MD&A

Management’s Discussion and Analysis (MD&A) should be read in conjunction with the Consolidated Financial Statements and Notes thereto of Stoneham Drilling Trust for the years ended December 31, 2007 and 2006. The Consolidated Financial Statements have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). Comparative percentages are between the three and twelve months ended December 31, 2007 and 2006, and all dollar amounts are expressed in Canadian currency. Throughout this report, “Stoneham” has been used to refer to Stoneham Drilling Trust and its subsidiaries, Stoneham Drilling Limited Partnership, Stoneham Drilling Inc., Stoneham Drilling Corporation, and Stoneham Administration Inc., as the context requires.

The information in this MD&A was prepared on March 27, 2008, and incorporates all relevant considerations to that date. This discussion provides management’s analysis of Stoneham’s historical financial and operating results and provides estimates of Stoneham’s future financial and operating performance based on information currently available.

This MD&A contains certain forward-looking information within the meaning of applicable securities laws. For a full discussion of the forward-looking information and the risks to which they are subject, see the Forward Looking Information and Statements Advisory.

Additional information relating to Stoneham, including the Annual Information Form for the year ended December 31, 2007, is available on our website at www.stonehamdrilling.com or on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.

SELECTED FINANCIAL INFORMATION

$ 000s except for per trust unit data and trust units outstanding

	Year ended December 31,
	2007	2006	2005
Revenue	65,922	63,215	40,575
Net earnings and comprehensive income	5,996	16,006	10,774
Per trust unit (basic and diluted)	0.75	2.00	1.80
Cash flow from operations (1)	17,245	22,321	14,473
Per trust unit (diluted)	2.15	2.78	2.42
Total assets	186,351	134,398	109,556
Long-term debt (2)	69,500	11,710	1,527
Weighted average units outstanding
Basic	8,023,261	8,023,261	5,990,826
Diluted	8,023,261	8,023,261	5,990,826
EBITDA (1)	20,329	21,758	14,351

1. Cash flow from operations is defined as cash flow from operating activities before changes in non-cash working capital relating to operating activities. EBITDA means earnings before interest, taxes, depreciation and amortization. Readers are advised that cash flow from operations, cash flow from operations per trust unit and EBITDA do not have a standardized meanings prescribed by GAAP and therefore may not be comparable with the calculations of similar measures for other companies. However, Stoneham does compute these measures on a consistent basis for each reporting period. The reconciliation of cash flow from operating activities and EBITDA to a GAAP measure can be found here.
2. Long-term debt includes the current portion.