As filed with the Securities and Exchange Commission on September 25, 2008

Registration No. [          ]

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Form F-4

 

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

PRECISION DRILLING TRUST

(Exact name of registrant as specified in its charter)

 

 

 

4200, 150-6th Avenue S.W., Calgary, Alberta, Canada T2P 3Y7
(403) 716-4500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

CT Corporation System, 350 North St. Paul Street, Dallas, Texas 75201
(214) 979-1172

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

 

WITH COPIES TO:

 

 

 

 

 

Approximate date of commencement of proposed sale of the securities to the public:  As promptly as practicable after this registration statement becomes effective and the conditions to consummation of the merger described herein have been satisfied or waived.

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

CALCULATION OF REGISTRATION FEE

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

 

 

 

PRELIMINARY DRAFT DATED SEPTEMBER 25, 2008, SUBJECT TO COMPLETION

 

PROXY STATEMENT OF GREY WOLF, INC.

 

PROSPECTUS OF PRECISION DRILLING TRUST

 

 

MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT

 

To the holders of Grey Wolf, Inc. common stock:

 

You are cordially invited to attend a special meeting of shareholders of Grey Wolf, Inc. (“Grey Wolf”), relating to the proposed merger of Grey Wolf with and into a wholly-owned subsidiary of Precision Drilling Trust (“Precision”). The meeting will be held at          a.m., local time, on          , 2008, at          , Houston, Texas.

 

We are sending you the accompanying proxy statement/prospectus to notify you of the special meeting of Grey Wolf shareholders being held to vote on the agreement and plan of merger and related matters and to ask you to vote at the special meeting in favor of the agreement and plan of merger.

 

Pursuant to the merger agreement, you may elect to receive either cash or Precision trust units in exchange for your shares of Grey Wolf common stock. Each share of Grey Wolf common stock will be converted, at your option, into $9.02 in cash or 0.4225 Precision trust units, subject to proration. The maximum amount of cash to be paid by Precision will be approximately $1.12 billion, and the maximum number of Precision trust units to be issued will be approximately 42.0 million. These amounts take into account shares of Grey Wolf common stock issuable upon the conversion of Grey Wolf’s convertible debt securities and the exercise of Grey Wolf stock options, which, together with Grey Wolf’s issued and outstanding common stock, totals approximately 223 million fully-diluted shares of Grey Wolf common stock. These maximum amounts translate to $5.00 in cash and 0.1883 of a Precision trust unit for each share of Grey Wolf common stock.

 

Precision trust units are listed on the New York Stock Exchange under the symbol “PDS” and the Toronto Stock Exchange under the symbol “PD.UN.” On September 23, 2008, the closing price of Precision trust units on the New York Stock Exchange was $17.30.

 

THE BOARD OF DIRECTORS OF GREY WOLF HAS DETERMINED UNANIMOUSLY THAT THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE GREY WOLF SHAREHOLDERS, AND HAS APPROVED, ADOPTED AND DECLARED ADVISABLE THE MERGER AGREEMENT. ACCORDINGLY, THE GREY WOLF BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE OR GIVE INSTRUCTIONS TO VOTE “FOR” THE PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER.

 

Your vote is important. Approval of the merger requires the affirmative vote of a majority of the outstanding shares of Grey Wolf common stock. Whether you plan to attend the special meeting or not, please take the time to vote by completing and mailing the enclosed proxy to us. If your shares are held in “street name,” you must instruct your broker in order to vote.

 

If you were a record holder of Grey Wolf common stock at the close of business on          , 2008, you have the right to vote or direct your vote at the special meeting.

 

Sincerely,

 

Thomas Richards

Chairman of the Board, President and Chief Executive Officer

Grey Wolf, Inc.

 

YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 25 OF THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS BEFORE VOTING.

 

 

NONE OF THE SECURITIES AND EXCHANGE COMMISSION, ANY SECURITIES COMMISSION OR SIMILAR AUTHORITY IN CANADA, OR ANY STATE OR FOREIGN SECURITIES COMMISSION OR SIMILAR AUTHORITY HAS APPROVED OR DISAPPROVED OF THE PRECISION TRUST UNITS TO BE ISSUED IN CONNECTION WITH THE MERGER DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, NOR HAVE THEY DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

This proxy statement/prospectus is dated September 24, 2008, and is first being mailed to Grey Wolf shareholders on or about          , 2008.

 

GREY WOLF, INC.
10370 Richmond Avenue, Suite 600
Houston, Texas 77042
(713) 435-6100

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To be held on          , 2008

 

Notice is hereby given that a special meeting of shareholders will be held on          , 2008, at   a.m., local time, at          , Houston, Texas. At the special meeting, you will be asked to:

 

1. approve the Agreement and Plan of Merger, dated as of August 24, 2008, among Grey Wolf, Inc. (“Grey Wolf”), Precision Drilling Trust, Precision Drilling Corporation and Precision Lobos Corporation, a copy of which is included as Annex A to the proxy statement/prospectus; and

 

2. approve the adjournment or postponement of the Grey Wolf special meeting, if necessary or appropriate, to solicit additional proxies in favor of the foregoing proposal.

 

For more information about the proposals and the special meeting, please review the accompanying proxy statement/prospectus.

 

Only holders of record of shares of Grey Wolf common stock at the close of business on          , 2008, the record date for the special meeting, are entitled to notice of, and a vote at, the special meeting and any adjournments or postponements of the special meeting. In order for the Agreement and Plan of Merger to be approved by Grey Wolf shareholders, the affirmative vote of the holders of a majority of the shares of Grey Wolf common stock outstanding and entitled to vote as of the record date is required.

 

Your vote is important. We encourage you to sign and return your proxy card, or use the telephone or Internet voting procedures, before the special meeting, so that your shares will be represented and voted at the special meeting even if you cannot attend in person.

 

By Order of the Board of Directors

 

David W. Wehlmann, Secretary

HOW TO OBTAIN ADDITIONAL INFORMATION

 

If you have more questions about the proposed merger or if you would like copies of any documents incorporated by reference into the accompanying proxy statement/prospectus, which include important business and financial information about Grey Wolf and Precision that is not included in or delivered with this document, you may write or call the following persons. Upon written or oral request, we will provide the documents you ask for at no cost to you. Please note that copies of these documents will not include exhibits to the documents, unless the exhibits are specifically incorporated by reference into the documents or this proxy statement/prospectus.

 

 

You may also obtain documents incorporated by reference in this proxy statement/prospectus by requesting them in writing or by telephone from the information agent:

 

Georgeson, Inc.

199 Water Street

26^th Floor

New York, N.Y. 10038

Banks and Brokers call (212) 440-9800

Grey Wolf shareholders call toll-free (800) 561-3540

 

 

In addition to the accompanying proxy card and voting instruction form, enclosed is a letter of transmittal and form of election to enable you to submit your share certificates and elect the form of merger consideration you wish to receive. The letter of transmittal and form of election contains complete instructions on how to submit your stock certificates and to make your election of cash and/or Precision trust units. Please complete and return the letter of transmittal and form of election together with your Grey Wolf common stock certificates in the separate envelope that is provided for that purpose. Your election must be submitted to the exchange agent, Computershare Trust Company, N.A., by          , 2008. The consequences of failing to timely deliver an election form are outlined in detail in the accompanying proxy statement/prospectus. You will not actually receive your cash and/or Precision trust units until after the merger is completed and you have returned a properly completed letter of transmittal and form of election.

 

TO ENSURE TIMELY DELIVERY PRIOR TO THE GREY WOLF SPECIAL MEETING,
ANY REQUEST FOR DOCUMENTS SHOULD BE RECEIVED BY          , 2008.

 

TABLE OF CONTENTS

 

 

 

 

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR ON THE INFORMATION TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.

 

THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION OR TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.

 

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

 

Glossary of Certain Terms Used in this Proxy Statement/Prospectus

	•	“Grey Wolf” means Grey Wolf, Inc., a Texas corporation.
	•	“Grey Wolf common stock” means shares of the common stock, par value $0.10 per share, of Grey Wolf.
	•	“Merger” means the merger of Grey Wolf with and into Merger Sub, with Merger Sub surviving the merger as a wholly-owned subsidiary of Precision, pursuant to the terms and subject to the conditions of the Merger Agreement.
	•	“Merger Agreement” means the Agreement and Plan of Merger, dated August 24, 2008, by and among Precision, Grey Wolf, PDC and Merger Sub.
	•	“Merger Sub” means Precision Lobos Corporation, a Texas corporation, and a wholly-owned subsidiary of Precision.
	•	“PDC” means Precision Drilling Corporation, an Alberta corporation.
	•	“Precision” means Precision Drilling Trust, an Alberta unincorporated open-ended investment trust.
	•	“Precision trust units” means the trust units of Precision, each representing an equal, undivided beneficial interest in Precision.
	•	“UBS” means UBS Securities LLC.

 

The Merger (Page 40)

 

Grey Wolf Shareholders Will Receive Cash and Precision Trust Units in the Merger (Page 89)

 

Effect of Conversion of Grey Wolf Convertible Notes (Page 83)

 

Treatment of Grey Wolf Stock Options (Page 83)

 

Comparative Market Prices and Share Information (Page 23)

										Grey Wolf
										Common Stock
		Precision				Grey Wolf				Pro Forma
		Trust Units				Common Stock				Equivalent
August 22, 2008		$	21.35			$	8.59			$	9.02
, 2008

 

Opinion of Grey Wolf’s Financial Advisor (Page 61)

 

Material US Federal Income Tax Consequences to Holders of Grey Wolf Common Stock (Page 69)

	•	US Holders of Grey Wolf common stock that receive both cash and Precision trust units generally will recognize gain, but not loss, to the extent of the cash received; and
	•	US Holders of Grey Wolf common stock that receive only cash generally will recognize a gain or loss.

 

Material Canadian Federal Income Tax Consequences to Holders of Grey Wolf Common Stock (Page 76)

 

Accounting Treatment (Page 79)

 

Dissenters’ Rights of Appraisal of Grey Wolf Shareholders under Texas Law (Page 84)

 

Grey Wolf’s Board of Directors Unanimously Recommends that You Vote “FOR” the Approval of the Merger Agreement (Page 55)

 

Your Rights as a Holder of Precision Trust Units Will Be Different from Your Rights as a Holder of Grey Wolf Common Stock (Page 120)

 

Grey Wolf Directors and Executive Officers Have Financial and Other Interests in the Merger that are Different from or in Addition to Your Interests (Page 84)

 

The Companies

 

The Special Meeting of Grey Wolf Shareholders (Page 38)

	•	to approve the Merger Agreement; and
	•	to approve the adjournment or postponement of the Grey Wolf special meeting, if necessary or appropriate, to solicit additional proxies in favor of the foregoing proposal.

 

Precision Unitholder Approval (Page 5)

 

The Merger Agreement (Page 88)

 

Voting Agreements (Page 83)

 

Regulatory Approval Required for the Merger (Page 79)

 

Completion of the Merger is Subject to Conditions (Page 98)

	•	approval of the Merger Agreement by Grey Wolf shareholders;
	•	the expiration or early termination of any waiting period applicable to the consummation of the Merger under the HSR Act;
	•	the receipt by Precision of written notice from CFIUS of its determination not to undertake an investigation of the Merger;
	•	the approval of the listing of the Precision trust units to be issued in the Merger on the New York Stock Exchange and the Toronto Stock Exchange;
	•	the absence of any action taken by any governmental agency or US court of competent jurisdiction that prohibits the consummation of the Merger;
	•	the receipt by each of Precision and Grey Wolf of a legal opinion with respect to certain US federal income tax consequences of the Merger; and
	•	other customary conditions, including the truth and correctness of the representations and warranties and performance of covenants by both Precision and Grey Wolf, subject to a materiality standard, and the absence of any occurrence, state of facts or development that has had or is reasonably likely to have a material adverse effect on either Precision or Grey Wolf.

 

Precision Will Obtain Financing In Connection With the Merger (Page 102)

 

The Merger Agreement Contains a “No Solicitation” Provision (Page 95)

 

The Merger Agreement May Be Terminated Under Some Circumstances (Page 99)

	•	by mutual written consent of Precision and Grey Wolf; or
	•	by either Precision or Grey Wolf if:

	-	the Merger has not been consummated by February 28, 2009, through no fault of the terminating party;
	-	there is a final and nonappealable legal restraint, injunction or prohibition of the Merger, through no fault of the terminating party;
	-	the Grey Wolf shareholders have held a meeting to consider the Merger Agreement but have voted not to approve the Merger Agreement; or
	-	the other party has breached its representations and warranties or failed to perform its covenants or agreements and such breach gives rise to a failure of certain closing conditions, unless the breach is cured within 30 days after receipt of written notice of the breach;

	•	by Precision if the board of directors of Grey Wolf has withdrawn or adversely modified its recommendation of the Merger Agreement or recommended a superior proposal, Grey Wolf has entered into an agreement for any alternative acquisition proposal or either Grey Wolf or the board of directors of Grey Wolf has announced its intention to do any of the foregoing; or
	•	by Grey Wolf before approval of the Merger Agreement by Grey Wolf shareholders, if Grey Wolf decides to accept a superior proposal.

 

Grey Wolf May Be Required to Pay a Termination Fee Under Some Circumstances (Page 99)

 

Exchange of Grey Wolf Common Stock (Page 80)

 

Election to Receive Cash and/or Precision Trust Units (Page 80)

 

FREQUENTLY ASKED QUESTIONS AND ANSWERS ABOUT
THE MERGER

Q:		What am I being asked to vote on?
A:		Precision and Grey Wolf have entered into the Merger Agreement pursuant to which Precision has agreed to acquire Grey Wolf. You are being asked to vote to approve the Merger Agreement pursuant to the terms and subject to the conditions of the Merger Agreement. Under the terms of the Merger Agreement, Grey Wolf will merge with and into Merger Sub with Merger Sub continuing as the surviving corporation and a wholly-owned subsidiary of Precision. In addition, you are also being asked to vote to approve a proposal to adjourn the special meeting if necessary or appropriate, including to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the Merger.
Q:		What will I receive if the Merger is completed?
A:		Under the terms of the Merger Agreement, shareholders of Grey Wolf may elect to receive either cash or Precision trust units in exchange for their Grey Wolf common stock. Each share of Grey Wolf common stock will be converted, at the option of the holder, into $9.02 in cash or 0.4225 Precision trust units, subject to proration. The maximum amount of cash to be paid by Precision will be approximately $1.12 billion, and the maximum number of Precision trust units to be issued will be approximately 42.0 million. These amounts take into account shares of Grey Wolf common stock issuable upon the conversion of Grey Wolf’s convertible debt securities and the exercise of Grey Wolf stock options, which, together with Grey Wolf’s issued and outstanding common stock, totals approximately 223 million fully-diluted shares of Grey Wolf common stock. These maximum amounts are equivalent to $5.00 in cash and 0.1883 of a Precision trust unit for each share of Grey Wolf common stock.
Q:		When and how must I elect the type of Merger consideration that I prefer to receive?
A:		Accompanying this proxy statement/prospectus is a letter of transmittal and form of election. The letter of transmittal and form of election allows you to elect to receive cash or Precision trust units for each share of Grey Wolf common stock that you own. You must return your properly completed and signed letter of transmittal and form of election to the exchange agent by               , 2008. If the effective time is delayed to a subsequent date, the election deadline will also be delayed and Precision and Grey Wolf will promptly announce any such delay and, when determined, the rescheduled election deadline. For additional information, see “The Merger — Election and Exchange Procedures — Elections as to Form of Consideration; Form of Election” beginning on page 81.
Q:		What happens if I fail to elect a type of Merger consideration?
A:		Under the terms of the Merger Agreement, shares for which shareholders fail to elect to receive cash and/or Precision trust units in exchange for their Grey Wolf common stock shall be treated as “No Election Shares.” To the extent that the amount of cash consideration that would be paid with respect to shares for which holders of Grey Wolf common stock have elected to receive cash, together with the aggregate amount of cash consideration payable to Grey Wolf dissenting shares, exceeds the $1.12 billion maximum cash consideration to be paid by Precision in the Merger, No Election Shares will be converted into Precision trust units. However, to the extent that the amount of cash consideration that would be paid with respect to shares for which Grey Wolf shareholders have elected to receive cash, together with the aggregate amount of cash consideration payable to Grey Wolf dissenting shares, is less than the $1.12 billion maximum cash consideration amount, then No Election Shares shall be converted into cash up to the maximum cash consideration amount. If payment of the No Election Shares would cause the aggregate cash consideration to exceed the maximum cash consideration amount, then all No Election Shares will be converted pro rata into cash up to the maximum cash consideration amount, with the balance of such shares converted into Precision trust units. For additional information, see “The Merger— Election and Exchange Procedures — Elections as to Form of Consideration; Form of Election” beginning on page 81.

Q:		Can I revoke or change an election after it has been submitted to the exchange agent?
A:		Yes. An election may be revoked by written notice to the exchange agent received prior to the election deadline. An election may also be changed prior to the election deadline by submitting to the exchange agent a properly completed and signed revised letter of transmittal and form of election. For additional information, see “The Merger — Election and Exchange Procedures — Elections as to Form of Consideration; Form of Election” beginning on page 81.
Q:		Will I be able to vote in elections of the trustees of Precision following the Merger?
A:		Each Precision trust unit entitles its holder to one vote on each proposal put forth at any meeting of the holders of Precision trust units, including the election of the trustees of Precision, pursuant to the terms and conditions of Precision’s Declaration of Trust. Precision’s trustees are generally elected by the holders of Precision trust units at each annual meeting of Precision unitholders, though trustees may also be elected at special meetings in accordance with the procedures set forth in the Declaration of Trust. Further information on the governance structure of Precision, including the election of Precision’s trustees is set forth in “Comparison of Shareholder Rights — Voting Rights Generally” and “Comparison of Shareholder Rights — Directors and Trustees Generally” beginning on pages 120 and 130, respectively. Additionally, the holders of Precision trust units are entitled to elect the board of directors of PDC in the manner set forth and described in “Comparison of Shareholder Rights — Voting Rights Generally” beginning on page 120.
Q:		Does Precision pay dividends?
A:		Precision has a policy of making monthly cash distributions to the holders of the Precision trust units. Distributions are paid from Precision’s “cash flow,” as that term is defined in Precision’s Declaration of Trust. The Declaration of Trust provides that an amount equal to Precision’s taxable income not already paid to holders of Precision trust units during the year will become payable on December 31 of each year, such that Precision will not be liable for ordinary Canadian income taxes for that year. Additional information on the distribution policies of Precision is set forth in “The Merger — Precision’s Distribution Policy” beginning on page 86 and “Comparison of Shareholder Rights — Payment of Dividends and Distributions” beginning on page 125. For a discussion of the general US federal income tax consequences of distributions by Precision, see “The Merger — Material US Federal Income Tax Consequences of the Merger and of Owning Precision Trust Units — Ownership by US Holders of Precision Trust Units — Dividends and Distributions” and “The Merger — Material US Federal Income Tax Consequences of the Merger and of Owning Precision Trust Units — Ownership by Non-US Holders of Precision Trust Units.” For a discussion of the general Canadian federal income tax consequences of distributions by Precision, see “The Merger — Material Canadian Federal Income Tax Consequences of the Merger and of Owning Precision Trust Units — Canadian Holders — Taxation of Trust Unit Distributions to Canadian Holders” and “The Merger — Material Canadian Federal Income Tax Consequences of the Merger and of Owning Precision Trust Units — Non-Canadian Holders — Taxation of Trust Unit Distributions to Non-Canadian Holders.”
Q.		What is the total value of the Merger and will it change between now and the time the Merger is completed?
A:		The total consideration to be paid by Precision is $1.12 billion in cash and approximately 42.0 million Precision trust units. The total value of the Merger will vary with changes in Precision’s trust unit price.
Q.		How much of the combined company will Grey Wolf shareholders own?
A:		After the Merger, Grey Wolf shareholders will hold approximately 25% of the outstanding Precision trust units, assuming that all of Grey Wolf’s convertible notes are converted into Grey Wolf common stock and all vested stock options are exercised prior to the Merger.

Q.		When do you expect the Merger to be completed?
A:		It is currently anticipated that the Merger will be completed on the first business day following approval of the Merger Agreement by the Grey Wolf shareholders.
Q:		Can the number of Precision trust units to be issued in the Merger for each share of Grey Wolf common stock change between now and the time the Merger is completed based on changes in the trading price of the Precision trust units?
A:		No. The aggregate number of Precision trust units to be issued at the time of the Merger is fixed regardless of the trading price of Precision trust units. However, in aggregate, the market value of the Precision trust units Grey Wolf shareholders will receive in the Merger will depend on the price of the Precision trust units at the time the trust units are issued. For various reasons, including the underlying value of Precision trust units, individual Grey Wolf shareholders may elect to receive all cash or all Precision trust units, which will ultimately impact the consideration mix on an individual level. See “Risk Factors — Risks Relating to the Merger” beginning on page 25.
Q:		What are the material US federal income tax consequences of the Merger to Grey Wolf shareholders?
A:		Precision and Grey Wolf have structured the Merger to qualify as a reorganization within the meaning of Section 368(a) of Internal Revenue Code of 1986, as amended (the “Code”). The material US federal income tax consequences of the Merger to US Holders (as defined in “The Merger — Material US Federal Income Tax Consequences of the Merger and of Owning Precision Trust Units” beginning on page 69) are as follows:

	•	A US Holder that exchanges Grey Wolf common stock solely for Precision trust units generally will not be subject to US federal income tax with respect to such transfer. US Holders of Grey Wolf common stock that receive both cash and Precision trust units generally will recognize gain, but not loss, to the extent of the cash received. US Holders of Grey Wolf common stock that receive only cash generally will recognize a gain or loss.
	•	A US Holder’s aggregate tax basis in the Precision trust units that such holder receives in the Merger will equal its aggregate tax basis in the Grey Wolf common stock surrendered, increased by the amount of taxable gain or dividend income, if any, recognized in the Merger, and decreased by the amount of cash, if any, received in the Merger.
	•	A US Holder’s holding period for the Precision trust units that such holder receives in the Merger generally will include the holding period for the Grey Wolf common stock exchanged therefor.
	•	A Non-US Holder (as defined in “The Merger — Material US Federal Income Tax Consequences of the Merger and of Owning Precision Trust Units” beginning on page 69) of Grey Wolf common stock generally will not be subject to US federal income tax with respect to the Merger unless such Non-US Holder has certain connections to the US.

Q:		What are the material Canadian federal income tax consequences of the Merger to Grey Wolf shareholders?
A:		The Merger itself should not give rise to any Canadian federal income tax liability for Grey Wolf shareholders who are non-residents of Canada for Canadian federal income tax purposes. For a Canadian Holder (as defined in “The Merger — Material Canadian Federal Income Tax Consequences of the Merger and of Owning Precision Trust Units” beginning on page 76), the Merger will be treated for Canadian federal income tax purposes as a taxable disposition by such holder of the Grey Wolf common stock that such holder disposes of in the Merger. The material Canadian federal income tax consequences

		of the Merger to a Canadian Holder who holds Grey Wolf common stock as capital property are as follows:

	•	A Canadian Holder should realize a capital gain or capital loss equal to the difference between (i) the sum of the cash consideration and the fair market value of the Precision trust units received in the Merger and (ii) the sum of such holder’s adjusted cost base of the Grey Wolf common stock that such holder disposes of in the Merger and any reasonable costs of disposition.
	•	A Canadian Holder that holds the Precision trust units received in the Merger as capital property should have an adjusted cost base in Precision trust units equal to the fair market value of Precision trust units at the time of the Merger, subject to the adjusted cost base of Precision trust units being averaged with the adjusted cost base to such holder of any Precision trust units held as capital property prior to the Merger.

Q:		Are there risks I should consider in deciding whether to vote for the Merger?
A:		Yes. We have set forth a list of known material risk factors that you should consider carefully in connection with the Merger in the section entitled “Risk Factors” beginning on page 25.
Q:		Can I dissent and require appraisal of my shares?
A:		Holders of shares of Grey Wolf common stock who do not vote in favor of the Merger will have the right to dissent, but only if they submit a written objection to the Merger and comply with other Texas law procedures and the requirements described in “The Merger — Appraisal Rights” beginning on page 84. Grey Wolf shareholders who wish to dissent to the Merger are in any case urged to seek the advice of counsel with respect to the availability of dissenters’ rights.
Q:		When and where is the Grey Wolf special meeting?
A:		The Grey Wolf special meeting will take place on          , 2008. The time and location of the meeting are specified on the cover page of this proxy statement/prospectus.
Q:		Who can vote at the special meeting?
A:		Holders of Grey Wolf common stock as of the close of business on the record date of          , 2008 are entitled to vote at the special meeting. Beneficial owners as of the record date should receive instructions from their bank, broker or other nominee describing the procedures to vote their shares.
Q:		What vote of Grey Wolf shareholders is required to approve the Merger Agreement?
A:		The affirmative vote of the holders of a majority of the issued and outstanding shares of Grey Wolf common stock as of the record date is required to approve the Merger Agreement.
Q:		What do I need to do now?
A:		After carefully reading and considering the information contained in this document, please submit your proxy by telephone or via the Internet in accordance with the instructions set forth in the enclosed proxy card, or fill out, sign and date the proxy card and then mail your signed proxy card in the enclosed prepaid envelope as soon as possible so that your shares may be voted at the special meeting. See “The Grey Wolf Special Meeting” beginning on page 38.
Q:		What happens if I do not indicate my preference for or against approval of the Merger?
A:		If you submit a proxy without specifying the manner in which you would like your shares to be voted, your shares will be voted “FOR” approval of the Merger Agreement.

Q:		What happens if I do not vote at all?
A:		Because approval of the Merger Agreement requires the affirmative vote of a majority of the shares of Grey Wolf common stock outstanding and entitled to vote as of the record date, if you abstain or fail to vote your shares in favor of approval of the Merger Agreement, this will have the same effect as voting your shares against approval of the Merger Agreement. If you fail to respond with a vote or fail to instruct your broker or other nominee how to vote on the approval of the Merger Agreement, it will have the same effect as a vote against the approval of the Merger Agreement.
Q:		If my shares are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee vote my shares for me?
A:		You should instruct your bank, broker or other nominee to vote your shares. If you do not instruct your nominee, your nominee will not be able to vote your shares. Please check with your nominee and follow the voting procedures your nominee provides. Your nominee will advise you whether you may submit voting instructions by telephone or via the Internet. See “The Grey Wolf Special Meeting — Record Date; Voting Rights and Outstanding Shares” and “The Grey Wolf Special Meeting — Quorum, Voting Requirements and Effect of Abstentions and Non-votes” beginning on pages 38 and 39, respectively.
Q:		May I change my vote after I have submitted a proxy?
A:		Yes. You may send a later-dated, signed proxy card so that it is received prior to the special meeting, or you may attend the special meeting in person and vote. You may also revoke your proxy card by sending a notice of revocation that is received prior to the special meeting to Grey Wolf’s corporate secretary at the address set forth under “— The Companies.” You may also change your vote by telephone or Internet. You may change your vote by using any one of these methods regardless of the procedure used to cast your previous vote. Additional information on how to change your vote is located beginning on page 80.
Q:		If I want to attend the special meeting, what do I do?
A:		You should come to          , Houston, Texas at          a.m., local time, on          , 2008. If you hold your shares in “street name,” you will need to bring proof of ownership (by means of a recent brokerage statement, letter from your bank or broker or similar means) to be admitted to the meeting. Shareholders of record as of the record date for the special meeting can vote in person at the special meeting. If your shares are held in “street name,” then you are not the shareholder of record and you must ask your bank, broker or other nominee how you can vote at the special meeting.
Q:		Can I send in my stock certificates with my proxy card?
A:		Yes, you may send in your Grey Wolf stock certificates with your proxy card provided that they are submitted in the enclosed envelope with a properly completed letter of transmittal and form of election. Otherwise, prior to the election deadline, which will be the second business day prior to the anticipated effective date of the Merger, which date Precision and Grey Wolf expect to publicly announce at least five business days prior to the anticipated effective date, you should send your Grey Wolf stock certificates to the exchange agent, together with your completed, signed letter of transmittal and form of election. If your shares of Grey Wolf common stock are held in “street name” by your broker or other nominee, you should follow your broker or nominee’s instructions for making an election with respect to your shares of Grey Wolf common stock.
Q:		Who can help answer my additional questions about the Merger or voting procedures?
A:		Grey Wolf has retained Georgeson, Inc., which we refer to as Georgeson, to serve as an information agent in connection with the Merger. Shareholders of Grey Wolf may call Georgeson toll-free at (800) 561-3540 with any questions they may have. Banks and brokers may call collect at (212) 440-9800.

 

VOTING BY INTERNET, TELEPHONE OR MAIL

 

SUMMARY HISTORICAL FINANCIAL STATEMENT PRESENTATION

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL

AND OPERATING DATA OF PRECISION

		Six Months Ended June 30,								Year Ended December 31,
		2008				2007				2007				2006				2005				2004				2003
		(Unaudited)
		(In US GAAP, Cdn$ in thousands, except per unit/share data and operating data)
Revenue		$	481,203			$	532,547			$	1,009,201			$	1,437,584			$	1,269,179			$	1,028,488			$	915,170
Expenses:
Operating			261,985				266,062				516,094				688,207				641,805				566,297				544,163
General and administrative			36,580				24,829				55,997				81,217				89,557				55,959				36,296
Depreciation and amortization			37,761				35,510				78,326				73,234				71,561				74,829				78,112
Foreign exchange			(1,125	)			893				2,398				(353	)			(3,474	)			(8,100	)			(2,216	)
Interest:
Long-term debt			4,344				4,179				7,767				8,800				38,735				46,575				34,492
Other			99				58				106				171				558				246				115
Income			(160	)			(195	)			(555	)			(942	)			(10,023	)			(541	)			(541	)
Other			—				—				—				(408	)			160,389				(4,899	)			(1,493	)
Earnings from continuing operations before income taxes			141,719				201,211				349,068				587,658				280,071				298,122				226,242
Income taxes:
Current			4,697				(3,647	)			(737	)			34,526				241,402				53,698				40,828
Deferred			9,300				21,069				6,950				(19,380	)			(169,019	)			48,103				34,900
Total income tax			13,997				17,422				6,213				15,146				72,383				101,801				75,728
Net earnings continuing operations			127,722				183,789				342,855				572,512				207,688				196,321				150,514
Earnings from discontinued operations (2)			—				—				2,956				7,077				1,388,060				64,920				38,162
Net earnings			127,722				183,789				345,811				579,589				1,595,748				261,241				188,676
Distributions declared			98,091				128,273				276,667				471,524				70,510				—				—
Cash distributions declared per unit (2)			0.78				1.02				1.96				3.56				0.56				—				—
Earnings per unit/share from continuing operations:
Basic			1.02				1.46				2.73				4.56				1.68				1.70				1.38
Diluted			1.02				1.46				2.73				4.56				1.66				1.67				1.36

		Six Months Ended June 30,								Year Ended December 31,
		2008				2007				2007				2006				2005				2004				2003
		(Unaudited)
		(In US GAAP, Cdn$ in thousands, except per unit/share data and operating data)
Unit/share data: (3)
Issued		$	125,758			$	125,758			$	125,758			$	125,758			$	125,461			$	121,580			$	109,691
Weighted average units/shares outstanding			125,758				125,758				125,758				125,545				123,304				115,654				108,860
Weighted average — diluted			125,785				125,758				125,760				125,545				125,412				117,210				110,598
Statement of cash flow data:
From operations			257,765				385,371				484,115				609,744				206,013				286,437				200,921
From investments			(103,443	)			(115,398	)			(191,402	)			(234,723	)			1,037,529				(873,160	)			(220,144	)
From financing			(147,205	)			(269,973	)			(292,713	)			(375,021	)			(1,462,574	)			527,144				(34,228	)
Discontinued operations (2)			—				—				—				—				97,020				160,221				57,506
Other financial data:
Acquisitions net of cash			—				—				—				16,428				30,421				679,814				6,800
Purchase of property, plant and equipment			54,812				108,542				186,973				263,030				155,231				122,692				96,193
Distributions paid			118,212				150,909				249,000				444,651				33,875				—				—
Operating Data:
Drilling rigs available (2)			248				247				245				241				230				277				245
Canada rig days			13,570				14,960				30,475				44,768				46,937				41,625				42,275
US rig days			2,243				499				1,850				170				—				—				—
International rig days (2)			124				—				—				—				—				—				—

		As of
		June 30,				As of December 31,
		2008				2007				2006				2005				2004				2003
		(Unaudited)
		(In US GAAP, Cdn$ in thousands)
Statement of Balance Sheet Data:
Total assets		$	1,819,331			$	1,826,506			$	1,824,215			$	1,781,911			$	3,915,078			$	3,001,637
Long-term debt			104,948				119,826				140,880				96,838				718,850				399,422
Assets net of liabilities			1,409,096				1,379,430				1,280,104				1,137,620				1,530,308				1,193,319
Unitholders’ temporary equity (1)			3,146,916				1,730,328				3,153,594				4,304,665				—				—
Share capital (3)			—				—				—				—				1,272,673				936,529

(1)		On November 7, 2005, PDC converted to an open-ended investment trust. Pursuant to the reorganization, shareholders of PDC exchanged their PDC common shares for Precision trust units. Precision trust units are, subject to certain limitations, redeemable at any time on demand by the unitholder. Under US GAAP the amount included on the consolidated balance sheet for unitholder’s equity is classified as temporary equity and recorded at an amount equal to the redemption value of the Precision trust units as of the balance sheet date.
(2)		On August 31, 2005, Precision sold its Energy Services and International Contract Drilling divisions to Weatherford International Ltd. for proceeds of approximately Cdn$1.13 billion and 26 million common shares of Weatherford, valued at Cdn$2.1 billion.
		In addition, on September 13, 2005, Precision sold its industrial plant maintenance business to Borealis Investments Inc. for proceeds of approximately Cdn$274 million.
		In 2005, Cdn$2.9 billion (Cdn$23.07 per share) was distributed to Precision’s shareholders in connection with the sale of Precision’s energy services and international contract drilling divisions.
		For comparative purposes results of discontinued operations information has been removed from the financial and operating data.
(3)		On May 15, 2005, PDC undertook a 2 for 1 stock split. Comparative numbers have been changed to affect the stock split equivalent.

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND

OPERATING DATA OF GREY WOLF

	•	EBITDA does not reflect current or future requirements for capital expenditures or capital commitments;
	•	EBITDA does not reflect changes in, or cash requirements necessary to service interest or principal payments on indebtedness;
	•	EBITDA does not reflect income taxes;
	•	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements;
	•	an improving trend in EBITDA may not be indicative of an improvement in profitability; and
	•	other companies in Grey Wolf’s industry may calculate EBITDA differently than Grey Wolf, limiting its usefulness as a comparative measure.

		Six Months Ended June 30,								Years Ended December 31,
		2008				2007				2007				2006				2005				2004				2003
		(US$ in thousands, except per share data and operating data)
		(Unaudited)
Statement of Operations Data:
Contract Drilling Revenue		$	418,229			$	469,533			$	906,577			$	945,527			$	696,979			$	424,634			$	285,974
Costs and expenses:
Drilling operations			243,461				253,260				513,847				516,787				418,644				327,797				244,287
Depreciation and amortization			54,753				43,811				97,361				74,010				61,279				55,329				50,521
General and administrative			16,833				14,558				29,439				24,305				16,248				13,317				11,966
(Gain) loss on sale of assets and other			50				(129	)			(175	)			(16,054	)			(115	)			(45	)			(81	)
Total costs and expenses			315,097				311,500				640,472				599,048				496,056				396,398				306,693
Interest income (expense), net			(1,568	)			(178	)			(708	)			(2,128	)			(7,791	)			(13,982	)			(26,878	)
Net income (loss)			63,621				100,286				169,892				219,951				120,637				8,078				(30,200	)
Net income (loss) per common stock:
Basic			0.36				0.55				0.93				1.16				0.63				0.04				(0.17	)
Diluted			0.31				0.46				0.79				0.98				0.54				0.04				(0.17	)
Statement of Cash Flows Data:
Cash flows provided by (used in):
Operating activities			172,218				190,319				295,832				288,230				221,612				45,146				(7,040	)
Investing activities			(104,214	)			(120,349	)			(225,500	)			(170,514	)			(128,250	)			(74,077	)			(33,927	)
Financing activities			(2,644	)			(8,014	)			(52,404	)			(61,088	)			8,073				46,291				(18,582	)
Other Financial Data:
Capital Expenditures:
Acquisitions, net of cash acquired			4,362				—				—				—				—				28,906				—
Property and equipment			96,077				122,842				220,191				197,161				131,352				46,951				35,102
Deposits for new rig purchases			5,766				—				9,771				10,979				—				—				—
EBITDA			162,363				208,596				376,668				431,975				265,775				84,342				30,770
Operating Data:
Rig days(1)			18,664				19,397				38,478				39,561				37,229				31,177				22,147
Average revenue per rig day			22,408				24,206				23,561				23,901				18,721				13,620				12,913
Average EBITDA per rig day			8,699				10,754				9,789				10,919				7,139				2,705				1,389
Average number of rigs operating			103				107				105				108				102				85				61

(1)		A rig day is a twenty-four hour period in which a Grey Wolf rig is under contract and should be earning revenues.

		Six Months Ended June 30,								Years Ended December 31,
		2008				2007				2007				2006				2005				2004				2003
		(US$ in thousands)
		(Unaudited)
Earnings before interest expense, income taxes, depreciation and amortization		$	162,363			$	208,596			$	376,668			$	431,975			$	265,775			$	84,342			$	30,770
Depreciation and amortization			(54,753	)			(43,811	)			(97,361	)			(74,010	)			(61,279	)			(55,329	)			(50,521	)
Interest expense			(6,046	)			(6,930	)			(13,910	)			(13,614	)			(11,364	)			(14,759	)			(27,832	)
Total income tax (expense) benefit			(37,943	)			(57,569	)			(95,505	)			(124,400	)			(72,495	)			(6,176	)			17,383
Net income (loss) applicable to common shares			63,621				100,286				169,892				219,951				120,637				8,078				(30,200	)

		As of June 30,								As of December 31,
		2008				2007				2007				2006				2005				2004				2003
		(US$ in thousands)
		(Unaudited)
Balance Sheet Data:
Cash and cash equivalents		$	313,061			$	291,729			$	247,701			$	229,773			$	173,145			$	71,710			$	54,350
Working capital			369,543				352,035				338,804				304,764				250,446				118,096				71,833
Total assets			1,304,951				1,203,330				1,207,970				1,086,984				869,035				635,876				532,184
Long-term liabilities			456,954				434,131				443,769				406,108				404,654				337,810				285,615
Shareholders’ equity			725,516				630,941				659,509				533,794				369,232				237,482				195,637

 

SELECTED UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL INFORMATION

		Six Months Ended				Year Ended
		June 30, 2008				December 31, 2007
		(US$ in thousands, except per share data)
Statement of Operations Data:
Revenue		$	896,087			$	1,847,031
Operating expenses (excluding depreciation and amortization)			503,625				994,784
Depreciation and amortization			98,187				194,204
General and administrative			53,159				81,621
Interest expense, net			39,799				72,980
Net income from continuing operations			162,777				433,205
Net income			162,777				435,960
Net Income Per Trust Unit:
Basic			0.97				2.60
Diluted			0.97				2.60
Weighted Average Trust Units Outstanding:
Basic			167,758				167,758
Diluted			167,785				167,760

						As of June 30, 2008
						(US$ in thousands)
Balance Sheet Data:
Cash and cash equivalents						$	6,988
Working capital							18,842
Total assets							4,247,224
Long-term debt, net of current portion							930,185
Unitholders’ equity (including temporary equity)							2,276,695

 

COMPARATIVE PER SHARE AND TRUST UNIT DATA

	•	Each of the comparative per share and trust unit data has been calculated assuming completion of the Merger as if it had been in effect for all periods presented based on the conversion of Grey Wolf’s convertible notes and an aggregate of approximately 223 million outstanding shares of Grey Wolf common stock to Precision trust units subject to the maximum amounts translated to $5.00 in cash and 0.1883 of a Precision trust unit for each share of Grey Wolf common stock.
	•	Net income per trust unit is presented based upon the pro forma results of the two entities stated under US GAAP.

		Six Months Ended				Year Ended
		June 30,				December 31,
		2008				2007
Precision — Historical (Cdn$)
Net Income From Continuing Operations Per Trust Unit:
Basic		$	1.02			$	2.73
Diluted			1.02				2.73
Book value per trust unit		$	11.20				10.97
Grey Wolf — Historical (US$)
Net Income Per Share:
Basic		$	0.36			$	0.93
Diluted			0.31				0.79
Book value per share			4.06				3.70
Combined Entity — Unaudited Pro Forma Combined Amounts (US$)
Net Income Per Trust Unit:
Basic		$	0.97			$	2.60
Diluted			0.97				2.60
Book value per trust unit		$	13.56				N/A

 

COMPARATIVE PER SHARE AND PER TRUST UNIT MARKET PRICE
AND DIVIDEND INFORMATION

		The American Stock								The New York Stock								The Toronto Stock
		Exchange (US$)								Exchange (US$)								Exchange (Cdn$)
		Grey Wolf								Precision Trust								Precision Trust
		Common Stock								Units								Units
		High				Low				High				Low				High				Low
Annual
2003(1)		$	4.99			$	3.11			$	44.08			$	31.10			$	58.74			$	45.30
2004(1)			5.58				3.30				66.19				42.30				78.70				55.89
2005			8.60				3.70				34.01				25.85				39.75				30.50
2006			8.93				6.10				38.20				21.46				43.40				24.40
2007			8.60				4.85				27.89				14.91				30.93				14.82
2008
Through September 23, 2008			9.65				5.00				28.59				15.15				28.93				15.13

(1)		Prior to November 7, 2005, Precision was a corporation and its common shares were listed for trading.

		Declared Distributions/Dividends
		Precision				Grey Wolf
		(Cdn$)(1)				(US$)
Year Ended December 31,
2003		$	—			$	—
2004			—				—
2005(2)			0.56				—
2006			3.56				—
2007			1.96				—
Six Months Ended June 30,
2007			1.02				—
2008			0.78				—

(1)		Aggregate of the cash distributions declared each calendar month.
(2)		Cash distributions were initially declared for unitholders of record in the month of November 2005 following the conversion of PDC to a trust effective November 7, 2005. In 2005, Cdn$2.9 billion (Cdn$23.07 per share) was distributed to Precision’s shareholders in connection with the sale of Precision’s energy services and international contract drilling divisions.

 

CURRENCY EXCHANGE RATE DATA

		Closing Rate				Average
		Cdn$ per				Cdn$ per
		US$1.00				US$1.00
Year Ended December 31,
2003		$	1.2923			$	1.4008
2004			1.2034				1.3017
2005			1.1656				1.2115
2006			1.1652				1.1340
2007			.9881				1.0742
Six Months Ended June 30,
2007			1.0634				1.1345
2008			1.0185				1.0070

 

In addition to the other information included or incorporated by reference in this proxy statement/prospectus, you should carefully consider the matters described below relating to the proposed Merger in deciding whether to vote for approval of the Merger Agreement. Although Precision and Grey Wolf believe that the matters described below cover the material risks related to the Merger, they may not contain all of the information that is important to you in evaluating the Merger. Accordingly, we urge you to read this entire proxy statement/prospectus, including the appendices and the information included or incorporated by reference in this document. Please also refer to the additional risk factors identified in the periodic reports and other documents of Precision and Grey Wolf incorporated by reference into this proxy statement/prospectus and listed in the section entitled “Where You Can Find More Information” beginning on page 132.

 

All the anticipated benefits of the Merger may not be realized.

 

The success of the Merger will depend, in part, on our ability to achieve the anticipated strategic benefits from integrating the businesses of Grey Wolf into Precision. We expect Precision to benefit from modest operational synergies resulting from the integration of the capabilities of Grey Wolf as well as greater efficiencies from increased scale. If we are not able to achieve these objectives, the anticipated cost synergies and other strategic benefits of the Merger may not be realized fully or at all or may take longer to realize than expected. We may fail to realize some or all of the anticipated benefits of the Merger in the amounts and times projected for a number of reasons, including that the integration may take longer than anticipated, be more costly than anticipated or have unanticipated adverse results relating to Precision’s or Grey Wolf’s existing businesses. As a result of these factors, it is possible that Precision and Grey Wolf will not achieve the anticipated operating synergies from the Merger.

 

Grey Wolf may not be integrated successfully.

 

Precision and Grey Wolf have operated, and until completion of the Merger will continue to operate, independently. As a result, the Merger will present challenges to management, including the integration of the operations, systems, technologies and personnel of Grey Wolf, and special risks, including possible unanticipated liabilities, unanticipated costs, diversion of management’s attention, inconsistencies in standards, controls, procedures and policies, operational interruptions and the loss of key employees, customers or suppliers. The difficulties to be encountered in the transition and integration processes could have an adverse effect on the revenues, levels of expenses and operating results of the combined company. As a result, Precision may not be able to successfully integrate Grey Wolf.

 

Precision and Grey Wolf will incur transaction, integration and restructuring costs in connection with the Merger.

 

We expect to incur significant costs associated with transaction fees, including a $25 million termination fee payable to Basic, professional services and other costs related to the Merger. We also will incur integration and restructuring costs following the completion of the Merger as the business operations of Grey Wolf are integrated with the business of Precision. Although Precision and Grey Wolf expect that, over time, the realization of efficiencies related to such integration will offset incremental transaction, Merger-related and restructuring costs, this net benefit may not be achieved in the near term, or at all. This may result in unanticipated costs and other changes in our future financial results.

 

The directors and executive officers of Grey Wolf have interests in the Merger that are different from yours.

 

In considering the recommendation of the board of directors of Grey Wolf to vote for the proposal to approve the Merger Agreement, you should be aware that members of the Grey Wolf board and members of Grey Wolf’s management team have pre-existing arrangements that provide them with interests in the Merger that differ from, or are in addition to, those of Grey Wolf shareholders generally. These arrangements include

employment agreements between Grey Wolf and its executive officers. For a more complete discussion see “The Merger — Interests of Grey Wolf Directors and Officers in the Merger” beginning on page 84. The Grey Wolf board was aware of these pre-existing agreements and arrangements during its deliberations on the merits of the Merger and in determining to unanimously recommend to the shareholders of Grey Wolf that they vote for the proposal to approve the Merger Agreement.

 

Changes in the value of the Precision trust units may affect the value of your Merger consideration.

 

The specific value of the consideration Grey Wolf’s shareholders will receive in the Merger will depend on the market price of the Precision trust units at the effective time of the Merger. As a Grey Wolf shareholder, you will have the ability to elect to receive cash or the Precision trust units subject to proration, where the maximum amount of cash to be paid by Precision will be approximately $1.12 billion, and the maximum number of the Precision trust units to be issued will be approximately 42.0 million (these maximums assume the conversion of all Grey Wolf’s convertible debt securities and exercise of certain stock options which, together with the outstanding shares of Grey Wolf common stock, total approximately 223 million fully-diluted shares of Grey Wolf common stock). These maximum aggregate amounts translate to $5.00 in cash and 0.1883 of a Precision trust unit for each share of Grey Wolf common stock, subject to the appropriate adjustment, if any is necessary, to account for any reclassification, recapitalization, stock or unit split, consolidation, combination or exchange of shares or trust units or similar event. Thus, if the market price of the Precision trust units increases or decreases, the market value of any Precision trust units you receive in the Merger will correspondingly increase or decrease. Because the date that the Merger becomes effective may be later than the date of the special meeting, the price of the Precision trust units on the date the Merger becomes effective may be higher or lower than the price on the date of the special meeting. Many of the factors that affect the market price of the Precision trust units are beyond the control of Precision and Grey Wolf. We urge Grey Wolf shareholders to obtain current market quotations for the Precision trust units and Grey Wolf common stock. If you elect all cash, the amount per share of Grey Wolf common stock is fixed at $9.02, assuming there is not a proration of shares electing to receive cash Merger consideration.

 

The rights of Grey Wolf shareholders will change as a result of the Merger.

 

Following the completion of the Merger, Grey Wolf shareholders will no longer be shareholders of Grey Wolf, a Texas corporation, but will instead be unitholders of Precision, a Canadian open-ended, unincorporated investment trust. There will be important differences between your current rights as a shareholder of Grey Wolf, on the one hand, and the rights to which you will be entitled as a unitholder of Precision, on the other hand. For a more complete discussion, see “Comparison of Shareholder Rights” beginning on page 120.

 

The Merger is subject to the receipt of consents and approvals from government entities that may impose conditions that could have an adverse effect on Precision.

 

We cannot complete the Merger unless we receive various consents, orders, approvals and clearances from the DOJ, FTC and CFIUS. These authorities may impose conditions on the completion of the Merger or require changes to the terms of the Merger. While Precision and Grey Wolf do not currently expect that any such conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of imposing additional costs on or limiting the revenues of Precision following the Merger, any of which may have an adverse effect on Precision.

 

Precision expects to maintain its status as a “foreign private issuer” in the US and thus will be exempt from a number of rules under the Exchange Act and will be permitted to file less information with the SEC than a company incorporated in the US.

 

As a “foreign private issuer,” Precision is exempt from certain rules under the Exchange Act that impose disclosure requirements, as well as procedural requirements, for proxy solicitations under Section 14 of the Exchange Act. Precision’s officers, trustees and principal unitholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act. Moreover, Precision is not

required to file periodic reports and financial statements with the SEC as frequently or as promptly as US companies whose securities are registered under the Exchange Act, nor is it generally required to comply with Regulation FD, which restricts the selective disclosure of material nonpublic information. Accordingly, there may be less information concerning Precision publicly available than there is for US public companies such as Grey Wolf and such information may not be provided as promptly. In addition, Precision is permitted, under a multi-jurisdictional disclosure system adopted by the US and Canada, to prepare its disclosure documents in accordance with Canadian disclosure requirements, including preparing its financial statements in accordance with Canadian GAAP, which differs in some respects from US GAAP.

 

The ability of Grey Wolf shareholders to elect to receive cash or Precision trust units in exchange for their shares of Grey Wolf will be subject to proration in the event of an oversubscription or under subscription of the cash election or the Precision trust unit election.

 

In the Merger, each Grey Wolf shareholder may elect to receive for each share of Grey Wolf common stock either cash or Precision trust units, but such elections are subject to proration and adjustment to ensure that, in the aggregate, the maximum amount of cash to be paid by Precision will not be more than approximately $1.12 billion, and the maximum number of Precision trust units to be issued will not be more than approximately 42.0 million. Accordingly, despite your election, you may not receive exactly the amount, type and mix of consideration that you elected to receive for your shares of Grey Wolf, which could result in, among other things, tax consequences that differ from those that would have resulted if you had received the form of consideration that you elected (including the potential recognition of gain for US federal income tax purposes if you receive cash).

 

The Merger may fail to qualify as a reorganization within the meaning of Section 368(a) of the Code, resulting in your recognition of taxable gain or loss in respect of your Grey Wolf common stock.

 

The Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code. Neither Precision nor Grey Wolf intends to request any ruling from the IRS as to the tax treatment of the Merger. No assurance can be given that the IRS will not assert, or that a court would not sustain, that the Merger does not qualify as a reorganization. If the Merger fails to qualify as a reorganization, you generally would recognize gain or loss equal to the difference between the sum of the fair market value of the Precision trust units and the amount of cash received in the Merger (including cash received in lieu of fractional Precision trust units) and your tax basis in shares of Grey Wolf common stock surrendered in exchange therefore. In addition, if the Merger fails to qualify as a reorganization, Grey Wolf will be subject to tax on a deemed sale of its assets, with any gain or loss for this purpose measured by the difference between Grey Wolf’s tax basis in its respective assets and the cash and Precision trust units conveyed in the Merger plus the amount of Grey Wolf’s liabilities. For a further discussion see “The Merger — Material US Federal Income Tax Consequences of the Merger and of Owning Precision Trust Units — Failure to Qualify as a Reorganization” beginning on page 73.

 

The Merger Agreement contains provisions that may discourage other companies from trying to acquire Grey Wolf for greater consideration.

 

The Merger Agreement contains provisions that may discourage a third party from submitting a business combination proposal to Grey Wolf that might result in greater value to Grey Wolf’s shareholders than the proposed Merger. These provisions include a general prohibition on Grey Wolf from soliciting or encouraging any acquisition proposal or offers for competing transactions and the requirement that Grey Wolf pay a termination fee of $64 million if the Merger Agreement is terminated in specified circumstances. Such termination fee is in addition to the $25 million termination fee that Grey Wolf will be required to pay to Basic upon consummation of the Merger or, in the event of an alternative acquisition transaction, upon consummation of an alternative acquisition, in each case if consummated prior to July 15, 2009 and as set forth in the Basic Merger Agreement.

 

Precision required Grey Wolf to agree to deal protection as a condition to Precision’s willingness to enter into the Merger Agreement. These provisions, however, might discourage a third party that might have an

interest in acquiring all or a significant part of Grey Wolf from considering or proposing an acquisition, even if that party were prepared to pay consideration with a higher per share price than the current proposed Merger consideration. Furthermore, the termination fee may result in a potential competing acquiror proposing to pay a lower per share price to acquire Grey Wolf than it might otherwise have proposed to pay.

 

Precision is presently dependent on PDC for all cash available for distributions.

 

To receive cash available for distributions, Precision is presently entirely dependent on the operations and assets of PDC through Precision’s interest in Precision Drilling Limited Partnership, a limited partnership formed under the laws of the Province of Manitoba (“PDLP”), which in turn owns 100% of the shares of PDC and a promissory note owing by PDC (the “Promissory Note”). Cash generated from the operations of PDC flows to PDLP in settlement of principal and interest owing on the Promissory Note and PDLP in turn makes distributions to Precision. Thus, distributions to holders of Precision trust units are dependent on the ability of PDC to make principal and interest payments on the Promissory Note, dividends and return of capital payments to PDLP. After the Merger, cash generated through the operations of the merged company will also flow to Precision and be available for distribution. The actual amount of cash available for distribution is and will be dependent upon numerous factors relating to the business of PDC (and Merger Sub after the Merger), including profitability, changes in revenue, fluctuations in working capital, capital expenditure levels, applicable laws, compliance with contracts, contractual restrictions contained in the instruments governing its indebtedness, the impact of interest rates, the growth of the general economy, the price of crude oil and natural gas, changes to tax laws, weather, future capital requirements, the number of Precision trust units issued and outstanding and potential tax liabilities resulting from any successful reassessments of prior taxation years by taxation authorities. Any reduction in the amount of cash available for distribution, or actually distributed, by PDC or Merger Sub to Precision may impact the amount of cash available for distributions to the holders of the Precision trust units. The market value of the Precision trust units may deteriorate if Precision is unable to meet distribution expectations in the future, and such deterioration may be material.

 

Distributions by Precision on the Precision trust units are variable.

 

The actual cash flow available for distribution to holders of Precision trust units is a function of numerous factors including Precision’s financial performance; debt obligations; working capital requirements; future upgrade capital expenditures and future expansion capital expenditure requirements for the purchase of property, plant and equipment; tax obligations; the impact of interest rates; the growth of the general economy; the price of crude oil and natural gas; weather; and the number of the Precision trust units issued and outstanding. Distributions may be increased, reduced or suspended entirely depending on Precision’s operations and the performance of its assets. The market value of the Precision trust units may deteriorate if Precision is unable to meet distribution expectations in the future, and that deterioration may be material.

 

Risks associated with the taxation of Precision could negatively affect the value of the Precision trust units.

 

There can be no assurances that Canadian federal income tax laws and administrative policies respecting the treatment of mutual fund trusts will not be changed or will not be applied in a manner which adversely affects the holders of Precision trust units. For example, if Precision ceases to qualify as a “mutual fund trust” under the Income Tax Act (Canada), as amended (the “Canadian Tax Act”), certain Canadian federal income tax considerations would be materially and adversely different in certain respects.

 

Moreover, if Precision were to cease to qualify as a mutual fund trust, Precision trust units held by non-residents of Canada for purposes of the Canadian Tax Act (“non-residents”) would become taxable Canadian property under the Canadian Tax Act. These non-resident holders would be subject to Canadian income tax on any gains realized on a disposition of the Precision trust units held by them unless they were exempt under an income tax convention, and non-resident holders would be subject to certain notification and withholding requirements on a disposition of their Precision trust units. In addition, Precision would be taxed on certain types of income distributed to holders of Precision trust units (apart from under the specified investment flow-

through legislation discussed below). Payment of this tax may have adverse consequences for some holders of Precision trust units, particularly holders of Precision trust units that are non-residents and residents of Canada that are otherwise exempt from Canadian income tax.

 

The Canadian Tax Act provides that a trust will not be considered a “mutual fund trust” for purposes of the Canadian Tax Act if it is established or is maintained primarily for the benefit of non-residents of Canada. However, this disqualification rule does not apply if all or substantially all of the trust’s property is property other than “taxable Canadian property” as defined in the Canadian Tax Act. The assets of Precision have been structured to allow Precision to assert that all or substantially all of its property is property other than “taxable Canadian property” as defined in the Canadian Tax Act. However, no assurances can be provided that all or substantially all of Precision’s property is property other than “taxable Canadian property” as defined in the Canadian Tax Act and that this disqualification rule will not apply to cause Precision to cease to qualify as a “mutual fund trust” under the Canadian Tax Act.

 

On September 16, 2004 draft amendments to the disqualification rule were introduced providing that a trust will lose its status as a mutual fund trust if the aggregate fair market value of all trust units issued by the trust held by one or more non-residents of Canada or partnerships that are not “Canadian partnerships” (as defined in the Canadian Tax Act) is more than 50% of the aggregate fair market value of all the trust units issued by the trust where more than 10% (based on fair market value) of the trust’s property is certain types of “taxable Canadian property,” Canadian resource property or timber resource property as defined in the Canadian Tax Act. Since the assets of Precision have been structured to allow Precision to assert that greater than 10% of its property will not be taxable Canadian property, Canadian resource property or timber resource property, these draft amendments should not adversely affect Precision’s status as a mutual fund trust. However, no assurances can be provided that such draft legislation will be enacted as currently proposed or at all. Moreover, no assurances can be provided that no more than 10% of Precision’s property will be taxable Canadian property, Canadian resource property or timber resource property and, therefore, that, if enacted, such draft legislation would not adversely affect Precision’s status as a mutual fund trust under the Canadian Tax Act.

 

Legislation to implement proposals originally announced on October 31, 2006 relating to the taxation of certain publicly-traded trusts and their unitholders under the Canadian Tax Act has received royal assent. This legislation applies to trusts that are resident in Canada for purposes of the Canadian Tax Act, that hold one or more “non-portfolio properties,” and the trust units of which are listed on a stock exchange or other public market (a “SIFT trust”). A SIFT trust effectively is subject to tax on its income from non-portfolio properties and taxable capital gains from dispositions of non-portfolio properties paid, or made payable, to unitholders at a rate comparable to the combined federal and provincial corporate income tax rate. Distributions of such income to unitholders should be treated as eligible dividends paid by a taxable Canadian corporation.

 

In general terms, a trust that existed on October 31, 2006 and to which the SIFT trust legislation otherwise would apply, should not become a SIFT trust until the earlier of January 1, 2011 or the first day after December 15, 2006 that the trust exceeds “normal growth” determined by reference to guidelines issued on December 15, 2006 by the Minister of Finance (Canada) (the “Guidelines”). The Guidelines provide that a trust should not be considered to exceed “normal growth” if the trust does not issue new equity (including convertible debentures or other equity substitutes) that exceeds the greater of Cdn$50 million per year or certain specified “safe harbor” amounts based on the market capitalization of the trust on October 31, 2006.

 

Provided that Precision does not issue new equity in an amount greater than the “safe-harbor” determined by the approximately Cdn$4 billion market capitalization of Precision on October 31, 2006, Precision should not be considered to exceed “normal growth” as set forth in the Guidelines. The Precision trust units issued in connection with the Merger should not result in Precision exceeding the “safe-harbor” amounts and becoming a SIFT trust prior to January 1, 2011. However, no assurances can be provided that Precision will not otherwise become a SIFT trust prior to January 1, 2011.

 

As part of its ongoing strategic planning, Precision will continue to examine and evaluate its various strategic alternatives, including its ability to reorganize its legal and tax structure to mitigate the expected impact of the SIFT legislation. While no assurances can be provided regarding the strategic alternatives, if any, that may

be available, the strategic alternatives considered will recognize that on December 20, 2007 the Minister of Finance announced that the federal government remains committed to ensuring that a SIFT trust may convert to a taxable Canadian corporation without undue tax consequences, and draft legislation was released on July 14, 2008 to specifically facilitate such a conversion. However, no assurances can be provided that such draft legislation will be enacted as currently proposed, or at all, or that if enacted the resulting legislation will apply to Precision’s particular circumstances to allow it to mitigate the impact of the SIFT legislation.

 

The Precision trust units have certain risks not associated with traditional investments in the oil and natural gas services business.

 

The Precision trust units do not represent a traditional investment in the oil and natural gas services business and should not be viewed as shares of PDC or Grey Wolf. The Precision trust units represent a fractional interest in Precision. Holders of Precision trust units do not have the statutory rights normally associated with ownership of shares of a corporation including, for example, the right to bring “oppression” or “derivative” actions. Precision’s sole assets are the shares of the general partner of PDLP and Merger Sub, the PDLP A units and other investments in securities. The price per Precision trust unit is a function of anticipated net earnings, distributable cash, the underlying assets of Precision and management’s ability to effect long-term growth in the value of PDC, Grey Wolf and other entities now or hereafter owned directly or indirectly by Precision. The market price of the Precision trust units is sensitive to a variety of market conditions including, but not limited to, interest rates, the growth of the general economy, the price of crude oil and natural gas and changes in law. Changes in market conditions may adversely affect the trading price of the Precision trust units. The Precision trust units are not “deposits” within the meaning of the Deposit Insurance Corporation Act (Canada) and are not insured under the provisions of that act or any other legislation. Furthermore, Precision is not a trust company and, accordingly, is not registered under any trust and loan company legislation as it does not carry on or intend to carry on the business of a trust company.

 

If Precision does not constitute a “qualified foreign corporation” for US federal income tax purposes, US Holders of the Precision trust units will be taxed at a higher rate on Precision distributions.

 

Precision is advised that distributions it makes to individual US Holders of Precision trust units that are treated as dividends for US federal income tax purposes generally should be treated as qualified dividend income eligible for the reduced maximum rate to individuals of 15% (5% for individuals in lower tax brackets). However, if Precision does not constitute a “qualified foreign corporation” for US federal income tax purposes, and as a result such dividends to individual US Holders of Precision trust units do not qualify for this reduced maximum rate, such holders will be subject to tax on such dividends at ordinary income rates (currently at a maximum rate of 35%). In addition, under current law, the preferential tax rate for qualified dividend income will not be available for taxable years beginning after December 31, 2010.

 

The composition for Canadian federal income tax purposes of distributions on the Precision trust units may change over time, and such changes could negatively affect the return on the Precision trust units.

 

Unlike interest payments on an interest-bearing security, distributions by income trusts on trust units (including those of Precision) are, for Canadian federal income tax purposes, composed of different types of payments (portions of which may be fully or partially taxable or may constitute non-taxable “returns of capital”). The composition for Canadian federal income tax purposes of distributions may change over time, thus affecting the after-tax return to holders of Precision trust units. Therefore, the rate of return for holders of Precision trust units over a defined period may not be comparable to the rate of return on a fixed-income security that provides a return on capital over the same period. This is because a holder of Precision trust units may receive distributions that constitute a return of capital (rather than a return on capital) to some extent during the relevant period. Returns on capital are generally taxed as ordinary income, dividends or taxable capital gains in the hands of a holder of Precision trust units, while returns of capital are generally non-taxable to a holder of Precision trust units (but reduce the adjusted cost base in a Precision trust unit for Canadian federal income tax purposes).

If Precision ceases to qualify as a mutual fund trust under the Canadian Tax Act, the Precision trust units will cease to be qualified investments for a variety of plans, which could have negative tax consequences.

 

If Precision ceases to qualify as a mutual fund trust, the Precision trust units will cease to be qualified investments for registered retirement savings plans, registered retirement income funds, deferred profit sharing plans and registered education savings plans, each as defined in the Canadian Tax Act (collectively, the “Exempt Plans”). Where at the end of any month an Exempt Plan holds Precision trust units that are not qualified investments, the Exempt Plan must, in respect of that month, pay a tax under Part XI.1 of the Canadian Tax Act equal to 1% of the fair market value of Precision trust units at the time such Precision trust units were acquired by the Exempt Plan. In addition, where a trust governed by a registered retirement savings plan or registered retirement income fund holds Precision trust units that are not qualified investments, such trust will become taxable on its income attributable to the Precision trust units while they are not qualified investments, including the full amount of any capital gain realized on a disposition of Precision trust units while they are not qualified investments. Where a trust governed by a registered education savings plan holds Precision trust units that are not qualified investments, the plan’s registration may be revoked.

 

If an investor acquires 10% or more of Precision’s trust units it may be subject to taxation under the “controlled foreign corporation” (the “CFC”) rules.

 

Under certain circumstances, a US person who directly or indirectly owns 10% or more of the voting power of a foreign corporation that is a CFC (generally a foreign corporation in which 10% US shareholders own more than 50% of the voting power of the foreign corporation) for an uninterrupted period of 30 days or more during a taxable year and who holds any shares of the foreign corporation on the last day of the corporation’s tax year must include in gross income for US federal income tax purposes its pro rata share of certain income of the CFC even if such share is not distributed to such person. We believe that Precision will not be a CFC immediately after the Merger, but this could change in the future.

 

Precision’s debt service obligations may limit the amount of cash available for distributions.

 

Precision and its affiliates may, from time to time, finance a significant portion of their growth (either from acquisitions or capital expenditure additions) through debt. Amounts paid in respect of interest and principal on debt incurred by Precision and its affiliates may impair Precision’s ability to satisfy its obligations under its subordinated inter-entity debt instruments through which cash flow is paid to PDLP and eventually to Precision for further distribution to its unitholders. Variations in interest rates and scheduled principal repayments could result in significant changes in the amount required to be applied to service debt before payment of subordinated inter-entity debt. This may result in lower levels of cash for distribution by Precision. Ultimately, subordination agreements or other debt obligations could preclude distributions altogether.

 

Sales of additional Precision trust units to unitholders could negatively affect the value of the Precision trust units.

 

Precision may issue additional Precision trust units in the future to pay down indebtedness or to directly or indirectly fund the capital expenditure requirements of PDC and other entities now or hereafter owned directly or indirectly by Precision, including to finance acquisitions by those entities. Such additional Precision trust units may be issued without the approval of holders of Precision trust units, and the holders have no pre-emptive rights in connection with such additional issues. Precision’s trustees have discretion in connection with the price and the other terms of the issue of such additional Precision trust units.

 

Issuance of additional Precision trust units in lieu of cash distributions could negatively affect the value of the Precision trust units and result in the payment of taxes.

 

Precision’s Declaration of Trust provides that an amount equal to the taxable income of Precision will be payable each year to holders of Precision trust units in order to reduce Precision’s taxable income for Canadian federal income tax purposes to zero. Where in a particular year, Precision does not have sufficient

cash to distribute such an amount, the Declaration of Trust provides that additional Precision trust units (which are subsequently consolidated into a unitholder’s existing Precision trust units) may be distributed in lieu of cash payments. Holders of Precision trust units will generally be required to include an amount equal to the fair market value of those Precision trust units in their taxable income for Canadian federal income tax purposes, notwithstanding that they do not directly receive a cash payment. In addition, as any such non-cash distributions made to persons that are not Canadian residents will be subject to Canadian tax withholding, but are generally not included in income for US federal income tax purposes (and also may not be included in income under the laws of certain other jurisdictions), such Canadian taxes withheld may exceed a US Holder’s or other non-resident holder’s allowable foreign tax credit under the laws of the relevant jurisdiction for the taxable year of the distribution.

 

A successful challenge by the tax authorities of the amount of interest expense deducted by PDC on its payments of promissory note interest could negatively affect the value of the Precision trust units.

 

Income fund structures often involve significant amounts of inter-entity debt, which may generate substantial interest expense and which serves to reduce earnings and therefore income tax payable. This is the case in respect of PDC and its interest expense on the Promissory Note. There can be no assurance that the taxation authorities will not seek to challenge the amount of interest expense deducted. If such a challenge were to succeed against PDC, it could have a material adverse affect on the amount of distributable cash available.

 

A successful challenge by the tax authorities of the amount of expenses deducted by Precision, PDC and PDLP could negatively affect the value of the Precision trust units.

 

There can be no assurance that the Canadian taxation authorities will agree with the classification of expenses claimed by Precision, PDLP and PDC, respectively. If the taxation authorities successfully challenge the deductibility of any such expenses, the return to holders of Precision trust units may be adversely affected.

 

Holders of Precision trust units face a remote possibility of personal liability in connection with the obligations and affairs of Precision.

 

Precision’s Declaration of Trust provides that no holder of Precision trust units will be subject to any liability in connection with Precision or its obligations and affairs and, in the event that a court determines that holders of Precision trust units are subject to any such liabilities, the liabilities will be enforceable only against, and will be satisfied only out of, Precision’s assets. Pursuant to the Declaration of Trust, Precision will indemnify and hold harmless each holder of Precision trust units from any costs, damages, liabilities, expenses, charges and losses suffered by a holder resulting from or arising out of such holder not having such limited liability. The Declaration of Trust also provides that all written instruments signed by or on behalf of Precision must contain a provision to the effect that obligations under those instruments will not be binding upon holders of any trust units personally. Personal liability may however arise in respect of claims against Precision that do not arise under contracts, including claims in tort, claims for taxes and possibly some other statutory liabilities. The possibility of any personal liability of this nature arising is considered unlikely. The Income Trusts Liability Act (Alberta) came into force on July 1, 2004. The legislation provides that a holder of Precision trust units will not be, as a beneficiary, liable for any act, default, obligation or liability of Precision’s trustee(s) that arises after the legislation came into force. However, this legislation has not yet been judicially considered by the courts and may not apply to unitholders outside of Alberta. The operations of Precision will be conducted, upon the advice of counsel, in such a way and in such jurisdictions as to avoid as far as possible any material risk of liability to the holders of Precision trust units for claims against Precision, including by obtaining appropriate insurance, where available and to the extent commercially feasible. However, no assurance can be provided that holders of Precision trust units will not be subject to any liability of Precision.

Asset valuation variability could negatively affect the value of the Precision trust units.

 

The net asset value of the assets of Precision from time to time will vary depending upon factors which are beyond the control of Precision. The trading price of the Precision trust units also fluctuates due to factors beyond the control of Precision and such trading prices may be greater than the net asset value of Precision’s assets.

 

The price of Precision’s trust units may experience volatility.

 

Following the consummation of the Merger, the price of Precision’s trust units may be volatile. Some of the factors that could affect the price of Precision’s trust units are quarterly increases or decreases in revenue or earnings, changes in revenue or earnings estimates by the investment community, the ability of Precision to implement its integration strategy and to realize the expected benefits from the Merger and speculation in the press or investment community about Precision’s financial condition or results of operations. General market conditions and US or international economic factors and political events unrelated to the performance of Precision may also affect its unit price. For these reasons, investors should not rely on recent trends in the price of Precision trust units or Grey Wolf common stock to predict the future price of Precision’s trust units or its financial results.

 

We may become a passive foreign investment company, or PFIC, which could result in adverse US tax consequences to US investors.

 

Since PFIC status is determined on an annual basis and will depend on the composition of Precision’s income and assets from time to time, it is possible that Precision could be considered a PFIC in a future taxable year. Such characterization could result in adverse US tax consequences to you if you are a US investor. In particular, a US investor would be subject to US federal income tax at ordinary income rates, plus a possible interest charge, in respect of any gain derived from a disposition of the Precision trust units, as well as certain distributions by Precision. In addition, a step-up in the tax basis of the Precision trust units would not be available upon the death of an individual holder.

 

Canadian tax withholding may exceed allowable US foreign tax credits and reduce effective yield to US investors

 

Withholding of Canadian tax is imposed at a 25% rate (reduced to 15% for recipients that are residents of the US eligible for benefits under the Canada-US Tax Convention) both on cash and non-cash distributions by Precision to persons that are not Canadian residents. However, as any non-cash distributions by Precision generally will not be included in income for US federal income tax purposes, such Canadian tax withholding may exceed a US Holder’s allowable foreign tax credit for the taxable year of the distribution, potentially resulting in a reduced after-tax cash yield to US investors for the year of such distribution. For a further discussion see “The Merger — Material US Federal Income Tax Consequences of the Merger and of Owning Precision Trust Units — Ownership by US Holders of Precision Trust Units — Dividends and Distributions” and “The Merger — Material Canadian Federal Income Tax Consequences of the Merger and of Owning Precision Trust Units — Non-Canadian Holders — Taxation of Trust Unit Distributions to Non-Canadian Holders” beginning on pages 74 and 78, respectively.

 

In addition to risks relating to the businesses currently conducted by Precision and Grey Wolf, there are considerations applicable to the combined company after the Merger.

 

Precision and its subsidiaries will have substantial debt after the Merger, which could have a material adverse effect on its financial health and limit its future operations.

 

Precision and its subsidiaries will have a significant amount of debt immediately after the Merger. As of June 30, 2008, on a pro forma basis to reflect the Merger and Precision’s borrowing to finance the cash component of the Merger consideration, repayment of outstanding Grey Wolf and Precision debt and expenses relating to the Merger, Precision’s total outstanding long-term debt would have been $930 million. Under the commitment letter between PDC and its lenders dated August 24, 2008, and subject to the terms and

conditions set forth in the commitment letter, the lenders have committed to provide an aggregate principal amount of $800 million under senior secured term loan facilities to Precision, an aggregate principal amount of $400 million under a senior secured revolving credit facility and $400 million (reduced by the amount of Grey Wolf’s convertible notes that PDC determines on or prior to the closing date of the Merger will not be converted or redeemed on or after the closing date) in cash proceeds from the issuance of debt securities in a Rule 144A or other private placement or, if PDC is unable to issue the full amount of the debt securities at or prior to the closing date, from a senior unsecured facility, which notes or senior unsecured facility may become secured under certain circumstances. The proceeds of the credit facilities may be used by Precision to finance the cash component of the Merger consideration, to repay outstanding debt of Precision and its subsidiaries, to pay expenses relating to the Merger, and to provide ongoing working capital requirements of Precision and its subsidiaries following the Merger. See “Financing of the Merger” beginning on page 102.

 

Precision’s substantial debt could have a material adverse effect on its financial condition and results of operations. In particular, it could:

 

 

Currency Exchange Exposure

 

Precision’s operations in the US have revenue, expenses, assets and liabilities denominated in US dollars. As a result Precision’s income statement, balance sheet and statement of cash flow are impacted by changes in exchange rates between Canadian and US currencies in two main aspects.