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UNITED STATESSECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 000-49887
 NABORS INDUSTRIES LTD.
  Bermuda
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    980363970
(I.R.S. Employer Identification No.)Mintflower Place 
8 Par-La-Ville Road 
Hamilton, HM08
Bermuda
(Address of principal executive offices)
    
    N/A
(Zip Code)
 (441) 292-1510
 Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
 Title of each class
    
    Name of each
exchange on which registeredCommon shares, $.001 par value per share
    
    The New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934:
  þ o
  o þ
  þ o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ
   DOCUMENTS INCORPORATED BY REFERENCE (to the extent indicated herein)




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##### 



NABORS INDUSTRIES LTD.
Form 10-K Annual Report
For the Fiscal Year Ended December 31, 2008
Table of Contents
 PART IItem 1.
    Business
    
    
    3Item 1A.
    Risk Factors
    
    
    9Item 1B.
    Unresolved Staff Comments
    
    
    14Item 2.
    Properties
    
    
    14Item 3.
    Legal Proceedings
    
    
    14Item 4.
    Submission of Matters to a Vote of Security Holders
    
    
    15PART IIItem 5.
    Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
    
    
    16Item 6.
    Selected Financial Data
    
    
    18Item 7.
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 7A.
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 8.
    Financial Statements and Supplementary Data
    
    
    44Item 9.
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    99Item 9A.
    Controls and Procedures and Managements Report on Internal Control over Financial Reporting
    
    
    99Item 9B.
    Other Information
    
    
    100PART IIIItem 10.
    Directors, Executive Officers and Corporate Governance
    
    
    101Item 11.
    Executive Compensation
    
    
    101Item 12.
    Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
    
    
    102Item 13.
    Certain Relationships and Related Transactions, and Director Independence
    
    
    103Item 14.
    Principal Accounting Fees and Services
    
    
    103PART IVItem 15.
    Exhibits, Financial Statement Schedules
    
    
    104EX-12EX-21EX-23EX-31.1EX-31.2EX-32.1
  2




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FORWARD-LOOKING STATEMENTS
   
    
    fluctuations in worldwide prices of and demand for natural gas and oil;
    
    fluctuations in levels of natural gas and oil exploration and development activities;
    
    fluctuations in the demand for our services;
    
    the existence of competitors, technological changes and developments in the oilfield services
industry;
    
    the existence of operating risks inherent in the oilfield services industry;
    
    the existence of regulatory and legislative uncertainties;
    
    the possibility of changes in tax laws;
    
    the possibility of political instability, war or acts of terrorism in any of the countries in
which we do business; and
    
    general economic conditions including the capital and credit markets.
  .
  
 PART I
 
 ITEM 1. BUSINESS
 Introduction
  3




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Our Fleet of Rigs
 
    
    Land Rigs. A land-based drilling rig generally consists of engines, a drawworks, a mast (or
derrick), pumps to circulate the drilling fluid (mud) under various pressures, blowout
preventers, drill string and related equipment. The engines power the different pieces of
equipment, including a rotary table or top drive that turns the drill string, causing the
drill bit to bore through the subsurface rock layers. Rock cuttings are carried to the surface
by the circulating drilling fluid. The intended well depth, bore hole diameter and drilling
site conditions are the principal factors that determine the size and type of rig most
suitable for a particular drilling job.A land-based workover or well-servicing rig consists of a mobile carrier, engine, drawworks and a
mast. The mobile workover or well-servicing rig is specially designed for periodic maintenance as
well as major repairs and modifications of oil and gas wells for which service is required to
maximize the productive life of such wells. Workovers may be required to remedy failures, modify
well depth and formation penetration to capture hydrocarbons from alternative formations, clean
out and recomplete a well when production has declined, repair leaks or convert a depleted well
to an injection well for secondary or enhanced recovery projects. The primary function of a
workover or well-servicing rig is to act as a hoist so that pipe, sucker rods and down-hole
equipment can be run into and out of a well. Because of size and cost considerations,
well-servicing and workover rigs are used for these operations rather than the larger drilling
rigs. Land-based drilling rigs are moved between well sites and between geographic areas of
operations by using our fleet of cranes, loaders and transport vehicles or those from a
third-party service vendor. Well-servicing rigs are generally self-propelled units and heavier
capacity workover rigs are either self-propelled or trailer mounted and include auxiliary
equipment, which is either transported on trailers or moved with trucks.
    
    Platform Rigs. Platform rigs provide offshore workover, drilling and re-entry services. Our
platform rigs have drilling and/or well-servicing or workover equipment and machinery arranged
in modular packages that are transported to, and assembled and installed on, fixed offshore
platforms owned by the customer. Fixed offshore platforms are steel tower-like structures that
either stand on the ocean floor or are moored floating structures. The top portion, or
platform, sits above the water level and provides the foundation upon which the platform rig
is placed.
    
    Jack-up Rigs. Jack-up rigs are mobile, self-elevating drilling and workover platforms
equipped with legs that can be lowered to the ocean floor until a foundation is established to
support the hull, which contains the drilling and/or workover equipment, jacking system, crew
quarters, loading and unloading facilities, storage areas for bulk and liquid materials,
helicopter landing deck and other related equipment. The rig legs may operate independently or
have a mat attached to the lower portion of the legs in order to provide a more stable
foundation in soft bottom areas. Many of our jack-up rigs are of cantilever design  a feature
that permits the drilling platform to be extended out from the hull, allowing it to perform
drilling or workover operations over adjacent, fixed platforms. Nabors shallow workover
jack-up rigs generally are subject to a maximum water depth of approximately 125 feet, while
some of our jack-up rigs may drill in water depths as shallow as 13 feet. Nabors also has
deeper water depth capacity jack-up rigs that are capable of drilling at depths between eight
feet and 150 to 250 feet. The water depth limit of a particular rig is determined by the
length of the rigs legs and the operating environment. Moving a rig from one drill site to
another involves lowering the hull down into the water until it is afloat and then jacking up
its legs with the hull floating. The rig is then towed to the new drilling site.
    
    Inland Barge Rigs. One of Nabors barge rigs is a full-size drilling unit. Nabors also owns
two workover inland barge rigs. These barges are designed to perform plugging and abandonment,
well service or workover services in shallow inland, coastal or offshore waters. Our barge
rigs can operate at depths between three and 20 feet.
 4




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Customers: Types of Drilling Contracts
    Well-Servicing and Workover Services
  
    
    Well-Servicing/Maintenance Services. We provide maintenance services on the mechanical
apparatus used to pump or lift oil from producing wells. These services include, among other
things, repairing and replacing pumps, sucker rods and tubing. We provide the rigs, equipment
and crews for these tasks, which are performed on both oil and natural gas wells, but which
are more commonly required on oil wells. Maintenance services typically take less than 48
hours to complete. Well-servicing rigs generally are provided to customers on a call-out
basis. We are paid an hourly rate and work typically is performed five days a week during
daylight hours.
 
    
    Workover Services. Producing oil and natural gas wells occasionally require major repairs or
modifications, called workovers. Workovers normally are carried out with a well-servicing
rig that includes additional specialized accessory equipment, which may include rotary
drilling equipment, mud pumps, mud tanks and blowout preventers. A workover may last anywhere
from a few days to several weeks. We are paid an hourly rate and work is generally performed
seven days a week, 24 hours a day.
 
    
    Completion Services. The kinds of activities necessary to carry out a workover operation are
essentially the same as those that are required to complete a well when it is first drilled.
The completion process may involve selectively perforating the well casing at the depth of
discrete producing zones, stimulating and testing these zones and installing down-hole
equipment. The completion process may take a few days to several weeks. We are paid an hourly
rate and work is generally performed seven days a week, 24 hours a day.
 
    
    Production and Other Specialized Services. We also can provide other specialized services,
including onsite temporary fluid-storage facilities, the provision, removal and disposal of
specialized fluids used during certain completion and workover operations, and the removal and
disposal of salt water that often is produced in conjunction with the production of oil and
natural gas. We also provide plugging services for wells from which the oil and natural gas
has been depleted or further production has become uneconomical. We are paid an hourly or a
per unit rate, as applicable, for these services.
 5




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Oil and Gas Investments
   Other Services
 ®
 Our Employees
   Seasonality
  Research and Development
  6




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Industry/Competitive Conditions
      Our Business Strategy
  
    
    Maintain flexibility to respond to changing conditions.
    
    Maintain a conservative and flexible balance sheet.
    
    Build cost effectively a base of premium assets.
    
    Build and maintain low operating costs through economies of scale.
    
    Develop and maintain long-term, mutually attractive relationships with key customers and
vendors.
    
    Build a diverse business in long-term, sustainable and worthwhile geographic markets.
 7




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
    
    Recognize and seize opportunities as they arise.
    
    Continually improve safety, quality and efficiency.
    
    Implement leading-edge technology where cost effective to do so.
    
    Build shareholder value by an expansion of our oil and gas reserves and production.
  Acquisitions and Divestitures
      Environmental Compliance
  8




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ITEM 1A. RISK FACTORS
   Uncertain or negative global economic conditions could adversely affect our results of operations
  Fluctuations in oil and natural gas prices could adversely affect drilling activity and our
revenues, cash flows and profitability
  We operate in a highly competitive industry with excess drilling capacity, which may adversely
affect our results of operations
  The nature of our operations presents inherent risks of loss that, if not insured or indemnified
against, could adversely affect our results of operations
  9




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Future price declines may result in a write-down of our asset carrying values
   The profitability of our international operations could be adversely affected by war, civil
disturbance, or political or economic turmoil, fluctuation in currency exchange rates and local
import and export controls
  Changes to or noncompliance with governmental regulation or exposure to environmental liabilities
could adversely affect our results of operations
  10




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Massachusetts, et al. v. EPA
  As a holding company, we depend on our subsidiaries to meet our financial obligations
  We do not currently intend to pay dividends
  Because our option, warrant and convertible securities holders have a considerable number of common
shares available for issuance and resale, significant issuances or resales in the future may
adversely affect the market price of our common shares
 11




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Provisions of our organizational documents and executive contracts may deter a change of control
transaction and decrease the likelihood of a shareholder receiving a change of control premium
   We have a substantial amount of debt outstanding
     Our access to borrowing capacity could be affected by the recent instability in the global
financial markets
  12




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Our ability to perform under new contracts and to grow our business as forecasted depends to a
substantial degree on timely delivery of rigs and equipment from our suppliers
  We may have additional tax liabilities
    Proposed tax legislation could mitigate or eliminate the benefits of our 2002 reorganization as a
Bermuda company
   Legal proceedings could affect our financial condition and results of operations
  13




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Our financial results could be affected by changes in the value of our investment portfolio
  The loss of key executives could reduce our competitiveness and prospects for future success
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
      
 ITEM 3. LEGAL PROCEEDINGS
  14




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  15




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 STOCK PERFORMANCE GRAPH
  
 2004
    
    2005
    
    2006
    
    2007
    
    2008Nabors Industries Ltd.
    
    
    124
    
    
    
    183
    
    
    
    144
    
    
    
    132
    
    
    
    58S&P 500 Index
    
    
    111
    
    
    
    116
    
    
    
    135
    
    
    
    142
    
    
    
    90Dow Jones Oil Equipment and Services Index
    
    
    135
    
    
    
    205
    
    
    
    233
    
    
    
    338
    
    
    
    138
 I. Market and Share Prices
   16




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Share PriceCalendar Year
    
    High
    
    Low2007 First quarter
    
    
    32.74
    
    
    
    27.53Second quarter
    
    
    36.42
    
    
    
    29.59Third quarter
    
    
    34.10
    
    
    
    27.05Fourth quarter
    
    
    31.23
    
    
    
    26.002008 First quarter
    
    
    34.14
    
    
    
    23.61Second quarter
    
    
    50.58
    
    
    
    33.06Third quarter
    
    
    50.35
    
    
    
    22.50Fourth quarter
    
    
    24.88
    
    
    
    9.72
  ApproximateTotal Number
    
    Dollar Value ofof Shares
    
    Shares that MayTotal
    
    
    
    
    
    Purchased as
    
    Yet BeNumber of
    
    Average
    
    Part of Publicly
    
    PurchasedPeriod
    
    Shares
    
    Price Paid
    
    Announced
    
    Under the(In thousands, except per share amounts)
    
    Purchased
    
    per Share
    
    Program
    

Program (1)October 1  October 31, 2008
    
    
    46
    (2)
    
    $
    22.59
    
    
    
    
    
    
    $
    35,458November 1  November 30, 2008
    
    
    1
    (2)
    
    $
    22.59
    
    
    
    
    
    
    $
    35,458December 1  December 31, 2008
    
    
    953
    (2)
    
    $
    22.59
    
    
    
    
    
    
    $
    35,458
 
 (1)
    
    In July 2006 our Board of Directors authorized a share repurchase program under
which we may repurchase up to $500 million of our common shares in the open market or in
privately negotiated transactions. This program supersedes and cancels our previous
share repurchase program. Through December 31, 2008, $464.5 million of our common
shares have been repurchased under this program. As of December 31, 2008, we had the
capacity to repurchase up to an additional $35.5 million of our common shares under the
July 2006 share repurchase program.(2)
    
    In September 2008 we entered into a three-month written put option for 1 million
of our common shares with a strike price of $25 per common share. We settled this
contract during the fourth quarter of 2008 and paid cash of $22.6 million, net of the
premium received on this contract.  II. Dividend Policy
  III. Shareholder Matters
   17




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ITEM 6. SELECTED FINANCIAL DATA
 Operating Data (1)(2)
    
    Year Ended December 31,(In thousands, except per share amounts and ratio data)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Revenues and other income:Operating revenues
    
    $
    5,511,896
    
    
    $
    4,938,848
    
    
    $
    4,707,289
    
    
    $
    3,394,472
    
    
    $
    2,351,571Earnings (losses) from unconsolidated affiliates
    
    
    (229,834
    )
    
    
    17,724
    
    
    
    20,545
    
    
    
    5,671
    
    
    
    4,057Investment income (loss)
    
    
    21,726
    
    
    
    (15,891
    )
    
    
    102,007
    
    
    
    85,428
    
    
    
    50,044Total revenues and other income
    
    
    5,303,788
    
    
    
    4,940,681
    
    
    
    4,829,841
    
    
    
    3,485,571
    
    
    
    2,405,672Costs and other deductions:Direct costs
    
    
    3,110,316
    
    
    
    2,764,559
    
    
    
    2,511,392
    
    
    
    1,958,538
    
    
    
    1,542,364General and administrative expenses
    
    
    479,984
    
    
    
    436,282
    
    
    
    416,610
    
    
    
    247,129
    
    
    
    192,692Depreciation and amortization
    
    
    611,066
    
    
    
    467,730
    
    
    
    364,653
    
    
    
    285,054
    
    
    
    248,057Depletion
    
    
    46,979
    
    
    
    72,182
    
    
    
    38,580
    
    
    
    46,894
    
    
    
    45,460Interest expense
    
    
    91,620
    
    
    
    53,702
    
    
    
    46,586
    
    
    
    44,849
    
    
    
    48,507Losses (gains) on sales, retirements and
impairments of long-lived assets and other
expense (income), net
    
    
    7,613
    
    
    
    10,895
    
    
    
    24,118
    
    
    
    45,952
    
    
    
    (5,036
    )Goodwill and intangible asset impairment
    
    
    154,586
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total costs and other deductions
    
    
    4,502,164
    
    
    
    3,805,350
    
    
    
    3,401,939
    
    
    
    2,628,416
    
    
    
    2,072,044Income from continuing operations before income
taxes
    
    
    801,624
    
    
    
    1,135,331
    
    
    
    1,427,902
    
    
    
    857,155
    
    
    
    333,628Income tax expense
    
    
    250,451
    
    
    
    239,664
    
    
    
    434,893
    
    
    
    219,000
    
    
    
    32,660Income from continuing operations, net of tax
    
    
    551,173
    
    
    
    895,667
    
    
    
    993,009
    
    
    
    638,155
    
    
    
    300,968Income from discontinued operations, net of tax
    
    
    
    
    
    
    35,024
    
    
    
    27,727
    
    
    
    10,540
    
    
    
    1,489Net income
    
    $
    551,173
    
    
    $
    930,691
    
    
    $
    1,020,736
    
    
    $
    648,695
    
    
    $
    302,457Earnings per share:Basic from continuing operations
    
    $
    1.98
    
    
    $
    3.21
    
    
    $
    3.42
    
    
    $
    2.05
    
    
    $
    1.01Basic from discontinued operations
    
    
    
    
    
    
    .13
    
    
    
    .10
    
    
    
    .03
    
    
    
    .01Total Basic
    
    $
    1.98
    
    
    $
    3.34
    
    
    $
    3.52
    
    
    $
    2.08
    
    
    $
    1.02Diluted from continuing operations
    
    $
    1.93
    
    
    $
    3.13
    
    
    $
    3.31
    
    
    $
    1.97
    
    
    $
    .96Diluted from discontinued operations
    
    
    
    
    
    
    .12
    
    
    
    .09
    
    
    
    .03
    
    
    
    Total Diluted
    
    $
    1.93
    
    
    $
    3.25
    
    
    $
    3.40
    
    
    $
    2.00
    
    
    $
    .96Weighted-average number of common shares
outstanding:Basic
    
    
    278,166
    
    
    
    279,026
    
    
    
    290,241
    
    
    
    312,134
    
    
    
    297,872Diluted
    
    
    285,285
    
    
    
    286,606
    
    
    
    299,827
    
    
    
    324,378
    
    
    
    328,060Capital
expenditures and acquisitions of businesses (3)
    
     $
    1,561,423
    
    
    $
    1,921,221
    
    
    $
    1,997,971
    
    
    $
    1,003,269
    
    
    $
    544,429Interest coverage ratio (4)
    
    
    20.9:1
    
    
    
    32.5:1
    
    
    
    38.1:1
    
    
    
    25.6:1
    
    
    
    12.9:1
 18




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Balance Sheet Data (2)
    
    As of December 31,(In thousands, except ratio data)
    
    2008
    
    2007
    
    2006
    
    2005
    
    2004Cash, cash equivalents, short-term and long-term
investments and other receivables (5)
    
    $
    826,063
    
    
    $
    1,179,639
    
    
    $
    1,653,285
    
    
    $
    1,646,327
    
    
    $
    1,411,047Working capital
    
    
    1,037,734
    
    
    
    710,980
    
    
    
    1,650,496
    
    
    
    1,264,852
    
    
    
    821,120Property, plant and equipment, net
    
    
    7,282,042
    
    
    
    6,632,612
    
    
    
    5,410,101
    
    
    
    3,886,924
    
    
    
    3,275,495Total assets
    
    
    10,467,982
    
    
    
    10,103,382
    
    
    
    9,142,303
    
    
    
    7,230,407
    
    
    
    5,862,609Long-term debt
    
    
    3,887,711
    
    
    
    3,306,433
    
    
    
    4,004,074
    
    
    
    1,251,751
    
    
    
    1,201,686Shareholders equity
    
    $
    4,692,119
    
    
    $
    4,514,121
    
    
    $
    3,536,653
    
    
    $
    3,758,140
    
    
    $
    2,929,393Funded debt to capital ratio:Gross (6)
    
    
    0.44:1
    
    
    
    0.44:1
    
    
    
    0.50:1
    
    
    
    0.32:1
    
    
    
    0.38:1Net (7)
    
    
    0.39:1
    
    
    
    0.36:1
    
    
    
    0.37:1
    
    
    
    0.08:1
    
    
    
    0.15:1
 
 (1)
    
    All periods present the Sea Mar business as a discontinued operation.(2)
    
    Our acquisitions results of operations and financial position have been included beginning
on the respective dates of acquisition and include Pragma Drilling Equipment Ltd. assets (May
2006), 1183011 Alberta Ltd. (January 2006), Sunset Well Service, Inc. (August 2005), Alexander
Drilling, Inc. assets (June 2005), Phillips Trucking, Inc. assets (June 2005), and Rocky
Mountain Oil Tools, Inc. assets (March 2005).(3)
    
    Represents capital expenditures and the portion of the purchase price of acquisitions
allocated to fixed assets and goodwill based on their fair market value.(4)
    
    The interest coverage ratio from continuing operations is computed by calculating the sum of
income from continuing operations before income taxes, interest expense, depreciation and
amortization, depletion expense, goodwill and intangible asset impairments and our
proportionate share of non-cash pre-tax full cost ceiling writedowns from our oil and gas
joint ventures less investment income (loss) and then dividing by interest expense. This ratio
is a method for calculating the amount of operating cash flows available to cover interest
expense. The interest coverage ratio from continuing operations is not a measure of
operating performance or liquidity defined by accounting principles generally accepted in the
United States of America (GAAP) and may not be comparable to similarly titled measures
presented by other companies.(5)
    
    The December 31, 2008 and 2007 amounts include $1.9 million and $53.1 million, respectively,
in cash proceeds receivable from brokers from the sale of certain long-term investments that
are included in other current assets and $224.2 million and $123.3 million, respectively, in
oil and gas financing receivables that are included in long-term investments and other
receivables.(6)
    
    The gross funded debt to capital ratio is calculated by dividing funded debt by funded debt
plus deferred tax liabilities, net of deferred tax assets plus capital. Funded debt is defined
as the sum of (1) short-term borrowings, (2) current portion of long-term debt and (3)
long-term debt. Capital is defined as shareholders equity. The gross funded debt to capital
ratio is not a measure of operating performance or liquidity defined by GAAP and may not be
comparable to similarly titled measures presented by other companies.(7)
    
    The net funded debt to capital ratio is calculated by dividing net funded debt by net funded
debt plus deferred tax liabilities, net of deferred tax assets plus capital. Net funded debt
is defined as the sum of (1) short-term borrowings, (2) current portion of long-term debt and
(3) long-term debt reduced by the sum of cash and cash equivalents and short-term and
long-term investments and other receivables. Capital is defined as shareholders equity. The
net funded debt to capital ratio is not a measure of operating performance or liquidity
defined by GAAP and may not be comparable to similarly titled measures presented by other
companies. 19




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##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Management Overview
      Year Ended December 31,
    
    Increase / (Decrease)2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Commodity prices:Average Henry
Hub natural gas
spot price
($/million cubic
feet (mcf))
    
    $
    8.89
    
    
    $
    6.97
    
    
    $
    6.73
    
    
    $
    1.92
    
    
    
    28
    %
    
    $
    0.24
    
    
    
    4
    %Average West
Texas
intermediate
crude oil spot
price ($/barrel)
    
    $
    99.92
    
    
    $
    72.23
    
    
    $
    66.09
    
    
    $
    27.69
    
    
    
    38
    %
    
    $
    6.14
    
    
    
    9
    %
    20




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##### Table of Contents



(In thousands, except percentages
    
    Year Ended December 31,
    
    
    Increase/(Decrease)and rig activity)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008 to 2007
    
    
    2007 to 2006Reportable segments:Operating revenues and Earnings (losses)
from unconsolidated affiliates from
continuing operations: (1)Contract Drilling: (2)U.S. Lower 48 Land Drilling
    
    $
    1,878,441
    
    
    $
    1,710,990
    
    
    $
    1,890,302
    
    
    $
    167,451
    
    
    
    10
    %
    
    $
    (179,312
    )
    
    
    (9
    %)U.S. Land Well-servicing
    
    
    758,510
    
    
    
    715,414
    
    
    
    704,189
    
    
    
    43,096
    
    
    
    6
    %
    
    
    11,225
    
    
    
    2
    %U.S. Offshore
    
    
    252,529
    
    
    
    212,160
    
    
    
    221,676
    
    
    
    40,369
    
    
    
    19
    %
    
    
    (9,516
    )
    
    
    (4
    %)Alaska
    
    
    184,243
    
    
    
    152,490
    
    
    
    110,718
    
    
    
    31,753
    
    
    
    21
    %
    
    
    41,772
    
    
    
    38
    %Canada
    
    
    502,695
    
    
    
    545,035
    
    
    
    686,889
    
    
    
    (42,340
    )
    
    
    (8
    %)
    
    
    (141,854
    )
    
    
    (21
    %)
 21




---



##### Table of Contents



(In thousands, except percentages
    
    Year Ended December 31,
    
    
    Increase/(Decrease)and rig activity)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008 to 2007
    
    
    2007 to 2006International
    
    
    1,372,168
    
    
    
    1,094,802
    
    
    
    746,460
    
    
    
    277,366
    
    
    
    25
    %
    
    
    348,342
    
    
    
    47
    %Subtotal Contract Drilling
(3)
    
    
    4,948,586
    
    
    
    4,430,891
    
    
    
    4,360,234
    
    
    
    517,695
    
    
    
    12
    %
    
    
    70,657
    
    
    
    2
    %Oil and Gas (4) (5)
    
    
    (151,465
    )
    
    
    152,320
    
    
    
    59,431
    
    
    
    (303,785
    )
    
    
    (199
    %)
    
    
    92,889
    
    
    
    156
    %Other Operating Segments (6)
(7)
    
    
    683,186
    
    
    
    588,483
    
    
    
    505,286
    
    
    
    94,703
    
    
    
    16
    %
    
    
    83,197
    
    
    
    16
    %Other reconciling items (8)
    
    
    (198,245
    )
    
    
    (215,122
    )
    
    
    (197,117
    )
    
    
    16,877
    
    
    
    8
    %
    
    
    (18,005
    )
    
    
    (9
    %)Total
    
    $
    5,282,062
    
    
    $
    4,956,572
    
    
    $
    4,727,834
    
    
    $
    325,490
    
    
    
    7
    %
    
    $
    228,738
    
    
    
    5
    %Adjusted income (loss) derived from
operating activities from continuing
operations: (1)(9)Contract Drilling:U.S. Lower 48 Land Drilling
    
    $
    628,579
    
    
    $
    596,302
    
    
    $
    821,821
    
    
    $
    32,277
    
    
    
    5
    %
    
    $
    (225,519
    )
    
    
    (27
    %)U.S. Land Well-servicing
    
    
    148,626
    
    
    
    156,243
    
    
    
    199,944
    
    
    
    (7,617
    )
    
    
    (5
    %)
    
    
    (43,701
    )
    
    
    (22
    %)U.S. Offshore
    
    
    59,179
    
    
    
    51,508
    
    
    
    65,328
    
    
    
    7,671
    
    
    
    15
    %
    
    
    (13,820
    )
    
    
    (21
    %)Alaska
    
    
    52,603
    
    
    
    37,394
    
    
    
    17,542
    
    
    
    15,209
    
    
    
    41
    %
    
    
    19,852
    
    
    
    113
    %Canada
    
    
    61,040
    
    
    
    87,046
    
    
    
    185,117
    
    
    
    (26,006
    )
    
    
    (30
    %)
    
    
    (98,071
    )
    
    
    (53
    %)International
    
    
    407,675
    
    
    
    332,283
    
    
    
    208,705
    
    
    
    75,392
    
    
    
    23
    %
    
    
    123,578
    
    
    
    59
    %Subtotal Contract
Drilling(3)
    
    
    1,357,702
    
    
    
    1,260,776
    
    
    
    1,498,457
    
    
    
    96,926
    
    
    
    8
    %
    
    
    (237,681
    )
    
    
    (16
    %)Oil and Gas(4)(5)
    
    
    (228,027
    )
    
    
    56,133
    
    
    
    4,065
    
    
    
    (284,160
    )
    
    
    (506
    %)
    
    
    52,068
    
    
    
    n/m
    (6)Other Operating Segments
(7)(8)
    
    
    68,572
    
    
    
    35,273
    
    
    
    30,028
    
    
    
    33,299
    
    
    
    94
    %
    
    
    5,245
    
    
    
    17
    %Other reconciling items (11)
    
    
    (164,530
    )
    
    
    (136,363
    )
    
    
    (135,951
    )
    
    
    (28,167
    )
    
    
    (21
    %)
    
    
    (412
    )
    
    
    0
    %Total
    
    
    1,033,717
    
    
    
    1,215,819
    
    
    
    1,396,599
    
    
    
    (182,102
    )
    
    
    (15
    %)
    
    
    (180,780
    )
    
    
    (13
    %)Interest expense
    
    
    (91,620
    )
    
    
    (53,702
    )
    
    
    (46,586
    )
    
    
    (37,918
    )
    
    
    (71
    %)
    
    
    (7,116
    )
    
    
    (15
    %)Investment (loss) income
    
    
    21,726
    
    
    
    (15,891
    )
    
    
    102,007
    
    
    
    37,617
    
    
    
    237
    %
    
    
    (117,898
    )
    
    
    (116
    %)(Losses) gains on sales, retirements and
impairments of long-lived assets and
other income (expense), net
    
    
    (7,613
    )
    
    
    (10,895
    )
    
    
    (24,118
    )
    
    
    3,282
    
    
    
    30
    %
    
    
    13,223
    
    
    
    55
    %Goodwill and intangible asset impairment
(12)
    
    
    (154,586
    )
    
    
    
    
    
    
    
    
    
    
    (154,586
    )
    
    
    (100
    %)
    
    
    
    
    
    
    Income from continuing operations before
income taxes
    
    $
    801,624
    
    
    $
    1,135,331
    
    
    $
    1,427,902
    
    
    $
    (333,707
    )
    
    
    (29
    %)
    
    $
    (292,571
    )
    
    
    (20
    %)Rig activity:Rig years: (13)U.S. Lower 48 Land Drilling
    
    
    247.9
    
    
    
    229.4
    
    
    
    255.5
    
    
    
    18.5
    
    
    
    8
    %
    
    
    (26.1
    )
    
    
    (10
    %)U.S. Offshore
    
    
    17.6
    
    
    
    15.8
    
    
    
    16.4
    
    
    
    1.8
    
    
    
    11
    %
    
    
    (0.6
    )
    
    
    (4
    %)Alaska
    
    
    10.9
    
    
    
    8.7
    
    
    
    8.6
    
    
    
    2.2
    
    
    
    25
    %
    
    
    0.1
    
    
    
    1
    %Canada
    
    
    35.5
    
    
    
    36.7
    
    
    
    53.3
    
    
    
    (1.2
    )
    
    
    (3
    %)
    
    
    (16.6
    )
    
    
    (31
    %)International (14)
    
    
    120.5
    
    
    
    115.2
    
    
    
    97.1
    
    
    
    5.3
    
    
    
    5
    %
    
    
    18.1
    
    
    
    19
    %Total rig years
    
    
    432.4
    
    
    
    405.8
    
    
    
    430.9
    
    
    
    26.6
    
    
    
    7
    %
    
    
    (25.1
    )
    
    
    (6
    %)Rig hours: (15)U.S. Land Well-servicing
    
    
    1,090,511
    
    
    
    1,119,497
    
    
    
    1,256,141
    
    
    
    (28,986
    )
    
    
    (3
    %)
    
    
    (136,644
    )
    
    
    (11
    %)Canada Well-servicing
    
    
    248,032
    
    
    
    283,471
    
    
    
    360,129
    
    
    
    (35,439
    )
    
    
    (13
    %)
    
    
    (76,658
    )
    
    
    (21
    %)Total rig hours
    
    
    1,338,543
    
    
    
    1,402,968
    
    
    
    1,616,270
    
    
    
    (64,425
    )
    
    
    (5
    %)
    
    
    (213,302
    )
    
    
    (13
    %)
 
 (1)
    
    All segment information excludes the Sea Mar business, which has been classified as a
discontinued operation.(2)
    
    These segments include our drilling, workover and well-servicing operations, on land and
offshore.(3)
    
    Includes earnings (losses), net from unconsolidated affiliates, accounted for by the equity
method, of $5.8 million, $5.6 million and $4.0 million for the years ended December 31, 2008,
2007 and 2006, respectively. 22




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##### Table of Contents



(4)
    
    Represents our oil and gas exploration, development and production operations. Includes
$228.3 million, representing our proportionate share, of non-cash pre-tax full cost ceiling
test writedowns from our U.S., international and Canadian joint ventures and non-cash pre-tax
impairment charges of $21.5 million under application of the successful efforts method of
accounting from our wholly owned Ramshorn business unit related to oil and gas properties.(5)
    
    Includes earnings (losses), net from unconsolidated affiliates, accounted for by the equity
method, of $(241.4) million, $(3.9) million and $0 for the years ended December 31, 2008, 2007
and 2006, respectively.(6)
    
    The percentage is so large that it is not meaningful.(7)
    
    Includes our drilling technology and top drive manufacturing, directional drilling, rig
instrumentation and software, and construction and logistics operations.(8)
    
    Includes earnings (losses), net from unconsolidated affiliates, accounted for by the equity
method, of $5.8 million, $16.0 million and $16.5 million for the years ended December 31,
2008, 2007 and 2006, respectively.(9)
    
    Represents the elimination of inter-segment transactions.(10)
    
    Adjusted income derived from operating activities is computed by: subtracting direct costs,
general and administrative expenses, depreciation and amortization, and depletion expense from
Operating revenues and then adding Earnings from unconsolidated affiliates. Such amounts
should not be used as a substitute to those amounts reported under GAAP. However, management
evaluates the performance of our business units and the consolidated company based on several
criteria, including adjusted income derived from operating activities, because it believes
that this financial measure is an accurate reflection of the ongoing profitability of our
Company. A reconciliation of this non-GAAP measure to income from continuing operations before
income taxes, which is a GAAP measure, is provided within the above table.(11)
    
    Represents the elimination of inter-segment transactions and unallocated corporate expenses.(12)
    
    Represents non-cash pre-tax goodwill and intangible asset impairment charges recorded during
the three months ended December 31, 2008, all of which related to our Canadian business units.(13)
    
    Excludes well-servicing rigs, which are measured in rig hours. Includes our equivalent
percentage ownership of rigs owned by unconsolidated affiliates. Rig years represent a measure
of the number of equivalent rigs operating during a given period. For example, one rig
operating 182.5 days during a 365-day period represents 0.5 rig years.(14)
    
    International rig years include our equivalent percentage ownership of rigs owned by
unconsolidated affiliates which totaled 3.5 years during the year ended December 31, 2008 and
4.0 years during the years ended December 31, 2007 and 2006, respectively.(15)
    
    Rig hours represents the number of hours that our well-servicing rig fleet operated during
the year. Segment Results of Operations
 Contract Drilling
  U.S. Lower 48 Land Drilling.
 (In thousands, except percentages
    
    Year Ended December 31,
    
    Increase/(Decrease)and rig activity)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Operating revenues and Earnings
from unconsolidated affiliates
    
    $
    1,878,441
    
    
    $
    1,710,990
    
    
    $
    1,890,302
    
    
    $
    167,451
    
    
    
    10
    %
    
    $
    (179,312
    )
    
    
    (9
    %)Adjusted income derived from
operating activities
    
    $
    628,579
    
    
    $
    596,302
    
    
    $
    821,821
    
    
    $
    32,277
    
    
    
    5
    %
    
    $
    (225,519
    )
    
    
    (27
    %)Rig years
    
    
    247.9
    
    
    
    229.4
    
    
    
    255.5
    
    
    
    18.5
    
    
    
    8
    %
    
    
    (26.1
    )
    
    
    (10
    %)
 23




---



##### Table of Contents



U.S. Land Well-servicing.
 (In thousands, except percentages
    
    Year Ended December 31,
    
    Increase/(Decrease)and rig activity)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Operating revenues and Earnings
from unconsolidated affiliates
    
    $
    758,510
    
    
    $
    715,414
    
    
    $
    704,189
    
    
    $
    43,096
    
    
    
    6
    %
    
    $
    11,225
    
    
    
    2
    %Adjusted income derived from
operating activities
    
    $
    148,626
    
    
    $
    156,243
    
    
    $
    199,944
    
    
    $
    (7,617
    )
    
    
    (5
    %)
    
    $
    (43,701
    )
    
    
    (22
    %)Rig hours
    
    
    1,090,511
    
    
    
    1,119,497
    
    
    
    1,256,141
    
    
    
    (28,986
    )
    
    
    (3
    %)
    
    
    (136,644
    )
    
    
    (11
    %)
  U.S. Offshore.
 (In thousands, except percentages
    
    Year Ended December 31,
    
    Increase/(Decrease)and rig activity)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Operating revenues and Earnings
from unconsolidated affiliates
    
    $
    252,529
    
    
    $
    212,160
    
    
    $
    221,676
    
    
    $
    40,369
    
    
    
    19
    %
    
    $
    (9,516
    )
    
    
    (4
    %)Adjusted income derived from
operating activities
    
    $
    59,179
    
    
    $
    51,508
    
    
    $
    65,328
    
    
    $
    7,671
    
    
    
    15
    %
    
    $
    (13,820
    )
    
    
    (21
    %)Rig years
    
    
    17.6
    
    
    
    15.8
    
    
    
    16.4
    
    
    
    1.8
    
    
    
    11
    %
    
    
    (0.6
    )
    
    
    (4
    %)
   Alaska.
 (In thousands, except percentages
    
    Year Ended December 31,
    
    Increaseand rig activity)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Operating revenues and Earnings
from unconsolidated affiliates
    
    $
    184,243
    
    
    $
    152,490
    
    
    $
    110,718
    
    
    $
    31,753
    
    
    
    21
    %
    
    $
    41,772
    
    
    
    38
    %Adjusted income derived from
operating activities
    
    $
    52,603
    
    
    $
    37,394
    
    
    $
    17,542
    
    
    $
    15,209
    
    
    
    41
    %
    
    $
    19,852
    
    
    
    113
    %Rig years
    
    
    10.9
    
    
    
    8.7
    
    
    
    8.6
    
    
    
    2.2
    
    
    
    25
    %
    
    
    0.1
    
    
    
    1
    %
  Canada.
 24




---



##### Table of Contents



(In thousands, except percentages
    
    Year Ended December 31,
    
    Increase/(Decrease)and rig activity)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Operating revenues and Earnings
from unconsolidated affiliates
    
    $
    502,695
    
    
    $
    545,035
    
    
    $
    686,889
    
    
    $
    (42,340
    )
    
    
    (8
    %)
    
    $
    (141,854
    )
    
    
    (21
    %)Adjusted income derived from
operating activities
    
    $
    61,040
    
    
    $
    87,046
    
    
    $
    185,117
    
    
    $
    (26,006
    )
    
    
    (30
    %)
    
    $
    (98,071
    )
    
    
    (53
    %)Rig years  Drilling
    
    
    35.5
    
    
    
    36.7
    
    
    
    53.3
    
    
    
    (1.2
    )
    
    
    (3
    %)
    
    
    (16.6
    )
    
    
    (31
    %)Rig hours  Well-servicing
    
    
    248,032
    
    
    
    283,471
    
    
    
    360,129
    
    
    
    (35,439
    )
    
    
    (13
    %)
    
    
    (76,658
    )
    
    
    (21
    %)
  International.
 (In thousands, except percentages
    
    Year Ended December 31,
    
    Increaseand rig activity)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Operating revenues and Earnings
from unconsolidated affiliates
    
    $
    1,372,168
    
    
    $
    1,094,802
    
    
    $
    746,460
    
    
    $
    277,366
    
    
    
    25
    %
    
    $
    348,342
    
    
    
    47
    %Adjusted income derived from
operating activities
    
    $
    407,675
    
    
    $
    332,283
    
    
    $
    208,705
    
    
    $
    75,392
    
    
    
    23
    %
    
    $
    123,578
    
    
    
    59
    %Rig years
    
    
    120.5
    
    
    
    115.2
    
    
    
    97.1
    
    
    
    5.3
    
    
    
    5
    %
    
    
    18.1
    
    
    
    19
    %
  Oil and Gas
  Year Ended December 31,
    
    Increase/(Decrease)(In thousands, except percentages)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Operating revenues and Earnings
(losses) from unconsolidated
affiliates
    
    $
    (151,465
    )
    
    $
    152,320
    
    
    $
    59,431
    
    
    $
    (303,785
    )
    
    
    (199
    %)
    
    $
    92,889
    
    
    
    156
    %Adjusted income derived from
operating activities
    
    $
    (228,027
    )
    
    $
    56,133
    
    
    $
    4,065
    
    
    $
    (284,160
    )
    
    
    (506
    %)
    
    $
    52,068
    
    
    
    n/m
    (1)
 
 (1)
    
    The percentage is so large that it is not meaningful.  25




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##### Table of Contents



Other Operating Segments
  Year Ended December 31,
    
    Increase(In thousands, except percentages)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Operating revenues and Earnings
from unconsolidated affiliates
    
    $
    683,186
    
    
    $
    588,483
    
    
    $
    505,286
    
    
    $
    94,703
    
    
    
    16
    %
    
    $
    83,197
    
    
    
    16
    %Adjusted income (loss) derived
from operating activities
    
    $
    68,572
    
    
    $
    35,273
    
    
    $
    30,028
    
    
    $
    33,299
    
    
    
    94
    %
    
    $
    5,245
    
    
    
    17
    %
  Discontinued Operations
 .
 Year Ended December 31,
    
    Increase/(Decrease)(In thousands, except percentages)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Revenues
    
    $
    
    
    
    $
    58,887
    
    
    $
    112,873
    
    
    $
    (58,887
    )
    
    
    (100
    %)
    
    $
    (53,986
    )
    
    
    (48
    %)Income from discontinued
operations, net of tax
    
    $
    
    
    
    $
    35,024
    
    
    $
    27,727
    
    
    $
    (35,024
    )
    
    
    (100
    %)
    
    $
    7,297
    
    
    
    26
    %
  26




---



##### Table of Contents



OTHER FINANCIAL INFORMATION
 General and administrative expenses
 Year Ended December 31,
    
    Increase/(Decrease)(In thousands, except percentages)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006General and administrative expenses
    
    $
    479,984
    
    
    $
    436,282
    
    
    $
    416,610
    
    
    $
    43,702
    
    
    
    10
    %
    
    $
    19,672
    
    
    
    5
    %General and administrative
expenses as a percentage of
operating revenues
    
    
    8.7
    %
    
    
    8.8
    %
    
    
    8.9
    %
    
    
    (.1
    %)
    
    
    (1
    %)
    
    
    (.1
    %)
    
    
    (1
    %)
  Depreciation and amortization, and depletion expense
 Year Ended December 31,
    
    Increase/(Decrease)(In thousands, except percentages)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Depreciation and amortization expense
    
    $
    611,066
    
    
    $
    467,730
    
    
    $
    364,653
    
    
    $
    143,336
    
    
    
    31
    %
    
    $
    103,077
    
    
    
    28
    %Depletion expense
    
    $
    46,979
    
    
    $
    72,182
    
    
    $
    38,580
    
    
    $
    (25,203
    )
    
    
    (35
    %)
    
    $
    33,602
    
    
    
    87
    %
 Depreciation and amortization expense.
 Depletion expense.
  Interest expense
 Year Ended December 31,
    
    Increase(In thousands, except percentages)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Interest expense
    
    $
    91,620
    
    
    $
    53,702
    
    
    $
    46,586
    
    
    $
    37,918
    
    
    
    71
    %
    
    $
    7,116
    
    
    
    15
    %
   Investment income (loss)
 Year Ended December 31,
    
    Increase/(Decrease)(In thousands, except percentages)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Investment income (loss)
    
    $
    21,726
    
    
    $
    (15,891
    )
    
    $
    102,007
    
    
    $
    37,617
    
    
    
    237
    %
    
    $
    (117,898
    )
    
    
    (116
    %)
   27




---



##### Table of Contents



Gains (losses) on sales, retirements and impairments of long-lived assets and other income
(expense), net
 Year Ended December 31,
    
    Increase/(Decrease)(In thousands, except percentages)
    
    2008
    
    2007
    
    2006
    
    2008 to 2007
    
    2007 to 2006Gains (losses) on sales,
retirements and impairments of
long-lived assets and other
income (expense), net
    
    $
    (7,613
    )
    
    $
    (10,895
    )
    
    $
    (24,118
    )
    
    $
    3,282
    
    
    
    30
    %
    
    $
    13,223
    
    
    
    55
    %
   Goodwill and intangible asset impairment
 Year Ended December 31,(In thousands, except percentages)
    
    2008
    
    2007
    
    2006Goodwill and intangible asset impairment
    
    $
    154,586
    
    
    
    
    
    
    
    
  Income tax rate
 Year Ended December 31,2008
    
    2007
    
    2006Effective income tax rate from continuing operations
    
    
    31
    %
    
    
    21
    %
    
    
    30
    %
   28




---



##### Table of Contents



Liquidity and Capital Resources
 Cash Flows
  Operating Activities.
 Investing Activities.
 Financing Activities.
 29




---



##### Table of Contents



Future Cash Requirements
         30




---



##### Table of Contents



Payments due by Period(In thousands)
    
    Total
    
    < 1 Year
    
    1-3 Years
    
    3-5 Years
    
    Thereafter
    
    OtherContractual cash obligations:Long-term debt: (1)Principal
    
    $
    4,126,008
    
    
    $
    225,288
    (2)
    
    $
    2,650,553
    (3)
    
    $
    275,167
    (4)
    
    $
    975,000
    (5)
    
    $
    Interest
    
    
    702,235
    
    
    
    110,683
    
    
    
    186,961
    
    
    
    134,760
    
    
    
    269,831
    
    
    
    Operating leases (6)
    
    
    46,254
    
    
    
    20,209
    
    
    
    16,869
    
    
    
    4,887
    
    
    
    4,289
    
    
    
    Purchase commitments (7)
    
    
    685,293
    
    
    
    681,922
    
    
    
    3,371
    
    
    
    
    
    
    
    
    
    
    
    Employment contracts (6)
    
    
    22,225
    
    
    
    6,906
    
    
    
    10,525
    
    
    
    4,794
    
    
    
    
    
    
    
    Pension funding obligations (8)
    
    
    750
    
    
    
    750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax reserves (9)
    
    
    70,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,447Total contractual cash obligations
    
    $
    5,653,212
    
    
    $
    1,045,758
    
    
    $
    2,868,279
    
    
    $
    419,608
    
    
    $
    1,249,120
    
    
    $
    70,447
 
 (1)
    
    See Note 10 in Part II, Item 8.  Financial Statements and Supplementary Data.(2)
    
    Represents Nabors Holdings $225 million 4.875% senior notes due August 2009. In January
and through February 23, 2009, we repurchased $56.6 million par value of our $225 million
principal amount of 4.875% senior notes due August 2009 in the open market for cash totaling
$56.8 million.(3)
    
    Includes Nabors Delawares $2.75 billion 0.94% senior exchangeable notes due May 2011.
In 2008 we purchased $100 million par value of these notes in the open market, leaving $2.65
billion par value outstanding at December 31, 2008. During January and through February 23,
2009, we purchased an additional $427.7 million par value of these notes in the open market
for cash totaling $370.6 million.(4)
    
    Includes Nabors Delawares $275 million 5.375% senior notes due August 2012.(5)
    
    Represents Nabors Delawares aggregate $975 million 6.15% senior notes due February 2018.(6)
    
    See Note 15 in Part II, Item 8.   Financial Statements and Supplementary Data.(7)
    
    Purchase commitments include agreements to purchase goods or services that are
enforceable and legally binding and that specify all significant terms, including: fixed or
minimum quantities to be purchased; fixed, minimum or variable pricing provisions; and the
approximate timing of the transaction.(8)
    
    See Note 13 in Part II, Item 8.  Financial Statements and Supplementary Data.(9)
    
    Tax reserves are included in Other due to the difficulty in making reasonably reliable
estimates of the timing of cash settlements to taxing authorities. See Note 11 in Part II,
Item 8.   Financial Statements and Supplementary Data.    Financial Condition and Sources of Liquidity
  31




---



##### Table of Contents



(In thousands)Credit available
    
    $
    295,045Letters of credit outstanding
    
    
    174,156Remaining availability
    
    $
    120,889
     Off-Balance Sheet Arrangements (Including Guarantees)
  32




---



##### Table of Contents



Maximum Amount(In thousands)
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    TotalFinancial standby letters of credit
and other financial surety instruments
    
    $
    143,444
    
    
    $
    12,277
    
    
    $
    965
    
    
    $
    
    
    
    $
    156,686Contingent consideration in acquisition
    
    
    
    
    
    
    2,125
    
    
    
    2,125
    
    
    
    
    
    
    
    4,250Total
    
    $
    143,444
    
    
    $
    14,402
    
    
    $
    3,090
    
    
    $
    
    
    
    $
    160,936
 Other Matters
 Recent Legislation
and Actions
   Recent Accounting Pronouncements
    33




---



##### Table of Contents



34




---



##### Table of Contents



Related-Party Transactions
     Critical Accounting Estimates
  35




---



##### Table of Contents




    
    it requires assumptions to be made that were uncertain at the time the estimate was made;
and
    
    changes in the estimate or different estimates that could have been selected could have a
material impact on our consolidated financial position or results of operations.
  Financial Instruments.
  Depreciation of Property, Plant and Equipment.
     36




---



##### Table of Contents



Impairment of Long-Lived Assets.
   Impairment of Goodwill and Intangible Assets.
    37




---



##### Table of Contents



Oil and Gas Properties.
  Income Taxes.
 38




---



##### Table of Contents



Self-Insurance Reserves.
    Fair Value of Assets Acquired and Liabilities Assumed.
 39




---



##### Table of Contents



Share-Based Compensation.
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign Currency Risk.
  Credit Risk.
 40




---



##### Table of Contents



Interest Rate, and Marketable and Non-marketable Security Price Risk.
      Fair Value of Financial Instruments.
 41




---



##### Table of Contents



December 31,2008
    
    
    2007Effective
    
    
    
    
    
    
    
    
    
    
    Effective(In thousands, except interest rates)
    
    Interest Rate
    
    
    Carrying Value
    
    
    Fair Value
    
    
    Interest Rate
    
    
    Carrying Value
    
    
    Fair Value$2.75 billion 0.94% senior
exchangeable notes due May 2011
    
    
    1.16
    %
    
    $
    2,650,000
    (1)
    
    $
    2,199,500
    
    
    
    1.15
    %
    
    $
    2,750,000
    
    
    $
    2,595,3136.15% senior notes due February 2018
    
    
    6.42
    %
    
    
    963,859
    
    
    
    835,244
    
    
    
    
    
    
    
    
    
    
    
    $700 million zero coupon senior
exchangeable notes due June 2023
(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.32
    %
    
    
    700,000
    
    
    
    696,9905.375% senior notes due August 2012
    
    
    5.69
    %(3)
    
    
    272,724
    (4)
    
    
    262,411
    
    
    
    5.69
    % (3)
    
    
    272,097
    (4)
    
    
    279,0434.875% senior notes due August 2009
    
    
    5.10
    %
    
    
    224,829
    
    
    
    227,239
    
    
    
    5.10
    %
    
    
    224,562
    
    
    
    225,709$82.8 million zero coupon
convertible senior debentures due
February 2021 (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.48
    % (6)
    
    
    59,774
    
    
    
    56,897Other
    
    
    4.50
    %
    
    
    1,329
    
    
    
    1,329
    
    
    
    
    
    
    
    
    
    
    
    $
    4,112,741
    
    
    $
    3,525,723
    
    
    
    
    
    
    $
    4,006,433
    
    
    $
    3,853,952
 
 (1)
    
    In 2008 we purchased $100 million par value of these notes in the open market, leaving $2.65
billion par value outstanding at December 31, 2008.(2)
    
    In May 2008 Nabors Delaware called for redemption of all of its $700 million zero coupon
senior exchangeable notes due 2023 and paid cash of $700.0 million to the noteholders during
June and July 2008. The total amount paid to effect the redemption and related exchange was
$700 million in cash and the issuance of approximately 5.25 million of our common shares with
a fair value of $249.8 million, the price equal to the principal amount of the notes plus the
excess of the exchange value of the notes over their principal amount.(3)
    
    Includes the effect of interest savings realized from the interest rate swap executed on
October 21, 2002.(4)
    
    Includes $1.5 million and $1.9 million as of December 31, 2008 and 2007, respectively,
related to the unamortized loss on the interest rate swap that was unwound during the fourth
quarter of 2005.(5)
    
    In June 2008 Nabors Delaware called for redemption the full $82.8 million aggregate principal
amount at maturity of its zero coupon senior convertible debentures due 2021 and in July 2008,
paid cash of $60.6 million; equal to the issue price of $50.4 million plus accrued original
issue discount of $10.2 million.(6)
    
    Represents the rate at which accretion of the original discount at issuance of these
debentures is charged to interest expense. 42




---



##### Table of Contents



December 31,2008
    
    
    2007Weighted-
    
    
    
    
    
    
    
    
    
    
    Weighted-Average
    
    
    
    
    
    
    
    
    
    
    Average(In thousands, except interest rates)
    
    Fair Value
    
    
    Interest Rates
    
    
    Life (Years)
    
    
    Fair Value
    
    
    Interest Rates
    
    
    Life (Years)Cash and cash equivalents
    
    $
    442,087
    
    
    
    .51%-2.0
    %
    
    
    0.00
    
    
    $
    531,306
    
    
    
    3.15%-6.07
    %
    
    
    0.01Short-term investments:Trading equity securities
    
    
    14,263
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale equity securities
    
    
    55,453
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale debt securities:Commercial paper and CDs
    
    
    1,119
    
    
    
    2.75
    %
    
    
    .6
    
    
    
    
    
    
    
    
    
    
    
    Corporate debt securities
    
    
    40,302
    
    
    
    1.5%-14.00
    %
    
    
    3.5
    
    
    
    95,456
    
    
    
    4.38%-7.60
    %
    
    
    0.5U.S. Government debt securities
    
    
    1,816
    
    
    
    6.0
    %
    
    
    .1
    
    
    
    20,048
    
    
    
    3.06%-3.32
    %
    
    
    1.2Government agencies debt
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,634
    
    
    
    4.25%-5.14
    %
    
    
    1.1Mortgage-backed debt securities
    
    
    7,619
    
    
    
    3.98%-5.42
    %
    
    
    .9
    
    
    
    6,788
    
    
    
    2.79%-5.39
    %
    
    
    1.5Mortgage-CMO debt securities
    
    
    15,326
    
    
    
    1.58%-8.73
    %
    
    
    .9
    
    
    
    23,784
    
    
    
    2.49%-5.68
    %
    
    
    0.9Asset-backed debt securities
    
    
    6,260
    
    
    
    .51%-5.19
    %
    
    
    6.3
    
    
    
    50,035
    
    
    
    3.96%-10.53
    %
    
    
    1.1Total available-for-sale debt
securities
    
    
    72,442
    
    
    
    
    
    
    
    
    
    
    
    235,745Total available-for-sale securites
    
    
    127,895
    
    
    
    
    
    
    
    
    
    
    
    235,745Total short-term investments
    
    
    142,158
    
    
    
    
    
    
    
    
    
    
    
    235,745Long-term investments and other
receivables:Actively-managed funds
    
    
    15,710
    
    
    
    N/A
    
    
    
    
    
    
    
    236,253
    
    
    
    N/AOil and gas financing receivables
    
    
    224,242
    
    
    
    13.10%-13.52
    %
    
    
    
    
    
    
    123,281
    
    
    
    13.10%-13.52
    %Total long-term investments and
other receivables
    
    
    239,952
    
    
    
    
    
    
    
    
    
    
    
    359,534Total cash, cash equivalents,
short-term and long-term investments
and other receivables
    
    $
    824,197
    
    
    
    
    
    
    
    
    
    
    $
    1,126,585
  43




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX
 Page No.Report of Independent Registered Public Accounting Firm
    
    
    45Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    46Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006
    
    
    47Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006
    
    
    48Consolidated Statements of Changes in Shareholders Equity for the Years Ended December 31, 2008, 2007 and 2006
    
    
    49Notes to Consolidated Financial Statements
    
    
    52
 44




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal Control
- Integrated Framework
    /s/PricewaterhouseCoopers LLP
 
 45




---



##### Table of Contents



CONSOLIDATED BALANCE SHEETS
Nabors Industries Ltd. and Subsidiaries
 December 31,(In thousands, except per share amounts)
    
    2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    442,087
    
    
    $
    531,306Short-term investments
    
    
    142,158
    
    
    
    235,745Accounts receivable, net
    
    
    1,160,768
    
    
    
    1,039,238Inventory
    
    
    150,118
    
    
    
    133,786Deferred income taxes
    
    
    28,083
    
    
    
    12,757Other current assets
    
    
    243,379
    
    
    
    252,280Total current assets
    
    
    2,166,593
    
    
    
    2,205,112Long-term investments and other receivables
    
    
    239,952
    
    
    
    359,534Property, plant and equipment, net
    
    
    7,282,042
    
    
    
    6,632,612Goodwill
    
    
    175,749
    
    
    
    368,432Investment in unconsolidated affiliates
    
    
    411,727
    
    
    
    404,842Other long-term assets
    
    
    191,919
    
    
    
    132,850Total assets
    
    $
    10,467,982
    
    
    $
    10,103,382LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    225,030
    
    
    $
    700,000Trade accounts payable
    
    
    424,908
    
    
    
    348,524Accrued liabilities
    
    
    367,393
    
    
    
    348,515Income taxes payable
    
    
    111,528
    
    
    
    97,093Total current liabilities
    
    
    1,128,859
    
    
    
    1,494,132Long-term debt
    
    
    3,887,711
    
    
    
    3,306,433Other long-term liabilities
    
    
    261,878
    
    
    
    246,714Deferred income taxes
    
    
    497,415
    
    
    
    541,982Total liabilities
    
    
    5,775,863
    
    
    
    5,589,261Commitments and contingencies (Note 15)Shareholders equity:Common shares, par value $.001 per share:Authorized common shares 800,000; issued 312,343 and 305,458, respectively
    
    
    312
    
    
    
    305Capital in excess of par value
    
    
    1,705,907
    
    
    
    1,710,036Accumulated other comprehensive income
    
    
    53,520
    
    
    
    322,635Retained earnings
    
    
    3,910,253
    
    
    
    3,359,080Less: treasury shares, at cost, 29,414 and 26,122 common shares, respectively
    
    
    (977,873
    )
    
    
    (877,935
    )Total shareholders equity
    
    
    4,692,119
    
    
    
    4,514,121Total liabilities and shareholders equity
    
    $
    10,467,982
    
    
    $
    10,103,382
  46




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF INCOME
Nabors Industries Ltd. and Subsidiaries
 Year Ended December 31,(In thousands, except per share amounts)
    
    2008
    
    
    2007
    
    
    2006Revenues and other income:Operating revenues
    
    $
    5,511,896
    
    
    $
    4,938,848
    
    
    $
    4,707,289Earnings (losses) from unconsolidated affiliates
    
    
    (229,834
    )
    
    
    17,724
    
    
    
    20,545Investment (loss) income
    
    
    21,726
    
    
    
    (15,891
    )
    
    
    102,007Total revenues and other income
    
    
    5,303,788
    
    
    
    4,940,681
    
    
    
    4,829,841Costs and other deductions:Direct costs
    
    
    3,110,316
    
    
    
    2,764,559
    
    
    
    2,511,392General and administrative expenses
    
    
    479,984
    
    
    
    436,282
    
    
    
    416,610Depreciation and amortization
    
    
    611,066
    
    
    
    467,730
    
    
    
    364,653Depletion
    
    
    46,979
    
    
    
    72,182
    
    
    
    38,580Interest expense
    
    
    91,620
    
    
    
    53,702
    
    
    
    46,586Losses (gains) on
sales, retirements and
impairments of
long-lived assets and
other expense (income),
net
    
    
    7,613
    
    
    
    10,895
    
    
    
    24,118Goodwill and intangible asset impairment
    
    
    154,586
    
    
    
    
    
    
    
    Total costs and other deductions
    
    
    4,502,164
    
    
    
    3,805,350
    
    
    
    3,401,939Income from continuing operations before income taxes
    
    
    801,624
    
    
    
    1,135,331
    
    
    
    1,427,902Income tax expense:Current
    
    
    188,832
    
    
    
    227,951
    
    
    
    213,866Deferred
    
    
    61,619
    
    
    
    11,713
    
    
    
    221,027Total income tax expense
    
    
    250,451
    
    
    
    239,664
    
    
    
    434,893Income from continuing operations, net of tax
    
    
    551,173
    
    
    
    895,667
    
    
    
    993,009Income from discontinued operations, net of tax
    
    
    
    
    
    
    35,024
    
    
    
    27,727Net income
    
    $
    551,173
    
    
    $
    930,691
    
    
    $
    1,020,736Earnings per share:Basic from continuing operations
    
    $
    1.98
    
    
    $
    3.21
    
    
    $
    3.42Basic from discontinued operations
    
    
    
    
    
    
    .13
    
    
    
    .10Total Basic
    
    $
    1.98
    
    
    $
    3.34
    
    
    $
    3.52Diluted from continuing operations
    
    $
    1.93
    
    
    $
    3.13
    
    
    $
    3.31Diluted from discontinued operations
    
    
    
    
    
    
    .12
    
    
    
    .09Total Diluted
    
    $
    1.93
    
    
    $
    3.25
    
    
    $
    3.40Weighted-average number of common shares outstanding:Basic
    
    
    278,166
    
    
    
    279,026
    
    
    
    290,241Diluted
    
    
    285,285
    
    
    
    286,606
    
    
    
    299,827
  47




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF CASH FLOWS
Nabors Industries Ltd. and Subsidiaries
 Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    551,173
    
    
    $
    930,691
    
    
    $
    1,020,736Adjustments to net income:Depreciation and amortization
    
    
    611,066
    
    
    
    472,077
    
    
    
    371,127Depletion
    
    
    46,979
    
    
    
    72,182
    
    
    
    38,580Deferred income tax (benefit) expense
    
    
    61,619
    
    
    
    (24,725
    )
    
    
    218,323Deferred financing costs amortization
    
    
    7,661
    
    
    
    8,352
    
    
    
    6,241Pension liability amortization and adjustments
    
    
    160
    
    
    
    277
    
    
    
    484Discount amortization on long-term debt
    
    
    1,824
    
    
    
    1,958
    
    
    
    3,798Amortization of loss on hedges
    
    
    548
    
    
    
    551
    
    
    
    554Goodwill and intangible asset impairment
    
    
    154,586
    
    
    
    
    
    
    
    Losses (gains) on long-lived assets, net
    
    
    9,644
    
    
    
    4,318
    
    
    
    22,648Losses (gains) on investments, net
    
    
    18,736
    
    
    
    61,395
    
    
    
    (46,260
    )Gains on debt retirement, net
    
    
    (23,589
    )
    
    
    
    
    
    
    Gain on disposition of Sea Mar business
    
    
    
    
    
    
    (49,500
    )
    
    
    Losses (gains) on derivative instruments
    
    
    4,783
    
    
    
    1,347
    
    
    
    (1,363
    )Share-based compensation
    
    
    45,401
    
    
    
    30,176
    
    
    
    79,888Foreign currency transaction losses (gains), net
    
    
    (2,718
    )
    
    
    (3,223
    )
    
    
    354Equity in losses (earnings) of unconsolidated affiliates, net of dividends
    
    
    236,763
    
    
    
    (5,136
    )
    
    
    (18,111
    )Changes in operating assets and liabilities, net of effects from acquisitions:Accounts receivable
    
    
    (157,697
    )
    
    
    93,490
    
    
    
    (279,686
    )Inventory
    
    
    (26,774
    )
    
    
    (28,668
    )
    
    
    (48,631
    )Other current assets
    
    
    (81,764
    )
    
    
    (47,959
    )
    
    
    (31,536
    )Other long-term assets
    
    
    (85,231
    )
    
    
    (117,237
    )
    
    
    (106,357
    )Trade accounts payable and accrued liabilities
    
    
    38,129
    
    
    
    4,501
    
    
    
    145,046Income taxes payable
    
    
    24,043
    
    
    
    (80,692
    )
    
    
    71,767Other long-term liabilities
    
    
    10,665
    
    
    
    46,023
    
    
    
    38,656Net cash provided by operating activities
    
    
    1,446,007
    
    
    
    1,370,198
    
    
    
    1,486,258Cash flows from investing activities:Purchases of investments
    
    
    (269,983
    )
    
    
    (378,318
    )
    
    
    (1,135,525
    )Sales and maturities of investments
    
    
    521,613
    
    
    
    860,385
    
    
    
    1,325,903Cash paid for acquisitions of businesses, net
    
    
    (287
    )
    
    
    (8,391
    )
    
    
    (82,407
    )Deposits released on acquisitions
    
    
    
    
    
    
    
    
    
    
    35,844Investment in unconsolidated affiliates
    
    
    (271,309
    )
    
    
    (278,100
    )
    
    
    (2,433
    )Capital expenditures
    
    
    (1,490,162
    )
    
    
    (2,014,469
    )
    
    
    (1,927,407
    )Proceeds from sales of assets and insurance claims
    
    
    69,842
    
    
    
    162,055
    
    
    
    17,556Proceeds from sale of Sea Mar business
    
    
    
    
    
    
    194,332
    
    
    
    Net cash used for investing activities
    
    
    (1,440,286
    )
    
    
    (1,462,506
    )
    
    
    (1,768,469
    )Cash flows from financing activities:Increase (decrease) in cash overdrafts
    
    
    23,858
    
    
    
    (38,416
    )
    
    
    2,154Proceeds from sale of warrants
    
    
    
    
    
    
    
    
    
    
    421,162Purchase of exchangeable note hedge
    
    
    
    
    
    
    
    
    
    
    (583,550
    )Proceeds from long-term debt
    
    
    962,901
    
    
    
    
    
    
    
    2,750,000Debt issuance costs
    
    
    (7,324
    )
    
    
    
    
    
    
    (28,683
    )Proceeds from issuance of common shares
    
    
    56,630
    
    
    
    61,620
    
    
    
    25,682Reduction in long-term debt
    
    
    (836,511
    )
    
    
    
    
    
    
    (769,789
    )Repurchase of common shares
    
    
    (281,101
    )
    
    
    (102,451
    )
    
    
    (1,402,840
    )Purchase of restricted stock
    
    
    (13,061
    )
    
    
    (1,811
    )
    
    
    Tax benefit related to the exercise of stock options
    
    
    5,369
    
    
    
    2,159
    
    
    
    4,139Net cash (used for) provided by financing activities
    
    
    (89,239
    )
    
    
    (78,899
    )
    
    
    418,275Effect of exchange rate changes on cash and cash equivalents
    
    
    (5,701
    )
    
    
    1,964
    
    
    
    (516
    )Net increase (decrease) in cash and cash equivalents
    
    
    (89,219
    )
    
    
    (169,243
    )
    
    
    135,548Cash and cash equivalents, beginning of period
    
    
    531,306
    
    
    
    700,549
    
    
    
    565,001Cash and cash equivalents, end of period
    
    $
    442,087
    
    
    $
    531,306
    
    
    $
    700,549
  48




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##### Table of Contents



CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS EQUITY
Nabors Industries Ltd. and Subsidiaries
 Accumulated Other Comprehensive Income (Loss)UnrealizedCommon
    
    
    
    
    
    
    
    
    
    
    GainsShares
    
    
    Capital in
    
    
    
    
    
    
    (Losses) on
    
    
    Cumulative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalPar
    
    
    Excess of
    
    
    Unearned
    
    
    Marketable
    
    
    Translation
    
    
    
    
    
    
    Retained
    
    
    Treasury
    
    
    Shareholders(In thousands)
    
    Shares
    
    
    Value
    
    
    Par Value
    
    
    Compensation
    
    
    Securities
    
    
    Adjustment
    
    
    Other
    
    
    Earnings
    
    
    Shares
    
    
    EquityBalances, December 31, 2005
    
    
    315,393
    
    
    $
    315
    
    
    $
    1,590,968
    
    
    $
    (15,649
    )
    
    $
    18,865
    
    
    $
    178,109
    
    
    $
    (3,994
    )
    
    $
    1,989,526
    
    
    $
    
    
    
    $
    3,758,140Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,020,736
    
    
    
    
    
    
    
    1,020,736Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,949
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,949
    )Unrealized gains on
marketable securities,
net of income taxes of
$623
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,620Less: reclassification
adjustment for gains
included in net
income, net of income
tax benefit of $12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,085
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,085
    )Pension liability
amortization, net of
income taxes of $179
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    305
    
    
    
    
    
    
    
    
    
    
    
    305Minimum pension liability
adjustment, net of income
taxes of $140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239
    
    
    
    
    
    
    
    
    
    
    
    239Amortization of loss on
cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    151Total comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,535
    
    
    
    (6,949
    )
    
    
    695
    
    
    
    1,020,736
    
    
    
    
    
    
    
    1,029,017Adoption of SFAS 123-R
    
    
    
    
    
    
    
    
    
    
    (15,649
    )
    
    
    15,649
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common shares
for stock options exercised
    
    
    1,226
    
    
    
    1
    
    
    
    25,681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,682Nabors Exchangeco shares
exchanged
    
    
    45
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of call options
    
    
    
    
    
    
    
    
    
    
    (583,550
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (583,550
    )Sale of warrants
    
    
    
    
    
    
    
    
    
    
    421,162
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    421,162Tax benefit from the
purchase of call options
    
    
    
    
    
    
    
    
    
    
    215,914
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215,914Repurchase and retirement
of common shares
    
    
    (17,935
    )
    
    
    (18
    )
    
    
    (90,449
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (536,889
    )
    
    
    
    
    
    
    (627,356
    )Repurchase of 22,340
treasury shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (775,484
    )
    
    
    (775,484
    )Tax effect of exercised
stock option deductions
    
    
    
    
    
    
    
    
    
    
    (6,761
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,761
    )Restricted stock awards, net
    
    
    604
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Share-based compensation
    
    
    
    
    
    
    
    
    
    
    79,888
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,888Subtotal
    
    
    (16,060
    )
    
    
    (16
    )
    
    
    46,236
    
    
    
    15,649
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (536,889
    )
    
    
    (775,484
    )
    
    
    (1,250,504
    )Balances, December 31, 2006
    
    
    299,333
    
    
    $
    299
    
    
    $
    1,637,204
    
    
    $
    
    
    
    $
    33,400
    
    
    $
    171,160
    
    
    $
    (3,299
    )
    
    $
    2,473,373
    
    
    $
    (775,484
    )
    
    $
    3,536,653
  49




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS EQUITY (Continued)
Nabors Industries Ltd. and Subsidiaries
 Accumulated Other Comprehensive Income (Loss)UnrealizedCommon
    
    
    
    
    
    
    GainsShares
    
    
    Capital in
    
    
    (Losses) on
    
    
    Cumulative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalPar
    
    
    Excess of
    
    
    Marketable
    
    
    Translation
    
    
    
    
    
    
    Retained
    
    
    Treasury
    
    
    Shareholders(In thousands)
    
    Shares
    
    
    Value
    
    
    Par Value
    
    
    Securities
    
    
    Adjustment
    
    
    Other
    
    
    Earnings
    
    
    Shares
    
    
    EquityBalances, December 31, 2006
    
    
    299,333
    
    
    $
    299
    
    
    $
    1,637,204
    
    
    $
    33,400
    
    
    $
    171,160
    
    
    $
    (3,299)
    
    
     $
    2,473,373
    
    
    $
    (775,484
    )
    
    $
    3,536,653Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    930,691
    
    
    
    
    
    
    
    930,691Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153,487
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153,487Unrealized gains on
marketable securities,
net of income taxes of
$704
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,164
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,164Less: reclassification
adjustment for gains
included in net
income, net of income
taxes of $2,664
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,283
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (47,283
    )Pension liability
amortization, net of
income taxes of $101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176
    
    
    
    
    
    
    
    
    
    
    
    176Pension liability
adjustment, net of income
taxes of $319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    679
    
    
    
    
    
    
    
    
    
    
    
    679Amortization of loss on
cash flow hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    151Total comprehensive
income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,119
    )
    
    
    153,487
    
    
    
    1,006
    
    
    
    930,691
    
    
    
    
    
    
    
    1,052,065Cumulative effect of
adoption of FIN 48
effective January 1, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,984
    )
    
    
    
    
    
    
    (44,984
    )Issuance of common shares
for stock options
exercised, net of surrender
of unexercised stock
options
    
    
    4,521
    
    
    
    5
    
    
    
    61,615
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,620Nabors Exchangeco shares
exchanged
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repurchase of 3,782
treasury shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102,451
    )
    
    
    (102,451
    )Tax effect of exercised
stock option deductions
    
    
    
    
    
    
    
    
    
    
    (17,147
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,147
    )Restricted stock awards, net
    
    
    1,553
    
    
    
    1
    
    
    
    (1,812
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,811
    )Share-based compensation,
net of tender offer for
stock options
    
    
    
    
    
    
    
    
    
    
    30,176
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,176Subtotal
    
    
    6,125
    
    
    
    6
    
    
    
    72,832
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,984
    )
    
    
    (102,451
    )
    
    
    (74,597
    )Balances, December 31, 2007
    
    
    305,458
    
    
    $
    305
    
    
    $
    1,710,036
    
    
    $
    281
    
    
    $
    324,647
    
    
    $
    (2,293)
    
    
    $
    3,359,080
    
    
    $
    (877,935
    )
    
    $
    4,514,121
  50




---



##### Table of Contents



CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS EQUITY (Continued)
Nabors Industries Ltd. and Subsidiaries
 Accumulated Other Comprehensive Income (Loss)UnrealizedCommon
    
    
    
    
    
    
    GainsShares
    
    
    Capital in
    
    
    (Losses) on
    
    
    Cumulative
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalPar
    
    
    Excess of
    
    
    Marketable
    
    
    Translation
    
    
    
    
    
    
    Retained
    
    
    Treasury

    
    
    Shareholders(In thousands)
    
    Shares
    
    
    Value
    
    
    Par Value
    
    
    Securities
    
    
    Adjustment
    
    
    Other
    
    
    Earnings
    
    
    Shares
    
    
    EquityBalances, December 31, 2007
    
    
    305,458
    
    
    $
    305
    
    
    $
    1,710,036
    
    
    $
    281
    
    
    $
    324,647
    
    
    $
    (2,293
    )
    
    $
    3,359,080
    
    
    $
    (877,935
    )
    
    $
    4,514,121Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    551,173
    
    
    
    
    
    
    
    551,173Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (228,865
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (228,865
    )Unrealized losses on marketable
securities, net of income tax
benefit of $4,374
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,190
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,190
    )Less: reclassification
adjustment for gains
included in net income, net
of income taxes of $129
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )Pension liability amortization,
net of income taxes of $56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    104Pension liability adjustment,
net of income tax benefit of $1,915

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,009
    )
    
    
    
    
    
    
    
    
    
    
    (3,009
    )Unrealized gain and
amortization of gains/(losses)
on cash flow hedges, net of
income taxes of $163
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (104
    )
    
    
    
    
    
    
    
    
    
    
    (104
    )Total comprehensive income
(loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,241
    )
    
    
    (228,865
    )
    
    
    (3,009
    )
    
    
    551,173
    
    
    
    
    
    
    
    282,058Issuance of common shares for
stock options exercised
    
    
    2,480
    
    
    
    2
    
    
    
    56,628
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,630Nabors Exchangeco shares exchanged
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of 5,246 treasury shares
related to conversion of notes
    
    
    
    
    
    
    
    
    
    
    (181,163
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,163
    
    
    
    Repurchase of 8,538 treasury
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (281,101
    )
    
    
    (281,101
    )Tax benefit related to the
redemption of convertible debt
    
    
    
    
    
    
    
    
    
    
    81,789
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,789Tax benefit related to stock
option exercises
    
    
    
    
    
    
    
    
    
    
    6,282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,282Restricted stock awards, net
    
    
    4,389
    
    
    
    5
    
    
    
    (13,066
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,061
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    45,401
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,401Subtotal
    
    
    6,885
    
    
    
    7
    
    
    
    (4,129
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99,938
    )
    
    
    (104,060
    )Balances, December 31, 2008
    
    
    312,343
    
    
    $
    312
    
    
    $
    1,705,907
    
    
    $
    (36,960
    )
    
    $
    95,782
    
    
    $
    (5,302
    )
    
    $
    3,910,253
    
    
    $
    (977,873
    )
    
    $
    4,692,119
  51




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1 Nature of Operations
       Note 2 Summary of Significant Accounting Policies
 Principles of Consolidation
  52




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##### Table of Contents



Cash and Cash Equivalents
  Investments
 Short-term investments
   Long-term investments and other receivables
  Inventory
  Property, Plant and Equipment
   53




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##### Table of Contents



Oil and Gas Properties
   Goodwill
  54




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##### Table of Contents



Acquisitions and
    
    
    
    
    
    
    CumulativeBalance as of
    
    
    Purchase Price
    
    
    Sales and
    
    
    Translation
    
    
    Balance as of(In thousands)
    
    December 31, 2006
    
    
    Adjustments
    
    
    Disposals
    
    
    Adjustment
    
    
    December 31, 2007Contract Drilling:U.S. Lower 48 Land Drilling
    
    $
    30,154
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30,154U.S. Land Well-servicing
    
    
    50,839
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,839U.S. Offshore
    
    
    18,003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,003Alaska
    
    
    19,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,995Canada
    
    
    154,157
    
    
    
    
    
    
    
    
    
    
    
    27,110
    
    
    
    181,267International
    
    
    18,983
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,983Subtotal Contract Drilling
    
    
    292,131
    
    
    
    
    
    
    
    
    
    
    
    27,110
    
    
    
    319,241Other Operating Segments
    
    
    70,138
    
    
    
    8,391
    
    
    
    (34,989
    ) (1)
    
    
    5,651
    
    
    
    49,191Total
    
    $
    362,269
    
    
    $
    8,391
    
    
    $
    (34,989
    )
    
    $
    32,761
    
    
    $
    368,432
 Acquisitions and
    
    
    Sales,
    
    
    CumulativeBalance as of
    
    
    Purchase Price
    
    
    Disposals and
    
    
    Translation
    
    
    Balance as of(In thousands)
    
    December 31, 2007
    
    
    Adjustments
    
    
    Impairments
    
    
    Adjustment
    
    
    December 31, 2008Contract Drilling:U.S. Lower 48 Land Drilling
    
    $
    30,154
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    30,154U.S. Land Well-servicing
    
    
    50,839
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,839U.S. Offshore
    
    
    18,003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,003Alaska
    
    
    19,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,995Canada
    
    
    181,267
    
    
    
    
    
    
    
    (145,447
    ) (2)
    
    
    (35,820
    )
    
    
    International
    
    
    18,983
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,983Subtotal Contract Drilling
    
    
    319,241
    
    
    
    
    
    
    
    (145,447
    )
    
    
    (35,820
    )
    
    
    137,974Other Operating Segments
    
    
    49,191
    
    
    
    284
    
    
    
    (4,561
    ) (3)
    
    
    (7,139
    )
    
    
    37,775Total
    
    $
    368,432
    
    
    $
    284
    
    
    $
    (150,008
    )
    
    $
    (42,959
    )
    
    $
    175,749
 
 (1)
    
    Represents goodwill associated with our Sea Mar business which was sold in August
2007.(2)
    
    Represents goodwill impairment associated with our Canada Well-servicing and
Drilling segment primarily relating to acquisitions of Enserco Energy Services Company, Inc.
in 2002 and Command Drilling Corporation in 2001.(3)
    
    Represents goodwill impairment associated with Nabors Blue Sky Ltd. in our Other
Operating segment.  Derivative Financial Instruments
  Litigation and Insurance Reserves
  55




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##### Table of Contents



Revenue Recognition
      Share-Based Compensation
  Income Taxes
      56




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##### Table of Contents



Foreign Currency Translation
  Cash Flows
  Use of Estimates
  
    
    financial instruments;
    
    depreciation and amortization of property, plant and equipment;
    
    impairment of long-lived assets;
    
    impairment of goodwill and intangible assets;
    
    impairment of oil and gas properties;
    
    income taxes;
    
    litigation and self-insurance reserves;
    
    fair value of assets acquired and liabilities assumed; and
    
    share-based compensation.
 Recent Accounting Pronouncements
   57




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58




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##### Table of Contents



Note 3 Financial Instruments
    59




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##### Table of Contents



Recurring Fair Value Measurements
    
    At Fair Value as of December 31, 2008Level
    
    
    Level
    
    
    Level(In thousands)
    
    1
    
    
    2
    
    
    3
    
    
    TotalAssets:Short-term investments:Available-for-sale equity securities
    
    $
    55,453
    
    
    $
    
    
    
    $
    
    
    
    $
    55,453Available-for-sale debt securities
    
    
    47,825
    
    
    
    24,617
    
    
    
    
    
    
    
    72,442Trading securities
    
    
    14,263
    
    
    
    
    
    
    
    
    
    
    
    14,263Total investments
    
    $
    117,541
    
    
    $
    24,617
    
    
    $
    
    
    
    $
    142,158Liabilities:Derivative contract
    
    $
    
    
    
    $
    4,723
    
    
    $
    
    
    
    $
    4,723
 Note 4 Share-Based Compensation
    Stock Option Plans
     60




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##### Table of Contents



Weighted-Average
    
    
    AggregateOptions
    
    
    
    
    
    Weighted-Average
    
    
    Remaining
    
    
    Intrinsic(In thousands, except exercise price)
    
    Shares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    ValueOptions outstanding as of December 31, 2007
    
    
    28,354
    
    
    $
    22.06Granted
    
    
    
    
    
    
    Exercised
    
    
    (2,480
    )
    
    
    22.84Forfeited
    
    
    (16
    )
    
    
    26.29Options outstanding as of December 31, 2008
    
    
    25,858
    
    
    $
    21.99
    
    
    4.05 years
    
    $
    663Options exercisable as of December 31, 2008
    
    
    25,858
    
    
    $
    21.99
    
    
    4.05 years
    
    $
    663
   Weighted-AverageNonvested Stock Options
    
    
    
    
    
    Grant-Date Fair(In thousands, except fair values)
    
    Outstanding
    
    
    ValueNonvested as of December 31, 2007
    
    
    602
    
    
    $
    7.19Granted
    
    
    
    
    
    
    Vested
    
    
    (598
    )
    
    
    7.19Forfeited
    
    
    (4
    )
    
    
    6.95Nonvested as of December 31, 2008
    
    
    
    
    
    $
    
   Restricted Stock and Restricted Stock Units
   Weighted-AverageRestricted Stock
    
    
    
    
    
    Grant-Date Fair(In thousands, except fair values)
    
    Outstanding
    
    
    ValueNonvested as of December 31, 2007
    
    
    2,500
    
    
    $
    30.47Granted
    
    
    4,983
    
    
    
    20.68Vested
    
    
    (1,383
    )
    
    
    31.03Forfeited
    
    
    (142
    )
    
    
    30.55Nonvested as of December 31, 2008
    
    
    5,958
    
    
    $
    22.25
 61




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##### Table of Contents



Note 5 Acquisitions
   Note 6 Cash and Cash Equivalents and Investments
  December 31,(In thousands)
    
    2008
    
    
    2007Cash and cash equivalents
    
    $
    442,087
    
    
    $
    531,306Short-term investments:Trading equity securities
    
    
    14,263
    
    
    
    Available-for-sale equity securities
    
    
    55,453
    
    
    
    Available-for-sale debt securities
    
    
    72,442
    
    
    
    235,745Total short-term investments
    
    
    142,158
    
    
    
    235,745Long-term investments and other receivables
    
    
    239,952
    
    
    
    359,534Total cash and cash equivalents and investments
    
    $
    824,197
    
    
    $
    1,126,585
  December 31,2008
    
    
    2007Gross
    
    
    Gross
    
    
    
    
    
    
    Gross
    
    
    GrossUnrealized
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized
    
    
    UnrealizedFair
    
    
    Holding
    
    
    Holding
    
    
    Fair
    
    
    Holding
    
    
    Holding(In thousands)
    
    Value
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Gains
    
    
    LossesCash and cash equivalents
    
    $
    442,087
    
    
    $
    
    
    
    $
    
    
    
    $
    531,306
    
    
    $
    
    
    
    $
    Short-term investments:Trading equity securities
    
    
    14,263
    
    
    
    8,538
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Available-for-sale equity securities
    
    
    55,453
    
    
    
    23,440
    
    
    
    (30,449
    )
    
    
    
    
    
    
    
    
    
    
    Available-for-sale debt securities:Commercial paper and CDs
    
    
    1,119
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 62




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##### Table of Contents



December 31,2008
    
    
    2007Gross
    
    
    Gross
    
    
    
    
    
    
    Gross
    
    
    GrossUnrealized
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized
    
    
    UnrealizedFair
    
    
    Holding
    
    
    Holding
    
    
    Fair
    
    
    Holding
    
    
    Holding(In thousands)
    
    Value
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Gains
    
    
    LossesCorporate debt securities
    
    
    40,302
    
    
    
    
    
    
    
    (32,322
    )
    
    
    95,456
    
    
    
    
    
    
    
    (22
    )U.S. Government debt securities
    
    
    1,816
    
    
    
    
    
    
    
    
    
    
    
    20,048
    
    
    
    257
    
    
    
    Government agencies debt securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,634
    
    
    
    245
    
    
    
    Mortgage-backed debt securities
    
    
    7,619
    
    
    
    13
    
    
    
    (152
    )
    
    
    6,788
    
    
    
    27
    
    
    
    Mortgage-CMO debt securities
    
    
    15,326
    
    
    
    160
    
    
    
    (782
    )
    
    
    23,784
    
    
    
    22
    
    
    
    Asset-backed debt securities
    
    
    6,260
    
    
    
    
    
    
    
    (1,150
    )
    
    
    50,035
    
    
    
    
    
    
    
    (29
    )Total available-for-sale debt securities
    
    
    72,442
    
    
    
    173
    
    
    
    (34,406
    )
    
    
    235,745
    
    
    
    551
    
    
    
    (51
    )Total available-for-sale securities
    
    
    127,895
    
    
    
    23,613
    
    
    
    (64,855
    )
    
    
    235,745
    
    
    
    551
    
    
    
    (51
    )Total short-term investments
    
    
    142,158
    
    
    
    32,151
    
    
    
    (64,855
    )
    
    
    235,745
    
    
    
    
    
    
    
    Total cash, cash equivalents and
short-term investments
    
    $
    584,245
    
    
    $
    32,151
    
    
    $
    (64,855
    )
    
    $
    767,051
    
    
    $
    551
    
    
    $
    (51
    )
   As of December 31, 2008Less Than 12 Months
    
    
    More Than 12 MonthsGross
    
    
    
    
    
    
    GrossUnrealized
    
    
    
    
    
    
    Unrealized(In thousands)
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    LossAvailable-for-sale equity securities (1)
    
    $
    16,298
    
    
    $
    30,449
    
    
    $
    
    
    
    $
    Available-for-sale debt securities:Corporate debt securities (2)
    
    
    34,793
    
    
    
    31,963
    
    
    
    5,509
    
    
    
    359Mortgage-backed debt securities (3)
    
    
    
    
    
    
    
    
    
    
    5,374
    
    
    
    152Mortgage-CMO debt securities (3)
    
    
    
    
    
    
    
    
    
    
    7,867
    
    
    
    782Asset-backed debt securities (3)
    
    
    
    
    
    
    
    
    
    
    6,251
    
    
    
    1,150Total available-for-sale debt securities
    
    
    34,793
    
    
    
    31,963
    
    
    
    25,001
    
    
    
    2,443Total
    
    $
    51,091
    
    
    $
    62,412
    
    
    $
    25,001
    
    
    $
    2,443
 
 (1)
    
    Our unrealized loss on investments in equity securities represents a single investment of
approximately $45 million. The severity of the impairment and the duration of the impairment,
which is less than 3 months, correlates with the deteriorating global economic environment
during late 2008. We have evaluated the near-term prospects of the issuer in relation to the
severity and duration of the impairment. As of December 31, 2008, we do not consider a
3-month decline in the trading price per share of this investment to be other-than-temporarily
impaired.(2)
    
    Our unrealized loss on investments held less than a year in corporate debt securities
primarily relates to a single $65 million investment in MBIA Inc. These bonds were rated A
by Standard & Poors and Baa3 by Moodys as of December 31, 2008. We currently do not
believe it is probable that we will be unable to collect all amounts due according to the
contractual terms of the investment. The impairment of this investment was evaluated based on
a variety of factors, including the length of time and extent to which the market value has
been less than cost, the financial condition of the issuer of the security, and our intent and
ability to hold the security to recovery. Based on that evaluation and our ability and intent
to hold this investment until a recovery of fair value, which may not be until maturity, we
do not consider this investment to be other-than-temporarily impaired at December 31, 2008.(3)
    
    Our unrealized losses on available-for-sale debt securities held for more than one year are
comprised of various types of securities, seven of which have impairment greater than $.1
million or 62% of the $2.4 milion gross unrealized losses. Each security has a rating from
A to AAA from Standard & Poors and A2 to Aaa from Moodys and is considered of high
credit quality. We have the ability and intent to hold these investments until a recovery of
fair value, which may not be until maturity, and do not consider these investments to be
other- than-temporarily impaired at December 31, 2008.  EstimatedFair Value(In thousands)
    
    2008Debt securities:Due in one year or less
    
    $
    6,215Due after one year through five years
    
    
    5,532Due in more than five years
    
    
    60,695Total debt securities
    
    $
    72,442
 63




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##### Table of Contents



Year Ended December 31,(In thousands)
    
    2008
    
    2007
    
    2006Available-for-sale:Proceeds from sales and maturities
    
    $
    202,382
    
    
    $
    531,230
    
    
    $
    1,324,882Realized gains, net of realized losses
    
    
    180
    
    
    
    49,947
    
    
    
    3,073
 Note 7 Property, Plant and Equipment
  December 31,(In thousands)
    
    2008
    
    
    2007Land
    
    $
    22,958
    
    
    $
    26,732Buildings
    
    
    79,094
    
    
    
    84,000Drilling, workover and well-servicing rigs, and related equipment
    
    
    8,501,373
    
    
    
    7,585,414Marine transportation and supply vessels
    
    
    13,663
    
    
    
    13,663Oilfield hauling and mobile equipment
    
    
    501,163
    
    
    
    417,308Other machinery and equipment
    
    
    115,074
    
    
    
    92,792Oil and gas properties
    
    
    633,537
    
    
    
    445,035Construction in process (1)
    
    
    444,878
    
    
    
    477,34310,311,740
    
    
    
    9,142,287Less: accumulated depreciation and amortization
    
    
    (2,752,614
    )
    
    
    (2,275,081
    )accumulated depletion on oil and gas properties
    
    
    (277,084
    )
    
    
    (234,594
    )$
    7,282,042
    
    
    $
    6,632,612
 
 (1)
    
    Relates to amounts capitalized for new or substantially new drilling, workover and
well-servicing rigs that were under construction and had not yet been placed in service as of
December 31, 2008 or 2007.   Note 8 Investments in Unconsolidated Affiliates
   December 31,(In thousands)
    
    2008
    
    2007Current assets
    
    $
    408,960
    
    
    $
    260,766Long-term assets
    
    
    916,191
    
    
    
    801,333Current liabilities
    
    
    294,701
    
    
    
    161,761Long-term liabilities
    
    
    185,281
    
    
    
    128,073
 64




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##### Table of Contents



Year Ended December 31,(In thousands)
    
    2008
    
    2007
    
    2006Gross revenues
    
    $
    827,044
    
    
    $
    589,923
    
    
    $
    486,347Gross margin
    
    
    142,763
    
    
    
    94,952
    
    
    
    85,700Net income (loss)
    
    
    (444,470
    )
    
    
    35,332
    
    
    
    45,123Nabors earnings (losses) from unconsolidated affiliates
    
    
    (229,834
    )
    
    
    17,724
    
    
    
    20,545
   Note 9 Financial Instruments and Risk Concentration
  Foreign Currency Risk
   Credit Risk
  Interest Rate and Marketable and Non-marketable Security Price Risk
  65




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##### Table of Contents



Fair Value of Financial Instruments
  December 31,2008
    
    
    2007(In thousands)
    
    Carrying Value
    
    
    Fair Value
    
    
    Carrying Value
    
    
    Fair Value$2.75 billion, 0.94% senior exchangeable notes due May 2011
    
    $
    2,650,000
    
    
    $
    2,199,500
    
    
    $
    2,750,000
    
    
    $
    2,595,313$975 million, 6.15% senior notes due February 2018
    
    
    963,859
    
    
    
    835,244
    
    
    
    
    
    
    
    $700 million zero coupon senior exchangeable notes due June 2023
    
    
    
    
    
    
    
    
    
    
    700,000
    
    
    
    696,9905.375% senior notes due August 2012 (1)
    
    
    272,724
    
    
    
    262,411
    
    
    
    272,097
    
    
    
    279,0434.875% senior notes due August 2009
    
    
    224,829
    
    
    
    227,239
    
    
    
    224,562
    
    
    
    225,709$82.8 million zero coupon convertible senior debentures due February 2021
    
    
    
    
    
    
    
    
    
    
    59,774
    
    
    
    56,897Other
    
    
    1,329
    
    
    
    1,329
    
    
    
    
    
    
    
    $
    4,112,741
    
    
    $
    3,525,723
    
    
    $
    4,006,433
    
    
    $
    3,853,952
 
 (1)
    
    Includes $1.5 million and $1.9 million as of December 31, 2008 and 2007, respectively,
related to the unamortized loss on the interest rate swap that was unwound during the fourth
quarter of 2005.   66




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##### Table of Contents



Note 10 Debt
  December 31,(In thousands)
    
    2008
    
    
    2007$2.75 billion 0.94% senior exchangeable notes due May 2011
    
    $
    2,650,000
    
    
    $
    2,750,000$975 million, 6.15% senior notes due February 2018
    
    
    963,859
    
    
    
    $700 million zero coupon senior exchangeable notes due June 2023
    
    
    
    
    
    
    700,0005.375% senior notes due August 2012 (1)
    
    
    272,724
    
    
    
    272,0974.875% senior notes due August 2009 (2)
    
    
    224,829
    
    
    
    224,562$82.8 million zero coupon convertible senior debentures due February 2021
    
    
    
    
    
    
    59,774Other
    
    
    1,329
    
    
    
    4,112,741
    
    
    
    4,006,433Less: current portion
    
    
    225,030
    
    
    
    700,000$
    3,887,711
    
    
    $
    3,306,433
 
 (1)
    
    The amount presented for the year ended December 31, 2008 and 2007 includes $1.5
million and $1.9 million, respectively, related to the unamortized loss on the interest
rate swap executed on October 21, 2002 and unwound during the fourth quarter of 2005. See
Note 9.(2)
    
    Represents Nabors Holdings 1, ULCs 4.875% senior notes due August 2009 which were
classified as current liabilities as of September 30, 2008.  (In thousands)
    
    Paid at Maturity2009
    
    $
    225,000
    (1)2010
    
    
    2011
    
    
    2,650,000
    (2)2012
    
    
    275,000
    (3)2013
    
    
    Thereafter
    
    
    975,000
    (4)$
    4,125,000
 
 (1)
    
    Represents our $225 million 4.875% senior notes due August 2009.(2)
    
    Represents our $2.75 billion 0.94% senior exchangeable notes due May 2011.(3)
    
    Represents our $275 million 5.375% senior notes due August 2012.(4)
    
    Represents our $975 million 6.15% senior notes due February 2018. $975 million Senior Notes Due February 2018
   67




---



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$2.75 billion Senior Exchangeable Notes Due May 2011
      68




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##### Table of Contents



4.875% Senior Notes Due August 2009 and 5.375% Senior Notes Due August 2012
     Other Debt Transactions
  69




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##### Table of Contents



Short-Term Borrowings
  December 31,(In thousands)
    
    2008
    
    
    2007Credit available
    
    $
    295,045
    
    
    $
    211,165Letters of credit outstanding
    
    
    (174,156
    )
    
    
    (157,877
    )Remaining availability
    
    $
    120,889
    
    
    $
    53,288
 Note 11 Income Taxes
  Year Ended December 31,(In thousands)
    
    2008
    
    
    2007Balance as of January 1,
    
    $
    55,627
    
    
    $
    84,294Additions based on tax positions related to the current year
    
    
    3,990
    
    
    
    3,298Additions for tax positions of prior years
    
    
    4,168
    
    
    
    9,873Reductions for tax positions of prior years
    
    
    (10,966
    )
    
    
    (41,838
    )Settlements
    
    
    (1,000
    )
    
    
    Balance as of December 31,
    
    $
    51,819
    
    
    $
    55,627
   70




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##### Table of Contents



Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Domestic and foreign summary:United States
    
    $
    433,444
    
    
    $
    616,588
    
    
    $
    929,261Foreign
    
    
    368,180
    
    
    
    518,743
    
    
    
    498,641Income before income taxes from continuing operations
    
    $
    801,624
    
    
    $
    1,135,331
    
    
    $
    1,427,902
   (In thousands)
    
    2008
    
    
    2007
    
    
    2006Current:U.S. federal
    
    $
    59,914
    
    
    $
    116,456
    
    
    $
    148,655Foreign
    
    
    119,889
    
    
    
    97,489
    
    
    
    50,313State
    
    
    9,029
    
    
    
    14,006
    
    
    
    14,898188,832
    
    
    
    227,951
    
    
    
    213,866Deferred:U.S. federal
    
    
    99,754
    
    
    
    42,846
    
    
    
    196,465Foreign
    
    
    (48,164
    )
    
    
    (41,167
    )
    
    
    9,219State
    
    
    10,029
    
    
    
    10,034
    
    
    
    15,34361,619
    
    
    
    11,713
    
    
    
    221,027Income tax expense
    
    $
    250,451
    
    
    $
    239,664
    
    
    $
    434,893
  Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Income tax provision at statutory rate (Bermuda rate of 0%)
    
    $
    
    
    
    $
    
    
    
    $
    Taxes on U.S. and foreign earnings (losses) at greater than the Bermuda rate
    
    
    228,862
    
    
    
    250,126
    
    
    
    387,748Increase in valuation allowance
    
    
    6,604
    
    
    
    8,144
    
    
    
    4,574Effect of change in tax rate
    
    
    (5,406
    )
    
    
    (17,119
    )
    
    
    (21,382
    )Establishment of a deferred tax asset, net of valuation allowance
    
    
    1,990
    
    
    
    
    
    
    
    Tax reserves established (released), net and interest
    
    
    (657
    )
    
    
    (25,527
    )
    
    
    (2,438
    )Stock redemption withholding
    
    
    
    
    
    
    
    
    
    
    36,150State income taxes
    
    
    19,058
    
    
    
    24,040
    
    
    
    30,241Income tax expense
    
    $
    250,451
    
    
    $
    239,664
    
    
    $
    434,893Effective tax rate
    
    
    31
    %
    
    
    21
    %
    
    
    30
    %
    71




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##### Table of Contents



December 31,2008
    
    
    2007(In thousands)Deferred tax assets:Net operating loss carryforwards
    
    $
    178,082
    
    
    $
    60,152Exchangeable note hedge
    
    
    99,927
    
    
    
    143,150Equity compensation
    
    
    29,206
    
    
    
    30,266Deferred revenue
    
    
    24,698
    
    
    
    13,589Tax credit carryforwards
    
    
    28,336
    
    
    
    8,336Insurance loss reserve
    
    
    22,521
    
    
    
    26,394Other
    
    
    113,086
    
    
    
    49,536Subtotal
    
    
    495,856
    
    
    
    331,423Valuation allowance
    
    
    (132,262
    )
    
    
    (29,658
    )Deferred tax assets
    
    $
    363,594
    
    
    $
    301,765(In thousands)Deferred tax liabilities:Depreciation, amortization
and depletion for tax in
excess of book expense
    
    $
    (781,073
    )
    
    $
    (598,514
    )Variable interest investments
    
    
    (1,055
    )
    
    
    (178,915
    )Other
    
    
    (50,798
    )
    
    
    (53,561
    )Deferred tax liability
    
    
    (832,926
    )
    
    
    (830,990
    )Net deferred assets (liabilities)
    
    $
    (469,332
    )
    
    $
    (529,225
    )Balance Sheet SummaryNet current deferred asset
    
    $
    28,083
    
    
    $
    12,757Net noncurrent liability
    
    
    (497,415
    )
    
    
    (541,982
    )Net deferred asset (liability)
    
    $
    (469,332
    )
    
    $
    (529,225
    )
   (In thousands)Year ended December 31,
    
    Total
    
    
    U.S. Federal
    
    
    Foreign2009
    
    $
    176
    
    
    $
    
    
    
    $
    1762010
    
    
    1,175
    
    
    
    
    
    
    
    1,1752011
    
    
    471
    
    
    
    
    
    
    
    4712012
    
    
    3,927
    
    
    
    
    
    
    
    3,9272013
    
    
    1,627
    
    
    
    
    
    
    
    1,6272014
    
    
    20
    
    
    
    
    
    
    
    202015
    
    
    13
    
    
    
    
    
    
    
    132016
    
    
    23,168
    
    
    
    
    
    
    
    23,1682017
    
    
    63,866
    
    
    
    27,759
    
    
    
    36,1072018
    
    
    83,024
    
    
    
    17,722
    
    
    
    65,3022026
    
    
    6,913
    
    
    
    
    
    
    
    6,9132027
    
    
    18,125
    
    
    
    
    
    
    
    18,1252028
    
    
    11,727
    
    
    
    
    
    
    
    11,727Subtotal: expiring NOLs
    
    
    214,232
    
    
    
    45,481
    
    
    
    168,751Non-expiring NOLs
    
    
    648,884
    
    
    
    
    
    
    
    648,884Total
    
    $
    863,116
    
    
    $
    45,481
    
    
    $
    817,635
    72




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##### Table of Contents



Note 12 Common Shares
         Note 13 Pension, Postretirement and Postemployment Benefits
 Pension Plans
  73




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##### Table of Contents



Pension Benefits(In thousands)
    
    2008
    
    
    2007Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    16,631
    
    
    $
    17,297Interest cost
    
    
    1,066
    
    
    
    1,020Actuarial loss (gain)
    
    
    610
    
    
    
    (1,208
    )Benefit payments
    
    
    (526
    )
    
    
    (478
    )Benefit obligation at end of year (1)
    
    $
    17,781
    
    
    $
    16,631Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    15,309
    
    
    $
    13,953Actual (loss) return on plan assets
    
    
    (3,248
    )
    
    
    810Employer contribution
    
    
    578
    
    
    
    1,024Benefit payments
    
    
    (526
    )
    
    
    (478
    )Fair value of plan assets at end of year
    
    $
    12,113
    
    
    $
    15,309Funded status:Underfunded status at end of year
    
    $
    (5,668
    )
    
    $
    (1,322
    )Amounts recognized in consolidated balance sheets:Other long-term liabilities
    
    $
    (5,668
    )
    
    $
    (1,322
    )Components of net periodic benefit cost (recognized in our consolidated statements of income):Interest cost
    
    $
    1,066
    
    
    $
    1,020Expected return on plan assets
    
    
    (1,001
    )
    
    
    (936
    )Recognized net actuarial loss
    
    
    95
    
    
    
    193Net periodic benefit cost
    
    $
    160
    
    
    $
    277Weighted-average assumptions:Weighted-average discount rate
    
    
    6.25
    %
    
    
    6.50
    %Expected long-term rate of return on plan assets
    
    
    6.50
    %
    
    
    6.50
    %
 
 (1)
    
    As of December 31, 2008 and 2007, the accumulated benefit obligation is the same as the
projected benefit obligation.      Pension Benefits2008
    
    2007Equity securities
    
    
    55
    %
    
    
    55
    %Debt securities
    
    
    45
    %
    
    
    45
    %Total
    
    
    100
    %
    
    
    100
    %
  74




---



##### Table of Contents



(In thousands)2009
    
    $
    5972010
    
    
    6412011
    
    
    7092012
    
    
    7782013
    
    
    8812014  2018
    
    
    5,954
  Postretirement Benefits Other Than Pensions
  Note 14 Related-Party Transactions
     Note 15 Commitments and Contingencies
 75




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##### Table of Contents



Commitments
 Operating Leases
  (In thousands)2009
    
    $
    20,2092010
    
    
    12,2262011
    
    
    4,6432012
    
    
    2,5142013
    
    
    2,373Thereafter
    
    
    4,289$
    46,254
  Employment Contracts
  (In thousands)2009
    
    $
    6,9062010
    
    
    6,2232011
    
    
    4,3022012
    
    
    4,1382013 and thereafter
    
    
    656$
    22,225
       76




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##### Table of Contents



Termination in the event of death, disability, or termination without cause .
  77




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Termination in the event of a Change in Control
 Other Obligations
 Contingencies
 Income Tax Contingencies
    78




---



##### Table of Contents



Self-Insurance Accruals
     Litigation
    Off-Balance Sheet Arrangements (Including Guarantees)
  79




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##### Table of Contents



Maximum Amount(In thousands)
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    TotalFinancial standby letters of credit
and other financial surety instruments
    
    $
    143,444
    
    
    $
    12,277
    
    
    $
    965
    
    
    $
    
    
    
    $
    156,686Contingent consideration in acquisition
    
    
    
    
    
    
    2,125
    
    
    
    2,125
    
    
    
    
    
    
    
    4,250Total
    
    $
    143,444
    
    
    $
    14,402
    
    
    $
    3,090
    
    
    $
    
    
    
    $
    160,936
 Note 16 Earnings Per Share
  Year Ended December 31,(In thousands, except per share amounts)
    
    2008
    
    
    2007
    
    
    2006Net income (numerator):Income from continuing operations, net of tax  basic
    
    $
    551,173
    
    
    $
    895,667
    
    
    $
    993,009Add interest expense on assumed conversion of our zero coupon
convertible/exchangeable senior debentures/notes, net of tax:$2.75 billion due 2011 (1)
    
    
    
    
    
    
    
    
    
    
    $82.8 million due 2021 (2)
    
    
    
    
    
    
    
    
    
    
    $700 million due 2023 (3)
    
    
    
    
    
    
    
    
    
    
    Adjusted
income from continuing operations, net of tax  diluted
    
    
    551,173
    
    
    
    895,667
    
    
    
    993,009Income from discontinued operations, net of tax
    
    
    
    
    
    
    35,024
    
    
    
    27,727Total adjusted net income
    
    $
    551,173
    
    
    $
    930,691
    
    
    $
    1,020,736Earnings per share:Basic from continuing operations
    
    $
    1.98
    
    
    $
    3.21
    
    
    $
    3.42Basic from discontinued operations
    
    
    
    
    
    
    .13
    
    
    
    .10Total Basic
    
    $
    1.98
    
    
    $
    3.34
    
    
    $
    3.52Diluted from continuing operations
    
    $
    1.93
    
    
    $
    3.13
    
    
    $
    3.31Diluted from discontinued operations
    
    
    
    
    
    
    .12
    
    
    
    .09Total Diluted
    
    $
    1.93
    
    
    $
    3.25
    
    
    $
    3.40Shares (denominator):Weighted-average number of shares outstanding  basic (4)
    
    
    278,166
    
    
    
    279,026
    
    
    
    290,241Net effect of dilutive stock options, warrants and restricted
stock awards based on the treasury stock method
    
    
    5,837
    
    
    
    7,580
    
    
    
    9,446Assumed conversion of our zero coupon convertible/exchangeable
senior debentures/notes:$2.75 billion due 2011 (1)
    
    
    
    
    
    
    
    
    
    
    $82.8 million due 2021 (2)
    
    
    
    
    
    
    
    
    
    
    $700 million due 2023 (3)
    
    
    1,282
    
    
    
    
    
    
    
    140Weighted-average number of shares outstanding  diluted
    
    
    285,285
    
    
    
    286,606
    
    
    
    299,827
 
 (1)
    
    Diluted earnings per share for the years ended December 31, 2008, 2007, and 2006 do not
include any incremental shares issuable upon exchange of the $2.75 billion 0.94% senior
exchangeable notes due 2011. In October 2008 we purchased $100 million par value of these
notes in the open market, leaving $2.65 billion par value outstanding. The number of shares
that we would be required to issue upon exchange consists of only the incremental shares that
would be issued above the principal amount of the notes, as we are required to pay cash up to
the principal amount of the notes exchanged. We would only issue an incremental number of
shares upon exchange of these notes. Such shares are only included in the calculation of the
weighted-average number 80




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##### Table of Contents



of shares outstanding in our diluted earnings per share calculation, when our stock price exceeds
$45.83 as of the last trading day of the quarter and the average price of our shares for the ten
consecutive trading days beginning on the third business day after the last trading day of the
quarter exceeds $45.83, which did not occur during any period for the years ended December 31,
2008, 2007, and 2006.(2)
    
    In June 2008 Nabors Delaware called for redemption of the full $82.8 million aggregate
principal amount at maturity of its zero coupon senior convertible debentures due 2021 and in
July 2008, paid cash of $60.6 million; an amount equal to the issue price of $50.4 million
plus accrued original issue discount of $10.2 million. No common shares were issued as part
of the redemption of the $82.8 million zero coupon convertible senior debentures.(3)
    
    Diluted earnings per share for the year ended December 31, 2008 reflect the conversion of the
$700 million zero coupon senior exchangeable notes due 2023. In May 2008 Nabors Delaware
called for redemption all of its $700 million zero coupon senior exchangeable notes due 2023
and in June and July 2008 issued an aggregate 5.25 million common shares which equated to the
excess of the exchange value of the notes over their principal amount, as cash was required up
to the principal amount of the notes exchanged. Diluted earnings per share for the year ended
December 31, 2007 does not include any incremental shares issuable upon exchange of the $700
million zero coupon senior exchangeable notes. Diluted earnings per share for the year ended
December 31, 2006 reflects the assumed conversion of our $700 million zero coupon senior
exchangeable notes resulting in the inclusion of the incremental number of shares that we
would be required to issue upon exchange of these notes. Such shares are only included in the
calculation of the weighted-average number of shares outstanding in our diluted earnings per
share calculation when the price of our shares exceeds $35.05 on the last trading day of the
quarter, which did not occur on December 31, 2007. This was the case for the quarter ended
March 31, 2006 and are therefore included in the weighted-average number of shares outstanding
in our diluted earnings per share calculation for the year ended December 31, 2006.(4)
    
    Includes the following weighted-average number of common shares of Nabors and
weighted-average number of exchangeable shares of Nabors (Canada) Exchangeco Inc.,
respectively: 278.1 million and .1 million shares for the year ended December 31, 2008; 278.9
million and .1 million shares for the year ended December 31, 2007; and 290.0 million and .2
million shares for the year ended December 31, 2006. The exchangeable shares of Nabors
Exchangeco are exchangeable for Nabors common shares on a one-for-one basis, and have
essentially identical rights as Nabors Industries Ltd. common shares, including but not
limited to, voting rights and the right to receive dividends, if any.  Note 17 Supplemental Balance Sheet and Income Statement Information
  December 31,(In thousands)
    
    2008
    
    
    2007Cash and cash equivalents
    
    $
    442,087
    
    
    $
    531,306Short-term investments
    
    
    142,158
    
    
    
    235,745Long-term investments and other receivables
    
    
    239,952
    
    
    
    359,534Other current assets
    
    
    1,866
    
    
    
    53,054Total
    
    $
    826,063
    
    
    $
    1,179,639
  81




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82




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##### Table of Contents



December 31,(In thousands)
    
    2008
    
    
    2007Accrued compensation
    
    $
    164,252
    
    
    $
    149,668Deferred revenue
    
    
    72,377
    
    
    
    91,071Other taxes payable
    
    
    24,191
    
    
    
    32,539Workers compensation liabilities
    
    
    23,618
    
    
    
    31,427Interest payable
    
    
    37,334
    
    
    
    13,165Warranty accrual
    
    
    8,639
    
    
    
    8,602Litigation reserves
    
    
    4,825
    
    
    
    5,083Other accrued liabilities
    
    
    32,157
    
    
    
    16,960$
    367,393
    
    
    $
    348,515
  Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Interest and dividend income
    
    $
    40,462
    
    
    $
    45,498
    
    
    $
    55,747Gains (losses) on marketable and non-marketable
securities, net
    
    
    (18,736
    )(1)
    
    
    (61,389
    )(2)
    
    
    46,260$
    21,726
    
    
    $
    (15,891
    )
    
    $
    102,007
 
 (1)
    
    This amount reflects net unrealized gains of $8.5 million from our trading securities,
partially offset by losses of $27.4 million from our actively managed funds classified as
long-term investments.(2)
    
    This amount reflects a net loss of approximately $61.4 million from the portion of our
long-term investments comprised of our actively managed funds inclusive of substantial gains
from sales of our marketable equity securities.  Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Losses (gains) on sales, retirements and involuntary conversions of long-lived assets
    
    $
    13,211
    (1)
    
    $
    4,429
    (2)
    
    $
    20,824
    (3)Litigation reserves
    
    
    3,492
    
    
    
    9,568
    
    
    
    2,217Foreign currency transaction losses (gains)
    
    
    (2,718
    )
    
    
    (3,235
    )
    
    
    380(Gains) losses on derivative instruments
    
    
    14,581
    (4)
    
    
    1,347
    
    
    
    (1,363
    )Gain on debt extinguishment
    
    
    (23,589
    )(5)
    
    
    
    
    
    
    Other losses (gains)
    
    
    2,636
    
    
    
    (1,214
    )
    
    
    2,060$
    7,613
    
    
    $
    10,895
    
    
    $
    24,118
 
 (1)
    
    This amount includes involuntary conversion losses recorded as a result of Hurricanes Gustav
and Ike during 2008 of approximately $12.0 million, net of insurance recoveries.(2)
    
    This amount includes a $38.6 million gain from the sale of three accommodation units in the
second quarter of 2007 and $40.0 million in impairment charges and losses on asset retirements
during 2007.(3)
    
    This amount includes $12.4 million in impairment charges related to asset retirements.(4)
    
    This amount includes a $9.9 million loss on a three-month written put option and a $4.7
million loss on the fair value of our range cap and floor derivative.(5)
    
    In the fourth quarter of 2008 we purchased $100 million par value of our $2.75 billion 0.94%
senior exchangeable notes in the open market for cash of $75.9 milion and recognized a pre-tax
gain of $23.6 million. 83




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##### Table of Contents



Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Cash paid for income taxes
    
    $
    235,907
    
    
    $
    378,726
    
    
    $
    157,209Cash paid for interest, net of capitalized interest
    
    
    67,327
    
    
    
    41,715
    
    
    
    28,605Acquisitions of businesses:Fair value of assets acquired
    
    
    7,328
    
    
    
    
    
    
    
    79,070Goodwill
    
    
    284
    
    
    
    8,391
    
    
    
    20,815Liabilities assumed
    
    
    (6,352
    )
    
    
    
    
    
    
    (17,293
    )Common stock of acquired company previously owned
    
    
    
    
    
    
    
    
    
    
    Equity consideration issued
    
    
    
    
    
    
    
    
    
    
    Cash paid for acquisitions of businesses
    
    
    1,260
    
    
    
    8,391
    
    
    
    82,592Cash acquired in acquisitions of businesses
    
    
    (973
    )
    
    
    
    
    
    
    (185
    )Cash paid for acquisitions of businesses, net
    
    $
    287
    
    
    $
    8,391
    
    
    $
    82,407
 Note 18 Unaudited Quarterly Financial Information
 Year Ended December 31, 2008(In thousands, except
    
    Quarter Endedper share amounts)
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Operating revenues and Earnings from unconsolidated
affiliates from continuing operations (1)
    
    $
    1,295,407
    
    
    $
    1,278,367
    
    
    $
    1,462,495
    
    
    $
    1,245,793Income (loss) from continuing operations, net of tax
    
    $
    230,506
    
    
    $
    194,361
    
    
    $
    210,299
    
    
    $
    (83,993
    )Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    230,506
    
    
    $
    194,361
    
    
    $
    210,299
    
    
    $
    (83,993
    )Earnings (loss) per share: (2)Basic from continuing operations
    
    $
    .83
    
    
    $
    .70
    
    
    $
    .75
    
    
    $
    (.30
    )Basic from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Basic
    
    $
    .83
    
    
    $
    .70
    
    
    $
    .75
    
    
    $
    (.30
    )Diluted from continuing operations
    
    $
    .81
    
    
    $
    .67
    
    
    $
    .73
    
    
    $
    (.30
    )Diluted from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Diluted
    
    $
    .81
    
    
    $
    .67
    
    
    $
    .73
    
    
    $
    (.30
    )
 Year Ended December 31, 2007(In thousands, except
    
    Quarter Endedper share amounts)
    
    March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Operating revenues and Earnings from unconsolidated
affiliates from continuing operations (3)
    
    $
    1,248,454
    
    
    $
    1,138,120
    
    
    $
    1,252,988
    
    
    $
    1,317,010Income from continuing operations, net of tax
    
    $
    256,890
    
    
    $
    220,862
    
    
    $
    195,763
    
    
    $
    222,152Income from discontinued operations, net of tax
    
    
    5,272
    
    
    
    7,487
    
    
    
    22,265
    
    
    
    Net income
    
    $
    262,162
    
    
    $
    228,349
    
    
    $
    218,028
    
    
    $
    222,152Earnings per share: (2)Basic from continuing operations
    
    $
    .93
    
    
    $
    .79
    
    
    $
    .70
    
    
    $
    .79Basic from discontinued operations
    
    
    .02
    
    
    
    .03
    
    
    
    .08
    
    
    
    Total Basic
    
    $
    .95
    
    
    $
    .82
    
    
    $
    .78
    
    
    $
    .79Diluted from continuing operations
    
    $
    .90
    
    
    $
    .77
    
    
    $
    .68
    
    
    $
    .78Diluted from discontinued operations
    
    
    .02
    
    
    
    .02
    
    
    
    .08
    
    
    
    Total Diluted
    
    $
    .92
    
    
    $
    .79
    
    
    $
    .76
    
    
    $
    .78
 
 (1)
    
    Includes earnings (losses) from unconsolidated affiliates, net, accounted for by the equity
method, of $(4.4) million, $(4.0) million, $7.9 million and $(229.3) million, respectively.(2)
    
    Earnings per share is computed independently for each of the quarters presented. Therefore,
the sum of the quarterly earnings per share may not equal the total computed for the year.(3)
    
    Includes earnings (losses) from unconsolidated affiliates, net, accounted for by the equity
method, of $12.4 million, $3.4 million, $2.7 million and $(.8) million, respectively. 84




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##### Table of Contents



Note 19 Discontinued Operation
  Condensed Statements of Income
 Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Revenues from discontinued operations
    
    $
    
    
    
    $
    58,887
    
    
    $
    112,873Income from discontinued operationsIncome from discontinued operations
    
    $
    
    
    
    $
    26,092
    
    
    $
    43,017Gain on disposal of business
    
    
    
    
    
    
    49,500
    
    
    
    Income tax expense
    
    
    
    
    
    
    40,568
    
    
    
    15,290Income from discontinued operations, net of tax
    
    $
    
    
    
    $
    35,024
    
    
    $
    27,727
 Note 20 Segment Information
    Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Operating revenues and earnings (losses) from
unconsolidated affiliates from continuing
operations: (1)Contract Drilling: (2)U.S. Lower 48 Land Drilling
    
    $
    1,878,441
    
    
    $
    1,710,990
    
    
    $
    1,890,302U.S. Land Well-servicing
    
    
    758,510
    
    
    
    715,414
    
    
    
    704,189U.S. Offshore
    
    
    252,529
    
    
    
    212,160
    
    
    
    221,676Alaska
    
    
    184,243
    
    
    
    152,490
    
    
    
    110,718Canada
    
    
    502,695
    
    
    
    545,035
    
    
    
    686,889International
    
    
    1,372,168
    
    
    
    1,094,802
    
    
    
    746,460Subtotal Contract Drilling (3)
    
    
    4,948,586
    
    
    
    4,430,891
    
    
    
    4,360,234Oil and Gas (4)(5)
    
    
    (151,465
    )
    
    
    152,320
    
    
    
    59,431Other Operating Segments (6)(7)
    
    
    683,186
    
    
    
    588,483
    
    
    
    505,286Other reconciling items (8)
    
    
    (198,245
    )
    
    
    (215,122
    )
    
    
    (197,117
    )Total
    
    $
    5,282,062
    
    
    $
    4,956,572
    
    
    $
    4,727,834Depreciation and amortization, and depletion: (1)Contract Drilling:U.S. Lower 48 Land Drilling
    
    $
    210,764
    
    
    $
    146,928
    
    
    $
    106,399
 85




---



##### Table of Contents



Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006U.S. Land Well-servicing
    
    
    65,050
    
    
    
    57,245
    
    
    
    43,217U.S. Offshore
    
    
    42,565
    
    
    
    34,408
    
    
    
    31,253Alaska
    
    
    21,710
    
    
    
    14,889
    
    
    
    13,012Canada
    
    
    67,373
    
    
    
    63,271
    
    
    
    54,924International
    
    
    172,066
    
    
    
    121,985
    
    
    
    95,045Subtotal Contract Drilling
    
    
    579,528
    
    
    
    438,726
    
    
    
    343,850Oil and Gas
    
    
    46,979
    
    
    
    72,182
    
    
    
    38,580Other Operating Segments
    
    
    38,903
    
    
    
    35,203
    
    
    
    24,829Other reconciling items (8)
    
    
    (7,365
    )
    
    
    (6,199
    )
    
    
    (4,026
    )Total depreciation and amortization, and depletion
    
    $
    658,045
    
    
    $
    539,912
    
    
    $
    403,233Adjusted income (loss) derived from operating
activities from
continuing operations: (1)(9)Contract Drilling:U.S. Lower 48 Land Drilling
    
    $
    628,579
    
    
    $
    596,302
    
    
    $
    821,821U.S. Land Well-servicing
    
    
    148,626
    
    
    
    156,243
    
    
    
    199,944U.S. Offshore
    
    
    59,179
    
    
    
    51,508
    
    
    
    65,328Alaska
    
    
    52,603
    
    
    
    37,394
    
    
    
    17,542Canada
    
    
    61,040
    
    
    
    87,046
    
    
    
    185,117International
    
    
    407,675
    
    
    
    332,283
    
    
    
    208,705Subtotal Contract Drilling (3)
    
    
    1,357,702
    
    
    
    1,260,776
    
    
    
    1,498,457Oil and Gas (4) (5)
    
    
    (228,027
    )
    
    
    56,133
    
    
    
    4,065Other Operating Segments (6) (7)
    
    
    68,572
    
    
    
    35,273
    
    
    
    30,028Total segment adjusted income derived from operating activities
    
    
    1,198,247
    
    
    
    1,352,182
    
    
    
    1,532,550Other reconciling items (10)
    
    
    (164,530
    )
    
    
    (136,363
    )
    
    
    (135,951
    )Interest expense
    
    
    (91,620
    )
    
    
    (53,702
    )
    
    
    (46,586
    )Investment income (loss)
    
    
    21,726
    
    
    
    (15,891
    )
    
    
    102,007(Losses) gains on sales, retirements and impairments of long-lived
assets and other income (expense), net
    
    
    (7,613
    )
    
    
    (10,895
    )
    
    
    (24,118
    )Goodwill and intangible asset impairment (11)
    
    
    (154,586
    )
    
    
    
    
    
    
    Income from continuing operations before income
taxes (1)
    
    $
    801,624
    
    
    $
    1,135,331
    
    
    $
    1,427,902
 December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Total assets:Contract Drilling: (13) (14)U.S. Lower 48 Land Drilling
    
    $
    2,833,618
    
    
    $
    2,544,629
    
    
    $
    2,210,070U.S. Land Well-servicing
    
    
    707,009
    
    
    
    725,845
    
    
    
    597,082U.S. Offshore
    
    
    480,324
    
    
    
    452,505
    
    
    
    456,889Alaska
    
    
    356,603
    
    
    
    283,121
    
    
    
    221,927Canada
    
    
    906,154
    
    
    
    1,398,363
    
    
    
    1,059,243International
    
    
    3,080,947
    
    
    
    2,577,057
    
    
    
    2,006,941Subtotal Contract Drilling
    
    
    8,364,655
    
    
    
    7,981,520
    
    
    
    6,552,152Oil and Gas (15)
    
    
    929,848
    
    
    
    646,837
    
    
    
    328,114Other Operating Segments (16)
    
    
    578,802
    
    
    
    610,041
    
    
    
    638,600Other reconciling items (10) (17)
    
    
    594,677
    
    
    
    864,984
    
    
    
    1,623,437Total assets
    
    $
    10,467,982
    
    
    $
    10,103,382
    
    
    $
    9,142,303
 Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Capital expenditures and acquisitions
of businesses: (12)Contract Drilling:U.S. Lower 48 Land Drilling
    
    $
    405,831
    
    
    $
    728,465
    
    
    $
    726,171U.S. Land Well-servicing
    
    
    48,911
    
    
    
    205,185
    
    
    
    224,812U.S. Offshore
    
    
    82,574
    
    
    
    49,270
    
    
    
    98,618Alaska
    
    
    85,735
    
    
    
    69,233
    
    
    
    27,145Canada
    
    
    85,113
    
    
    
    94,058
    
    
    
    222,727International
    
    
    635,340
    
    
    
    620,264
    
    
    
    382,911Subtotal Contract Drilling
    
    
    1,343,504
    
    
    
    1,766,475
    
    
    
    1,682,384Oil and Gas
    
    
    191,937
    
    
    
    113,224
    
    
    
    155,681Other Operating Segments
    
    
    32,191
    
    
    
    53,594
    
    
    
    146,895Other reconciling items (10) (17)
    
    
    (6,209
    )
    
    
    (12,072
    )
    
    
    13,011Total capital expenditures
    
    $
    1,561,423
    
    
    $
    1,921,221
    
    
    $
    1,997,971
 86




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##### Table of Contents



(1)
    
    All segment information excludes the Sea Mar business, which has been reclassified as a
discontinued operation.(2)
    
    These segments include our drilling, workover and well-servicing operations, on land and
offshore.(3)
    
    Includes earnings (losses), net from unconsolidated affiliates, accounted for by the equity
method, of $5.8 million, $5.6 million and $4.0 million for the years ended December 31, 2008,
2007 and 2006, respectively.(4)
    
    Represents our oil and gas exploration, development and production operations. Includes
$228.3 million, representing our proportionate share, of non-cash pre-tax full cost ceiling
test writedowns from our U.S., international and Canadian joint ventures and non-cash pre-tax
impairment charges of $21.5 million under application of the successful efforts method of
accounting from our wholly owned Ramshorn business unit related to oil and gas properties.(5)
    
    Includes earnings (losses), net from unconsolidated affiliates, accounted for by the equity
method, of $(241.4) million, $(3.9) million and $0 for the years ended December 31, 2008, 2007
and 2006, respectively.(6)
    
    Includes our drilling technology and top drive manufacturing, directional drilling, rig
instrumentation and software, and construction and logistics operations.(7)
    
    Includes earnings (losses), net from unconsolidated affiliates, accounted for by the equity
method, of $5.8 million, $16.0 million and $16.5 million for the years ended December 31,
2008, 2007 and 2006, respectively.(8)
    
    Represents the elimination of inter-segment transactions.(9)
    
    Adjusted income derived from operating activities is computed by: subtracting direct costs,
general and administrative expenses, depreciation and amortization, and depletion expense from
Operating revenues and then adding Earnings from unconsolidated affiliates. Such amounts
should not be used as a substitute to those amounts reported under GAAP. However, management
evaluates the performance of our business units and the consolidated company based on several
criteria, including adjusted income derived from operating activities, because it believes
that this financial measure is an accurate reflection of the ongoing profitability of our
Company. A reconciliation of this non-GAAP measure to income from continuing operations before
income taxes, which is a GAAP measure, is provided within the above table.(10)
    
    Represents the elimination of inter-segment transactions and unallocated corporate expenses,
assets and capital expenditures.(11)
    
    Represents non-cash pre-tax goodwill and intangible asset impairment charges recorded during
the three months ended December 31, 2008, all of which related to our Canadian business units.(12)
    
    Includes the portion of the purchase price of acquisitions allocated to fixed assets and
goodwill based on their fair market value.(13)
    
    Includes $49.2 million, $47.3 million and $39.6 million of investments in unconsolidated
affiliates accounted for by the equity method as of December 31, 2008, 2007 and 2006,
respectively.(14)
    
    Includes $21.4 million of investments in unconsolidated affiliates accounted for by the cost
method as of December 31, 2007. There were no investments in unconsolidated affiliates
accounted for by the cost method as of December 31, 2008 or 2006.(15)
    
    Includes $298.3 million, $274.1 million and $0 of investments in unconsolidated affiliates
accounted for by the equity method as of December 31, 2008, 2007 and 2006, respectively.(16)
    
    Includes $63.3 million, $62.0 million and $58.5 million of investments in unconsolidated
affiliates accounted for by the equity method as of December 31, 2008, 2007 and 2006,
respectively.(17)
    
    Includes $.9 million of investments in unconsolidated affiliates accounted for by the cost
method as of December 31, 2008. There were no investments in unconsolidated affiliates
accounted for by the cost method as of December 31, 2007 or 2006  87




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##### Table of Contents



Year Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Operating revenues and earnings
from unconsolidated affiliates
from continuing operations:United States
    
    $
    3,306,064
    
    
    $
    3,189,230
    
    
    $
    3,141,299Foreign
    
    
    1,975,998
    
    
    
    1,767,342
    
    
    
    1,586,535$
    5,282,062
    
    
    $
    4,956,572
    
    
    $
    4,727,834Property, plant and equipment, net:United States
    
    $
    4,032,243
    
    
    $
    3,725,601
    
    
    $
    3,211,023Foreign
    
    
    3,249,799
    
    
    
    2,907,011
    
    
    
    2,199,078$
    7,282,042
    
    
    $
    6,632,612
    
    
    $
    5,410,101Goodwill:United States
    
    $
    130,275
    
    
    $
    130,275
    
    
    $
    165,264Foreign
    
    
    45,474
    
    
    
    238,157
    
    
    
    197,005$
    175,749
    
    
    $
    368,432
    
    
    $
    362,269
 88




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##### Table of Contents



Note 21 Condensed Consolidating Financial Information
    89




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##### Table of Contents



Condensed Consolidating Balance Sheets
 December 31, 2008Nabors
    
    
    
    
    
    
    OtherNabors
    
    
    Delaware
    
    
    Nabors
    
    
    Subsidiaries(Parent/
    
    
    (Issuer/
    
    
    Holdings
    
    
    (Non-
    
    
    Consolidating
    
    
    Consolidated(In thousands)
    
    Guarantor)
    
    
    Guarantor)
    
    
    (Issuer)
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalASSETSCurrent assets:Cash and cash equivalents
    
    $
    8,291
    
    
    $
    96
    
    
    $
    1,259
    
    
    $
    432,441
    
    
    $
    
    
    
    $
    442,087Short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    142,158
    
    
    
    
    
    
    
    142,158Accounts receivable, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,160,768
    
    
    
    
    
    
    
    1,160,768Inventory
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,118
    
    
    
    
    
    
    
    150,118Deferred income taxes
    
    
    
    
    
    
    (3,992
    )
    
    
    
    
    
    
    32,075
    
    
    
    
    
    
    
    28,083Other current assets
    
    
    136
    
    
    
    60,090
    
    
    
    376
    
    
    
    182,777
    
    
    
    
    
    
    
    243,379Total current assets
    
    
    8,427
    
    
    
    56,194
    
    
    
    1,635
    
    
    
    2,100,337
    
    
    
    
    
    
    
    2,166,593Long-term investments and other
receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239,952
    
    
    
    
    
    
    
    239,952Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,282,042
    
    
    
    
    
    
    
    7,282,042Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,749
    
    
    
    
    
    
    
    175,749Intercompany receivables
    
    
    185,626
    
    
    
    1,177,864
    
    
    
    135,284
    
    
    
    36,715
    
    
    
    (1,535,489
    )
    
    
    Investment in unconsolidated
affiliates
    
    
    4,506,617
    
    
    
    4,388,439
    
    
    
    378,237
    
    
    
    2,315,986
    
    
    
    (11,177,552
    )
    
    
    411,727Other long-term assets
    
    
    
    
    
    
    20,874
    
    
    
    401
    
    
    
    170,644
    
    
    
    
    
    
    
    191,919Total assets
    
    $
    4,700,670
    
    
    $
    5,643,371
    
    
    $
    515,557
    
    
    $
    12,321,425
    
    
    $
    (12,713,041
    )
    
    $
    10,467,982LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    224,829
    
    
    $
    201
    
    
    $
    
    
    
    $
    225,030Trade accounts payable
    
    
    755
    
    
    
    79
    
    
    
    
    
    
    
    424,074
    
    
    
    
    
    
    
    424,908Accrued liabilities
    
    
    7,796
    
    
    
    31,773
    
    
    
    4,151
    
    
    
    323,673
    
    
    
    
    
    
    
    367,393Income taxes payable
    
    
    
    
    
    
    135,992
    
    
    
    36
    
    
    
    (24,500
    )
    
    
    
    
    
    
    111,528Total current liabilities
    
    
    8,551
    
    
    
    167,844
    
    
    
    229,016
    
    
    
    723,448
    
    
    
    
    
    
    
    1,128,859Long-term debt
    
    
    
    
    
    
    3,886,582
    
    
    
    
    
    
    
    1,129
    
    
    
    
    
    
    
    3,887,711Other long-term liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261,878
    
    
    
    
    
    
    
    261,878Deferred income taxes
    
    
    
    
    
    
    (7,983
    )
    
    
    (333
    )
    
    
    505,731
    
    
    
    
    
    
    
    497,415Intercompany payable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,535,489
    
    
    
    (1,535,489
    )
    
    
    Total liabilities
    
    
    8,551
    
    
    
    4,046,443
    
    
    
    228,683
    
    
    
    3,027,675
    
    
    
    (1,535,489
    )
    
    
    5,775,863Shareholders equity
    
    
    4,692,119
    
    
    
    1,596,928
    
    
    
    286,874
    
    
    
    9,293,750
    
    
    
    (11,177,552
    )
    
    
    4,692,119Total liabilities and
shareholders equity
    
    $
    4,700,670
    
    
    $
    5,643,371
    
    
    $
    515,557
    
    
    $
    12,321,425
    
    
    $
    (12,713,041
    )
    
    $
    10,467,982
 90




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##### Table of Contents



December 31, 2007Nabors
    
    
    
    
    
    
    OtherNabors
    
    
    Delaware
    
    
    Nabors
    
    
    Subsidiaries(Parent/
    
    
    (Issuer/
    
    
    Holdings
    
    
    (Non-
    
    
    Consolidating
    
    
    Consolidated(In thousands)
    
    Guarantor)
    
    
    Guarantor)
    
    
    (Issuer)
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,659
    
    
    $
    2,753
    
    
    $
    4
    
    
    $
    517,890
    
    
    $
    
    
    
    $
    531,306Short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235,745
    
    
    
    
    
    
    
    235,745Accounts receivable, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,039,238
    
    
    
    
    
    
    
    1,039,238Inventory
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133,786
    
    
    
    
    
    
    
    133,786Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,757
    
    
    
    
    
    
    
    12,757Other current assets
    
    
    136
    
    
    
    1,039
    
    
    
    376
    
    
    
    250,729
    
    
    
    
    
    
    
    252,280Total current assets
    
    
    10,795
    
    
    
    3,792
    
    
    
    380
    
    
    
    2,190,145
    
    
    
    
    
    
    
    2,205,112Long-term investments and other
receivables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    359,534
    
    
    
    
    
    
    
    359,534Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,632,612
    
    
    
    
    
    
    
    6,632,612Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    368,432
    
    
    
    
    
    
    
    368,432Intercompany receivables
    
    
    361,832
    
    
    
    1,224,222
    
    
    
    
    
    
    
    19,918
    
    
    
    (1,605,972
    )
    
    
    Investment in unconsolidated
affiliates
    
    
    4,148,256
    
    
    
    4,429,139
    
    
    
    304,450
    
    
    
    2,306,797
    
    
    
    (10,783,800
    )
    
    
    404,842Other long-term assets
    
    
    
    
    
    
    22,180
    
    
    
    638
    
    
    
    110,032
    
    
    
    
    
    
    
    132,850Total assets
    
    $
    4,520,883
    
    
    $
    5,679,333
    
    
    $
    305,468
    
    
    $
    11,987,470
    
    
    $
    (12,389,772
    )
    
    $
    10,103,382LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    700,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    700,000Trade accounts payable
    
    
    2
    
    
    
    24
    
    
    
    
    
    
    
    348,498
    
    
    
    
    
    
    
    348,524Accrued liabilities
    
    
    6,760
    
    
    
    8,877
    
    
    
    4,151
    
    
    
    328,727
    
    
    
    
    
    
    
    348,515Income taxes payable
    
    
    
    
    
    
    71,761
    
    
    
    2,411
    
    
    
    22,921
    
    
    
    
    
    
    
    97,093Total current liabilities
    
    
    6,762
    
    
    
    780,662
    
    
    
    6,562
    
    
    
    700,146
    
    
    
    
    
    
    
    1,494,132Long-term debt
    
    
    
    
    
    
    3,081,871
    
    
    
    224,562
    
    
    
    
    
    
    
    
    
    
    
    3,306,433Other long-term liabilities
    
    
    
    
    
    
    1,900
    
    
    
    
    
    
    
    244,814
    
    
    
    
    
    
    
    246,714Deferred income taxes
    
    
    
    
    
    
    15,131
    
    
    
    16
    
    
    
    526,835
    
    
    
    
    
    
    
    541,982Intercompany payable
    
    
    
    
    
    
    
    
    
    
    193
    
    
    
    1,605,779
    
    
    
    (1,605,972
    )
    
    
    Total liabilities
    
    
    6,762
    
    
    
    3,879,564
    
    
    
    231,333
    
    
    
    3,077,574
    
    
    
    (1,605,972
    )
    
    
    5,589,261Shareholders equity
    
    
    4,514,121
    
    
    
    1,799,769
    
    
    
    74,135
    
    
    
    8,909,896
    
    
    
    (10,783,800
    )
    
    
    4,514,121Total liabilities and
shareholders equity
    
    $
    4,520,883
    
    
    $
    5,679,333
    
    
    $
    305,468
    
    
    $
    11,987,470
    
    
    $
    (12,389,772
    )
    
    $
    10,103,382
 91




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##### Table of Contents



Condensed Consolidating Statements of Income
 Year Ended December 31, 2008Nabors
    
    
    
    
    
    
    OtherNabors
    
    
    Delaware
    
    
    Nabors
    
    
    Subsidiaries(Parent/
    
    
    (Issuer/
    
    
    Holdings
    
    
    (Non
    
    
    Consolidating
    
    
    Consolidated(In thousands)
    
    Guarantor)
    
    
    Guarantor)
    
    
    (Issuer)
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalRevenues and other income:Operating revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,511,896
    
    
    $
    
    
    
    $
    5,511,896Earnings (losses) from unconsolidated
affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (229,834
    )
    
    
    
    
    
    
    (229,834
    )Earnings (losses) from consolidated
affiliates
    
    
    565,574
    
    
    
    197,934
    
    
    
    19,335
    
    
    
    206,417
    
    
    
    (989,260
    )
    
    
    Investment income (loss)
    
    
    364
    
    
    
    2,373
    
    
    
    3
    
    
    
    18,986
    
    
    
    
    
    
    
    21,726Intercompany interest income
    
    
    4,000
    
    
    
    70,017
    
    
    
    11,840
    
    
    
    
    
    
    
    (85,857
    )
    
    
    Total revenues and other income
    
    
    569,938
    
    
    
    270,324
    
    
    
    31,178
    
    
    
    5,507,465
    
    
    
    (1,075,117
    )
    
    
    5,303,788Costs and other deductions:Direct costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,110,316
    
    
    
    
    
    
    
    3,110,316General and administrative expenses
    
    
    21,191
    
    
    
    494
    
    
    
    32
    
    
    
    459,582
    
    
    
    (1,315
    )
    
    
    479,984Depreciation and amortization
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    610,466
    
    
    
    
    
    
    
    611,066Depletion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,979
    
    
    
    
    
    
    
    46,979Interest expense
    
    
    
    
    
    
    92,047
    
    
    
    11,440
    
    
    
    (11,867
    )
    
    
    
    
    
    
    91,620Intercompany interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85,857
    
    
    
    (85,857
    )
    
    
    Losses (gains) on sales,
retirements and impairments of
long-lived assets and other expense
(income), net
    
    
    (2,426
    )
    
    
    (16,386
    )
    
    
    27,444
    
    
    
    (2,334
    )
    
    
    1,315
    
    
    
    7,613Goodwill and intangible asset
impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    154,586
    
    
    
    
    
    
    
    154,586Total costs and other deductions
    
    
    18,765
    
    
    
    76,755
    
    
    
    38,916
    
    
    
    4,453,585
    
    
    
    (85,857
    )
    
    
    4,502,164Income from continuing operations
before income taxes
    
    
    551,173
    
    
    
    193,569
    
    
    
    (7,738
    )
    
    
    1,053,880
    
    
    
    (989,260
    )
    
    
    801,624Income tax (benefit) expense
    
    
    
    
    
    
    (1,616
    )
    
    
    (2,477
    )
    
    
    254,544
    
    
    
    
    
    
    
    250,451Income from continuing operations, net
of tax
    
    
    551,173
    
    
    
    195,185
    
    
    
    (5,261
    )
    
    
    799,336
    
    
    
    (989,260
    )
    
    
    551,173Income from discontinued operations,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    $
    551,173
    
    
    $
    195,185
    
    
    $
    (5,261
    )
    
    $
    799,336
    
    
    $
    (989,260
    )
    
    $
    551,173
 92




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##### Table of Contents



Year Ended December 31, 2007Nabors
    
    
    
    
    
    
    OtherNabors
    
    
    Delaware
    
    
    Nabors
    
    
    Subsidiaries(Parent/
    
    
    (Issuer/
    
    
    Holdings
    
    
    (Non
    
    
    Consolidating
    
    
    Consolidated(In thousands)
    
    Guarantor)
    
    
    Guarantor)
    
    
    (Issuer)
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalRevenues and other income:Operating revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,938,848
    
    
    $
    
    
    
    $
    4,938,848Earnings (losses) from unconsolidated
affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,724
    
    
    
    
    
    
    
    17,724Earnings (losses) from consolidated
affiliates
    
    
    914,328
    
    
    
    503,713
    
    
    
    17,632
    
    
    
    543,370
    
    
    
    (1,979,043
    )
    
    
    Investment income (loss)
    
    
    687
    
    
    
    146
    
    
    
    
    
    
    
    (16,724
    )
    
    
    
    
    
    
    (15,891
    )Intercompany interest income
    
    
    3,989
    
    
    
    85,550
    
    
    
    2
    
    
    
    
    
    
    
    (89,541
    )
    
    
    Total revenues and other income
    
    
    919,004
    
    
    
    589,409
    
    
    
    17,634
    
    
    
    5,483,218
    
    
    
    (2,068,584
    )
    
    
    4,940,681Costs and other deductions:Direct costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,764,559
    
    
    
    
    
    
    
    2,764,559General and administrative expenses
    
    
    17,085
    
    
    
    144
    
    
    
    17
    
    
    
    419,573
    
    
    
    (537
    )
    
    
    436,282Depreciation and amortization
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    467,130
    
    
    
    
    
    
    
    467,730Depletion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,182
    
    
    
    
    
    
    
    72,182Interest expense
    
    
    
    
    
    
    51,156
    
    
    
    11,456
    
    
    
    (8,910
    )
    
    
    
    
    
    
    53,702Intercompany interest expense
    
    
    6,260
    
    
    
    
    
    
    
    
    
    
    
    83,281
    
    
    
    (89,541
    )
    
    
    Losses (gains) on sales,
retirements and impairments of
long-lived assets and other expense
(income), net
    
    
    (8
    )
    
    
    1,377
    
    
    
    
    
    
    
    8,989
    
    
    
    537
    
    
    
    10,895Total costs and other deductions
    
    
    23,337
    
    
    
    53,277
    
    
    
    11,473
    
    
    
    3,806,804
    
    
    
    (89,541
    )
    
    
    3,805,350Income from continuing operations before income taxes
    
    
    895,667
    
    
    
    536,132
    
    
    
    6,161
    
    
    
    1,676,414
    
    
    
    (1,979,043
    )
    
    
    1,135,331Income tax expense
    
    
    
    
    
    
    11,996
    
    
    
    1,971
    
    
    
    225,697
    
    
    
    
    
    
    
    239,664Income from continuing operations, net
of tax
    
    
    895,667
    
    
    
    524,136
    
    
    
    4,190
    
    
    
    1,450,717
    
    
    
    (1,979,043
    )
    
    
    895,667Income from discontinued operations,
net of tax
    
    
    35,024
    
    
    
    35,024
    
    
    
    
    
    
    
    70,048
    
    
    
    (105,072
    )
    
    
    35,024Net income
    
    $
    930,691
    
    
    $
    559,160
    
    
    $
    4,190
    
    
    $
    1,520,765
    
    
    $
    (2,084,115
    )
    
    $
    930,691
 93




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##### Table of Contents



Year Ended December 31, 2006Nabors
    
    
    
    
    
    
    OtherNabors
    
    
    Delaware
    
    
    Nabors
    
    
    Subsidiaries(Parent/
    
    
    (Issuer/
    
    
    Holdings
    
    
    (Non
    
    
    Consolidating
    
    
    Consolidated(In thousands)
    
    Guarantor)
    
    
    Guarantor)
    
    
    (Issuer)
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalRevenues and other income:Operating revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,707,289
    
    
    $
    
    
    
    $
    4,707,289Earnings (losses) from unconsolidated
affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,545
    
    
    
    
    
    
    
    20,545Earnings (losses) from consolidated
affiliates
    
    
    1,007,301
    
    
    
    772,123
    
    
    
    16,357
    
    
    
    807,604
    
    
    
    (2,603,385
    )
    
    
    Investment income (loss)
    
    
    324
    
    
    
    10,480
    
    
    
    
    
    
    
    91,203
    
    
    
    
    
    
    
    102,007Intercompany interest income
    
    
    4,050
    
    
    
    66,476
    
    
    
    
    
    
    
    
    
    
    
    (70,526
    )
    
    
    Total revenues and other income
    
    
    1,011,675
    
    
    
    849,079
    
    
    
    16,357
    
    
    
    5,626,641
    
    
    
    (2,673,911
    )
    
    
    4,829,841Costs and other deductions:Direct costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,511,392
    
    
    
    
    
    
    
    2,511,392General and administrative expenses
    
    
    17,130
    
    
    
    388
    
    
    
    5
    
    
    
    399,454
    
    
    
    (367
    )
    
    
    416,610Depreciation and amortization
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    364,053
    
    
    
    
    
    
    
    364,653Depletion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,580
    
    
    
    
    
    
    
    38,580Interest expense
    
    
    
    
    
    
    40,457
    
    
    
    11,440
    
    
    
    (5,311
    )
    
    
    
    
    
    
    46,586Intercompany interest expense
    
    
    1,536
    
    
    
    
    
    
    
    
    
    
    
    68,990
    
    
    
    (70,526
    )
    
    
    Losses (gains) on sales,
retirements and impairments of
long-lived assets and other expense
(income), net
    
    
    
    
    
    
    (1,339
    )
    
    
    
    
    
    
    25,090
    
    
    
    367
    
    
    
    24,118Total costs and other deductions
    
    
    18,666
    
    
    
    40,106
    
    
    
    11,445
    
    
    
    3,402,248
    
    
    
    (70,526
    )
    
    
    3,401,939Income from continuing operations before income taxes
    
    
    993,009
    
    
    
    808,973
    
    
    
    4,912
    
    
    
    2,224,393
    
    
    
    (2,603,385
    )
    
    
    1,427,902Income tax expense
    
    
    
    
    
    
    13,635
    
    
    
    1,622
    
    
    
    419,636
    
    
    
    
    
    
    
    434,893Income from continuing operations, net
of tax
    
    
    993,009
    
    
    
    795,338
    
    
    
    3,290
    
    
    
    1,804,757
    
    
    
    (2,603,385
    )
    
    
    993,009Income from discontinued operations,
net of tax
    
    
    27,727
    
    
    
    27,727
    
    
    
    
    
    
    
    55,454
    
    
    
    (83,181
    )
    
    
    27,727Net income
    
    $
    1,020,736
    
    
    $
    823,065
    
    
    $
    3,290
    
    
    $
    1,860,211
    
    
    $
    (2,686,566
    )
    
    $
    1,020,736
 94




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##### Table of Contents



Condensed Consolidating Statements of Cash Flows
 Year Ended December 31, 2008Nabors
    
    
    
    
    
    
    OtherNabors
    
    
    Delaware
    
    
    Nabors
    
    
    Subsidiaries(Parent/
    
    
    (Issuer/
    
    
    Holdings
    
    
    (Non
    
    
    Consolidating
    
    
    Consolidated(In thousands)
    
    Guarantor)
    
    
    Guarantor)
    
    
    (Issuer)
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalNet cash provided by (used for)
operating activities
    
    $
    39,987
    
    
    $
    270,811
    
    
    $
    (162,293
    )
    
    $
    1,455,628
    
    
    $
    (158,126
    )
    
    $
    1,446,007Cash flows from investing activities:Purchases of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (269,983
    )
    
    
    
    
    
    
    (269,983
    )Sales and maturities of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    521,613
    
    
    
    
    
    
    
    521,613Cash paid for acquisitions of
businesses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (287
    )
    
    
    
    
    
    
    (287
    )Investment in unconsolidated
affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (271,309
    )
    
    
    
    
    
    
    (271,309
    )Capital expenditures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,490,162
    )
    
    
    
    
    
    
    (1,490,162
    )Proceeds from sales of assets and
insurance claims
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,842
    
    
    
    
    
    
    
    69,842Cash paid for investments in
consolidated affiliates
    
    
    (85,927
    )
    
    
    (150,626
    )
    
    
    
    
    
    
    (163,548
    )
    
    
    400,101
    
    
    
    Net cash provided by (used for)
investing activities
    
    
    (85,927
    )
    
    
    (150,626
    )
    
    
    
    
    
    
    (1,603,834
    )
    
    
    400,101
    
    
    
    (1,440,286
    )Cash flows from financing activities:Increase (decrease) in cash
overdrafts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,858
    
    
    
    
    
    
    
    23,858Proceeds from long-term debt
    
    
    
    
    
    
    962,901
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    962,901Debt issuance costs
    
    
    
    
    
    
    (7,324
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,324
    )Proceeds from issuance of common
shares
    
    
    56,633
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    56,630Reduction in long-term debt
    
    
    
    
    
    
    (836,431
    )
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    (836,511
    )Repurchase of common shares
    
    
    
    
    
    
    (247,357
    )
    
    
    
    
    
    
    (33,744
    )
    
    
    
    
    
    
    (281,101
    )Purchase of restricted stock
    
    
    (13,061
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,061
    )Tax benefit related to the
exercise of stock options
    
    
    
    
    
    
    5,369
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,369Proceeds from parent contributions
    
    
    
    
    
    
    
    
    
    
    163,548
    
    
    
    236,553
    
    
    
    (400,101
    )
    
    
    Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (158,126
    )
    
    
    158,126
    
    
    
    Net cash (used for) provided by
financing activities
    
    
    43,572
    
    
    
    (122,842
    )
    
    
    163,548
    
    
    
    68,458
    
    
    
    (241,975
    )
    
    
    (89,239
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,701
    )
    
    
    
    
    
    
    (5,701
    )Net (decrease) increase in cash and
cash equivalents
    
    
    (2,368
    )
    
    
    (2,657
    )
    
    
    1,255
    
    
    
    (85,449
    )
    
    
    
    
    
    
    (89,219
    )Cash and cash equivalents, beginning
of period
    
    
    10,659
    
    
    
    2,753
    
    
    
    4
    
    
    
    517,890
    
    
    
    
    
    
    
    531,306Cash and cash equivalents, end of
period
    
    $
    8,291
    
    
    $
    96
    
    
    $
    1,259
    
    
    $
    432,441
    
    
    $
    
    
    
    $
    442,087
 95




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##### Table of Contents



Year Ended December 31, 2007Nabors
    
    
    
    
    
    
    OtherNabors
    
    
    Delaware
    
    
    Nabors
    
    
    Subsidiaries(Parent/
    
    
    (Issuer/
    
    
    Holdings
    
    
    (Non
    
    
    Consolidating
    
    
    Consolidated(In thousands)
    
    Guarantor)
    
    
    Guarantor)
    
    
    (Issuer)
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalNet cash provided by (used for)
operating
activities
    
    $
    (6,213
    )
    
    $
    117,758
    
    
    $
    (16,111
    )
    
    $
    1,280,248
    
    
    $
    (5,484
    )
    
    $
    1,370,198Cash flows from investing activities:Purchases of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (378,318
    )
    
    
    
    
    
    
    (378,318
    )Sales and maturities of investments
    
    
    
    
    
    
    926
    
    
    
    
    
    
    
    859,459
    
    
    
    
    
    
    
    860,385Cash paid for acquisitions of
businesses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,391
    )
    
    
    
    
    
    
    (8,391
    )Investment in unconsolidated
affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (278,100
    )
    
    
    
    
    
    
    (278,100
    )Capital expenditures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,014,469
    )
    
    
    
    
    
    
    (2,014,469
    )Proceeds from sales of assets and
insurance claims
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    356,387
    
    
    
    
    
    
    
    356,387Cash paid for investments in
consolidated affiliates
    
    
    
    
    
    
    (120,484
    )
    
    
    
    
    
    
    (16,107
    )
    
    
    136,591
    
    
    
    Net cash provided by (used for)
investing activities
    
    
    
    
    
    
    (119,558
    )
    
    
    
    
    
    
    (1,479,539
    )
    
    
    136,591
    
    
    
    (1,462,506
    )Cash flows from financing activities:Decrease in cash overdrafts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,416
    )
    
    
    
    
    
    
    (38,416
    )Proceeds from long-term debt
    
    
    (57,811
    )
    
    
    
    
    
    
    
    
    
    
    57,811
    
    
    
    
    
    
    
    Proceeds from issuance of common
shares
    
    
    61,620
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,620Repurchase of common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (102,451
    )
    
    
    
    
    
    
    (102,451
    )Purchase of restricted stock
    
    
    (1,811
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,811
    )Tax benefit related to the
exercise of stock options
    
    
    
    
    
    
    2,159
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,159Proceeds from parent contributions
    
    
    
    
    
    
    
    
    
    
    16,107
    
    
    
    120,484
    
    
    
    (136,591
    )
    
    
    Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,484
    )
    
    
    5,484
    
    
    
    Net cash (used for) provided by
financing activities
    
    
    1,998
    
    
    
    2,159
    
    
    
    16,107
    
    
    
    31,944
    
    
    
    (131,107
    )
    
    
    (78,899
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,964
    
    
    
    
    
    
    
    1,964Net (decrease) increase in cash and
cash equivalents
    
    
    (4,215
    )
    
    
    359
    
    
    
    (4
    )
    
    
    (165,383
    )
    
    
    
    
    
    
    (169,243
    )Cash and cash equivalents, beginning
of period
    
    
    14,874
    
    
    
    2,394
    
    
    
    8
    
    
    
    683,273
    
    
    
    
    
    
    
    700,549Cash and cash equivalents, end of
period
    
    $
    10,659
    
    
    $
    2,753
    
    
    $
    4
    
    
    $
    517,890
    
    
    $
    
    
    
    $
    531,306
 96




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##### Table of Contents



Year Ended December 31, 2006Nabors
    
    
    
    
    
    
    OtherNabors
    
    
    Delaware
    
    
    Nabors
    
    
    Subsidiaries(Parent/
    
    
    (Issuer/
    
    
    Holdings
    
    
    (Non
    
    
    Consolidating
    
    
    Consolidated(In thousands)
    
    Guarantor)
    
    
    Guarantor)
    
    
    (Issuer)
    
    
    Guarantors)
    
    
    Adjustments
    
    
    TotalNet cash provided by (used for)
operating
activities
    
    $
    1,172,786
    
    
    $
    (189,608
    )
    
    $
    (10,971
    )
    
    $
    3,356,390
    
    
    $
    (2,842,339
    )
    
    $
    1,486,258Cash flows from investing activities:Purchases of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,135,525
    )
    
    
    
    
    
    
    (1,135,525
    )Sales and maturities of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,325,903
    
    
    
    
    
    
    
    1,325,903Cash paid for acquisitions of
businesses, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (82,407
    )
    
    
    
    
    
    
    (82,407
    )Deposits released on acquisitions
closed subsequent to year-end
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,844
    
    
    
    
    
    
    
    35,844Investment in unconsolidated
affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,433
    )
    
    
    
    
    
    
    (2,433
    )Capital expenditures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,927,407
    )
    
    
    
    
    
    
    (1,927,407
    )Proceeds from sales of assets and
insurance claims
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,556
    
    
    
    
    
    
    
    17,556Cash paid for investments in
consolidated affiliates
    
    
    (977,927
    )
    
    
    (487,275
    )
    
    
    
    
    
    
    (1,189,056
    )
    
    
    2,654,258
    
    
    
    Cash received from investments in
consolidated affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000,000
    
    
    
    (2,000,000
    )
    
    
    Net cash provided by (used for)
investing activities
    
    
    (977,927
    )
    
    
    (487,275
    )
    
    
    
    
    
    
    (957,525
    )
    
    
    654,258
    
    
    
    (1,768,469
    )Cash flows from financing activities:Increase in cash overdrafts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,154
    
    
    
    
    
    
    
    2,154Proceeds from sale of warrants
    
    
    421,162
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    421,162Purchase of exchangeable note hedge
    
    
    
    
    
    
    (583,550
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (583,550
    )Proceeds from long-term debt
    
    
    
    
    
    
    2,750,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,750,000Debt issuance costs
    
    
    
    
    
    
    (28,683
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,683
    )Proceeds from issuance of common
shares
    
    
    25,682
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,682Reduction in long-term debt
    
    
    
    
    
    
    (769,789
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (769,789
    )Repurchase of common shares
    
    
    (627,356
    )
    
    
    
    
    
    
    
    
    
    
    (2,775,484
    )
    
    
    2,000,000
    
    
    
    (1,402,840
    )Tax benefit related to the
exercise of stock options
    
    
    
    
    
    
    4,139
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,139Proceeds from parent contributions
    
    
    
    
    
    
    1,178,088
    
    
    
    10,968
    
    
    
    1,465,202
    
    
    
    (2,654,258
    )
    
    
    Cash dividends paid
    
    
    
    
    
    
    (1,870,942
    )
    
    
    
    
    
    
    (971,397
    )
    
    
    2,842,339
    
    
    
    Net cash (used for) provided by
financing activities
    
    
    (180,512
    )
    
    
    679,263
    
    
    
    10,968
    
    
    
    (2,279,525
    )
    
    
    2,188,081
    
    
    
    418,275Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (516
    )
    
    
    
    
    
    
    (516
    )Net (decrease) increase in cash and
cash equivalents
    
    
    14,347
    
    
    
    2,380
    
    
    
    (3
    )
    
    
    118,824
    
    
    
    
    
    
    
    135,548Cash and cash equivalents, beginning
of period
    
    
    527
    
    
    
    14
    
    
    
    11
    
    
    
    564,449
    
    
    
    
    
    
    
    565,001Cash and cash equivalents, end of
period
    
    $
    14,874
    
    
    $
    2,394
    
    
    $
    8
    
    
    $
    683,273
    
    
    $
    
    
    
    $
    700,549
 97




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##### Table of Contents



Note 22 Subsequent Events
    98




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 (a)
    
    Disclosure Controls and Procedures. We maintain a set of disclosure controls and
procedures that are designed to provide reasonable assurance that information required to be
disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms. We have investments
in certain unconsolidated entities that we do not control or manage. Because we do not
control or manage these entities, our disclosure controls and procedures with respect to
such entities are necessarily more limited than those we maintain with respect to our
consolidated subsidiaries.The Companys management, with the participation of the Companys Chairman and Chief
Executive Officer and Vice President and Chief Financial Officer, has evaluated the
effectiveness of the Companys disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by
this report. Based on such evaluation, the Companys Chairman and Chief Executive Officer and
Vice President and Chief Financial Officer have concluded that, as of the end of such period,
the Companys disclosure controls and procedures are effective, at the reasonable assurance
level, in recording, processing, summarizing and reporting, on a timely basis, information
required to be disclosed by the Company in the reports that it files or submits under the
Exchange Act and are effective, at the reasonable assurance level, in ensuring that
information required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Companys management, including
the Companys Chairman and Chief Executive Officer and Vice President and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.(b)
    
    Changes in Internal Control Over Financial Reporting. There have not been any changes in
the Companys internal control over financial reporting (identified in connection with the
evaluation required by paragraph (d) in Rules 13a-15 and 15d-15 under the Exchange Act)
during the most recently completed fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over financial
reporting.
 99




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##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
    
 ITEM 9B. OTHER INFORMATION
  100




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Election of Directors Other Executive Officers Section 16(a)
Beneficial Ownership Reporting Compliance
   
 ITEM 11. EXECUTIVE COMPENSATION
 Management Compensation
 101




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##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS
   (a)
    
    
    
    
    
    (c)Number of
    
    
    
    
    
    Number of securitiessecurities to be
    
    (b)
    
    remaining available forissued upon
    
    Weighted-average
    
    future issuance underexercise of
    
    exercise price of
    
    equity compensationoutstanding
    
    outstanding
    
    plans (excludingoptions, warrants
    
    options, warrants
    
    securitiesPlan category
    
    and rights
    
    and rights
    
    reflected in column (a))Equity compensation
plans approved by
security holders
    
    
    18,114,684
    
    
    $
    21.7965
    
    
    
    14,752,029
    (1)(2)Equity compensation
plans not approved
by security holders
    
    
    7,743,321
    
    
    $
    22.4308
    
    
    
    886,000Total
    
    
    25,858,005

    
    
    
    
    
    
    
    15,638,029
 (1)
    
    The 1996 Employee Stock Plan incorporated an evergreen formula pursuant to which on each
January 1, the aggregate number of shares reserved for issuance under the 1996 Employee Stock
Plan were increased by an amount equal to 1 1-5 % of the common shares outstanding
on December 31 of the immediately preceding fiscal year. The 1996 Employee Stock Plan expired
on January 17, 2006, and no additional shares were reserved for issuance during fiscal 2006.(2)
    
    The 2003 Employee Stock Plan provides, commencing on June 1, 2006 and thereafter for a period
of four (4) years on each January 1, for an automatic increase in the number of shares
reserved and available for issuance under the Plan by an amount equal to two percent (2%) of
the Companys outstanding common shares as of each June 1 or January 1 date.
  1997 Executive Officers Incentive Stock Plan
  1998 Employee Stock Plan
  102




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##### Table of Contents



1999 Stock Option Plan for Non-Employee Directors
  Share Ownership of Management and Principal Shareholders
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 Certain Relationships and Related Transactions
 
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 Principal Accounting Fees and Services
 103




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
   Page No.Consolidated Balance Sheets as of December 31, 2008 and 2007
    
    
    46Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006
    
    
    47Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006
    
    
    48Consolidated Statements of Changes in Shareholders Equity for the Years Ended December 31, 2008, 2007 and 2006
    
    
    49
  Page No.Schedule II  Valuation and Qualifying Accounts
    
    111
  104




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##### Table of Contents



(b) Exhibits
 Exhibit No.
    
    Description2.1
    
    Agreement and Plan of Merger among Nabors Industries, Inc.,
Nabors Acquisition Corp. VIII, Nabors Industries Ltd. and
Nabors US Holdings Inc. (incorporated by reference to Annex
I to the proxy statement/prospectus included in Nabors
Industries Ltd.s Registration Statement on Form S-4 (File
No. 333-76198) filed with the Commission on May 10, 2002,
as amended).2.2
    
    Amended and Restated Acquisition Agreement, dated as of
March 18, 2002, by and between Nabors Industries, Inc. and
Enserco Energy Service Company Inc. (incorporated by
reference to Exhibit 2.1 to Nabors Industries, Inc.s
Registration Statement on Form S-3 (File No. 333-85228)).2.3
    
    Form of Plan of Arrangement Under Section 192 of the Canada
Business Corporations Act Involving and Affecting Enserco
Energy Service Company Inc. and its Security holders
(included in Schedule B to Exhibit 2.2).2.4
    
    Arrangement Agreement dated August 12, 2002 between Nabors
Industries Ltd. and Ryan Energy Technologies Inc.
(incorporated by reference to Exhibit 2.4 to Nabors
Industries Ltd.s Form 10-K for the year ended December 31,
2002 (File No. 000-49887)).2.5
    
    Asset Purchase Agreement dated July 20, 2007, by and among
Nabors US Finance LLC, Nabors Well Services Co. (inclusive
of its Sea Mar Division), Sea Mar Management LLC and
Hornbeck Offshore Services, Inc. (incorporated by reference
to Exhibit 2.5 to Nabors Industries Ltd.s Form 10-Q (File
No. 001-32657) filed with the Commission on August 2,
2007).3.1
    
    Memorandum of Association of Nabors Industries Ltd.
(incorporated by reference to Annex II to the proxy
statement/prospectus included in Nabors Industries Ltd.s
Registration Statement on Form S-4 (Registration No.
333-76198) filed with the Commission on May 10, 2002, as
amended).3.2
    
    Amended and Restated Bye-Laws of Nabors Industries Ltd.
(incorporated by reference to Exhibit 4.2 to Nabors
Industries Ltd.s Form 10-Q (File No. 000-49887) filed with
the Commission on August 3, 2005).3.3
    
    Amendment to Amended and Restated Bye-Laws of Nabors
Industries Ltd. (incorporated by reference to Exhibit A of
Nabors Industries Ltd. Notice of Special General Meeting
and Proxy Statement (File No. 001-32657) filed February 24,
2006).3.4
    
    Form of Resolutions of the Board of Directors of Nabors
Industries Ltd. authorizing the issue of the Special Voting
Preferred Share (incorporated by reference to Exhibit 3.3
to Nabors Industries Ltd.s Post-Effective Amendment No. 1
to Registration Statement on Form S-3 (Registration No.
333-85228-99) filed with the Commission on June 11, 2002).4.1
    
    Indenture dated as of February 5, 2001 between Nabors
Industries, Inc. and Bank One, N.A., as trustee, in
connection with $1,382,200,000 principal amount at
maturity of Zero Coupon Convertible Senior Debentures due
2021 (incorporated by reference to Exhibit 4.11 to Nabors
Industries, Inc.s Form 10-K (File No. 1-9245) filed with
the Commission on March 30, 2001).4.2
    
    First Supplemental Indenture, dated as of June 21, 2002,
among Nabors Industries, Inc., as issuer, Nabors Industries
Ltd. as guarantor, and Bank One, N.A. as trustee, with
respect to Nabors Industries, Inc.s Zero Coupon
Convertible Senior Debentures due 2021 (incorporated by
reference to Exhibit 4.5 to Nabors Industries Ltd.s Form
10-Q (File No. 000-49887) filed with the Commission on
August 14, 2002).4.3
    
    Second Supplemental Indenture dated as of October 25, 2004,
by and among Nabors Industries, Inc., as issuer, Nabors
Industries Ltd., as guarantor, and J.P. Morgan Trust
Company, National Association (as successor to Bank One,
N.A.), as Trustee, to the Indenture, dated as of February
5, 2001, as amended, with respect to Nabors Industries,
Inc.s Zero Coupon Convertible Senior Debentures due 2021
(incorporated by reference to Exhibit 4.1 to Nabors
Industries Ltd.s Current Report on Form 8-K (File No.
000-49887) filed with the Commission on October 27, 2004).4.4
    
    Indenture, dated August 22, 2002, among Nabors Industries,
Inc., as issuer, Nabors Industries Ltd., as guarantor, and
Bank One, N.A., with respect to Nabors Industries, Inc.s
Series A and Series B 5.375% Senior Notes due 2012
(incorporated by reference to Exhibit 4.1 to Nabors
Industries, Inc.s Registration Statement on Form S-4
(Registration No. 333-10049201) filed with the Commission
on October 11, 2002).4.5
    
    Indenture, dated August 22, 2002, among Nabors Holdings 1,
ULC, as issuer, Nabors Industries, Inc. and Nabors
Industries Ltd., as guarantors, and Bank One, N.A., with
respect to Nabors Holdings 1, ULCs Series A and Series B
4.875% Senior Notes due 2009 (incorporated by reference to
Exhibit 4.1 to Nabors Holdings 1, ULCs Registration
Statement on Form S-4 (Registration No. 333-10049301) filed
with the Commission on October 11, 2002).4.6
    
    Form of Provisions Attaching to the Exchangeable Shares of
Nabors Exchangeco (Canada) Inc. (incorporated by
 105




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##### Table of Contents



Exhibit No.
    
    Descriptionreference
to Exhibit 4.1 to Nabors Industries, Inc.s Registration
Statement on Form S-3 (Registration No. 333-85228) filed
with the Commission on March 29, 2002, as amended).4.7
    
    Form of Support Agreement between Nabors Industries, Inc.,
3064297 Nova Scotia Company and Nabors Exchangeco (Canada)
Inc. (incorporated by reference to Exhibit 4.2 to Nabors
Industries, Inc.s Registration Statement on Form S-3
(Registration No. 333-85228) filed with the Commission on
March 29, 2002, as amended).4.8
    
    Form of Acknowledgement of Novation to Nabors Industries,
Inc., Nabors Exchangeco (Canada) Inc., Computershare Trust
Company of Canada and 3064297 Nova Scotia Company executed
by Nabors Industries Ltd. (incorporated by reference to
Exhibit 4.3 to Nabors Industries Ltd.s Post-Effective
Amendment No. 1 to Registration Statement on Form S-3
(Registration No. 333-85228-99) filed with the Commission
on June 11, 2002).4.9
    
    Indenture, dated as of June 10, 2003, between Nabors
Industries, Inc., Nabors Industries Ltd. and Bank One, N.A.
with respect to Nabors Industries, Inc.s Zero Coupon
Senior Exchangeable Notes due 2023 (incorporated by
reference to Exhibit 4.1 to Nabors Industries, Inc.s and
Nabors Industries Ltd.s Registration Statement on Form S-3
(File No. 333-107806-01) filed with the Commission on
August 8, 2003).4.10
    
    Registration Rights Agreement, dated as of June 10, 2003,
by and among Nabors Industries, Inc., Nabors Industries
Ltd. and Citigroup Global Markets Inc. (incorporated by
reference to Exhibit 4.2 to Nabors Industries Inc.s and
Nabors Industries Ltd.s Registration Statement on Form S-3
(File No. 333-107806-01) filed with the Commission on
August 8, 2003).4.11
    
    First Supplemental Indenture, dated as of October 25, 2004,
by and among Nabors Industries, Inc., as issuer, Nabors
Industries Ltd., as guarantor, and J.P. Morgan Trust
Company, National Association, (as successor to Bank One,
N.A.), as trustee to the Indenture, dated as of June 10,
2003, with respect to Nabors Industries, Inc.s Zero Coupon
Senior Exchangeable Notes due 2023 (incorporated by
reference to Exhibit 4.2 to Nabors Industries Ltd.s
Current Report on Form 8-K (File No. 000-49887) filed
with the Commission on October 27, 2004).4.12
    
    Indenture, dated as of December 13, 2004, by and among
Nabors Industries, Inc., Nabors Industries Ltd., and J.P.
Morgan Trust Company, National Association, with respect to
Nabors Industries, Inc.s Series B Zero Coupon Senior
Exchangeable Notes due 2023 (incorporated by reference to
Exhibit 4.12 to Nabors Industries Ltd.s Form 10-K (File
No. 000-49887) filed with the Commission on March 7, 2005).4.13
    
    Purchase Agreement, dated May 18, 2006, among Nabors
Industries, Inc., Nabors Industries Ltd., Citigroup Global
Markets Inc. and Lehman Brothers Inc. (incorporated by
reference to Exhibit 4.1 to Nabors Industries Ltd. Form 8-K
(File No. 000-49887) filed with the Commission on May 24,
2006).4.14
    
    Indenture related to the Senior Exchangeable Notes, due
2011, dated as of May 23, 2006, among Nabors Industries,
Inc., Nabors Industries Ltd. and Wells Fargo Bank, National
Association, as trustee (including form of 0.94% Senior
Exchangeable Note due 2011) (incorporated by reference to
Exhibit 4.2 to Nabors Industries Ltd. Form 8-K (File No.
000-49887) filed with the Commission on May 24, 2006).4.15
    
    Registration Rights Agreement, dated as of May 23, 2006,
among Nabors Industries, Inc., Nabors Industries Ltd.,
Citigroup Global Markets Inc. and Lehman Brothers Inc.
(incorporated by reference to Exhibit 4.3 to Nabors
Industries Ltd. Form 8-K (File No. 000-49887) filed with
the Commission on May 24, 2006).4.16
    
    Amended and Restated 2003 Employee Stock Plan (incorporated
by reference to Exhibit A of Nabors Industries Ltd.
Notice of 2006 Annual General Meeting of Shareholders and
Proxy Statement (File No. 001-32657) filed May 4, 2006).4.17
    
    Purchase Agreement, dated February 14, 2008, among Nabors
Industries, Inc., Nabors Industries Ltd., Citigroup Global
Markets Inc. and UBS Securities LLC (incorporated by
reference to Exhibit 4.1 to Nabors Industries Ltd. Form 8-K
(File No. 000-49887) filed February 22, 2008).4.18
    
    Indenture related to the Senior Notes due 2018, dated
February 20, 2008, among Nabors Industries, Inc., Nabors
Industries Ltd. and Wells Fargo Bank, National Association,
as trustee (including form of 6.15% Senior Note due 2018)
(incorporated by reference to Exhibit 4.2 to Nabors
Industries Ltd. Form 8-K (File No. 000-49887) filed
February 22, 2008).4.19
    
    Registration Rights Agreement, dated as of February 20,
2008, among Nabors Industries, Inc., Nabors Industries,
Ltd., Citigroup Global Markets Inc. and UBS Securities LLC
(incorporated by reference to Exhibit 4.3 to Nabors
Industries Ltd. Form 8-K (File No. 000-49887) filed
February 22, 2008).4.20
    
    Purchase Agreement, dated July 17, 2008, among Nabors
Industries, Inc., Nabors Industries, Ltd., Citigroup Global
Markets Inc. and UBS Securities LLC (incorporated by
reference to Exhibit 4.1 to Nabors Industries Ltd. Form 8-K
(File No. 000-49887) filed July 1, 2008).4.21
    
    Registration Rights Agreement, dated July 22, 2008, among
Nabors Industries, Inc., Nabors Industries, Ltd., Citigroup
Global Markets Inc. and UBS Securities LLC (incorporated by
reference to Exhibit 4.2 to Nabors Industries Ltd. Form 8-K
(File No. 000-49887) filed July 1, 2008).
 106




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##### Table of Contents



Exhibit No.
    
    Description4.22
    
    Purchase Agreement, dated January 7, 2009, among Nabors
Industries, Inc., Nabors Industries Ltd., Goldman, Sachs &
Co., UBS Securities LLC, Citigroup Global Markets Inc.,
Deutsche Bank Securities Inc., Howard Weil Incorporated,
J.P. Morgan Securities Inc., Morgan Stanley & Co.
Incorporated, Tudor, Pickering, Holt & Co. Securities, Inc.
and Wells Fargo Securities, LLC (incorporated by reference
to Exhibit 4.1 to Nabors Industries Ltd.s Form 8-K (File
No. 001-32657) filed January 14, 2009).4.23
    
    Indenture related to the Senior Notes due 2019, dated as of
January 12, 2009, among Nabors Industries, Inc., Nabors
Industries Ltd. and Wells Fargo Bank, National Association,
as trustee (including form of 9.25% Senior Note due 2019)
(incorporated by reference to Exhibit 4.2 to Nabors
Industries Ltd.s Form 8-K (File No. 001-32657) filed
January 14, 2009).4.24
    
    Registration Rights Agreement, dated as of January 12,
2009, among Nabors Industries, Inc., Nabors Industries
Ltd., Goldman, Sachs & Co., UBS Securities LLC, Citigroup
Global Markets Inc., Deutsche Bank Securities Inc., Howard
Weil Incorporated, J.P. Morgan Securities Inc., Morgan
Stanley & Co. Incorporated, Tudor, Pickering, Holt & Co.
Securities, Inc. and Wells Fargo Securities, LLC
(incorporated by reference to Exhibit 4.2 to Nabors
Industries Ltd.s Form 8-K (File No. 001-32657) filed
January 14, 2009).10.1 (+)
    
    1996 Employee Stock Plan (incorporated by reference to
Nabors Industries Inc.s Registration Statement on Form S-8
(Registration No. 333-11313) filed September 3, 1996).10.2 (+)
    
    1994 Executive Stock Option Agreement effective December
28, 1994, between Nabors Industries, Inc. and Eugene M.
Isenberg (incorporated by reference to Exhibit 10.4 to
Nabors Industries Inc.s Form 10-K (File No. 1-9245) filed
December 30, 1996).10.3 (+)
    
    1994 Executive Stock Option Agreement effective December
28, 1994, between Nabors Industries, Inc. and Anthony G.
Petrello (incorporated by reference to Exhibit 10.5 to
Nabors Industries Inc.s Form 10-K (File No. 1-9245) filed
December 30, 1996).10.4 (+)
    
    Employment Agreement effective October 1, 1996, between
Nabors Industries, Inc. and Eugene M. Isenberg
(incorporated by reference to Exhibit 10.7 to Nabors
Industries Inc.s Form 10-Q (File No. 1-9245) filed May 16,
1997).10.5 (+)
    
    First Amendment to Amended and Restated Employment
Agreement between Nabors Industries, Inc., Nabors
Industries Ltd. and Eugene M. Isenberg dated as of June 24,
2002 (incorporated by reference to Exhibit 10.1 to Nabors
Industries Ltd.s Form 10-Q (File No. 000-49887) filed
August 14, 2002).10.6 (+)
    
    Second Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Eugene M.
Isenberg dated as of July 17, 2002 (incorporated by
reference to Exhibit 10.1 to Nabors Industries Ltd.s Form
10-Q (File No. 000-49887) filed August 14, 2002).10.7 (+)
    
    Third Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Eugene M.
Isenberg dated as of December 28, 2005 (incorporated by
reference to Exhibit 10.01 to Nabors Industries Ltd.s Form
8-K (File No. 000-49887) filed December 28, 2005).10.8 (+)
    
    Fourth Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Eugene M.
Isenberg dated as of March 10, 2006 (incorporated by
reference to Exhibit 10.8 to Nabors Industries Ltd.,s Form
10-K (File No. 000-49887) filed March 16, 2006).10.9 (+)
    
    Fifth Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Eugene M.
Isenberg dated as of December 31, 2008 (incorporated by
reference to Exhibit 10.1 to Nabors Industries Ltd. Form
8-K (File No. 001-32657) filed with the Commission on
January 7, 2009).10.10 (+)
    
    Employment Agreement effective October 1, 1996, between
Nabors Industries, Inc. and Anthony G. Petrello
(incorporated by reference to Exhibit 10.8 to Nabors
Industries Inc.s Form 10-Q (File No. 1-9245) filed May 16,
1997).10.11 (+)
    
    First Amendment to Amended and Restated Employment
Agreement between Nabors Industries, Inc., Nabors
Industries Ltd. and Anthony G. Petrello dated as of June
24, 2002 (incorporated by reference to Exhibit 10.2 to
Nabors Industries Ltd.s Form 10-Q (File No. 000-49887)
filed August 14, 2002).10.12 (+)
    
    Second Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Anthony G.
Petrello dated as of July 17, 2002 (incorporated by
reference to Exhibit 10.3 to Nabors Industries Ltd.s Form
10-Q, File No. 000-49887, filed August 14, 2002).10.13 (+)
    
    Third Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Anthony G.
Petrello dated as of December 28, 2005 (incorporated by
reference to Exhibit 10.02 to Nabors Industries Ltd.s Form
8-K (File No. 000-49887) filed December 28, 2005).10.14 (+)
    
    Fourth Amendment to Employment Agreement between Nabors
Industries, Inc., Nabors Industries Ltd. and Anthony G.
Petrello dated as of December 31, 2008 (incorporated by
reference to Exhibit 10.2 to Nabors Industries Ltd. Form
 107




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Exhibit No.
    
    Description8-K (File No. 001-32657) filed with the Commission on
January 7, 2009).10.15 (+)
    
    Waiver dated as of September 27, 2002, pursuant to Section
9.[c] and Schedule 9.[c] of the Amended Employment
Agreement among Nabors Industries, Inc., Nabors Industries
Ltd., and Anthony G. Petrello (incorporated by reference to
Exhibit 10.1 to Nabors Industries Ltd.s Form 10-Q (File
No. 000-49887) filed November 14, 2002).10.16 (+)
    
    Nabors Industries, Inc. 1996 Chairmans Executive Stock
Plan (incorporated by reference to Exhibit 10.17 to Nabors
Industries Inc.s Form 10-K (File No. 1-9245) filed
December 29, 1997).10.17 (+)
    
    Nabors Industries, Inc. 1996 Executive Officers Stock Plan
(incorporated by reference to Exhibit 10.18 to Nabors
Industries Inc.s Form 10-K (File No. 1-9245) filed
December 29, 1997).10.18 (+)
    
    Nabors Industries, Inc. 1996 Executive Officers Incentive
Stock Plan (incorporated by reference to Exhibit 10.9 to
Nabors Industries Inc.s Form 10-K (File No. 1-9245) filed
December 29, 1997).10.19 (+)
    
    Nabors Industries, Inc. 1997 Executive Officers Incentive
Stock Plan (incorporated by reference to Exhibit 10.20 to
Nabors Industries Inc.s Form 10-K (File No. 1-9245) filed
December 29, 1997).10.20 (+)
    
    Nabors Industries, Inc. 1998 Employee Stock Plan
(incorporated by reference to Exhibit 10.19 to Nabors
Industries Inc.s Form 10-K (File No. 1-9245) filed March
31, 1999).10.21 (+)
    
    Nabors Industries, Inc. 1998 Chairmans Executive Stock
Plan (incorporated by reference to Exhibit 10.20 to Nabors
Industries Inc.s Form 10-K (File No. 1-9245) filed March
31, 1999).10.22 (+)
    
    Nabors Industries, Inc. 1999 Stock Option Plan for
Non-Employee Directors (incorporated by reference to
Exhibit 10.21 to Nabors Industries Inc.s Form 10-K (File
No. 1-9245) filed March 31, 1999).10.23 (+)
    
    Amendment to Nabors Industries, Inc. 1999 Stock Option Plan
for Non-Employee Directors (incorporated by reference to
Exhibit 10.19 to Nabors Industries Inc.s Form 10-K (File
No. 1-09245) filed March 19, 2002).10.24 (+)
    
    1999 Pool Employee/Director Option Exchange Plan
(incorporated by reference to Exhibit 10.20 to Nabors
Industries Inc.s Form 10-K (File No. 1-09245) filed
March 19, 2002).10.25
    
    Form of Indemnification Agreement entered into between
Nabors Industries Ltd. and the directors and executive
officers identified in the schedule thereto (incorporated
by reference to Exhibit 10.28 to Nabors Industries Ltd.s
Form 10-K (File No. 000-49887) filed March 31, 2003).10.26 (+)
    
    Amended and Restated 1999 Stock Option Plan for
Non-Employee Directors (amended on May 2, 2003)
(incorporated by reference to Exhibit 10.29 to Nabors
Industries Ltd.s Form 10-Q (File No. 000-49887) filed May
12, 2003).10.27 (+)
    
    2003 Employee Stock Option Plan (incorporated by reference
to Annex D of Nabors Industries Ltd.s Notice of 2003
Annual General Meeting of Shareholders and Proxy Statement
(File No. 000-49887) filed May 8, 2003).10.28
    
    Purchase and Sale Agreement (Red River) by and among El
Paso Production Company and El Paso Production GOM Inc.,
jointly and severally as Seller and Ramshorn Investments,
Inc., as Purchaser dated October 8, 2003 (incorporated by
reference to Exhibit 10.23 to Nabors Industries Ltd.s Form
10-K (File No. 000-49887) filed March 15, 2004).10.29
    
    Purchase and Sale Agreement (USA) between El Paso
Production Oil & Gas USA, L.P., as Seller and Ramshorn
Investments, Inc., as Purchaser dated October 8, 2003
(incorporated by reference to Exhibit 10.24 to Nabors
Industries Ltd.s Form 10-K (File No. 000-49887) filed
March 15, 2004).10.30
    
    Exploration Participation Agreement (South Texas) by and
between El Paso Production Oil & Gas Company and El Paso
Production Oil & Gas USA, L.P., jointly and severally and
Ramshorn Investments, Inc., dated November 6, 2003
(incorporated by reference to Exhibit 10.25 to Nabors
Industries Ltd.s Form 10-K (File No. 000-49887) filed
March 15, 2004).10.31
    
    Exploration Participation Agreement (Catapult) by and
between El Paso Production Company, and Ramshorn
Investments, Inc., dated November 6, 2003 (incorporated by
reference to Exhibit 10.26 to Nabors Industries Ltd.s Form
10-K (File No. 000-49887) filed March 15, 2004).10.32 (+)
    
    Form of Restricted Stock AwardIsenberg/Petrello
(incorporated by reference to Exhibit 10.01 to Nabors
Industries Ltd.s Form 8-K (File No. 000-49887) filed March
2, 2005).10.33 (+)
    
    Form of Restricted Stock AwardOthers (incorporated by
reference to Exhibit 10.02 to Nabors Industries Ltd.s Form
8-K (File No. 000-49887) filed March 2, 2005).10.34 (+)
    
    Form of Stock Option AgreementIsenberg/Petrello
(incorporated by reference to Exhibit 10.03 to Nabors
Industries Ltd.s Form 8-K (File No. 000-49887) filed March
2, 2005).10.35 (+)
    
    Form of Stock Option AgreementOthers (incorporated by
reference to Exhibit 10.04 to Nabors Industries Ltd.s Form
8-K (File No. 000-49887) filed March 2, 2005).10.36
    
    First Amendment to 2003 Employee Stock Plan (incorporated
by reference to Exhibit 4.1 to Nabors Industries Ltd.s
 108




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Exhibit No.
    
    DescriptionForm 10-Q (File No. 000-49887) filed August 3, 2005).10.37
    
    Form of Notice of Resignation-Bruce P. Koch, Vice President
and Chief Financial Officer (incorporated by reference to
Item 5.01 Nabors Industries, Ltd., Form 8-K (File No.
000-49887) filed October 27, 2008).10.38
    
    Nabors Industries Ltd. Amended and Restated 2003 Employee
Stock Plan (incorporated by reference to Exhibit A of
Nabors Industries Ltd.s Revised Definitive Proxy Statement
on Schedule 14A (File No. 001-32657) filed with the
Commission on May 4, 2006) (incorporated by reference to
Exhibit 99.1 to Nabors Industries Ltd.s Form S-8 filed
November 12, 2008.12
    
    Computation of Ratios. *14
    
    Code of Business Conduct (incorporated by reference to
Exhibit 14 to Nabors Industries Ltd.s Form 10-K (File No.
000-49887) filed March 15, 2004).18
    
    Preference Letter of Independent Accountants Regarding
Change in Accounting Principle (incorporated by reference
to Exhibit 18 to Nabors Industries Ltd.s Form 10-Q (File
No. 000-49887) filed November 2, 2005).21
    
    Significant Subsidiaries of Nabors Industries Ltd. *23
    
    Consent of Independent Registered Public Accounting Firm. *31.1
    
    Rule 13a-14(a)/15d-14(a) Certification, executed by Eugene
M. Isenberg, Chairman and Chief Executive Officer of Nabors
Industries Ltd. *31.2
    
    Rule 13a-14(a)/15d-14(a) Certification, executed by Bruce
P. Koch, Vice President and Chief Financial Officer of
Nabors Industries Ltd. *32.1
    
    Certifications required by Rule 13a-14(b) or Rule 15d-14(b)
and Section 1350 of Chapter 63 of Title 18 of the United
States Code (18 U.S.C. 1350), executed by Eugene M.
Isenberg, Chairman and Chief Executive Officer of Nabors
Industries Ltd. and Bruce P. Koch, Vice President and Chief
Financial Officer of Nabors Industries Ltd. (furnished
herewith).
 
 *
    
    Filed herewith.(+)
    
    Management contract or compensatory plan or arrangement. 109




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##### Table of Contents



SIGNATURES
  NABORS INDUSTRIES LTD.By:
    /s/ Eugene M. IsenbergEugene M. IsenbergChairman and
Chief Executive OfficerBy:
    /s/ Bruce P. KochBruce P. KochVice President and Chief Financial Officer
 
(Principal Financial and Accounting  Officer)Date: February 27, 2009  Signature
    
    Title
    
    Date/s/ Eugene M. Isenberg
    
    Chairman and Chief
Executive Officer
    
    February 27, 2009Eugene M. Isenberg/s/ James L. Payne
    
    Director
    
    February 27, 2009James L. Payne/s/ Anthony G. Petrello
    
    Deputy Chairman, President and
    
    February 27, 2009Anthony G. Petrello
    
    Chief
Operating Officer/s/ Hans Schmidt
    
    Director
    
    February 27, 2009Hans Schmidt/s/ Myron M. Sheinfeld
    
    Director
    
    February 27, 2009Myron M. Sheinfeld/s/ Martin J. Whitman

Martin J. Whitman
    
    Director
    
    February 27, 2009/s/ William T. Comfort

William T. Comfort
    
    Director
    
    February 27, 2009
 110




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SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
  Balance at
    
    Charged to
    
    Charged to
    
    
    
    
    
    Balance atBeginning
    
    Costs and
    
    Other
    
    
    
    
    
    End of(In thousands)
    
    of Period
    
    Expenses
    
    Accounts
    
    Deductions
    
    Period2008Allowance for doubtful accounts
    
    $
    16,713
    
    
    $
    6,715
    
    
    $
    1,241
    
    
    $
    (1,445
    )
    
    $
    23,224Inventory reserve
    
    
    2,309
    
    
    
    4,573
    
    
    
    
    
    
    
    (2,399
    )
    
    
    4,483Valuation allowance on deferred tax assets
    
    
    29,658
    
    
    
    102,604
    
    
    
    
    
    
    
    
    
    
    
    132,2622007Allowance for doubtful accounts
    
    $
    14,850
    
    
    $
    2,824
    
    
    $
    88
    
    
    $
    (1,049
    ) (1)
    
    $
    16,713Inventory reserve
    
    
    1,145
    
    
    
    1,164
    
    
    
    
    
    
    
    
    
    
    
    2,309Valuation allowance on deferred tax assets
    
    
    22,140
    
    
    
    8,144
    
    
    
    (626
    )
    
    
    
    
    
    
    29,6582006Allowance for doubtful accounts
    
    $
    11,364
    
    
    $
    3,354
    
    
    $
    652
    
    
    $
    (520
    ) (1)
    
    $
    14,850Inventory reserve
    
    
    1,808
    
    
    
    534
    
    
    
    
    
    
    
    (1,197
    ) (2)
    
    
    1,145Valuation allowance on deferred tax assets
    
    
    17,566
    
    
    
    4,574
    
    
    
    
    
    
    
    
    
    
    
    22,140
 
 (1)
    
    Uncollected receivables written-off, net of recoveries.(2)
    
    Inventory written-off. 111