rigs working than in the prior year; these rigs typically generate higher gross margins than older, conventional style equipment.

Net earnings before impairment of intangible assets was $0.1 million or $0.01 per share (diluted) for 2009 in comparison to net earnings before goodwill impairment of $120.3 million or $1.32 per share (diluted) in 2008, driven largely by lower utilization across the Company. Given the weak market conditions impacting the barge drilling business in 2009, Trinidad recognized an impairment charge of $23.2 million related to the Bareboat Charters. The net impact on earnings per share was a reduction of $0.21 per share (diluted) for the year ended December 31, 2009 (see the Impairment of Intangible Assets section of this MD&A for further details). Net earnings (loss) was also impacted by slightly higher general and administrative costs, increased stock-based compensation expenses and a loss on sale of assets. A large movement in the Canadian/US exchange rate resulted in a $24.6 million foreign exchange loss in 2009 compared to a gain of $33.5 million in the prior year. The impact of these factors was partly offset by lower interest expense in 2009 reflecting Trinidad's lower debt balances and reduced depreciation costs as a result of the lower number of drilling days in both Canada and the US.

During 2009, Trinidad took several steps to improve its financial flexibility given the weak industry conditions present. In the first quarter of 2009, the Company reduced its dividend level and lowered forecast capital expenditures in order to conserve cash flow and focus on lowering debt levels. In addition, in June 2009, Trinidad issued equity with the net proceeds of approximately $133.8 million being applied against existing debt balances. At December 31, 2009, Trinidad's net debt was $456.8 million down $102.5 million from the end of 2008.

Trinidad has positioned itself at the forefront of the drilling industry with a modern, deep-capacity fleet and a track record of strong performance. The Company's high level of long-term, take-or-pay contracts provides stability to its revenue stream and backs up its growth opportunities. As at March 2, 2010, approximately 50% of the Company's total fleet was under long-term contract with an average term approximately of two years. Additionally, following the completion of the 2010 rig construction program, Trinidad expects to have approximately 45% of the Company's fleet working in the unconventional shale plays in North America.

RESULTS OF OPERATIONS

    
    Canadian Drilling Operations

    For the years ended December 31,
    ($ thousands except percentages
     and operating data)                      2009         2008     % Change
    -------------------------------------------------------------------------
    Revenue                                196,505      348,067        (43.5)
    Operating expense                      120,322      205,059        (41.3)
                                     ----------------------------------------
    Gross margin                            76,183      143,008        (46.7)
                                     ----------------------------------------
    Gross margin percentage                  38.8%        41.1%

    Operating days - drilling                7,066       12,196        (42.1)
    Rate per drilling day (CDN$)            23,315       23,827         (2.1)
    Utilization rate - drilling                35%          57%        (38.6)
    CAODC industry average                     24%          42%        (42.9)
    Number of drilling rigs at year end         52           57         (8.8)

    Utilization rate for service rigs          30%          46%        (34.8)
    Number of service rigs at year end          22           23         (4.3)
    Number of coring and surface casing
     rigs at year end                           20           20            -
    -------------------------------------------------------------------------
    

In 2009, Trinidad's Canadian drilling segment successfully maintained stable dayrates through weak market conditions and a highly competitive environment. Declining demand for oil and gas during 2009 led to lower cash flow levels for a large number of producers and reduced drilling budgets. As a result of these conditions, the industry average utilization dropped 42.9% from the 2008 level to 24.0% in 2009. Trinidad's utilization in 2009 averaged 35.0% and, although it was 38.6% lower than the previous year's average of 57.0%, it remained 45.8% higher than the industry average in 2009 of 24.0%, continuing the Company's track record of achieving industry-leading utilization levels. During the year, the Company's Canadian rig count dropped by five rigs or 8.8% following the redeployment of four rigs to Trinidad's Mexico operations in the latter half of 2009. In addition, one rig was removed from service.

Trinidad's fleet of young, technically-advanced rigs are purpose built for working in the unconventional resource plays with their deep-drilling ability, advanced control systems and state-of-the-art automation. Producers operating in these deeper plays typically have longer timelines in terms of both capital outlays and cash flows, making deeper fleets more defensive when commodity prices decline. For Trinidad, longer-term contracts on deeper-drilling projects incur less move days and downtime, generating more consistent dayrates and higher average utilization than the industry. Overall, Trinidad's above-average utilization rate and active rig count is reflective of how Trinidad has positioned itself at the forefront of the drilling industry with a modern, deep-capacity fleet.

Revenue in 2009 was down 43.5% from $348.1 million in 2008 to $196.5 million in 2009. The Company's drill days were down 42.1% to 7,066 days from 12,196 days in 2008 and directly affected the Canadian drilling segment's revenue level. According to the Canadian Association of Oilwell Drilling Contractors (CAODC), industry operating days also decreased 42.9% in 2009, reflecting the impact of the economic slowdown on the entire oilfield service industry. Although Trinidad experienced declines in both revenue and operating days in 2009, the Company was able to achieve a dayrate of $23,315 during the year, representing only a 2.1% decline from the dayrate of $23,827 in 2008. Over the past few years, Trinidad has added stability to its dayrates by incorporating a solid level of long-term, take-or-pay contracts which provide a steadier operating environment.

Operating costs in 2009 declined to $120.3 million from $205.1 million in 2008. As a percentage of revenues, operating costs represented a slight increase of 2.3% from 58.9% to 61.2%. As a result, the annual gross margin percentage in 2009 for Canada declined marginally by 2.3% from 41.1% in 2008 to 38.8% in 2009. These percentages remained relatively constant in 2009 as the Company was able to reduce costs of repairs and maintenance and recertification expenses due to the lower number of drill days in the year. In an unstable recessionary market, Trinidad has also been successful on maintaining its gross margin percentage through a number of cost reductions over the 2009 year, including operational efficiencies, staffing reductions, wage roll backs and lower discretionary spending. Management is encouraged by the Canadian drilling segment's ability to maintain stable gross margin percentages across the Canadian fleet on a year-over-year basis and its continued focus on minimizing costs while maximizing utilization, and believes this will continue to position Trinidad at the forefront of the industry as the Company moves into 2010.

Trinidad's well service rig division was significantly impacted in 2009 by the reduction in well completions caused by lower activity levels in the Western Canadian Sedimentary Basin (WCSB). The Company's service utilization rate in 2009 was 30.0% - a decline of 34.8% from the 2008 level of 46.0%. The drop in service activity is a result of fewer existing wells requiring completion work or production maintenance work. Due to the limited availability of work, competitive pricing pressure has been present on the bidding of those projects tendered.

In the coring and surface casing services division, Trinidad also experienced a decline in activity, resulting in reduced revenues and profitability. Lower activity began in 2008 and continued throughout 2009. The key factors influencing the lower revenue level are the large cutbacks on projects in the oil sands as a result of the drop in crude oil prices over the past eighteen months. One driver that has assisted in maintaining Canada's gross margin percentage was the receipt of early termination revenues of $5.0 million that was recognized mid-year in the coring and surface casing services division. Costs related to this project were minimal. As crude oil prices have begun to increase, the Company has seen an increase in available work; however the impact of these increases has mostly been mitigated by ongoing pricing pressure.

For 2009, the Canadian drilling industry experienced declines on many levels. As per the CAODC, there were 9,348 wells drilled on a completion basis during the year, representing a reduction of 54.9% from the 20,729 wells reported in 2008. Wells rig released in Canada in 2008 totalled 16,870 wells, a decline of 50.3% to 8,382 wells in 2009. Of these wells, directional and horizontal drilling continues to be the theme in the WCSB, 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 technical, deep-drilling capabilities. These capabilities are a key contributor to the achievement of higher utilization rates as compared to the industry.

United States and International Drilling Operations(1)

    
    For the years ended December 31,
    ($ thousands except percentages
     and operating data)                      2009         2008     % Change
    -------------------------------------------------------------------------
    Revenue                                350,454      366,803         (4.5)
    Operating expense                      188,945      207,523         (9.0)
                                     ----------------------------------------
    Gross margin                           161,509      159,280          1.4
                                     ----------------------------------------
    Gross margin percentage                  46.1%        43.4%

    Land Drilling Rigs
    Operating days - drilling               13,889       15,076         (7.9)
    Rate per drilling day (CDN$)            23,336       23,098          1.0
    Rate per drilling day (US$)             20,189       22,006         (8.3)
    Utilization rate - drilling                63%          85%        (25.9)
    Number of drilling rigs at year end         66           56         17.9

    Barge Drilling Rigs
    Operating days - drilling                1,136        1,285        (11.6)
    Rate per drilling day (CDN$)            29,971       44,387        (32.5)
    Rate per drilling day (US$)             25,614       42,358        (39.5)
    Utilization rate - drilling(2)             78%          93%        (16.1)
    Number of barge drilling rigs
     at year end                                 1            1            -
    Number of barge drilling rigs
     under Bareboat Charter Agreements
     at year end                                 3            3            -
    -------------------------------------------------------------------------

    (1) Trinidad commenced its drilling operations in Mexico effective
        November 2008 and expanded its international drilling operations into
        Chile effective August 2009.
    (2) 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 for that quarter.
    

Commensurate with the expansion of drilling operations into Mexico and Chile, Trinidad has included the results of operations for Mexico and Chile with the operating results of its US operations. Accordingly, this segment is named United States and International Drilling Operations.

Over the past few years, the land-drilling mix in the US and International operating segment has changed significantly. The majority of the segment's revenue in 2009 was driven by deeper rigs under long-term contracts which provide higher and more stable dayrates and utilization. As well, in both 2008 and 2009, the Company moved into international markets such as Mexico and Chile, where utilization levels and gross margins remain strong. Revenue from this segment remained relatively consistent year over year with $350.5 million recognized in 2009, down only 4.5% or $16.3 million from the prior year. There are several factors driving the US and International segment's ability to maintain its revenue level despite a decline in drilling market activity and a drop in commodity prices. During 2009, the Company added six newly constructed rigs into its US Operations operating in the unconventional Haynesville shale play under long-term, take-or-pay contracts. In addition, the Company moved four under-utilized Canadian rigs into Mexico and one US rig into Chile; all five rigs are under long-term contracts with expected utilization rates of approximately 100% and strong dayrates. The depressed industry conditions present in the US offset these positive changes by lowering utilization rates and operating days, particularly in Trinidad's non-contracted land drilling fleet and barge rigs.

In January 2009, as the world was experiencing recessionary conditions and an economic slowdown, the Company and its customers agreed to delay a part of the planned 2008-2009 rig construction program. Six of the rigs originally planned to be built in 2009 were delayed until 2010 with the expectation that market conditions would be stronger. Six rigs remained in the 2009 construction program and were successfully completed with two new rigs delivered in the first quarter, another two rigs delivered in the second quarter and the final two rigs delivered in the third quarter. Five of the six rigs built in 2009 were built at Trinidad's manufacturing facility, Victory Rig Equipment Corporation. At December 31, 2009, Trinidad's US and International Operations had 66 rigs, an increase of 10 drilling rigs from the prior year, or a 17.9% increase.

During the second quarter, Trinidad announced the renegotiation and extension of 17 long-term, take-or-pay contracts with a key US customer. These rigs had existing contracts that were due to expire over the next few years, and following this renegotiation, the average remaining term was extended by approximately one year, giving Trinidad added stability over a substantial portion of its revenue stream. In addition to changes in term, dayrates on the contracts were adjusted to accurately reflect the current operating environment. The impact of lower dayrates was considerably mitigated by reductions in operating costs and Trinidad experienced only a minimal impact to its gross margin percentage following these changes. The US and International land drilling operations average dayrate reflected these lower dayrates and the highly competitive environment for the Company's non-contracted fleet. In 2009, average US dollar denominated dayrates declined by 8.3% to US$20,189 from US$22,006 in 2008. In Canadian dollars, rates are similar year-over-year due to the strength of the US dollar during the first half of 2009.

Operating days for Trinidad's US and International land rigs in 2009 were down by 7.9% from 2008, flowing through to lower land rig utilization of 63.0% in 2009 compared to 85.0% in 2008. As mentioned previously, the majority of this decline relates to lower industry activity and weaker economic conditions. Baker Hughes drilling utilization statistics reported industry activity levels in the US declined steeply in comparison to the prior year. US industry land rig counts for 2009 averaged 1,036 rigs in comparison to a 1,791 rig count average in 2008, reflecting a difference of 42.2%. This change in market fundamentals in addition to significant volatility in commodity pricing were primarily responsible for the US and International segment's decline in both utilization and operating days.

Operating expenses decreased in 2009 by $18.6 million to $189.0 million from $207.5 million in 2009. Lower costs were related to reduced activity levels and operating days. The 9.0% favourable decline in operating costs exceeded the 4.5% decrease in revenues for the year, increasing the overall gross margin percentage from 43.4% to 46.1%. The improved margin in 2009 is a clear indication of the benefit to Trinidad and ongoing demand by its customers for its modern, deep-drilling fleet. In 2008, Trinidad's US operation's gross margins were negatively impacted by refurbishment work of approximately $4.4 million, as well as the incurrence of the losses from the Bareboat Charter related to its barge rig operations. For 2009, the intangible asset associated with the Bareboat Charter was impaired in the first quarter of 2009 removing the impact of this expense to the Bareboat's net revenues for the remainder of the year. Overall in 2009, management was successful in controlling operating costs and maintaining strong gross margins. This was accomplished through the combination of operating efficiencies, long-term contracts with higher utilization and day rates, as well as staff reductions and wage rollbacks.

Over the past few years, Trinidad has expanded its overall strategy into the international arena. The Company has moved rigs into areas of opportunity, such as Mexico and Chile. Redeploying rigs to higher-utilization and higher-dayrate areas increases the rigs' contribution to the Company's cash flow and improves the returns on assets. As of December 31, 2009, Trinidad has successfully moved seven rigs into the southern edge of the Chicontepec field in central eastern Mexico. The rigs are contracted to work at a utilization rate of 100% for an initial term of eighteen months, with a further 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. 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 also allows Trinidad to strategically redeploy rigs from areas which are subject to the impacts of seasonality or where assets are under-utilized.

In addition in 2009, Trinidad moved a rig from its US operations to Chile to create a new operating area. The rig is operating in northern Chile, where it is drilling geothermal wells for an Italian/Chilean joint venture company. The rig is contracted for a period of two years with a possible one year extension.

In January 2010, Trinidad resumed the construction of the six previously delayed rigs from 2008-2009 rig construction program. These rigs are expected to be completed and delivered into operations throughout 2010. Following the completion of this rig build program, the US and International operations will have approximately 65.0% of its drilling rigs committed under long-term, take-or-pay contracts.

During 2009, Trinidad's barge drilling rigs experienced lower overall drilling demand. Throughout 2009, there was softening of operating days, rates per drilling day and utilization as compared to 2008. Operating days for 2009 totalled 1,136 days - an 11.6% decline from 1,285 operating days in 2008. Overall in 2009, the rate per drilling day showed a 39.5% decline from US$42,358 in 2008 to US$25,614 in 2009, a difference of US$16,744 per drilling day. The main driver to the overall reduction was lower industry demand and high levels of competition for tendered work. In addition, throughout the year there were unfavourable losses in operating days due to logistical issues. Utilization at the end of 2009 was 78.0% compared to 93.0% at the end of 2008, a 16.1% decline. Offsetting this decline was additional service revenue of US$8.5 million generated through the provision of labour services to a third party with an additional mark up on these costs. This net revenue amount less associated expenses is included in Other in the Revenue section of the consolidated statement of operations. The barge drilling market operations showed a 5.0% increase in the fourth quarter compared to the third quarter's utilization of 73.0%, indicating improvements in drilling activity in this sector as Trinidad heads into 2010. Following increases in commodity prices, bid activity has increased with additional interest from customers. Given Trinidad's strong performance record and quality customer relationships, the Company expects that results in 2010 will show improvements from 2009.

Construction Operations

    
    For the years ended December 31,
    ($ thousands except percentage data)      2009         2008     % Change
    -------------------------------------------------------------------------
    Revenue(1)                             115,406      157,004        (26.5)
    Operating expense(1)                   106,356      149,797        (29.0)
                                     ----------------------------------------
    Gross margin                             9,050        7,207         25.6
                                     ----------------------------------------
    Gross margin percentage                   7.8%         4.6%

    (1) Includes inter-segment revenue and operating expenses of
        $79.8 million and $114.0 million for the years ended December 31,
        2009 and 2008, respectively.
    

Throughout 2008 and 2009, Trinidad's Construction segment manufactured six rigs under Trinidad's 2008/2009 rig build program. Moving forward into 2010, the segment has resumed production on the remaining six contracted rigs under this program which were originally postponed in early 2009. The segment reported $35.6 million of third party revenue and $79.8 million of intercompany revenues in 2009 compared to $43.0 million and $114.0 million, respectively in 2008. The segment continues to operate as a cost center to Trinidad's other divisions and accordingly, records no profit in relation to these activities. Included in this segment for 2009 are 12 months of operations related to the acquisition of Victory Rig Equipment Corporation, a privately-held oilfield equipment and fabrication company purchased by Trinidad on August 18, 2008. On January 1, 2009, Trinidad combined all of its oilfield equipment manufacturing and construction business into one segment, retaining the name Victory Rig Equipment Corporation. With operations in both Red Deer and Nisku, Alberta, Trinidad's construction segment offers the Company an additional advantage in manufacturing its own drillings rigs creating synergies to reduce costs, reduce production time and efficiently manage Trinidad's customers' specifications.

In 2009, revenue from the construction operations segment decreased by 26.5% or $41.6 million from $157.0 million in 2008 to $115.4 million in 2009. Despite the acquisition of Victory Rig Equipment Corporation in August 2008, representing a full year of operations in 2009, Trinidad had lower revenues for the year of 2009 due to the decline of third party work and the postponement of an additional six rigs to 2010 from the 2008/2009 rig build program. The construction of three rigs built for a major third party customer increased revenues and margins in the latter half of 2008 and first quarter of 2009.

Consistent with the decline of revenue in 2009, operating expenses declined 29.0% from 2008, with a similar decline in both third party and intercompany work. In addition to the intercompany work performed on the five rigs in 2009, the segment also performed modification work for the relocation of the four Trinidad rigs from Canada to Mexico, and one rig to Chile from the US operating segment. The segment's gross margin percentage increased in 2009 to 7.8% from 4.6% in 2008 largely due to the third party work performed in the first and fourth quarters of 2009. On top of the construction work on the three rigs mentioned previously for a third party, the segment performed an external project of approximately $9.0 million in revenues in the fourth quarter of 2009. At December 31, 2009, this project was substantially completed. With the 2010 construction work resumed on the remaining six rigs from the 2008/2009 rig build program and as the segment continues to pursue prospects of similar third party work, the Company has seen an increase in opportunities in this sector in the initial months of 2010.

GENERAL AND ADMINISTRATIVE EXPENSES

    
    For the years ended December 31,
    ($ thousands except percentage data)      2009         2008     % Change
    -------------------------------------------------------------------------
    General and administrative expenses     53,117       50,272          5.7
    % of revenue                              9.1%         6.6%
    

General and administrative (G&A) expenses were $53.1 million in 2009, an increase of 5.7% from $50.3 million in 2008. As a percentage of revenue, G&A expenses were 9.1% in 2009 versus 6.6% in the year ended December 31, 2008. In the second quarter of 2009, Trinidad implemented cost reduction measures including administration and office staff reductions, wage roll backs and minimization of discretionary spending. Incremental expansion costs into Mexico and Chile, as well as the inclusion of 12 months of G&A expenses from the acquisition of Victory Rig Equipment Corporation offset these reductions. Approximately $1.0 million of the expansion costs were non-recurring, professional expenses related to international expansion costs and tax planning. Although the Company experienced increases in bad debts expenses during the first half of 2009, it was able to partially recover allowances previously incurred in the latter half of 2009 to reduce total bad debt expense before year end. A significant portion of G&A expenses remain fixed regardless of revenue levels and Trinidad continues to maintain G&A expenses at a relatively consistent level and will continue prudent administration of G&A expenses spending moving forward.

INTEREST

    
    For the years ended December 31,
    ($ thousands)                             2009         2008     % Change
    -------------------------------------------------------------------------
    Interest on long-term debt              17,956       22,018        (18.4)
    Effective interest on deferred
     financing costs                         3,207        1,691         89.7
                                     ----------------------------------------
                                            21,163       23,709        (10.7)
                                     ----------------------------------------

    Interest on convertible debentures      27,447       27,457            -
    Effective interest on deferred
     financing costs                         2,663        2,641          0.8
    Accretion of convertible debenture       5,296        4,836          9.5
                                     ----------------------------------------
                                            35,406       34,934          1.4
                                     ----------------------------------------
    

Total interest expense on long-term debt of $21.2 million was 10.7% lower in 2009 in comparison to 2008 at $23.7 million. The decline of $2.5 million of interest on long-term debt is a result of lower average long-term debt levels and lower BA and LIBOR rates in 2009. Proceeds from an equity financing of $133.8 million (net of share issue costs) were applied to outstanding long-term debt amounts during mid-year of 2009. Prepayment penalties on the early repayment were offset by lower interest costs.

Interest and effective interest on accretion of convertible debentures and effective interest on deferred financing costs remained consistent in 2009 at $35.4 million in 2009 versus $34.9 million in 2008 - a 1.4% difference. Please refer to the section of the MD&A titled "Liquidity and Capital Resources - Convertible Debentures" for details on Trinidad's ability to acquire 10% of the convertible debentures public float by way of normal course issuer bid.

STOCK-BASED COMPENSATION

    
    For the years ended December 31,
    ($ thousands)                             2009         2008     % Change
    -------------------------------------------------------------------------
    Stock-based compensation                 4,366        2,465         77.1
    

Stock-based compensation in 2009 was $4.4 million, representing an increase of $1.9 million or 77.1% from the 2008 year. The majority of the increase relates to Trinidad's new incentive programs, the Performance Share Unit Plan (PSU Plan) and the Deferred Share Unit Plan (DSU Plan) introduced in 2008. Costs related to these plans are subject to the fair value method using the Company's closing share price at each reporting period. Therefore in 2009, PSUs generated an expense for the year of $3.1 million while the DSUs expense was $0.8 million in comparison to $0.6 million and $0.1 million, respectively in 2008. A significantly higher closing share price at December 31, 2009 was the key driver for the increase in 2009. Stock-based compensation expense on the Company's Incentive Option Plan of $0.5 million in 2009 versus $1.7 million in 2008 is also included in these costs.

FOREIGN EXCHANGE LOSS (GAIN)

    
    For the years ended December 31,
    ($ thousands)                             2009         2008     % Change
    -------------------------------------------------------------------------
    Foreign exchange loss (gain)            24,638      (33,478)      (173.6)
    

Trinidad's US, Mexican and Chilean operations have expanded the Company's US and International presence in 2009. As a result, upon consolidation, Trinidad's US and International 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 entities on US denominated intercompany balances continue to be recognized in the statement of operations. For 2009, Trinidad recognized a loss of $24.7 million versus a gain of $33.5 million in 2008. The Canadian dollar strengthening over the latter half of 2009 has resulted in Trinidad's Canadian divisions recognizing significant foreign exchange losses on intercompany balances with Trinidad's US and International operations. Further, significant growth in these intercompany balances, as a result of the rig transfers that were completed from Canada to the US, Mexico and Chile, and rig construction programs that were funded through the Canadian revolving credit facility, has caused foreign exchange fluctuations to become more pronounced. A loss of $15.4 million on foreign currency translation adjustments on intercompany balances corresponds to an equal and offsetting unrealized gain in the US and international subsidiaries included in OCI and disclosed in the Company's notes to the consolidated financial statements. The remaining foreign exchange losses of $9.2 million relate to $7.4 million of unrealized losses on translation of foreign denominated working capital accounts in the Canadian entities at December 31, 2009 and $1.8 million on actual realized losses on settlement on these accounts throughout the year of 2009.

DEPRECIATION AND AMORTIZATION

    
    For the years ended December 31,
    ($ thousands)                             2009         2008     % Change
    -------------------------------------------------------------------------
    Depreciation                            86,448       94,130         (8.2)
    Amortization of intangible assets          584          212        175.5
                                     ----------------------------------------
                                            87,032       94,342         (7.7)
                                     ----------------------------------------
    Loss (gain) on sale of assets           10,544      (29,312)      (136.0)
    

Depreciation declined in 2009 by 8.2% from $94.1 million in 2008 to $86.5 million in 2009. A fall in drilling rig utilization and lower operating days in 2009 caused depreciation expense to be lower in both the Canadian and US drilling divisions. Offsetting this reduction was additional depreciation expense in both the Construction segment due to the Victory Rig Corporation acquisition in August 2008 and the International operations due to the redeployment of rigs to new international operations commencing in late 2008 and throughout 2009. As a percentage of revenues, depreciation represented 14.9% in 2009, an increase of 2.5 percentage points from 2008 at 12.4%. The increase relates to higher proportion of drilling rigs with greater depth capacities and higher capital asset costs operating during the year, leading to increased depreciation expense as a percentage of revenue.

With the 2008 acquisition of Victory Rig Corporation, 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 2009, the amortization of intangibles represented a full year at $0.6 million as compared to $0.2 million in 2008 which included approximately four months of amortization.

Trinidad recognized a loss on disposal of assets of $10.5 million in 2009. The majority of this amount was related to the replacement of 33 diesel engines on 11 US based rigs, during the first two quarters of the fiscal year. Trinidad has filed a warranty claim related to these engines. At December 31, 2009 and March 2, 2010, Trinidad is unable to conclude on the likelihood or quantify the proceeds, if any, related to this warranty claim. The 2008 gain on sale of assets of $29.0 million was related to the Company's sale of a newly constructed barge drilling rig for proceeds of US$53.5 million.

IMPAIRMENT OF GOODWILL

    
    For the years ended December 31,
    ($ thousands)                             2009         2008     % 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. Impairment tests completed in 2009 on Trinidad's goodwill has indicated that the fair value exceeds the carrying value and thus no impairment charge is required. In 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. A goodwill impairment charge of $38.2 million was recorded in 2008 on Trinidad's Canadian drilling operations segment. No goodwill remains in this segment.

IMPAIRMENT OF INTANGIBLE ASSET

    
    For the years ended December 31,
    ($ thousands)                             2009         2008     % Change
    -------------------------------------------------------------------------
    Impairment of intangible asset          23,189            -            -
    

During the first quarter of 2009, the Company recorded an intangible impairment charge of $23.2 million related to the Bareboat Charters in the Company's US and International segment. The intangible asset was recognized in connection with the acquisition of Axxis Drilling Inc (Axxis) on July 5, 2007. The original value of $39.6 million was related to the US$12.5 million annual payments to the former owners of Axxis in relation to the Bareboat Charters. The intangible asset was originally amortized over the period of the payment term, ending July 2010. Management concluded the remaining value of $23.2 million was fully impaired based on the outlook for the barge drilling market and its adverse effect on the Bareboat Charters up until July 2010. The entire amount has been recognized as an impairment of intangible assets in the statement of operations for the year ended December 31, 2009. For 2009, in conjunction with Trinidad's annual goodwill impairment testing, management also reviewed the estimated fair value of the remaining intangible assets related to the acquisition of Victory Rig Equipment Corporation on August 18, 2008. Trinidad's management concluded that the fair value exceeded the carrying value of these intangible assets, thus no impairment charges were taken for the year ended December 31, 2009.

REORGANIZATION COSTS

    
    For the years ended December 31,
    ($ thousands)                             2009         2008     % 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 recorded these reorganization costs in the statement of operations for the year ended December 31, 2008.

INCOME TAXES

    
    For the years ended December 31,
    ($ thousands)                             2009         2008     % Change
    -------------------------------------------------------------------------
    Current tax expense                      1,871        1,504         24.4
    Future tax expense                       7,741       41,965        (81.6)
    

The current tax expense for the year ended December 31, 2009 has increased by 24.4% to $1.9 million over the prior year as a result of an increase in current taxes payable in the construction segment, resulting in current taxes of $1.5 million for this segment. In addition, current taxes of $0.4 million were incurred in relation to the additional Mexican and Chilean operations. The increase in current taxes in the construction segment was partially offset by a $0.5 million tax refund granted in relation to Scientific Research and Experimental Development.

Future income tax expense decreased by $34.2 million, or 81.6%, to $7.7 million. The decrease is primarily a reflection of the $138.4 million change in net earnings before taxes from 2008 to the net loss before taxes in 2009, offset by permanent differences of $2.9 million, therefore increasing the Company's future tax assets relating to non-capital loss carryforwards by $61.1 million. The expected future tax recovery was further offset by the increase in taxable temporary differences relating to capital assets; differences between tax depreciation and GAAP depreciation created larger temporary differences in Trinidad's capital asset base resulting in a greater future tax liability on these assets at December 31, 2009. In addition, tax rates increased in the US due to greater activity taking place in the State of Louisiana, offset by a scheduled reduction in Canadian current income tax rates.

NET EARNINGS (LOSS) AND CASH FLOW

    
    For the years ended December 31,
    ($ thousands except per share data)       2009         2008     % Change
    -------------------------------------------------------------------------
    Net earnings (loss)                    (22,439)      82,174       (127.3)
      Per share (diluted)                    (0.21)        0.90
    Net earnings before impairment of
     intangible assets and goodwill(1)         750      120,328        (99.4)
      Per share (diluted)                     0.01         1.32
    Adjusted net earnings(2)                29,754       89,315        (67.0)
      Per share (diluted)                     0.28         0.98
    Cash flow from operations              107,080      210,782        (49.2)
      Per share (diluted)                     0.99         2.32
    Cash flow from operations before
     change in non-cash working capital    144,526      207,121        (30.2)
      Per share (diluted)(2)                  1.34         2.28

    (1) Trinidad recorded an impairment of intangible assets of $23,189 in
        2009 and an impairment of goodwill of $38,154 in 2008.
    (2) Please see Non-GAAP Measures definition section of this MD&A for
        further details.
    

CHANGE IN NET EARNINGS (LOSS)

    
                                                                      Change
    For the years ended December 31,                                  (loss)/
    ($ thousands except per share data)       2009         2008     recovery
    -------------------------------------------------------------------------
    Revenues                               582,591      757,900     (175,309)
    Operating                              335,849      448,405      112,556
                                     ----------------------------------------
    Gross margin                           246,742      309,495      (62,753)
                                     ----------------------------------------
    Losses:
      Foreign exchange loss (gain)          24,638      (33,478)     (58,116)
      Loss (gain) on sale of assets         10,544      (29,312)     (39,856)
      Other(1)                             116,037      115,650         (387)
    Recoveries:
      Depreciation and amortization         87,032       94,342        7,310
      Impairment of intangible assets
       and goodwill                         23,189       38,154       14,965
      Future tax expense                     7,741       41,965       34,224
                                     ----------------------------------------
    Net earnings (loss)                    (22,439)      82,174     (104,613)

    (1) "Other" includes all other expenses from the statement of operations
        for the years of 2009 and 2008.
    

For 2009, the Company recorded a consolidated net loss of $22.4 million, a decline of 127.3% or $104.6 million from consolidated net earnings of $82.2 million recorded in 2008. The difference is largely the result of reduced utilization levels resulting in a drop of $175.3 million in consolidated revenues from the prior year. Despite the lower activity in 2009, Trinidad was able to mitigate the lower revenue levels and narrow the overall decline by reducing operating costs at a higher rate. Gross margins in 2009 totalled $246.7 million compared to $309.5 million in 2008, a decrease of 20.3%. These changes flowed through to consolidated gross margin percentage (total revenues less total operating expenses divided by total revenues) and led to an increase from 40.8% in 2008 to 42.4% in 2009. Other factors impacting the decline in consolidated net earnings were the changes in foreign exchange loss (gain) of $58.1 million and the loss (gain) on sale of assets of $39.9 million totalling a decrease in net earnings (loss) from 2008 of $98.0 million. Partly offsetting this negative impact was a depreciation reduction of $7.3 million, a reduction on goodwill and intangible assets impairment of $15.0 million and tax reduction of $34.2 million. In total, the positive changes amounted to a reduction of $56.5 million from 2008. Further details on all above mentioned changes are outlined in previous sections of this MD&A.

Cash flow from operations decreased by 49.2% from $210.8 million cash inflow ($2.32 per share (diluted)) in 2008 to a cash inflow of $107.1 million ($0.99 per share (diluted)) in 2009. Cash flow from operations before changes in non-cash working capital decreased by 30.2% from an inflow of $207.1 million ($2.28 per share (diluted)) to an inflow of $144.5 million ($1.34 per share (diluted)) in 2009. Change in non-cash working capital in 2009 was related to an outflow of $37.4 million in 2009 in comparison to an inflow of $3.7 million in 2008. The difference is related to a greater amount of outflows in the working capital components of liabilities, particularly accounts payable and accrued liabilities which were greater than the inflows from the working capital assets such as accounts receivable and prepaid expenses for 2009. With this non-cash operating working capital decline, the decrease in cash flow from operations was also impacted by the current period's net loss of $22.4 million as compared to the net earnings of $82.2 million in 2008. Overall, Trinidad's operations continue to successfully generate significant positive cash flows from its operating activities company-wide.

Declines in per share and per share diluted calculation are impacted by the increase of weighted-average number of shares outstanding in 2009 of 107,915,093 shares (basic and diluted) versus 90,804,564 basic shares and 91,003,946 diluted shares in 2008. The primary difference is the issue of 27,184,500 shares on June 25, 2009 from a bought deal equity financing for gross proceeds of $140.0 million.

FOURTH QUARTER AND QUARTER BY QUARTER ANALYSIS

    
    ---------------------------------------------------------------
                                                2009
    ($ millions except
     per share data and
     operating data)              Q4        Q3        Q2        Q1
    ---------------------------------------------------------------
    Financial Highlights
    Revenue                    148.2     126.1   116.7(1)    191.6
    Gross margin                59.7      53.0      52.5      81.5

    Net earnings                 3.9     (12.1)     (8.6)  (5.6)(2)
    Effective interest on
     financing costs             1.6       1.6       1.6       1.1
    Accretion on convertible
     debentures                  1.5       1.3       1.3       1.2
    Stock-based compensation    (0.1)      2.1       1.7       0.7
    Unrealized foreign
     exchange loss (gain)        6.5      11.4       9.9      (5.0)
    Depreciation and
     amortization               23.3      20.6      19.1      24.0
    Loss (gain) on sale of
     assets                      0.6       0.3       5.6       4.1
    Impairment of intangible
     assets                        -         -         -      23.2
    Impairment of goodwill         -         -         -         -
    Future income tax expense
     (recovery)                  1.1       1.7      (2.9)      7.8
                             --------------------------------------
    Cash flow from operations
     before change in
     non-cash working capital   38.4      26.9      27.7      51.5
    Net earnings (loss) per
     share (diluted)            0.03     (0.10)    (0.09)    (0.06)
    Cash flow from operations
     before change in non-cash
     working capital per
     share (diluted)            0.32      0.22      0.29      0.55
    ---------------------------------------------------------------


    -------------------------------------------------------------------------
                                                2008                    2007
    ($ millions except
     per share data and
     operating data)              Q4        Q3        Q2        Q1        Q4
    -------------------------------------------------------------------------
    Financial Highlights
    Revenue                    205.3     191.7     141.2     219.7     145.8
    Gross margin                84.2      73.1      53.8      98.4      58.8

    Net earnings              21.8(3)     20.4       1.1      38.9      17.9
    Effective interest on
     financing costs             1.1       1.1       1.1       1.1       1.1
    Accretion on convertible
     debentures                  1.2       1.2       1.2       1.1       1.2
    Stock-based compensation     0.9       1.2       0.1       0.2       0.4
    Unrealized foreign
     exchange loss (gain)      (22.0)     (6.6)      0.9      (4.1)      0.2
    Depreciation and
     amortization               25.8      24.0      20.5      24.0      19.0
    Loss (gain) on sale of
     assets                    (29.0)        -      (0.2)     (0.1)      0.2
    Impairment of intangible
     assets                        -         -         -         -         -
    Impairment of goodwill      38.2         -         -         -         -
    Future income tax expense
     (recovery)                 19.8      10.3       2.5       9.4      (7.8)
                             ------------------------------------------------
    Cash flow from operations
     before change in
     non-cash working capital   57.8      51.6      27.2      70.5      32.2
    Net earnings (loss) per
     share (diluted)            0.23      0.21      0.01      0.44      0.21
    Cash flow from operations
     before change in non-cash
     working capital per
     share (diluted)            0.60      0.53      0.31      0.75      0.38
    -------------------------------------------------------------------------

    (1) Previously reported revenue and operating costs were both reduced by
        $8.8 million to more properly reflect the characterization of certain
        activities as inter-segment. There were no changes to previously
        reported gross margin, net earnings (loss) and other related amounts.
    (2) Includes impairment of intangible asset charge of $23.2 million.
    (3) Includes impairment of goodwill charge of $38.2 million.


    QUARTERLY ANALYSIS                          2009
    ($ millions except
     per share and
     operating data)              Q4        Q3        Q2        Q1
    ---------------------------------------------------------------
    Operating Highlights
    Land Drilling Market
    Operating days -
     drilling
      Canada                   2,090     1,739       692     2,545
      United States and
       International(1)        3,994     3,419     3,233     3,243
    Rate per drilling day
      Canada (CDN$)           22,543    21,486    23,564    25,132
      United States and
       International
       (CDN$)(1)              21,887    21,819    23,747    27,124
      United States and
       International
       (US$)(1)               20,355    19,632    19,554    21,961
    Utilization rate -
     drilling
      Canada                     44%       36%       14%       51%
      United States and
       International(1)          63%       61%       61%       64%
    CAODC industry average       32%       21%       11%       36%
    Number of drilling rigs
     at quarter end
      Canada                      52        53        53        57
      United States and
       International(1)           66        66        64        58
    Utilization for
     service rigs                32%       27%       19%       41%
    Number of service rigs
     at quarter end               22        23        23        23
    Number of coring and
     surface casing rigs
     at quarter end               20        20        20        20

    Barge Drilling Market(2)
    Operating days               274       266       351       245
    Rate per drilling day
     (CDN$)                   20,275    28,805    30,250    41,183
    Rate per drilling day
     (US$)                    19,482    25,736    24,906    33,353
    Utilization rate             75%       72%       96%       68%
    Number of drilling rigs
     at quarter end                1         1         1         1
    Number of drilling
     rigs under Bareboat
     Charter Agreements at
     quarter end                   3         3         3         3
    ---------------------------------------------------------------


    QUARTERLY ANALYSIS                          2008                    2007
    ($ millions except
     per share and
     operating data)              Q4        Q3        Q2        Q1        Q4
    -------------------------------------------------------------------------
    Operating Highlights
    Land Drilling Market
    Operating days -
     drilling
      Canada                   3,034     3,411     1,742     4,009     2,135
      United States and
       International(1)        3,757     3,861     3,783     3,675     3,399
    Rate per drilling day
      Canada (CDN$)           26,358    21,772    23,219    24,517    23,631
      United States and
       International
       (CDN$)(1)              26,418    22,668    21,565    21,735    21,404
      United States and
       International
       (US$)(1)               22,882    22,049    21,449    21,636    21,650
    Utilization rate -
     drilling
      Canada                     61%       63%       31%       72%       37%
      United States and
       International(1)          80%       85%       87%       87%       83%
    CAODC industry average       43%       48%       20%       56%       37%
    Number of drilling rigs
     at quarter end
      Canada                      57        60        62        62        64
      United States and
       International(1)           56        50        48        48        46
    Utilization for
     service rigs                45%       49%       29%       62%       57%
    Number of service rigs
     at quarter end               23        20        20        20        20
    Number of coring and
     surface casing rigs
     at quarter end               20        20        20        20        20

    Barge Drilling Market(2)
    Operating days               347       305       361       272       352
    Rate per drilling day
     (CDN$)                   47,583    40,678    41,500    48,128    47,536
    Rate per drilling day
     (US$)                    41,401    39,620    41,268    47,910    47,991
    Utilization rate             94%       83%      100%     98%(2)      96%
    Number of drilling rigs
     at quarter end                1         1         1         1         1
    Number of drilling
     rigs under Bareboat
     Charter Agreements at
     quarter end                   3         3         3         3         3
    -------------------------------------------------------------------------

    (1) Trinidad commenced its operations in Mexico effective November 2008
        and expanded its international operations into Chile effective
        August 2009.
    (2) 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.
    

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, 2009, with comparable information for the same time period of 2008:

    
    Canadian Drilling Operations

                                             Three        Three
                                            months       months
                                             ended        ended
    ($ thousands except                December 31, December 31,
     percentage data)                         2009         2008     % Change
    -------------------------------------------------------------------------
    Revenue                                 53,532       88,942        (39.8)
    Operating expense                       33,597       50,308        (33.2)
                                     ----------------------------------------
    Gross margin                            19,935       38,634        (48.4)
                                     ----------------------------------------
    Gross margin percentage                  37.2%        43.4%


    United States and International Operations

                                             Three        Three
                                            months       months
                                             ended        ended
    ($ thousands except                December 31, December 31,
     percentage data)                         2009         2008     % Change
    -------------------------------------------------------------------------
    Revenue                                 84,737      103,859        (18.4)
    Operating expense                       47,058       58,292        (19.3)
                                     ----------------------------------------
    Gross margin                            37,679       45,567        (17.3)
                                     ----------------------------------------
    Gross margin percentage                  44.5%        43.9%


    Construction Operations

                                             Three        Three
                                            months       months
                                             ended        ended
    ($ thousands except                December 31, December 31,
     percentage data)                         2009         2008     % Change
    -------------------------------------------------------------------------
    Revenue(1)                              15,544       71,081        (78.1)
    Operating expense(1)                    13,364       71,073        (81.2)
                                     ----------------------------------------
    Gross margin                             2,180            8            -
                                     ----------------------------------------
    Gross margin percentage                  14.0%         0.0%

    (1) Includes inter-segment revenue and operating expenses of $5.6 million
        and $58.5 million for the three months ended December 31, 2009 and
        2008, respectively.
    

Fourth Quarter Analysis

An overview of the quarter-by-quarter analysis above shows results are trending upward in comparison to the previous two quarters of 2009. Revenue in the Canadian drilling operations segment was lower in the fourth quarter of 2009 at $53.5 million, representing a decline of $35.4 million or 39.8% from $88.9 million for the fourth quarter of 2008. The majority of this decline relates to lower drilling days of 2,090 days compared to 3,034 days in the same period of 2008. This equates to a utilization rate of 44.0% in the fourth quarter of 2009 compared to a utilization rate of 61.0% in the same quarter of 2008. In addition, the Canadian drilling rig count dropped to 52 drilling rigs at the end of 2009 versus 57 rigs at the end of 2008. The reduced rig count is largely due to the redeployment of four rigs to Mexico during the third and fourth quarters of 2009. The average rate per drilling day was $22,543 in the fourth quarter of 2009 in comparison to the average rate per drilling day of $26,358 in fourth quarter 2008. Year over year, gross margin as a percentage, was 37.2% in the final quarter of 2009 versus 43.4% in the final quarter of 2008. The lower gross margin percentage quarter over quarter is representative of the overall change in rig mix in 2009 which resulted in a gross margin percentage for the year of 38.8% down from 41.1% in 2008.

For the fourth quarter of 2009, revenues in the US and International drilling segment were $84.7 million, while in the fourth quarter of 2008 revenues were $103.9 million, showing a decline of 18.4% or $19.1 million. Lower utilization rates and dayrates continued in the final quarter of 2009 reflecting the renegotiation of 17 long-term, take-or-pay contracts with a US customer in the second quarter of 2009 and a competitive spot market. Dayrates in the fourth quarter of 2009 were US$20,355 versus US$22,882 in 2008 with a rig count of 66 rigs in the quarter compared to 56 rigs in the same quarter of 2008. Gross margin percentage increased year over year for the fourth quarter from 43.9% in 2008 to 44.5% in 2009. The increase in the gross margin percentage is reflective of higher margin percentages from drilling rigs in unconventional resource plays with the ability to drill deeper, directional and horizontal deeper rigs, as well as the higher margin percentage generated from Trinidad's international rigs located in Mexico and Chile. The fourth quarter also includes several cost-cutting initiatives that continued from prior quarters.

For the barge rig drilling division, in the US and International drilling operations segment, revenues were down substantially from the same period in 2008 due to the decline in dayrates of US$19,482, a 52.9% decline quarter over quarter. Operating days were also down 21.0% from 347 days to 274 days. Although the rig utilization is down from prior year's fourth quarter, the rig utilization in the fourth quarter in 2009 rose to 75.0% above the 72.0% in the third quarter of 2009.

With Trinidad's expansion into Mexico and Chile, the fourth quarter of 2009 was the first quarter to include activity from all the seven rigs in Mexico and the one rig in Chile. The final Mexican rig began operations early in the fourth quarter of 2009 while the Chilean rig started in the third quarter.

The Construction segment generated lower revenues in the final quarter of 2009 of $15.5 million, in comparison to $71.1 million generated in 2008. A large part of the $55.6 million difference is due to construction work on three drilling rigs for a third party customer with final completion in the second quarter of 2009. As well, there was substantial work performed in fourth quarter of 2008 on the 2008/2009 rig construction program for the five rigs constructed and delivered in the first three quarters of 2009. Activity levels slowed down in the fourth quarter of 2009 with construction of the six delayed rigs not resuming until early 2010. This delay of rig construction work also slowed down inter-segment revenues to only $5.6 million in the fourth quarter, compared to inter-segment revenue $58.5 million in 2008 in the fourth quarter. Modification work on the redeployment of rigs moved to international destinations in 2009 was substantially completed towards the end of third quarter of 2009; therefore minimal inter-segment revenues were included in the fourth quarter. In 2008, this segment generated intercompany revenue from the first three rigs transferred into Mexico in the fourth quarter on 2008. With less inter-company work in the fourth quarter in 2009, the construction segment performed a project of approximately $9.0 million in revenues for a third-party customer delivering higher than historical margins, bringing the segment's margin to 14.0% for the fourth quarter of 2009. At December 31, 2009, this project was substantially completed.

Quarter by Quarter Analysis

A comparison of Trinidad's quarterly results, at any given time, requires consideration of movement in crude oil and natural gas pricing and seasonality over the past two years. Commodity prices ultimately drive the level of exploration and development activities carried out by the Company's customers and the associated demand for the oilfield services provided by Trinidad. Generally speaking, North American markets have greater exposure to natural gas prices while international markets are more heavily weighted to crude oil projects. From a seasonality perspective, Trinidad operates a substantial number of rigs in western Canada and therefore operations are impacted by weather and seasonal factors. The winter season, which occurs during the first quarter, is generally a busy period in western Canada as oil and 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 in western Canada are usually representative of average activity levels.

Trinidad's continued expansion into the US and international markets have reduced the Company's overall exposure to the seasonal factors that are present in its Canadian operations. Operators in the US, Mexico and Chile have more flexibility to work throughout the year. This increased number of available operating days has allowed Trinidad to better manage its business with more sustainable cash flow throughout the annual cycle. This was evident throughout 2008 and 2009 as Trinidad expanded its operations internationally, redeploying three rigs into Mexico in 2008. Expansion continued into 2009 with another four rigs from Canada moving into Mexico and one US rig into Chile. Trinidad continues to pursue other international opportunities into the future.

Overall in 2008, Trinidad performed strongly in both the western Canadian and US drilling markets, as dayrates and utilization levels generally improved. The Company's revenue also continued to grow as a result of acquisitions, redeployment of existing under-utilized assets into regions with higher activity levels, the continued deployment of rigs under previous rig construction programs and an improvement in market conditions. Upward momentum in Trinidad's operations was evident throughout 2008 as reflected in the growth in the Company's revenue, gross margin and EBITDA. During the 2008 year, in addition to higher dayrates, the US dollar strengthened, and Trinidad reported a large foreign exchange gain. However, a goodwill impairment charge, higher interest, depreciation expense, increased income taxes and reorganization costs from conversion back to a corporation downwardly impacted net earnings during the year.

During 2009, Trinidad's financial and operating results have been impacted by the global economic recession. In 2009, Trinidad faced declining market conditions company-wide as a result of lower commodity prices and a decline in customer activity. These downward financial and operational trends in 2009 are directly tied to the global recession, tight capital markets, and sustained lows for energy commodity prices, particularly natural gas. In response to these conditions, Trinidad significantly reduced its capital expenditure plans, lowered its dividend and undertook a number of cost reduction measures in 2009. The Canadian dollar strengthened in the latter half of 2009 causing foreign exchange losses upon translation of US denominated accounts. In addition to the foreign exchange loss, an intangible impairment charge, loss on sale of assets and increased general and administration and stock-based compensation expenses brought Trinidad's overall reporting to a net loss 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 International 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 and International areas, 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)      2009         2008         2007
    -------------------------------------------------------------------------
    Working capital                         90,673       85,789       84,101

    Current portion of long-term debt       14,146       16,844        1,679
    Long-term debt(1)                      216,273      321,768      402,489
    Convertible debentures(2)              331,249      323,381      315,991
                                     ----------------------------------------
    Total debt                             561,668      661,993      720,159
                                     ----------------------------------------
    Total debt as a percentage
     of assets                               34.6%        35.6%        48.1%

    Net debt                               456,849      559,360      634,379
    Net debt as a percentage of assets       28.1%        30.0%        42.4%

    Total assets                         1,624,013    1,862,064    1,497,156
    Total long-term liabilities            631,074      742,692      764,102
    Total long-term liabilities as
     a percentage of assets                  38.9%        39.9%        51.0%

    Shareholders' equity                   913,958      919,471      634,502
    Total debt to shareholders' equity       61.5%        72.0%       113.5%
    Net debt to shareholders' equity         50.0%        60.8%       100.0%
    -------------------------------------------------------------------------

    (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.
    

On June 25, 2009, the Company closed a bought deal equity financing whereby 27,184,500 shares were issued for gross proceeds of $140.0 million. Net of transaction costs (and prior to future tax asset benefit), the amount received was $133.8 million. A total of $141.0 million, mostly consisting of funds from the equity offering, was applied to reduce debt, of which $71.0 million was applied in June 2009 to reduce amounts outstanding under the revolving facility and $70 million was applied in July 2009 to reduce outstanding term indebtedness. Trinidad's long-term debt decreased by $105.5 million or 32.8% from $321.8 million at December 31, 2008 to $216.3 million at December 31, 2009 primarily as a result of the debt repayment, although partially offset by increased revolving indebtedness used to fund the 2009 capital expenditure program. As at December 31, 2009, $55.0 million was outstanding on the Company's revolving credit facility of which $170.0 million remained unutilized.

A total of $162.6 million of capital expenditures were incurred during the twelve months ended December 31, 2009 compared to $261.2 million in 2008. Capital expenditures in 2009 were substantially related to the Company's 2009 rig build program in addition to capital upgrades related to the redeployment of four rigs into Mexico and one rig to Chile.

Working capital increased by $4.9 million to $90.7 million as at December 31, 2009 compared to $85.8 million at December 31, 2008, due to the combined effect of slower accounts receivable collections in 2009 combined with reduced dividend and certain long term-debt obligations compared to the twelve months ended December 31, 2008.

On July 5, 2007, Trinidad issued $354.3 million in unsecured subordinated convertible debentures, which 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 on 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 at a price equal to 95.0% of the weighted average trading price of the shares. Trinidad's covenants under its current credit facility exclude the debentures in their calculations.

Shareholders' equity decreased by $5.5 million from $919.5 million at December 31, 2008 compared to $914.0 million at December 31, 2009 mostly due to a $94.4 million decrease in Accumulated Other Comprehensive Income, $22.4 million of net losses and $22.8 million of dividends declared to shareholders in 2009. The large movement in Accumulated Other Comprehensive Income, which is comprised of losses and gains on the translation of the Company's foreign subsidiaries and the fair value of Trinidad's interest rate swaps, was almost exclusively related to the strengthening of the Canadian dollar relative to the US dollar. The decrease in Shareholder's equity was mostly offset by the net proceeds from the equity offering of $133.8 million less shares repurchased of $14.4 million.

Current financial performance is well in excess of the financial ratio covenants under the revolving and term facilities (the "Facilities") as reflected in the table below:

    
                                  December 31,  December 31,
    RATIO                                2009          2008        THRESHOLD
    -------------------------------------------------------------------------
    Current Ratio(1)                   2.12:1        1.71:1   1.20:1 minimum
    Leverage(2)                        1.40:1        1.43:1    2.5:1 maximum
    Interest Coverage(3)               8.61:1       10.14:1    5.0:1 minimum
    Fixed Charge Coverage(4)           7.55:1        9.03:1   1.25:1 minimum
    Distribution Payout(5)             38.33%        36.25%      85% maximum

    (1) Current Ratio means, the ratio of consolidated current assets
        (excluding cash and cash equivalents) to consolidated current
        liabilities (excluding the current portion of the Facilities
        outstanding).
    (2) Leverage Ratio means, the ratio of (i) consolidated total debt
        (excluding convertible debentures) to (ii) consolidated EBITDA for
        the trailing twelve months (TTM).
    (3) Interest Coverage Ratio means, calculated on a TTM basis, the ratio
        of (i) consolidated EBITDA to (ii) consolidated Cash Interest Expense
        (excluding interest paid under the convertible debentures).
    (4) Fixed Charge Coverage Ratio means, calculated on a TTM basis, the
        ratio of (i) consolidated EBITDA minus (a) capital expenditures which
        are not financed under the Facilities and (b) current taxes to
        (ii) consolidated Fixed Charges. Fixed Charges are defined as the
        sum of (a) Cash Interest Expense (excluding interest paid on the
        convertible debentures), (b) scheduled principal repayments due
        during the period and (c) commitment fees relating to the issuance
        of debt.
    (5) Distribution Payout Ratio means, calculated on a TTM basis, the ratio
        of Restricted Payments to Excess Cash Flow. Restricted Payments
        include dividends, distributions, purchase of stock or stock
        equivalents under NCIB and interest payments on convertible
        debentures. Excess Cash Flow is calculated as consolidated net
        earnings (loss) adjusted for items including depreciation and
        amortization, future income taxes, unrealized foreign exchange gains
        (losses), stock-based compensation and interest expense on the
        convertible debentures.
    

Readers are cautioned that the ratios noted above do not have standardized meanings prescribed in GAAP. 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 Revolver, Trinidad has no significant term-debt repayment required until April 2011.

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

    
                                      Amount
                                    drawn at
    Debt                            December                       Repayment
    Facility   Currency    Amount   31, 2009       Maturity     requirements
    -------------------------------------------------------------------------
    Revolving                                                 If not renewed,
     credit                $225.0      $55.0   Next renewal    repayment due
     facility     CDN $   million    million  in April 2010   364 days later

    Five-year                                                1% amortization,
     term                  $100.0      $67.8                         balloon
     facility     CDN $   million    million    May 1, 2011     repayment at
                                                                    maturity

    Five-year                                                1% amortization,
     term                  $125.0      $84.7                         balloon
     facility      US $   million    million    May 1, 2011     repayment at
                                                                    maturity
    

The Facilities are secured by a general guarantee over the assets of the Company and its subsidiaries.

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.

For the year ended December 31, 2009 there were conversions of 100 debentures (2008 - 95 debentures) into shares, reducing the overall convertible debenture balance by $0.1 million (2008 - $0.1 million) of which $0.1 million (2008 - $0.1 million) was allocated to debt.

On March 23, 2009, Trinidad announced its intent to acquire, for cancellation, by way of normal course issuer bid (the "Bid"), convertible unsecured subordinated debentures (the "Debentures") of the Company in the principal amount of up to $35.4 million, which represents approximately ten percent of the Company's public float. The Bid commenced on March 25, 2009 and will terminate on the earlier of March 24, 2010 or the date upon which the Company acquires the maximum amount of Debentures pursuant to the Bid. There were no debentures repurchased under the Bid during 2009.

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)
    -------------------------------------------------------------------------
    2010                                                               3,504
    2011                                                               9,306
    2012                                                               2,165
    2013                                                               2,053
    2014                                                               1,955
    Thereafter                                                         1,031
    -------------------------------------------------------------------------
    

Rig Construction Program

On January 4, 2010, Trinidad announced that it has agreed to resume the construction of six new contracted rigs that were delayed in early 2009 due to weak industry conditions. These rigs have depth capacities of 18,000 feet and remain under five-year take-or-pay contracts with the original customer which provides Trinidad with a guaranteed utilization rate of 100% on these rigs over their respective contract terms. These six rigs are destined for operations in the Haynesville Shale in Louisiana bringing the total rig count in the area to 34. The first rig delivery is scheduled for the first quarter of 2010. Capital costs expected to complete these rigs total approximately $60.0 million.

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 return for a management fee and a portion of net revenues and operating margin of the Charters. However, as part of the purchase agreement Trinidad committed to pay the former shareholders of Axxis, who are also the former operators of the Charters, US $12.5 million per year for the three years subsequent to acquisition for the right to operate the 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.

    
    SHAREHOLDERS' EQUITY

    As at December 31,
    ($ thousands)                                          2009         2008
    -------------------------------------------------------------------------
    Shareholders' equity - Common shares                951,863      828,882
    -------------------------------------------------------------------------
    

Common share capital increased by $123.0 million to $951.9 million during the year ending December 31, 2009. The increase was mainly attributable to equity financing during the second quarter whereby 27,184,500 shares were issued for gross proceeds of $140.0 million. Net of transaction costs and future tax asset benefit, the amount received was $133.8 million. This equity financing was primarily applied to reduce debt levels on both the revolving and the term facilities.

On September 2, 2008, Trinidad announced its intent to acquire for cancellation up to ten percent (9,373,221 common shares) of the Company's public float by way of Normal Course Issuer Bid (NCIB) and would extend to the earlier of September 3, 2009 or the date upon which the Company acquired the ten percent. During 2009, Trinidad repurchased 1,576,100 shares ($14.4 million of book value) by way of the NCIB. Partly offsetting this was a conversion of convertible debentures during the year of 5,181 shares ($0.1 million of book value). At December 31, 2009, under this NCIB plan, Trinidad has acquired and cancelled a total of 2,763,500 shares at a cost of $12.0 million, at an average cost of $4.34 per share. The NCIB was terminated on September 4, 2009 as per the expiry timeline.

Common shares on March 2, 2009 were $951.9 million (120,840,962 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 for options under the Incentive Option Plan are estimates at grant date and are estimated 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. Compensation expense, for options under the Deferred Share Unit Plan and Performance Share Unit Plan, are estimates at grant date calculated using the fair value method and are re-measured at the end of each reporting period based on volume-weighted average trading price of the Company's share for the five days immediately preceding period end.

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 and intangible assets

In accordance with Canadian GAAP, Trinidad performs an impairment test at least annually on intangible assets and goodwill and will conduct the test at an earlier date if changing circumstances indicate a possible impairment exists. Earlier in 2009, an impairment test was performed and the Company recorded an intangible impairment charge of $23.2 million related to the Bareboat Charters in the Company's US and International segment (See the Impairment of Intangible assets section of this MD&A for further details). For goodwill, management has concluded there is no impairment in 2009. In 2008, 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 based on quoted market prices from 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.

ADOPTION OF NEW ACCOUNTING STANDARDS

Goodwill and intangible assets

Effective January 1, 2009, the Company adopted the Canadian Institute of Chartered Accountants (CICA) new handbook section 3064, "Goodwill and Intangible Assets". The new standard revises the requirements for recognition, measurement, presentation and disclosure of intangible assets, particularly with respect to internally developed intangible assets. The adoption of this standard has not had any effect on the Company's consolidated financial statements.

Business combinations, consolidated financial statements and non-controlling interests

In January 2009, the CICA issued the new handbook sections 1582, "Business Combinations"; 1601, "Consolidated Financial Statements"; and 1602 "Non-controlling Interests" in the on-going effort to further align Canadian GAAP with International Financial Reporting Standards (IFRS) prior to changeover to IFRS on January 1, 2011.

Section 1582, which replaces 1581, "Business Combinations" significantly changes the principles and requirements governing how an acquiring company recognizes and measures identifiable assets acquired and liabilities assumed in a business combination, including the measurement of non-controlling interests and goodwill. The section also establishes disclosure requirements that will enable users of the acquiring company's financial statements to evaluate the nature and financial effects of its business combinations. Section 1582 is effective for fiscal years beginning on or after January 1, 2011, but early adoption is permitted. Upon adoption, the new standard is applied to prospectively, and therefore, any business combinations occurring before the adoption date are not restated.

Section 1601, together with 1602 replace 1600, "Consolidated Financial Statements" and established standards for the preparation of consolidated financial statements and the presentation of non-controlling interests subsequent to a business combination. In particular, Section 1602 introduces a number of changes to the accounting for non-controlling interests when a change in ownership occurs. Section 1601 and 1602 are effective for fiscal years beginning on or after January 1, 2011, but early adoption is permitted. Upon adoption, the new standards are generally applied retrospectively.

Regardless of the timing of adoption, all three new sections must be adopted simultaneously. Trinidad has chosen to adopt all three standards effective January 1, 2009. Accordingly, the new non-controlling presentation requirements of 1602 have impacted the consolidated financial statements. However, since 1582 is not applied retroactively, there is no material impact on the current consolidated financial statements as a result of historical business combinations.

Financial instruments - credit risk

Effective January 20, 2009, Trinidad adopted the CICA's Emerging Issues Committee (EIC) 173 Credit Risk and the Fair Value of Financial Assets and Financial Liabilities. EIC 173 establishes standards for companies to take into account the credit risk of a counterparty to a financial instrument in determining the fair value of financial assets and financial liabilities, including derivative instruments for presentation and disclosure purposes. There was no effect in the implementation of this new standard on the Company.

Financial instruments - fair value disclosures

During 2009, CICA handbook section 3862, Financial Instruments - Disclosures, was amended to require disclosures about the inputs to fair value measurements, including their classification within a hierarchy that prioritizes the inputs to fair value measurement. The three levels of the fair value hierarchy are:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

Level 3 - Inputs that are not based on observable market data.

Trinidad has incorporated the new disclosure requirements of section 3862 in its financial instruments note to the Consolidated Financial Statements.

FUTURE CHANGES IN ACCOUNTING POLICIES

International Financial Reporting Standards

In February 2008, the Canadian Accounting Standards Board (AcSB) confirmed that Canadian publicly accountable enterprises will be required to report financial statements under International Financial Reporting Standards. The transition to IFRS will require the Company to retroactively apply IFRS to the consolidated financial statements effective January 1, 2011, except where IFRS 1 - First Time Adoption of International Financial Reporting Standards (IFRS 1) permits prospective application or prohibits retroactive adoption of certain standards. Accordingly, the Company will begin presenting IFRS compliant financial statements, including comparative results, for the interim and year end reporting period ending December 31, 2011.

IFRS is based on a conceptual framework similar to Canadian GAAP, but there are currently significant differences in certain recognition, measurement and disclosure requirements included in specific IFRS standards. The AcSB has recently issued new and amended existing accounting standards in an attempt to be substantially aligned with IFRS at the convergence date. However, there are a number of on-going IFRS projects that are expected to result in new accounting pronouncements in 2010 and 2011, and as a result, IFRS at the convergence date is expected to differ from its current form.

The Company has developed an IFRS implementation plan that attempts to address both the impact of current IFRS standards and the potential for change through the convergence date. The key aspects and status of the current IFRS implementation plan are as follows:

    
    -------------------------------------------------------------------------
    Phase           Key Activity/Milestones                Status
    -------------------------------------------------------------------------
    Initial         Identify key differences between       Complete.
    assessment      current Canadian GAAP and IFRS and
                    categorize potential impacts as
                    high, medium and low.

                    Assemble and educate a core IFRS
                    project team that includes the
                    appropriate levels of senior
                    management and crosses functional
                    areas (i.e., accounting, operations,
                    IT, investor relations, etc.).

                    Develop a communication plan and
                    structure to ensure executive
                    management, Board of Directors,
                    Audit Committee and external
                    auditors are kept current on IFRS
                    implementation plan progress and
                    results.
    -------------------------------------------------------------------------
    Research and    Research specific accounting           In progress -
    impact          differences identified in the initial  Assessment of high
    assessment      assessment phase.                      and medium impact
                                                           standards ongoing.
                    Identify potential impacts on          Assessment of low
                    applicable functions, including        impact standards,
                    financial statements, accounting       as well as
                    policies and processes, performance    monitoring of
                    metrics, business and operations       current IFRS
                    management, banking arrangements,      projects underway.
                    information systems, control
                    environment and internal and external
                    communications.

                    Identify transition options available
                    under IFRS 1.

                    Communicate findings to executive
                    management, Board of Directors, Audit
                    Committee and external auditors.
    -------------------------------------------------------------------------
    Solution        Quantify impact of accounting          Beginning in
    development     differences identified in the          fiscal 2010
                    research and impact assessment phase.  through IFRS
                                                           convergence.
                    Finalize transitional (i.e. IFRS 1)
                    and on-going accounting policy
                    choices.

                    Develop an implementation plan and
                    timeline for changes to key functions
                    addressed in the research and impact
                    assessment phase, including drafting
                    initial adoption and go-forward IFRS
                    compliant financial statements in
                    addition to necessary MD&A
                    disclosures.
    -------------------------------------------------------------------------
    Implementation  Implement changes to key functions     Beginning in
                    and test output.                       fiscal 2010
                                                           through March 31,
                    Prepare opening January 1, 2010        2011.
                    balance sheet and comparative 2011
                    and 2010 IFRS compliant financial
                    statements and related note
                    disclosures.

                    Prepare required MD&A disclosures.

                    Communicate findings to executive
                    management, Board of Directors,
                    Audit Committee, external auditors
                    and external stakeholders, including
                    investment community and bankers.
    -------------------------------------------------------------------------
    

IFRS implementation is currently progressing according to plan. An implementation team with the appropriate training has been assembled and has identified the key differences between IFRS and Canadian GAAP as applicable to the Company. Research and impact assessment has begun on high and medium impact IFRS standards and communication of results to executive management, the Board of Directors, Audit Committee and external auditors commenced in conjunction with the 2009 year-end financial reporting process. The Company's approach to selecting accounting policies under IFRS is to assess whether the policies will improve the overall usefulness of the consolidated financial statements while still maintaining comparability with industry peers. The IFRS implementation team has prioritized the detailed assessment of the IFRS standards based on the likelihood and significance of impact on the consolidated financial statements, the availability of significantly different accounting policy choices, and the possibility of significant changes to key processes and systems.

The following summarizes the key differences noted and communicated to date:

    
    1.  Share-based payments (IFRS 2) - Canadian GAAP and IFRS differ with
        respect to accounting for forfeitures and graded vesting provisions
        of all share-based payments, and the measurement of cash-settled
        share based payments. These differences will impact Trinidad's
        consolidated financial statements, but the extent of the impact
        cannot be reasonably determined at this time. However, IFRS 1
        provides an exemption to retroactive application of IFRS 2 for
        share-based payments issued after November 2002 and which vested
        prior to January 1, 2010. The IFRS 1 transition provision would
        likely mitigate the historical impact of applying IFRS 2, and
        therefore, adoption of the provision is currently being contemplated.

    2.  Property, plant and equipment (IFRS 16) - Canadian GAAP and IFRS are
        largely aligned except for the requirement under IFRS to disclose and
        separately amortize major components of property, plant and
        equipment, including qualifying major overhauls and re-
        certifications. The process to identify these separate components is
        underway, and therefore, the impact on the Company's consolidated
        financial statements cannot be quantified at this time. However, the
        impact is not expected to be significant given the classification and
        amortization of property, plant and equipment currently implemented
        under Canadian GAAP. The Company is currently in the process of
        determining if it has sufficient accounting data to retroactively
        apply IFRS 16 to its historical cost of property, plant and
        equipment. If appropriate historical cost data is available, the
        deemed cost provisions afforded under IFRS 1 will not be adopted.

    3.  Foreign exchange (IAS 21) - Canadian GAAP and IFRS are largely
        aligned with respect to accounting for foreign exchange transactions
        and translation of foreign-currency based financial statements.
        However, the process used to determine foreign currency exposure
        differs slightly under IFRS and could result in a different
        conclusion than would be made under Canadian GAAP. The principles
        outlined in IFRS to determine the Company's exposure to foreign
        currency fluctuations for each of its material operations is underway
        and any identified differences will be addressed. However, IFRS 1
        provides for a retroactive exemption in applying IAS 21 which allows
        the accumulated other comprehensive income (loss) balance at
        January 1, 2010 to be eliminated. Trinidad is currently assessing
        whether the IFRS 1 provision will be adopted.

    4.  Borrowing costs (IAS 23) - IFRS differs significantly from Canadian
        GAAP in its requirement to capitalize borrowing costs for certain
        qualifying assets, and therefore, will impact the Company's
        consolidated financial statements. However, the determination of the
        type and amount of borrowing costs to capitalize is largely
        predicated on the choice of accounting policies. A number of
        different accounting policy options have been developed and a final
        policy will be chosen in 2010 at which time the impact on the
        financial statements will be quantified and disclosed. Regardless of
        the accounting policy chosen, the IFRS 1 provides a retroactive
        exemption to the adoption of IAS 23. Trinidad is also assessing
        whether the IFRS 1 provision will be adopted.

    5.  Business combinations and non-controlling interests (IFRS 3) - IFRS
        differs significantly from existing Canadian GAAP in the principles
        and requirements governing how an acquiring company recognizes and
        measures identifiable net assets acquired in a business combination,
        including the measurement of non-controlling interests and goodwill
        and the subsequent accounting for non-controlling interests when a
        change in ownership occurs. However, the new Canadian GAAP standards
        1582, "Business Combinations"; 1601, "Consolidated Financial
        Statements"; and 1602 "Non-controlling Interests", result in
        substantial convergence with IFRS. The early adoption of these new
        Canadian GAAP standards by Trinidad effective January 1, 2009,
        together with the IFRS 1 retroactive exemption afforded on business
        combinations should result in no significant impact on Trinidad's
        historical business combinations upon IFRS transitions. However, a
        detailed impact assessment is currently underway.

    6.  Intangible assets (IAS 38) - With the issuance of Canadian GAAP
        standard 3064 - Goodwill and Intangible Assets and Trinidad's
        adoption of the standard effective January 1, 2009, there are no
        significant differences between Canadian GAAP and IFRS with respect
        to recognition of intangible assets. Accordingly, there should be no
        significant impact on Trinidad's consolidated financial statements.
        However, a detailed impact assessment is currently underway.
    

The remaining applicable IFRS standards will be analyzed in the first half of 2010, including financial instruments, revenue recognition, impairment of assets and financial statement presentation and disclosures. The impact of these standards will be disclosed when quantifiable.

In conjunction with the assessment of the financial statement implications of the transition to IFRS, the implementation team is currently assessing the impact of IFRS convergence on internal controls, the control environment and IT and other financial reporting systems. The IFRS standards analyzed above are expected to have an impact in these areas, particularly with respect to property, plant and equipment, share-based payments, and borrowing costs. Necessary changes are currently being identified and will be implemented prior to the IFRS convergence date. In addition, to the extent adoption of the IFRS standards analyzed above impacts the financial statements, the financial covenants in Trinidad's debt facilities are also likely to be impacted, particularly with respect to borrowing costs and future business combinations. Any impacts will be communicated with lenders as soon as they can be quantified and adjustments to financial covenants will be made if deemed necessary.

Additional implementation plan status, including details of additional assessments needed as IFRS evolves through the convergence date, will be provided as information becomes available during the IFRS transition period.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

Trinidad'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, 2009. Trinidad's CEO and CFO have concluded, based on these evaluations of the design and operating effectiveness at December 31, 2009, 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 Rig Corporation effective August 18, 2008, Trinidad has removed its limitation on its assessment of Victory Rig Corporation's internal control environment. Trinidad's management has successfully aligned Victory Rig Corporation's systems, processes and controls with corporate standards and has concluded positively on the design and effectiveness of DC&P or ICFR for this subsidiary.

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.

Trinidad engages the law firm of Blake, Cassels & Graydon LLP, to provide legal advice. One partner of this law firm holds a board position with Trinidad, and another partner is an officer of the Company. Trinidad incurred legal fees of $2.3 million (2008 - $1.7 million) to Blake, Cassels & Graydon LLP. As of December 31, 2009, $nil (2008 - $0.1 million) was due to Blake, Cassels & Graydon LLP.

During the first quarter of 2009, Trinidad purchased a parcel of land from 1010460 Alberta Ltd., a company owned by an executive officer within Trinidad's Canadian operations. The land purchase of $1.6 million, as well as all of the purchase agreement's conditions, was representative of an unrelated party transaction. This property currently houses a facility used in the coring and surface casing division of the Canadian drilling operations.

Effective August 18, 2008, Trinidad closed a $16.7 million acquisition of an oilfield equipment fabrication company, Victory Rig Equipment Corporation, which was substantially held by one of Trinidad's executive officers.

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 SEDAR 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.

OUTLOOK

The first few months of 2010 have shown some improvement in industry activity rates and higher confidence for a return of stronger market conditions. Although these are promising signs, the Company remains cautious in its outlook for 2010. Natural gas storage levels in North America remain high and the Company believes that natural gas prices will remain under pressure until demand, largely generated by the US economy, returns to stronger levels or until supply levels decrease significantly.

Trinidad has assembled a fleet of modern, deep-capacity rigs that are well suited to drilling in the unconventional shale plays. These areas have been one of the few places where drilling activity has been relatively strong even through the industry slowdown. By positioning itself as a key player in this market, Trinidad has been able to keep more of its equipment working than most of its competitors and generate stable gross margin percentages.

Trinidad is well positioned in the current market and for the return of stronger conditions. With its ongoing expansion in Latin America, the Company has shown its ability to redeploy existing assets to higher utilization, strong dayrate areas while spending only minimal amounts of capital. This is a strategy that allows the Company to increase the contribution of existing equipment and add value for its investors. Trinidad expects to continue to pursue similar opportunities, assessing any additional risk and ensuring they provide returns in excess of the Company's internal benchmarks and fit with its strategic direction.

In addition, as the outlook in the market improves, the Company expects to see an increased number of opportunities to work with existing and new customers to build new equipment or enhance existing equipment. In 2010, Trinidad plans to complete the construction of six new high-tech rigs that were delayed in 2009 and have now resumed construction following an improvement in market conditions. These rigs are all destined for the Haynesville shale in Louisiana. As in the past, any new builds will be backed by long-term, take-or-pay contracts that provide the Company with a guaranteed revenue stream over the payback period of the investment.

Trinidad sees several frontiers for expansion moving forward. In North America, there are opportunities to grow the Company's market share in the unconventional shale plays with an increased presence in areas where it has an established reputation as a strong performer like the Haynesville shale or the Montney. Trinidad is also pursuing opportunities to branch out into the newer shale plays like the Marcellus in north-east US or to use some of the drilling techniques that have been proven in the shale plays in existing, conventional areas like the Cardium play in Canada's Deep Basin.

During 2009, Trinidad lowered its net debt levels by $102.5 million. As the rigs under construction are put into operation, Trinidad's ability to generate free cash flow and repay debt is expected to increase. The Company remains committed to reducing its debt levels over the longer term and will carefully assess any capital expenditures, ensuring it can balance its growth opportunities with its debt repayment strategy.

While the Company sees the improving trends both in the drilling sector and in the world economy, it believes that it may take some time before the recession and its impact on the oil and gas industry are truly behind us. Trinidad was built to withstand the inevitable cycles of the drilling sector; by having the right equipment to meet the new challenges of our industry and extensive contract coverage, the Company is well positioned to withstand the remaining downturn and to excel once a stronger market returns.

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, gross margin percentage, EBITDA, Adjusted EBITDA, cash flow from operations before change in non-cash working capital, net earnings before impairment of intangible asset, Adjusted net earnings, net debt and working capital. 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 consolidated statements of operations and retained earnings (deficit) and from the segmented information contained in the notes to the consolidated financial statements and is defined as revenue less operating expenses.

"Gross margin percentage" is used by management to analyze overall and segmented operating performance. Gross margin percentage is calculated from the consolidated statements of operations and retained earnings (deficit) and from the segmented information in the notes to the consolidated financial statements and is defined as gross margin divided by revenue.

"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,          2009         2008         2007
    ($ thousands)
    -------------------------------------------------------------------------
    Net earnings (loss)                    (22,439)      82,174       79,524
    Plus:
      Interest on long-term debt            21,163       23,709       32,649
      Interest on convertible debentures    35,406       34,934       16,946
      Depreciation and amortization         87,032       94,342       72,260
      Impairment of intangible assets       23,189            -            -
      Impairment of goodwill                     -       38,154            -
      Loss (gain) on sale of assets         10,544      (29,312)         355
      Income taxes                           9,612       43,469        4,520
                                     ----------------------------------------
    EBITDA                                 164,507      287,470      206,254
                                     ----------------------------------------
    

"Adjusted EBITDA" is used by management to analyze EBITDA (as defined above) prior to the effect of foreign exchange loss (gain), stock-based compensation and impairments on intangible assets and goodwill, respectively, and are not intended to represent net earnings as calculated in accordance with Canadian GAAP.

    
    For the years ended December 31,          2009         2008         2007
    ($ thousands)
    -------------------------------------------------------------------------
    EBITDA                                 164,507      287,470      206,254
    Plus:
      Stock-based compensation               4,366        2,465        2,450
      Foreign exchange loss (gain)          24,638      (33,478)      12,354
                                     ----------------------------------------
    Adjusted EBITDA                        193,511      256,457      221,058
                                     ----------------------------------------
    

"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 intangible assets and goodwill" is used by management to analyze net earnings prior to the effect of goodwill impairment or stock-based compensation charges, and are not intended to represent net earnings as calculated in accordance with Canadian GAAP.

"Net earnings before impairment of intangible assets and goodwill is derived from the annual consolidated statements of operations and retained earnings and is calculated as follows:

    
    For the years ended December 31,          2009         2008         2007
    ($ thousands)
    -------------------------------------------------------------------------
    Net earnings (loss)                    (22,439)      82,174       79,524
    Plus:
      Impairment of intangible assets       23,189            -            -
      Impairment of goodwill                     -       38,154            -
                                     ----------------------------------------
    Net earnings before impairment of
     intangible assets and goodwill            750      120,328       79,524
                                     ----------------------------------------
    

"Adjusted net earnings" is used by management to analyze net earnings prior to the effect of foreign exchange loss (gain), stock-based compensation charges and impairment charges of intangible assets and goodwill, respectively, and are not intended to represent net earnings as calculated in accordance with Canadian GAAP.

"Adjusted net earnings" is derived from the annual consolidated statements of operations and retained earnings and is calculated as follows:

    
    For the years ended December 31,          2009         2008         2007
    ($ thousands)
    -------------------------------------------------------------------------
    Net earnings (loss)                    (22,439)      82,174       79,524
    Plus:
      Stock-based compensation               4,366        2,465        2,450
      Foreign exchange loss (gain)          24,638      (33,478)      12,354
      Impairment of intangible assets       23,189            -            -
      Impairment of goodwill                     -       38,154            -
                                     ----------------------------------------
    Adjusted net earnings                   29,754       89,315       94,328
                                     ----------------------------------------
    

"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,          2009         2008         2007
    ($ thousands)
    -------------------------------------------------------------------------
    Convertible debentures                 331,249      323,381      315,991
    Long-term debt                         216,273      321,768      402,489
    Less:
      Working capital:
        Current assets                     169,654      285,690      182,653
        Current liabilities                (78,981)    (199,901)     (98,552)
                                     ----------------------------------------
    Net debt                               456,849      559,360      634,379
                                     ----------------------------------------
    

"Working capital" is used by management and the investment community to analyze the operating liquidity available to the Company.

Working capital is derived from the consolidated balance sheets and is calculated as follows:

    
    For the years ended December 31,          2009         2008         2007
    ($ thousands)
    -------------------------------------------------------------------------
    Current assets                         169,654      285,690      182,653
    Less:
      Current liabilities                   78,981      199,901       98,552
                                     ----------------------------------------
    Working capital                         90,673       85,789       84,101
                                     ----------------------------------------
    

References to gross margin, gross margin percentage, EBITDA, Adjusted EBITDA, cash flow from operations before changes in non-cash working capital, net earnings before impairment of goodwill, Adjusted net earnings 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 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 2010 rig construction program, Trinidad will have 125 land drilling rigs ranging in depths from 1,000 - 6,500 metres and operations in Canada, the United States, Mexico and Chile. In addition to its land drilling rigs, Trinidad has 22 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        Executive Vice President and
    Officer                              Chief Financial Officer
    

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

    
    -------------------------------------------------------------------------
    CONSOLIDATED BALANCE SHEETS
    As at December 31,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------

    Assets
    Current assets
    Cash and cash equivalents                            4,198        31,202
    Accounts receivable                                139,418       225,744
    Inventory (note 5)                                  20,378        14,834
    Prepaid expenses                                     5,660        13,811
    Future income taxes (note 11)                            -            99
                                                -----------------------------
                                                       169,654       285,690

    Deposits on capital assets                           2,310        11,581
    Capital assets (note 6)                          1,300,281     1,375,661
    Intangible assets (note 7)                           3,806        26,959
    Goodwill (note 8)                                  147,962       162,173
                                                -----------------------------
                                                     1,624,013     1,862,064
                                                -----------------------------

    Liabilities
    Current liabilities
    Accounts payable and accrued liabilities            51,055       134,764
    Dividends payable                                    6,042        14,305
    Current portion of deferred revenue                  1,965        28,241
    Current portion of long-term debt, net
     of transaction costs (note 9)                      14,146        16,844
    Current portion of fair value of
     interest rate swaps                                 5,773         5,747
                                                -----------------------------
                                                        78,981       199,901

    Deferred revenue                                         -         1,572
    Long-term debt, net of transaction
     costs (note 9)                                    216,273       321,768
    Convertible debentures, net of transaction
     costs (note 10)                                   331,249       323,381
    Fair value of interest rate swaps                    1,886         7,144
    Future income taxes (note 11)                       81,666        88,827
                                                -----------------------------
                                                       710,055       942,593
    Shareholders' equity
    Common shares (note 12(a))                         951,863       828,882
    Convertible debentures (note 10)                    28,207        28,215
    Contributed surplus (note 12(b))                    27,832        19,043
    Accumulated other comprehensive income (loss)      (53,453)       40,932
    Retained earnings (deficit)                        (42,828)        2,399
                                                -----------------------------
    Equity attributable to shareholders                911,621       919,471
    Non-controlling interest                             2,337             -
                                                -----------------------------
                                                       913,958       919,471
                                                -----------------------------
                                                     1,624,013     1,862,064
                                                -----------------------------
    Commitments (note 16)

    (See Notes to the Consolidated Financial Statements)

    Michael Heier                        Naveen Dargan
    Director                             Director



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
    For the years ended December 31,
    ($ thousands except share and per share data)         2009          2008
    -------------------------------------------------------------------------

    Revenue
    Oilfield services                                  578,402       761,144
    Bareboat Charter gain (loss)                         1,550        (4,667)
    Other                                                2,639         1,423
                                                -----------------------------
                                                       582,591       757,900
                                                -----------------------------

    Expenses
    Operating                                          335,849       448,405
    General and administrative                          53,117        50,272
    Interest on long-term debt (note 9)                 21,163        23,709
    Interest on convertible debentures (note 10)        35,406        34,934
    Stock-based compensation                             4,366         2,465
    Foreign exchange loss (gain)                        24,638       (33,478)
    Depreciation and amortization                       87,032        94,342
    Loss (gain) on sale of assets                       10,544       (29,312)
    Impairment of intangible assets (note 7)            23,189             -
    Impairment of goodwill (note 8)                          -        38,154
    Reorganization costs                                     -         2,766
                                                -----------------------------
                                                       595,304       632,257
                                                -----------------------------

    Earnings (loss) before income taxes                (12,713)      125,643

    Income taxes (note 11)
    Current tax expense                                  1,871         1,504
    Future tax expense                                   7,741        41,965
                                                -----------------------------
                                                         9,612        43,469
                                                -----------------------------

    Net earnings (loss) before
     non-controlling interest                          (22,325)       82,174
    Net earnings attributable to
     non-controlling interest                              114             -
                                                -----------------------------
    Net earnings (loss)                                (22,439)       82,174

    Dividends                                          (22,788)      (47,396)
    Trust distributions                                      -        (8,362)
    Charges for normal course issuer bid
     (note 12(a))                                            -           (36)

    Retained earnings (deficit) -
     beginning of year                                   2,399       (23,981)
                                                -----------------------------
    Retained earnings (deficit) -
     end of year                                       (42,828)        2,399
                                                -----------------------------

    Earnings (loss) per share
      Basic                                              (0.21)         0.90
      Diluted                                            (0.21)         0.90

    Weighted average number of shares
      Basic                                        107,915,093    90,804,564
      Diluted                                      107,915,093    91,003,946

    (See Notes to the Consolidated Financial Statements)



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
    For the years ended December 31,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------

    Net earnings (loss) before
     non-controlling interest                          (22,325)       82,174

    Other comprehensive income (loss)
      Change in fair value of derivatives
       designated as cash flow hedges, net
       of income tax (note 15)                           2,292        (3,217)
      Foreign currency translation adjustment
       (note 20)                                       (96,876)      105,937
                                                -----------------------------
    Total other comprehensive income (loss)            (94,584)      102,720
                                                -----------------------------

    Total comprehensive income (loss)                 (116,909)      184,894
                                                -----------------------------

    Attributable to:
      Shareholders                                    (116,824)      184,894
      Non-controlling interest                             (85)            -
                                                -----------------------------
    Total comprehensive income (loss)                 (116,909)      184,894
                                                -----------------------------

    (See Notes to the Consolidated Financial Statements)



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
    For the years ended December 31,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------

    Accumulated other comprehensive income
     (loss) - beginning of year                         40,932       (61,788)
      Other comprehensive income (loss)
       attributable to shareholders                    (94,385)      102,720
                                                -----------------------------
    Accumulated other comprehensive income
     (loss) - end of year                              (53,453)       40,932
                                                -----------------------------

    (See Notes to the Consolidated Financial Statements)



    -------------------------------------------------------------------------
    EQUITY ATTRIBUTABLE TO NON-CONTROLLING INTEREST
    For the years ended December 31,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------

    Equity attributable to non-controlling
     interest - beginning of year                            -             -
      Share issuance                                     2,422             -
      Net income                                           114             -
      Other comprehensive loss from foreign
       currency translation adjustment                    (199)            -
                                                -----------------------------
    Equity attributable to non-controlling
     interest - end of year                              2,337             -
                                                -----------------------------

    (See Notes to the Consolidated Financial Statements)



    -------------------------------------------------------------------------
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the years ended December 31,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------

    Cash provided by (used in)
    Operating activities
    Net earnings (loss)                                (22,439)       82,174
    Items not affecting cash
      Effective interest on financing costs
       (note 15)                                         5,870         4,332
      Accretion on convertible debentures
       (note 10)                                         5,296         4,836
      Stock-based compensation                           4,366         2,465
      Unrealized foreign exchange loss (gain)           22,813       (31,835)
      Depreciation and amortization                     87,032        94,342
      Loss (gain) on sale of assets                     10,544       (29,312)
      Impairment of intangible assets (note 7)          23,189             -
      Impairment of goodwill (note 8)                        -        38,154
      Future income tax expense                          7,741        41,965
      Non-controlling interest                             114             -
                                                -----------------------------
                                                       144,526       207,121
    Change in non-cash operating working capital       (37,446)        3,661
                                                -----------------------------
                                                       107,080       210,782
                                                -----------------------------

    Investing activities
    Acquisition of Victory Rig Equipment
     Corporation (note 4)                                    -       (16,694)
    Purchase of capital assets                        (162,563)     (261,207)
    Expenditures on intangibles                            (75)            -
    Proceeds from dispositions of capital assets         4,762        68,740
    Change in non-cash working capital                  14,280       (15,658)
                                                -----------------------------
                                                      (143,596)     (224,819)
                                                -----------------------------

    Financing activities
    Decrease in long-term debt, net                    (81,664)      (89,209)
    Proceeds on share issuance (note 12(a)), net       133,800       158,010
    Repurchased shares (note 12(a))                     (6,120)       (5,895)
    Proceeds from exercise of options                        -         1,911
    Proceeds from non-controlling interest
     share issuance                                      2,422             -
    Dividends paid                                     (31,072)      (33,091)
    Debt financing costs                                (2,619)         (600)
    Trust unit distribution                                  -       (17,978)
                                                -----------------------------
                                                        14,747        13,148
                                                -----------------------------

    Cash flow from operating, investing,
     and financing activities                          (21,769)         (889)
    Effect of translation of foreign
     currency cash                                      (5,235)       14,070
                                                -----------------------------
    (Decrease) increase in cash for the year           (27,004)       13,181

    Cash and cash equivalents - beginning
     of year                                            31,202        18,021
                                                -----------------------------
    Cash and cash equivalents - end of year              4,198        31,202
                                                -----------------------------

    Interest paid                                       45,761        50,011
    Interest received                                      103           523
    Taxes paid                                           4,328         3,568

    (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'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 rigs under construction,
        Trinidad will have 125 land drilling rigs ranging in depths from
        1,000 - 6,500 metres and operations in Canada, the United States,
        Mexico and Chile. In addition to its land drilling rigs, Trinidad has
        22 service rigs, 20 pre-set and coring rigs and four barge rigs
        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.

    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 2009

        Goodwill and intangible assets

        Effective January 1, 2009, the Company adopted the CICA's new
        handbook section 3064, "Goodwill and Intangible Assets". The new
        standard revises the requirements for recognition, measurement,
        presentation and disclosure of intangible assets, particularly with
        respect to internally developed intangible assets. The adoption of
        this standard has not had any affect on the Company's Consolidated
        Financial Statements.

        Business combinations, consolidated financial statements and non-
        controlling interests

        In January 2009, the Canadian Institute of Chartered Accountants
        (CICA) issued the new handbook sections 1582, "Business
        Combinations"; 1601, "Consolidated Financial Statements"; and 1602,
        "Non-controlling Interests" in the on-going effort to further align
        Canadian GAAP with International Financial Reporting Standards
        (IFRS) prior to changeover to IFRS on January 1, 2011.

        Section 1582, which replaces 1581, "Business Combinations"
        significantly changes the principles and requirements governing how
        an acquiring company recognizes and measures identifiable assets
        acquired and liabilities assumed in a business combination, including
        the measurement of non-controlling interests and goodwill. The
        section also establishes disclosure requirements that will enable
        users of the acquiring company's financial statements to evaluate the
        nature and financial effects of its business combinations. Section
        1582 is effective for fiscal years beginning on or after January 1,
        2011, but early adoption is permitted. Upon adoption, the new
        standard is applied to prospectively, and therefore, any business
        combinations occurring before the adoption date are not restated.

        Section 1601, together with 1602 replace 1600, "Consolidated
        Financial Statements" and established standards for the preparation
        of consolidated financial statements and the presentation of non-
        controlling interests subsequent to a business combination. In
        particular, Section 1602 introduces a number of changes to the
        accounting for non-controlling interests when a change in ownership
        occurs. Section 1601 and 1602 are effective for fiscal years
        beginning on or after January 1, 2011, but early adoption is
        permitted. Upon adoption, the new standards are generally applied
        retrospectively.

        Regardless of the timing of adoption, all three new sections must be
        adopted simultaneously. Trinidad has chosen to adopt all three
        standards effective January 1, 2009. Accordingly, the new non-
        controlling presentation requirements of 1602 have impacted the
        Consolidated Financial Statements. However, since 1582 is not applied
        retroactively, there is no material impact on the current
        Consolidated Financial Statements as a result of historical business
        combinations.

        Financial instruments - credit risk

        Effective January 20, 2009, Trinidad adopted the CICA's Emerging
        Issues Committee (EIC) 173 Credit Risk and the Fair Value of
        Financial Assets and Financial Liabilities. EIC 173 establishes
        standards for companies to take into account the credit risk of a
        counterparty to a financial instrument in determining the fair value
        of financial assets and financial liabilities, including derivative
        instruments for presentation and disclosure purposes. There was no
        effect in the implementation of this new standard on the Company.

        Financial instruments - fair value disclosures

        During 2009, CICA handbook section 3862, Financial Instruments -
        Disclosures, was amended to require disclosures about the inputs to
        fair value measurements, including their classification within a
        hierarchy that prioritizes the inputs to fair value measurement. The
        three levels of the fair value hierarchy are:

        -   Level 1 - Unadjusted quoted prices in active markets for
            identical assets or liabilities;

        -   Level 2 - Inputs other than quoted prices that are observable for
            the asset or liability either directly or indirectly; and

        -   Level 3 - Inputs that are not based on observable market data.

        Trinidad has incorporated the new disclosure requirements of section
        3862 in its financial instruments note to the Consolidated Financial
        Statements.

        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, with
        the exception of the Chilean operations, which has a 10% non-
        controlling interest, at December 31, 2009. 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 consist of cash and short-term investments
        with maturities, at purchase, of three months or less.

        Inventories

        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 assets

        Capital assets are recorded at cost less accumulated depreciation.
        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 depreciation 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. Internally generated
        intangible assets are measured at historical cost as expenditures are
        made starting from the date the expenditures qualify for
        recognition as an intangible asset. All 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        Based on usage up to
                                                         a maximum of 5 years

        Trade name                       5 years        Straight-line

        Engineering and design           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. Intangible assets are subject to impairment testing when
        circumstances indicate its carrying amount may not be recoverable.

        Goodwill

        Goodwill arises only in business combinations and represents the
        excess of the purchase price over the fair values of the net assets
        acquired. Goodwill is carried at initial costs and not subject to
        amortization, but is tested for impairment at least annually, on
        December 31, and more often if circumstances indicate its carrying
        amount may not be recoverable. A goodwill impairment loss is
        recognized when the carrying amount of goodwill exceeds its fair
        value which is calculated on a discounted cash flow basis.

        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 measured based on hourly
        or daily rates specified in purchase orders or customer contracts.
        Customer contracts and purchase orders do not include any post-
        delivery service terms. 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 for future drilling or construction services are
        recorded as deferred revenue and recognized as services are
        performed.

        Stock-based compensation

        Incentive Option Plan

        On March 10, 2008, Trinidad established an Incentive Option Plan
        (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. Options 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 are exercisable for a period of five years from the
        date of grant.

        Compensation expense associated with options granted under the Option
        Plan is deferred and recognized into earnings over the vesting period
        of the options granted with a corresponding increase in contributed
        surplus. Trinidad measures the fair value of options at the date of
        grant using the Black-Scholes model, amortizing the fair value over
        the vesting term of the option as stock-based compensation expense.

        Deferred Share Unit Plan

        On March 11, 2008 the Company established a Deferred Share Unit Plan
        (DSU Plan) 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 Deferred
        Share Unit (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 preceding payment. DSUs vest immediately upon
        grant but are not exercisable until resignation or termination from
        the Board of Directors.

        The DSUs are paid in cash when exercised and are measured based on a
        mark-to-market basis when granted and subsequently at each reporting
        period based on the volume weighted average trading price of a
        Trinidad share for the five days immediately preceding period end.
        DSU holders are entitled to share in dividends which are credited as
        additional DSUs at the dividend record date. The associated expense
        is recognized entirely as stock-based compensation expense with the
        offset to accrued liabilities.

        Performance Share Unit

        On March 11, 2008, Trinidad also established a Performance Share Unit
        Plan (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. Each Performance
        Share Unit (PSU) 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 preceding payment. The PSU's are to vest
        entirely no later than the third anniversary of the grant date
        (unless otherwise determined by the Board of Directors at the time of
        issuance), and must be exercised within three years from the grant
        date.

        The PSUs are paid in cash when exercised and are measured based on a
        mark-to-market basis when granted and subsequently at each reporting
        period based on the volume weighted average trading price of a
        Trinidad share for the five days immediately preceding period end.
        PSU holders are entitled to share in dividends which are credited as
        additional PSUs at the dividend record date. The associated expense
        is recognized over the vesting period of the PSU as stock-based
        compensation expense with the offset to accrued liabilities.

        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.

        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), Mexico and Chile 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 (OCI).

        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 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", "held-to-maturity", "loans and
        receivables", or "other liabilities".

        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", "loans
        and receivables", and "other liabilities" 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
        (Loss), 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.

    3.  THE ARRANGEMENT

        On March 10, 2008, unitholders of the Trust and holders of
        exchangeable shares (the "Securityholders") approved the
        reorganization the Trust, by way of a plan of arrangement under the
        Business Corporations Act (Alberta), into a corporation pursuant to
        an arrangement agreement dated January 9, 2008 between Trinidad and
        the Trust (the "Arrangement"). 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. 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. The impact on outstanding trust units and exchangeable
        shares was as follows:

        For the years ended December 31,                       2008
        ($ thousands except unit data)
        ---------------------------------------------------------------------
                                                    Number of        Amount
                                                      Units             $
                                                 ----------------------------
        Unitholders' capital - opening balance      83,615,790       675,728
        Trust units issued on conversion of
         exchangeable shares                           412,233         2,477
        Trust units issued on exercise of rights         7,850            67
        Contributed surplus transferred on
         exercised rights                                    -            10
        Trust units cancelled under the
         Arrangement                               (84,035,873)     (678,282)
                                                 ----------------------------
        Unitholders' capital - ending balance                -             -
                                                 ----------------------------

    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
        $16.7 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:

        December 31,                                                    2009
        ($ thousands)
        ---------------------------------------------------------------------

        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                                         (413)
                                                              ---------------
                                                                      16,694
                                                              ---------------

        Financed as follows:
          Cash                                                        16,694


        The purchase price allocation has been finalized as of December 31,
        2009.

    5.  INVENTORY

        As at December 31,                                2009          2008
        ($ thousands)
        ---------------------------------------------------------------------
        Parts and materials                             14,418        10,378
        Work-in-progress                                 5,960         4,456
                                                 ----------------------------
        Total inventory                                 20,378        14,834
                                                 ----------------------------

        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, 2009,
        there were no material inventory write-downs or reversals of
        previously written-down amounts (2008 - no material write-downs).

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

        For the year ended December 31,                   2009          2008
        ($ thousands)
        ---------------------------------------------------------------------
        Raw materials and consumables purchased         91,383       126,706
        Labour costs                                    19,790        18,935
        Other costs                                        727           759
        (Increase) decrease in inventory                (5,544)        3,397
                                                 ----------------------------
        Amount of inventories expensed in period       106,356       149,797
                                                 ----------------------------

    6.  CAPITAL ASSETS

        As at December 31,                           2009
                                                 Accumulated
        ($ thousands)                   Cost    Depreciation  Net Book Value
        ---------------------------------------------------------------------

        Rigs and rig-related
         equipment                 1,480,316         302,582       1,177,734
        Automotive equipment
         and other equipment          27,965          17,212          10,753
        Construction equipment         3,676             984           2,692
        Building                      40,917           4,565          36,352
        Land                          16,091               -          16,091
        Assets under construction     56,659               -          56,659
                                  -------------------------------------------
                                   1,625,624         325,343       1,300,281
                                  -------------------------------------------


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

    7.  INTANGIBLE ASSETS

        As at December 31,                           2009
                                                 Accumulated
        ($ thousands)                   Cost    Amortization  Net Book Value
        ---------------------------------------------------------------------

        Customer contracts            30,964          30,964               -
        Patents                        3,000             411           2,589
        Customer relationships           820             314             506
        Trade name                       790             216             574
        Non-compete agreements           130              59              71
        Engineering and design
         costs                            75               9              66
                                  -------------------------------------------
                                      35,779          31,973           3,806
                                  -------------------------------------------


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

        The aggregate amortization expense for the intangible assets for the
        year ended December 31, 2009 is $0.6 million (2008 - $8.4 million)
        and is included in depreciation and amortization. The impairment loss
        of $23.2 million incurred in the year ended December 31, 2009 is
        related to the Bareboat Charters in the Company's US and
        International segment. The intangible asset was recognized in
        connection with the acquisition of Axxis on July 5, 2007. The
        original value of $39.6 million was related to the US$12.5 million
        annual payments to the former owners of Axxis in relation to the
        Bareboat Charters. The intangible asset was originally amortized over
        the period of the payment term, ending July 2010. Management
        concluded the remaining value of $23.2 million was fully impaired
        based on the outlook for the barge drilling market and its adverse
        effect on the Bareboat Charters up until July 2010. The entire amount
        has been recognized as an impairment of intangible assets in the
        Consolidated Statement of Operations.

    8.  GOODWILL

        In 2008, 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, in 2008 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. There were no impairments
        identified during the 2009 annual impairment test on goodwill
        balances.

        The changes in goodwill during the year are as follows:

        As at December 31,                                2009          2008
        ($ thousands)
        ---------------------------------------------------------------------
        Balance, beginning of year                     162,173       169,134
        Additions due to acquisitions                        -        11,901
        Impairment of goodwill                               -       (38,154)
        Adjustments due to foreign exchange            (14,211)       19,292
                                                 ----------------------------
        Balance, end of year                           147,962       162,173
                                                 ----------------------------

    9.  LONG-TERM DEBT

        As at December 31,                                2009          2008
        ($ thousands)
        ---------------------------------------------------------------------
        Credit facilities, net of transaction
         costs(a)                                      209,856       307,772
        Building and other equipment loans(b)            7,478         7,959
        Deferred purchase obligation(c)                 13,085        22,881
                                                 ----------------------------
                                                       230,419       338,612
        Less: current portion of long-term debt        (14,146)      (16,844)
                                                 ----------------------------
                                                       216,273       321,768
                                                 ----------------------------

        a) Effective February 12, 2009, Trinidad renewed the syndicated loan
           facility comprised of a $225.0 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) rates 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 rates
           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 $456.4 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.

           The effective interest rate on these facilities was 6.6% for the
           year ended December 31, 2009 (2008 - 6.8%).

        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.

           Other equipment loans are payable over various periods from two
           months to 16 months at interest rates varying from 0% to 8.3% per
           annum, and are secured by the related assets.

        c) 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 16. 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,                   2009          2008
        ($ thousands)
        ---------------------------------------------------------------------
        Convertible debentures - opening balance       323,381       315,991
        Conversion of convertible debentures               (92)          (87)
        Accretion of discount                            5,296         4,836
        Effective interest on transaction costs          2,664         2,641
                                                 ----------------------------
        Convertible debentures - ending balance        331,249       323,381
                                                 ----------------------------

        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.

        Upon issuance, 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
        discount on the debentures is being accreted such that the liability
        at maturity will equal the face value of $354.3 million. For the year
        ended December 31, 2009 there were conversions of 100 debentures
        (2008 - 95 debentures) into shares, reducing the overall convertible
        debenture balance by $0.1 million (2008 - $0.1 million) of which
        $0.1 million (2008 - $0.1 million) was allocated to reduce the
        outstanding debt.

        Interest on convertible debentures of $35.4 million (2008 -
        $34.9 million) represents coupon payments of $27.4 million (2008 -
        $27.5 million), $5.3 million (2008 - $4.8 million) pertaining to the
        accretion of the convertible debenture and $2.7 million (2008 -
        $2.6 million) pertaining to the effective interest on financing costs
        for the year ended December 31, 2009.

        On March 23, 2009, Trinidad announced its intent to acquire, for
        cancellation, by way of normal course issuer bid (the "Bid"),
        convertible unsecured subordinated debentures (the "Debentures") of
        the Company in the principal amount of up to $35.4 million, which
        represents approximately ten percent of the Company's public debt.
        The Bid commenced on March 25, 2009 and will terminate on the earlier
        of March 24, 2010 or the date upon which the Company acquires the
        maximum amount of Debentures pursuant to the Bid. There were no
        debentures repurchased under the Bid during 2009.

    11. INCOME TAXES

        For the years ended December 31,                  2009          2008
        ($ thousands except percentages)
        ---------------------------------------------------------------------
        Net income (loss) before tax                   (12,713)      125,643
        Corporate tax rate                              29.61%        30.19%
                                                 ----------------------------
        Tax expense at statutory rate                   (3,764)       37,932
          Tax reduction arising from trust
           income distribution                               -        (1,855)
          Non-deductible expenses                        2,914        12,555
          Statutory and other rate differences            (342)        3,300
          Effect of change in timing of
           expected tax rates                            3,881        (2,986)
          Large corporation tax expense                      -          (142)
          Mexican flat taxes                               107             -
          Return to provision adjustment                 6,566        (5,454)
          Other                                            250           119
                                                 ----------------------------
        Total tax expense                                9,612        43,469
                                                 ----------------------------

        Trinidad's income is subject to Canadian federal and provincial
        taxes, US federal and state taxes, and international federal taxes.
        For 2009, a $1.6 million recovery (2008 - $7.4 million expense)
        relates to the Company's Canadian entities resulting from operations
        in Alberta, British Columbia and Saskatchewan, a $3.6 million (2008 -
        $0.5 million) expense pertains to operations in Mexico, and a
        $0.4 million (2008 - nil) expense relates to other international
        subsidiaries. The remaining tax expense of $7.2 million (2008 -
        $38.6 million) relates to the Company's US operations, and is a
        blended rate involving the federal rate, and a pro-rata of the
        following states: Colorado, Kansas, Texas, Louisiana, New Mexico 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,                                2009          2008
        ($ thousands)
        ---------------------------------------------------------------------
        Loss carry-forward                                   -            12
        Deferred costs                                       -            87
                                                 ----------------------------
        Current future tax asset                             -            99
                                                 ----------------------------

        Loss carry-forward                             149,464        88,406
        Capital and other long-lived assets           (237,833)     (184,226)
        Interest rate swap                               3,827         6,250
        Financing costs                                  2,876           743
                                                 ----------------------------
        Long-term future tax liability                 (81,666)      (88,827)
                                                 ----------------------------

        Loss carry-forwards of $432.7 million (2008 - $279.6 million) have
        been recognized for income tax purposes, and are due to expire
        between 2019 and 2029.

    12. SHAREHOLDERS' EQUITY AND CONTRIBUTED SURPLUS

        a) Common Shares

        Authorized
        Unlimited number of common shares, voting, participating

        For the years ended
         December 31,                     2009                   2008
        ($ thousands except
         share data)
        ---------------------------------------------------------------------
                                    Number     Amount      Number     Amount
                                  of Shares       $      of Shares       $
                               ----------------------------------------------
        Common shares -
         opening balance         95,227,381   828,882            -         -
        Shares issued for cash,
         net of transaction
         costs and future tax    27,184,500   137,309   12,132,353   158,010
        Shares issued on
         conversion of
         convertible debentures       5,181        99        4,921        95
        Shares repurchased and
         cancelled under NCIB    (1,576,100)  (14,427)  (1,048,800)   (9,122)
        Shares issued on
         exercise of options              -         -      241,634     1,851
        Contributed surplus
         transferred on
         exercised options                -         -            -       279
        Shares issued pursuant
         to the Arrangement               -         -   84,035,873   678,282
                               ----------------------------------------------
                                120,840,962   951,863   95,365,981   829,395
        Shares repurchased,
         but not cancelled                -         -     (138,600)     (513)
                               ----------------------------------------------
        Common Shares -
         closing balance        120,840,962   951,863   95,227,381   828,882
                               ----------------------------------------------

        On June 25, 2009, Trinidad closed a bought deal equity financing
        whereby 27,184,500 shares were issued for gross proceeds of
        $140.0 million. $133.8 million in net proceeds were received net of
        $6.2 million in total transaction costs, which were offset by a
        $3.5 million future income tax asset. This equity financing was
        primarily applied to reduce outstanding principal on both the
        revolving and the term facilities.

        During the second quarter of 2008, Trinidad closed an equity
        financing deal whereby 12,132,353 shares, including the overallotment
        of 1,102,941 shares, were issued for gross proceeds of
        $165.0 million. The net proceeds of $158 million included $7 million
        of transaction costs, and were used to reduce debt and to fund the
        2008 rig construction programs.

        On September 2, 2008, Trinidad announced its intent to acquire for
        cancellation up to ten percent (9,373,221 common shares) of the
        Company's public float, by way of Normal Course Issuer Bid (NCIB),
        that extended to the earlier of September 3, 2009 or the date upon
        which the Company acquired the ten percent. During 2009, Trinidad
        repurchased 1,576,100 shares at an average cost of $3.87 per share
        ($14.4 million of book value) by way of the NCIB. Partly offsetting
        this was a conversion of convertible debentures during the year of
        5,181 shares ($0.1 million of book value). At December 31, 2009,
        under this NCIB plan, Trinidad has acquired and cancelled a total of
        2,763,500 shares at a cost of $12.0 million, at an average cost of
        $4.34 per share. The NCIB was terminated on September 4, 2009 as per
        the expiry timeline. 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.

        b) Contributed surplus

        For the years ended December 31,                  2009          2008
        ($ thousands)
        ---------------------------------------------------------------------
        Contributed surplus - opening balance           19,043        13,843
        Stock-based compensation expense                   482         1,713
        Contributed surplus transferred on
         exercise of options                                 -          (289)
        Effect of NCIB                                   8,307         3,776
                                                 ----------------------------
        Contributed surplus - ending balance            27,832        19,043
                                                 ----------------------------

    13. LONG TERM INCENTIVE PLANS

        Option Plan

        The following summarizes the outstanding options as at December 31,
        2009 and 2008 and the changes during these periods:

        For the years ended
         December 31,                 2009                      2008
        ---------------------------------------------------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                               Number     Exercise       Number     Exercise
                           of Options     Price ($)  of Options     Price ($)
        ---------------------------------------------------------------------
        Outstanding -
         beginning of year  8,259,495        12.66    7,965,670        12.55
        Granted during
         the period            46,038         6.87      823,810        11.95
        Exercised during
         the period                 -            -     (249,484)        7.69
        Forfeited during
         the period        (2,271,584)        9.70     (280,501)       11.83
                          ---------------------------------------------------
        Outstanding -
         end of year        6,033,949        13.68    8,259,495        12.66
                          ---------------------------------------------------

        The range of exercise prices for the options outstanding at
        December 31, 2009 is as follows:

        ---------------------------------------------------------------------
                             Total Options Outstanding   Exercisable Options

                                               Weighted
                                    Weighted    Average             Weighted
                                     Average  Remaining              Average
        Range of                    Exercise       Life             Exercise
         Exercise Prices    Number  Price ($)    (years)    Number  Price ($)
        ---------------------------------------------------------------------
        $6.87 - $9.50       46,038      6.87       4.88     23,019      6.87
        $9.51 - $12.00     807,062     11.93       3.58    637,858     11.93
        $12.01 - $14.00  3,265,192     12.39       1.06  3,265,192     12.39
        $14.01 - $16.83  1,915,657     16.79       1.03  1,915,657     16.79
        ---------------------------------------------------------------------
        $9.51 - $16.83   6,033,949     13.68       1.41  5,841,726     13.76
        ---------------------------------------------------------------------

        Trinidad uses the Black-Scholes option-pricing model to determine the
        estimated fair value of the options granted. The per share weighted
        average fair value of options granted during the year ended
        December 31, 2009 was $2.59 (2008 - $2.47). For the year ended
        December 31, 2009, Trinidad recognized compensation expense included
        in the calculation of net earnings of $0.5 million (2008 -
        $1.7 million) using the following weighted average assumptions:

        For the years ended December 31,                  2009          2008
        ---------------------------------------------------------------------
        Expected volatility                              64.4%         38.8%
        Annual dividend yield                             2.9%          5.0%
        Risk-free interest rate                           1.9%          3.0%
        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.

        DSU Plan

        As at December 31, 2009, there were 127,385 (2008 - 40,732) DSUs
        outstanding, with a mark-to-market liability of $0.9 million (2008 -
        $0.2 million), which is included in accounts payable and accrued
        liabilities. During the year ended December 31, 2009, 14,053 DSUs
        were exercised (2008 - nil). The expense related to the DSUs is
        recognized in stock-based compensation in the Consolidated Statement
        of Operations.

        PSU Plan

        As at December 31, 2009, there were 626,847 (2008 - 237,000) PSUs
        outstanding, with a mark-to-market liability of $2.0 million (2008 -
        $0.6 million), which is included in accounts payable and accrued
        liabilities. Of the 626,847 units, 417,898 vest on December 1, 2010
        and the remaining 208,949 will vest on December 1, 2011. During the
        year ended December 31, 2009, 265,252 PSUs were exercised (2008 -
        nil). The expense related to the PSUs is recognized in stock-based
        compensation in the Consolidated Statement of Operations.

    14. 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,                  2009          2008
        ($ thousands)
        ---------------------------------------------------------------------
        Long-term debt(1)                              219,347       316,564
        Convertible debentures(1)                      338,233       333,029
                                                 ----------------------------
        Total debt                                     557,580       649,593
        Shareholders' equity                           911,621       919,471
        Less: cash and cash equivalents                 (4,198)      (31,202)
                                                 ----------------------------
        Total capitalization                         1,465,003     1,537,862
                                                 ----------------------------

        (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.

        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,
        which is a non-GAAP measure. This ratio is calculated as the
        consolidated debt balance, excluding convertible debentures, divided
        by consolidated net earnings (loss), adjusted by interest on the
        long-term debt, depreciation and amortization, income taxes,
        gain/loss on sale of assets, unrealized foreign exchange and any
        other non-cash expenditure or loss for the rolling four quarters, and
        must be maintained below 2.5:1. For the rolling four quarters ended
        December 31, 2009, this ratio was 1.40:1 (December 31, 2008 -
        1.43:1).

        Trinidad remains in compliance with all of the banking syndicate's
        financial covenants.

    15. 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 debenture as follows:

        December 31,                    2009                    2008
                                            Carrying                Carrying
        ($ thousands)         Fair Value       Value  Fair Value       Value
        ---------------------------------------------------------------------
        Held for trading:
          Cash and cash
           equivalents             4,198       4,198      31,202      31,202
        Loans and receivables:
          Accounts receivable    139,418     139,418     225,744     225,744
        Other liabilities
          Interest rate swaps      7,659       7,659      12,891      12,891
          Credit facilities(1)
            Canadian Revolving
             Credit Facility      55,000      55,000      62,980      65,000
             Canadian Term
              Facility            65,624      67,798      91,937      97,333
             US Term Facility     86,213      89,070     139,974     148,190
          Convertible
           debentures(1)         357,684     366,441     214,317     361,245
          Other debt               7,663       7,478       6,168       7,959

        (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,
            and is a level 2 in the fair value hierarchy.

        -   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. Long-term
            debt is a level 2 in the fair value hierarchy.

        -   Convertible debentures - The fair value is based on the closing
            market price on the date of valuation, and is therefore a level 1
            in the fair value hierarchy.

        Interest rate swap

        Trinidad entered into two cash flow hedges using interest rate swap
        arrangements to hedge the floating interest rate on 71.0% 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, 2009, Trinidad recorded a gain of $2.3 million (2008 -
        $3.2 million loss) in OCI, net of $2.0 million in taxes (2008 -
        $1.8 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 $3.2 million for
        the year ended December 31, 2009 (2008 - $1.7 million) relating to
        costs under the debt facility. In addition, Trinidad also recognized
        interest expense of $2.7 million (2008 - $2.6 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,                                2009          2008
        ($ thousands)
        ---------------------------------------------------------------------
        Opening reserve balance                          4,849         4,364
        Increase in reserve recorded in the
         Statement of Operations in the
         current period                                  3,055         2,534
        Write-offs charged against the reserve          (2,187)       (1,122)
        Adjustments due to foreign exchange               (406)            -
        Recoveries of amounts previously
         written-off                                    (2,102)         (927)
                                                 ----------------------------
        Ending reserve balance                           3,209         4,849
                                                 ----------------------------

        As at December 31, 2009, Trinidad had accounts receivable of
        $8.3 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 and
        international marketplace and reliance on US and international
        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 and international operations from its Canadian parent for cash
        flow requirements to satisfy daily operations, creating a natural
        hedge. However, Trinidad is exposed to unrealized fluctuations in the
        gains and losses on consolidation, and US dollar-denominated
        intercompany balances between the US, international and Canadian
        entities. As at December 31, 2009, 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, 2009, 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 and international subsidiaries are subject to foreign translation
        adjustments upon consolidation. Based on these US dollar financial
        instrument closing balances, net income for the year ended
        December 31, 2009, would have fluctuated by approximately
        $0.1 million (2008 - $0.8 million), and OCI would have fluctuated by
        $5.1 million (2008 - $3.6 million) for the year ended December 31,
        2009, 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 71.0% of the outstanding
        borrowings under the US and Canadian term credit facilities,
        rendering them partially fixed. As at December 31, 2009, Trinidad had
        $211.9 million outstanding under the credit facilities. A change of
        one percent in the interest rates would cause a $1.5 million (2008 -
        $1.9 million) change in the interest expense for the year ended
        December 31, 2009.

        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,
         2009                                                          There-
        ($ thousands)      2010     2011     2012     2013     2014    after
        ---------------------------------------------------------------------
        Accounts payable
         and accrued
         liabilities     51,055        -        -        -        -        -
        Interest rate
         swaps            5,773    1,886        -        -        -        -
        Canadian
         revolving
         debt(1)              -   55,000        -        -        -        -
        Canadian term
         debt             1,000   66,799        -        -        -        -
        US term debt      1,314   87,756        -        -        -        -
        Other debt          491    6,987        -        -        -        -
        Convertible
         debentures(2)        -        -  354,142        -        -        -
        Interest payments
         on contractual
         obligations     35,649   29,080   13,723        -        -        -
                       ------------------------------------------------------
        Total            95,282  247,508  367,865        -        -        -
                       ------------------------------------------------------

    (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) The financial liability of the convertible debentures represents the
        face value at maturity in 2012.

    16. 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)
        ---------------------------------------------------------------------
        2010                                                           3,504
        2011                                                           9,306
        2012                                                           2,165
        2013                                                           2,053
        2014                                                           1,955
        Thereafter                                                     1,031
        ---------------------------------------------------------------------

        Rig Construction Program

        On January 4, 2010, Trinidad announced that it has agreed to resume
        the construction of six new contracted rigs that were delayed in
        early 2009 due to weak industry conditions. These rigs have depth
        capacities of 18,000 feet and remain under five-year take-or-pay
        contracts with the original customer which provides Trinidad with a
        guaranteed utilization rate of 100% on these rigs over their
        respective contract terms. These six rigs are destined for operations
        in the Haynesville Shale in Louisiana bringing the total rig count in
        the area to 31. The first rig delivery is scheduled for the first
        quarter of 2010. Capital costs expected to complete these rigs total
        approximately $60.0 million.

        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 return for a
        management fee and a portion of net revenues and operating margin of
        the Charters. However, as part of the purchase agreement Trinidad
        committed to pay the former shareholders of Axxis, who are also the
        former operators of the Charters, US $12.5 million per year for the
        three years subsequent to acquisition for the right to operate the
        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.

    17. 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 US, such that a significant proportion of Trinidad's
        operations now occur in the US marketplace. The acquisitions of
        Cheyenne Drilling and Axxis Drilling, as well as Trinidad's rig
        construction programs have provided additional rigs of varying depths
        and capabilities for the US operations, which complemented the
        drilling fleet operating in the Canadian market and expanded
        Trinidad's overall drilling operations. Despite the similarities in
        the identified assets, 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 and Chile 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 Derrick Service Ltd 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.

        ---------------------------------------------------------------------
                                     United
        For the                      States/
         year ended                   Inter-                Inter-
         December 31,   Canadian   national               segment
         2009           Drilling   Drilling Construction    Elimi-
        ($ thousands) Operations Operations   Operations  nations      Total
        ---------------------------------------------------------------------
        Revenue          196,505    350,454    115,406    (79,774)   582,591
        Operating
         expense         120,322    188,945    106,356    (79,774)   335,849
                      -------------------------------------------------------
                          76,183    161,509      9,050          -    246,742

        Interest on
         long-term debt   12,135      8,968         60          -     21,163
        Interest on
         convertible
         debentures       35,406          -          -          -     35,406
        Depreciation and
         amortization     27,282     57,718      2,032          -     87,032
        Loss on sale
         of assets           246     10,294          4          -     10,544
        Impairment of
         intangible
         assets                -     23,189          -          -     23,189
                      -------------------------------------------------------
        Income before
         corporate
         items             1,114     61,340      6,954          -     69,408
        General and
         administrative                                               53,117
        Stock-based
         compensation                                                  4,366
        Foreign exchange
         loss                                                         24,638
        Reorganization
         costs                                                             -
        Income taxes                                                   9,612
        Non-controlling
         interest                                                        114
                      -------------------------------------------------------
        Net earnings
         (loss)                                                      (22,439)
                      -------------------------------------------------------
        Capital
         expenditures
         (including
         acquisitions)    10,950    150,653        960          -    162,563
        Total assets     556,611  1,036,351     31,051          -  1,624,013
        Goodwill               -     89,441     58,521          -    147,962
        Net future
         income tax
         liability        (8,831)   (78,729)    (2,106)         -    (81,666)
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                     United
        For the                      States/
         year ended                   Inter-                Inter-
         December 31,   Canadian   national               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
                      -------------------------------------------------------
                         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 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                                                        (33,478)
        Reorganization
         costs                                                         2,766
        Income taxes                                                  43,469
                      -------------------------------------------------------
        Net earnings                                                  82,174
                      -------------------------------------------------------
        Capital
         expenditures
         (including
         acquisitions)    39,051    232,205      2,645          -    273,901
        Total assets     634,499  1,184,827     42,738          -  1,862,064
        Goodwill               -    103,652     58,521          -    162,173
        Net future
         income tax
         liability       (14,279)   (72,522)    (1,927)         -    (88,728)
        ---------------------------------------------------------------------

    18. SIGNIFICANT CUSTOMERS

        At December 31, 2009, 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 2009 revenue. In management's assessment, the future
        viability of Trinidad is not dependent on these customers.

    19. 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.

        Trinidad engages the law firm of Blake, Cassels & Graydon LLP to
        provide legal advice. One partner of this law firm holds a board
        position with Trinidad, and another partner is an officer of the
        Company. Trinidad incurred legal fees of $2.3 million (2008 - $1.7
        million) to Blake, Cassels & Graydon LLP. As of December 31, 2009,
        $nil (2008 - $0.1 million) was due to Blake, Cassels & Graydon LLP.

        During the first quarter of 2009, Trinidad purchased a parcel of land
        from 1010460 Alberta Ltd., a company owned by an executive officer
        within Trinidad's Canadian operations. The land purchase of
        $1.6 million, as well as all of the purchase agreement's conditions,
        was representative of an unrelated party transaction. This property
        currently houses a facility used in the coring and surface casing
        division of the Canadian drilling operations.

        Effective August 18, 2008, Trinidad closed a $16.7 million
        acquisition of an oilfield equipment fabrication company, Victory Rig
        Equipment Corporation, which was substantially held by one of
        Trinidad's executive officers.

    20. FOREIGN CURRENCY TRANSLATION

        As at December 31,                                2009          2008
        ($ thousands)
        ---------------------------------------------------------------------
        Unrealized (losses) gains on translating
         financial statements of self-sustaining
         foreign operations excluding intercompany
         balances                                     (112,260)      137,572
        Unrealized gains (losses) on foreign
         currency translation adjustments on
         intercompany balances                          15,384       (31,635)
                                                 ----------------------------
        Total foreign currency translation
         adjustment                                    (96,876)      105,937
                                                 ----------------------------

    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.
    



For further information: For further information: Lyle Whitmarsh, President and Chief Executive Officer, 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

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Trinidad Drilling Ltd.

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