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CALGARY - Precision Drilling Trust's (TSX:PD.UN) is eagerly awaiting the outcome of a strategic review by Grey Wolf Inc. (AMEX:GW), the U.S. driller it has been focused on acquiring as a means to expand in the United States.

Houston-based Grey Wolf said earlier this month it would be exploring its strategic alternatives after a proposed merger of equals with fellow U.S. firm Basic Energy Services Trust (NYSE:BAS) failed to get shareholder support.

That opened the door for Precision, Canada's largest oil and gas services firm, to re-approach Grey Wolf with its rival US$1.79-billion takeover offer, which had been repeatedly rebuffed by the Grey Wolf board.

"It's a process being managed by Grey Wolf and they have an obligation to their shareholders to do the right thing," Precision chief executive Kevin Neveu told an analyst conference call Wednesday.

"We hope that will include us as they move through their process."

Precision has been courting Grey Wolf, which has 121 rigs, as a means to expand in the United States, a market it left in 2005 as part of a plan to convert into an income trust.

"Certainly it's our belief that the Grey Wolf rigs, the Grey Wolf people and the facilities will be an excellent fit in Precision Drilling and will certainly support our growth strategy," Neveu said.

"We believe that Precision's systems, our processes and our size will bring immediate operating costs savings and particularly capital cost reductions to Grey Wolf's operations."

Neveu added: "Grey Wolf's loyal and diverse customer base will help us to accelerate our high performance, high value growth opportunities in the U.S. and we know that the fine Grey Wolf people will certainly fit the culture of Precision drilling very well."

Earlier Wednesday, Precision reported second-quarter earnings of C$21.7 million, down 15 per cent from a year earlier on higher executive incentive costs.

The oil and gas drilling rig operator said Wednesday that compensation expense accruals of $9 million in the April-June period compared with a $4-million recovery a year ago.

The quarter's net profit of 17 cents per unit was down from $25.7 million or 20 cents per unit a year earlier.

Revenue increased to $138.5 million from $122 million, rising 18 per cent in Precision's contract drilling services segment and six per cent in completion and production services.

Revenue from the United States tripled from a year ago as Precision returned to the American market, while Canadian activity was down slightly in contract drilling and up moderately in completion and production.

"Operationally, Precision performed in line with what we were looking for in the second quarter," CIBC World Markets analyst Jeff Fetterly said.

The spring months are normally slow for oilfield services firms in Canada, since it is hard for rigs to operate on soft, thawing ground.

"I certainly don't put a lot of weight into the second quarter," Fetterly said.

The outlook for future quarters looks good, Neveu told the conference call.

"We are feeling very positive about the Canadian market. The indications and the facts support a sustained improvement during the latter half of '08 through 2009," he said.

"We're very pleased with our organic growth in the United States and we expect to keep that momentum through 2009."

Precision is "locked and loaded" to make a move into international markets in September, when non-compete agreements with Weatherford International Ltd., the Houston firm that bought Precision's international business in 2005, expire.

Precision units were down more than eight per cent to $21.61 in on the Toronto Stock Exchange.