<PAGE>   1
                                                                    EXHIBIT 10.4


                                 1994 EXECUTIVE
                             STOCK OPTION AGREEMENT
                            NABORS INDUSTRIES, INC.




       This Agreement is effective the 28th day of December, 1994, between
NABORS INDUSTRIES, INC., a Delaware corporation (the "Company"), and EUGENE M.
ISENBERG ("Optionee"),

                              W I T N E S S E T H:

       1.     Grant of Option.  The Company hereby grants to Optionee, subject
to the terms and conditions herein set forth (the "Plan"), the right and option
to purchase from the Company all or any part of an aggregate of 1,800,000
shares of Stock of the Company at the purchase price of $6.375 per share, such
option to be exercisable as hereinafter provided.

       2.     Terms and Conditions.  The option evidenced hereby is subject to
the following terms and conditions:

              (a)    Expiration Date.  The option shall expire on December 27,
2004.

              (b)    Exercise of Option.  Subject to the accelerated vesting as
otherwise provided for in this Agreement, the option shall be exercisable in
four equal installments in accordance with the following schedule:  450,000 on
October 1, 1995 (the "First Installment"), a further 450,000 on October 1, 1996
(the "Second Installment"), a further 450,000 on
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October 1, 1997 ( the "Third Installment"), and a further 450,000 on October 1,
1998 (the "Fourth Installment").  However, in the event that the Common Stock
of the Company trades at or above the Average Closing Price on or prior to the
scheduled vesting date indicated in the table below, the relevant installment
will be accelerated and become immediately vested:

<TABLE>
<CAPTION>
                       SCHEDULED                    ACCELERATED IF
    INSTALLMENT      VESTING DATE       AVERAGE CLOSING PRICE EQUALS OR EXCEEDS
    -----------      ------------       ---------------------------------------
       <S>          <C>                                <C>     
       First        October 1, 1995                     $7.3313 
       Second       October 1, 1996                     $8.4309 
       Third        October 1, 1997                     $9.6956 
       Fourth       October 1, 1998                    $11.1499
</TABLE>

In addition, in the event any installment is vested early as provided for in
the preceding sentence, new options (hereinafter the "Reload Options") equal in
number to the number of options of the installments vesting early shall be
granted to the Optionee upon the exercise of such vested options or any other
options held by the Optionee pursuant to any other grant prior, or subsequent,
to the effective date of this Agreement in a number equal to the number of such
options exercised.  These Reload Options will have an exercise price equal to
the Closing Price on the date of the new grant and shall be immediately vested
and exercisable for a period from the date of grant through the expiration date
of the original option replaced.  Any option not exercised on any applicable
vesting date may be exercised thereafter at any time, in whole or in part,
before the relevant expiration date of the option.  Any exercise shall be
accompanied by a written notice to the Company specifying the number of shares
as to which the option is being exercised.  If the Optionee so requests, shares
of  Common Stock purchased upon exercise of an option may be issued in the name
of the Optionee or another person.
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              (c)    Payment of Purchase Price Upon Exercise.  At the time of
any exercise, Optionee shall deliver to the Company, together with the notice
provided in paragraph (b) above, the full amount of the purchase price
therefore payable either by bank cashier's check or certified check payable to
the order of the Company or in Common Stock delivered by the Optionee valued at
the Closing Price of such Common Stock, or any combination of cash or Common
Stock in the sole discretion of the Optionee.  The term "Closing Price" shall
be the last sale price regular way on the date of exercise of the option or, in
the case no sale takes place on such date, the average of the high bid and low
asked prices regular way, in either case on the principal National Securities
Exchange in which the Common Stock is listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any such
securities exchange, the last sales price in the over-counter market as
reported by NASDAQ or such other system then in use.  If the Common Stock is
not traded such that the Closing Price can be determined in accordance with the
preceding sentence, the Closing Price shall mean the fair market value of the
Common Stock as of the last day of the measuring period as determined by an
independent investment banker approved by the Corporation and the Employee.
The Average Closing Price shall be the average of the Closing Prices for a
twenty (20) day consecutive period of trading days.

              (d)    Exercise Upon Termination of Employment.  Any option
granted hereunder (including all Reload Options) may be exercised by the
Optionee, his heirs, devisees, legatees or assigns at any time before the
relevant expiration date, whether or not Optionee ceases to be an employee and
whether or not such employment is terminated by voluntary written resignation,
by action of the Company for cause, without cause, or by reason of death
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or disability, with respect to all options as to which his right of exercise
has vested as provided for in paragraph (b) or as to which his right of
exercise shall vest in accordance with the next sentence of this paragraph on
the date of his termination of employment.  In the event of a termination of
employment for any reason, except by the Company for cause or by voluntary
resignation by Optionee, all unvested options granted under this Agreement
shall be immediately exercisable as of the date of his termination of his
employment without regard to the installment provision set forth in paragraph
(b) above.  In this event, the target Average Closing Prices defined in
paragraph 2(b) shall be deemed to have been achieved on or before the scheduled
vesting date and Optionee shall also have the right to the Reload Options as
described therein.  The term "for cause" shall have the same meaning as in
section 4(a)(v) of the Optionee's Employment Agreement dated January 6, 1987
("Employment Agreement").

              (e)    Transferability.  This option may be transferred by the
Employee with the consent of the Company which shall not be unreasonably
withheld at any time; provided however, Section 2(d) of this Agreement shall be
applied based on the Employee and his status and not that of any assignee.

              (f)    Adjustments.  In the event of a reorganization,
recapitalization, stock split, stock dividend, Extraordinary Dividend,
combination of shares, consolidation, merger (other than a merger or
consolidation which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares), any sale or transfer by the
Company of all or substantially all of its assets or any tender offer or
exchange offer for or the acquisition, directly or indirectly, by any person or
group of all or a majority of the then outstanding voting securities of the
Company, rights offering, or any other change in the corporate structure or
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rights with respect to any shares of the Company, adjustments shall be made to
the number or type of stock subject to this Agreement and, in order to prevent
dilution or enlargement of the rights of Optionee, to the number of Options,
and the type and option price of stock subject to outstanding Options or as
provided below with respect to Extraordinary Dividend.  In the case of an
Extraordinary Dividend, the Optionee shall be entitled to have distributed to
him upon the exercise of any portion of the option an amount equal to the
Extraordinary Dividend he would have received had he exercised such portion of
the option immediately prior to the declaration of the Extraordinary Dividend.
For this purpose, an Extraordinary Dividend shall mean any dividend or
dividends paid or declared in the twelve month period immediately prior to the
day after any such declaration in excess in the aggregate of 7% of the average
Closing Price of the Common Stock during such period.

              (g)    Withholding of Taxes.  No stock may be granted or option
may be exercised unless the Grantee or the Optionee has paid, or has made
provision, satisfactory to the Committee for payment of, federal, state and
local income taxes, or any other taxes (other than stock transfer taxes) which
the Company may be obligated to collect as a result of the issue or transfer of
shares of Stock upon exercise of an option.  The Optionee may elect that shares
of Common Stock can be applied towards the payment of withholding taxes.

       3.     Treatment of Options as Non-Qualified Stock Options.  The Company
and Optionee acknowledge that the stock options granted hereunder shall be
treated as non-qualified stock options for U.S. federal income tax purposes.
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       4.     Registration, Listing and Qualification of Shares of Stock.

              (a)     Registration.  The Company, within six months of the date
any option granted pursuant to this Agreement first becomes vested and
exercisable, shall register all the shares underlying the options on a
Registration Statement on Form S-8 ("S-8").  The Company shall also prepare and
file a Form S-3 prospectus with such S-8.

              (b)    Listing.  The Company, within six months of the date any
option granted pursuant to this Agreement first becomes vested and exercisable,
shall list all the shares underlying the options on the American Stock Exchange
with an Additional Listing Application.

              (c)    Qualification.  The Company may require Optionee to
furnish to the Company, prior to the issuance of any shares upon the exercise
of all or any part of this option, an agreement in which Optionee acknowledges
the status of the shares and the conditions and the restrictions, if any, upon
their sale or distribution under the applicable securities laws.

       5.     Notices.  Any notice hereunder to the Company shall be addressed
to it at its office as follows: Attn: Corporate Secretary.  Any notice
hereunder to Optionee shall be addressed to him at Two North Breakers Row, Apt.
25-S, Palm Beach, Florida 33480.  Either party may designate at any time
hereafter in writing some other address.

       6.     Binding Agreement.  This Agreement constitutes the binding
agreement of the parties with respect to the grant of options to the Optionee
under the Plan.  Notwithstanding any discretionary authority possessed by the
Committee under the Plan or the Company to
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impose other terms or conditions on the grant or exercise of options, no
additional terms or condition (other than those expressly stated in this
Agreement) may be imposed by the unilateral action of the Committee or the
Company.  This Agreement may not be modified except by the mutual agreement of
the parties in writing.

       7.     No Termination or Amendment.  No termination or amendment of the
Plan by the Company, without the consent of Optionee, shall adversely affect
the rights of Optionee with respect to any option granted under this Agreement.

       8.     Governing Law.  This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware.

              IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.



                                         NABORS INDUSTRIES, INC.



                                         By:                                    
                                            ------------------------------------
                                                     Daniel McLachlin





                                                                                
                                         ---------------------------------------
                                                   EUGENE M. ISENBERG