Trinidad Drilling Ltd. reports third quarter and year-to-date 2009 results;
strong gross margins maintained and expanded US and International operations

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

    TSX SYMBOLS: TDG and TDG.DB
    

CALGARY, Nov. 4 /CNW/ - Trinidad Drilling Ltd. ("Trinidad" or the "Company") reported operating and financial results for the third quarter and first nine months of 2009 today. Trinidad maintained strong gross margins in the quarter and year to date, with utilization levels staying above industry average and the Company remaining focused on cost reductions. In addition, Trinidad expanded its US operations with the delivery of the last two rigs constructed in 2009, began the redeployment of four rigs to its Mexican operations and moved an existing rig into a new area of operations in Chile.

"During the quarter, Trinidad was able to achieve strong gross margins by remaining focused on its existing business and improving efficiencies where possible. In addition, we broadened our operations base further, increasing the Company's exposure to the high-activity, high-margin shale gas drilling in North America and provided additional diversification by expanding our international operations," said Lyle Whitmarsh, Trinidad's President and Chief Executive Officer. "Trinidad has consistently shown an ability to identify, grasp and execute on value-adding opportunities. Our growth in the US, Mexico and Chile in the third quarter demonstrates that our strategy has not changed."

    
    THIRD QUARTER AND YEAR-TO-DATE HIGHLIGHTS

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

    -   Trinidad recorded revenue of $126.1 million for the third quarter of
        2009 and $434.4 million year to date, down 34.2% and 21.4%
        respectively, largely due to lower utilization rates and weaker
        industry conditions.

    -   Drilling utilization in Canada averaged 36% in the third quarter and
        33% year to date, exceeding industry utilization averages by 15 and
        11 percentage points, respectively, but down from the levels recorded
        in 2008 of 63% for the quarter and 55% for the first nine months of
        the year. The US and International drilling operations reported
        utilization of 61% in the quarter and 62% year to date compared to
        85% and 86% in the respective comparative periods. Trinidad has
        also outperformed the industry activity levels in the US. Since the
        peak of the market in the fall of 2008, the industry active rig
        count has dropped 54% while Trinidad is down 22% over the same
        period. (Source - Tudor Pickering Holt/Rig Data)

    -   Trinidad's high level of rigs under contract, its modern, deeper-
        capacity fleet and its focus on cost control allowed the Company to
        record a strong gross margin(1) percentage of 42% in the third
        quarter and 43% year to date compared to 38% and 41%, respectively,
        in 2008.

    -   Net earnings before impairment of intangible asset(1) in the third
        quarter were a loss of $12.1 million ($0.10 per share (diluted)) and
        a loss of $3.2 million ($0.03 per share (diluted)) year to date,
        compared to earnings of $20.4 million and $60.4 million, respectively
        in 2008. In the third quarter, in addition to the items above, net
        earnings were impacted by a foreign exchange loss of $11.4 million.

    -   Earnings before interest, taxes, depreciation and amortization
        (EBITDA)(1) prior to stock based compensation and foreign exchange
        loss or gains was $40.8 million in the third quarter compared to
        $61.5 million in the same quarter of 2008.

    -   Cash flow from operations before changes in non-cash working
        capital(1) was $27.0 million ($0.22 per share (diluted)) in the
        third quarter of 2009 and $106.1 million ($1.02 per share (diluted))
        year-to-date, down 47.7% and 28.9%, respectively, compared to the
        same periods last year. The lower cash flow levels reflect the
        reduced revenue generated, however this impact was partially
        mitigated through improved cost control in the quarter and year to
        date.

    -   During the third quarter of 2009, Trinidad delivered two new rigs
        into its US operations, redeployed four existing, under-utilized rigs
        to its Mexican operations and one rig into Chile, all under long-
        term, take-or-pay contracts with 100% utilization over the contracted
        periods.

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

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following management's discussion and analysis (MD&A) of the 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"). The MD&A discusses the operating and financial results for the three and nine months ended September 30, 2009, and is dated November 3, 2009 and takes into consideration information available up to that date. The MD&A is based on the unaudited consolidated financial statements of Trinidad for the three and nine month periods ended September 30, 2009, which were prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP). This MD&A should be read in conjunction with the annual consolidated financial statements and related notes for the year ended December 31, 2008. Additional information is available on Trinidad's website (www.trinidaddrilling.com) and all previous public filings, including the most recently filed Annual Report and Annual Information Form, are available through SEDAR (www.sedar.com).

As a result of Trinidad's conversion from an income trust to a corporation, effective March 10, 2008, references to the "Company", "shares", the "Incentive Options Plan", "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

    ($ thousands except share,
     per share and percentage data)
                                             Three months ended September 30,
                                              2009         2008     % change
    -------------------------------------------------------------------------

    Revenue                                126,142      191,687        (34.2)
    Gross margin(1)                         52,983       73,093        (27.5)
    Gross margin percentage(1)               42.0%        38.1%         10.2
    EBITDA(1)                               27,261       67,150        (59.4)
      Per share (diluted)(2)                  0.23         0.69        (66.7)
    EBITDA before stock-based
     compensation(1)                        29,348       68,347        (57.1)
      Per share (diluted)(2)                  0.24         0.71        (66.2)
    Cash flow from operations               (3,302)      24,582       (113.4)
      Per share (basic)(2)                   (0.03)        0.26       (111.5)
      Per share (diluted)(2)                 (0.03)        0.25       (112.0)
    Cash flow from operations before
     changes in non-cash working
     capital(1)                             26,975       51,538        (47.7)
      Per share (diluted)(2)                  0.22         0.53        (58.5)
    Net earnings (loss)                    (12,143)      20,373       (159.6)
      Per share (basic)(2)                   (0.10)        0.21       (147.6)
      Per share (diluted)(2)                 (0.10)        0.21       (147.6)
    Net earnings (loss) before
     impairment of intangible asset(1)     (12,143)      20,373       (159.6)
      Per share (basic)(2)                   (0.10)        0.21       (147.6)
      Per share (diluted)(2)                 (0.10)        0.21       (147.6)
    Net earnings (loss) before
     stock-based compensation(1)           (10,056)      21,570       (146.6)
      Per share (diluted)(2)                 (0.08)        0.22       (136.4)
    Capital expenditures
     (including deposits)                   38,809       81,022        (52.1)
    Net debt(1)                            479,585      510,102         (6.0)
    Shares outstanding - basic
     (weighted average)(2)             120,840,962   96,289,155         25.5
    Shares outstanding - diluted
     (weighted average)(2)             120,840,962   96,869,702         24.7
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                              Nine months ended September 30,
                                              2009         2008     % change
    -------------------------------------------------------------------------

    Revenue                                434,411      552,517        (21.4)
    Gross margin(1)                        186,948      225,286        (17.0)
    Gross margin percentage(1)               43.0%        40.8%          5.4
    EBITDA(1)                              125,618      195,703        (35.8)
      Per share (diluted)(2)                  1.21         2.19        (44.7)
    EBITDA before stock-based
     compensation(1)                       130,066      197,202        (34.0)
      Per share (diluted)(2)                  1.26         2.20        (42.7)
    Cash flow from operations              126,564      154,906        (18.3)
      Per share (basic)(2)                    1.22         1.74        (29.9)
      Per share (diluted)(2)                  1.22         1.73        (29.5)
    Cash flow from operations before
     changes in non-cash working
     capital(1)                            106,144      149,250        (28.9)
      Per share (diluted)(2)                  1.02         1.67        (38.9)
    Net earnings (loss)                    (26,382)      60,426       (143.7)
      Per share (basic)(2)                   (0.25)        0.68       (136.8)
      Per share (diluted)(2)                 (0.25)        0.67       (137.3)
    Net earnings (loss) before
     impairment of intangible asset(1)      (3,193)      60,426       (105.3)
      Per share (basic)(2)                   (0.03)        0.68       (104.4)
      Per share (diluted)(2)                 (0.03)        0.67       (104.5)
    Net earnings (loss) before
     stock-based compensation(1)           (21,934)      61,925       (135.4)
      Per share (diluted)(2)                 (0.21)        0.69       (130.4)
    Capital expenditures
     (including deposits)                  130,207      138,855         (6.2)
    Net debt(1)                            479,585      510,102         (6.0)
    Shares outstanding - basic
     (weighted average)(2)             103,559,122   89,021,557         16.3
    Shares outstanding - diluted
     (weighted average)(2)             103,559,122   89,551,403         15.6
    -------------------------------------------------------------------------
    (1) Readers are cautioned that gross margin, gross margin percentage,
        EBITDA, EBITDA before stock-based compensation, cash flow from
        operations before change in non-cash working capital, net earnings
        (loss) before impairment of intangible asset, net earnings (loss)
        before stock-based compensation 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

                               Three months ended          Nine months ended
                                     September 30,              September 30,
                           2009     2008 % change     2009     2008 % change
    -------------------------------------------------------------------------
    Land Drilling Market
    Operating days -
     drilling
      Canada              1,739    3,411    (49.0)   4,976    9,162    (45.7)
      United States and
       International(1)   3,419    3,861    (11.4)   9,895   11,319    (12.6)
    Rate per
     drilling day
      Canada (CDN$)      21,486   21,772     (1.3)  23,639   22,989      2.8
      United States and
       International
       (CDN$)(1)         21,819   22,668     (3.7)  24,187   21,996     10.0
      United States and
       International
       (US$)(1)          19,632   22,049    (11.0)  20,370   21,715     (6.2)
    Utilization rate
     - drilling
      Canada                36%      63%    (42.9)     33%      55%    (40.0)
      United States and
       International(1)     61%      85%    (28.2)     62%      86%    (27.9)
    CAODC industry
     average                21%      48%    (56.3)     22%      41%    (46.3)
    Number of drilling
     rigs at quarter end
      Canada                 53       60    (11.7)      53       60    (11.7)
      United States and
       International(1)      66       50     32.0       66       50     32.0
    Utilization rate
     for service rigs       27%      49%    (44.9)     30%      46%    (34.8)
    Number of service
     rigs at quarter end     23       20     15.0       23       20     15.0
    Number of coring and
     surface casing rigs
     at quarter end          20       20        -       20       20        -

    Barge Drilling Market
    Operating days          266      305    (12.8)     862      938     (8.1)
    Rate per drilling
     day (CDN$)          28,805   40,678    (29.2)  32,915   43,208    (23.8)
    Rate per drilling
     day (US$)           25,736   39,620    (35.0)  27,566   42,712    (35.5)
    Utilization rate        72%      83%    (13.3)     79%    93%(2)   (15.1)
    Number of barge
     drilling rigs at
     quarter end              1        1        -        1        1        -
    Number of barge
     drilling rigs under
     Bareboat Charter
     Agreements               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.
    

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), EBITDA before stock-based compensation, cash flow from operations before change in non-cash working capital, net earnings (loss) before impairment of intangible asset, net earnings (loss) before stock-based compensation, 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 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 consolidated financial statements.

PROFILE

Trinidad is a growth-oriented corporation that trades on the Toronto Stock Exchange (TSX) under the symbols TDG and TDG.DB. Trinidad's divisions operate in the drilling, well-servicing, coring and barge-drilling sectors of the North American oil and natural gas industry. Trinidad has 119 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 23 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.

OVERVIEW

Conditions in the drilling sector remained difficult in the third quarter of 2009; lower activity levels and a competitive pricing environment limited Trinidad's ability to generate high levels of revenue, cash flow and earnings. Despite these challenging conditions, Trinidad was able to maintain focus on its existing operations, improving efficiencies and recording strong gross margins in the quarter and year to date. In addition, the Company expanded its operations through the completion of its rig building program and by redeploying existing, under-utilized equipment to high-utilization, high-margin areas.

Lower utilization rates in both Canada and the US led to a reduced revenue level of $126.1 million in the third quarter of 2009 compared to $191.7 million in the previous comparative quarter, a reduction of 34.2%. For the first nine months of 2009, Trinidad recorded revenue of $434.4 million, a 21.4% decrease from the same period in 2008. As a percentage of revenue, gross margin was 42.0% in the third quarter and 43.0% for the first nine months of 2009, up from 38.1% and 40.8%, respectively, in 2008. The Company's high level of contracted rigs, the predominantly deeper mix of active rigs and a continued focus on cost control were the key drivers behind the strong margins achieved in the quarter and year to date.

EBITDA (as defined in Non-GAAP measures section) was $27.3 million and $125.6 million, respectively, for the three and nine month periods ended September 30, 2009, a decrease of $39.9 million and $70.1 million, respectively, as compared to 2008. EBITDA in the third quarter of 2009 was negatively impacted by the lower revenue levels generated in the period. EBITDA also decreased due to an $11.4 million foreign exchange loss recorded in the quarter, reflecting the impact of the weakening of the US dollar relative to the Canadian dollar. Since the beginning of 2009, the US/Canadian exchange rate has weakened substantially; at the end of September the US dollar was 12% weaker than at year-end 2008. Excluding stock-based compensation and foreign exchange losses or gains from Trinidad's EBITDA figures increases the total to $40.8 million in the quarter and $146.1 million year to date.

Trinidad reported a net loss of $12.1 million or $0.10 per share diluted for the quarter ended September 30, 2009, a decrease from net earnings of $20.4 million or $0.21 per share (diluted) as reported in the third quarter of 2008. For the first nine months of 2009, Trinidad reported a net loss of $26.4 million or $0.25 per share (diluted), down from net earnings of $60.4 million or $0.67 per share (diluted) in the same period in 2008. In addition to the items mentioned above, net earnings in the third quarter of 2009 were positively impacted by lower depreciation costs due to lower activity levels and lower income tax expenses, partially offset by higher stock-based compensation expenses. Net earnings per share (diluted) for the third quarter also reflect a 25.5% increase in the weighted-average diluted shares outstanding following Trinidad's equity offering in June 2009.

Industry activity levels in the third quarter improved in Canada and the US compared to the second quarter, however both regions remain at levels below historical averages. Despite low industry utilization for the quarter, Trinidad was able to continue to achieve industry-leading utilization. Along with Trinidad's long-term contracts, the Company's focus on deep, technical drilling has allowed it to outperform the industry on a consistent basis. Trinidad has approximately 50% of its fleet under long-term, take-or-pay contracts with an average term remaining of 2.5 years.

In the third quarter of 2009, Trinidad continued its strategy of diversifying its operations geographically through organic growth and the redeployment of existing assets to areas with attractive utilization levels and strong gross margins. The last two rigs built under Trinidad's 2009 rig build program were deployed to the US in the third quarter; these rigs were both moved into the Haynesville shale increasing the Company's exposure to the more economic and higher activity North American shale plays. Trinidad is well positioned as a key player in the shale plays with approximately 40% of its fleet operating in these areas. In addition, the Company expanded its Mexican operations and delivered three of the four rigs it had previously agreed to move into the country. The remaining rig has recently completed some minor enhancements and is now in Mexico. As well, in the third quarter, Trinidad moved an existing rig from its US operations into Chile, creating a new operating area for the Company. The deployment of these rigs during the quarter demonstrates Trinidad's ongoing strategy for pursuing new opportunities for its equipment and maximizing returns for the Company. All the rigs were deployed with long-term, take-or-pay contracts, guaranteeing 100% utilization and solid day rates during the term of their contracts. Trinidad will continue to be opportunistic in deploying rigs to North American and international markets with minimal new capital investment requirements and contracts that reward high-value, high-performance drilling rigs.

Trinidad's earnings are highly dependent upon crude oil and natural gas commodity prices which drive its customers' cash flow levels and, in turn, demand for its oilfield services. The Company's strong base of long-term, take-or-pay contracts and its extensive exposure to the unconventional shale plays throughout North America have helped mitigate the impact of the reduced activity levels; however, the non-contracted portion of the fleet remains vulnerable to these market conditions. Low activity levels and downward pricing pressure appear to have reached their extremes and a conservative level of optimism is creeping into the drilling sector. This changing outlook did not materially impact the sector in the third quarter; however, Trinidad believes that the industry may be in early stages of recovery. While West Texas Instrument (WTI) oil prices were down 42% during the third quarter of 2009 compared to the same period in 2008, oil prices moved up 14% from the prior quarter on expectations that global economies have potentially troughed. Meanwhile, Henry Hub natural gas decreased 22% from the second quarter of 2009 and 62% from the same period of 2008, as storage levels remain high and the market is oversupplied with natural gas. In response to falling natural gas prices, producers have reduced their development plans due to contracting economics, thus curbing the flow of new natural gas supplies into the market. Trinidad believes that once economic conditions improve and energy demand increases, the sharp reduction in natural gas drilling activity, together with declining existing production levels, will bring supply back in line with demand and help bolster natural gas prices.

Trinidad's high quality equipment with deep-drilling capacity and advanced technology provides the Company with a competitive advantage. The Company's proven performance and strong customer relationships position it well for continued geographic expansion and to perform strongly once more robust natural gas pricing returns.

    
    QUARTERLY ANALYSIS                      2009                   2008
    ($ millions except per
     share and operating data)        Q3       Q2       Q1       Q4       Q3
    -------------------------------------------------------------------------
    Financial Highlights
    Revenue                        126.1   116.7(1)  191.6    205.3    191.7
    Gross margin                    53.0     52.5     81.5     84.2     73.1

    Net earnings (loss)            (12.1)    (8.6)  (5.6)(2)  21.8(3)   20.4
    Depreciation and
     amortization                   20.6     19.1     24.0     25.8     24.0
    Loss (gain) on disposal
     or sale of assets               0.3      5.6      4.1    (29.0)       -
    Stock-based compensation         2.1      1.7      0.7      0.9      1.2
    Future income tax
     (recovery) expense              1.7     (2.9)     7.8     19.8     10.3
    Effective interest on
     financing costs                 1.6      1.6      1.1      1.1      1.1
    Accretion on convertible
     debentures                      1.3      1.3      1.2      1.2      1.2
    Unrealized foreign
     exchange loss (gain)           11.4      9.9     (5.0)   (22.0)    (6.6)
    Impairment of intangible
     asset or goodwill                 -        -     23.2     38.2        -
                                   ------------------------------------------
    Cash flow from operations
     before change in non-cash
     working capital                26.9     27.7     51.5     57.8     51.6
    Net earnings (loss) per
     share (diluted)               (0.10)   (0.09)   (0.06)    0.23     0.21
    Cash flow from operations
     before change in non-cash
     working capital per
     share (diluted)                0.22     0.29     0.55     0.60     0.53


    QUARTERLY ANALYSIS                  2008              2007
    ($ millions except per
     share and operating data)        Q2       Q1       Q4       Q3
    ----------------------------------------------------------------
    Financial Highlights
    Revenue                        141.2    219.7    145.8    162.2
    Gross margin                    53.8     98.4     58.8     70.5

    Net earnings (loss)              1.1     38.9     17.9     15.0
    Depreciation and
     amortization                   20.5     24.0     19.0     20.2
    Loss (gain) on disposal
     or sale of assets              (0.2)    (0.1)     0.2        -
    Stock-based compensation         0.1      0.2      0.4      0.5
    Future income tax
     (recovery) expense              2.5      9.4     (7.8)     3.3
    Effective interest on
     financing costs                 1.1      0.4      1.1      1.1
    Accretion on convertible
     debentures                      1.2      1.8      1.2      1.0
    Unrealized foreign
     exchange loss (gain)            0.9     (4.1)     0.2      5.3
    Impairment of intangible
     asset or goodwill                 -        -        -        -
                                   ---------------------------------
    Cash flow from operations
     before change in non-cash
     working capital                27.2     70.5     32.2     46.4
    Net earnings (loss) per
     share (diluted)                0.01     0.44     0.21     0.18
    Cash flow from operations
     before change in non-cash
     working capital per
     share (diluted)                0.31     0.75     0.38     0.55

    (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                    2008
    ($ millions except per
     share and operating data)    Q3      Q2      Q1      Q4      Q3      Q2
    -------------------------------------------------------------------------
    Operating Highlights
    Land Drilling Market
    Operating days - drilling
      Canada                   1,739     692   2,545   3,034   3,411   1,742
      United States and
       International(1)        3,419   3,233   3,243   3,757   3,861   3,783
    Rate per drilling day
      Canada (CDN$)           21,486  23,564  25,132  26,358  21,772  23,219
      United States and
       International
       (CDN$)(1)              21,819  23,747  27,124  26,418  22,668  21,565
      United States and
       International
       (US$)(1)               19,632  19,554  21,961  22,882  22,049  21,449
    Utilization rate
     - drilling
      Canada                     36%     14%     51%     61%     63%     31%
      United States and
       International(1)          61%     61%     64%     80%     85%     87%
    CAODC industry average       21%     11%     36%     43%     48%     20%
    Number of drilling rigs
     at quarter end
      Canada                      53      53      57      57      60      62
      United States and
       International(1)           66      64      58      56      50      48
    Utilization for service
     rigs                        27%     19%     41%     45%     49%     29%
    Number of service rigs
     at quarter end               23      23      23      23      20      20
    Number of coring and
     surface casing rigs
     at quarter end               20      20      20      20      20      20

    Barge Drilling Market(2)
    Operating days               266     351     245     347     305     361
    Rate per drilling
     day (CDN$)               28,805  30,250  41,183  47,583  40,678  41,500
    Rate per drilling
     day (US$)                25,736  24,906  33,353  41,401  39,620  41,268
    Utilization rate             72%     96%     68%     94%     83%    100%
    Number of drilling rigs
     at quarter end                1       1       1       1       1       1
    Number of drilling rigs
     under Bareboat Charter
     Agreements at quarter end     3       3       3       3       3       3
    -------------------------------------------------------------------------

    QUARTERLY ANALYSIS          2008        2007
    ($ millions except per
     share and operating data)    Q1      Q4      Q3
    -------------------------------------------------
    Operating Highlights
    Land Drilling Market
    Operating days - drilling
      Canada                   4,009   2,135   2,718
      United States and
       International(1)        3,675   3,399   3,305
    Rate per drilling day
      Canada (CDN$)           24,517  23,631  21,746
      United States and
       International
       (CDN$)(1)              21,735  21,404  23,265
      United States and
       International
       (US$)(1)               21,636  21,650  21,978
    Utilization rate
     - drilling
      Canada                     72%     37%     47%
      United States and
       International(1)          87%     83%     85%
    CAODC industry average       56%     37%     39%
    Number of drilling rigs
     at quarter end
      Canada                      62      64      64
      United States and
       International(1)           48      46      43
    Utilization for service
     rigs                        62%     57%     46%
    Number of service rigs
     at quarter end               20      20      20
    Number of coring and
     surface casing rigs
     at quarter end               20      20      20

    Barge Drilling Market(2)
    Operating days               272     352     352
    Rate per drilling
     day (CDN$)               48,128  47,536  51,904
    Rate per drilling
     day (US$)                47,910  47,991  49,050
    Utilization rate           98%(3)    96%    100%
    Number of drilling rigs
     at quarter end                1       1       1
    Number of drilling rigs
     under Bareboat Charter
     Agreements at quarter end     3       3       3
    -------------------------------------------------
    (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 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.
    

An assessment or comparison of Trinidad's quarterly results, at any given time, requires consideration of crude oil and natural gas commodity prices and seasonality. 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 2007 and 2008 as Trinidad expanded its operations in the US land and barge rig markets and in the fourth quarter of 2008 into Mexico.

Throughout 2007, Canadian drilling operations faced declining market conditions as a result of lower commodity prices and high natural gas storage levels. Canadian dayrates decreased due to these conditions and the industry experienced lower utilization levels from the second quarter of 2007 onwards, in comparison to the same period in the prior year. The fourth quarter of 2007 was particularly impacted in western Canada as the Alberta Government announced a new royalty regime which resulted in many of Trinidad's key customers reducing their spending levels.

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. 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.

Trinidad's financial and operating results for the first nine months of 2009 have been impacted by the global economic recession. 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. Drilling activity levels remain at historically low levels, particularly in Alberta, which is seeing the largest portion of the decrease. Overall demand is down, commodity prices are low, which in addition to other factors, has caused exploration and production companies to significantly reduce their spending. Trinidad significantly reduced its capital expenditure plans, lowered its dividend and undertook a number of cost reduction measures in 2009 to mitigate the impact of the challenging industry conditions.

    
    RESULTS FROM OPERATIONS

    Canadian Drilling Operations

    ($ thousands except        Three months ended          Nine months ended
     percentages and                 September 30,              September 30,
     operating data)       2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Revenue              40,979   82,680    (50.4) 142,973  259,125    (44.8)
    Operating expense    25,430   52,100    (51.2)  86,725  154,751    (44.0)
                        -----------------------------------------------------
    Gross margin         15,549   30,580    (49.2)  56,248  104,374    (46.1)
                        -----------------------------------------------------
    Gross margin
     percentage           37.9%    37.0%             39.3%    40.3%

    Operating days -
     drilling             1,739    3,411    (49.0)   4,976    9,162    (45.7)
    Rate per drilling
     day (CDN$)          21,486   21,772     (1.3)  23,639   22,989      2.8
    Utilization rate -
     drilling               36%      63%    (42.9)     33%      55%    (40.0)
    CAODC industry
     average                21%      48%    (56.3)     22%      41%    (46.3)
    Number of drilling
     rigs at quarter end     53       60    (11.7)      53       60    (11.7)

    Utilization rate
     for service rigs       27%      49%    (44.9)     30%      46%    (34.8)
    Number of service
     rigs at quarter end     23       20     15.0       23       20     15.0
    Number of coring and
     surface casing rigs
     at quarter end          20       20        -       20       20        -
    -------------------------------------------------------------------------
    

Weak conditions in the oilfield services industry in Canada continued in the third quarter of 2009. Following the seasonal spring break-up period in the second quarter, industry activity failed to return to historical levels and industry utilization for the third quarter of 2009 was 21% compared to 48% in 2008. Industry utilization over the first nine months of 2009 averaged 22% compared to 41% for the same period of 2008. While activity levels have been low to date in 2009 compared to the same time frame in 2008, Trinidad's record of substantially exceeding industry utilization continued in 2009. The Company's deliberate focus on deep drilling and long-term contracts resulted in utilization levels of 36% for the third quarter and 33% year to date. Trinidad's utilization rates were 15 percentage points higher than the industry in the third quarter and 11 percentage points higher for the nine months ended September 30, 2009.

Relatively low natural gas prices and a hesitancy to commit to capital programs led oil and gas companies to delay drilling programs during the third quarter of 2009. Operators continued to be very selective in the development plans that did move forward in the quarter and activity levels were relatively stronger in the unconventional shale plays, such as the Montney, Horn River and Bakken compared to conventional drilling areas in western Canada. The bulk of Trinidad's deeper capacity rigs are operating in these unconventional areas, largely under long-term, take-or-pay contracts.

The number of wells rig released in the quarter declined by 63%, from 5,295 wells to 1,965 wells year over year. On a year-to-date basis, 5,719 wells rig released over the first nine months of 2009, compared to 12,056 wells in 2008, representing a 53% decline. This large decline reflects the strong impact the recessionary economic environment has had on drilling activity in Canada. The industry has not been impacted evenly across all drilling depths; the deeper portion of both Trinidad's fleet and the industry has been more highly utilized than the shallower rigs. For the first nine months of 2009, industry utilization for shallow rigs, with a drilling capacity of less than 2,400 metres, was 17%, while deeper rigs averaged 33%. Trinidad's strategic focus on deep-capacity and technically-advanced rigs has positioned it well for this market. The Company expects the trend towards deeper, more challenging drilling to continue over the long term as the more robust economics of the deeper wells drives higher activity. Trinidad's rigs are purpose built for the deeper style of drilling and this shift in focus by exploration and production companies continues to differentiate the Company from its competitors.

Trinidad's Canadian drilling segment experienced strong declines in operating days during the third quarter of 2009, with 1,739 operating days, representing a 49.0% decline year over year for the quarter. Year to date in 2009, operating days declined by 45.7%, from 9,162 days to 4,976 days year over year due to lower utilization levels, as well as strategic rig redeployments. In the past 12 months, Trinidad has redeployed seven under-utilized rigs from its Canadian fleet into its Mexican operations. Although operating days declined, the Company has been able to maintain relatively stable dayrates year over year in a highly competitive environment, reflecting the strength of its long-term, take-or-pay contracts and the high quality of its equipment. The Company's deeper-capacity drilling rig mix operating in 2009, compared to 2008 also helped to maintain stable day rates.

Revenue decreased by $41.7 million or 50.4% from $82.7 million in the third quarter of 2008 to $41.0 million for the three months ended September 30, 2009. On a year-to-date basis, revenue was $143.0 million, down $116.2 million or 44.8% compared to the same time period of 2008. The lower revenue levels are largely a factor of lower rig utilization, lower operating days, rig redeployments and reduced activity levels in the service rig and coring operating divisions. Operating costs as a percentage of revenue decreased slightly in the third quarter of 2009 to 62.1%, compared to 63.0% in the prior year's comparative quarter, increasing Trinidad's Canadian drilling segment's gross margin percentage to 37.9% for the quarter compared to 37.0% in 2008. Trinidad's ongoing focus on cost control and stable dayrates allowed the Company to maintain and slightly strengthen gross margins in the quarter. Gross margin for the first nine months of 2009, for the Canadian Drilling segment, was $56.2 million or 39.3% of revenue compared to $104.4 million or 40.3% of revenue in the first three quarters of 2008.

Utilization for the Company's service rigs was 27% for the quarter and 30% for the nine months ended September 30, 2009. These represent declines of 44.9% and 34.8%, respectively, compared to the same periods of 2008. Significantly lower activity levels in the Western Canadian Sedimentary Basin have reduced the need for well completions, this combined with limited spending on producing wells has negatively impacted Trinidad's well servicing division over the past quarter and nine months. Hourly rates for service rigs have been subject to competitive pressure as a large number of available rigs compete for limited work. Trinidad's coring and surface casing rigs continue to be negatively impacted by cutbacks in oil sands projects compared to the first nine months of 2008. The drastic drop in oil prices in the past 12 to 18 months has resulted in the reduction of capital spending by oil sands producers, which has had a significant impact on this division's financial and operating results to date in 2009. While crude oil prices have recovered somewhat in recent months, operators appear to be slow at committing to upcoming winter coring projects and pricing pressure is strong on those bids that are beginning to appear.

    
    United States and International Drilling Operations


    ($ thousands except        Three months ended          Nine months ended
     percentages and                 September 30,              September 30,
     operating data)       2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Revenue              83,494   92,661     (9.9) 265,717  262,944      1.1
    Operating expense    45,623   53,350    (14.5) 141,887  149,231     (4.9)
                        -----------------------------------------------------
    Gross margin         37,871   39,311     (3.7) 123,830  113,713      8.9
                        -----------------------------------------------------
    Gross margin
     percentage           45.4%    42.4%             46.6%    43.2%

    Land Drilling Rigs
    Operating days -
     drilling             3,419    3,861    (11.4)   9,895   11,319    (12.6)
    Rate per drilling
     day (CDN$)          21,819   22,668     (3.7)  24,187   21,996     10.0
    Rate per drilling
     day (US$)           19,632   22,049    (11.0)  20,370   21,715     (6.2)
    Utilization rate -
     drilling               61%      85%    (28.2)     62%      86%    (27.9)
    Number of drilling
     rigs at quarter end     66       50     32.0       66       50     32.0

    Barge Drilling Rigs
    Operating days -
     drilling               266      305    (12.8)     862      938     (8.1)
    Rate per drilling
     day (CDN$)          28,805   40,678    (29.2)  32,915   43,208    (23.8)
    Rate per drilling
     day (US$)           25,736   39,620    (35.0)  27,566   42,712    (35.5)
    Utilization rate -
     drilling               72%      83%    (13.1)     79%    93%(1)   (15.1)
    Number of barge
     drilling rigs at
     quarter end              1        1        -        1        1        -
    Number of barge
     drilling rigs under
     Bareboat Charter
     Agreements at
     quarter end              3        3        -        3        3        -

    (1) During the first quarter of 2008, Trinidad completed significant work
        to one of its barge rigs and as a result it was removed from service
        and not included in the utilization calculation.
    

Trinidad's US and International drilling operations continued to be impacted by low industry activity and weak economic conditions in the third quarter of 2009. Trinidad's US non-contracted fleet bore the brunt of these conditions with the remainder of the rigs in this division all working under long-term contracts. Baker Hughes drilling utilization statistics reported that industry activity levels in the US have declined steeply on a year-over-year comparison. The average active land rig count for the third quarter of 2009 was 929 rigs, which was down 51% from the same time period of 2008 with 1,886 active rigs. Over the first nine months of 2009 there were on average 1,029 active rigs, representing a 42% drop from the levels seen in the nine months ended September 30, 2008. Although the active rig count has come down significantly year over year, it has rebounded from the lows experienced in the second quarter of 2009, largely reflecting stronger crude oil prices. On average, the third quarter US active rig count was up 6% or 50 rigs from the average level recorded in the previous quarter. Trinidad's utilization for its US and International land drilling segment in the third quarter of 2009 was 61%, representing a 28.2% decline from levels achieved in 2008. On a year-to-date basis, the division's land drilling rig utilization was 62%, down 27.9% from the levels recorded over the first nine months of 2008. Total land drilling operating days declined 11.4% in the third quarter and 12.6% year-to-date compared to 2008. Trinidad's decline in utilization and operating days is largely a reflection of the change in market fundamentals over the latter part of 2008 and first nine months of 2009 on the Company's non-contracted rigs.

Trinidad's US and International fleet has approximately 65% of its rigs under long-term, take-or-pay contract, including six rigs with delayed construction dates. While the contracts have mitigated the effect of the industry downturn for both utilization levels and dayrates, the non-contracted portion of the fleet has been impacted by the challenging industry conditions present to date in 2009. The increasing number of active rigs in the US is encouraging for the industry, however pricing pressure continued throughout the third quarter of the year. As Trinidad's non-contracted rigs go back to work, they are exposed to the current market conditions and competitive pricing environment. The lower dayrates available for non-contracted rigs have had a negative impact on dayrates. In the second quarter of 2009, Trinidad renegotiated 17 long-term, take-or-pay contracts with one of its key US customers. The contracts were due to expire over the next few years and the Company was able to extend the average term on these contracts by one year. In exchange for adding visibility to its revenue stream during a challenging time, Trinidad reduced dayrates to better reflect the existing operating environment. These reduced dayrates also contributed to the lower dayrates recorded in the quarter. US dollar denominated dayrates averaged US$19,632 in the third quarter of 2009, down 11.0% from the same quarter last year. Year-to-date dayrates were US$20,370 down 6.2% from last year. On a Canadian dollar basis, dayrates were stable quarter over quarter but up 10.0% year to date, reflecting a weaker Canadian dollar in the first half of 2009.

The US and International drilling segment generated revenue of $83.5 million in the third quarter of 2009 compared with revenue of $92.7 million recorded in the comparable quarter of 2008, a decrease of 9.9%. The lower revenue in the quarter was largely driven by lower utilization, lower operating days and lower dayrates. For the first nine months of 2009, revenue from the US and International segment totalled $265.7 million, up 1.1% from the same period in 2008. The impact of lower operating days and lower utilization levels was offset during this time frame by a relatively weaker Canadian dollar, particularly in the first half of 2009, compared to 2008.

Operating expenses for the quarter decreased by 14.5% from $53.4 million in 2008 to $45.6 million in 2009, causing the gross margin percentage to increase from 42.4% to 45.4%. For the nine month period ended September 30, 2009, gross margin increased 8.9% or $10.1 million from $113.7 million to $123.8 million; gross margin percentage in the same time frame increased from 43.2% to 46.6%. Over the past twelve months, Trinidad has expanded its US and International Drilling segment by 16 rigs, through the delivery of nine rigs built in its rig construction program and the redeployment of seven existing under-utilized rigs from its Canadian operations into Mexico. These rigs are all backed by long-term, take-or-pay contracts and generate strong gross margins. The majority of this segment's revenue is now being driven by deeper rigs under long-term contracts that tend to work at higher margins. The Company's gross margins have also been positively impacted by reduced operating expenses. Trinidad has carefully scrutinized its operating expenses; eliminating unnecessary expenses, rolling back wages and implementing cost cutting initiatives. These changes have significantly impacted gross margins in the quarter and year to date and reflect the Company's flexible cost structure.

Trinidad completed its 2009 rig build program in the third quarter with the delivery of the remaining two rigs into its US operations. During 2009, Trinidad has delivered six new build rigs into its US operations; five of these rigs were constructed at the Company's rig manufacturing facility, Victory. All six rigs are operating in the unconventional shale plays, under long-term, take-or-pay contracts.

Trinidad continued its value-adding strategy of redeploying existing, under-utilized equipment into higher-margin, higher-utilization regions in the third quarter. The Company moved a rig from its US operations to create a new operating area in Chile. The rig is now on location 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 extension. Earlier in 2009, the previous term contract on this rig was paid out; Trinidad is currently receiving the anticipated gross margin on the rig while also generating revenue from operating the rig in Chile.

Trinidad expanded its Mexican operations in the third quarter of 2009, delivering three of the four rigs the Company had previously agreed to move into the country. The remaining rig has recently completed the minor enhancements needed to operate in the Mexican climate and in the specific drilling environment and is now in Mexico. The four existing, under-utilized rigs were redeployed from Trinidad's Canadian operations with take-or-pay contracts for an initial term of 18 months, with a further 18-month extension option, at a utilization rate of 100%. Trinidad's operations in Mexico have been performing well and the Company's ability to grow its fleet in this area reflects the quality of its equipment and experience of its crews. All seven of Trinidad's rigs in Mexico are operating in the Chicontepec region in central eastern Mexico. Activity in this area has increased sharply over the past 12 months with a large number of rigs moving into the area. Petroleos Mexicanos (Pemex), the Mexican national oil company, has recently been undergoing a review of their operations in the region, looking to incorporate some of the knowledge gained from its previous drilling programs into its future development plans. Trinidad believes that activity will continue in the area, although at a more measured pace. The Company is also of the opinion that Pemex is recognizing the benefits of high-quality equipment and the gains in performance and efficiency it can provide, a trend that positions Trinidad's high-performing fleet well for future opportunities in the area and elsewhere in Mexico.

The Company's barge drilling operations have been negatively impacted by the slow down in activity and low natural gas prices. US dollar denominated dayrates were US$25,736 in the third quarter, down 35.0% and US$27,566 for the first nine months of the year, down 35.5%, compared to the same periods in 2008. During the quarter, Trinidad experienced a number of logistical issues, including permit delays, which impacted its utilization level, bringing the rate to 72% compared to 83% in the third quarter of 2008. These issues were not work related and the Company anticipates an increased utilization rate moving forward. Year to date in 2009, utilization of the barge drilling rigs has averaged 79% compared to 93% in 2008. Trinidad continued during the quarter to proactively manage costs to partially offset dayrate reductions. At the end of September 2009, the barge drilling rig industry utilization in the Gulf of Mexico was approximately 25% (source: Delta Towing, L.L.C.). Given Trinidad's strong track record for superior performance and quality customer relationships, the Company was able to outperform the industry utilization and is well positioned to attract new business when activity levels improve. Moving forward, Trinidad expects the barge rig segment to continue to be an important component of the Company's business.

The Company now has a total of 66 rigs in its US and International drilling operations, 58 rigs operate in the US, seven in Mexico and one in Chile. In addition, this division operates four shallow barge drilling rigs in the Gulf of Mexico, including three rigs operating under bareboat arrangements.

    
    Construction Operations

                               Three months ended          Nine months ended
    ($ thousands except              September 30,              September 30,
     percentage data)      2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Revenue(1)           29,502   44,791    (34.1)  99,862   85,923     16.2
    Operating
     expense(1)          29,939   41,589    (28.0)  92,992   78,724     18.1
                        -----------------------------------------------------
    Gross margin           (437)   3,202   (113.6)   6,870    7,199     (4.6)
                        -----------------------------------------------------
    Gross margin
     percentage          (1.5)%     7.1%              6.9%     8.4%

    (1) Includes inter-segment revenue and operating expenses of
        $27.8 million and $28.4 million for the three months ended
        September 30, 2009 and 2008, respectively and $74.1 million and
        $55.5 million for the nine months ended September 30, 2009 and 2008,
        respectively.
    

Revenue from construction operations for the third quarter of 2009 decreased by 34.1% or $15.3 million from $44.8 million in 2008 to $29.5 million in 2009. Gross margin as a percentage of revenue decreased from 7.1% for the third quarter of 2008 to (1.5)% for the same time period of 2009. The lower revenue level for the division in the third quarter is due to a significant decline in third party work compared to the same period of 2008 as a result of a general slowdown in available work and depressed industry conditions. A total of $27.8 million of inter-segment construction work was completed in the quarter as part of the current rig construction program compared to $28.4 million of inter-segment rig construction work in the same quarter of 2008. As this division operates as a cost centre to the other Trinidad divisions, the significant reduction in third party work led to a small loss in gross margin compared to a $3.2 million gross margin in the third quarter of 2008. The loss in gross margin in the third quarter is a result of the fixed portion of operating costs which were not supported by sufficient third party revenue in the quarter compared to the third quarter of 2008. The division completed the final rig of the three rig construction project for a major third party customer in the quarter.

Trinidad's Construction segment manufactured six of the nine rigs under its 2008/2009 rig build program. The segment completed the construction and delivery of the final two rigs in this project in the third quarter of 2009.

Revenue for the nine months ended September 30, 2009 improved by 16.2% or $14.0 million from $85.9 million to $99.9 million, while gross margin declined by 4.6% compared to the same period last year. The increase in revenue was a result of the increase in inter-segment rig construction compared to last year. Reduced gross margins are predominantly related to the increase in inter-segment construction work performed at cost and the overall decline in third party rig construction work as a result of industry activity levels.

    
    GENERAL AND ADMINISTRATIVE EXPENSES

                               Three months ended          Nine months ended
    ($ thousands except              September 30,              September 30,
     percentage data)      2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    General and
     administrative
     expenses            12,205   11,557      5.6   40,868   35,729     14.4
    % of revenue           9.7%     6.0%              9.4%     6.5%
    

General and administrative (G&A) expenses increased by 5.6% to $12.2 million in the third quarter of 2009 as a result of Trinidad's international expansion into Mexico and Chile over the past twelve months ended September 30, 2009. The Company also incurred $0.8 million in non-recurring costs related to its international expansion and tax planning in the quarter. Partly offsetting these are the numerous cost reduction measures implemented by the Company during 2009, which include administrative and office staff reductions, wage rollbacks and further reductions in support costs.

The increase of 14.4% on a year-to-date basis is attributable to both the international expansion as well as an increase in the allowance for doubtful accounts of $2.5 million which was incurred during the first quarter. This increase is partially offset with the cost reduction measures mentioned above.

    
    INTEREST

                               Three months ended          Nine months ended
                                     September 30,              September 30,
    ($ thousands)          2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Interest on
     long-term debt       4,443    4,390      1.2   13,994   16,940    (17.4)
    Effective interest
     on deferred
     financing costs        921      420    119.3    2,293    1,260     82.0
                        -----------------------------------------------------
                          5,364    4,810     11.5   16,287   18,200    (10.5)

    Interest on
     convertible
     debentures           6,861    6,937     (1.1)  20,584   20,595     (0.1)
    Effective interest
     on deferred
     financing costs        667      661      0.9    1,996    1,979      0.9
    Accretion on
     convertible
     debentures           1,340    1,221      9.7    3,924    3,584      9.5
                        -----------------------------------------------------
                          8,868    8,819      0.6   26,504   26,158      1.3
    

Interest on long-term debt increased by $0.1 million in the quarter, as a result of prepayment penalties paid on the early repayment of term debt in the quarter. This was partially offset by reduced interest as a result of lower average long-term debt levels. Interest on long-term debt decreased by $2.9 million for the year-to-date period, as compared to the same period in the prior year. These decreases were a result of lower average long-term debt levels in addition to declines in both the BA and LIBOR rates compared to the same periods of 2008.

Interest and accretion expenses on the convertible debentures are consistent during both the quarter and year-to-date period as compared to the consistent periods in the prior year. Please refer to the section of the MD&A titled "Liquidity and Capital Resources - Convertible Debentures" for details of Trinidad's ability to acquire up to ten percent of the convertible debentures' public float by way of normal course issuer bid (NCIB).

    
    STOCK-BASED COMPENSATION

                               Three months ended          Nine months ended
                                     September 30,              September 30,
    ($ thousands)          2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Stock-based
     compensation         2,087    1,197     74.4    4,448    1,499    196.7
    

Stock-based compensation expense increased by $0.9 million quarter over quarter to $2.1 million and by $2.9 million to $4.4 million, on a year-to-date basis, as compared to the same periods in the prior year. The majority of the quarter and year-to-date increase is directly related to Trinidad establishing and issuing units under two new incentive programs, the Performance Share Unit Plan (PSU Plan) and the Deferred Share Unit Plan (DSU Plan) during 2008. For the three months ended September 30, 2009, the PSUs generated an expense of $1.7 million and the DSUs generated an expense of $0.2 million. The PSUs generated an expense of $3.3 million, while the DSU expense was $0.8 million for the nine months ended September 30, 2009. These costs represent revised estimates which are subject to the fair value method using the Company's higher closing share price at September 30, 2009 in comparison to prior periods. There were no costs associated with either of these option plans in the comparative period of the prior year.

    
    FOREIGN EXCHANGE LOSS(GAIN)

                               Three months ended          Nine months ended
                                     September 30,              September 30,
    ($ thousands)          2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Foreign exchange
     loss (gain)         11,430   (6,835)  (267.2)  16,014  (10,358)  (254.6)
    

For the three months ended September 30, 2009, Trinidad recognized a loss of $11.4 million in comparison with a gain of $6.8 million for the same period in 2008, a difference of $18.3 million. Year to date, the Company recorded a $16.0 million loss in 2009 versus a gain of $10.4 million in 2008. Foreign exchange gains during 2008 relate to strengthening of the US dollar relative to the Canadian dollar throughout the year. For 2009, the Canadian dollar has strengthened by an estimated 12% since December 31, 2008, resulting in foreign exchange losses being reported. These foreign exchange changes are a result of losses and gains in the Canadian entity on US dollar denominated intercompany balances and are recognized in the statement of operations. These intercompany balances are the result of rig funding from Canada, for the US, Mexico and Chile operations and the ongoing US rig construction program. Although Trinidad's US and International operations have continued to contribute significantly to the overall operations of the Company, upon consolidation these operations are considered to be self-sustaining and therefore, losses and gains 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. The $11.4 million loss, in the third quarter of 2009, corresponds to an equal and offsetting unrealized gain from the US and Mexico operations included in OCI.

    
    DEPRECIATION AND AMORTIZATION

                               Three months ended          Nine months ended
                                     September 30,              September 30,
    ($ thousands)         2009     2008  % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Depreciation        20,453   23,970     (14.7)  63,278   68,471     (7.6)
    Amortization of
     intangible assets     148        -         -      437        -        -
    Loss (gain) on
     sale of assets        320       (3)(10,766.7)  10,069     (320)(3,246.6)
    

Depreciation decreased 14.7% to $20.5 million in the third quarter of 2009 from $24.0 million in the same period of 2008; and for the nine months ended September 30, 2009, there was a decrease of 7.6% to $63.3 million from $68.4 million. In comparison to the same periods of 2008, the decline in drilling rig utilization and resultant lower operating days has reduced the depreciation expense in both the Canadian and US drilling divisions compared to the same period of 2008. Another contributing factor of the decline from 2008 relates to a higher US translation rate to Canadian dollars in 2008 versus 2009. As a percentage of revenue, depreciation increased from 12.5% to 16.2% for the quarter and increased from 12.4% to 14.6% over the nine month period. The increasing proportion of drilling rigs with deeper depth capacities has resulted in higher capital asset costs and therefore higher depreciation expense as a percentage of revenue.

The acquisition of Victory included intangible assets of $4.3 million, which are comprised of patent technology, trade name, non-compete agreements and engineering and design costs. Amortization expense related to these intangibles was $0.1 million for the quarter and $0.4 million for the year-to-date period.

During the first nine months of 2009, Trinidad recognized a loss on disposal of assets of $10.1 million. This loss on disposal 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 September 30, 2009, Trinidad is unable to conclude on the likelihood or quantify the proceeds, if any, related to this warranty claim.

    
    IMPAIRMENT OF INTANGIBLE ASSET

                               Three months ended          Nine months ended
                                     September 30,              September 30,
    ($ thousands)          2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Impairment of
     intangible assets        -        -        -   23,189        -        -
    

During the first quarter of 2009, the Company recorded an intangible impairment charge of $23.2 million related to the Bareboat Charters. 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 be paid to the former owners of Axxis in relation to the Bareboat Charters. The intangible asset was being amortized over the period of 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 nine months ended September 30, 2009.

    
    REORGANIZATION COSTS

                               Three months ended          Nine months ended
                                     September 30,              September 30,
    ($ thousands)          2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Reorganization costs      -       24        -        -    2,713        -
    

Trinidad incurred one-time costs of $0.02 million for the third quarter of 2008 and $2.7 million for the nine months ended 2008 relating to its conversion from an income trust to a corporation. Reorganization costs 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.

    
    INCOME TAXES

                               Three months ended          Nine months ended
                                     September 30,              September 30,
    ($ thousands)          2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Current tax expense
     (recovery)           2,509   (1,122)  (323.6)   5,622      575    877.7
    Future tax expense    1,742   10,303    (83.1)   6,614   22,193    (70.2)
    

Current tax expense has increased by $3.6 million to $2.5 million in the current quarter and by $5.0 million to $5.6 million in the year-to-date period as compared to the same periods in the prior year. This increase is related to the increase in net tax profits in Trinidad's construction operations. The increased profitability in this segment, coupled with a declining tax shield on earnings, has resulted in increased current taxes. Furthermore, the recovery experienced in the three months ended September 30, 2008 was the result of a reversal of previously recognized taxes due to clearer interpretations of the Texas Margins Tax rules.

The decrease in the future tax expense of $8.6 million or 83.1% in the current quarter, as well as the $15.6 million or 70.2% decrease over the nine month period ended September 30, 2009 as compared to the same periods in the prior year, is the result of several factors. The reduction of net income and the graduated reduction of the federal corporate tax rate are the main drivers. In addition, the future tax expense was further decreased by the reversal of future tax assets sooner than anticipated within the construction operations due to their increasing profitability. Offsetting these factors continues to be a greater proportion of profitability coming from our US and international operations where tax rates are higher than typical corporate averages.

    
    NET EARNINGS (LOSS) AND CASH FLOW

                               Three months ended          Nine months ended
    ($ thousands except              September 30,              September 30,
     per share data)       2009     2008 % Change     2009     2008 % Change
    -------------------------------------------------------------------------
    Net earnings
     (loss)             (12,143)  20,373   (159.6) (26,382)  60,426   (143.7)
      Per share
       (diluted)          (0.10)    0.21   (147.6)   (0.25)    0.67   (137.3)
    Net earnings (loss)
     before impairment
     of intangible
     assets(1)          (12,143)  20,373   (159.6)  (3,193)  60,426   (105.3)
      Per share
       (diluted)          (0.10)    0.21   (147.6)   (0.03)    0.67   (104.5)
    Cash flow from
     operations          (3,302)  24,582   (113.4) 126,564  154,906    (18.3)
      Per share
       (diluted)          (0.03)    0.25   (112.0)    1.22     1.73    (29.5)
    Cash flow from
     operations before
     change in non-cash
     working capital(1)  26,975   51,538    (47.7) 106,144  149,250    (28.9)
      Per share
       (diluted)           0.22     0.53    (58.5)    1.02     1.67    (38.9)

    (1) Readers are cautioned that net earnings (loss) before impairment of
        intangible assets and cash flow from operations before change in
        non-cash working capital and the related per share information do not
        have standardized meanings prescribed by GAAP - see "Non-GAAP
        Measures".
    

For the three months ended September 30, 2009, Trinidad's consolidated net loss was $12.1 million, representing a decline of $32.5 million compared to net earnings of $20.4 million in the same period of 2008. Net earnings declined quarter over quarter as a result of reduced revenues and increased general and administrative costs, including stock-based compensation, as explained above, and foreign exchange losses of $11.4 million compared to a gain of $6.8 million in the same quarter in 2008. The decline is partially offset by lower deprecation and income tax expenses.

Year to date, the Company's consolidated net loss of $26.4 million decreased by 143.7% over the 2008 year-to-date net earnings of $60.4 million. These declines were primarily the result of reduced utilization levels on a company wide basis, reducing overall revenues from the prior-year period. Slightly offsetting the decrease in revenue was the decrease in operating costs of $79.8 million, or 24.4%, the result of cost-cutting initiatives implemented during the first nine months. Additional items which impacted the net loss were the loss on foreign exchange of $16.0 million as compared to a gain of $10.4 million in the prior period and loss on sale of assets of $10.1 million which the majority related to the replacement of diesel engines on US rigs. The most significant factor impacting net earnings was a $23.2 million impairment of intangible assets charge; excluding this amount, Trinidad would have reported year-to-date net loss of $3.2 million.

Cash flow from operations for the third quarter decreased by 113.4% from $24.6 million cash inflow ($0.25 per share (diluted)) in 2008 to a cash outflow of $3.3 million (($0.03) per share (diluted)) in 2009 and cash flow from operations before changes in non-cash working capital for the same period decreased by 47.7% from $51.5 million ($0.53 per share (diluted)) in the third quarter of 2008 to $27.0 million ($0.22 per share (diluted)) in 2009. The decrease in cash flow from operations and cash flow from operations before change in non-cash operating working capital was primarily a result of the current period's net loss of $12.1 million as compared to the net earnings of $20.4 million in 2008, less the changes year-over-year in the unrealized foreign exchange losses/gains of the quarters of $18.0 million (2009 - $11.4 million, 2008 - $(6.6 million)). Year-to-date cash flow from operations was $126.6 million ($1.22 per share (diluted)), representing a decrease of $28.3 million or 29.5% as compared to $154.9 million ($1.73 per share (diluted)) for the same period of 2008. Cash flow from operations before changes in non-cash working capital also decreased by $43.1 million, or 28.9%, to $106.1 million ($1.02 per share (diluted)) from $149.3 million ($1.67 per share (diluted)) for the same period in 2008. Again, the year-to-date changes were related to those mentioned above from the third quarter of 2008 versus 2009.

    
    -------------------------------------------------------------------------
    LIQUIDITY AND CAPITAL RESOURCES               September 30,  December 31,
    ($ thousands except percentage data)                  2009          2008
    -------------------------------------------------------------------------
    Working capital(1)                                  59,978        85,789

    Current portion of long-term debt                      431        16,844
    Long-term debt(2)                                  210,355       321,768
    Convertible debentures(2)                          329,208       323,381
                                                  ---------------------------
    Total debt                                         539,994       661,993
                                                  ---------------------------
    Total debt as a percentage of assets                 32.5%         35.6%

    Net debt(1)                                        479,585       559,360
    Net debt as a percentage of assets                   28.9%         30.0%

    Total assets                                     1,662,295     1,862,064
    Total long-term liabilities                        627,910       742,692
    Total long-term liabilities as a
     percentage of assets                                37.8%         39.9%

    Shareholders' equity                               921,302       919,471
    Total debt to shareholders' equity                   58.6%         72.0%
    Net debt to shareholders' equity                     52.1%         60.8%
    -------------------------------------------------------------------------
    (1) Readers are cautioned that working capital and net debt do not have
        standardized meanings prescribed by GAAP - see "Non-GAAP Measures".
    (2) Convertible debentures and long-term debt are reflected net of
        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, 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 late June 2009 to reduce amounts outstanding under the revolving facility and $70 million was applied in early July 2009 to reduce outstanding term indebtedness. Trinidad's long-term debt decreased by $111.4 million or 34.6% from $321.8 million at year end to $210.4 million at September 30, 2009 primarily as a result of the debt repayment, although partially offset by indebtedness used to fund the 2009 capital expenditure program. As at September 30, 2009, $47.0 million was outstanding on the Company's revolving credit facility of which $178.0 million remained unutilized.

A total of $38.8 million (including deposits) of capital expenditures were incurred in the third quarter of 2009 compared to $81.0 million in the third quarter of 2008. Total capital expenditures (including deposits) for the nine months ended September 30, 2009 were $130.2 million compared to $138.9 million in the same period last year. Both third quarter and year-to-date 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 decreased by $25.8 million or 30.1% as at September 30, 2009 compared to the year ended December 31, 2008, as a result of lower activity levels in the current quarter compared to the fourth quarter of 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 increased by $1.8 million compared to December 31, 2008 mostly due to the net proceeds from the equity offering of $133.8 million less shares repurchased of $14.4 million, $26.4 million of net losses and $16.7 million of dividends declared to shareholders during the nine months ended September 30, 2009. 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, reduced shareholders' equity by $83.2 million over the nine month period almost exclusively related to the strengthening of the Canadian dollar relative to the US dollar.

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:

    
    RATIO              September 30, 2009  December 31, 2008       THRESHOLD
    -------------------------------------------------------------------------
    Current Ratio(1)               1.43:1             1.71:1  1.20:1 minimum
    Leverage(2)                    1.18:1             1.43:1   2.5:1 maximum
    Interest Coverage(3)           9.53:1            10.14:1   5.0:1 minimum
    Fixed Charge Coverage(4)       8.14:1             9.03:1  1.25:1 minimum
    Distribution Payout(5)         41.73%             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) for the
        TTM.
    (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                           September                       Repayment
    Facility   Currency    Amount   30, 2009       Maturity     requirements
    -------------------------------------------------------------------------
    Revolving              $225.0      $47.0   Next renewal   If not renewed,
     credit       CDN $   million    million  in April 2010    repayment due
     facility                                                 364 days later

    Five-year              $100.0      $68.0                 1% amortization,
     term         CDN $   million    million    May 1, 2011          balloon
     facility                                                   repayment at
                                                                    maturity

    Five-year              $125.0      $85.0                 1% amortization,
     term          US $   million    million    May 1, 2011          balloon
     facility                                                   repayment at
                                                                    maturity
    

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

    
    -------------------------------------------------------------------------
    SHAREHOLDERS' EQUITY                          September 30,  December 31,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------
    Common shares                                      948,383       828,882
    

Common shares increased by $119.5 million to $948.4 million at September 30, 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, 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 NCIB and would extend to the earlier of September 3, 2009 or the date upon which the Company acquired the ten percent. During the first nine months of 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 quarter of 5,181 shares ($0.1 million of book value). At September 30, 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 November 3, 2009 were $948.4 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.

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, Mexican and Chilean 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 United States, Mexico and South America operators have more flexibility to work throughout the year. This increased number of operating days throughout the year has allowed Trinidad to better manage its business with more sustainable cash flow throughout the annual cycle.

CRITICAL ACCOUNTING ESTIMATES

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

Depreciation and amortization

The accounting estimate that has the greatest impact on Trinidad's financial results is depreciation and amortization. Depreciation and amortization of Trinidad's capital assets and intangible assets incorporates estimates of useful lives and residual values. These estimates may change as more experience is obtained or as general market conditions change impacting the operation of Trinidad's capital assets. In addition, these estimates are reviewed at least annually, to ensure they are still valid.

Stock-based compensation

Compensation expense associated with options at grant date are estimates based on various assumptions such as volatility, annual dividend yield, risk free interest rate and expected life using the Black-Scholes methodology to produce an estimate of the fair value of such compensation. In addition, the deferred share units and the performance share units are subject to estimates of their fair values using the appropriate market rates at 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 been minimal and generally limited to specific customer circumstances; however, given the cyclical nature of the oil and natural gas industry, the credit risks can change suddenly and without notice.

Goodwill

In accordance with Canadian GAAP, Trinidad performs a goodwill impairment test at least annually and will conduct the test at an earlier date if changing circumstances indicate a possible impairment exists. Trinidad re-evaluated the conclusions from its 2008 year end test at the end of the third quarter of 2009 and determined that no impairment existed in the carrying value of goodwill.

Fair value of interest rate swaps

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

Convertible debentures

The proceeds from the July 2007 issuance were 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

Effective January 20, 2009, Trinidad adopted the Canadian Institute of Chartered Accountants ("CICA") 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. To date, there is no effect in the implementation of this new standard on the Company.

FUTURE CHANGES IN ACCOUNTING POLICIES

Canadian Generally Accepted Accounting Policies

In December 2008, the CICA issued section 1582 Business Combinations which will replace CICA section 1581 of the same name. Under this new guidance, the purchase price used is based on the fair value as of the date of acquisition. Furthermore, the new guidance generally requires all acquisition costs to be expensed, rather than the current practice of capitalizing them as part of the purchase price; contingent liabilities are to be recognized at fair value at the acquisition date and revalued at fair value with the change flowing through earnings until settled. Lastly, negative goodwill is required to be recognized immediately into earnings, unlike the current requirement to eliminate it by deducting it from non-current assets in the purchase price allocation. Entities adopting section 1582 will also be required to adopt CICA section 1601 Consolidated Financial Statements and section 1602 Non-Controlling Interests. Sections 1601 and 1602 will require a change in the measurement of non-controlling interest and will require the change to be presented as part of shareholders' equity on the balance sheet. In addition, the income statement of the controlling parent will include one hundred percent of the subsidiary's results and present an allocation of net income between controlling interest and non-controlling interest. These three standards will be effective for Trinidad on January 1, 2011, but Trinidad has the option to early adopt all three. When adopted, section 1582 will be applied on a prospective basis and 1601 and 1602 will be applied retrospectively.

International Financial Reporting Standards

In February 2008, the Canadian Accounting Standards Board (AcSB) announced that Canadian public reporting issuers will be required to report under International Financial Reporting Standards (IFRS) beginning January 1, 2011. Consequently, the transition date of January 1, 2011 will require restatement for comparative purposes of amounts reported by the Company for the year ended December 31, 2010.

Trinidad has started to determine the potential effects of the changeover to IFRS by:

    
    -   Researching and documenting expected differences between its current
        accounting policies that are in accordance with Canadian GAAP and
        those to be adopted under IFRS;
    -   Considering financial statement presentation and disclosure options
        available to Trinidad upon initial changeover to IFRS;
    -   Developing a timeline for key milestones on the changeover project;
    -   Raising awareness of the change with accounting staff and the Audit
        Committee of Trinidad's Board of Directors;
    -   Considering the impacts on the Company's financial reporting systems,
        performance metrics, staff training, and internal/external
        communications; and
    -   Concluding that the Company will not early adopt IFRS.
    

The changeover will affect the presentation and valuation of balances and transactions presented in Trinidad's interim and annual consolidated financial statements and related notes; however it is too early in the changeover process for the Company to provide quantification of those effects.

    
    DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL
    REPORTING
    

There have been no significant changes in the Company's disclosure controls and procedures (DC&P) and internal controls over financial reporting (ICFR) for the three or nine month periods ended September 30, 2009 and no material weaknesses or significant deficiencies have been identified in the design and operating effectiveness of these controls, that could materially affect or are reasonably likely to affect Trinidad's internal controls over financial reporting.

In accordance with the provisions of section 3.3 of NI 52-109, in relation to the acquisition of Victory effective August 18, 2008, Trinidad has removed its limitation on its assessment of Victory's internal control environment. Trinidad's management has successfully aligned Victory's systems, processes and controls with corporate standards and has concluded on the design 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 Blake, Cassels & Graydon LLP, a law firm in which a director is a partner, to provide legal advice. During the three and nine month periods ended September 30, 2009, Trinidad incurred legal fees of $0.3 million and $0.8 million, respectively (2008 - $0.3 million and $1.2 million, respectively) to Blake, Cassels & Graydon LLP. On September 30, 2009 there was $0.1 million outstanding, and on September 30, 2008 there were no amounts outstanding.

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 proceeds on purchase of $1.6 million, as well as all of the purchase agreement's conditions, were representative of an unrelated party transaction. This property currently houses a facility used in the coring division of the Canadian Drilling Operations.

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

Moving into the fourth quarter of 2009, industry activity levels remain low relative to historical levels and competitive pricing pressures persist. There does however, appear to be an upswing in the general outlook for future industry conditions. The stabilization of oil prices and somewhat higher natural gas prices have improved the confidence and optimism among exploration and production companies. These improved conditions, combined with encouraging comments from several countries indicating the end of the recession, have led to a more positive outlook for the world economy and the oil and gas industry. While these changes are promising, Trinidad does not expect to see an immediate recovery in the oil and gas sector. Natural gas storage levels remain very high and the Company believes that there will need to be strong recovery in demand levels, particularly in the US, before natural gas prices return to levels that will encourage strong, wide-spread activity.

Exploration and production companies continue to be selective in their development plans, selecting those projects with more robust economics, typically unconventional plays. Trinidad's foresight in building a fleet of deep-capacity, technically-advanced rigs has positioned it well in this environment and is largely the reason the Company has been able to record industry-leading utilization rates and maintain strong margins. Trinidad does not expect the interest in unconventional shale plays to be fleeting. In fact, the Company anticipates that drilling activity will be increasingly focused in these plays moving forward. Trinidad currently has approximately 40% of its fleet operating in these areas, largely under long-term, take-or-pay contract. Trinidad's strong performance and customer-focused approach has created a reputation as a driller-of-choice with key shale operators; a reputation that will be a valuable asset when industry activity levels ramp up.

While industry conditions have been challenging, Trinidad has remained focused on executing its business plan. The Company's operations have expanded in the US with the delivery of the final rigs in the 2009 rig construction program and in Mexico and Chile through the redeployment of existing, under-utilized equipment. The Company expects to continue to find opportunities to place its equipment in areas of high utilization and robust margins and, where appropriate, to back-up these operations with take-or-pay contracts. International markets are now recognizing the benefits of modern, technically-advanced equipment and the Company will continue to pursue select opportunities to further broaden its operating base.

Recent equity issues by a number of existing and potential customers suggest that they will be in a better position to pursue their development plans in the near future. Trinidad does not believe that a full-scale recovery in the oil and natural gas sector is eminent; the Company anticipates seeing ongoing improvements in activity and a slow return of price control in 2010, perhaps towards mid-2010. The number of rigs returning to work in both Canada and the US is beginning to increase, with the deeper, high-tech equipment the first to be picked up and generally put to work in the unconventional shale plays. As the number of rigs working increases, pricing control will begin to move back to the drilling contractors, particularly for the in-demand style of equipment in which Trinidad specializes. Trinidad's deep-drilling, technically-advanced fleet combined with its long-term contracts and improved financial flexibility positions the Company well to lead the industry out of this downturn.

Trinidad Drilling Ltd. is a growth-oriented, dividend-paying oil and natural gas services provider based in Calgary, Alberta. Focusing on deep drilling, modern rig fleets, in-house design and technology-based advancement, Trinidad has positioned itself as a premium service provider. Trinidad's growth is driven by chasing and capturing new horizons - advancing technologies, offering new services, entering new markets and performing strategic acquisitions. Trinidad has 119 land drilling rigs ranging in depth capacities from 1,000 - 6,500 metres and four barge drilling rigs operating in the Gulf of Mexico. Trinidad has operations in Canada, the United States, Mexico and Chile. In addition to its drilling rigs, Trinidad will have 23 well servicing rigs that have been completely retrofitted or were constructed within the past five years and 20 pre-setting and coring rigs. 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 highly capable, expertly designed, well-equipped, adaptable and competitive in the industry.

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, EBITDA before stock-based compensation, cash flow from operations before change in non-cash working capital, net earnings (loss) before impairment of intangible asset, net earnings (loss) before stock-based compensation, 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 consolidated statements of operations and retained earnings (deficit) and is calculated as follows:

    
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($ thousands)                   2009        2008        2009        2008
    -------------------------------------------------------------------------
    Net earnings (loss)          (12,143)     20,373     (26,382)     60,426
    Plus:
      Interest on long-term debt   5,364       4,810      16,287      18,200
      Interest on convertible
       debentures                  8,868       8,819      26,504      26,158
      Depreciation and
       amortization               20,601      23,970      63,715      68,471
      Impairment of intangible
       assets                          -           -      23,189           -
      Loss (gain) on disposal
       or sale of assets             320          (3)     10,069        (320)
      Income taxes                 4,251       9,181      12,236      22,768
                                ---------------------------------------------
    EBITDA                        27,261      67,150     125,618     195,703
                                ---------------------------------------------
    

"EBITDA before stock-based compensation" is used by management to analyze EBITDA (as defined above) prior to the effect of stock-based compensation.

"Cash flow from operations before change in non-cash working capital" is used to assist management and investors in analyzing Trinidad's liquidity and ability to generate cash to fund investing and financing activities. Cash flow from operations before change in non-cash working capital is derived from the 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 asset" and "net earnings (loss) before stock-based compensation" are used by management to analyze net earnings prior to the effect of intangible impairment or stock-based compensation charges, respectively, and are not intended to represent net earnings as calculated in accordance with Canadian GAAP.

Net earnings (loss) before impairment of intangible asset is derived from the consolidated statements of operations and retained earnings (deficit) and is calculated as follows:

    
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($ thousands)                   2009        2008        2009        2008
    -------------------------------------------------------------------------
    Net earnings (loss)          (12,143)     20,373     (26,382)     60,426
    Plus:
      Impairment of
       intangible assets               -           -      23,189           -
                                ---------------------------------------------
    Net earnings (loss)
     before impairment of
     intangible asset            (12,143)     20,373      (3,193)     60,426
                                ---------------------------------------------
    

Net earnings (loss) before stock-based compensation is derived from the consolidated statements of operations and retained earnings (deficit) and is calculated as follows:

    
                                  Three months ended       Nine months ended
                                        September 30,           September 30,
    ($ thousands)                   2009        2008        2009        2008
    -------------------------------------------------------------------------
    Net earnings (loss)          (12,143)     20,373     (26,382)     60,426
    Plus:
      Stock-based compensation     2,087       1,197       4,448       1,499
                                ---------------------------------------------
    Net earnings (loss)
     before stock-based
     compensation                (10,056)     21,570     (21,934)     61,925
                                ---------------------------------------------
    

"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 consolidated balance sheets and is calculated as follows:

    
                                                  September 30,  December 31,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------
    Convertible debentures                             329,208       323,381
    Long-term debt                                     210,355       321,768
    Less:
      Working capital:
        Current assets                                 173,061       285,690
        Current liabilities                           (113,083)     (199,901)
                                                 ----------------------------
    Net debt                                           479,585       559,360
                                                 ----------------------------
    

"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:

    
                                                  September 30,  December 31,
    ($ thousands)                                         2009          2008
    -------------------------------------------------------------------------
    Current Assets                                     173,061       285,690
    Less:
      Current liabilities                              113,083       199,901
                                                 ----------------------------
    Working capital                                     59,978        85,789
                                                 ----------------------------
    

References to gross margin, gross margin percentage, EBITDA, EBITDA before stock-based compensation, cash flow from operations before changes in non-cash working capital, net earnings (loss) before impairment of intangible asset, net earnings (loss) before stock-based compensation, net debt and working capital throughout this MD&A have the meanings set out above.

    
    "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.
    

Trinidad will be holding a conference call and webcast to discuss its third quarter 2009 results on November 4, 2009 beginning at 9:00 a.m. MT (11:00 a.m. ET). To participate, please dial (800) 796-7558 (toll-free in North America) or (416) 644-3433 approximately 10 minutes prior to the conference call. An archived recording of the call will be available from approximately 12:00 p.m. MT on November 4 until midnight November 11, 2009 by dialing (877) 289-8525 or (416) 640-1917 and entering replay access code 4175959 followed by the pound sign.

A live audio webcast of the conference call will also be available on the investor relations page of Trinidad's website www.trinidaddrilling.com.

    
    CONSOLIDATED BALANCE SHEETS
    ($ thousands - Unaudited)
                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------

    Assets
    Current assets
    Cash and cash equivalents                           20,107        31,202
    Accounts receivable                                122,678       225,744
    Inventory (note 5)                                  23,414        14,834
    Prepaid expenses                                     6,814        13,811
    Future income taxes                                     48            99
                                                 ----------------------------
                                                       173,061       285,690

    Deposit on capital assets                            2,341        11,581
    Capital assets (note 6)                          1,329,189     1,375,661
    Intangible assets (note 7)                           4,066        26,959
    Goodwill                                           153,638       162,173
                                                 ----------------------------
                                                     1,662,295     1,862,064
                                                 ----------------------------

    Liabilities
    Current liabilities
    Accounts payable and accrued liabilities            81,782       134,764
    Dividends payable                                    6,042        14,305
    Current portion of deferred revenue                 18,885        28,241
    Current portion of long-term debt                      431        16,844
    Current portion of fair value of interest
     rate swap                                           5,943         5,747
                                                 ----------------------------
                                                       113,083       199,901

    Deferred revenue                                         -         1,572
    Long-term debt, net of transaction costs           210,355       321,768
    Convertible debentures, net of transaction
     costs                                             329,208       323,381
    Fair value of interest rate swaps                    3,062         7,144
    Future income taxes                                 85,285        88,827
                                                 ----------------------------
                                                       740,993       942,593
    Shareholders' equity
    Common shares (note 8(a))                          948,383       828,882
    Convertible debentures                              28,207        28,215
    Contributed surplus (note 8(b))                     27,712        19,043
    Accumulated other comprehensive income (loss)      (42,271)       40,932
    Retained earnings (deficit)                        (40,729)        2,399
                                                 ----------------------------
                                                       921,302       919,471
                                                 ----------------------------
                                                     1,662,295     1,862,064
                                                 ----------------------------

    (See notes to the unaudited interim consolidated financial statements)
    Commitments (note 12)



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

                                Three months ended         Nine months ended
                                      September 30,             September 30,
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------

    Revenue
    Oilfield services         126,086      192,162      431,356      555,038
    Bareboat Charter (loss)
     income (note 12)             (24)      (1,330)       1,900       (3,635)
    Other                          80          855        1,155        1,114
                          ---------------------------------------------------
                              126,142      191,687      434,411      552,517
                          ---------------------------------------------------

    Expenses
    Operating                  73,159      118,594      247,463      327,231
    General and
     administrative            12,205       11,557       40,868       35,729
    Interest on long-term
     debt                       5,364        4,810       16,287       18,200
    Interest on convertible
     debentures                 8,868        8,819       26,504       26,158
    Stock-based compensation    2,087        1,197        4,448        1,499
    Foreign exchange loss
     (gain)                    11,430       (6,835)      16,014      (10,358)
    Depreciation and
     amortization              20,601       23,970       63,715       68,471
    Loss (gain) on disposal
     or sale of assets            320           (3)      10,069         (320)
    Impairment of intangible
     assets (note 7)                -            -       23,189            -
    Reorganization costs            -           24            -        2,713
                          ---------------------------------------------------
                              134,034      162,133      448,557      469,323
                          ---------------------------------------------------

    Earnings (loss) before
     income taxes              (7,892)      29,554      (14,146)      83,194

    Income taxes
    Current tax expense
     (recovery)                 2,509       (1,122)       5,622          575
    Future tax expense          1,742       10,303        6,614       22,193
                          ---------------------------------------------------
                                4,251        9,181       12,236       22,768
                          ---------------------------------------------------

    Net earnings (loss)       (12,143)      20,373      (26,382)      60,426

    Dividends                  (6,042)     (14,447)     (16,746)     (33,091)
    Trust distributions             -            -            -       (8,362)
    Charges for normal
     course issuer bid              -           (9)           -           (9)

    Retained earnings
     (deficit) - beginning
     of period                (22,544)     (10,934)       2,399      (23,981)
                          ---------------------------------------------------
    Retained earnings
     (deficit) - end of
     period                   (40,729)      (5,017)     (40,729)      (5,017)
                          ---------------------------------------------------

    Earnings (loss) per share
    Basic                       (0.10)        0.21        (0.25)        0.68
    Diluted                     (0.10)        0.21        (0.25)        0.67

    Weighted average number
     of shares
    Basic                 120,840,962   96,289,155  103,559,122   89,021,557
    Diluted               120,840,962   96,869,702  103,559,122   89,551,403

    (See notes to the unaudited interim consolidated financial statements)



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

                                Three months ended         Nine months ended
                                      September 30,             September 30,
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------

    Net earnings (loss)       (12,143)      20,373      (26,382)      60,426

    Other comprehensive
     income (loss)
      Change in fair value
       of derivatives
       designated as cash
       flow hedges, net of
       income tax (note 11)       437         (265)       1,516         (510)
      Foreign currency
       translation
       adjustment (note 15)   (52,771)      20,698      (84,719)      33,258
                          ---------------------------------------------------
    Total other
     comprehensive income
     (loss)                   (52,334)      20,433      (83,203)      32,748

                          ---------------------------------------------------
    Comprehensive income
     (loss)                   (64,477)      40,806     (109,585)      93,174
                          ---------------------------------------------------

    (See notes to the unaudited interim consolidated financial statements)


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

                                Three months ended         Nine months ended
                                      September 30,             September 30,
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive income
     (loss) - beginning
     of period                 10,063      (49,473)      40,932      (61,788)
    Other comprehensive
     income (loss) during
     the period               (52,334)      20,433      (83,203)      32,748
                          ---------------------------------------------------
    Accumulated other
     comprehensive loss
     - end of period          (42,271)     (29,040)     (42,271)     (29,040)
                          ---------------------------------------------------

    (See notes to the unaudited interim consolidated financial statements)



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (thousands - Unaudited)

                                Three months ended         Nine months ended
                                      September 30,             September 30,
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------

    Cash provided by
     (used in)
    Operating activities
    Net earnings (loss)
     for the period           (12,143)      20,373      (26,382)      60,426
    Items not affecting cash
      Effective interest
       on financing costs
       (note 11)                1,588        1,081        4,289        3,239
      Accretion on
       convertible
       debentures               1,340        1,221        3,924        3,584
      Stock-based
       compensation             2,087        1,197        4,448        1,499
      Unrealized foreign
       exchange loss (gain)    11,440       (6,604)      16,278       (9,842)
      Depreciation and
       amortization            20,601       23,970       63,715       68,471
      Loss (gain) on sale
       of assets                  320           (3)      10,069         (320)
      Impairment of
       intangible asset             -            -       23,189            -
      Future income tax
       expense                  1,742       10,303        6,614       22,193
                          ---------------------------------------------------
                               26,975       51,538      106,144      149,250
    Change in non-cash
     operating working
     capital                  (30,277)     (26,956)      20,420        5,656
                          ---------------------------------------------------
                               (3,302)       24,582      126,564      154,906
                          ---------------------------------------------------

    Investing activities
    (Increase) decrease
     in deposits on
     capital assets              (976)     (15,358)       9,240      (16,276)
    Purchase of capital
     assets                   (37,833)     (65,664)    (139,447)    (122,579)
    Purchase of intangibles        (2)           -          (77)           -
    Proceeds from
     dispositions               2,818            3        4,378        3,263
    Change in non-cash
     investing working
     capital                   14,073       (5,092)       3,210      (16,575)
                          ---------------------------------------------------
                              (21,920)     (86,111)    (122,696)    (152,167)
                          ---------------------------------------------------

    Financing activities
    (Decrease) increase
     in long-term debt, net   (49,337)      27,288     (110,740)    (122,265)
    (Costs) proceeds
     from share issuance
     (note 8), net               (414)         (28)     133,929      158,010
    Repurchased shares
     (note 8)                       -         (175)      (6,120)        (175)
    Proceeds from exercise
     of options (note 8)            -          188            -        1,377
    Dividends paid             (6,063)     (14,442)     (25,030)     (18,644)
    Debt financing costs            -            -       (2,619)        (600)
    Trust unit distribution         -            -            -      (17,978)
                          ---------------------------------------------------
                              (55,814)      12,831      (10,580)        (275)
                          ---------------------------------------------------

    Cash flow from
     operating, investing
     and financing
     activities               (67,706)     (48,698)      (6,712)       2,464
    Effect of translation
     on foreign
     currency cash            (16,034)         679       (4,383)         913
                          ---------------------------------------------------
    (Decrease)increase in
     cash for the period      (83,740)     (48,019)     (11,095)       3,377

    Cash - beginning of
     period                   103,847       69,417       31,202       18,021
                          ---------------------------------------------------
    Cash - end of period       20,107       21,398       20,107       21,398
                          ---------------------------------------------------

    Interest paid               4,626        4,430       28,079       31,193
    Interest received               5          142           98          435
    Taxes paid                  1,876        2,122        3,748        4,222

    (See notes to the unaudited interim consolidated financial statements)



    NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

    1.  STRUCTURE OF THE CORPORATION

        Organization

        Trinidad Drilling Ltd. ("Trinidad" or the "Company") is incorporated
        under the laws of the Province of Alberta. The Company was formed by
        way of an arrangement under the Business Corporations Act of Alberta
        pursuant to an arrangement agreement dated January 9, 2008 between
        the Company and Trinidad Energy Services Income Trust (the "Trust").
        The Arrangement involved the exchange, on a one-for-one basis of
        trust units and exchangeable shares, after accounting for the
        conversion factor applicable to the exchangeable shares, for common
        shares of Trinidad. The effective date of the Arrangement was
        March 10, 2008 - see note 8(a).

        Operations

        Trinidad operates in the land and barge drilling, coring and surface
        casing and well-servicing sectors of the North American oil and
        natural gas industry. Trinidad owns 119 land drilling rigs ranging in
        depths from 1,000 - 6,500 metres and operates in Canada, the United
        States, Mexico and Chile. In addition to its land drilling rigs,
        Trinidad has 23 service rigs, 20 pre-set and coring and surface
        casing rigs and 4 barge rigs currently operating in the Gulf of
        Mexico. Trinidad is focused on providing modern, reliable, expertly-
        designed equipment operated by well-trained and experienced
        personnel.

    2.  ACCOUNTING POLICIES AND ESTIMATES

        These unaudited interim consolidated financial statements are
        prepared by management, in accordance with Canadian Generally
        Accepted Accounting Principles (GAAP), and follow the same accounting
        policies and methods as the audited consolidated financial statements
        for the year ended December 31, 2008, except as noted below, and
        therefore do not contain all of the disclosures required for the
        annual financial statements. As a result, the unaudited interim
        consolidated financial statements should be read in conjunction with
        the audited consolidated financial statements of Trinidad contained
        in the annual report for the year ended December 31, 2008.

        ADOPTION OF NEW ACCOUNTING STANDARDS

        Effective January 20, 2009, Trinidad adopted the Canadian Institute
        of Chartered Accountants ("CICA") 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. To date, there is no effect in the
        implementation of this new standard on the Company.

        FUTURE CHANGES IN ACCOUNTING POLICIES

        Canadian Generally Accepted Accounting Policies

        In December 2008, the CICA issued section 1582 Business Combinations
        which will replace CICA section 1581 of the same name. Under this new
        guidance, the purchase price used is based on the fair value as of
        the date of acquisition. Furthermore, the new guidance generally
        requires all acquisition costs to be expensed, rather than the
        current practice of capitalizing them as part of the purchase price;
        contingent liabilities including contingent consideration are to be
        recognized at fair value at the acquisition date and revalued at fair
        value with the change flowing through earnings until settled. Lastly,
        negative goodwill is required to be recognized immediately into
        earnings, unlike the current requirement to eliminate it by deducting
        it from non-current assets in the purchase price allocation. Entities
        adopting section 1582 will also be required to adopt CICA section
        1601 Consolidated Financial Statements and section 1602 Non-
        Controlling Interests. Sections 1601 and 1602 may require a change in
        the measurement of non-controlling interest and will require the
        change to be presented as part of shareholders' equity on the balance
        sheet. In addition, the income statement of the controlling parent
        will include one hundred percent of the subsidiary's results and
        present an allocation of income between controlling interest and non-
        controlling interest. These three standards will be effective for
        Trinidad on January 1, 2011, but Trinidad has the option to early
        adopt all three. When adopted, section 1582 will be applied on a
        prospective basis and 1601 and 1602 will be applied retrospectively.

        International Financial Reporting Standards

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

    3.  SEASONALITY

        Trinidad operates a substantial number of rigs in western Canada and
        therefore, Canadian Drilling Operations are heavily dependent upon
        the seasons. The winter season, which incorporates the first quarter,
        is typically a busy period 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 are usually
        representative of average activity levels.

        Trinidad's expansion to the US, Mexican and South American 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, Mexico
        and South America, operators have increased flexibility to work
        throughout the year. This increased number of operating days
        throughout the year has allowed Trinidad to better manage its
        business with more sustainable cash flows throughout the annual
        cycle.

    4.  ACQUISITION

        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:

        ($ thousands)                                                   2009
        ---------------------------------------------------------------------

        Purchase price allocated as follows:
          Capital assets                                               1,334
          Other long-term assets                                          73
          Intangible assets                                            4,290
          Goodwill                                                    15,901
          Working capital deficiency                                    (491)
          Long-term liabilities                                       (4,413)
                                                           ------------------
                                                                      16,694
                                                           ------------------

        Financed as follows:
          Cash                                                        12,694
          Contingent consideration                                     4,000
                                                           ------------------
                                                                      16,694
                                                           ------------------

        The purchase price allocation has not been finalized as it is subject
        to contingent payments. During the first quarter of 2009, an
        additional $4.0 million of purchase consideration was accrued. As per
        the share purchase agreement, additional consideration to a maximum
        of $4.0 million was payable to the former shareholders of Victory Rig
        Equipment Corporation based on the achievement of certain earnings
        level targets. Contingency payments have been accrued based on
        conditions at September 30, 2009 and have caused an increase in
        goodwill and the purchase price of $4.0 million. Changes to the
        contingency payments in the future will be offset by changes in
        goodwill.

    5.  INVENTORY

                                                  September 30,  December 31,
        ($ thousands)                                     2009          2008
        ---------------------------------------------------------------------
        Parts and materials                             17,029        10,378
        Work-in-progress                                 6,385         4,456
                                                 ----------------------------
        Total inventory                                 23,414        14,834
                                                 ----------------------------

        All inventory balances are carried at the lower of cost or net
        realizable value. The construction operations regularly utilizes
        inventory in the construction and recertification of rigs and rig
        related equipment. For the three and nine months ended September 30,
        2009, there were no material write-downs or reversals of previously
        written-down amounts (2008 - no material write-downs).

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

                                Three months ended         Nine months ended
                                      September 30,             September 30,
        ($ thousands)            2009         2008         2009         2008
        ---------------------------------------------------------------------
        Raw materials and
         consumables
         purchased             25,211       37,372       85,475       64,659
        Labour costs            3,819        5,240       15,622       12,548
        Other costs               182          199          475          417
        Decrease (increase)
         in inventory             727       (1,222)      (8,580)       1,100
                            -------------------------------------------------
        Amount of
         inventories
         expensed in period    29,939       41,589       92,992       78,724
                            -------------------------------------------------


    6.  CAPITAL ASSETS

        As at September 30,                             2009
                                                 Accumulated
        ($ thousands)                   Cost    Depreciation  Net Book Value
        ---------------------------------------------------------------------

        Rigs and rig-related
         equipment                 1,475,888        284,875        1,191,013
        Automotive equipment
         and other equipment          27,877          16,151          11,726
        Construction equipment         3,464             774           2,690
        Building                      39,059           4,166          34,893
        Land                          15,732               -          15,732
        Assets under
         construction                 73,135               -          73,135
                                 --------------------------------------------
                                   1,635,155         305,966       1,329,189
                                 --------------------------------------------


        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 September 30,                             2009
                                                 Accumulated
        ($ thousands)                   Cost    Amortization  Net Book Value
        ---------------------------------------------------------------------

        Customer contracts            30,964          30,964(1)            -
        Patents                        3,001             336           2,665
        Customer relationships           820             183             637
        Trade name                       790             177             613
        Non-compete agreements           130              49              81
        Engineering and design
         costs                            75               5              70
                                 --------------------------------------------
                                      35,780          31,714           4,066
                                 --------------------------------------------
    (1) Amount includes impairment of $23,189 recorded at March 31, 2009.


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

        There are no internally developed intangible assets.

        The aggregate amortization expense for the intangible assets for the
        three and nine months ended September 30, 2009 is $0.1 million and
        $0.4 million, respectively (2008 - $2.2 million and $7.7 million,
        respectively) and is included in depreciation and amortization.

        Engineering and design costs are being amortized over five years,
        with no residual value.

    8.  SHAREHOLDERS' EQUITY AND CONTRIBUTED SURPLUS

        a) Common shares

        Authorized
        Unlimited number of common shares, voting, participating

        ($ thousands except
         share data)            September 30, 2009         December 31, 2008
        ---------------------------------------------------------------------
                               Number                    Number
                            of Shares     Amount $    of Shares     Amount $
                         ----------------------------------------------------
        Common shares -
         opening balance   95,227,381      828,882            -            -
        Shares issued for
         cash, net of
         transaction costs 27,184,500      133,829   12,132,353      158,010
        Shares issued on
         conversion of
         convertible
         debentures             5,181           99        4,921           95
        Shares repurchased
         under NCIB
         (defined herein)  (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      948,383   95,365,981      829,395
        Shares
         repurchased, but
         not cancelled              -            -     (138,600)        (513)
                         ----------------------------------------------------
        Common shares -
         closing balance  120,840,962      948,383   95,227,381      828,882
                         ----------------------------------------------------

        During the quarter ended June 30, 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, the amount
        received was $133.8 million. The net proceeds of the issuance were
        used to reduce overall indebtedness. A total of $141.0 million, the
        majority of which was related to the equity proceeds, was applied to
        reduce debt, of which $71.0 million was applied in late June 2009 to
        reduce amounts outstanding under the revolving facility and
        $70.0 million was applied in early July of 2009 to reduce outstanding
        term indebtedness.

        Effective 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) commencing September 4, 2008 and extending to the earlier
        of September 3, 2009 or the date upon which the Company acquires the
        maximum number of common shares to be purchased pursuant to the NCIB.
        At September 3, 2009, Trinidad acquired and cancelled 2,763,500
        shares at an average cost of $4.34 per share. As the purchase price
        was lower than the carrying amount of the common shares acquired and
        cancelled, the difference between cost and carrying value at
        repurchase was recorded as contributed surplus. The NCIB was
        terminated on September 4, 2009 as per the expiry timeline.

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

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

        b) Contributed surplus

                                                  September 30,  December 31,
        ($ thousands)                                     2009          2008
        ---------------------------------------------------------------------
        Contributed surplus - opening balance           19,043        13,843
        Stock-based compensation expense, from
         Incentive Option Plan                             362         1,713
        Contributed surplus transferred on
         exercise of options                                 -          (289)
        Effect of NCIB                                   8,307         3,776
                                                 ----------------------------
        Contributed surplus - ending balance            27,712        19,043
                                                 ----------------------------

        c) Exchangeable shares

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

    9.  STOCK-BASED COMPENSATION PLANS

        a) Incentive Option Plan

        The Incentive Option Plan was created to assist directors, officers,
        employees and consultants of Trinidad and its affiliates to
        participate in the growth and development of the Company.

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

        The following summarizes the options that are outstanding under
        Trinidad's Incentive Option Plan as at September 30, 2009 and
        December 31, 2008 and the changes during the periods:

                                September 30, 2009         December 31, 2008
        ---------------------------------------------------------------------
                                          Weighted                  Weighted
                                           Average                   Average
                                          Exercise                  Exercise
                               Number        Price       Number        Price
                           of Options          ($)   of Options          ($)
        ---------------------------------------------------------------------
        Outstanding -
         opening balance    8,259,495        12.66    7,965,670        12.55
        Granted during
         the period                 -            -      823,810        11.95
        Exercised during
         the period                 -            -     (249,484)        7.69
        Forfeited during
         the period        (1,258,218)        9.75     (280,501)       11.83
                          ---------------------------------------------------
        Outstanding -
         ending balance     7,001,277        13.18    8,259,495        12.66
                          ---------------------------------------------------

        Trinidad uses the Black-Scholes option-pricing model to determine the
        estimated fair value of the options granted subsequent to January 1,
        2003. The per share weighted average fair value of options granted
        during the period ended September 30, 2009 was nil, as no options
        were granted over this period (September 30, 2008 - $2.47).

        b) Deferred Share Unit Plan

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

        As at September 30, 2009, there were 142,475 (December 31, 2008 -
        40,732) DSUs outstanding. Trinidad recognized compensation expense of
        $0.8 million for the nine months ended September 30, 2009, with an
        accumulated mark-to-market liability of $1.0 million (September 30,
        2008 - nil), which is included in accounts payable and accrued
        liabilities. The expense related to the DSUs is recognized in stock-
        based compensation in the consolidated statement of operations.

        c) Performance Share Unit Plan

        In 2008, Trinidad established a Performance Share Unit Plan (PSU) to
        provide an opportunity for officers and employees of Trinidad and its
        subsidiaries to promote further alignment of interests between
        employees and the shareholders and to participate in the growth and
        development of the Company. Each PSU granted permits the holder to
        receive a cash payment equal to the fair value of the volume
        weighted-average Trinidad share price for the five days preceding
        payment.PSUs granted have various vesting periods, of which none
        exceed three years from the date of grant. When dividends are paid,
        the value is credited as additional PSUs on the dividend payment
        date.

        As at September 30, 2009, there were 886,750 (December 31, 2008 -
        237,000) PSUs outstanding, with an accumulated mark-to-market
        liability of $3.8 million (September 30, 2008 - nil), which is
        included in accounts payable and accrued liabilities. The expense
        related to the PSUs is recognized in stock-based compensation in the
        consolidated statement of operations.

    10. CAPITAL MANAGEMENT

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

                                                  September 30,  December 31,
        ($ thousands)                                     2009          2008
        ---------------------------------------------------------------------
        Long-term debt(1)                              223,841       316,564
        Convertible debentures(1)                      336,861       333,029
                                                 ----------------------------
        Total debt                                     560,702       649,593
        Shareholders' equity                           921,302       919,471
        Less: cash and cash equivalents                (20,107)      (31,202)
                                                 ----------------------------
        Total capitalization                         1,461,897     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 returns through dividends to ensure that
           income-oriented investors are provided a cash yield; and

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

        Trinidad manages its capital structure based on current economic
        conditions, the risk characteristics of the underlying assets, and
        Trinidad's planned capital requirements, within guidelines approved
        by its Board of Directors. Total capitalization is maintained or
        adjusted by drawing on existing debt facilities, issuing new debt or
        equity securities when opportunities are identified and through the
        disposition of underperforming assets to reduce debt or equity when
        required.

        On March 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 Corporation in the principal amount of up to $35,417,934, which
        represents approximately ten percent of the Corporation'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 Corporation
        acquires the maximum amount of Debentures pursuant to the Bid. There
        were no debentures repurchased under the Bid as at September 30,
        2009.

        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, adjusted by interest on the long-term
        debt, depreciation and amortization, income taxes, gain/loss on sale
        of assets and unrealized foreign exchange for the rolling four
        quarters, and must be maintained below 2.5:1. For the rolling four
        quarters ended September 30, 2009, this ratio was 1.18:1
        (December 31, 2008 - 1.43:1).

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

    11. FINANCIAL INSTRUMENTS

        Carrying Value and Fair Value Disclosures on Financial Instruments

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

                                           September 30, 2009
                                                                       Total
                             Held for    Loans and        Other     Carrying
        ($ thousands)         Trading  Receivables  Liabilities        Value
        ---------------------------------------------------------------------
        Cash and cash
         equivalents           20,107            -            -       20,107
        Accounts receivable         -      122,678            -      122,678
        Accounts payable
         and accrued
         liabilities                -            -       81,782       81,782
        Interest rate swaps         -            -        9,005        9,005
        Long-term debt              -            -      210,786      210,786
        Convertible
         debentures                 -            -      357,415      357,415
                          ---------------------------------------------------


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

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

                                September 30, 2009         December 31, 2008

                                          Carrying                  Carrying
        ($ thousands)      Fair Value        Value   Fair Value        Value
        ---------------------------------------------------------------------
        Interest rate swaps     9,005        9,005       12,891       12,891
        Credit facilities(1)
          Canadian Revolving
           Credit Facility     47,000       47,000       62,980       65,000
          Canadian Term
           Facility            65,464       68,048       91,937       97,333
          US Term Facility     87,616       91,074      139,974      148,190
        Convertible
         debentures(1)        342,633      365,068      214,317      361,245
        Other debt              7,823        7,602        6,168        7,959
                          ---------------------------------------------------
                              559,541      587,797      528,267      692,618
                          ---------------------------------------------------
        (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 period end.

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

        -   Convertible debentures - The fair value is based on the closing
            market price at period end.

        Interest rate swaps

        Trinidad has two cash flow hedges using interest rate swap
        arrangements to hedge the floating interest rate on 71% of the
        outstanding balance of the US and Canadian term debt facilities.
        These contracts have been recorded at their fair values on the
        Company's unaudited interim consolidated financial statements. During
        the three and nine months ended September 30, 2009, Trinidad recorded
        gains of $0.4 million and $1.5 million, respectively, (2008 - losses
        of $0.3 million and $0.5 million, respectively) in Other
        Comprehensive Income (OCI), net of taxes of $0.5 million and
        $1.6 million for each respective period (2008 - $0.2 million and
        $0.2 million, respectively), due to the change in fair value of the
        cash flow hedge. Trinidad has assessed 100% hedge effectiveness;
        hence the entire change in fair value has been recorded in OCI.

        Financing costs

        The carrying value of the long-term debt and convertible debentures
        was recorded net of debt issuance costs. Under the effective interest
        rate method Trinidad recorded interest expense of $0.9 million and
        $2.3 million (2008 - $0.3 million and $1.1 million, respectively) for
        the three and nine months ended September 30, 2009 relating to costs
        under the debt facility. In addition, Trinidad also recognized
        interest expense of $0.7 million and $2.0 million (2008 -
        $0.7 million and $2.0 million, respectively) relating to costs
        associated with the convertible debentures for the same period using
        the effective interest method. The total effective interest costs on
        debt for the three and nine months ended September 30, 2009 are
        $1.6 million and $4.3 million (2008 - $1.0 million and $3.1 million)
        respectively.

        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 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 accounts are continuously
        monitored to ensure the creditworthiness of all customers with
        outstanding balances and when collectability becomes questionable a
        provision for doubtful accounts has been established. The following
        is a reconciliation of the change in the reserve balance:

                                                   Nine months
                                                         ended    Year ended
                                                  September 30,  December 31,
        ($ thousands)                                     2009          2008
        ---------------------------------------------------------------------
        Opening reserve balance                          4,849         4,364
        Increase in reserve recorded in the income
         statement in the current period                 2,469         2,534
        Write-offs charged against the reserve          (2,751)       (1,122)
        Recoveries of amounts previously written-off      (175)         (927)
                                                 ----------------------------
        Reserve allowance at period end                  4,392         4,849
                                                 ----------------------------

        As at September 30, 2009, Trinidad had accounts receivable of
        $8.8 million that were greater than 90 days for which no provision
        had been established, as the Company believes that these amounts will
        be collected.

        Currency Risk

        Trinidad's operations are affected by fluctuations in currency
        exchange rates due to the Company's expansion into the US marketplace
        and reliance on US suppliers to deliver components used by its
        manufacturing subsidiaries. Over the last few years, the Canadian
        dollar has experienced significant volatility, ranging from an
        exchange low of $0.77 US/Canadian to an exchange high of $1.10
        US/Canadian. The exposure to realized foreign currency fluctuations
        from its US, Mexican and Chilean subsidiaries is mitigated due to the
        independence of the US, Mexican and Chilean operations from its
        Canadian parent company for cash flow requirements to satisfy daily
        operations, creating a natural hedge. However, upon consolidation,
        Trinidad is exposed to unrealized fluctuations in the gains and
        losses on consolidation and US dollar-denominated intercompany
        balances with the Canadian entities. As at September 30, 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.
        The fluctuations in the foreign currency exchange rates are recorded
        in unrealized foreign exchange losses or gains in the consolidated
        statement of cash flows, with an equal and offsetting unrealized
        loss or gain included in the current translation adjustment in the
        consolidated statements of comprehensive income (loss) during the
        period as disclosed in Note 15.

        As at September 30, 2009, portions of Trinidad's cash and cash
        equivalents, accounts receivable, accounts payable and accrued
        liabilities were denominated in US dollars and Mexican Pesos. In
        addition, Trinidad's US, Mexican and Chilean subsidiaries are subject
        to translation losses and gains upon consolidation. Based on these
        foreign currency financial instrument closing balances, net income
        for the three and nine months ended September 30, 2009, would have
        fluctuated by approximately $0.1 million and $0.1 million,
        respectively, and OCI would have fluctuated by $5.0 million for the
        quarter ended September 30, 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% of the outstanding
        borrowings under the US and Canadian term credit facilities,
        rendering them partially fixed. As at September 30, 2009, Trinidad
        had $206.1 million outstanding under the credit facilities. A change
        of one percent in the interest rates would cause a $0.3 million and a
        $1.4 million change in the interest expense for the three and nine
        months ended September 30, 2009, respectively (2008 - $0.2 million
        and $1.5 million, respectively).

        Liquidity Risk

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

        To achieve this objective, the Company:

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

        -   Limits the maturity of cash balances; and

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

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

        As at
         September 30,                                                 There-
         2009              2009     2010     2011     2012     2013    after
        ---------------------------------------------------------------------
        Accounts payable
         and accrued
         liabilities     81,782        -        -        -        -        -
        Interest rate
         swaps            1,554    5,639    1,812        -        -        -
        Canadian
         revolving
         debt(1)(3)           -   47,000        -        -        -        -
        Canadian term
         debt(3)            250    1,000   66,798        -        -        -
        US term debt(3)     335    1,338   89,401        -        -        -
        Other debt          123      491    6,987        -        -        -
        Convertible
         debentures(2)(3)     -        -        -  354,142        -        -
        Interest payments
         on contractual
         obligations      8,639   33,462   28,980   13,723        -        -
                        -----------------------------------------------------
        Total            92,683   88,930  193,978  367,865        -        -
                        -----------------------------------------------------
        (1) This 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.
        (3) The convertible debentures and credit facilities are recorded at
            their gross amounts and do not include transaction costs incurred
            on their issuance.


    12. COMMITMENTS

        Rig Construction Program

        In 2008, Trinidad announced its intent to expand its existing
        drilling fleet through the construction of an additional nine
        drilling rigs which have now been deployed in the US. These drilling
        rigs have depth capacities ranging from 16,000 feet to 18,000 feet
        and are backed by three to five year long-term, take-or-pay contracts
        with three major North American oil and natural gas exploration and
        production companies which provides Trinidad with a guaranteed
        utilization rate of 100% on these rigs over their respective contract
        terms. Six rigs were deployed in the nine months ended September 30,
        2009, in addition to the three rigs which were deployed during 2008.

        Bareboat Charters

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

        This payment is contingent on the continued operation of the rigs and
        to the extent that the contract is terminated by the rigs' owner, no
        further payments will be required. This fixed payment was structured
        to represent the residual earnings in excess of the payment to the
        third party. 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. Trinidad has disclosed all transactions
        pertaining to the Bareboat Charters on a net basis. Trinidad does not
        bear the significant risks and rewards of the arrangement nor does it
        absorb the associated credit risk or asset risk.

    13. SEGMENTED INFORMATION

        Since Trinidad announced its intention to expand operations into the
        US marketplace in 2005, its operations have been diversified from its
        primary geographical focus in western Canada to include various
        locations in the 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 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
        Three months                 States/
         ended                        Inter-                Inter-
         September 30,  Canadian   national     Constr-   segment
         2009           Drilling   Drilling     uction     Elimin-
        ($ thousands) Operations Operations Operations     ations      Total
        ---------------------------------------------------------------------
        Revenue           40,979     83,494     29,502    (27,833)   126,142
        Operating
         expense          25,430     45,623     29,939    (27,833)    73,159
                       ------------------------------------------------------
        Gross margin      15,549     37,871       (437)         -     52,983

        Interest on
         long-term debt    2,999      2,348         17          -      5,364
        Interest on
         convertible
         debentures        8,868          -          -          -      8,868
        Depreciation and
         amortization      6,728     13,342        531          -     20,601
        (Gain) loss on
         sale of assets      258         58          4          -        320
                       ------------------------------------------------------
        Income (loss)
         before corporate
         items            (3,304)    22,123       (989)         -     17,830
        General and
         administrative                                               12,205
        Stock-based
         compensation                                                  2,087
        Foreign exchange
         (gain) loss                                                  11,430
        Reorganization
         costs                                                             -
        Income tax
         recovery                                                      4,251
                       ------------------------------------------------------
        Net loss                                                     (12,143)
                       ------------------------------------------------------
        Capital
         expenditures
         (including
         acquisitions
         and deposits)    16,730     21,883        196          -     38,809
        ---------------------------------------------------------------------



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

        Interest on
         long-term debt    2,461      2,341          8          -      4,810
        Interest on
         convertible
         debentures        8,819          -          -          -      8,819
        Depreciation and
         amortization      9,627     14,160        183          -     23,970
        (Gain) loss on
         sale of assets        -         (3)         -          -         (3)
                       ------------------------------------------------------
        Income (loss)
         before corporate
         items             9,673     22,813      3,011          -     35,497
        General and
         administrative                                               11,557
        Stock-based
         compensation                                                  1,197
        Foreign exchange
         (gain) loss                                                  (6,835)
        Reorganization
         costs                                                            24
        Income tax
         expense                                                       9,181
                       ------------------------------------------------------
        Net earnings                                                  20,373
                       ------------------------------------------------------
        Capital
         expenditures
         (including
         acquisitions
         and deposits)    27,658     52,441        923          -     81,022
        ---------------------------------------------------------------------



        ---------------------------------------------------------------------
                                     United
        Nine months                  States/
         ended                        Inter-                Inter-
         September 30,  Canadian   national     Constr-   segment
         2009           Drilling   Drilling     uction     Elimin-
        ($ thousands) Operations Operations Operations     ations      Total
        ---------------------------------------------------------------------
        Revenue          142,973    265,717     99,862    (74,141)   434,411
        Operating
         expense          86,725    141,887     92,992    (74,141)   247,463
                       ------------------------------------------------------
        Gross margin      56,248    123,830      6,870          -    186,948

        Interest on
         long-term debt    9,197      7,033         57          -     16,287
        Interest on
         convertible
         debentures       26,504          -          -          -     26,504
        Depreciation and
         amortization     19,724     42,505      1,486          -     63,715
        (Gain) loss on
         sale of assets      125      9,940          4          -     10,069
        Impairment of
         intangible
         assets                -     23,189          -          -     23,189
                       ------------------------------------------------------
        Income before
         corporate items     698     41,163      5,323          -     47,184
        General and
         administrative                                               40,868
        Stock-based
         compensation                                                  4,448
        Foreign exchange
         (gain) loss                                                  16,014
        Reorganization
         costs                                                             -
        Income tax
         expense                                                      12,236
                       ------------------------------------------------------
        Net loss                                                     (26,382)
                       ------------------------------------------------------
        Capital
         expenditures
         (including
         acquisitions
         and deposits)    23,213    106,202        792          -    130,207
        ---------------------------------------------------------------------



        ---------------------------------------------------------------------
        Nine months
         ended                       United                 Inter-
         September 30,  Canadian     States     Constr-   segment
         2008           Drilling   Drilling     uction     Elimin-
        ($ thousands) Operations Operations Operations     ations      Total
        ---------------------------------------------------------------------
        Revenue          259,125    262,944     85,923    (55,475)   552,517
        Operating
         expense         154,751    149,231     78,724    (55,475)   327,231
                       ------------------------------------------------------
        Gross margin     104,374    113,713      7,199          -    225,286

        Interest on
         long-term debt   10,971      7,222          7          -     18,200
        Interest on
         convertible
         debentures       26,158          -          -          -     26,158
        Depreciation and
         amortization     27,320     40,634        517          -     68,471
        (Gain) on sale
         of assets           (60)       (17)      (243)         -       (320)
        Impairment of
         intangible
         assets                -          -          -          -          -
                       ------------------------------------------------------
        Income before
         corporate items  39,985     65,874      6,918          -    112,777
        General and
         administrative                                               35,729
        Stock-based
         compensation                                                  1,499
        Foreign exchange
         (gain) loss                                                 (10,358)
        Reorganization
         costs                                                         2,713
        Income tax
         expense                                                      22,768
                       ------------------------------------------------------
        Net earnings                                                  60,426
                       ------------------------------------------------------
        Capital
         expenditures
         (including
         acquisitions
         and deposits)    37,448    100,230      1,177          -    138,855
        ---------------------------------------------------------------------



        ---------------------------------------------------------------------
                                     United
                                     States/
        As at                         Inter-                Inter-
         September 30,  Canadian   national     Constr-   segment
         2009           Drilling   Drilling     uction     Elimin-
        ($ thousands) Operations Operations Operations     ations      Total
                      -------------------------------------------------------
        Total assets     666,301  1,053,097     35,215    (92,318) 1,662,295
        Goodwill               -     91,117     62,521          -    153,638
        Future income
         tax asset
         (liability)      (9,995)   (91,908)    (2,177)    18,843    (85,237)
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                     United
                                     States/
        As at                         Inter-                Inter-
         December 31,   Canadian   national     Constr-   segment
         2008           Drilling   Drilling     uction     Elimin-
        ($ thousands) Operations Operations Operations     ations      Total
                      -------------------------------------------------------
        Total assets     634,499  1,184,827     42,738          -  1,862,064
        Goodwill               -    103,652     58,521          -    162,173
        Future income
         tax asset
         (liability)     (14,279)   (72,522)    (1,927)         -    (88,728)
        ---------------------------------------------------------------------

    14. 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 Blake, Cassels & Graydon LLP, a law firm in which a
        director is a partner, to provide legal advice. During the three and
        nine month periods ended September 30, 2009, Trinidad incurred legal
        fees of $0.3 million and $0.8 million, respectively (2008 -
        $0.3 million and $1.2 million, respectively) to Blake, Cassels &
        Graydon LLP. On September 30, 2009 there was $0.1 million
        outstanding, and on September 30, 2008 there were no amounts
        outstanding.

        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,
        were 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.

    15. FOREIGN CURRENCY TRANSLATION ADJUSTMENT

                                Three months ended         Nine months ended
                                   September 30,             September 30,
        ($ thousands)            2009         2008         2009         2008
        ---------------------------------------------------------------------
        Unrealized (losses)
         gains on translating
         financial statements
         of self-sustaining
         foreign operations
         excluding
         intercompany balances  (64,211)     27,302     (100,997)     43,100
        Unrealized gains
         (losses) on
         foreign currency
         translation
         adjustments on
         intercompany balances   11,440      (6,604)      16,278      (9,842)
                                 --------------------------------------------
        Total foreign currency
         translation adjustment (52,771)     20,698      (84,719)     33,258
                                 --------------------------------------------

    16. COMPARATIVE FIGURES

        Certain of the comparative figures have been reclassified to conform
        to current year's presentation. Such reclassification did not impact
        previously reported net earnings (loss) or retained earnings
        (deficit).

    17. SUBSEQUENT EVENTS

        On October 5, 2009, an independent third party acquired 10% of
        Trinidad's operations in Chile in exchange for cash of $1.1 million
        and a note receivable of $1.1 million. This minority interest in
        Chile will require their portion of the net assets and net income to
        be segregated as non-controlling interest in Trinidad's consolidated
        financial statements.
    

For further information: For further information: Lyle Whitmarsh, President & Chief Executive Officer or Brent Conway, Executive Vice President & Chief Financial Officer or Lisa Ciulka, Director of Investor Relations at: Phone: (403) 265-6525, Fax: (403) 265-4168, E-mail: lciulka@trinidaddrilling.com


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890