TAXATION

Conversion to Trinidad Drilling Ltd. – March 10, 2008

Effective March 10, 2008 Trinidad Energy Services Income Trust announced that it had received the securityholder and court approvals necessary to approve the plan of arrangement in which Trinidad converted to a growth oriented dividend paying corporation continuing under the name “Trinidad Drilling Ltd.”. Canadian Resident unitholders who do not hold their units in their RRSP or other registered plan may wish to make a joint election with Trinidad to obtain a full or partial tax-deferred “rollover” of the adjusted cost base at the time of the arrangement. In order to make this election an eligible holder must provide, to Trinidad, two signed copies of the election as provided below on or before July 31, 2008.

Trinidad Election Package
Letter of Transmittal

Canadian Tax Information – Corporation

All dividends paid by Trinidad Drilling Ltd., are, pursuant to subsection 89(14) of the Income Tax Act (Canada), designated as eligible dividends. An eligible dividend paid to a Canadian resident individual is entitled to the enhanced dividend tax credit.

Canadian Tax Information – Trust Pre-Conversion

Under the Canadian Income Tax Act, Trinidad Energy Services Income Trust is an open-ended mutual fund trust and therefore its distributions were considered taxable income to Trinidad’s unitholders. The cash distributions received by unitholders consist of both interest income and dividend income, depending on the tax deductions the trust is able to claim against its overall income.

Unitholders who received cash distributions during 2008 from the Trust will receive a T3 form in the mail before February 28, 2009. The T3 will outline the full amount of cash distributions as well as the percentage of interest income and dividend income. Unitholders must report the income as shown on the T3 return.

The distribution amount for 2007 is classified as income at 57.4% interest income, 19.8% dividend income and 22.8% return of capital.

Click to view:
2007 T3 tax form breakdown (pdf)
2006 T3 tax form breakdown (pdf)
2005 T3 tax form breakdown (pdf)
2004 T3 tax form breakdown (pdf)
2003 T3 tax form breakdown (pdf)
2002 T3 tax form breakdown (pdf)

Unitholders who hold their trust units in an RRSP or RRIF do not need to report any amounts on their tax return.

Trinidad provides exact figures regarding the total per unit cash distributions and taxable amounts once the year-end accounting has been completed. Trinidad strongly recommends that unitholders seek independent professional tax advice when calculating these amounts on their tax returns.

Eligible Dividends

Pursuant to tax legislation, Canadian resident individuals who receive "eligible dividends" in 2006 and subsequent years will be entitled to an enhanced gross-up and dividend tax credit on such dividends. Distributions designated as dividends by Trinidad Energy Services Income Trust in 2006, 2007 and 2008 are "eligible dividends" for these purposes.

U.S. Tax Information

The following information is being provided to assist U.S. individual unitholders of Trinidad in reporting distributions received from Trinidad during 2007 on their Internal Revenue Services (“IRS”) Form 1040, “ U.S. Individual Income Tax Form” (“Form1040”).

This summary is of a general nature only and is not intended to be legal or tax advice to any particular holder or potential holder of Trinidad trust units. Holders or potential holders of Trinidad trust units should consult their legal and tax advisors as to their particular tax consequences of holding Trinidad trust units.

In consultation with its U.S. tax advisors, Trinidad believes that its trust units should be properly classified as equity in a corporation and that dividends paid to individual U.S. unitholders should be “qualified dividends” for U.S. federal income tax purposes. As such, the portion of the distributions made during 2007 that are considered dividends for U.S. federal income tax purposes should qualify for the reduced rate of tax applicable to capital gains.

The following table provides, on a per unit basis, the breakdown of the amount of cash distribution, prior to Canadian withholding tax, paid by Trinidad for the 2007 fiscal year. The amounts are segregated between the portion of the cash distribution that could be considered “qualified dividends” and the portion reported as non-taxable return of capital (and/or capital gain). The amounts shown on the following table are in U.S. dollars as converted on the applicable payment dates. This table is for information purposes only.

Record Date	Distribution Date	Distribution Paid (CDN$)	Exchange Rate	Distribution Paid (US$)	Taxable Qualified Dividend (US$)	Non-Taxable Return of Capital (US$)
31-Jan-2007	15-Feb-2007	0.115	0.8592	0.0988	0.0821	0.0167
28-Feb-2007	15-Mar-2007	0.115	0.8505	0.0978	0.0813	0.0165
31-Mar-2007	16-Apr-2007	0.115	0.8842	0.1017	0.0845	0.0172
30-Apr-2007	15-May-2007	0.115	0.9110	0.1048	0.0871	0.0177
31-May-2007	15-Jun-2007	0.115	0.9634	0.1108	0.0921	0.0187
30-Jun-2007	16-Jul-2007	0.115	0.9588	0.1103	0.0916	0.0186
31-Jul-2007	15-Aug-2007	0.115	0.9306	0.1070	0.0889	0.0181
31-Aug-2007	17-Sep-2007	0.115	0.9701	0.1116	0.0927	0.0189
30-Sep-2007	15-Oct-2007	0.115	1.0248	0.1179	0.0979	0.0199
31-Oct-2007	15-Nov-2007	0.115	1.0196	0.1173	0.0974	0.0198
30-Nov-2007	17-Dec-2007	0.115	0.9928	0.1142	0.0949	0.0193
31-Dec-2007	15-Jan-2008	0.115	0.9834	0.1131	0.0940	0.0191
Total		1.38		1.3051	1.0845	0.2206

Non-Canadian Unitholders

Trinidad recommends that unitholders from outside Canada consult their tax professional for advice on how distributions are treated in their country of residence. According to the Income Tax Act of Canada, the usual taxation rate for non-Canadian residents is 25% unless a tax treaty designates a reduced rate. Please visit the Canadian government tax-treaty webpage for taxation information specific to your country.