[LOGO - PRECISION DRILLING TRUST]
September 1, 2006
VIA EDGAR
Securities and Exchange Commission
Division of Corporate Finance
100 F Street, N.E.
Washington, D.C. 20549-7010
Attention: Pradip Bhaumik
Precision Drilling Trust -- 2005 Annual
Report on Form 40-F (File No. 1-14534)
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Ladies and Gentlemen:
Precision Drilling Trust, an Alberta trust ("PRECISION"), submits this
letter in response to comments received from the staff (the "STAFF") of the
Securities and Exchange Commission (the "COMMISSION") on the Trust's Annual
Report on Form 40-F for the year ended December 31, 2005, as filed with the
Commission on March 31, 2006, in a letter from Cecilia D. Blye, dated August
28, 2006 (the "COMMENT LETTER"). The discussion below is presented in the
order of the numbered comments in the Comment Letter. Certain capitalized
terms set forth in this letter are used as defined in the 2005 Annual Report.
Precision's responses to the Staff's comments are as follows:
GENERAL
1. We note the statement on page 8 of the Form 40-F that, as a result of
the divestiture of your energy services segment and your international
drilling business, you now derive 100 percent of your revenue from the
Canadian market. It appears from your website that you may have direct
or indirect operations in Syria, a country identified as a state
sponsor of terrorism by the U.S. State Department and subject to U.S.
economic sanctions. Please clarify for us whether you currently have
operations in Syria. Describe for us in reasonable detail your past,
and any current and anticipated, direct or indirect business
activities in or contacts with Syria, whether through subsidiaries,
affiliates, joint ventures, or other direct or indirect arrangements.
Describe any technologies, products, equipment, and services you have
sold or otherwise distributed into Syria. Describe the extent to which
your dealings have been with the government of Syria, or entities
affiliated with or controlled by it.
4200, 150 - 6th Avenue, S.W.
Calgary, Alberta, Canada T2P 3Y7
Telephone: 403.716.4500
Facsimile: 403.264.0251
www.precisiondrilling.com
2
RESPONSE TO COMMENT 1
Precision is the successor in interest to Precision Drilling
Corporation, the continuing assets and businesses of which were converted to
an income trust on November 7, 2005 pursuant to a plan of arrangement.
Precision has no current operations or other business activities or
contacts either directly or indirectly through affiliates in or with the
Syrian Arab Republic ("SYRIA") nor does it anticipate acquiring or developing
such operations, business activities or contacts in the future.
Since 1985, Precision and its successors have been a provider of
contract drilling services in western Canada. In the late 1990's, Precision
expanded its core businesses to include wireline logging, directional
drilling, measurement while drilling ("MWD") and logging while drilling
("LWD") services through the acquisition of Computalog Ltd., a Canadian
publicly-traded company ("COMPUTALOG"). Underbalanced drilling and production
testing services were acquired through other acquisitions prior to Computalog.
Collectively, these services became the core wireline logging services,
drilling and evaluation services and production services segments of
Precision's Energy Services division (originally referred to as the Oilfield
Specialty Group, then Technology Services Group).
By early 2001, Precision had globally expanded its Energy Services
division globally to include Canada, the United States, Latin America,
Europe-Africa, Middle East and Asia-Pacific regions. Expansion into the Middle
East in particular resulted from the acquisition by Computalog of BecField
Drilling Services Ltd. ("BECFIELD") which provided directional drilling and
MWD services in western Europe through BecField Drilling Services GmbH based
in Germany and in the Middle East through BecField Middle East L.L.C. based in
the United Arab Emirates. BecField Middle East also had a branch operation
providing directional and MWD services in Syria, including to Syrian Petroleum
Company, a state-owned entity of the Syrian Arab Republic.
Directional drilling and MWD services include the provision of
equipment and trained personnel for the controlled drilling of a wellbore to a
predetermined target location, generally other than vertical. Directional
drilling equipment includes drilling motors, mechanical and hydraulic jars,
non-magnetic drill string components, stabilizers and under-reamers and is
generally non-proprietary. The directional equipment used in Syria was sourced
from third parties in Canada and the United Kingdom. The MWD equipment
includes sensors which measure and relay continuous real time information to
the surface to monitor the trajectory of the well being drilled. The MWD
equipment used in Syria was proprietary to and was developed by BecField at
its research and development facilities in Germany.
Directional or MWD equipment was not sold into Syria. Equipment would
typically be mobilized from Abu Dhabi or Germany to sites in Syria on a
call-out or contract basis and demobilized to Abu Dhabi or Germany upon the
completion of services. While in Syria, the equipment would generally be
within the control of BecField personnel.
3
Precision and Weatherford International Ltd. ("WEATHERFORD") entered
into a definitive agreement dated June 6, 2005, for the acquisition by
Weatherford of Precision's Energy Services and International Contract Drilling
divisions effective August 31, 2005. Precision reported the Energy Services
and International Contract Drilling divisions as discontinued operations prior
to June 30, 2005.
2. Please discuss the materiality of the operations or other contacts
described in response to the foregoing comment, and whether they
constitute a material investment risk for your security holders. You
should address materiality in quantitative terms, including the dollar
amounts of any associated revenues, assets, and liabilities. Please
also address materiality in terms of qualitative factors that a
reasonable investor would deem important in making an investment
decision, including the potential impact of corporate activities upon
a company's reputation and share value.
We note, for example, that Arizona and Louisiana have adopted
legislation requiring their state retirement systems to prepare
reports regarding state pension fund assets invested in, and/or
permitting divestment of state pension fund assets from, companies
that do business with countries identified as state sponsors of
terrorism. The Pennsylvania legislature has adopted a resolution
directing its Legislative Budget and Finance Committee to report
annually to the General Assembly regarding state funds invested in
companies that have ties to terrorist-sponsoring countries. The
Missouri Investment Trust has established an equity fund for the
investment of certain state-held monies that screens out stocks of
companies that do business with U.S.-designated state sponsors of
terrorism. Your materiality analysis should address the potential
impact of the investor sentiment evidenced by such actions directed
toward companies having operations in, or other business contacts
with, Syria.
RESPONSE TO COMMENT 2
The financial results of the BecField entities were first consolidated
into Precision in the first quarter of 2001. The revenue generated from
operations in Syria for the fiscal year was Cdn $6,949,000, or 0.36% of the
Cdn $1,953,563,000 in total revenue reported in Precision's annual report for
fiscal 2001. The revenue generated from operations in Syria was Cdn
$4,840,000, Cdn $2,607,000 and Cdn $3,132,000, or 0.31%, 0.14% and 0.13%,
respectively, of total revenue in fiscal 2002, 2003 and 2004.
The revenue generated from operations in Syria for the first quarter
of 2005 (the last full financial reporting period before the Energy Services
and International Contract Drilling divisions were reported as discontinued
operations of Precision) was Cdn $818,000, or 0.10% of the Cdn $791,876,000 in
total revenue reported in Precision's interim financial report for the period
ended March 31, 2005. As noted above, operations in Syria were reported as
discontinued operations prior to June 30, 2005.
4
Based on the foregoing, we do not believe that there is any material
risk to Precision's security holders related to conducting business in Syria.
Precision's historical business in Syria was very small relative to our total
revenue, and the Precision division that conducted business in Syria was sold
in 2005. Precision no longer conducts business in Syria, directly or
indirectly.
CLOSING COMMENTS
We acknowledge that:
o Precision is responsible for the adequacy and accuracy of the
disclosure in the filing;
o Staff comments or changes to disclose in response to Staff
comments do not foreclose the Commission from taking any action
with respect to the filing; and
o Precision may not assert Staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
If there are further questions in connection with the foregoing responses, you
may contact the undersigned at (403) 716-4500.
Yours truly,
/s/ Hank B. Swartout
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Hank B. Swartout
Chairman and Chief Executive Officer
Precision Drilling Corporation, Administrator to Precision Drilling Trust
cc: Andrew J. Foley, Paul, Weiss, Rifkind, Wharton & Garrison LLP