Trinidad Drilling Ltd. Reports Second Quarter and Year-To-Date 2016 Results; Increased Adjusted EBITDA and Lower Debt Levels, Despite Weak Industry Conditions, by @marketwired

CALGARY, ALBERTA--(Marketwired - Aug. 2, 2016) -

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

Trinidad Drilling Ltd. (TSX:TDG) ("Trinidad" or the "Company") reported second quarter and year-to-date 2016 results today. In the second quarter and first six months of 2016, Trinidad recorded higher adjusted EBITDA⁽¹⁾ than the same periods last year, despite weak commodity prices and reduced customer demand. Higher early termination and standby revenue received in the current periods, combined with the impact of cost control measures, offset weaker industry conditions. As conditions improved slightly with higher commodity prices towards the end of the second quarter, Trinidad began to receive increased customer inquiry and was able to put incremental rigs back to work.

"Trinidad has demonstrated its ability to carefully manage its operations, lower its cost structure and reduce debt levels throughout the downturn," said Lyle Whitmarsh, Trinidad's Chief Executive Officer. "A gradual increase in activity levels so far in the third quarter points to a potential improvement in industry conditions; however, commodity prices remain volatile. While the increasing inquiry and activity levels are promising, we are continuing to closely monitor industry conditions and prepare the Company for both an industry recovery or the potential of a protracted downturn."

(1) See Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section of this document for further details.

FINANCIAL HIGHLIGHTS

		Three months ended June 30,						Six months ended June 30,
($ thousands except share and per share data)		2016		2015		% Change		2016		2015	% Change
Revenue		94,476		95,213		(0.8	)	202,126		289,609	(30.2	)
Revenue, net of third party costs ⁽¹⁾		91,830		89,992		2.0		193,960		276,071	(29.7	)
Operating income ⁽¹⁾		61,679		41,896		47.2		108,358		114,178	(5.1	)
Operating income percentage ⁽¹⁾		65.3%		44.0%	%	48.4		53.6%		39.4%	36.0
Operating income - net percentage ⁽¹⁾		66.8%		46.3%		44.3		55.5%		41.1%	35.0
Adjusted EBITDA ⁽¹⁾		57,035		34,679		64.5		101,243		94,708	6.9
	Per share (diluted) ⁽²⁾	0.26		0.26		-		0.46		0.71	(35.2	)
Cash provided by operations		30,157		113,621		(73.5	)	46,050		114,549	(59.8	)
	Per share (basic / diluted) ⁽²⁾	0.14		0.85		(83.5	)	0.21		0.86	(75.6	)
Funds provided by operations ⁽¹⁾		46,898		25,132		86.6		55,598		61,224	(9.2	)
	Per share (basic / diluted) ⁽²⁾	0.21		0.19		10.5		0.25		0.46	(45.7	)
Net (loss) income ⁽⁴⁾		(16,256	)	(1,467	)	(1,008.1	)	(4,953	)	10,663	(146.5	)
	Per share (basic / diluted) ⁽²⁾⁽⁴⁾	(0.07	)	(0.01	)	(600.0	)	(0.02	)	0.08	(125.0	)
Capital expenditures		4,499		41,794		(89.2	)	24,663		91,928	(73.2	)
Dividends declared ⁽³⁾		-		6,671		(100.0	)	-		13,343	-
Shares outstanding - diluted
	(weighted average) ⁽²⁾	222,506,645		133,425,344		66.8		222,087,270		133,559,340	66.3
As at								June 30,		December 31,
($ thousands except percentage data)								2016		2015	% Change
Total assets								1,976,683		2,236,200	(11.6	)
Total long-term liabilities								645,431		783,254	(17.6	)

(1)	Readers are cautioned that Operating income, Operating income percentage, Operating income - net percentage, Revenue, net of third party costs, adjusted EBITDA, Funds provided by operations, and the related per share information do not have standardized meanings prescribed by IFRS - see Non-GAAP Measures Definitions and Additional GAAP Measures Definitions at the end of this document.
(2)	Basic shares include the weighted average number of shares outstanding over the period. Diluted shares include the weighted average number of shares outstanding over the period and the dilutive impact, if any, of the number of shares issuable pursuant to the Incentive Option Plan.
(3)	No dividend was declared in the three and six months ended June 30, 2016. $0.05 per share was declared in the three and six months ended June 30, 2015.
(4)	Net (loss) income is net income attributable to shareholders of Trinidad. Net income per share is calculated as net income attributable to shareholders of Trinidad divided by the weighted average number of common shares outstanding, both adjusted for dilutive factors.

OPERATING HIGHLIGHTS

		Three months ended June 30,						Six months ended June 30,
		2016		2015		% Change		2016		2015		% Change
Land Drilling Market
Operating days⁽¹⁾
	Canada	665		380		75.0		2,666		2,723		(2.1	)
	United States and International	915		2,202		(58.4	)	2,648		4,897		(45.9	)
Rate per operating day ⁽¹⁾
	Canada (CDN$)	31,138		31,731		(1.9	)	26,258		26,597		(1.3	)
	United States and International (CDN$)	76,220		33,184		129.7		45,004		33,188		35.6
	United States and International (US$)	59,070		26,755		120.8		33,839		27,318		23.9
Utilization rate - operating day ⁽¹⁾
	Canada	10	%	8	%	25.0		20	%	29	%	(31.0	)
	United States and International	15	%	50	%	(70.0	)	22	%	55	%	(60.0	)
Number of drilling rigs at period end ⁽⁴⁾
	Canada	72		54		33.3		72		54		33.3
	United States and International	67		49		36.7		67		49		36.7
Barge Drilling Market
	Number of barge drilling rigs at period end ⁽⁴⁾	-		2		(100.0	)	-		2		(100.0	)
TDI Joint Venture Operations ⁽²⁾
	Operating days ⁽¹⁾	461		516		(10.7	)	1,151		926		24.3
	Rate per operating day (CDN$) ⁽¹⁾	72,773		60,555		20.2		68,051		60,935		11.7
	Rate per operating day (US$) ⁽¹⁾	55,962		48,959		14.3		50,397		49,785		1.2
	Utilization rate - operating day ⁽¹⁾	63	%	95	%	(33.7	)	79	%	94	%	(16.0	)
	Number of drilling rigs at period end ⁽⁴⁾	8		8		-		8		8		-
DCM Joint Venture Operations ⁽³⁾
	Number of drilling rigs at period end ⁽⁴⁾	2		-		100.0		2		-		100.0
	Number of service rigs at period end ⁽⁴⁾	2		-		100.0		2		-		100.0

(1)	See Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section at the end of this document.
(2)	Trinidad is party to a joint venture with a wholly-owned subsidiary of Halliburton. These rigs are owned by the joint venture.
(3)	As part of the CanElson acquisition, effective August 11, 2015, Trinidad acquired a 50% ownership of a joint venture operating under the name Diavaz CanElson de Mexico, S.A. de C.V. (DCM).
(4)	Refer to the Results from Operations section for details on the changes to the rig count.

OVERVIEW

During the second quarter and first half of 2016, Trinidad continued to closely manage its business. The Company remained focused on adjusting costs and reviewing operations where possible to improve efficiencies. During the first six months of 2016, Trinidad was also able to improve its financial flexibility by reducing debt levels, relaxing its debt covenants and generating positive funds provided by operations.

In the first six months of 2016, activity levels weakened as customers re-evaluated drilling programs based on lower commodity price levels. These challenging industry conditions led to intense competition that increased pressure on spot dayrates. The impact of these factors was partly offset by early termination and standby revenue recognized in the current period. Early termination payments are an acceleration of income that the Company would have received in future periods and provides cash flows in a period when liquidity is very important. Trinidad believes that early termination payments should be seen as a positive. They provide immediate cash flow, without any associated costs, rather than earning it over a longer period of term with unknown credit or foreign exchange risks. They also provide an opportunity to put terminated rigs back to work and earn incremental revenue.

In the second quarter of 2016, adjusted EBITDA was $57.0 million, up 64.5% from the same quarter last year. Adjusted EBITDA increased in the current quarter largely as a result of higher early termination and standby revenue received and a larger contribution from the TDI joint venture. In the second quarter of 2016, Trinidad recognized early termination and standby revenue of $49.5 million, compared to $14.7 million in the same quarter last year. Year to date in 2016, adjusted EBITDA was $101.2 million, up 6.9% from the same period in 2015. The increase in 2016 was mainly due to early termination and standby revenue, the impact of cost cutting initiatives and a stronger US/CDN dollar translation in the current period; offset by reduced activity and lower dayrates.

Early termination and standby revenue drove strong operating income - net percentage in the current quarter and year to date. As well, Trinidad's ongoing focus on cost reduction, a higher proportion of high specification rigs operating and less manufacturing revenue, which generates lower margins, also contributed to improved profitability in 2016. Trinidad recorded operating income - net percentage in the current quarter of 66.8% and year to date in 2016 of 55.5%, compared to 46.3% and 41.1%, respectively, in 2015. Excluding the impact of early termination and standby revenue, Trinidad's operating income - net percentage was 27.9% in the current quarter compared to 35.8% in the second quarter of 2015.

Trinidad recorded a net loss of $16.3 million or $(0.07) per share (diluted) for the quarter ended June 30, 2016, down $14.8 million from the same quarter of 2015. The net loss recorded in the current quarter was mostly a result of higher depreciation and amortization expense of $22.8 million and a loss recorded on investment in joint venture of $9.7 million due to a non-cash fair value adjustment. Year to date in 2016, Trinidad recorded a net loss of $5.0 million or $(0.02) per share (diluted), down $15.6 million from the same period last year. Net loss increased year to date as a result of higher depreciation and amortization expense of $42.4 million and higher finance and transaction costs. The impact of these factors was partly offset by higher operating income, a foreign exchange gain, compared to a loss in the prior year, an increased gain from investment in joint venture and a higher tax recovery.

In the first half of 2016, Trinidad was able to lower its total long-term debt by $130.9 million. Trinidad's improved liquidity in the current year was driven by a $21.5 million distribution paid by the TDI joint venture in the first quarter, a weaker US dollar compared to the Canadian dollar at June 30, 2016 versus December 31, 2015, which lowered the translated value of US dollar based Senior Notes. In addition, liquidity was improved due to a decrease in the revolving facility of $89.9 million and the suspension of the Company's dividend. At June 30, 2016, Trinidad had nil outstanding on each of the Canadian and US dollar credit facilities.

On June 24, 2016, Trinidad announced that it had further amended its credit facility, reducing the size of the facility, as well as adjusting the required covenants in order to allow the Company more financial flexibility. As part of this amendment, Trinidad reduced the revolving facilities to $100.0 million on the Canadian revolver (previously $150.0 million) and US$100.0 million (previously US$150.0 million).

Lastly despite challenging market conditions in the first half of 2016, Trinidad generated positive funds provided by operations of $55.6 million, compared to $61.2 million in the first half of 2015.

INDUSTRY STATISTICS

Commodity prices began to increase in the second quarter of 2016, leading to a gradual improvement in sentiment among oil and gas industry participants and a slow increase in the active rig count. Crude oil prices increased during the quarter and reached US$50.00 per barrel in early June of 2016. On average, WTI crude oil was US$45.73 per barrel in the second quarter, down 21% from the same quarter last year, but up 35% from the first quarter of 2016. US-based natural gas prices also increased in the second quarter of 2016, with Henry Hub natural gas averaging US$2.15 per mmBtu, down 21% from the same quarter last year, but up 8% from the first quarter of 2016. Industry activity levels began to increase towards the end of the second quarter. In the US, the active rig count bottomed at 391 active rigs in late April, but had increased to 433 active rigs by the end of the second quarter. In Canada, industry activity averaged 7% in the second quarter of 2016, down from 13% in the same quarter last year and 20% in the first quarter of 2016. Activity in Canada is typically low in the second quarter due to seasonality; however, weak customer demand in 2016 drove levels below historical norms.

	2016				Full Year		2015								Full Year		2014
	Q2		Q1		2015		Q4		Q3		Q2		Q1		2014		Q4		Q3
Commodity Prices
Aeco natural gas price (CDN$ per gigajoule)	1.43		1.81		2.57		2.35		2.76		2.54		2.60		4.28		3.44		3.82
Henry Hub natural gas price (US$ per mmBtu)	2.15		1.99		2.61		2.11		2.75		2.73		2.87		4.36		3.76		3.94
Western Canada Select crude oil price (CDN$ per barrel)	42.35		36.79		45.26		37.05		41.22		59.40		43.52		82.00		65.42		85.68
WTI crude oil price (US$ per barrel)	45.73		33.78		48.68		42.02		46.48		57.85		48.49		93.06		73.21		97.60
Canadian / US dollar exchange rate	1.29		1.37		1.28		1.34		1.31		1.23		1.24		1.10		1.14		1.09

US Activity
Average industry active land rig count ⁽¹⁾	394		533		983		757		829		935		1,403		1,789		1,843		1,828
Average Trinidad active land rig count ⁽²⁾	15		19		27		26		26		24		30		50		52		53

Canadian Activity
Average industry utilization ⁽³⁾	7	%	20	%	23	%	21	%	24	%	13	%	35	%	44	%	45	%	46	%
Average Trinidad utilization ⁽⁴⁾	10	%	29	%	29	%	28	%	32	%	7	%	46	%	52	%	57	%	61	%

(1)	Baker Hughes rig counts (information obtained from Tudor, Pickering, Holt & Co. weekly rig roundup report).
(2)	Includes US and international rigs.
(3)	Canadian Association of Oilwell Drilling Contractors (CAODC) utilization.
(4)	Based on drilling days (spud to rig release dates).

RESULTS FROM OPERATIONS

Canadian Operations

	Three months ended June 30,						Six months ended June 30,
($ thousands except percentage and operating data)	2016		2015		% Change		2016		2015		% Change
Operating revenue ⁽¹⁾	20,942		12,061		73.6		71,300		72,431		(1.6	)
Other revenue	125		28		346.4		357		73		389.0
	21,067		12,089		74.3		71,657		72,504		(1.2	)
Operating costs ⁽¹⁾	10,964		8,775		24.9		37,653		43,597		(13.6	)
Operating income ⁽³⁾	10,103		3,314		204.9		34,004		28,907		17.6
Operating income - net percentage ⁽³⁾	48.0	%	27.4	%			47.5	%	39.9	%

Operating days ⁽³⁾	665		380		75.0		2,666		2,723		(2.1	)
Drilling days ⁽³⁾	629		349		80.2		2,504		2,484		0.8
Rate per operating day (CDN$) ⁽³⁾	31,138		31,731		(1.9	)	26,258		26,597		(1.3	)
Utilization rate - operating day ⁽³⁾	10	%	8	%	25.0		20	%	29	%	(31.0	)
Utilization rate - drilling day ⁽³⁾	10	%	7	%	42.9		19	%	26	%	(26.9	)
CAODC industry average ⁽²⁾	7	%	13	%	(46.2	)	14	%	24	%	(41.7	)

Number of drilling rigs at period end	72		54		33.3		72		54		33.3

(1)	Operating revenue and operating costs for the three months ended June 30, 2016 and 2015 exclude third party recovery and third party costs of $1.4 million and $1.3 million, respectively. Operating revenue and operating costs for the six months ended June 30, 2016 and 2015 exclude third party recovery and third party costs of $5.2 million and $7.9 million, respectively.
(2)	CAODC industry average is based on drilling days divided by total days available.
(3)	See Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section at the end of this document.

Despite weak industry conditions, Trinidad recorded strong results in the second quarter and year to date in 2016. For the three and six months ended June 30, 2016, operating income increased by 204.9% and 17.6%, respectively, compared to the prior year periods. More early termination and standby revenue recorded in 2016, than the prior year, positively impacted profitability in the Canadian operations in 2016. In the current quarter, operating days were also positively impacted by the rigs acquired through the CanElson acquisition.

Dayrates for the three and six months ended June 30, 2016 decreased by $593 per day and $339 per day, respectively, compared to the prior year. Dayrates in the current year declined mainly due to weak customer demand and strong industry competition, as well as a change in the active rig mix in 2016. This was offset by an increase in early termination and standby revenue recorded in 2016. For the three and six months ended June 30, 2016, total early termination and standby revenue was $4.9 million and $9.5 million, respectively, compared to nil and $0.3 million, respectively, in the prior year. Adjusting for the early termination and standby revenue recorded, dayrates for the three and six months ended June 30, 2016 were $23,738 per day in the current quarter and $22,697 per day year to date, a decline of $7,993 per day and $3,777 per day, respectively, compared to the adjusted 2015 dayrates. The early termination and standby revenue recorded in 2016 mainly related to lump sum shortfall amounts collected for three rigs in the first quarter and one rig in the second quarter. Contracts on these rigs all expired by June 30, 2016.

A decline in commodity prices throughout 2015 and into 2016 significantly affected utilization rates for the drilling industry as a whole. Despite this weakness in commodity prices, Trinidad was able to record higher utilization and operating days in the current quarter compared to the same period last year. Higher activity in the current quarter was partly driven by utilization on the rigs acquired through the CanElson acquisition and partly due to the development plans of Trinidad's targeted customer base. On a year-to-date basis, operating days were down slightly compared to the prior year and utilization was down nine percentage points.

Operating income - net percentage increased in the current quarter to 48.0% compared to 27.4% in the prior year. Year to date in 2016, operating income - net percentage increased to 47.5% compared to 39.9% in the prior year. Operating income - net percentage was positively impacted by early termination and standby revenue in the current periods as this revenue is recorded with no associated operating costs. Trinidad's ongoing focus on lowering costs throughout the downturn also had a positive impact on profitability in the current periods. Excluding the impact of early termination and standby revenue, operating income - net percentage remained strong at 32.1% in the current quarter, compared to 27.4% in second quarter of 2015. Year to date, operating income - net percentage adjusted for early termination and standby revenue was 39.4%, in line with 39.6% recorded in the same period last year. Throughout 2015 and into 2016, Trinidad has closely monitored repair and maintenance expenditures, incurring expenses only as rigs return to work. As well, the Company has worked with its suppliers to reduce costs in all aspects of its operations.

Trinidad's Canadian rig count totaled 72 rigs at June 30, 2016, an increase of 18 rigs compared to the second quarter of 2015. The rig count increased as a result of the CanElson acquisition which closed in August of 2015 and added 28 rigs to the Canadian rig fleet in the third quarter of 2015. This was offset by the reduction of 10 rigs removed at December 31, 2015, as Trinidad reviewed the existing rig fleet and chose to decommission low specification rigs.

Second quarter of 2016 versus first quarter of 2016

Operating revenue and operating income decreased by $29.4 million and $13.8 million, respectively, in the second quarter of 2016 compared to the first quarter of 2016. Typically the first quarter is the most active period in the Canadian drilling industry and the second quarter is impacted by spring break-up as weather conditions and road bans restrict movement of the rigs. As such, due to seasonal factors, Trinidad recorded 1,336 less operating days in the second quarter of 2016 compared to the first quarter, significantly affecting revenue generation.

Although overall operating income decreased, Trinidad recorded increased profitability in the second quarter of 2016. Operating income - net percentage was 48.0% in the second quarter, compared to 47.2% in the first quarter of 2016. A change in the active rig mix and increased early termination and standby recorded in the second quarter of 2016 positively affected the profitability of the Canadian operations.

United States and International Operations

	Three months ended June 30,						Six months ended June 30,
($ thousands except percentage and operating data)	2016		2015		% Change		2016		2015		% Change
Operating revenue ⁽¹⁾	69,725		73,102		(4.6	)	119,175		164,291		(27.5	)
Other revenue	203		108		88.0		210		383		(45.2	)
	69,928		73,210		(4.5	)	119,385		164,674		(27.5	)
Operating costs ⁽¹⁾	18,255		35,082		(48.0	)	44,602		83,088		(46.3	)
Operating income ⁽¹⁾	51,673		38,128		35.5		74,783		81,586		(8.3	)
Operating income - net percentage ⁽²⁾	73.9	%	52.1	%			62.6	%	49.5	%

Land Drilling Rigs
Operating days ⁽²⁾	915		2,202		(58.4	)	2,648		4,897		(45.9	)
Drilling days ⁽²⁾	775		1,938		(60.0	)	2,245		4,204		(46.6	)
Rate per operating day (CDN$) ⁽²⁾	76,220		33,184		129.7		45,004		33,188		35.6
Rate per operating day (US$) ⁽²⁾	59,070		26,755		120.8		33,839		27,318		23.9
Utilization rate - operating day ⁽²⁾	15	%	50	%	(70.0	)	22	%	55	%	(60.0	)
Utilization rate - drilling day ⁽²⁾	13	%	44	%	(70.5	)	19	%	47	%	(59.6	)
Number of drilling rigs at period end	67		49		36.7		67		49		36.7

Barge Drilling Rigs
Number of barge drilling rigs at period end	-		2		(100.0	)	-		2		(100.0	)

(1)	Operating revenue and operating costs for the three months ended June 30, 2016 and 2015 exclude third party recovery and third party costs of $0.9 million and $3.7 million, respectively. Operating revenue and operating costs for the six months ended June 30, 2016 and 2015 exclude third party recovery and third party costs of $2.3 million and $4.9 million, respectively.
(2)	See Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section at the end of this document.

Trinidad's US and international operations recorded solid operating income and strong operating income - net percentage in the three and six months ended June 30, 2016, despite weak market conditions. The Company achieved this result mainly due to increased early termination and standby revenue recorded in 2016. Through the first six months of 2016, Trinidad continued to feel the effects of weaker customer demand with lower operating days directly impacting revenue generation, resulting in lower operating revenue in 2016.

For the three and six months ended June 30, 2016, operating days and utilization decreased as weakening commodity prices in 2015 and into the beginning of 2016 caused a significant reduction in demand for land drilling rigs.

Although overall utilization and operating days significantly declined in 2016, Trinidad was able to record improved dayrates and operating income - net percentage, mainly due to higher early termination and standby revenue recorded in the current year. Trinidad recorded US$34.7 million of early termination and standby in the second quarter of 2016 and US$38.4 million in the first six months of 2016. Early termination and standby recorded in the second quarter and year to date mainly related to three rigs that were terminated at the end of 2015, one rig in early 2016 and one rig in the current quarter, as well as various standby revenue recorded. For the early termination revenue recorded, the contracts had an average remaining period of 12 months at June 30, 2016. Trinidad recorded early termination and standby revenue of US$11.8 million in the second quarter of 2015 mainly related to eight rigs with an average remaining term of two months, and US$27.9 million in the first six months of 2015 related to 14 rigs with an average remaining term of one month.

Of the total early termination and standby revenue recorded for the three and six months ended June 30, 2016, US$4.5 million and US$5.4 million, respectively, related to standby revenue recorded on idle but contracted rigs. Of the total early termination and standby revenue recorded for the three and six months ended June 30, 2015, US$0.2 million and US$2.1 million, respectively, related to standby revenue recorded on idle but contracted rigs.

Dayrates in the current quarter and first six months of 2016 increased by US$32,315 and US$6,521, respectively, compared to the prior year due to the early termination and standby revenue discussed above. Adjusted for early termination and standby revenue, dayrates were US$21,120 per day in the second quarter and US$19,329 per day for the year to date, respectively, down US$295 per day and US$2,299 per day, respectively, from the adjusted prior year comparable periods. Competitive industry conditions and pressure on spot pricing drove the decline in the dayrates in 2016; partly offset by a higher concentration of contracted, high performance rigs operating in the current period.

Operating income - net percentage increased for the three and six months ended June 30, 2016, driven partly by higher early termination and standby revenue received in 2016. For the three months ended June 30, 2016, Trinidad recorded operating income - net percentage of 73.9%, compared to 52.1% for the second quarter of 2015, and 62.6% for the first half of 2016, compared to 49.5% in the first half of 2015. After adjusting for early termination and standby revenue, operating income - net percentage was 27.9% in the second quarter of 2016, compared to 40.1% in the second quarter of 2015, and 35.9% in the first half of 2016, compared to 36.5% in the first half of 2015. On a year to date basis, cost cutting measures undertaken by the Company, including lower wages, a reduced headcount and lower repairs and maintenance, have allowed the Company to reduce operating costs in 2016 and continue to record reasonable operating margins.

During the second quarter of 2016, Trinidad's rig in the United Arab Emirates began drilling, recording 45 operating days in the current period.

At June 30, 2016, Trinidad's US and international rig count totaled 67 rigs, an increase of 18 rigs compared to the same period last year. In the third quarter of 2015, Trinidad's US and international rig fleet increased by 21 rigs as a result of the CanElson acquisition. Additionally in the third quarter of 2015, one contracted new build rig was delivered by Trinidad's manufacturing division to the US and international operations and one new rig was added in the United Arab Emirates. This was offset by the reduction of five low specification rigs decommissioned at December 31, 2015.

Due to the downturn, Trinidad has chosen to discontinue marketing its barge rigs in order to focus on its core land drilling business. By December 31, 2015, all barge rigs had been removed from Trinidad's active rig count with no operations in 2016.

Second quarter of 2016 versus first quarter of 2016

Operating revenue and operating income increased by $20.3 million and $28.6 million, respectively, in the second quarter of 2016 compared to the first quarter of 2016. Although activity levels in Trinidad's US and international operations continued to decline into 2016 as commodity prices remained weak, Trinidad recorded higher early termination and standby revenues in the current period increasing profitability.

Trinidad recorded early termination and standby revenue of US$34.7 million in the second quarter of 2016, compared to US$3.7 million in the first quarter of 2016. Adjusted for early termination and standby revenue, dayrates increased to US$21,120 per day, compared to US$18,299 per day in the first quarter. Trinidad was also positively impacted by the additional operating days in the current period from the rig located in the United Arab Emirates.

Joint Venture Operations

Trinidad Drilling International (TDI):

Amounts are presented at 100% of the value included in the statement of operations and comprehensive income for Trinidad Drilling International (TDI); Trinidad owns 60% of the shares of TDI.

	Three months ended June 30,						Six months ended June 30,
($ thousands except percentage and operating data)	2016		2015		% Change		2016		2015		% Change
Operating revenue	34,704		31,812		9.1		80,776		57,844		39.6
Other revenue	-		274		(100.0	)	-		255		(100.0	)
	34,704		32,086		8.2		80,776		58,099		39.0
Operating costs	18,200		17,125		6.3		44,960		32,594		37.9
Operating income ⁽¹⁾	16,504		14,961		10.3		35,816		25,505		40.4
Operating income - net percentage ⁽¹⁾	47.6	%	46.6	%			44.3	%	43.9	%

Operating days ⁽¹⁾	461		516		(10.7	)	1,151		926		24.3
Rate per operating day (CDN$) ⁽¹⁾	72,773		60,555		20.2		68,051		60,935		11.7
Rate per operating day (US$) ⁽¹⁾	55,962		48,959		14.3		50,397		49,785		1.2
Utilization rate - operating day ⁽¹⁾	63	%	95	%	(33.7	)	79	%	94	%	(16.0	)
Number of drilling rigs at period end	8		8		-		8		8		-
Number of active drilling rigs at period end	8		6		33.3		8		6		33.3

(1)	See Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section at the end of this document.

In Trinidad's TDI joint venture operations, operating revenue for the three and six months ended June 30, 2016 increased by 9.1% and 39.6%, respectively, compared to the prior year. As well, for the three and six months ended June 30, 2016, operating income increased by 10.3% and 40.4%, respectively, compared to 2015.

For the three months ended June 30, 2016, Trinidad recorded lower operating days and lower utilization compared to 2015 mainly due to one rig in Saudi Arabia being under repair for the entire quarter, compared to this rig being fully operational in the second quarter of 2015. This was slightly offset by higher operating days in Mexico due to a higher active rig count in 2016.

For the six months ended June 30, 2016, Trinidad recorded 24.3% higher operating days compared to the prior year mainly due to a higher active rig count during the period. This was slightly offset by the one Saudi rig under repair during the second quarter and recording no operating days.

For the three and six months ended June 30, 2016, dayrates increased compared to the prior year by US$7,003 per day and US$612 per day, respectively. Dayrates increased in the current periods mainly as a result of higher moving revenue recorded. Additionally, the stronger US to CDN dollar exchange rate positively impacted the translated dayrate.

Operating income - net percentage increased in each of the three and six months ended June 30, 2016. Trinidad recorded operating income - net percentage of 47.6% in the quarter, compared to 46.6% in the second quarter of 2015, and 44.3% for the first six months of 2016, compared to 43.9% in the first six months of 2015. The increase in profitability was mainly due to increased operating days in Mexico and a stronger US to CDN dollar exchange rate in 2016, compared to the prior year.

Second quarter 2016 versus first quarter 2016

Operating revenue and operating income decreased in the second quarter of 2016 compared to the first quarter of 2016 by $11.4 million and $2.8 million, respectively. The decrease in the current quarter was mainly due to lower utilization in the current period. Trinidad recorded utilization of 63% in the second quarter of 2016 compared to 95% in the first quarter, mainly due to one rig under repair in Saudi Arabia during the quarter and lower operating days in Mexico due to rigs being on standby during the quarter. As of June 30, 2016, all four rigs located in Mexico were currently receiving standby revenue.

Diavaz CanElson de Mexico, S.A. de C.V. (DCM):

As part of the CanElson acquisition, Trinidad acquired a 50% ownership in Diavaz CanElson de Mexico, S.A. de C.V., a joint venture which operates drilling and service rigs in Mexico. DCM currently has two drilling rigs and two service rigs in Mexico. For the three and six months ended June 30, 2016, Trinidad's portion of DCM's net loss was $0.6 million and $0.6 million, respectively.

Manufacturing Operations

	Three months ended June 30,						Six months ended June 30,
($ thousands except percentage)	2016		2015		% Change		2016		2015		% Change
Operating revenue ⁽¹⁾	835		4,692		(82.2	)	2,917		38,888		(92.5	)
Other revenue	-		2		(100.0	)	1		6		(83.3	)
	835		4,694		(82.2	)	2,918		38,894		(92.5	)
Operating costs ⁽¹⁾	1,291		4,473		(71.1	)	4,029		36,009		(88.8	)
Operating income ⁽²⁾	(456	)	221		(306.3	)	(1,111	)	2,885		(138.5	)
Operating income - net percentage ⁽²⁾	(54.6	)%	4.7	%			(38.1	)%	7.4	%

(1)

For the three months ended June 30, 2016, excluded from operating revenue and operating costs are downstream elimination entries of $1.3 million and $0.9 million, respectively (2015 - $2.4 million and $2.3 million, respectively). For the six months ended June 30, 2016, excluded from operating revenue and operating costs are downstream elimination entries of $4.4 million and $4.0 million, respectively (2015 - $51.4 million and $49.0 million, respectively). These entries remove Trinidad's percentage of profits related to the manufacturing of rigs for the TDI joint venture.

(2)

See Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section at the end of this document.

Towards the end of 2015, due to lower demand for new and upgraded equipment, Trinidad chose to restructure its manufacturing operations, resizing its cost base to better reflect the lower activity levels. As such, the manufacturing operations recorded reduced revenue generation and profitability in the current year compared to 2015.

For the three and six months ended June 30, 2016, Trinidad recognized revenue and expenses related to an upgrade project and various repairs and maintenance type work for the TDI joint venture rigs. In the first half of 2015, Trinidad recognized revenue and expenses related to the rigs it was building for the Mexico joint venture operations and for the training rig it was building for the Company's joint venture partner, Halliburton.

As of June 30, 2016, the restructuring of the manufacturing division has been completed. Costs incurred in relation to the re-organization of this segment negatively impacted profitability in the current year.

FINANCIAL HIGHLIGHTS - QUARTERLY ANALYSIS

		2016				2015								2014
($ millions except per share data and operating data)		Q2		Q1		Q4		Q3		Q2		Q1		Q4		Q3
Revenue		94.5		107.7		138.0		124.3		95.2		194.4		276.4		244.5
Operating income ⁽¹⁾		61.7		46.7		56.0		52.0		41.9		72.3		93.9		80.5
Operating income percentage ⁽¹⁾		65.3	%	43.4	%	40.6	%	41.8	%	44.0	%	37.2	%	34.0	%	32.9	%
Operating income - net percentage ⁽¹⁾		66.8	%	45.4	%	42.5	%	43.9	%	46.3	%	38.5	%	35.6	%	34.7	%

Net (loss) income ⁽⁴⁾		(16.6	)	11.1		(141.3	)	(87.6	)	(1.5	)	12.1		(13.5	)	19.2
Adjustments for:
	Depreciation and amortization	42.5		43.2		49.0		26.6		19.7		23.6		34.0		33.4
	Foreign exchange	0.1		(2.4	)	(2.3	)	3.3		-		6.2		(0.1	)	0.5
	(Gain) loss on sale of property and equipment	(0.7	)	(1.2	)	0.5		(0.6	)	(0.4	)	(1.1	)	3.5		0.1
	Impairment of property and equipment	-		-		178.7		26.9		-		-		56.9		-
	Impairment of goodwill	-		-		-		111.8		-		-		-		-
	Loss (gain) from investment in joint ventures	9.7		(21.4	)	6.2		(2.8	)	(0.6	)	(1.3	)	(1.3	)	1.6
	Finance and transaction costs	13.3		14.1		13.7		17.9		12.9		11.4		9.8		9.7
	Income taxes	(3.5	)	(10.4	)	(66.7	)	(56.1	)	(3.4	)	4.4		(8.9	)	4.9
	Interest income	-		-		-		-		-		-		-		(0.1	)
	Other expense	4.5		0.9		0.8		(1.9	)	1.4		2.9		0.6		(4.0	)
	Income taxes paid	(0.9	)	(0.9	)	(5.8	)	(1.1	)	(2.0	)	(1.6	)	(0.3	)	(0.7	)
	Income taxes recovered	-		0.1		-		2.9		0.1		0.2		0.4		1.3
	Interest paid	(1.5	)	(24.4	)	(2.2	)	(22.9	)	(1.1	)	(20.7	)	(1.4	)	(19.5	)
	Interest received	-		-		-		-		-		-		-		0.1
Funds provided by operations ⁽¹⁾		46.9		8.7		30.6		16.4		25.1		36.1		79.7		46.5
	Per share (diluted) ⁽²⁾	0.21		0.04		0.14		0.09		0.19		0.27		0.58		0.34
Adjusted EBITDA ⁽¹⁾		57.0		44.2		47.0		45.0		34.7		60.0		77.3		64.6
	Per share (diluted) ⁽²⁾	0.26		0.20		0.21		0.25		0.26		0.45		0.56		0.47
Net (loss) income attributable to Trinidad ⁽³⁾		(16.3	)	11.3		(141.5	)	(87.5	)	(1.5	)	12.1		(13.5	)	19.2
	Per share (diluted) ^{(2) (3)}	(0.07	)	0.05		(0.64	)	(0.48	)	(0.01	)	0.09		(0.10	)	0.14

(1)	See Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section at the end of this document.
(2)	Diluted shares include the weighted average number of shares outstanding over the period and the dilutive impact, if any, of the number of shares issuable pursuant to the Incentive Option Plan.
(3)	Net (loss) income is net income attributable to shareholders of Trinidad. Net income per share is calculated as net income attributable to shareholders of Trinidad divided by the weighted average number of common shares outstanding. Both are adjusted for dilutive factors.
(4)	Net (loss) income used in the consolidated statement of cash flows is total net income (loss) before adjustments for non-controlling interest amounts.

OPERATING HIGHLIGHTS - QUARTERLY ANALYSIS

		2016				2015								2014
		Q2		Q1		Q4		Q3		Q2		Q1		Q4		Q3
Land Drilling Market
Operating days ⁽¹⁾
	Canada	665		2,001		2,471		2,109		380		2,343		3,271		3,424
	United States and International	915		1,733		2,378		2,199		2,202		2,695		4,820		4,906
Rate per operating day ⁽¹⁾
	Canada (CDN$)	31,138		24,635		24,079		23,695		31,731		25,764		26,624		24,669
	United States and International (CDN$)	76,220		28,529		28,171		30,223		33,184		33,194		25,150		22,842
	United States and International (US$)	59,070		20,438		21,209		23,582		26,755		27,778		22,476		21,092
Utilization rate - operating day ⁽¹⁾
	Canada	10	%	31	%	31	%	34	%	8	%	50	%	62	%	66	%
	United States and International	15	%	29	%	36	%	40	%	50	%	61	%	97	%	96	%
Number of drilling rigs at period end ⁽⁴⁾
	Canada	72		72		72		82		54		54		53		61
	United States and International	67		67		67		72		49		47		47		54
Barge Drilling Market
	Number of barge drilling rigs at period end ⁽⁴⁾	-		-		-		-		2		2		2		2
	Number of barge drilling rigs under
	Bareboat Charter Agreements at period end ⁽⁴⁾	-		-		-		-		-		3		3		3
TDI Joint Venture Operations ⁽²⁾
	Operating days ⁽¹⁾	461		690		668		595		516		410
	Rate per operating day (CDN$) ⁽¹⁾	72,773		64,894		60,619		59,609		60,555		61,412
	Rate per operating day (US$) ⁽¹⁾	55,962		46,676		45,898		46,591		48,959		50,825
	Utilization rate - operating day ⁽¹⁾	63	%	95	%	97	%	99	%	95	%	94	%
	Number of drilling rigs at period end ⁽⁴⁾	8		8		8		8		8		8		6		4
DCM Joint Venture Operations ⁽³⁾
	Number of drilling rigs at period end ⁽⁴⁾	2		2		2		2
	Number of service rigs at period end ⁽⁴⁾	2		2		2		2

(1)	See Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section at the end of this document.
(2)	Trinidad is party to a joint venture with a wholly owned subsidiary of Halliburton (TDI). These rigs are owned by the joint venture.
(3)	As part of the CanElson acquisition, effective August 11, 2015, Trinidad acquired 50% ownership of a joint venture operating under the name Diavaz CanElson de Mexico, S.A. de C.V. (DCM).
(4)	Refer to the Results from Operations section for details on changes to the rig count.

GENERAL AND ADMINISTRATIVE

	Three months ended June 30,						Six months ended June 30,
($ thousands except percentage)	2016		2015		% Change		2016		2015		% Change
General and administrative ⁽¹⁾	12,566		13,665		(8.0	)	25,220		29,641		(14.9	)
% of revenue	13.3	%	14.4	%			12.5	%	10.2	%
Share-based payment expense	4,077		1,302		213.1		4,751		1,729		174.8
Third party recoverable costs	359		233		54.1		682		800		(14.8	)
Total general and administrative	17,002		15,200		11.9		30,653		32,170		(4.7	)
% of revenue	18.0	%	16.0	%			15.2	%	11.1	%

(1)	General and administrative expenses excluding share-based payment expense and third party recoverable costs. This number is discussed as "Other G&A" per the below analysis.

For the three and six months ended June 30, 2016, total general and administrative (G&A) expenses were $17.0 million and $30.7 million, an increase of 11.9% and a decrease of 4.7%, respectively, over the previous comparable periods.

For the three and six months ended June 30, 2016, Trinidad recorded Other G&A of $12.6 million and $25.2 million, a decrease of 8.0% and 14.9%, respectively, compared to the prior year. Towards the end of 2015 and into 2016, Trinidad implemented several measures to lower costs including a headcount reduction, a reduction in salaries and board fees for all executives and directors of approximately 20% and a company-wide average wage rollback of 12% for salaried employees. These changes and an ongoing focus on cost control have allowed the Company to lower its Other G&A expenses. This was slightly offset by the increase to Other G&A associated with managing an increased rig fleet due to the CanElson acquisition; such as an increase to professional fees, insurance and rent expenses.

Trinidad has significantly reduced expenditures in non-core business activities in 2016; including the Company's barge and manufacturing operations. In order to restructure these divisions, Trinidad did incur one-time costs of approximately $1.1 million in the second quarter and $1.7 million in the first six months of 2016. As well, in the second quarter of 2016, Trinidad recorded a bad debt expense of $0.5 million which was included in Other G&A expense (2015 - $0.5 million). Trinidad continues to closely monitor its receivables and does not expect any additional bad debt expenses. Other G&A costs were also impacted by an increase in professional fees in 2016.

For the three and six months ended June 30, 2016, share-based payment expense was $4.1 million and $4.8 million, respectively, an increase of 213.1% and 174.8%, respectively, from the prior year. The increase in expense in the current year is related to the share price which increased by 56.8% in the second quarter and 18.7% year to date 2016. As well, increased PSU and DSU units outstanding in 2016, due to the annual grants of each in the first quarter of 2016, caused an increased expense in the current periods.

Third party recoverable costs relate to costs incurred by Trinidad on behalf of the TDI joint venture. As these costs are fully recoverable, Trinidad records a related revenue entry for this same amount, causing a nil net income effect.

For the three and six months ended June 30, 2016, G&A as a percentage of revenue increased in each period mainly due to lower revenue generation year over year and higher share-based payment expenses in 2016.

FINANCIAL SUMMARY

As at	June 30,		December 31,
($ thousands)	2016		2015		$ Change
Working capital ⁽¹⁾	43,623		61,372		(17,749	)

Limited partnership loans	2,237		2,609		(372	)
Senior Notes	579,560		620,661		(41,101	)
Credit facility	-		89,873		(89,873	)
	581,797		713,143		(131,346	)
Less: unamortized debt issue costs	(5,776	)	(6,223	)	447
Total long-term debt	576,021		706,920		(130,899	)
Total long-term debt as a percentage of assets	29.1	%	31.6	%


Total assets	1,976,683		2,236,200		(259,517	)
Total long-term liabilities	645,431		783,254		(137,823	)
Total long-term liabilities as a percentage of assets	32.7	%	35.0	%

Six months ended June 30,	2016		2015		$ Change
Cash provided by operations	46,050		114,549		(68,499	)
Cash provided (used) by investing	27,299		(107,692	)	134,991
Cash (used) provided by financing	(91,665	)	32,935		(124,600	)

(1)	See Non-GAAP Measures Definitions section at the end of this document.

For the six months ended June 30, 2016, working capital decreased by $17.7 million when compared to December 31, 2015, due to a decrease in current assets of $82.8 million offset by a decrease in current liabilities of $65.0 million.

Current assets decreased in the quarter mainly due to a reduction in accounts receivable as a result of lower activity in 2016 compared to the prior year. As well, prepaid assets decreased mainly due to the recognition of prepaid insurance expense during the period. Cash decreased as a result of lower activity and repayments of long-term debt, partly offset by a distribution from the TDI joint venture. Assets held for sale decreased due to the disposal of the property classified as assets held for sale at year end. These were slightly offset by an increase in inventory due to parts received during the period.

Current liabilities decreased in the period mainly due to a reduction in accounts payable and accrued liabilities and deferred revenue. The reduction in accounts payable and accrued liabilities was a result of lower activity across Canada and the US and international operations and lower activity in Trinidad's manufacturing division. The decrease in deferred revenue was due to this balance being fully recognized to revenue during the second quarter of 2016. The revenue recorded related to deferred early termination revenue for contracts in the US and international operations. In addition, dividends payable decreased due to the suspension of the dividend in 2016 compared to a $0.01 per share dividend declared at December 31, 2015. Lastly, there was a slight decrease in the current portion of long-term debt due to a payment made in the first quarter of 2016.

Trinidad's total long-term debt balance at June 30, 2016 decreased by $130.9 million compared to December 31, 2015. This decrease was largely due to no amounts being drawn on the Canadian revolving facility or US revolving facility at June 30, 2016 compared to December 31, 2015 where $65.0 million and US$18.0 million were drawn, respectively. Additionally, the value of the Senior Notes decreased as a result of the foreign currency fluctuations in the second quarter as the Canadian dollar strengthened in value compared to the US dollar closing at 1.2917 compared to 1.3840 at December 31, 2015. As these notes are held in US funds, the Senior Notes are translated at each period end, and as such, their aggregate value fluctuates with US to Canadian exchange rates.

The Senior Notes are due on January 15, 2019 and interest is payable semi-annually in arrears on January 15 and July 15. Trinidad has designated the Senior Notes as a net investment hedge of the US and international operations. As a result, unrealized gains and losses on the US dollar Senior Notes are offset against foreign exchange gains and losses arising from the translation of the foreign subsidiaries and included in the cumulative translation account in other comprehensive income.

The changes to the Company's credit agreement are included in the amending agreement, a copy of which is filed on SEDAR.

2016 Capital Expenditures

In December of 2015, Trinidad's announced its 2016 capital budget which consisted of $30.0 million in capital expenditures, and an additional $15.0 million available to be spent on select upgrades based on management discretion and industry conditions. The budget is comprised mostly of capital for maintenance and infrastructure projects necessary to maintain the Company's current operations. In addition, Trinidad expects to utilize existing capital inventory items to upgrade and maintain its fleet.

Six months ended June 30,
($ thousands)	2016	2015
New builds	-	45,312
Capital upgrades and enhancements	12,066	12,341
Maintenance and infrastructure	2,092	6,317
Capital spares inventory	10,505	27,958
Total capital expenditures for Trinidad	24,663	91,928
Less: non-cash working capital allocated to investing activities	16,192	29,221
Total capital expenditures adjusted for non-cash items - Trinidad	8,471	62,707
TDI joint venture capital expenditures (Trinidad's 60% share)	4,880	25,780
Total capital expenditures adjusted for non-cash items - Trinidad and TDI joint venture	13,351	88,487

In the first six months ended June 30, 2016, a total of $24.7 million was spent on capital expenditures in Trinidad, compared to $91.9 million in the prior year. Of the $24.7 million, $16.2 million related to non-cash changes for deposits and payables with no actual cash outflow in 2016. The additional $8.5 million of capital expenditures mainly related to upgrading assets that are expected to work in 2016 and additional inventory expenditures.

In addition to the amounts spent on Trinidad's capital, the Company spent $4.9 million related to its portion of capital spending for the TDI joint venture. The majority of the capital spend in 2016 for the joint venture related to upgrading the rigs and investing in capital inventory items.

Capital Resources

Trinidad expects cash provided by operations and the Company's various sources of financing to be sufficient to meet its debt repayments, future obligations and to fund planned capital expenditures.

Current financial performance is within the financial ratio covenants under the revolving credit facility as reflected in the table below:

RATIO	June 30,	December 31,	THRESHOLD
	2016	2015
Senior Debt to Bank EBITDA ⁽¹⁾	(0.16):1	0.21:1	2.50:1 maximum
Bank EBITDA to Cash Interest Expense ⁽¹⁾	3.20:1	3.49:1	1.50:1 minimum

(1)	See Non-GAAP Measures Definitions section at the end of this document for further details.

At June 30, 2016, Trinidad was onside with each of the Senior Debt to Bank EBITDA and Bank EBITDA to Cash Interest Expense covenants noted above.

The Bank EBITDA does not include the adjusted EBITDA from investment in the joint ventures. Dividends and distributions paid to Trinidad from the joint ventures are eligible for inclusion in the Bank EBITDA in the period that payment occurs. In the first quarter of 2016, the TDI joint venture distributed approximately $36.0 million, of which $21.5 million was paid to Trinidad. The TDI joint venture expects to continue to distribute cash back to Trinidad in future periods. The amount and timing of these distributions will depend on the profitability of the joint venture and the working capital and capital expenditure needs within the joint venture.

In addition to the financial covenants, the credit facility contains other covenants with threshold limitations on various day to day events, including the following: incurring additional debt and liens on assets; investments, including advances to the TDI joint venture; asset sales; repurchase of Senior Notes; and making restricted payments. At June 30, 2016, Trinidad is in compliance with all of the covenants of the credit facility.

Senior Notes

The Senior Notes are unsecured and have no financial covenant compliance reporting requirements. There are other covenant limitations, including the following; incurring additional debt; investments, including advances to the TDI joint venture; asset sales; and restricted payments. Restricted payments are allowed within a basket, calculated as the accumulated net earnings from October 1, 2010 to the current period at 50% of net income or 100% of net loss, plus equity issued for cash and the net fair market value of other restricted assets added for equity. As at June 30, 2016, Trinidad has a significant positive restricted payment basket available.

Readers are cautioned that the ratios noted above do not have standardized meanings under IFRS.

OUTLOOK

To date in the third quarter of 2016, industry conditions have shown some signs of gradual improvement; however, commodity prices remain volatile. Activity is slowly increasing and the number of customer inquiries is also growing, with demand appearing slightly stronger in the US than Canada. Despite the increase in activity, competition continues to be high and dayrates remain at low levels.

Trinidad currently has 15 rigs or 21% of its Canadian fleet working. In its US and international operations there are 13 rigs or 19% working and an additional two rigs idle but contracted. In the Company's Joint Venture operations, there are currently three rigs in Saudi Arabia operating, with repair work on the fourth rig almost complete. The four rigs in Mexico are currently receiving standby revenue while the rigs in the Joint Venture wait on direction from Petroleos Mexicanos for new locations.

During the past two years, Trinidad has demonstrated the flexibility of its cost structure and the Company's commitment to finding efficiencies in its operations. As conditions improve, Trinidad will remain focused on maintaining these improvements and continue to operate safe, efficient and high-performance operations. The Company's expectation for Other G&A expenses for the full year of 2016 remains unchanged at $45 million.

With limited visibility into the remainder of 2016 and into 2017, Trinidad continues to manage a careful balance between preparing the Company for a rebound while also managing for the potential of a protracted downturn. As part of this process, Trinidad is considering upgrades to select rigs in response to customer demand. In addition to the $30 million of capital expenditures Trinidad had budgeted for 2016, the Company also has $15 million of discretionary capital expenditure that it may consider spending if appropriate projects are identified and customer demand warrants the upgrades.

Trinidad currently has 27 rigs or 18% of its fleet under long-term contracts, with an average term remaining of 1.6 years. Contracts on two of these rigs expire throughout the remainder of 2016. Trinidad has not received any additional early termination payments to date in the third quarter of 2016.

Oil and gas producers are increasingly turning to modern, high-performance equipment to drill their wells. As a result of these changes, Trinidad believes that the number of active rigs required to drive higher dayrates is lower than in previous cycles. As idle, high-performance rigs and experienced crews are put back to work, Trinidad believes that pricing power will return more quickly to this style of equipment. With a largely high-performance fleet, Trinidad is well positioned to benefit from this new industry dynamic. Current oil and natural gas prices have improved from earlier in 2016; however, Trinidad believes these price levels are not sufficient and that sustained, higher commodity pricing is required to drive significant incremental investment in the oil and gas sector.

CONFERENCE CALL

Conference Call:	Wednesday, August 3, 2016
	9:00 a.m. MT (11:00 a.m. ET)
	877-291-4570 (toll-free in North America) or 647-788-4922 approximately 10 minutes prior to the conference call
	Conference ID: 23993990

Archived Recording:	Available from approximately 12:00 p.m. MT on August 3, 2016 until midnight August 18, 2016. The dial-in number is 800-585-8367 or 416-621-4642
	Conference ID: 23993990

Webcast:	Available at https://www.trinidaddrilling.com/investors/events-presentations

Trinidad is a corporation focused on sustainable growth that trades on the Toronto Stock Exchange under the symbol TDG. Trinidad's divisions currently operate in the drilling sector of the oil and natural gas industry, with operations in Canada, the United States (US) and the United Arab Emirates. In addition, through joint venture arrangements, Trinidad operates drilling rigs in Saudi Arabia and Mexico, and is currently assessing operations in other international markets. Trinidad is focused on providing modern, reliable, expertly designed equipment operated by well-trained and experienced personnel. Trinidad's drilling fleet is one of the most adaptable, technologically advanced and competitive in the industry.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at	June 30,		December 31,
($ thousands) - unaudited	2016		2015

Assets
Current Assets
Cash and cash equivalents	44,265		63,686
Accounts receivable	55,610		113,870
Inventory	8,087		7,136
Prepaid expenses	4,145		7,423
Assets held for sale	-		2,744
	112,107		194,859

Property and equipment	1,514,920		1,656,268
Intangible assets and goodwill	33,671		35,048
Deferred income taxes	55,967		54,367
Investment in joint ventures	260,018		295,658
	1,976,683		2,236,200

Liabilities
Current Liabilities
Accounts payable and accrued liabilities	65,764		93,795
Dividends payable	-		2,221
Deferred revenue and customer deposits	483		34,862
Current portion of long-term debt	2,237		2,609
	68,484		133,487

Long-term debt	573,784		704,311
Deferred income taxes	54,881		60,495
Non-controlling interest	16,766		18,448
	713,915		916,741

Shareholders' Equity
Common shares	1,374,656		1,374,656
Contributed surplus	64,959		64,884
Accumulated other comprehensive income	152,134		203,947
Deficit	(328,981	)	(324,028	)
	1,262,768		1,319,459
	1,976,683		2,236,200

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME AND LOSS

	Three months ended				Six months ended
	June 30,				June 30,
($ thousands) - unaudited	2016		2015		2016		2015

Revenue
Oilfield service revenue	93,788		94,842		200,875		288,345
Other revenue	688		371		1,251		1,264
	94,476		95,213		202,126		289,609

Expenses
Operating expense	32,797		53,317		93,768		175,431
General and administrative	17,002		15,200		30,653		32,170
Depreciation and amortization	42,479		19,693		85,726		43,305
Foreign exchange	114		40		(2,336	)	6,199
Gain on sale of assets ⁽¹⁾	(691	)	(384	)	(1,928	)	(1,484	)
	91,701		87,866		205,883		255,621

Loss (gain) from investment in joint ventures ⁽²⁾	9,665		(646	)	(11,767	)	(1,917	)
Finance and transaction costs	13,267		12,894		27,399		24,320
(Loss) income before income taxes	(20,157	)	(4,901	)	(19,389	)	11,585

Income taxes
Current	870		591		1,156		3,237
Deferred	(4,404	)	(4,025	)	(15,063	)	(2,315	)
	(3,534	)	(3,434	)	(13,907	)	922
Net (loss) income	(16,623	)	(1,467	)	(5,482	)	10,663

Other comprehensive loss
Foreign currency translation adjustment
for foreign operations, net of income tax	(3,493	)	(8,688	)	(51,813	)	55,890
Foreign currency translation adjustment
for non-controlling interest, net of income tax	(25	)	-		(323	)	-
	(3,518	)	(8,688	)	(52,136	)	55,890
Total comprehensive (loss) income	(20,141	)	(10,155	)	(57,618	)	66,553

Net (loss) income attributable to:
Shareholders of Trinidad	(16,256	)	(1,467	)	(4,953	)	10,663
Non-controlling interest	(367	)	-		(529	)	-
Total comprehensive (loss) income attributable to:
Shareholders of Trinidad	(19,749	)	(10,155	)	(56,766	)	66,553
Non-controlling interest	(392	)	-		(852	)	-
Earnings per share
Net (loss) income
Basic / Diluted	(0.07	)	(0.01	)	(0.02	)	0.08

(1)	Gain on sale of assets in 2016 includes the loss of $0.2 million related to the disposition of a non-drilling division.
(2)	Loss (gain) from investment in joint ventures includes Trinidad's portion of the net income in all joint ventures as well as the fair value adjustment related to the TDI joint venture as this is held as a financial asset.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For six months ended June 30, 2016 and 2015 ($ thousands) - unaudited	Common shares		Contributed surplus	Accumulated other comprehensive income ⁽¹⁾		(Deficit)		Total equity
Balance at December 31, 2015	1,374,656		64,884	203,947		(324,028	)	1,319,459
Share-based payment expense	-		75	-		-		75
Total comprehensive loss	-		-	(51,813	)	(4,953	)	(56,766	)
Balance at June 30, 2016	1,374,656		64,959	152,134		(328,981	)	1,262,768

Balance at December 31, 2014	1,093,426		59,005	62,470		(79,010	)	1,135,891
Shares repurchased through normal course issuer bid	(14,015	)	5,665	-		-		(8,350	)
Share-based payment expense	-		88	-		-		88
Total comprehensive income	-		-	55,890		10,663		66,553
Dividends	-		-	-		(13,343	)	(13,343	)
Balance at June 30, 2015	1,079,411		64,758	118,360		(81,690	)	1,180,839

(1)	Accumulated other comprehensive income consists of the foreign currency translation adjustment. All amounts will be reclassified to profit or loss when specific conditions are met.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For six months ended June 30,
($ thousands) - unaudited		2016		2015

Cash provided by (used in)
Operating activities
Net (loss) income		(5,482	)	10,663
Adjustments for:
	Depreciation and amortization	85,726		43,305
	Foreign exchange	(2,336	)	6,199
	Gain on sale of assets ⁽¹⁾	(1,928	)	(1,484	)
	Gain from investment in joint ventures ⁽²⁾	(11,767	)	(1,917	)
	Finance and transaction costs	27,399		24,320
	Income taxes	(13,907	)	922
	Interest income	(1	)	(27	)
	Other ⁽³⁾	5,508		4,333
	Income taxes paid	(1,818	)	(3,618	)
	Income taxes recovered	119		286
	Interest paid	(25,916	)	(21,785	)
	Interest received	1		27
Funds provided by operations		55,598		61,224
Change in non-cash operating working capital		(9,548	)	53,325
Cash provided by operations		46,050		114,549

Investing activities
Purchase of property and equipment		(24,663	)	(91,928	)
Proceeds from disposition of assets ⁽¹⁾		8,900		3,987
Net investment in joint ventures		5,361		(48,162	)
Distribution and dividends received from joint venture		21,509		-
Purchase of intangibles		-		(810	)
Change in non-cash working capital		16,192		29,221
Cash provided (used) by investing		27,299		(107,692	)

Financing activities
Proceeds from long-term debt		130,188		54,925
Repayments of long-term debt		(218,971	)	-
Repurchase of shares		-		(8,350	)
Dividends paid		(2,221	)	(13,429	)
Finance costs		(661	)	(211	)
Cash (used) provided by financing		(91,665	)	32,935

Cash flow from operating, investing and financing activities		(18,316	)	39,792
Effect of translation of foreign currency cash		(1,105	)	4,715
(Decrease) increase in cash for the period		(19,421	)	44,507

Cash and cash equivalents - beginning of period		63,686		71,062
Cash and cash equivalents - end of period		44,265		115,569

(1)	Gain on sale of assets in 2016 includes the loss of $0.2 million related to the sale of a non-drilling division. Proceeds from disposition of property and equipment in 2016 includes $2.8 million related to the disposition of a non-drilling division.
(2)	Gain from investment in joint ventures includes Trinidad's portion of the net income in all joint ventures as well as the fair value adjustment related to the TDI joint venture as this is held as a financial asset.
(3)	Other includes share-based payment expense and elimination of downstream transactions in the Manufacturing Operations net earnings.

SEGMENTED INFORMATION

The following presents the result of Trinidad's operating segments:

For three months ended
June 30, 2016
($ thousands)

Canadian
Operations

United States /
International
Operations

Manufacturing
Operations

Joint Venture
Operations ⁽¹⁾

Inter-segment
Eliminations

Corporate

Total

Operating revenue

20,942

69,725

2,091

92,758

Other revenue

223

283

506

Third party recovery

1,420

867

2,287

General and administrative - third party recovery

359

Inter-segment revenue

52,499

(52,499

)

Elimination of downstream transactions

(98

)

(80

)

(1,256

)

(1,434

)

22,487

70,795

53,334

(52,499

)

359

94,476

Operating costs

10,964

18,255

2,224

31,443

Third party costs

1,420

867

2,287

Inter-segment operating

52,499

(52,499

)

Elimination of downstream transactions

(933

)

(933

)

Operating income

10,103

51,673

(456

)

359

61,679

Depreciation and amortization

17,536

24,526

417

42,479

Gain on sale of assets

(94

)

(597

)

(691

)

17,442

23,929

417

41,788

Segmented (loss) income

(7,339

)

27,744

(873

)

359

19,891

Loss from investment in joint ventures

9,665

General and administrative

16,643

General and administrative - third party costs

359

Foreign exchange

114

Finance and transaction costs

13,267

Income taxes

(3,534

)

(3,534

)

Net (loss) income

(7,339

)

27,744

(873

)

(9,665

)

(26,490

)

(16,623

)

Purchase of property and equipment

2,301

2,198

4,499

(1)	The loss from investment in joint ventures reflects the Company's share of the financial performance of TDI and DCM during the period. The Company's share of individual assets and liabilities are recognized as an investment on the consolidated statements of financial position.

For three months ended June 30, 2015 ($ thousands)	Canadian Operations	United States / International Operations		Manufacturing Operations		Joint Venture Operations ⁽¹⁾	Inter-segment Eliminations		Corporate	Total

Operating revenue	12,061	73,102		7,074		-	-		-	92,237
Other revenue	28	183		2		-	-		-	213
Third party recovery	1,310	3,677		-		-	-		-	4,987
General and administrative - third party recovery	-	-		-		-	-		233	233
Inter-segment revenue	-	-		30,254		-	(30,254	)	-	-
Elimination of downstream transactions	-	(75	)	(2,382	)	-	-		-	(2,457	)
	13,399	76,887		34,948		-	(30,254	)	233	95,213
Operating costs	8,775	35,082		6,782		-	-		-	50,639
Third party costs	1,310	3,677		-		-	-		-	4,987
Inter-segment operating	-	-		30,254		-	(30,254	)	-	-
Elimination of downstream transactions	-	-		(2,309	)	-	-		-	(2,309	)
Operating income	3,314	38,128		221		-	-		233	41,896
Depreciation and amortization	6,241	12,862		590		-	-		-	19,693
Loss (gain) on sale of assets	1,156	(1,041	)	(499	)	-	-		-	(384	)
	7,397	11,821		91		-

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