##### Table of Contents



UNITED STATES
SECURITIES 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 (NO FEE REQUIRED)
 For the fiscal year ended December 31, 2004 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
 For the transition period from  to Commission file number: 0-13857 NOBLE CORPORATION 
 (Exact name of registrant as specified in its charter)
 Cayman Islands
    
    98-0366361(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. employer identification number)13135 South Dairy Ashford, Suite 800, Sugar Land, Texas 77478(Address of principal executive offices) (Zip Code)Registrants Telephone Number, Including Area Code: (281) 276-6100Securities registered pursuant to Section 12(b) of the Act:Ordinary Shares, Par Value $.10 Per Share
    
    New York Stock ExchangePreferred Share Purchase
Rights
    
    New York Stock ExchangeTitle of each class
    
    Name of each exchange on which registeredSecurities registered pursuant to Section 12(g) of the Act:None
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Act). Yes þ No o Aggregate market value of Ordinary Shares held by nonaffiliates as of June 30, 2004:
$4,990,000,000 Number of Ordinary Shares outstanding as of March 3, 2005: 135,569,061 DOCUMENTS INCORPORATED BY REFERENCE Listed below are documents parts of which are incorporated herein by reference and the part of
this report into which the document is incorporated: (1) Proxy statement for the 2005 annual general meeting of members - Part III




---



##### Table of Contents



TABLE OF CONTENTS PAGEPART
I   
ITEM 1. BUSINESS
    
    
    2General
    
    
    2Business Strategy
    
    
    2Business Development During 2004
    
    
    3Drilling Contracts
    
    
    4Offshore Drilling Operations
    
    
    5International Contract Drilling
    
    
    5Domestic Contract Drilling
    
    
    5Labor Contracts
    
    
    5Technology, Engineering Services and Project Management
    
    
    5Competition and Risks
    
    
    6Governmental Regulation and Environmental Matters
    
    
    7Employees
    
    
    7Financial Information about Foreign and Domestic Operations
    
    
    7Available Information
    
    
    7ITEM 2. PROPERTIES
    
    
    8Drilling Fleet
    
    
    8Semisubmersibles
    
    
    8Dynamically Positioned Drillships
    
    
    8Jackup Rigs
    
    
    9Submersibles
    
    
    9Facilities
    
    
    12ITEM 3. LEGAL PROCEEDINGS
    
    
    12ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    12EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    13PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    14ITEM 6. SELECTED FINANCIAL DATA
    
    
    15ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    16Executive Overview
    
    
    16Results of Operations
    
    
    17Liquidity and Capital Resources
    
    
    30Corporate Restructuring
    
    
    33Critical Accounting Policies
    
    
    33Accounting Pronouncements
    
    
    34ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
    
    
    35ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    36ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
    
    
    79ITEM 9A. CONTROLS AND PROCEDURES
    
    
    79ITEM 9B. OTHER INFORMATION
    
    
    79PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    79ITEM 11 EXECUTIVE COMPENSATION
    
    
    80ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    
    
    80ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    80ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    80PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    80SIGNATURES
    
    
    81Amend. #2 to Equity Compensation Plan for Non-Employee DirectorsAmended 1992 Nonqualified Stock Option & Restricted Share PlanSubsidiaries of the RegistrantConsent of PricewaterhouseCoopers LLPCertification of James C. Day pursuant to Rule 13a-14(a)Certification of Mark A. Jackson pursuant to Rule 13a-14(a)Certification of James C. Day pursuant to 18 U.S.C. Section 1350Certification of Mark A. Jackson pursuant to 18 U.S.C. Section 1350




---



##### Table of Contents



FORM 10-K This report onForm 10-Kincludes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. All statements other than statements of historical facts included in this Form
10-K, including, without limitation, statements contained in Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations, regarding our financial position,
business strategy, plans and objectives of management for future operations, industry conditions,
and indebtedness covenant compliance, are forward-looking statements. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we cannot assure you that
such expectations will prove to have been correct. We have identified factors that could cause
actual plans or results to differ materially from those included in any forward-looking statements.
These factors include, but are not limited to, the following:  
    volatility in crude oil and natural gas prices;
    changes in our customers drilling programs or budgets due to their own internal
corporate events, changes in the markets and prices for oil and gas, or shifts in the
relative strengths of various geographic drilling markets brought on by things such as a
general economic slowdown, or regional or worldwide recession, any of which could result in
deterioration in demand for our drilling services;
    our inability to execute any of our business strategies;
    cost overruns or delays in shipyard repair, maintenance, conversion or upgrade projects;
    changes in tax laws, tax treaties or tax regulations or the interpretation or
enforcement thereof, including taxing authorities not agreeing with our assessment of the
effects of such laws, treaties and regulations;
    cancellation by our customers of drilling contracts or letter agreements or letters of
intent for drilling contracts or their exercise of early termination provisions generally
found in our drilling contracts;
    intense competition in the drilling industry;
    changes in the rate of economic growth in the U.S. or in other major international economies;
    political and economic conditions in markets where we from time to time operate;
    adverse weather (such as hurricanes and monsoons) and seas;
    operational risks (such as blowouts, fires and loss of production);
    changes in oil and gas drilling technology or in our competitors drilling rig fleets
that could make our drilling rigs less competitive or require major capital investment to
keep them competitive;
    costs and effects of unanticipated legal and administrative proceedings;
    limitations on our insurance coverage or our inability to obtain or maintain insurance
coverage at rates and with deductible amounts that we believe are commercially reasonable;
    the discovery of significant additional oil and/or gas reserves or the construction of
significant oil and/or gas delivery or storage systems that impact regional or worldwide
energy markets;
    requirements and potential liability imposed by governmental regulation of the drilling
industry (including environmental regulation);
    acts of war or terrorism; 1




---



##### Table of Contents




    significant changes in trade, monetary or fiscal policies worldwide, including changes
in interest rates; and
    currency fluctuations between the U.S. dollar and other currencies. All of the foregoing risks and uncertainties are beyond our ability to control, and in many
cases, we cannot predict the risks and uncertainties that could cause our actual results to differ
materially from those indicated by the forward-looking statements. When used in thisForm 10-K,
the words believes, anticipates, expects, plans and similar expressions as they relate to
the Company or its management are intended to identify forward-looking statements. 
 PART I 
 ITEM 1. BUSINESS. 
 GENERAL We are a leading provider of diversified services for the oil and gas industry. We perform
contract drilling services with our fleet of 60 offshore drilling units located in key markets
worldwide. This fleet consists of 13 semisubmersibles (including five Noble EVA-4000TM
semisubmersibles and four ultra-deepwater hulls), three dynamically positioned drillships, 41
jackup rigs and three submersibles. For additional information on the specifications of the fleet,
see Item 2. Properties-Drilling Fleet. Approximately 80 percent of the fleet is currently
deployed in international markets, principally including the Middle East, Mexico, the North Sea,
Brazil, West Africa, India and the Mediterranean Sea. We provide technologically advanced
drilling-related products and services designed to create value for our customers. We also provide
labor contract drilling services, well site and project management services, and engineering
services. Noble Corporation, a Cayman Islands exempted company limited by shares (which we sometimes
refer to in this report as Noble), became the successor to Noble Drilling Corporation, a Delaware
corporation (which we sometimes refer to as Noble Drilling) that was organized in 1939, as part
of the internal corporate restructuring of Noble Drilling and its subsidiaries effective April 30,
2002. For more information on this restructuring, see Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations-Corporate Restructuring. Noble and its
predecessors have been engaged in the contract drilling of oil and gas wells for others
domestically since 1921 and internationally during various periods since 1939. As used herein,
unless otherwise required by the context, the term Noble refers to Noble Corporation and the
terms Company, we, our and words of similar import refer to Noble and its consolidated
subsidiaries. The use herein of such terms as group, organization, we, us, our and its, or
references to specific entities, is not intended to be a precise description of corporate
relationships. 
 BUSINESS STRATEGY Our long-standing business strategy continues to be the active expansion of our international
offshore drilling and deepwater capabilities through acquisitions, rig upgrades and modifications,
and the deployment of assets in important geological areas. Since the beginning of 2000, we have mobilized nine jackup rigs and one semisubmersible from
the U.S. Gulf of Mexico to international markets. In addition, since the beginning of 2000 we have
added nine jackups to our international fleet through acquisitions. We continue to evaluate other
opportunities to deploy units in our fleet, including certain deepwater units, in important
geological areas worldwide. Both the level of drilling activity and the number of announced discoveries and related
development programs in water depths greater than 5,000 feet have increased substantially in recent
years, thus increasing the demand for rigs capable of drilling in these water depths. As such, in
recent years we have focused on increasing the number of rigs in our fleet capable of
ultra-deepwater offshore drilling. Since the beginning of 2000, we have 2




---



##### Table of Contents



added two deepwater semisubmersibles to our fleet and have acquired two additional
semisubmersible baredeck hulls. The offshore contract drilling industry has, in recent years, experienced a series of asset
sales and consolidations among drilling contractors, and we expect this trend to continue as
drilling contractors position themselves strategically in the market. From time to time, we discuss
asset transactions or business combinations with others, and we intend to continue to consider
business opportunities that we believe promote our business strategy. As noted above, since the
beginning of 2000 we have added 13 units to our fleet through acquisitions and joint ventures (see
-Business Development During 2004 below). In addition, as part of our strategy, we have focused on the continued development of
technological applications for the drilling industry. We believe these applications differentiate
our fleet by incorporating new technology, enhancing our reputation with our customers, and
providing a mechanism to grow our earnings with lower capital investment requirements than required
for our fleet of drilling rigs. Our Noble Drilling Technology Division is engaged in this
activity. 
 BUSINESS DEVELOPMENT DURING 2004 As part of our strategy to expand our international operations, we acquired three jackup rigs,
which are currently in the Middle East, and we mobilized the Noble Homer Ferringtonsemisubmersible
to Nigeria from the U.S. Gulf of Mexico for a long-term contract that commenced in November 2004.
In December 2003, we mobilized the Noble Carl Norbergjackup rig to the Mediterranean Sea from the
U.S. Gulf of Mexico for a 14-month contact, which commenced in January 2004. Also in December
2003, we mobilized the Noble Dick Favorjackup rig from Brazil to the Middle East. Following an
upgrade project, the unit commenced operations in August 2004. In addition, since September 2002
we have mobilized a total of seven jackup rigs to Mexico from the U.S. Gulf of Mexico for long-term
contracts with Petroleos Mexicanos (Pemex). In December 2004, we received a commitment from Shell Exploration & Production Company for a
two-year contract on the Noble Clyde Boudreauxultra-deepwater semisubmersible.The unit began a
capital upgrade program in January 2005, which upon completion will enable the unit to drill in
water depths of 10,000 feet. This upgrade is expected to be completed and the unit to commence
operations in the third quarter of 2006. For additional information regarding the estimated costs
of this upgrade, see Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations  Liquidity and Capital Resources  Capital Expenditures. In October 2004, we exercised our option to purchase the Noble David Tinsley(formerly Maersk
Valiant), a MODEC 300C, independent leg, cantilever jackup rig, for an exercise price of
$28,400,000. In June 2003, we paid an option fee of $13,200,000 for the right to acquire the
unit. Our aggregate purchase price for the rig was therefore $41,600,000. After undergoing a
refurbishment and upgrade program, the unit commenced a 500-day contract in Qatar in February
2005. In July 2004, we exercised our option to purchase the Noble Cees van Diemen(formerly Maersk
Viking), a MODEC 300C, independent leg, cantilever jackup rig, for an exercise price of
$32,900,000. In June 2003, we paid an option fee of $15,000,000 for the right to acquire the unit.
Our aggregate purchase price for the rig was therefore $47,900,000. After undergoing a
refurbishment and upgrade program, the unit commenced an 880-day contract in Qatar in September
2004. In June 2004, we purchased the Noble Mark Burns(formerly Okhi), a Levingston 111-S designed
independent leg jackup rig, for $29,500,000 in cash. After undergoing initial refurbishments and
upgrades in the Dalian New Shipyard in Dalian, China, in December 2004 we mobilized the unit to
the Middle East, where additional upgrade work is currently ongoing to include leg extension to
300 feet water depth capability, a 65 foot cantilever, a third mud pump and quarters expansion for
160 personnel. The unit has a letter of intent for a 475-day contract in Qatar following
completion of its upgrade scheduled for the third quarter of 2005. We continued the development of our technology initiatives in 2004. We installed aluminum
alloy riser on the Noble Roger Easondrillship in Brazil during its upgrade in 2004. We had
previously successfully installed 3




---



##### Table of Contents



aluminum alloy riser on the Noble Leo Segeriusdrillship in Brazil and the Noble Therald
Martinsemisubmersible in the U.S. Gulf of Mexico, with further installation planned on the Noble
Lorris Bouzigardsemisubmersible. During 2004, we continued to test various components of our
Well DirectorTM automatic rotary steerable system to ensure its robustness and
reliability prior to its full commercialization. We drilled additional test wells for customers
using the system in 2004 and anticipate it will become fully commercial during 2005. We also
continue to seek additional opportunities to utilize or license our drilling products and software
designed to increase drilling efficiency. These efforts may be done solely by Noble or through
joint ventures with industry partners. In addition, we continued to expand our project management
and engineering services to international markets during 2004. 
 DRILLING CONTRACTS We typically employ each drilling unit under an individual contract. Although the final terms
of the contracts are the result of our negotiations with our customers, many contracts are awarded
based upon competitive bidding. Our drilling contracts generally contain the following terms:  
    contract duration extending over a specific period of time or a period necessary to
drill one or more wells (in general, we seek to have a reasonable balance of short- and
long-term contracts to minimize the impact of a decline in the market, while obtaining
the upside of increasing market prices in a rising market);
    provisions permitting early termination of the contract by the customer (i) if the unit
is lost or destroyed or (ii) if operations are suspended for a specified period of time
due to either breakdown of major equipment or force majeure events beyond our control
and the control of the customer;
    options in favor of the customer to drill one or more additional wells, generally
upon advance notice to us;
    payment of compensation to us (generally in U.S. dollars) on a daywork basis, so
that we receive a fixed amount for each day (dayrate) that the drilling unit is
operating under contract (lower rates or no compensation is payable during periods of
equipment breakdown and repair or adverse weather or in the event operations are
interrupted by other conditions, some of which may be beyond our control);
    payment by us of the operating expenses of the drilling unit, including labor costs
and the cost of incidental supplies; and
    reimbursement to us by the customer of certain out-of-pocket expenses paid by us
for the account of the customer. The terms of some of our drilling contracts permit early termination of the contract by the
customer, without cause, generally exercisable upon advance notice to us. The terms may also
require an early termination payment by the customer. The drilling contracts for seven of our
jackups contracted to Pemex as of February 28, 2005 contain provisions that allow early
cancellation on five days or less notice to us without Pemex making an early termination payment. During times of depressed market conditions, our customers may seek to avoid or reduce their
obligations under term drilling contracts or letter agreements or letters of intent for drilling
contracts. A customer may no longer need a rig, due to a reduction in its exploration, development
or production program, or it may seek to obtain a comparable rig at a lower dayrate. As of February 28, 2005, 23 of our rigs were contracted for the remainder of 2005. We
anticipate that the primary terms of the current contracts on 31 of our rigs will expire at varying
times in 2005, subject to options to extend in the case of 27 contracts. Our remaining rigs
(excluding our three ultra-deepwater hulls in inventory, ready for upgrade) were in a shipyard for
repair, refurbishment or upgrade as of February 28, 2005. 4




---



##### Table of Contents



Many contracts allow us to recover our mobilization and demobilization costs associated with
moving a drilling unit from one location to another. When market conditions require us to bear
these costs, our operating margins are accordingly reduced. We cannot predict our ability to
recover these costs in the future. For shorter moves such as field moves, our customers have
generally agreed to bear the costs of moving the unit by paying us a reduced dayrate or move rate
while the unit is being moved. 
 OFFSHORE DRILLING OPERATIONS Our offshore contract drilling operations, which accounted for approximately 91 percent, 94
percent and 95 percent of operating revenues for the years ended December 31, 2004, 2003 and 2002,
respectively, are conducted worldwide. Our offshore drilling fleet consists of 60 units. For
additional information on the specifications of the fleet, see Item 2. Properties-Drilling Fleet.
Our principal regions of contract drilling operations include the Middle East, Gulf of Mexico,
Mexico, the North Sea, Brazil, West Africa, India and the Mediterranean Sea. In 2004, Pemex and
Petroleo Brasiliero S.A. (Petrobras) accounted for approximately 14 percent and 10 percent,
respectively, of our total operating revenues. No other single customer accounted for more than 10
percent of our total operating revenues in 2004. 
 International Contract Drilling Our contract drilling services revenues from international sources accounted for approximately
74 percent, 73 percent and 68 percent of our total contract drilling services revenues for 2004,
2003 and 2002, respectively. In 2004, approximately 47 percent of our international contract
drilling services revenues was derived from contracts with government-owned companies, 43 percent
was derived from contracts with companies having equity market capitalization greater than $4
billion (large cap companies), and the remaining 10 percent was derived from other independent
operators. 
 Domestic Contract Drilling Contract drilling services revenues generated in the U.S. accounted for approximately 26
percent, 27 percent and 32 percent of our total contract drilling services revenues for 2004, 2003
and 2002, respectively. In 2004, approximately 72 percent of our domestic contract drilling
revenues was derived from contracts with large cap companies and the remaining 28 percent was
derived from contracts with other independent operators. 
 Labor Contracts Our offshore operations also include services we perform under labor contracts for drilling
and workover activities covering 13 rigs operating in the U.K. North Sea and two rigs under a labor
contract (the Hibernia Project) off the east coast of Canada. These rigs are not owned or leased
by us. During 2004, we commenced a three-year contract with Apache North Sea Limited to take over
the provision of drilling and maintenance services on its Forties Field covering five platforms and
a labor contract for the BP Clair Platform in the North Sea. Under our labor contracts, we provide the personnel necessary to manage and perform the
drilling operations from drilling platforms owned by the operator. With the exception of the
Hibernia Project, which is operated under a five-year agreement that expires in 2007, our labor
contracts are generally renewable on an annual basis. 
 TECHNOLOGY, ENGINEERING SERVICES AND PROJECT MANAGEMENT Our technology initiative focuses on the design and development of drilling products,
drilling-related software programs, technical solutions to enhance drilling efficiency, and
applications that allow us to drill in deeper water depths with less capital investment. In
addition, we provide well site management, project management and engineering services. 5




---



##### Table of Contents



COMPETITION AND RISKS The contract drilling industry is a highly competitive and cyclical business characterized by
high capital and maintenance costs. Although demand for our services improved throughout 2004, we
believe that competition for drilling contracts will continue to be highly competitive for the
foreseeable future. Certain competitors may have access to greater financial resources than we do. Competition in contract drilling involves numerous factors, including price, rig availability
and suitability, experience of the workforce, efficiency, condition of equipment, operating
integrity, reputation, industry standing and customer relations. We believe that we compete
favorably with respect to all of these factors. Competition is primarily on a regional basis and
may vary significantly by region at a particular time. Demand for offshore drilling equipment also
depends on the exploration and development programs of oil and gas producers, which in turn are
influenced by the financial condition of such producers, by general economic conditions and prices
of oil and gas, and, from time to time, by political considerations and policies. We follow a policy of keeping our equipment well maintained and technologically competitive.
However, our equipment could be made obsolete by the development of new techniques and equipment.
In addition, industry-wide shortages of supplies, services, skilled personnel and equipment
necessary to conduct our business occur from time to time. We cannot assure you that any such
shortages experienced in the past would not occur again or that any shortages, to the extent
currently existing, will not continue or worsen in the future. Our results of operations depend on the levels of activity in offshore oil and gas
exploration, development and production in markets worldwide. Historically, oil and gas prices and
market expectations of potential changes in these prices have significantly affected that level of
activity. Generally speaking, higher oil and natural gas prices or our customers expectations of
higher prices result in a greater demand for our services. These prices are extremely volatile.
Despite favorable oil prices in 2004, drilling activity in certain international markets, which are
influenced more by oil prices than natural gas prices, was generally weaker in 2004 as compared to
2003 and 2002. We believe that operators in these international markets have been reluctant to
increase drilling activity due to the uncertainty surrounding the worldwide economy, the political
unrest in the Middle East (including the military action in Iraq), Nigeria and Venezuela, and
difficulties in obtaining funding from government-affiliated oil companies. However, drilling
activity in the North Sea and West Africa began to improve in the latter part of 2004, while
remaining strong in other international markets in which we operate, including the Middle East,
Mexico and Brazil. Natural gas prices during 2004 averaged $6.13 per thousand cubic feet (source: average Henry
Hub closing bidweek price). Although natural gas prices in 2004 were 12 percent higher than 2003,
and significantly higher than historical prices, operators generally did not significantly increase
drilling activities in the U.S. Gulf of Mexico in water depths applicable to jackups and
submersibles until the second half of 2004 due principally to a lack of economically viable
drilling prospects and uncertainty surrounding the worldwide economy. Drilling activity levels in
water depths applicable to semisubmersibles also began to improve during the second half of 2004. Demand for drilling services depends on a variety of economic and political factors, including
worldwide demand for oil and gas, the ability of the Organization of Petroleum Exporting Countries
(OPEC) to set and maintain production levels and pricing, the level of production of non-OPEC
countries and the policies of the various governments regarding exploration and development of
their oil and gas reserves. We believe that a significant decrease from recent historical average
oil and gas prices could depress the level of exploration and production activity and result in a
corresponding decline in demand for our services. For the foregoing reasons, we cannot predict the future level of demand for our drilling
services or future conditions in the offshore contract drilling industry. Our operations are subject to the many hazards inherent in the drilling business, including
blowouts, cratering, fires and collisions or groundings of offshore equipment. In addition, our
operations are subject to damage or loss from adverse weather and seas. These hazards could cause
personal injury and loss of life, suspend drilling operations or seriously damage or destroy the
property and equipment involved and, in addition to causing environmental damage, could cause
substantial damage to oil and natural gas producing formations. Although we 6




---



##### Table of Contents



maintain insurance against many of these hazards, our insurance is subject to deductibles. It
also excludes certain matters from coverage, such as loss of earnings on certain rigs. Also, we
generally obtain indemnification from our customers for environmental damage with respect to
offshore drilling. Our international operations are also subject to certain political, economic and other
uncertainties including, among others, risks of war, terrorism and civil disturbances,
expropriation, nationalization, renegotiation or modification of existing contracts, taxation
policies, foreign exchange restrictions, international monetary fluctuations and other hazards
arising out of foreign governmental sovereignty over certain areas in which we conduct operations.
We have sought to obtain, where economical, insurance against certain political risks. However, we
cannot assure you that this insurance will always be available to us or, if available, will cover
all losses that we may incur in respect of foreign operations. 
 GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS Many aspects of our operations are affected by domestic and foreign political developments and
are subject to numerous governmental regulations that may relate directly or indirectly to the
contract drilling industry. The regulations applicable to our operations include provisions that
regulate the discharge of materials into the environment or require remediation of contamination
under certain circumstances. Generally, these environmental laws and regulations impose strict
liability. This means that we could be liable without regard to our negligence or fault. Such
environmental laws and regulations may expose us to liability for the conduct of, or conditions
caused by, others, or for any of our acts, even if they complied with all applicable laws in effect
at the time we acted. The U.S. Oil Pollution Act of 1990 (OPA `90) and regulations thereunder impose certain
additional operational requirements on our domestic offshore rigs and govern liability for leaks,
spills and blowouts involving pollutants. Regulations under OPA `90 require owners and operators of
rigs in United States waters to maintain certain levels of financial responsibility. We monitor
these regulations and do not believe that they are likely to have a material adverse effect on our
financial condition or results of operations. We have made and will continue to make expenditures
to comply with environmental requirements. To date we have not expended material amounts in order
to comply and we do not believe that our compliance with such requirements will have a material
adverse effect upon our results of operations or competitive position or materially increase our
capital expenditures. Although these requirements impact the energy and energy services industries,
generally they do not appear to affect us any differently or to any greater or lesser extent than
other companies in the energy services industry. The modification of existing laws or regulations or the adoption of new laws or regulations
curtailing exploratory or developmental drilling for oil and gas for economic, environmental or
other reasons could materially and adversely affect our operations by limiting drilling
opportunities. 
 EMPLOYEES At December 31, 2004, the Company employed approximately 5,300 persons, including persons
engaged through labor contractors or agencies. Of the 5,300 persons, approximately 80 percent were
engaged in international operations and approximately 20 percent were engaged in domestic
operations. We are not a party to any collective bargaining agreements that are material. We
consider our employee relations to be satisfactory. 
 FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS Information regarding our operating revenues and identifiable assets attributable to each of
our geographic areas of operations for the last three fiscal years is presented in Note 16 to our
consolidated financial statements included in this Annual Report on Form 10-K. 
 AVAILABLE INFORMATION Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 are available free of charge at our internet website at
http://www.noblecorp.com. These filings are also available to the public at the Securities and
Exchange Commissions (SEC) Public Reference Room at 450 Fifth 7




---



##### Table of Contents



Street, NW, Washington, DC 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. Electronic filings with the SEC are
also available on the SEC internet website at http://www.sec.gov. We also make available on our website the following:  
    Charters for the Audit, Compensation, Nominating and Corporate Governance, and
Finance Committees of our board of directors;
    Our code of business conduct and ethics;
    Our Memorandum and Articles of Association; and
    Methods for contacting members of our board of directors. Printed copies of our committee charters and code of business conduct and ethics are available
in print to any member who requests them. 
 ITEM 2. PROPERTIES. 
 DRILLING FLEET Our offshore drilling rig fleet consists of 60 units composed of 13 semisubmersibles
(including five Noble EVA-4000 semisubmersibles and four ultra-deepwater hulls), three drillships,
41 jackup rigs and three submersibles. The rig count includes one drillship and one jackup unit in
which we have partial ownership interests through joint ventures and one jackup rig operated
pursuant to a lease (bareboat charter) agreement. Each type of rig is described further below.
There are several factors that determine the type of rig most suitable for a particular job, the
most significant of which include the water depth and bottom conditions at the proposed drilling
location, whether the drilling is being done over a platform or other structure, and the intended
well depth. 
 Semisubmersibles Our semisubmersible fleet consists of 13 units. Among the 13 are five units that have been
converted to Noble EVA-4000 semisubmersibles and three Friede & Goldman 9500 Enhanced Pacesetter
semisubmersibles (two of which require substantial capital expenditure upgrades to place in
operational condition). Also included in this fleet are two Pentagone 85 semisubmersibles, two
Bingo 9000 baredeck hulls, and one semisubmersible capable of operating in harsh environments.
Semisubmersibles are floating platforms which, by means of a water ballasting system, can be
submerged to a predetermined depth so that a substantial portion of the hull is below the water
surface during drilling operations. These units maintain their position over the well through the
use of either a fixed mooring system or a dynamic positioning system and can drill in many areas
where jackup rigs can also drill. However, semisubmersibles normally require water depth of at
least 200 feet in order to conduct operations. Our semisubmersibles are designed to work in water
depths of up to 10,000 feet, depending on the unit. Semisubmersibles are typically more expensive
to construct and operate than jackup rigs. One of our Friede & Goldman 9500 Enhanced Pacesetter
semisubmersibles, the Noble Clyde Boudreaux,received a commitment in December 2004 from Shell
Exploration & Production Company for a two-year contract. Upon completion of capital upgrades,
which are estimated to be completed in the third quarter of 2006, the unit will be capable of
drilling in water depths up to 10,000 feet. We have extended the water depth capability of certain of our semisubmersibles and dynamically
positioned drillships discussed below by the deployment of our proprietary aluminum alloy riser
(see Item 1. Business-Business Development During 2004). 
 Dynamically Positioned Drillships We have three dynamically positioned drillships in the fleet. Drillships are ships that are
equipped for drilling and are typically self-propelled. Our drillships are positioned over the
well through the use of a computer controlled dynamic positioning system. Our two wholly-owned
drillships, the Noble Leo Segeriusand Noble Roger Eason, are capable of drilling in water depths
up to 5,900 feet and 7,200 feet, respectively. The Noble Muravlenko, 8




---



##### Table of Contents



in which we own an 82 percent interest through a joint venture, is capable of drilling in
water depths up to 4,800 feet. 
 Jackup Rigs We have 41 jackup rigs in the fleet, including one in which we own a 50 percent interest
through a joint venture and one that we operate pursuant to a bareboat charter agreement. Jackup
rigs are mobile, self-elevating drilling platforms equipped with legs which can be lowered to the
ocean floor until a foundation is established to support the drilling platform. The rig hull
includes the drilling rig, jacking system, crew quarters, loading and unloading facilities, storage
areas for bulk and liquid materials, helicopter landing deck and other related equipment. All of
our jackup rigs are independent leg (i.e., the legs can be raised or lowered independently of each
other), cantilevered rigs, and the Noble Mark Burnsis under conversion.We acquired the Noble
Mark Burnsin June 2004 and are upgrading the unit to 300 feet water depth capability, a 65 foot
cantilever, a third mud pump, and quarters expansion for 160 personnel. A cantilevered jackup has
a feature that permits the drilling platform to be extended out from the hull, allowing it to
perform drilling or workover operations over pre-existing platforms or structures. Moving a rig to
the drill site involves jacking up its legs until the hull is floating on the surface of the water.
The hull is then towed to the drill site by tugs and the legs are jacked down to the ocean floor.
The jacking operation continues until the hull is raised out of the water and drilling operations
are conducted with the hull in its raised position. Our jackup rigs are capable of drilling to a
maximum depth of 25,000 feet in water depths ranging between eight and 390 feet, depending on the
jackup rig. 
 Submersibles We have three submersibles in the fleet. Submersibles are mobile drilling platforms which are
towed to the drill site and submerged to drilling position by flooding the lower hull until it
rests on the sea floor, with the upper deck above the water surface. Our submersibles are capable
of drilling to a maximum depth of 25,000 feet in water depths ranging between 12 and 85 feet,
depending on the submersible. The following table sets forth certain information concerning our drilling rig fleet at
February 28, 2005. The table does not include any rigs owned by operators for which we had labor
contracts or letters of intent as of February 28, 2005. We operate and, unless otherwise
indicated, own all of the rigs included in the table. All of our rigs are equipped with top
drives. 9




---



##### Table of Contents



Drilling Fleet Water


DrillingDepth
    
    
    DepthYear Built
    
    Rating
    
    
    CapacityName
    
    Make
    
    or Rebuilt(1)
    
    (feet)
    
    
    (feet)
    
    
    Location
    
    Status(2)Semisubmersibles - 13Noble Paul Wolff
    
    Noble EVA-4000- DP
    
    1999 R
    
    
    8,900
    
    
    
    30,000
    
    
    Brazil
    
    ActiveNoble Paul Romano
    
    Noble EVA-4000
    
    1998 R
    
    
    6,000
    
    
    
    30,000
    
    
    U.S. Gulf of Mexico
    
    Shipyard/ContractedNoble Amos Runner
    
    Noble EVA-4000
    
    1999 R
    
    
    6,600
    
    
    
    30,000
    
    
    U.S. Gulf of Mexico
    
    ActiveNoble Jim Thompson
    
    Noble EVA-4000
    
    1999 R
    
    
    6,000
    
    
    
    30,000
    
    
    U.S. Gulf of Mexico
    
    ActiveNoble Max Smith
    
    Noble EVA-4000
    
    1999 R
    
    
    6,000
    
    
    
    30,000
    
    
    U.S. Gulf of Mexico
    
    ActiveNoble Homer Ferrington
    
    Friede & Goldman 9500Enhanced Pacesetter
    
    2000 R
    
    
    6,000
    
    
    
    30,000
    
    
    Nigeria
    
    ActiveNoble Lorris Bouzigard(3)
    
    Pentagone 85
    
    2003 R
    
    
    4,000
    
    
    
    25,000
    
    
    U.S. Gulf of Mexico
    
    ActiveNoble Therald Martin(3)
    
    Pentagone 85
    
    2003 R
    
    
    4,000
    
    
    
    25,000
    
    
    U.S. Gulf of Mexico
    
    ActiveNoble Ton van Langeveld(4)
    
    Offshore Co. SCP III
    
    2000 R
    
    
    1,500
    
    
    
    20,000
    
    
    U.K.
    
    ActiveNoble Clyde Boudreaux (5)
    
    Friede & Goldman 9500Enhanced Pacesetter
    
    2006 R
    
    
    10,000
    
    
    
    35,000
    
    
    U.S. Gulf of Mexico
    
    Shipyard/ContractedNoble Dave Beard (5)
    
    Friede & Goldman 9500Enhanced Pacesetter
    
    1986
    
    
    10,000
    
    
    
    35,000
    
    
    China
    
    ShipyardBingo 9000 Rig 3 (5)
    
    Trosvik Bingo 9000
    
    1999
    
    
    10,000
    
    
    
    35,000
    
    
    China
    
    ShipyardBingo 9000 Rig 4 (5)
    
    Trosvik Bingo 9000
    
    1999
    
    
    10,000
    
    
    
    35,000
    
    
    China
    
    ShipyardDynamically Positioned Drillships - 3Noble Roger Eason(3)
    
    Nedlloyd
    
    2005 R
    
    
    7,200
    
    
    
    25,000
    
    
    Brazil
    
    Shipyard/ContractedNoble Leo Segerius(3)
    
    Gusto Engineering Pelican Class
    
    1996 R
    
    
    5,900
    
    
    
    20,000
    
    
    Brazil
    
    ActiveNoble Muravlenko(6)
    
    Gusto Engineering Pelican Class
    
    1997 R
    
    
    4,800
    
    
    
    21,000
    
    
    Brazil
    
    ActiveIndependent Leg Cantilevered Jackups - 41Noble Bill Jennings
    
    MLT 84 - E.R.C.
    
    1997 R
    
    
    390
    
    
    
    25,000
    
    
    Mexico
    
    ActiveNoble Eddie Paul
    
    MLT 84 - E.R.C.
    
    1995 R
    
    
    390
    
    
    
    25,000
    
    
    U.S. Gulf of Mexico
    
    ActiveNoble Leonard Jones
    
    MLT 53 - E.R.C.
    
    1998 R
    
    
    390
    
    
    
    25,000
    
    
    Mexico
    
    ActiveNoble Julie Robertson (4) (7)
    
    Baker Marine Europe Class
    
    2000 R
    
    
    390
    
    
    
    25,000
    
    
    U.K.
    
    ActiveNoble Al White(4)
    
    CFEM T-2005C
    
    1997 R
    
    
    360
    
    
    
    25,000
    
    
    The Netherlands
    
    ActiveNoble Kolskaya (4) (8)
    
    Gusto Engineering-C
    
    1997 R
    
    
    330
    
    
    
    25,000
    
    
    The Netherlands
    
    ActiveNoble Byron Welliver (4)
    
    CFEM T-2005C
    
    1982
    
    
    300
    
    
    
    25,000
    
    
    Denmark
    
    ActiveNoble Johnnie Hoffman
    
    Baker Marine BMC 300
    
    1993 R
    
    
    300
    
    
    
    25,000
    
    
    Mexico
    
    ActiveNoble Roy Butler (9)
    
    F&G L-780 MOD II
    
    1996 R
    
    
    300
    
    
    
    25,000
    
    
    Nigeria
    
    ActiveNoble Tommy Craighead
    
    F&G L-780 MOD II
    
    2003 R
    
    
    300
    
    
    
    25,000
    
    
    Nigeria
    
    ActiveNoble Kenneth Delaney
    
    F&G L-780 MOD II
    
    1998 R
    
    
    300
    
    
    
    25,000
    
    
    U.A.E.
    
    ActiveNoble Percy Johns
    
    F&G L-780 MOD II
    
    1995 R
    
    
    300
    
    
    
    25,000
    
    
    Nigeria
    
    ActiveNoble George McLeod
    
    F&G L-780 MOD II
    
    1995 R
    
    
    300
    
    
    
    25,000
    
    
    U.A.E.
    
    ActiveNoble Jimmy Puckett
    
    F&G L-780 MOD II
    
    2002 R
    
    
    300
    
    
    
    25,000
    
    
    Qatar
    
    ActiveNoble Gus Androes
    
    Levingston 111-C
    
    1996 R
    
    
    300
    
    
    
    25,000
    
    
    U.A.E.
    
    ActiveNoble Lewis Dugger
    
    Levingston 111-C
    
    1997 R
    
    
    300
    
    
    
    20,000
    
    
    U.S. Gulf of Mexico
    
    ShipyardNoble Ed Holt
    
    Levingston 111-C
    
    1994 R
    
    
    300
    
    
    
    25,000
    
    
    India
    
    ActiveNoble Sam Noble
    
    Levingston 111-C
    
    1982
    
    
    300
    
    
    
    25,000
    
    
    Mexico
    
    ActiveNoble Gene Rosser
    
    Levingston 111-C
    
    1996 R
    
    
    300
    
    
    
    20,000
    
    
    Mexico
    
    ActiveNoble John Sandifer
    
    Levingston 111-C
    
    1995 R
    
    
    300
    
    
    
    20,000
    
    
    Mexico
    
    ActivePanon (10)
    
    Levingston 111-C
    
    2001 R
    
    
    300
    
    
    
    20,000
    
    
    Qatar
    
    ActiveNoble Mark Burns
    
    Levingston 111-C
    
    2005 R
    
    
    300
    
    
    
    25,000
    
    
    U.A.E.
    
    Shipyard/ContractedNoble Cees van Diemen
    
    MODEC 300C
    
    1981
    
    
    300
    
    
    
    25,000
    
    
    Qatar
    
    ActiveNoble David Tinsley
    
    MODEC 300C
    
    2004 R
    
    
    300
    
    
    
    25,000
    
    
    U.A.E.
    
    ActiveNoble Gene House
    
    MODEC 300C-38
    
    1981
    
    
    300
    
    
    
    25,000
    
    
    Qatar
    
    ActiveNoble Charlie Yester
    
    MLT Class 116-C
    
    1980
    
    
    300
    
    
    
    25,000
    
    
    India
    
    ActiveNoble Roy Rhodes (11)
    
    MLT Class 116-C
    
    1979
    
    
    300
    
    
    
    25,000
    
    
    U.A.E.
    
    ActiveNoble Charles Copeland
    
    MLT Class 82-SD-C
    
    2001 R
    
    
    250
    
    
    
    20,000
    
    
    Qatar
    
    ActiveNoble Earl Frederickson
    
    MLT Class 82-SD-C
    
    1979
    
    
    250
    
    
    
    20,000
    
    
    Mexico
    
    ActiveNoble Tom Jobe
    
    MLT Class 82-SD-C
    
    1982
    
    
    250
    
    
    
    25,000
    
    
    U.S. Gulf of Mexico
    
    ActiveNoble Ed Noble
    
    MLT Class 82-SD-C
    
    1990 R
    
    
    250
    
    
    
    20,000
    
    
    Nigeria
    
    ActiveNoble Lloyd Noble
    
    MLT Class 82-SD-C
    
    1990 R
    
    
    250
    
    
    
    20,000
    
    
    Nigeria
    
    ActiveNoble Carl Norberg
    
    MLT Class 82-C
    
    2003 R
    
    
    250
    
    
    
    20,000
    
    
    Mediterranean Sea
    
    ActiveNoble Chuck Syring
    
    MLT Class 82-C
    
    1996 R
    
    
    250
    
    
    
    20,000
    
    
    U.A.E.
    
    ActiveNoble George Sauvageau (4)
    
    NAM Nedlloyd-C
    
    1981
    
    
    250
    
    
    
    20,000
    
    
    The Netherlands
    
    ActiveNoble Ronald Hoope (4)
    
    Marine Structure CJ-46
    
    1982
    
    
    250
    
    
    
    25,000
    
    
    The Netherlands
    
    ActiveNoble Lynda Bossler (4)
    
    Marine Structure CJ-46
    
    1982
    
    
    250
    
    
    
    25,000
    
    
    The Netherlands
    
    ActiveNoble Piet van Ede (4)
    
    Marine Structure CJ-46
    
    1982
    
    
    250
    
    
    
    25,000
    
    
    The Netherlands
    
    ActiveNoble Dick Favor
    
    Baker Marine BMC 150
    
    2004 R
    
    
    150
    
    
    
    20,000
    
    
    Qatar
    
    ActiveNoble Don Walker
    
    Baker Marine BMC 150
    
    1992 R
    
    
    150
    
    
    
    20,000
    
    
    Nigeria
    
    ActiveDhabi II
    
    Baker Marine BMC 150
    
    1981
    
    
    150
    
    
    
    20,000
    
    
    U.A.E.
    
    ActiveSubmersibles - 3Noble Joe Alford
    
    Pace Marine 85G
    
    1997 R
    
    
    85
    
    
    
    25,000
    
    
    U.S. Gulf of Mexico
    
    ActiveNoble Lester Pettus
    
    Pace Marine 85G
    
    1997 R
    
    
    85
    
    
    
    25,000
    
    
    U.S. Gulf of Mexico
    
    ActiveNoble Fri Rodli
    
    Transworld
    
    1998 R
    
    
    70
    
    
    
    25,000
    
    
    U.S. Gulf of Mexico
    
    Active
 See footnotes on the following page. 10




---



##### Table of Contents



Footnotes to Drilling Fleet   (1)
    
    Rigs designated with an R were modified, refurbished or otherwise upgraded in the year indicated by capital expenditures in an amount
deemed material by management.(2)
    
    Rigs listed as active were operating under contract; rigs listed as available were available for bidding; rigs listed as
contracted have signed contracts or have letters of intent with operators but have not begun operations; rigs listed as shipyard are
in a shipyard for repair, refurbishment or upgrade.(3)
    
    Water depth rating is pursuant to the use of Nobles proprietary aluminum alloy riser. For additional information regarding units on
which the aluminum alloy riser is or will be deployed, see Item 1.Business-Business Developments During 2004.(4)
    
    Harsh environment capability.(5)
    
    Water depth rating is subsequent to the rigs planned upgrade. The Noble Bingo 9000 Rig 3and Noble Bingo 9000 Rig 4are baredeck hulls.(6)
    
    We operate the unit and own an 82 percent interest in the unit through a joint venture.(7)
    
    Although designed for a water depth rating of 390 feet of water in a non-harsh environment, the rig is currently equipped with legs
adequate to drill in approximately 180 feet of water. We own the additional legs required to extend the drilling depth capability to
390 feet of water.(8)
    
    We operate the unit pursuant to a bareboat charter agreement.(9)
    
    Although designed for a water depth rating of 300 feet of water, the rig is currently equipped with legs adequate to drill in
approximately 250 feet of water. We own the additional legs required to extend the drilling depth capability to 300 feet of water.(10)
    
    We own a 50 percent interest in the unit through a joint venture.(11)
    
    Although designed for a water depth rating of 300 feet of water, the rig is currently equipped with legs adequate to drill in
approximately 250 feet of water. The estimated cost of adding the additional leg capacity is $2,500,000. 11




---



##### Table of Contents



FACILITIES Our principal executive offices are located in Sugar Land, Texas, and are leased through June
2011. We also lease administrative and marketing offices, and sites used primarily for storage,
maintenance and repairs for drilling rigs and equipment, in Zug, Switzerland; Sugar Land, Texas;
New Orleans, Louisiana; Leduc, Alberta and St. Johns, Newfoundland, Canada; Lagos and Port
Harcourt, Nigeria; Aberdeen, Scotland; Stavanger, Norway; Ciudad Ojeda, Venezuela; Del Carmen,
Mexico; Doha, Qatar; Abu Dhabi and Dubai, U.A.E.; Beverwijk and Den Helder, The Netherlands; Macae,
Brazil; Celle, Germany; Moscow, Russia; and Esjberg, Denmark. We own certain tracts of land,
including office and administrative buildings and warehouse facilities in Bayou Black, Louisiana
and Aberdeen, Scotland. 
 ITEM 3. LEGAL PROCEEDINGS. In August 2004, an indirect, wholly-owned subsidiary of Noble was served as a named defendant
in two lawsuits filed in the Circuit Courts of the State of Mississippi involving numerous other
companies (not affiliated with Noble) as co-defendants. In December 2004, such subsidiary was
served as a named defendant in a third lawsuit filed in Mississippi Circuit Court. The lawsuits
seek an unspecified amount of monetary damages on behalf of approximately 130 named individuals
alleging personal injury or death, including claims under the Jones Act, purportedly resulting from
exposure to asbestos on drilling rigs and associated facilities during the period 1965 through
1986. The lawsuits are in preliminary stages and we have not confirmed the number of plaintiffs,
if any, that were employed by our subsidiary or otherwise associated with our drilling operations
during the relevant period. We intend to defend vigorously against the litigation, and based on
information currently available, we do not believe the resolution of these lawsuits will have a
material adverse effect on our financial position, results of operations or cash flows. Noble Asset Company Limited (NACL), a wholly-owned, indirect subsidiary of Noble, was named
one of 21 parties served a Show Cause Notice issued by the Commissioner of Customs (Prev.), Mumbai,
India in August 2003. The Show Cause Notice concerns alleged violations of Indian Customs laws and
regulations regarding one of our jackup drilling rigs. The Commissioner alleges certain violations
to have occurred before, at the time of, and after NACL acquired the rig from the rigs previous
owner. We maintain that NACL has acted in accordance with all Indian Customs laws and regulations
and believe the Show Cause Notice is without merit as against NACL. In the purchase agreement for
the rig, NACL received contractual indemnification against liability for Indian customs duty from
the rigs previous owner. In connection with the export of the rig from India in 2001, NACL posted
a bank guarantee in the amount of $3,300,000 and a customs bond in the amount of $21,340,000, both
of which remain in place. NACL filed its initial replies to the Show Cause Notice in December
2003. NACL appeared through counsel before the Commissioner in September 2004 and made oral
arguments and written submissions. The Commissioner has not ruled to date. We do not believe the
resolution of this matter will have a material adverse effect on our financial position, results of
operations or cash flows. We are a defendant in certain claims and litigation arising out of operations in the normal
course of business. In the opinion of management, uninsured losses, if any, will not be material
to our financial position, results of operations or cash flows. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. 12




---



##### Table of Contents



EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information as of March 1, 2005 with respect to our
executive officers: Name
    
    Age
    
    PositionJames C. Day
    
    
    61
    
    
    Chairman of the Board, Chief Executive Officer and President and DirectorMark A. Jackson
    
    
    49
    
    
    Chief Operating Officer, Senior Vice President, Chief Financial Officer,Treasurer, Controller and Assistant SecretaryDanny W. Adkins
    
    
    54
    
    
    Senior Vice President  Operations, Noble Drilling CorporationJulie J. Robertson
    
    
    49
    
    
    Senior Vice President  Administration and Corporate Secretary
 James C. Day has served as Chairman of the Board of Noble since October 22, 1992 and as Chief
Executive Officer since January 1, 1984. He served as President of Noble Drilling from January 1,
1984 to January 1, 1999 before reassuming the office of President of Noble effective March 1, 2005.
From
January 1983 until his election as President and Chief Executive Officer, Mr. Day served as
Vice President of Noble Drilling. Prior to 1983, Mr. Day served as Vice President and Assistant
Secretary of Noble Affiliates, Inc. He has been a director of Noble since 1984. Mr. Day is also a
director of two public companies, Global Industries, Ltd. and ONEOK, Inc., and a trustee of The
Samuel Roberts Noble Foundation, Inc., a not-for-profit corporation. Mark A. Jackson has served as Senior Vice President, Chief Financial Officer, Treasurer and
Controller of Noble since
September 1, 2000. Mr. Jackson was named Chief Operating Officer effective March 1, 2005.
From May 1999 to August 2000, Mr. Jackson served as Executive Vice President and Chief Financial
Officer for Santa Fe Snyder Corporation, an oil and gas exploration and production company. From
August 1997 to May 1999, he served as Senior Vice President and Chief Financial Officer of Snyder
Oil Corporation, an oil and gas exploration and production company. Prior to August 1997, Mr.
Jackson served consecutively in the positions of Vice President & Controller, Vice President -
Finance and Vice President & Chief Financial Officer of Apache Corporation, an oil and gas
exploration and production company, beginning in 1988. Danny W. Adkins has served as Senior Vice President  Operations of Noble Drilling since
November 1, 2003. Prior to that, he held the same position with Noble Drilling International
(Cayman) Ltd. since August 2000. From March 1997 to August 2000, Mr. Adkins served consecutively
as Vice President  Engineering and Senior Vice President  Engineering for Noble Drilling Services
Inc. From September 1994 to March 1997, he served as Vice President  Operations for Noble
Drilling Services Inc. Prior to September 1994, Mr. Adkins served consecutively in the positions
of Manager of Engineering and Vice President  Operations for a predecessor subsidiary of Noble,
beginning in December 1990. Julie J. Robertson has served as Senior Vice President  Administration of Noble since July
2001 and as Corporate Secretary of Noble since December 1993. Ms. Robertson served as Vice
President  Administration of Noble Drilling from April 1996 to July 2001. In September 1994, Ms.
Robertson became Vice President  Administration of Noble Drilling Services Inc. From January 1989
to September 1994, Ms. Robertson served consecutively as Manager of Benefits and Director of Human
Resources for Noble Drilling Services Inc. Prior to 1989, Ms. Robertson served consecutively in the
positions of Risk and Benefits Manager and Marketing Services Coordinator for a predecessor
subsidiary of Noble, beginning in 1979. 13




---



##### Table of Contents



PART II 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES. Nobles ordinary shares are listed and traded on the New York Stock Exchange under the symbol
NE. The following table sets forth for the periods indicated the high and low sales prices of our
ordinary shares: High
    
    
    Low2004First quarter
    
    $
    42.91
    
    
    $
    35.00Second quarter
    
    
    39.69
    
    
    
    33.53Third quarter
    
    
    46.50
    
    
    
    35.32Fourth quarter
    
    
    50.54
    
    
    
    42.772003First quarter
    
    $
    38.40
    
    
    $
    31.18Second quarter
    
    
    37.80
    
    
    
    30.46Third quarter
    
    
    36.61
    
    
    
    31.37Fourth quarter
    
    
    37.46
    
    
    
    32.75
 As previously reported on Form 8-K, in October 2004, Nobles board of directors took action to
modify our then existing dividend policy and institute a new policy in the first quarter of 2005
for the payment of a quarterly cash dividend. On February 4, 2005, Nobles board of directors
declared a quarterly cash dividend of $0.02 per ordinary share. This dividend was paid on March 1,
2005 to members (shareholders) of record on February 16, 2005. Prior thereto, the Company had not
paid cash dividends on its equity securities since becoming a publicly held corporation in October
1985. The declaration and payment of dividends in the future are at the discretion of Nobles
board of directors and the amount thereof will depend on the Companys results of operations,
financial condition, cash requirements, future business prospects, contractual restrictions and
other factors deemed relevant by Nobles board of directors. At March 3, 2005, there were 1,467 record holders of ordinary shares. 14




---



##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA. Year Ended December 31,2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(In thousands, except per share amounts)Statement of Income DataOperating revenues
    
    $
    1,066,231
    
    
    $
    987,380
    
    
    $
    990,248
    
    
    $
    1,029,760
    
    
    $
    898,224Net income
    
    
    146,086
    
    
    
    166,416
    
    
    
    209,503
    
    
    
    262,922
    
    
    
    165,554Per share:Basic
    
    $
    1.10
    
    
    $
    1.26
    
    
    $
    1.58
    
    
    $
    1.98
    
    
    $
    1.24Diluted
    
    
    1.09
    
    
    
    1.25
    
    
    
    1.57
    
    
    
    1.96
    
    
    
    1.22Balance Sheet Data (at end of period)Cash and marketable securities (1)
    
    $
    191,578
    
    
    $
    237,843
    
    
    $
    265,466
    
    
    $
    278,306
    
    
    $
    173,235Property and equipment, net
    
    
    2,743,620
    
    
    
    2,625,866
    
    
    
    2,471,043
    
    
    
    2,149,217
    
    
    
    2,095,129Total assets
    
    
    3,307,973
    
    
    
    3,189,633
    
    
    
    3,065,714
    
    
    
    2,750,740
    
    
    
    2,595,531Long-term debt
    
    
    503,288
    
    
    
    541,907
    
    
    
    589,562
    
    
    
    550,131
    
    
    
    650,291Total debt (2)
    
    
    511,649
    
    
    
    589,573
    
    
    
    670,139
    
    
    
    605,561
    
    
    
    699,642Shareholders equity
    
    
    2,384,434
    
    
    
    2,178,425
    
    
    
    1,989,210
    
    
    
    1,778,319
    
    
    
    1,576,719Other DataNet cash provided by operating activities
    
    $
    332,221
    
    
    $
    365,308
    
    
    $
    445,364
    
    
    $
    451,046
    
    
    $
    330,736Acquisitions and related capital upgrades
    
    
    110,548
    
    
    
    194,400
    
    
    
    356,854
    
    
    
    50,440
    
    
    
    58,993Other capital expenditures
    
    
    150,493
    
    
    
    112,734
    
    
    
    121,500
    
    
    
    89,426
    
    
    
    66,206
   (1)
    
    Consists of Cash and cash equivalents and Investments in marketable securities as reported on our
consolidated balance sheets.(2)
    
    Consists of long-term debt and current maturities of long-term debt. 15




---



##### Table of Contents



ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion is intended to assist you in understanding our financial position as
of
December 31, 2004 and 2003, and our results of operations for each of the three years in the
period ended
December 31, 2004. You should read the accompanying consolidated financial statements and
their notes in conjunction with this discussion. 
 EXECUTIVE OVERVIEW Demand for drilling services depends on a variety of economic and political factors, including
worldwide demand for oil and gas, the ability of OPEC to set and maintain production levels and
pricing, the level of production of non-OPEC countries and the policies of the various governments
regarding exploration and development of their oil and gas reserves. Our results of operations depend on the levels of activity in offshore oil and gas
exploration, development and production in markets worldwide. Historically, oil and gas prices and
market expectations of potential changes in these prices have significantly affected that level of
activity. Generally speaking, higher oil and natural gas prices or our customers expectations of
higher prices result in a greater demand for our services. These prices are extremely volatile.
Despite favorable oil prices in 2004, drilling activity in certain international markets, which are
influenced more by oil prices than natural gas prices, was generally weaker in 2004 as compared to
2003 and 2002. We believe that operators in these international markets have been reluctant to
increase drilling activity due to the uncertainty surrounding the worldwide economy, the political
unrest in the Middle East (including the military action in Iraq), Nigeria and Venezuela, and
difficulties in obtaining funding from government-affiliated oil companies. However, drilling
activity in the North Sea and West Africa began to improve in the latter part of 2004, while
remaining strong in other international markets in which we operate, including the Middle East,
Mexico and Brazil. Natural gas prices during 2004 averaged $6.13 per thousand cubic feet (source: average Henry
Hub closing bidweek price). Although natural gas prices in 2004 were 12 percent higher than 2003,
and significantly higher than historical prices, operators generally did not significantly increase
drilling activities in the U.S. Gulf of Mexico in water depths applicable to jackups and
submersibles until the second half of 2004 due principally to a lack of economically viable
drilling prospects and uncertainty surrounding the worldwide economy. Drilling activity levels in
water depths applicable to semisubmersibles also began to improve during the second half of 2004. We cannot predict the future level of demand for our drilling services or future conditions in
the offshore contract drilling industry. Decreases in the level of demand for our drilling
services have an adverse effect on our results of operations. In recent years, we have focused on increasing the number of rigs in our fleet capable of
ultra-deepwater offshore drilling. We have incorporated this focus into our broader, long-standing
business strategy to actively expand our international and offshore deepwater capabilities through
acquisitions, rig upgrades and modifications and to deploy assets in important geological areas.
We have also increased the number of jackups in key international markets. Since the beginning of
2000, we have mobilized nine jackup rigs and one semisubmersible from the U.S. Gulf of Mexico to
international markets. We have also added nine jackups to our international fleet through rig
acquisitions during this same period. In addition, we have added two deepwater semisubmersibles to
our fleet and have acquired two additional semisubmersible baredeck hulls since the beginning of
2000. 16




---



##### Table of Contents



RESULTS OF OPERATIONS 2004 Compared to 2003 General Net income for 2004 was $146,086,000, or $1.09 per diluted share, on operating revenues of
$1,066,231,000, compared to net income of $166,416,000, or $1.25 per diluted share, on operating
revenues of $987,380,000 for 2003. The following table sets forth operating revenues and operating costs and expenses for each of
our reportable segments (for additional information regarding our reportable segments, see Note 16
of our accompanying consolidated financial statements) for the periods indicated: International
    
    
    DomesticContract
    
    
    Contract
    
    
    EngineeringDrilling
    
    
    Drilling
    
    
    & ConsultingServices
    
    
    Services
    
    
    Services
    
    
    Other
    
    
    Total(In thousands)2004Operating Revenues:Contract drilling services
    
    $
    697,858
    
    
    $
    239,556
    
    
    $
    
    
    
    $
    
    
    
    $
    937,414Reimbursables
    
    
    19,720
    
    
    
    13,777
    
    
    
    7,557
    
    
    
    9,180
    
    
    
    50,234Labor contract drilling services
    
    
    
    
    
    
    

    
    
    
    
    
    
    
    51,327
    
    
    
    51,327Engineering, consulting and other
    
    
    2,834
    
    
    
    1,694
    
    
    
    13,935
    
    
    
    8,793
    
    
    
    27,256$
    720,412
    
    
    $
    255,027
    
    
    $
    21,492
    
    
    $
    69,300
    
    
    $
    1,066,231Operating Costs and Expenses:Contract drilling services
    
    $
    436,895
    
    
    $
    125,613
    
    
    $
    
    
    
    $
    
    
    
    $
    562,508Reimbursables
    
    
    15,184
    
    
    
    13,100
    
    
    
    7,509
    
    
    
    8,817
    
    
    
    44,610Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,669
    
    
    
    42,669Engineering, consulting and other
    
    
    (2,250
    )
    
    
    620
    
    
    
    20,034
    
    
    
    8,935
    
    
    
    27,339Depreciation
    
    
    119,608
    
    
    
    44,566
    
    
    
    589
    
    
    
    3,456
    
    
    
    168,219Selling, general and administrative
    
    
    22,340
    
    
    
    8,602
    
    
    
    1,113
    
    
    
    1,659
    
    
    
    33,714$
    591,777
    
    
    $
    192,501
    
    
    $
    29,245
    
    
    $
    65,536
    
    
    $
    879,059
 17




---



##### Table of Contents



International
    
    
    DomesticContract
    
    
    Contract
    
    
    EngineeringDrilling
    
    
    Drilling
    
    
    & ConsultingServices
    
    
    Services
    
    
    Services
    
    
    Other
    
    
    Total(In thousands)2003Operating Revenues:Contract drilling services
    
    $
    646,949
    
    
    $
    242,654
    
    
    $
    
    
    
    $
    
    
    
    $
    889,603Reimbursables
    
    
    15,234
    
    
    
    10,350
    
    
    
    13,887
    
    
    
    4,743
    
    
    
    44,214Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,492
    
    
    
    28,492Engineering, consulting and other
    
    
    1,138
    
    
    
    9,374
    
    
    
    9,658
    
    
    
    4,901
    
    
    
    25,071$
    663,321
    
    
    $
    262,378
    
    
    $
    23,545
    
    
    $
    38,136
    
    
    $
    987,380Operating Costs and Expenses:Contract drilling services
    
    $
    380,029
    
    
    $
    125,009
    
    
    $
    
    
    
    $
    
    
    
    $
    505,038Reimbursables
    
    
    11,135
    
    
    
    9,722
    
    
    
    13,606
    
    
    
    4,561
    
    
    
    39,024Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,642
    
    
    
    22,642Engineering, consulting and other
    
    
    (614
    )
    
    
    3,012
    
    
    
    21,270
    
    
    
    4,581
    
    
    
    28,249Depreciation
    
    
    97,584
    
    
    
    46,473
    
    
    
    610
    
    
    
    3,460
    
    
    
    148,127Selling, general and administrative
    
    
    15,839
    
    
    
    8,527
    
    
    
    1,235
    
    
    
    1,033
    
    
    
    26,634Gain on sale of property and equipment
    
    
    
    
    
    
    (3,472
    )
    
    
    
    
    
    
    
    
    
    
    (3,472
    )$
    503,973
    
    
    $
    189,271
    
    
    $
    36,721
    
    
    $
    36,277
    
    
    $
    766,242
 Rig Utilization, Operating Days and Average Dayrates The following table sets forth the average rig utilization, operating days and average
dayrates for our rig fleet for 2004 and 2003: Average RigUtilization (1)
    
    
    Operating Days (2)
    
    
    Average Dayrate2004
    
    
    2003
    
    
    2004
    
    
    2003
    
    
    2004
    
    
    2003International (3):Jackups
    
    
    87
    %
    
    
    82
    %
    
    
    11,332
    
    
    
    9,620
    
    
    $
    50,325
    
    
    $
    51,614Semisubmersibles  >6,000(4)
    
    
    72
    %
    
    
    100
    %
    
    
    397
    
    
    
    365
    
    
    $
    144,018
    
    
    $
    149,217Semisubmersibles  <6,000(5)
    
    
    100
    %
    
    
    95
    %
    
    
    366
    
    
    
    347
    
    
    $
    49,877
    
    
    $
    44,131Drillships
    
    
    60
    %
    
    
    98
    %
    
    
    659
    
    
    
    1,071
    
    
    $
    79,134
    
    
    $
    75,296Total International
    
    
    85
    %
    
    
    84
    %
    
    
    12,754
    
    
    
    11,403
    
    
    $
    54,717
    
    
    $
    56,735Domestic (6):Jackups
    
    
    97
    %
    
    
    91
    %
    
    
    713
    
    
    
    1,144
    
    
    $
    45,785
    
    
    $
    30,271Semisubmersibles  >6,000(4)
    
    
    97
    %
    
    
    87
    %
    
    
    1,612
    
    
    
    1,580
    
    
    $
    103,210
    
    
    $
    120,784Semisubmersibles  <6,000(5)
    
    
    43
    %
    
    
    29
    %
    
    
    313
    
    

    
    107
    
    
    $
    44,144
    
    
    $
    45,025Submersibles
    
    
    94
    %
    
    
    77
    %
    
    
    1,034
    
    
    
    613
    
    
    $
    25,840
    
    
    $
    20,188Total Domestic
    
    
    87
    %
    
    
    81
    %
    
    
    3,672
    
    
    
    3,444
    
    
    $
    65,239
    
    
    $
    70,457
   (1)
    
    Information reflects our policy of reporting on the basis of the number of actively marketed
rigs in our fleet. Percentages reflect the results of rigs only during the period in which
they are owned or operated by us.(2)
    
    Information reflects the number of days that our rigs were operating under contractual
terms.(3)
    
    International encompasses contract drilling services conducted in the Middle East, Mexico,
the North Sea, Brazil, West Africa, India and the Mediterranean Sea.(4)
    
    These units have water depth ratings of 6,000 feet or greater depending on the unit.(5)
    
    These units have water depth ratings less than 6,000 feet.(6)
    
    Domestic encompasses contract drilling services conducted in the U.S. Gulf of Mexico. 18




---



##### Table of Contents



International Contract Drilling Services The following table sets forth the operating revenues and the operating costs and expenses
for our international contract drilling services segment for 2004 and 2003: Operating CostsOperating Revenues
    
    
    and Expenses2004
    
    
    2003
    
    
    2004
    
    
    2003(In thousands)Contract drilling services
    
    $
    697,858
    
    
    $
    646,949
    
    
    $
    436,895
    
    
    $
    380,029Reimbursables (1)
    
    
    19,720
    
    
    
    15,234
    
    
    
    15,184
    
    
    
    11,135Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Engineering, consulting and other
    
    
    2,834
    
    
    
    1,138
    
    
    
    (2,250
    )
    
    
    (614
    )Depreciation
    
    
    N/A
    
    
    
    N/A
    
    
    
    119,608
    
    
    
    97,584Selling, general and administrative
    
    
    N/A
    
    
    
    N/A
    
    
    
    22,340
    
    
    
    15,839Total
    
    $
    720,412
    
    
    $
    663,321
    
    
    $
    591,777
    
    
    $
    503,973
   (1)
    
    We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as direct operating expenses. Changes in the amount of these
reimbursables do not have a material effect on our financial position, results of operations
or cash flows. Operating Revenues.International contract drilling services revenues increased $50,909,000
as additional operating days in our Middle East, Mexico and West Africa divisions were partially
offset by weaker market conditions in the North Sea, and a shipyard project on the Noble Roger
Easondrillship in Brazil. We had 1,392 additional operating days in our Middle East division due
primarily to the acquisition of the Noble Gene House, Noble Charlie Yesterand Noble Cees van
Diemenpremium jackups in July 2003, September 2003, and July 2004, respectively, the mobilization
of the Noble Carl Norbergpremium jackup to the Mediterranean Sea from the U.S. Gulf of Mexico in
December 2003, and additional operating days on the Noble Dick Favor. The additional operating
days in our Middle East division resulted in additional revenues of approximately $68,000,000. In
Mexico, we experienced an additional 373 operating days due to the mobilization of three premium
jackups from the U.S. Gulf of Mexico since the beginning of 2003 for long-term contracts with
Pemex, which resulted in additional international contract drilling services revenues of
approximately $19,000,000. An increase in activity in West Africa over the latter part of 2004
resulted in an additional 256 operating days on our jackups in the region as compared to 2003. In
addition, we transferred the Noble Homer Ferringtonsemisubmersible to our West Africa division in
July 2004 from the U.S. Gulf of Mexico for a two-year contract that commenced in November 2004.
The additional operating days in West Africa resulted in additional revenues of approximately
$13,000,000. The generally weaker market conditions in the North Sea resulted in lower utilization
and average dayrates in 2004 for this region. Utilization in the North Sea during 2004 decreased
to 91 percent from 97 percent in 2003, while our average dayrate decreased 10 percent to $52,090.
The weaker market conditions in the North Sea and the shipyard project on the Noble Roger Eason
decreased revenues by approximately $28,000,000 and $21,000,000, respectively. The increase in
engineering, consulting and other revenue of $1,696,000 was attributable primarily to an equipment
inspection fee earned on a per day basis by the Noble Homer Ferringtonas part of the rigs
preparations for its long-term contract in Nigeria. Since September 2002, we have mobilized a total of seven jackups from the U.S. Gulf of Mexico
to Mexico for long-term contracts with Petroleos Mexicanos (Pemex), including three since the
beginning of 2003. The mobilization of these jackup rigs was pursuant to our long-standing
business strategy of deploying our assets in important geological regions. We believe the
long-term financial returns for our jackup rigs will be higher in international regions due to
relatively fewer quality drilling prospects in the U.S. Gulf of Mexico at water depths applicable
to these units. As a result, we made the strategic decision to mobilize these units to Mexico for
long-term contracts. Following the completion of its contract in early January 2005, we mobilized
the Noble Lewis Duggerfrom Mexico to the U.S. Gulf of Mexico for upgrades and refurbishments.
Following this shipyard work, we plan to mobilize the rig back to Mexico if successful on a recent
bid to Pemex for a one-year contract that is expected to commence in May 2005. 19




---



##### Table of Contents



Nigeria traditionally has had the largest concentration of drilling rigs in West Africa.
Demand in Nigeria began to decline in the latter part of 2002 due to political unrest attributable
to elections and strikes. Although this unrest declined towards the end of 2003, demand did not
improve as our customers were in the process of obtaining approval for projects from the
government-affiliated oil companies. Due to geology which is favorable for offshore exploration
and production, we believe the prospects for drilling activity in West Africa are good and that our
operations in the region will provide financial returns over time which are comparable to other key
international regions, and as a result, we have kept our six jackups in this market. Utilization
on our six jackups in West Africa improved during 2004, especially over the second half of the
year. By the middle of the fourth quarter of 2004, all six of our jackups were under contract,
with five contracted through 2005. In November 2004, the Noble Homer Ferringtonsemisubmersible
commenced a two-year contract with ExxonMobil in Nigeria. This unit previously operated in the
U.S. Gulf of Mexico. We believe that the long-term contracts initiated during 2004 for our jackups
and the Noble Homer Ferringtonsemisubmersible support our favorable outlook for this region. We believe that the weaker market conditions in the North Sea during 2004 were attributable to
the gradual maturing of the North Sea basin. We also believe that improvement in dayrates in this
region will be driven by the independent operators, who historically have been more aggressive than
major oil and gas companies in developing smaller reserve targets. Market conditions in the North
Sea improved during the second half of 2004, as the supply and demand of rigs in the region came
closer into balance. All of our units in the region are currently operating and dayrates have
continued to strengthen on recent contracts. In Brazil, the Noble Roger Easondrillship was in the
shipyard for all of 2004. We performed regulatory maintenance and upgrades to the unit, including
water depth increase to 7,200 feet, which we recently completed. The unit has a 700-day contract
with Petrobras at a dayrate of $96,250, plus the opportunity for a performance bonus, which we
anticipate will commence in March 2005. Operating Costs and Expenses.International contract drilling services expenses increased
$56,866,000 due to the additional operating days in our Middle East, Mexico and West Africa
divisions following the acquisition of five international jackups since July 2003, the
mobilization of four premium jackups out of the U.S. Gulf of Mexico to international locations
since the beginning of 2003, and the transfer of the Noble Homer Ferringtonsemisubmersible to our
West Africa division in July 2004 for a contract that commenced in November 2004. In addition, we
performed maintenance projects on our three drillships in Brazil, including the Noble Roger Eason
upgrade project that we recently completed, and we experienced higher labor costs in all
our international regions. Approximately two-thirds of the increase in our international contract
drilling services expenses was attributable to the additional operating days. Engineering,
consulting and other expenses in our international contract drilling services segment decreased
$1,636,000 due to a lower minority interest amount related to our Noble Muravlenkodrillship. The
Noble Muravlenko, in which we own an 82 percent interest, incurred additional downtime in 2004, as
well as the rigs drydocking in late July 2004, resulting in a reduced minority interest amount.
Depreciation expense increased $22,024,000 due to the rig acquisitions, mobilization of jackup
rigs to international locations, and transfer of the Noble Homer Ferringtonto our West Africa
division discussed above. See the discussion below under Other Items regarding selling, general
and administrative expenses. 20




---



##### Table of Contents



Domestic Contract Drilling Services The following table sets forth the operating revenues and the operating costs and expenses
for our domestic contract drilling services segment for 2004 and 2003: Operating CostsOperating Revenues
    
    
    and Expenses2004
    
    
    2003
    
    
    2004
    
    
    2003(In thousands)Contract drilling services
    
    $
    239,556
    
    
    $
    242,654
    
    
    $
    125,613
    
    
    $
    125,009Reimbursables (1)
    
    
    13,777
    
    
    
    10,350
    
    
    
    13,100
    
    
    
    9,722Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Engineering, consulting and other
    
    
    1,694
    
    
    
    9,374
    
    
    
    620
    
    
    
    3,012Depreciation
    
    
    N/A
    
    
    
    N/A
    
    
    
    44,566
    
    
    
    46,473Selling, general and administrative
    
    
    N/A
    
    
    
    N/A
    
    
    
    8,602
    
    
    
    8,527Gain on sale of property and equipment
    
    
    N/A
    
    
    
    N/A
    
    
    
    
    
    
    
    (3,472
    )Total
    
    $
    255,027
    
    
    $
    262,378
    
    
    $
    192,501
    
    
    $
    189,271
   (1)
    
    We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as direct operating expenses. Changes in the amount of these
reimbursables do not have a material effect on our financial position, results of operations
or cash flows. Operating Revenues.Domestic contract drilling services revenues decreased $3,098,000 due to
a lower average dayrate on our semisubmersibles and fewer operating days on our jackups following
the mobilization of four premium jackups out of the U.S. Gulf of Mexico to international locations
since the beginning of 2003. These items were mostly offset by a higher average dayrate on our
jackups, higher utilization and average dayrates on our submersibles, and additional operating
days on our semisubmersibles. Market conditions for jackups and submersibles in the U.S. Gulf of
Mexico improved during 2004 as the supply of such rigs has come closer into balance with demand
following the industrys mobilization of jackup rigs out of this region for international
opportunities and a moderate increase in demand. Utilization of our submersibles increased to 94
percent from 77 percent in 2003, while the average dayrate on these units increased 28 percent to
$25,840. Our submersibles contributed additional revenues of $14,000,000 in 2004. Likewise, the
average dayrate on our jackup rigs increased 51 percent, although the impact on our domestic
contract drilling services revenues was mostly offset by 431 fewer operating days due to the
mobilization of the three premium jackups to Mexico for long-term contracts with Pemex and the
mobilization of another premium jackup to the Mediterranean Sea during 2003. The Noble Homer
Ferringtonwas transferred to our West Africa division in July 2004 and began preparations for a
two-year contract in Nigeria. The average dayrate on our semisubmersibles with water depth
ratings of 6,000 feet or greater decreased 15 percent, which reduced revenues by approximately
$28,000,000, due to certain units operating on the spot-rate market with lower average dayrates
than those earned while under previous long-term contracts. However, additional operating days on
our semisubmersibles, primarily the Noble Lorris Bouzigardand Noble Therald Martin, resulted in
additional revenues of approximately $13,000,000. The decrease in engineering, consulting and
other revenues of $7,680,000 was attributable to the sale of our interest in certain deepwater oil
and gas properties during the fourth quarter of 2003. The demand for semisubmersibles in the U.S. Gulf of Mexico began to improve during the latter
part of 2004, with significant dayrate increases and longer terms on contracts for these units as
compared to earlier in the year. This improvement has been the result of increased demand for
deepwater semisubmersibles due to operators increased exploration spending and upcoming
development projects in the region. The supply of these units is currently short of projected
demand for the next two to three years as operators look to obtain the rig capacity necessary to
meet their long-term exploration and development plans. In December 2004, we received a
commitment from Shell Exploration & Production Company for a two-year contract on the Noble Clyde
Boudreaux, an ultra-deepwater semisubmersible that upon completion of its upgrade will be capable
of drilling in water depths of 10,000 feet. This upgrade is expected to be completed and the unit
to commence operations in the third quarter of 2006. In addition to the Noble Clyde Boudreaux, we
have three ultra-deepwater hulls in inventory, ready for upgrade. Notwithstanding the recent
improvement in both the deepwater and shallow water markets in the U.S. 21




---



##### Table of Contents



Gulf of Mexico, the mobilization of the Noble Homer Ferringtonsemisubmersible and four
premium jackups from the U.S. Gulf of Mexico to international locations was pursuant to our
long-standing business strategy of deploying our assets in important geological regions as
described earlier. Operating Costs and Expenses.Domestic contract drilling services expenses increased
$604,000 due to a $9,000,000 pre-tax charge related to costs incurred in 2004 to repair damage to
three of our semisubmersibles in the U.S. Gulf of Mexico as a result of Hurricane Ivan. Excluding
this charge, domestic contract drilling services expenses decreased $8,396,000 due to the
mobilization of four jackup rigs from the U.S. Gulf of Mexico to international locations and the
transfer of the Noble Homer Ferringtonsemisubmersible to our West Africa division, partially
offset by increased costs attributable to the activation of the Noble Lorris Bouzigardand Noble
Therald Martinsemisubmersibles, which were placed into service in March 2003 and November 2003,
respectively. The mobilization of the four jackup rigs and transfer of the Noble Homer Ferrington
semisubmersible to international locations reduced domestic contract drilling expenses by
approximately $16,000,000, whereas the activation of the Noble Lorris Bouzigardand Noble Therald
Martinincreased contract drilling expenses by approximately $8,000,000. The lower engineering,
consulting and other expenses of $2,392,000 were due to the sale of our interests in certain
deepwater oil and gas properties during the fourth quarter of 2003. Depreciation expense
decreased $1,907,000 due to the mobilization of four premium jackups out of the U.S. Gulf of
Mexico and transfer of the Noble Homer Ferringtonto our West Africa division, which reduced
depreciation expense by approximately $7,000,000, partially offset by additional depreciation of
approximately $5,000,000 attributable to the activation of the Noble Lorris Bouzigardand Noble
Therald Martinsemisubmersibles. See the discussion below under Other Items regarding selling,
general and administrative expenses. Engineering & Consulting Services The following table sets forth the operating revenues and the operating costs and expenses
for our engineering and consulting services segment for 2004 and 2003: Operating CostsOperating Revenues
    
    
    and Expenses2004
    
    
    2003
    
    
    2004
    
    
    2003(In thousands)Contract drilling services
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Reimbursables (1)
    
    
    7,557
    
    
    
    13,887
    
    
    
    7,509
    
    
    
    13,606Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Engineering, consulting and other
    
    
    13,935
    
    
    
    9,658
    
    
    
    20,034
    
    
    
    21,270Depreciation
    
    
    N/A
    
    
    
    N/A
    
    
    
    589
    
    
    
    610Selling, general and administrative
    
    
    N/A
    
    
    
    N/A
    
    
    
    1,113
    
    
    
    1,235Total
    
    $
    21,492
    
    
    $
    23,545
    
    
    $
    29,245
    
    
    $
    36,721
   (1)
    
    We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as operating expenses. Changes in the amount of these reimbursables do
not have a material effect on our financial position, results of operations or cash flows. Operating Revenues.Excluding reimbursables, operating revenues for our engineering and
consulting services segment increased $4,277,000 due principally to the sale of a license of our
OptiDrillTM drilling efficiency technology during 2004 for $3,000,000 and additional
project management engagements. Operating Costs and Expenses.Excluding reimbursables, operating costs and expenses for our
engineering and consulting services segment decreased $1,379,000 due to fewer joint industry
research projects conducted in 2004 by our Noble Technology Services Division, mostly offset by
additional project management engagements in 2004. 22




---



##### Table of Contents



Other The following table sets forth the operating revenues and the operating costs and expenses
for our other services for 2004 and 2003: Operating CostsOperating Revenues
    
    
    and Expenses2004
    
    
    2003
    
    
    2004
    
    
    2003(In thousands)Contract drilling services
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Reimbursables (1)
    
    
    9,180
    
    
    
    4,743
    
    
    
    8,817
    
    
    
    4,561Labor contract drilling services
    
    
    51,327
    
    
    
    28,492
    
    
    
    42,669
    
    
    
    22,642Engineering, consulting and other
    
    
    8,793
    
    
    
    4,901
    
    
    
    8,935
    
    
    
    4,581Depreciation
    
    
    N/A
    
    
    
    N/A
    
    
    
    3,456
    
    
    
    3,460Selling, general and administrative
    
    
    N/A
    
    
    
    N/A
    
    
    
    1,659
    
    
    
    1,033Total
    
    $
    69,300
    
    
    $
    38,136
    
    
    $
    65,536
    
    
    $
    36,277
   (1)
    
    We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as operating expenses. Changes in the amount of these reimbursables do
not have a material effect on our financial position, results of operations or cash flows. Operating Revenues.Revenues from our labor contract drilling services increased $22,835,000
due to additional operating days in the North Sea, mostly attributable to the start of a new labor
contract for Apache North Sea Limited under which we commenced operations on three platforms in
the Forties Field during 2004. The additional operating days in the North Sea represented
approximately 90 percent of the increase in our labor contract drilling services revenues in 2004. Foreign
exchange fluctuations related to our operations in Canada on the Hibernia project also resulted in
higher revenues. We are paid for this work in Canadian dollars, and the Canadian dollar was
stronger relative to the U.S. dollar in 2004 than in 2003. In addition, contractual provisions
covering the Hibernia project allowed for increases in the labor, maintenance and administrative
portions of the dayrate on the project during 2004. Engineering, consulting and other revenues
increased $3,892,000 due to increased activity on an engineering services engagement in the North
Sea. Operating Costs and Expenses.Excluding reimbursables, operating costs and expenses for our
other services increased $25,003,000 due to the additional labor contract operating days in the
North Sea, the stronger Canadian dollar, higher labor, maintenance and administrative costs
related to our Hibernia project in Canada, and the increased activity on an engineering services
engagement in the North Sea. The additional operating days on our North Sea labor contracts and
increased activity on the engineering services engagement represented approximately 75 percent and
15 percent, respectively, of the increase in our other services operating costs and expenses. Other Items Selling, General and Administrative Expenses.Selling, general and administrative (SG&A)
expenses increased $7,080,000 due to additional professional fees associated with compliance under
the requirements of the Sarbanes-Oxley Act of 2002, additional stock-based compensation expense,
higher insurance premiums for corporate-related policies and additional pension expense. The
additional professional fees related to the Sarbanes-Oxley Act of 2002 was the largest individual
factor in our higher SG&A expenses in 2004, representing nearly 30 percent of the increase. Gain on Sale of Property and Equipment.In 2003, we sold our interest in a deepwater oil and
gas property in the U.S. Gulf of Mexico to ENI Petroleum for $5,200,000 in cash. We realized a
gain of $3,472,000 upon the sale of our interest in this property. No sales of oil and gas
properties were made in 2004. 23




---



##### Table of Contents



Interest Expense.Interest expense decreased $5,902,000 due to the continued retirement of
debt since the beginning of 2003. Since January 1, 2003, we have made repayments of long-term
debt totaling $158,513,000, including $77,933,000 in 2004. Other, net.Other, net increased $2,897,000 due to additional equity in income from our 50
percent equity interest in Noble Crosco Drilling Ltd., a joint venture which owns the Panonjackup
rig, and additional interest income earned on our cash and investments in marketable debt
securities due to higher interest rates in 2004 than in 2003. The Panonwas in the shipyard for
two months in 2003, whereas the rig operated the full year in 2004. Income Tax Provision.Income tax provision decreased $4,837,000 due to lower pretax
earnings and the favorable resolution of income tax audits in 2004, which resulted in a lower
effective tax rate in 2004 than in 2003. Excluding the impact of the favorable resolution of
income tax audits, the effective tax rate was 15 percent in 2004 compared to 11 percent in 2003.
This higher effective tax rate was a result of additional earnings during 2004 from rigs owned by
U.S. subsidiaries which were operating in Mexico, India and the Mediterranean Sea and reduced
earnings from our Brazil and North Sea divisions, which have lower effective tax rates. 24




---



##### Table of Contents



2003 Compared to 2002 General Net income for 2003 was $166,416,000, or $1.25 per diluted share, on operating revenues of
$987,380,000, compared to net income of $209,503,000, or $1.57 per diluted share, on operating
revenues of $990,248,000 for 2002. The following table sets forth operating revenues and operating costs and expenses for each of
our reportable segments (for additional information regarding our reportable segments, see Note 16
of our accompanying consolidated financial statements) for the periods indicated: International
    
    
    DomesticContract
    
    
    Contract
    
    
    EngineeringDrilling
    
    
    Drilling
    
    
    & ConsultingServices
    
    
    Services
    
    
    Services
    
    
    Other
    
    
    Total(In thousands)2003Operating Revenues:Contract drilling services
    
    $
    646,949
    
    
    $
    242,654
    
    
    $
    
    
    
    $
    
    
    
    $
    889,603Reimbursables
    
    
    15,234
    
    
    
    10,350
    
    
    
    13,887
    
    
    
    4,743
    
    
    
    44,214Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,492
    
    
    
    28,492Engineering, consulting and other
    
    
    1,138
    
    
    
    9,374
    
    
    
    9,658
    
    
    
    4,901
    
    
    
    25,071$
    663,321
    
    
    $
    262,378
    
    
    $
    23,545
    
    
    $
    38,136
    
    
    $
    987,380Operating Costs and Expenses:Contract drilling services
    
    $
    380,029
    
    
    $
    125,009
    
    
    $
    
    
    
    $
    
    
    
    $
    505,038Reimbursables
    
    
    11,135
    
    
    
    9,722
    
    
    
    13,606
    
    
    
    4,561
    
    
    
    39,024Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,642
    
    
    
    22,642Engineering, consulting and other
    
    
    (614
    )
    
    
    3,012
    
    
    
    21,270
    
    
    
    4,581
    
    
    
    28,249Depreciation
    
    
    97,584
    
    
    
    46,473
    
    
    
    610
    
    
    
    3,460
    
    
    
    148,127Selling, general and administrative
    
    
    15,839
    
    
    
    8,527
    
    
    
    1,235
    
    
    
    1,033
    
    
    
    26,634Gain on sale of property and equipment
    
    
    
    
    
    
    (3,472
    )
    
    
    
    
    
    
    
    
    
    
    (3,472
    )$
    503,973
    
    
    $
    189,271
    
    
    $
    36,721
    
    
    $
    36,277
    
    
    $
    766,242
 25




---



##### Table of Contents



International
    
    
    DomesticContract
    
    
    Contract
    
    
    EngineeringDrilling
    
    
    Drilling
    
    
    & ConsultingServices
    
    
    Services
    
    
    Services
    
    
    Other
    
    
    Total(In thousands)2002Operating Revenues:Contract drilling services
    
    $
    620,289
    
    
    $
    290,130
    
    
    $
    
    
    
    $
    
    
    
    $
    910,419Reimbursables
    
    
    14,970
    
    
    
    10,646
    
    
    
    
    
    
    
    567
    
    
    
    26,183Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,416
    
    
    
    26,416Engineering, consulting and other
    
    
    1,610
    
    
    
    4,066
    
    
    
    14,569
    
    
    
    6,985
    
    
    
    27,230$
    636,869
    
    
    $
    304,842
    
    
    $
    14,569
    
    
    $
    33,968
    
    
    $
    990,248Operating Costs and Expenses:Contract drilling services
    
    $
    325,830
    
    
    $
    162,799
    
    
    $
    
    
    
    $
    
    
    
    $
    488,629Reimbursables
    
    
    13,341
    
    
    
    9,253
    
    
    
    
    
    
    
    464
    
    
    
    23,058Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,951
    
    
    
    20,951Engineering, consulting and other
    
    
    (716
    )
    
    
    1,230
    
    
    
    20,731
    
    
    
    6,623
    
    
    
    27,868Depreciation
    
    
    70,803
    
    
    
    50,774
    
    
    
    380
    
    
    
    3,197
    
    
    
    125,154Selling, general and administrative
    
    
    14,764
    
    
    
    10,333
    
    
    
    742
    
    
    
    1,100
    
    
    
    26,939Gain on sale of property and equipment
    
    
    
    
    
    
    (5,908
    )
    
    
    
    
    
    
    
    
    
    
    (5,908
    )$
    424,022
    
    
    $
    228,481
    
    
    $
    21,853
    
    
    $
    32,335
    
    
    $
    706,691
 Rig Utilization, Operating Days and Average Dayrates The following table sets forth the average rig utilization, operating days and average
dayrates for our rig fleet for 2003 and 2002: Average RigUtilization (1)
    
    
    Operating Days (2)
    
    
    Average Dayrate2003
    
    
    2002
    
    
    2003
    
    
    2002
    
    
    2003
    
    
    2002International (3):Jackups
    
    
    82
    %
    
    
    97
    %
    
    
    9,620
    
    
    
    8,480
    
    
    $
    51,614
    
    
    $
    58,149Semisubmersibles - >6,000(4)
    
    
    100
    %
    
    
    100
    %
    
    
    365
    
    
    
    365
    
    
    $
    149,217
    
    
    $
    129,472Semisubmersibles - <6,000(5)
    
    
    95
    %
    
    
    74
    %
    
    
    347
    
    
    
    269
    
    
    $
    44,131
    
    
    $
    61,882Drillships
    
    
    98
    %
    
    
    86
    %
    
    
    1,071
    
    
    
    938
    
    
    $
    75,296
    
    
    $
    67,464Total International
    
    
    84
    %
    
    
    95
    %
    
    
    11,403
    
    
    
    10,052
    
    
    $
    56,735
    
    
    $
    61,708Domestic (6):Jackups
    
    
    91
    %
    
    
    86
    %
    
    
    1,144
    
    
    
    2,832
    
    
    $
    30,271
    
    
    $
    28,723Semisubmersibles - >6,000(4)
    
    
    87
    %
    
    
    91
    %
    
    
    1,580
    
    
    
    1,667
    
    
    $
    120,784
    
    
    $
    120,217Semisubmersibles - <6,000(5)
    
    
    29
    %
    
    
    
    
    
    
    107
    
    
    
    
    
    
    $
    45,025
    
    
    $
    Submersibles
    
    
    77
    %
    
    
    56
    %
    
    
    613
    
    
    
    435
    
    
    $
    20,188
    
    
    $
    19,271Total Domestic
    
    
    81
    %
    
    
    84
    %
    
    
    3,444
    
    
    
    4,934
    
    
    $
    70,457
    
    
    $
    58,802
   (1)
    
    Information reflects our policy of reporting on the basis of the number of actively marketed
rigs in our fleet. Percentages reflect the results of rigs only during the period in which
they are owned or operated by us.(2)
    
    Information reflects the number of days that our rigs were operating under contractual
terms.(3)
    
    International encompasses contract drilling services conducted in the Middle East, Mexico,
the North Sea, Brazil, West Africa, India and the Mediterranean Sea.(4)
    
    These units have water depth ratings of 6,000 feet or greater depending on the unit.(5)
    
    These units have water depth ratings less than 6,000 feet.(6)
    
    Domestic encompasses contract drilling services conducted in the U.S. Gulf of Mexico. 26




---



##### Table of Contents



International Contract Drilling Services The following table sets forth the operating revenues and the operating costs and expenses
for our international contract drilling services segment for 2003 and 2002: Operating CostsOperating Revenues
    
    
    and Expenses2003
    
    
    2002
    
    
    2003
    
    
    2002(In thousands)Contract drilling services
    
    $
    646,949
    
    
    $
    620,289
    
    
    $
    380,029
    
    
    $
    325,830Reimbursables (1)
    
    
    15,234
    
    
    
    14,970
    
    
    
    11,135
    
    
    
    13,341Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Engineering, consulting and other
    
    
    1,138
    
    
    
    1,610
    
    
    
    (614
    )
    
    
    (716
    )Depreciation
    
    
    N/A
    
    
    
    N/A
    
    
    
    97,584
    
    
    
    70,803Selling, general and administrative
    
    
    N/A
    
    
    
    N/A
    
    
    
    15,839
    
    
    
    14,764Total
    
    $
    663,321
    
    
    $
    636,869
    
    
    $
    503,973
    
    
    $
    424,022
   (1)
    
    We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as direct operating expenses. Changes in the amount of these
reimbursables do not have a material effect on our financial position, results of operations
or cash flows. Operating Revenues.International contract drilling services revenues increased $26,660,000
due to additional operating days for our jackup rigs in Mexico and the Middle East, and a higher
average dayrate in Brazil, partially offset by lower utilization rates on jackup rigs in West
Africa and lower average dayrates in the North Sea. The additional operating days in Mexico, which
resulted in additional international contract drilling services revenues of approximately
$94,000,000, were attributable to the mobilization of seven rigs to Mexico from the U.S. Gulf of
Mexico beginning in September 2002. The increase in operating days in the Middle East provided
additional revenue of approximately $19,000,000 and was attributable primarily to the operations of
the Noble Roy Rhodesand Dhabi IIjackups, which we purchased in December 2002. The average
dayrates on our Noble Paul Wolffsemisubmersible and three drillships in Brazil increased from 2002
due to the receipt of performance bonuses for reducing operational downtime, which resulted in
higher revenues in this region of approximately $15,000,000. The lower utilization in West Africa
and lower average dayrates in the North Sea impacted revenues by approximately $55,000,000 and
$46,000,000, respectively. Engineering, consulting and other revenues decreased $472,000 due to a
special safety incentive bonus earned in West Africa during 2002. Operating Costs and Expenses.International contract drilling services expenses increased
$54,199,000 due to the additional operating days in Mexico and the Middle East, and labor
increases in all regions. In addition, these expenses increased due to stacked costs on two
jackups we acquired in the Middle East during 2003, and the costs to mobilize one jackup rig to
the Middle East from Brazil and one jackup rig to the Mediterranean Sea from the U.S. Gulf of
Mexico. These increases were partially offset by lower insurance costs. Of these factors, the
additional operating days in Mexico had the largest impact on our international contract drilling
expenses, representing an increase of approximately $38,000,000. We did not reduce our operating
expenses in West Africa significantly during 2003 even though we experienced fewer operating days
there, because we maintained a standard crew size on stacked units in order to perform repairs,
maintenance, and asset preservation work. Depreciation expense increased $26,781,000 due to the
mobilization of seven rigs to Mexico from the U.S. Gulf of Mexico beginning in September 2002, the
acquisition of the Dhabi IIand Noble Roy Rhodesjackup rigs in December 2002 and the acquisition
of the Noble Gene Houseand Noble Charlie Yesterjackups in July 2003 and September 2003,
respectively. See the discussion below under Other Items regarding selling, general and
administrative expenses. 27




---



##### Table of Contents



Domestic Contract Drilling Services The following table sets forth the operating revenues and direct operating expenses for our
domestic contract drilling services segment for 2003 and 2002: Operating CostsOperating Revenues
    
    
    and Expenses2003
    
    
    2002
    
    
    2003
    
    
    2002(In thousands)Contract drilling services
    
    $
    242,654
    
    
    $
    290,130
    
    
    $
    125,009
    
    
    $
    162,799Reimbursables (1)
    
    
    10,350
    
    
    
    10,646
    
    
    
    9,722
    
    
    
    9,253Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Engineering, consulting and other
    
    
    9,374
    
    
    
    4,066
    
    
    
    3,012
    
    
    
    1,230Depreciation
    
    
    N/A
    
    
    
    N/A
    
    
    
    46,473
    
    
    
    50,774Selling, general and administrative
    
    
    N/A
    
    
    
    N/A
    
    
    
    8,527
    
    
    
    10,333Gain on sale of property and equipment
    
    
    N/A
    
    
    
    N/A
    
    
    
    (3,472
    )
    
    
    (5,908
    )Total
    
    $
    262,378
    
    
    $
    304,842
    
    
    $
    189,271
    
    
    $
    228,481
   (1)
    
    We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as direct operating expenses. Changes in the amount of these
reimbursables do not have a material effect on our financial position, results of operations
or cash flows. Operating Revenues.Domestic contract drilling services revenues decreased $47,476,000 due to
fewer operating days on our domestic jackup rigs following the mobilization of seven rigs from the
U.S. Gulf of Mexico to Mexico beginning in September 2002. The fewer operating days on our
domestic jackups resulted in a reduction in our domestic contracting drilling services revenues of
approximately $47,000,000. The mobilization of these jackup rigs was pursuant to our long-standing
business strategy of deploying our assets in important geological regions as described earlier.
Operating days on the Noble Lorris Bouzigard, which was activated in March 2003, and higher
utilization on our submersibles were offset by lower utilization on our deepwater semisubmersibles.
Engineering, consulting and other revenues increased $5,308,000 due to additional revenue from
interests in deepwater oil and gas properties, which began producing during the latter part of
2002, and revenue earned by the Noble Homer Ferringtonsemisubmersible while the unit was not
operating, pursuant to its long-term contract. Operating Costs and Expenses.Domestic contract drilling services expenses decreased
$37,790,000 due to the fewer operating days on our domestic jackup rigs, while lower insurance
costs, due to no hull and machinery claims incurred during 2003, offset additional operating
expenses attributable to the activation of the Noble Lorris Bouzigardand Noble Therald Martin
semisubmersibles. Engineering, consulting and other expenses increased $1,782,000 due to
additional operating expenses related to our interests in deepwater oil and gas properties.
Depreciation expense decreased $4,301,000 due to the mobilization of seven rigs from the U.S. Gulf
of Mexico to Mexico beginning in September 2002, partially offset by the activation of the Noble
Lorris Bouzigardand Noble Therald Martinsemisubmersibles in March 2003 and November 2003,
respectively, following each units upgrade. The mobilization of jackup rigs out of the U.S. Gulf
of Mexico reduced domestic depreciation expense by approximately $8,000,000, whereas the
activation of the two semisubmersibles increased depreciation expense by approximately $4,000,000.
See the discussion below under Other Items regarding selling, general and administrative
expenses. 28




---



##### Table of Contents



Engineering & Consulting Services The following table sets forth the operating revenues and the operating costs and expenses
for our engineering and consulting services segment for 2003 and 2002: Operating CostsOperating Revenues
    
    
    and Expenses2003
    
    
    2002
    
    
    2003
    
    
    2002(In thousands)Contract drilling services
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Reimbursables (1)
    
    
    13,887
    
    
    
    
    
    
    
    13,606
    
    
    
    Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Engineering, consulting and other
    
    
    9,658
    
    
    
    14,569
    
    
    
    21,270
    
    
    
    20,731Depreciation
    
    
    N/A
    
    
    
    N/A
    
    
    
    610
    
    
    
    380Selling, general and administrative
    
    
    N/A
    
    
    
    N/A
    
    
    
    1,235
    
    
    
    742Total
    
    $
    23,545
    
    
    $
    14,569
    
    
    $
    36,721
    
    
    $
    21,853
   (1)
    
    We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as operating expenses. Changes in the amount of these reimbursables do
not have a material effect on our financial position, results of operations or cash flows. Operating Revenues.Excluding reimbursables, operating revenues for our engineering and
consulting services segment decreased $4,911,000 due to fewer joint industry research projects
undertaken by our Noble Drilling Technology Division, partially offset by additional project
management engagements. Operating Costs and Expenses.Excluding reimbursables, operating costs and expenses for our
engineering and consulting services segment increased $1,262,000 due to additional costs related
to the testing and development of our Well DirectorTM automatic rotary steerable
drilling system, additional project management engagements and higher depreciation and
administrative expenses. These increases were partially offset by fewer joint industry research
projects undertaken and reduced costs on certain drilling optimization software projects. Other The following table sets forth the operating revenues and the operating costs and expenses
for our other services for 2003 and 2002: Operating CostsOperating Revenues
    
    
    and Expenses2003
    
    
    2002
    
    
    2003
    
    
    2002(In thousands)Contract drilling services
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Reimbursables (1)
    
    
    4,743
    
    
    
    567
    
    
    
    4,561
    
    
    
    464Labor contract drilling services
    
    
    28,492
    
    
    
    26,416
    
    
    
    22,642
    
    
    
    20,951Engineering, consulting and other
    
    
    4,901
    
    
    
    6,985
    
    
    
    4,581
    
    
    
    6,623Depreciation
    
    
    N/A
    
    
    
    N/A
    
    
    
    3,460
    
    
    
    3,197Selling, general and administrative
    
    
    N/A
    
    
    
    N/A
    
    
    
    1,033
    
    
    
    1,100Total
    
    $
    38,136
    
    
    $
    33,968
    
    
    $
    36,277
    
    
    $
    32,335
   (1)
    
    We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as operating expenses. Changes in the amount of these reimbursables do
not have a material effect on our financial position, results of operations or cash flows. Operating Revenues.Labor contract drilling services revenues increased $2,076,000 as a
result of foreign exchange fluctuation due in large part to our operations in Canada on the
Hibernia project. We are paid for that 29




---



##### Table of Contents



work in Canadian dollars, and the Canadian dollar was stronger in 2003 as compared to the U.S.
dollar. In addition, contractual provisions covering the Hibernia project allowed for increases in
the labor, maintenance and administrative portions of the dayrate on the Hibernia project during
2003. These increases were partially offset by lower utilization on two of our North Sea labor
contracts. The lower engineering, consulting and other revenues of $2,084,000 were attributable to
reduced activity on an engineering services engagement in the North Sea. Operating Costs and Expenses.Excluding reimbursables, operating costs and expenses for other
services decreased $155,000 as higher labor contract drilling services expenses were mostly offset
by lower engineering, consulting and other expenses. The higher labor contract drilling services
expenses of $1,691,000 were due to the stronger Canadian dollar and higher labor, maintenance and
administrative costs related to our Hibernia project in Canada, partially offset by lower
utilization on two of our North Sea labor contracts. The lower engineering, consulting and other
expenses of $2,042,000 were attributable to reduced activity on an engineering services engagement
in the North Sea. Other Items Selling, General and Administrative Expenses.Selling, general and administrative expenses
decreased $305,000 due to nonrecurring professional fees and filing fees of approximately
$3,500,000 incurred during the first half of 2002 related to our corporate restructuring. This
decrease was mostly offset by unrealized gains in 2002 on the assets in the Rabbi Trust for the
Noble Drilling Corporation 401(k) Savings Restoration Plan, which increased the related liability
for the plan in 2003, and higher pension expense in 2003 due to a lower discount rate and assumed
long-term rate of return on plan assets for 2003. Gain on Sale of Property and Equipment.Gain on sale of property and equipment decreased by
$2,436,000 due to a gain in 2002 of $5,908,000 on the sale of our interest in one of our deepwater
oil and gas properties to Pioneer Natural Resources USA, Inc. for $6,200,000 in cash and the
assumption of liabilities related to our share of drilling and development costs on this property.
In 2003, we sold our interest in another deepwater oil and gas property to ENI Petroleum for
$5,200,000 in cash. We realized a gain of $3,472,000 upon the sale of our interest in this
property. Interest Expense.Interest expense decreased $2,331,000 due to the continued retirement of
higher interest rate debt in 2003. We made payments of long-term debt totaling $80,580,000 in
2003. Other, net.Other, net increased $3,747,000 as 2002 included a realized loss of $9,758,000
on an investment in marketable equity securities resulting from a decline in value considered by
management to be other than temporary. The 2002 loss was partially offset by additional interest
income earned on our cash and marketable securities and equity in income of joint ventures in 2002
as compared to 2003. In 2003, interest income on our cash and marketable securities decreased
$2,007,000 due to a lower average balance of these investments and a 30 percent decrease in their
average yield. Income Tax Provision.Income tax provision decreased $13,254,000 due to lower pre-tax
earnings and a lower effective tax rate. The effective tax rate was 11 percent in 2003 compared to
14 percent in 2002. The lower effective tax rate in 2003 was a result of our corporate
restructuring in April 2002 and a higher percentage of our pretax earnings being derived from our
international operations, which generally have lower effective tax rates than our domestic
operations. 
 LIQUIDITY AND CAPITAL RESOURCES Overview Our principal capital resource in 2004 was net cash provided by operating activities of
$332,221,000, which compared to $365,308,000 and $445,364,000 in 2003 and 2002, respectively. At
December 31, 2004, we had cash and cash equivalents of $58,790,000, marketable debt securities
totaling $132,788,000, and approximately $184,279,000 of funds available under our bank credit
facility. We had working capital, including cash, of $211,117,000 and $177,936,000 at December 31,
2004 and 2003, respectively. Total debt as a percentage of total debt plus shareholders equity
was 18 percent at December 31, 2004 and 21 percent at December 31, 2003. 30




---



##### Table of Contents



During 2004, we repurchased 1,087,000 of our ordinary shares at an average price of $36.54 per
ordinary share for a total cost of $39,714,000. We did not repurchase any of our ordinary shares
during 2003. During 2002, we repurchased 1,055,000 of our ordinary shares at an average price of
$32.20 per ordinary share for a total cost of $33,966,000. Additional repurchases, if any, may be
made on the open market or in private transactions at prices determined by us. We did not sell any put options covering our ordinary shares during 2004 or 2003. During
2002, we sold put options covering an aggregate of 1,300,000 of our ordinary shares in private
transactions at an average price paid to us of $2.81 per option. Of the 1,300,000 options sold
during 2002, 300,000 expired unexercised and 400,000 were exercised during 2002, which resulted in
600,000 options outstanding at December 31, 2002. All of these options expired unexercised in the
first quarter of 2003. At December 31, 2004 and 2003, we had no purchase requirements with regard
to any put options previously sold by us. These share repurchases and sales of put options were effected pursuant to the share
repurchase program which our board of directors authorized and adopted and which we announced on
January 31, 2002. The program authorization covers an aggregate of 15,000,000 ordinary shares. As
of March 3, 2005, 9,162,000 shares remained available under this authorization. In 2004, we made total fundings of $1,389,000 to our domestic and international pension
plans. We made total fundings of $22,155,000 to our domestic and international pension plans in
2003, including a discretionary funding of $17,100,000. This discretionary funding did not have a
material impact on our 2003 selling, general and administrative expenses, but it reduced our
unfunded pension liability. During 2002, we made fundings totaling $5,327,000 to our pension
plans. We expect fundings in 2005 to approximate $1,500,000. Capital Expenditures Capital expenditures totaled $261,041,000 and $307,134,000 for 2004 and 2003, respectively.
Capital expenditures for 2004 included the acquisition of the Noble Mark Burns(formerly Okhi),a
Levingston 111-S designed independent leg jackup unit, for $29,500,000, and the exercise prices of
options to purchase the Noble Cees van Diemen(formerly Maersk Viking)and the Noble David Tinsley
(formerly Maersk Valiant)premium jackup rigs for $32,900,000 and $28,400,000, respectively.
Capital expenditures during 2003 included capital upgrades to certain semisubmersibles of
$108,100,000, the exercise prices of options to purchase the Noble Gene House(formerly Trident
19) and Noble Charlie Yester(formerly Trident 18) jackup rigs for $25,200,000 and $32,900,000,
respectively, and the acquisition of options for $28,200,000 to purchase the Noble Cees van Diemen
and Noble David Tinsley. In addition, deferred repair and maintenance expenditures totaled
$72,948,000 and $36,984,000 for 2004 and 2003, respectively. We expect that our capital
expenditures and deferred repair and maintenance expenditures for 2005 will aggregate
approximately $300,000,000 and $85,000,000, respectively, which includes approximately
$100,000,000 for 2005 for the upgrade of the Noble Clyde Boudreauxsemisubmersible in preparation
for its commitment for a long-term contract with Shell Exploration & Production Company estimated
to begin in the third quarter of 2006. We estimate our capital expenditures for 2006 to complete
the upgrade of the Noble Clyde Boudreauxto approximate $50,000,000. We had no joint venture
fundings in 2004 and anticipate none in 2005. For more information on acquisitions, see Note 3 of
our accompanying consolidated financial statements. For information on deferred repair and
maintenance expenditures and joint venture fundings, see Notes 1 and 6 of our accompanying
consolidated financial statements. The Noble Mark Burnswas recently mobilized from China to the Middle East, where additional
upgrade work will include leg extension to 300 feet water depth capability, a 65 foot cantilever,
a third mud pump, and quarters expansion for 160 personnel. We estimate the costs of this upgrade will approximate
$30,000,000. In connection with several projects, we have entered into agreements with various vendors to
purchase or construct property and equipment that generally have long lead times for delivery. Any
equipment purchased for a project on which we do not proceed would be used, where applicable, as
capital spares for other units in our fleet. As of December 31, 2004, we had approximately
$32,000,000 of outstanding purchase commitments related to these projects, which are included in
the projected 2005 capital expenditure and deferred repair and maintenance amounts above. 31




---



##### Table of Contents



Certain projects currently under consideration could require, if they materialize, capital
expenditures or other cash requirements not included in the 2005 budget. In addition, we will
continue to evaluate acquisitions of drilling units from time to time. Factors that could cause
actual project capital expenditures to materially exceed the planned capital expenditures include
delays and cost overruns in shipyards, shortages of equipment, latent damage or deterioration to
hull, equipment and machinery in excess of engineering estimates and assumptions, and changes in
design criteria or specifications during repair or construction. Credit Facilities and Long-Term Debt Noble Drilling has in place a $300,000,000 bank credit agreement (the Credit Agreement),
which extends through November 30, 2009. In November 2004, we amended the Credit Agreement to
increase the total commitment to $300,000,000 from $200,000,000 and extend the maturity date to
November 30, 2009 from May 30, 2006. In connection with our corporate restructuring in 2002, Noble
Corporation (Noble) and its wholly-owned subsidiary, Noble Holding (U.S.) Corporation, have
unconditionally guaranteed the performance of Noble Drilling under the Credit Agreement. As of
December 31, 2004, we had outstanding borrowings and outstanding letters of credit of $100,000,000
and $15,721,000, respectively, under the Credit Agreement, with $184,279,000 remaining available
thereunder. Additionally, as of December 31, 2004, we had other letters of credit and third-party
guarantees of $35,916,000 and performance and customs bonds totaling $46,949,000 supported by
surety bonds. At December 31, 2004, our debt had decreased to $511,649,000, including current maturities of
$8,361,000, due to debt repayments during 2004 of $77,933,000, including the repayment of
$25,000,000 of borrowings on our credit facility. At December 31, 2004 and 2003, we had no
off-balance sheet debt. For additional information on long-term debt, see Note 7 to our
accompanying consolidated financial statements. We believe that our cash and cash equivalents, marketable securities, net cash provided by operating activities,
available borrowings under lines of credit, and access to other financing sources will be adequate
to meet our anticipated short-term and long-term liquidity requirements, including capital
expenditures and scheduled debt repayments. Summary of Contractual Cash Obligations and Commitments The following table summarizes our contractual cash obligations and commitments at December
31, 2004 (dollar amounts are in thousands): Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    

1 year
    
    
    1-3 years
    
    
    3-5 years
    
    

5 yearsContractual Cash ObligationsLong-Term Debt
    
    $
    511,649
    
    
    $
    8,361
    
    
    $
    18,605
    
    
    $
    282,988
    
    
    $
    201,695Interest Payments
    
    
    288,617
    
    
    
    33,076
    
    
    
    64,273
    
    
    
    51,972
    
    
    
    139,296Operating Leases
    
    
    19,528
    
    
    
    3,525
    
    
    
    5,333
    
    
    
    4,513
    
    
    
    6,157Pension Fundings
    
    
    1,500
    
    
    
    1,500
    
    
    
    
    
    
    
    
    
    
    
    Purchase Commitments
    
    
    32,000
    
    
    
    32,000
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Cash Obligations
    
    $
    853,294
    
    
    $
    78,462
    
    
    $
    88,211
    
    
    $
    339,473
    
    
    $
    347,148
 Amount of Commitment Expiration Per PeriodTotal Amounts
    
    
    Less than
    
    
    
    
    
    
    
    
    
    
    OverCommitted
    
    

1 year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsOther Commercial CommitmentsLetters of Credit
    
    $
    51,637
    
    
    $
    35,117
    
    
    $
    16,520
    
    
    $
    
    
    
    $
    Surety Bonds
    
    
    46,949
    
    
    
    9,020
    
    
    
    37,929
    
    
    
    
    
    
    
    Total Commercial Commitments
    
    $
    98,586
    
    
    $
    44,137
    
    
    $
    54,449
    
    
    $
    
    
    
    $
    
 32




---



##### Table of Contents



CORPORATE RESTRUCTURING On April 30, 2002, Noble became the successor to Noble Drilling as part of the internal
corporate restructuring of Noble Drilling and its subsidiaries approved by stockholders of Noble
Drilling. The restructuring was accomplished through the merger of an indirect, wholly-owned
subsidiary of Noble Drilling into Noble Drilling. Noble Drilling was the surviving entity in the
merger and is now an indirect, wholly-owned subsidiary of Noble. In addition, as a result of the
merger, all of the outstanding shares of common stock (and the related preferred stock purchase
rights) of Noble Drilling were exchanged for ordinary shares (and related preferred share purchase
rights) of Noble. We accounted for the restructuring as a reorganization of entities under common
control. Consequently, the consolidated amounts of assets, liabilities and shareholders equity
did not change as a result of the restructuring. 
 CRITICAL ACCOUNTING POLICIES Our consolidated financial statements are impacted by the accounting policies used and the
estimates and assumptions made by management during their preparation. Critical accounting
policies and estimates that most significantly impact our consolidated financial statements are
those related to our property and equipment, impairment of long-lived assets, insurance reserves,
revenue recognition and income taxes. Property and Equipment Property and equipment is stated at cost, reduced by provisions to recognize economic
impairment in value whenever events or changes in circumstances indicate an assets carrying value
may not be recoverable. Major replacements and improvements are capitalized. When assets are
sold, retired or otherwise disposed of, the cost and related accumulated depreciation, if
determinable, are eliminated from the accounts and the gain or loss is recognized. Repair and
maintenance costs are generally charged to expense as incurred; however, overhauls related to
large-scale maintenance projects are deferred when incurred and amortized into contract drilling
expense over a 36-month period. Drilling equipment
and facilities are depreciated using the straight-line method over the estimated useful lives as of
the in-service date or date of major refurbishment. Estimated useful lives of our drilling
equipment range from three to twenty-five years. Other property and equipment is depreciated using
the straight-line method over useful lives ranging from two to twenty years. Impairment of Long-lived Assets We evaluate the realization of our long-lived assets, including property and equipment and
goodwill, whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. We evaluate goodwill on at least an annual basis. An impairment loss on
our property and equipment exists when estimated undiscounted cash flows expected to result from
the use of the asset and its eventual disposition are less than its carrying amount. Any
impairment loss recognized represents the excess of the assets carrying value as compared to its
estimated fair value. Prior to an impairment loss being recognized, an independent appraisal would
be performed to determine the assets estimated fair value. An impairment loss on our goodwill
exists when the carrying amount of the goodwill exceeds its implied fair value, as determined
pursuant to Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets. No impairment losses were recorded on our property and equipment or goodwill
balances during the years ended December 31, 2004, 2003 and 2002. However, on March 31, 2002, we recognized an impairment loss of $9,758,000 on an investment in
equity securities resulting from a decline in value considered by management to be other than
temporary. There were no other impairment losses during the years ended December 31, 2004, 2003
and 2002. Insurance Reserves We maintain insurance coverage against certain marine liabilities, including liability for
physical damage to our drilling rigs and personal injury to our drilling crews. Our marine package
policy insures us for physical damage to our drilling rigs up to the fair value of each rig.
During 2004, we retained the first $10,000,000 per occurrence under this policy. Our protection
and indemnity policy insures us for personal injury to our drilling 33




---



##### Table of Contents



crews. Since February 2004, our protection and indemnity policy has had a standard deductible
of $1,000,000 per occurrence and we retain $5,000,000 of claims in the aggregate beyond the
standard deductible. From January 2002 through January 2004, we had a standard deductible of
$100,000 per occurrence and we retained $7,250,000 of claims in the aggregate beyond the standard
deductible. We accrue for these deductibles during the year and the insurance retention reserve is
adjusted based on our actual claims losses during the year. Revenue Recognition Revenues generated from our dayrate-basis drilling contracts, labor contracts, and engineering
services and project management engagements are recognized as services are performed. We may
receive lump-sum fees for the mobilization of equipment and personnel. Mobilization fees received
and costs incurred to mobilize an offshore rig from one market to another are recognized over the
term of the related drilling contract. Costs incurred to relocate drilling units to more promising
geographic areas in which a contract has not been secured are expensed as incurred. Lump-sum
payments received from customers relating to specific contracts are deferred and amortized to
income over the term of the drilling contract. We record reimbursements from customers for
out-of-pocket expenses as revenues and the related cost as direct operating expenses. Income Taxes Noble is a Cayman Islands company. The Cayman Islands does not impose corporate income taxes.
Consequently, income taxes have been provided based on the laws and rates in effect in the
countries in which operations are conducted, or in which Noble and/or its subsidiaries are
considered resident for income tax purposes. Applicable U.S. and foreign income and withholding
taxes have not been provided on undistributed earnings of Nobles subsidiaries. We do not intend
to repatriate such undistributed earnings for the foreseeable future except for distributions upon
which incremental income and withholding taxes would not be material. In certain circumstances, we
expect that, due to changing demands of the offshore drilling markets and the ability to redeploy
our offshore drilling units, certain of such units will not reside in a location long enough to
give rise to future tax consequences. As a result, no deferred tax liability has been recognized
in these circumstances. Should our expectations change regarding the length of time an offshore
drilling unit will be used in a given location, we will adjust deferred taxes accordingly. Our
recognition of a deferred tax liability in these circumstances would not have had a material effect
on our results of operations for 2004, 2003 or 2002, and would have had no effect on our liquidity
or our cash flows. For additional information on our accounting policies, see Note 1 to our accompanying
consolidated financial statements. 
 ACCOUNTING PRONOUNCEMENTS In December 2004, the FASB issued SFAS 123 (revised 2004), Share-Based Payment(SFAS 123
(revised 2004)). SFAS 123 (revised 2004) is a revision to SFAS No. 123, Accounting for Stock-Based
Compensation(SFAS 123), and supercedes APB Opinion No. 25, Accounting for Stock Issued to
Employees(APB 25).SFAS 123 (revised 2004) establishes standards for accounting for exchanges of
an entitys equity instruments for goods or services, focusing primarily on transactions in which
an entity obtains employee services in share-based payment transactions. The statement requires
that entities measure the cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award and that the cost is recognized over
the period in which the employee services are performed, which is usually the equity instruments
vesting period. SFAS 123 (revised 2004) eliminates the alternative allowed under SFAS 123 in which
equity instruments could be measured at their intrinsic value, as prescribed by APB Opinion 25,
with only pro forma disclosure in the entitys notes to its financial statements of the impact on
net income and earnings per share had the equity instruments been measured at fair value. SFAS 123
(revised 2004) is effective for public entities that do not file as small business issuers as of
the beginning of the first interim or annual reporting period that begins after June 15, 2005. The
impact that the adoption of SFAS 123 (revised 2004) will have on our consolidated results of
operations will be determined primarily by the number of stock options issued to employees in
future periods. Based on recent stock option issuances, we estimate that the adoption of this
statement will reduce annual net income by approximately $3,000,000 to $5,000,000, or $.02 to $.04
per diluted share. We do not expect the adoption of SFAS 123 (revised 2004) to have a material
impact on our consolidated cash flows or financial position. 34




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Market risk is the potential for loss due to a change in the value of a financial instrument
as a result of fluctuations in interest rates, currency exchange rates or equity prices. We own
investments in both marketable equity and debt securities. To mitigate the risk of losses, these
investments are marked to market and are monitored by management to assure compliance with policies
established by the Company. Under the Noble Drilling Corporation 401(k) Savings Restoration Plan,
certain highly compensated employees may elect to defer compensation into the plan and invest among
several alternatives, primarily mutual funds. Any change in the fair value of these investments
would result in a comparable change in the deferred compensation plan obligation. We are subject to market risk exposure related to changes in interest rates on our Credit
Agreement. Interest on our Credit Agreement is at an agreed upon percentage point spread from
LIBOR. At December 31, 2004, there were $100,000,000 of outstanding borrowings under our Credit
Agreement. An immediate change of one percent in the interest rate would cause a $1,000,000 change
in interest expense on an annual basis. Although we conduct business internationally, a substantial majority of the value of our
foreign transactions are denominated in U.S. Dollars. With minor exceptions, we structure our
drilling contracts in U.S. Dollars to mitigate our exposure to fluctuations in foreign currencies.
Other than trade accounts receivable and trade accounts payable, which mostly offset each other, we
do not currently have any significant assets, liability or financial instruments that are sensitive
to foreign currency exchange rates. We periodically enter into derivative instruments to manage our exposure to fluctuations in
interest rates and foreign currency exchange rates, and we may conduct hedging activities in future
periods to mitigate such exposure. Our North Sea operations have a significant amount of their
cash operating expenses payable in either the Euro or British Pound. To reduce our exposure to
fluctuations in these currencies during 2004, we entered into forward contracts in March and April
2004 to purchase 1,400,000 Euros and 1,200,000 British Pounds, respectively, per month for the
months April 2004 through December 2004. These forward contracts represented approximately 50
percent of our forecasted Euro and British Pound requirements for 2004 after the respective dates
on which we entered into the forward contracts. These forward contracts were accounted for as cash
flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities (an amendment of FASB Statement No. 133),and SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. Because all of these forward contracts expired
during 2004, there is no cumulative net unrealized gain or loss on these contracts included in
Accumulated other comprehensive income in our Consolidated Balance Sheet at December 31, 2004.
We did not recognize a gain or loss due to hedge ineffectiveness in our Consolidated Statements of
Income during 2004 related to these forward contracts. We did not utilize any derivative financial
instruments or undertake any hedging activities in 2003 or 2002. 35




---



##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following financial statements are filed in this Item 8: Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets at December 31, 2004 and 2003Consolidated Statements of Income for each of the three years
in the period ended December 31, 2004Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 2004Consolidated Statements of Shareholders Equity for each of the
three years in the period ended December 31, 2004Consolidated Statements of Comprehensive Income for each of the
three years in the period ended December 31, 2004Notes to Consolidated Financial Statements
 36




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and
Shareholders of Noble Corporation: We have completed an integrated audit of Noble Corporations 2004 consolidated financial statements
and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003
and 2002 consolidated financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our opinions, based on our audits, are presented
below. Consolidated financial statements In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of income, of cash flows, of shareholders equity and of comprehensive income present
fairly, in all material respects, the financial position of Noble Corporation and its subsidiaries
(the Company) at December 31, 2004 and 2003, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2004 in conformity with
accounting principles generally accepted in the United States of America. These financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit of
financial statements includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. Internal control over financial reporting Also, in our opinion, managements assessment, included in the accompanying Managements Annual
Report on Internal Control Over Financial Reporting under Item 9A, that the Company maintained
effective internal control over financial reporting as of December 31, 2004 based on criteria
established in Internal Control - Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects,
based on those criteria. Furthermore, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2004, based on
criteria established in Internal Control - Integrated Frameworkissued by the COSO. The
Companys management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express opinions on managements assessment and on the
effectiveness of the Companys internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. An audit of internal
control over financial reporting includes obtaining an understanding of internal control over
financial reporting, evaluating managements assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other procedures as we consider
necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinions. A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance 37




---



##### Table of Contents



with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. PricewaterhouseCoopers LLP Houston, Texas
March 8, 2005 38




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands) December 31,2004
    
    
    2003ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    58,790
    
    
    $
    62,567Investments in marketable securities
    
    
    132,788
    
    
    
    175,276Accounts receivable
    
    
    205,023
    
    
    
    149,235Inventories
    
    
    4,013
    
    
    
    4,086Prepaid expenses
    
    
    12,454
    
    
    
    11,809Other current assets
    
    
    12,215
    
    
    
    18,986Total current assets
    
    
    425,283
    
    
    
    421,959PROPERTY AND EQUIPMENTDrilling equipment and facilities
    
    
    3,739,338
    
    
    
    3,454,163Other
    
    
    65,550
    
    
    
    64,5913,804,888
    
    
    
    3,518,754Accumulated depreciation
    
    
    (1,061,268
    )
    
    
    (892,888
    )2,743,620
    
    
    
    2,625,866INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
    
    
    18,804
    
    
    
    19,868OTHER ASSETS
    
    
    120,266
    
    
    
    121,940$
    3,307,973
    
    
    $
    3,189,633LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESCurrent maturities of long-term debt
    
    $
    8,361
    
    
    $
    47,666Accounts payable
    
    
    83,012
    
    
    
    87,178Accrued payroll and related costs
    
    
    60,911
    
    
    
    48,511Taxes payable
    
    
    22,883
    
    
    
    31,734Interest payable
    
    
    8,981
    
    
    
    9,384Other current liabilities
    
    
    30,018
    
    
    
    19,550Total current liabilities
    
    
    214,166
    
    
    
    244,023LONG-TERM DEBT
    
    
    503,288
    
    
    
    541,907DEFERRED INCOME TAXES
    
    
    206,506
    
    
    
    213,357OTHER LIABILITIES
    
    
    8,110
    
    
    
    18,201COMMITMENTS AND CONTINGENCIES (Note 13)
    
    
    
    
    
    
    MINORITY INTEREST
    
    
    (8,531
    )
    
    
    (6,280
    )923,539
    
    
    
    1,011,208SHAREHOLDERS EQUITYOrdinary Shares-par value $0.10 per share;
400,000 shares authorized and 134,407 issued
and outstanding in 2004; 400,000 shares
authorized and 133,894 issued and outstanding
in 2003
    
    
    13,441
    
    
    
    13,389Capital in excess of par value
    
    
    926,652
    
    
    
    915,240Retained earnings
    
    
    1,452,974
    
    
    
    1,306,888Treasury stock, at cost
    
    
    
    
    
    
    (49,121
    )Restricted stock (unearned compensation)
    
    
    (11,171
    )
    
    
    (7,981
    )Accumulated other comprehensive income
    
    
    2,538
    
    
    
    102,384,434
    
    
    
    2,178,425$
    3,307,973
    
    
    $
    3,189,633
 See accompanying notes to the consolidated financial statements. 39




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts) Year Ended December 31,2004
    
    
    2003
    
    
    2002OPERATING REVENUESContract drilling services
    
    $
    937,414
    
    
    $
    889,603
    
    
    $
    910,419Reimbursables
    
    
    50,234
    
    
    
    44,214
    
    
    
    26,183Labor contract drilling services
    
    
    51,327
    
    
    
    28,492
    
    
    
    26,416Engineering, consulting and other
    
    
    27,256
    
    
    
    25,071
    
    
    
    27,2301,066,231
    
    
    
    987,380
    
    
    
    990,248OPERATING COSTS AND EXPENSESContract drilling services
    
    
    562,508
    
    
    
    505,038
    
    
    
    488,629Reimbursables
    
    
    44,610
    
    
    
    39,024
    
    
    
    23,058Labor contract drilling services
    
    
    42,669
    
    
    
    22,642
    
    
    
    20,951Engineering, consulting and other
    
    
    27,339
    
    
    
    28,249
    
    
    
    27,868Depreciation
    
    
    168,219
    
    
    
    148,127
    
    
    
    125,154Selling, general and administrative
    
    
    33,714
    
    
    
    26,634
    
    
    
    26,939Gain on sale of property and equipment
    
    
    
    
    
    
    (3,472
    )
    
    
    (5,908
    )879,059
    
    
    
    766,242
    
    
    
    706,691OPERATING INCOME
    
    
    187,172
    
    
    
    221,138
    
    
    
    283,557OTHER INCOME (EXPENSE)Interest expense
    
    
    (34,389
    )
    
    
    (40,291
    )
    
    
    (42,622
    )Other, net
    
    
    9,034
    
    
    
    6,137
    
    
    
    2,390INCOME BEFORE INCOME TAXES
    
    
    161,817
    
    
    
    186,984
    
    
    
    243,325INCOME TAX PROVISION
    
    
    (15,731
    )
    
    
    (20,568
    )
    
    
    (33,822
    )NET INCOME
    
    $
    146,086
    
    
    $
    166,416
    
    
    $
    209,503NET INCOME PER SHARE:Basic
    
    $
    1.10
    
    
    $
    1.26
    
    
    $
    1.58Diluted
    
    $
    1.09
    
    
    $
    1.25
    
    
    $
    1.57
 See accompanying notes to the consolidated financial statements. 40




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) Year Ended December 31,2004
    
    
    2003
    
    
    2002CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    146,086
    
    
    $
    166,416
    
    
    $
    209,503Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation, and amortization of deferred repairs and maintenance
    
    
    209,123
    
    
    
    182,590
    
    
    
    154,469Deferred income tax provision
    
    
    5,022
    
    
    
    4,376
    
    
    
    16,870Loss on sales of marketable securities
    
    
    129
    
    
    
    382
    
    
    
    168Equity in income of joint venture
    
    
    (3,931
    )
    
    
    (2,307
    )
    
    
    (1,780
    )Distributions received from joint venture
    
    
    2,700
    
    
    
    
    
    
    
    Compensation expense from stock-based plans
    
    
    5,753
    
    
    
    4,627
    
    
    
    4,878Non-cash impairment of investment
    
    
    
    
    
    
    
    
    
    
    9,758Gain on sale of interest in deepwater oil and gas properties
    
    
    
    
    
    
    (3,472
    )
    
    
    (5,908
    )Loss on debt repurchases
    
    
    
    
    
    
    
    
    
    
    400Dissolution of rabbi trust
    
    
    11,945
    
    
    
    
    
    
    
    Discretionary pension funding
    
    
    
    
    
    
    (17,100
    )
    
    
    Other
    
    
    (4,028
    )
    
    
    1,518
    
    
    
    3,523Other changes in current assets and liabilities, net of acquired
working capital:Accounts receivable
    
    
    (55,788
    )
    
    
    15,378
    
    
    
    4,395Other current assets
    
    
    1,187
    
    
    
    (12,081
    )
    
    
    4,942Accounts payable
    
    
    (4,164
    )
    
    
    22,400
    
    
    
    14,509Other current liabilities
    
    
    18,187
    
    
    
    2,581
    
    
    
    29,637Net cash provided by operating activities
    
    
    332,221
    
    
    
    365,308
    
    
    
    445,364CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions and related capital upgrades
    
    
    (110,548
    )
    
    
    (194,400
    )
    
    
    (356,854
    )Other capital expenditures
    
    
    (150,493
    )
    
    
    (112,734
    )
    
    
    (121,500
    )Deferred repair and maintenance expenditures
    
    
    (72,948
    )
    
    
    (36,984
    )
    
    
    (42,771
    )Proceeds from sales of property and equipment
    
    
    2,135
    
    
    
    1,606
    
    
    
    1,879Proceeds from sale of interest in deepwater oil and gas properties
    
    
    
    
    
    
    5,200
    
    
    
    6,200Repayments from joint venture
    
    
    2,295
    
    
    
    4,977
    
    
    
    4,160Investment in marketable securities
    
    
    (233,216
    )
    
    
    (210,020
    )
    
    
    (115,082
    )Proceeds from sales of marketable securities
    
    
    265,352
    
    
    
    239,285
    
    
    
    83,219Net cash used for investing activities
    
    
    (297,423
    )
    
    
    (303,070
    )
    
    
    (540,749
    )CASH FLOWS FROM FINANCING ACTIVITIES(Payments of) proceeds from borrowing on credit facility
    
    
    (25,000
    )
    
    
    
    
    
    
    125,000Payments of other long-term debt
    
    
    (52,933
    )
    
    
    (80,580
    )
    
    
    (60,772
    )Proceeds from issuance of ordinary shares
    
    
    79,072
    
    
    
    9,432
    
    
    
    15,367Repurchase of ordinary shares
    
    
    (39,714
    )
    
    
    
    
    
    
    (33,966
    )Proceeds from sales of put options on ordinary shares
    
    
    
    
    
    
    
    
    
    
    3,658Decrease in restricted cash
    
    
    
    
    
    
    8,668
    
    
    
    698Net cash (used for) provided by financing activities
    
    
    (38,575
    )
    
    
    (62,480
    )
    
    
    49,985NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (3,777
    )
    
    
    (242
    )
    
    
    (45,400
    )CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    
    
    62,567
    
    
    
    62,809
    
    
    
    108,209CASH AND CASH EQUIVALENTS, END OF YEAR
    
    $
    58,790
    
    
    $
    62,567
    
    
    $
    62,809
 See accompanying notes to the consolidated financial statements. 41




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In thousands) 2004
    
    
    2003
    
    
    2002Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    AmountORDINARY SHARESBalance at beginning of year
    
    
    133,894
    
    
    $
    13,389
    
    
    
    133,534
    
    
    $
    13,353
    
    
    
    138,175
    
    
    $
    13,818Exercise of stock options
    
    
    3,048
    
    
    
    305
    
    
    
    413
    
    
    
    41
    
    
    
    775
    
    
    
    77Treasury shares cancelled upon restructuring
    
    
    (1,625
    )
    
    
    (162
    )
    
    
    
    
    
    
    
    
    
    
    (4,298
    )
    
    
    (430
    )Repurchase ordinary shares
    
    
    (1,087
    )
    
    
    (109
    )
    
    
    
    
    
    
    
    
    
    
    (1,055
    )
    
    
    (106
    )Issuance of restricted shares
    
    
    238
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    (61
    )
    
    
    (6
    )
    
    
    (53
    )
    
    
    (5
    )
    
    
    (63
    )
    
    
    (6
    )Balance at end of year
    
    
    134,407
    
    
    
    13,441
    
    
    
    133,894
    
    
    
    13,389
    
    
    
    133,534
    
    
    
    13,353CAPITAL IN EXCESS OF PAR VALUEBalance at beginning of year
    
    
    
    
    
    
    915,240
    
    
    
    
    
    
    
    905,865
    
    
    
    
    
    
    
    1,041,017Exercise of stock options
    
    
    
    
    
    
    78,767
    
    
    
    
    
    
    
    9,391
    
    
    
    
    
    
    
    15,290Tax benefit of stock options
    
    
    
    
    
    
    11,840
    
    
    
    
    
    
    
    820
    
    
    
    
    
    
    
    4,664Treasury shares cancelled upon restructuring
    
    
    
    
    
    
    (46,832
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (122,729
    )Repurchase ordinary shares
    
    
    
    
    
    
    (39,605
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,860
    )Issuance of restricted shares
    
    
    
    
    
    
    8,919
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted shares surrendered for
employee taxes
    
    
    
    
    
    
    (2,120
    )
    
    
    
    
    
    
    (1,430
    )
    
    
    
    
    
    
    (1,369
    )Sales of put options on ordinary shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,658Other
    
    
    
    
    
    
    443
    
    
    
    
    
    
    
    594
    
    
    
    
    
    
    
    (806
    )Balance at end of year
    
    
    
    
    
    
    926,652
    
    
    
    
    
    
    
    915,240
    
    
    
    
    
    
    
    905,865RETAINED EARNINGSBalance at beginning of year
    
    
    
    
    
    
    1,306,888
    
    
    
    
    
    
    
    1,140,472
    
    
    
    
    
    
    
    930,969Net income
    
    
    
    
    
    
    146,086
    
    
    
    
    
    
    
    166,416
    
    
    
    
    
    
    
    209,503Balance at end of year
    
    
    
    
    
    
    1,452,974
    
    
    
    
    
    
    
    1,306,888
    
    
    
    
    
    
    
    1,140,472TREASURY STOCKBalance at beginning of year
    
    
    (1,700
    )
    
    
    (49,121
    )
    
    
    (1,791
    )
    
    
    (51,317
    )
    
    
    (6,160
    )
    
    
    (177,408
    )Treasury shares cancelled upon restructuring
    
    
    1,625
    
    
    
    46,994
    
    
    
    
    
    
    
    
    
    
    
    4,298
    
    
    
    123,158Contribution to employee benefit plans
    
    
    72
    
    
    
    2,037
    
    
    
    79
    
    
    
    2,076
    
    
    
    102
    
    
    
    3,579Restricted stock plan shares returned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    (219
    )Other
    
    
    3
    
    
    
    90
    
    
    
    12
    
    
    
    120
    
    
    
    (16
    )
    
    
    (427
    )Balance at end of year
    
    
    
    
    
    
    
    
    
    
    (1,700
    )
    
    
    (49,121
    )
    
    
    (1,791
    )
    
    
    (51,317
    )RESTRICTED STOCK (UNEARNED COMPENSATION)Balance at beginning of year
    
    
    
    
    

    
    (7,981
    )
    
    
    
    
    

    
    (12,871
    )
    
    
    
    
    

    
    (18,340
    )Issuance of restricted shares
    
    
    
    
    
    
    (8,943
    )
    
    
    
    
    
    

    
    
    
    
    
    
    

    
    Compensation expense recognized
    
    
    
    
    
    

    5,753
    
    
    
    
    
    

    
    4,627
    
    
    
    
    
    
    

    4,878Other
    
    
    
    
    
    

    
    
    
    
    
    
    
    

    263
    
    
    
    
    
    
    
    591Balance at end of year
    
    
    
    
    

    
    (11,171
    )
    
    
    
    
    
    
    (7,981
    )
    
    
    
    
    
    
    (12,871
    )ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)Balance at beginning of year
    
    
    
    
    
    


    10
    
    
    
    
    
    
    
    (6,292
    )
    
    
    
    
    
    
    (11,737
    )Other comprehensive income
    
    

    
    
    
    
    2,528
    
    
    
    
    
    
    
    6,302
    
    
    
    
    
    
    
    5,445Balance at end of year
    
    

    
    
    
    
    2,538
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    (6,292
    )TOTAL SHAREHOLDERS EQUITY
    
    
    134,407
    
    
    $
    2,384,434
    
    
    
    132,194
    
    
    $
    2,178,425
    
    
    
    131,743
    
    
    $
    1,989,210
 See accompanying notes to the consolidated financial statements. 42




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands) Year EndedDecember 31, 2004NET INCOME
    
    $
    146,086OTHER COMPREHENSIVE INCOME, NET OF TAX:Foreign currency translation adjustments
    
    
    3,079Unrealized holding loss on securities arising during period
    
    
    (490
    )Minimum pension liability adjustment (net of tax benefit of $33)
    
    
    (61
    )Other comprehensive income
    
    
    2,528COMPREHENSIVE INCOME
    
    $
    148,614
 Year EndedDecember 31, 2003NET INCOME
    
    $
    166,416OTHER COMPREHENSIVE INCOME, NET OF TAX:Foreign currency translation adjustments
    
    
    192Unrealized holding loss on securities arising during period
    
    
    (296
    )Minimum pension liability adjustment (net of tax provision of $3,450)
    
    
    6,406Other comprehensive income
    
    
    6,302COMPREHENSIVE INCOME
    
    $
    172,718
 Year EndedDecember 31, 2002NET INCOME
    
    $
    209,503OTHER COMPREHENSIVE LOSS, NET OF TAX:Foreign currency translation adjustments
    
    
    1,223Unrealized holding loss on securities arising during period
    
    
    (707
    )Minimum pension liability adjustment (net of tax benefit of $2,600)
    
    
    (4,829
    )Reclassification adjustment for impairment charge on
investment included in net income
    
    
    9,758Other comprehensive income
    
    
    5,445COMPREHENSIVE INCOME
    
    $
    214,948
 See accompanying notes to the consolidated financial statements. 43




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization and Business Noble Corporation (Noble or, together with its consolidated subsidiaries, unless the context
requires otherwise, the Company, we, our and words of similar import) is primarily engaged in
contract drilling services in key markets worldwide. We provide technologically advanced
drilling-related products and services designed to create value for all our customers. We also
provide labor contract drilling services, well site and project management services, and
engineering services. Our operations are conducted in the Middle East, U.S. Gulf of Mexico,
Mexico, the North Sea, Brazil, West Africa, India, the Mediterranean Sea and Canada. Consolidation The consolidated financial statements include the accounts of Noble and its wholly- and
majority-owned subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation. The equity method of accounting is used for investments in affiliates
where we have a significant influence but not a controlling interest. (See Note 6.) In connection with the preparation of the 2004 financial statements, we concluded that it was
appropriate to classify our auction rate securities as marketable debt securities and include such
investments in Investments in marketable securities on our Consolidated Balance Sheets.
Previously, such investments had been classified as cash equivalents and included in Cash and cash
equivalents. Accordingly, we have revised the classification in 2003 to report
$76,900,000 of these securities as Investments in
marketable securities in the Consolidated Balance Sheet at December 31, 2003 and made
corresponding adjustments to the Consolidated Statements of Cash Flows for the years ended December
31, 2003 and 2002 to reflect the beginning of year and end of year balances of cash and cash
equivalents and to reflect the gross purchases and sales of these securities as investing
activities rather than as a component of cash and cash equivalents. For the years ended December
31, 2003 and 2002, net cash provided by (used for) investing activities related to these current
investments of $52,800,000 and $(1,200,000), respectively, was previously included in cash and cash
equivalents in our Consolidated Statements of Cash Flows. This revision in classification does not
affect previously reported net cash provided by operating activities or net cash (used for)
provided by financing activities, or our previously reported Consolidated Statements of Income for
any period. Certain other reclassifications have been made in prior year consolidated financial statements
to conform to the classifications used in the 2004 consolidated financial statements. These
reclassifications have no impact on net income. Foreign Currency Translation We follow a translation policy in accordance with Statement of Financial Accounting Standards
(SFAS) No. 52, Foreign Currency Translation. In international locations where the U.S. Dollar
has been designated as the functional currency (based on an evaluation of such factors as the
markets in which the subsidiary operates, inflation, generation of cash flow, financing activities
and intercompany arrangements), local currency transaction gains and losses are included in net
income. In international locations where the local currency is the functional currency, assets and
liabilities are translated at the rates of exchange on the balance sheet date, while income and
expense items are translated at average rates of exchange. The resulting gains or losses arising
from the translation of accounts from the functional currency to the U.S. Dollar are included in
Accumulated other comprehensive income in the Consolidated Balance Sheets. We did not recognize
any material gains or losses on foreign currency transactions or translations during the years
ended December 31, 2004, 2003 and 2002. We use the Canadian Dollar and British Pound, respectively,
as the functional currency for our labor contract drilling services in Canada and the North Sea. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, demand deposits with banks and all highly
liquid investments with original maturities of three months or less. Our cash, cash equivalents
and short-term investments (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 44




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS are subject to potential credit risk. Our cash management and investment policies restrict
investments to lower risk, highly liquid securities and we perform periodic evaluations of the
relative credit standing of the financial institutions with which we conduct business. In accordance with SFAS No. 95, Statement of Cash Flows, cash flows from our labor contract
drilling services in Canada and the United Kingdom are calculated based on their respective local
functional currencies. As a result, amounts related to assets and liabilities reported on the
Consolidated Statements of Cash Flows will not necessarily agree with changes in the corresponding
balances on the Consolidated Balance Sheets. The effect of exchange rate changes on cash balances
held in foreign currencies was not material in 2004, 2003 or 2002. Investments in Marketable Securities Our investments in marketable debt securities included auction rate securities of $41,400,000
and $76,900,000 at December 31, 2004 and 2003, respectively. These auction rate securities are recorded at
cost, which approximates fair value due to their variable interest rates, which interest rates reset
within a period of less than 60 days. Although these securities have long-term stated contractual maturities, we
have the ability to quickly liquidate these securities. As a result, we classify these securities
as current investments. Because these securities are recorded at cost, which approximates fair
value, we had no realized or unrealized gains or losses related to these securities during the
years ended December 31, 2004, 2003 and 2002. All income related to these current investments was
recorded as interest income. Derivative Instruments and Hedging Activities We periodically enter into derivative instruments to manage our exposure to fluctuations in
interest rates and foreign currency exchange rates. We do not use derivative financial instruments
for trading purposes. We designate and assign the financial instruments as hedges of specific
assets, liabilities or anticipated transactions. Cash flows from hedge transactions are classified
in the Consolidated Statements of Cash Flows under the same category as the cash flows from the
underlying assets, liabilities or anticipated transactions. Our North Sea operations have a significant amount of their cash operating expenses payable in
either the Euro or British Pound. To reduce our exposure to fluctuations in these currencies
during 2004, we entered into forward contracts in March and April 2004 to purchase 1,400,000 Euros
and 1,200,000 British Pounds, respectively, per month for the months April 2004 through December
2004. These forward contracts represented approximately 50 percent of our forecasted Euro and
British Pound requirements for 2004 after the respective dates on which we entered into the forward
contracts. These forward contracts were accounted for as cash flow hedges under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities (an amendment of FASB
Statement No. 133),and SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. Because all of these forward contracts expired during 2004, there is no
cumulative net unrealized gain or loss on these contracts included in Accumulated other
comprehensive income in our Consolidated Balance Sheet at December 31, 2004. We did not recognize
a gain or loss due to hedge ineffectiveness in our Consolidated Statements of Income during 2004
related to these forward contracts. We did not utilize any derivative financial instruments or
undertake any hedging activities in 2003 or 2002. Inventories Inventories consist of spare parts, material and supplies held for consumption and are stated
principally at the lower of average cost or fair value. Property and Equipment Property and equipment is stated at cost, reduced by provisions to recognize economic
impairment in value whenever events or changes in circumstances indicate an assets carrying value
may not be recoverable. At December 31, 2004 and 2003, there was $469,623,000 and $361,663,000,
respectively, of construction in progress. Such amounts are included in Drilling equipment and
facilities in the accompanying Consolidated Balance Sheets. Major replacements and improvements
are capitalized. When assets are sold, retired or otherwise disposed of, the (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 45




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS cost and related accumulated depreciation, if determinable, are eliminated from the accounts
and the gain or loss is recognized. Scheduled maintenance of equipment and overhauls are performed on the basis of number of hours
operated in accordance with our preventative maintenance program. Repair and maintenance costs are
generally charged to expense as incurred; however, overhauls related to large-scale maintenance
projects are deferred when incurred and amortized into contract drilling services expense over a
36-month period. The deferred portion of these large-scale maintenance projects is included in
Other assets in the Consolidated Balance Sheets. Such amounts totaled $88,621,000 and
$56,575,000 at December 31, 2004 and 2003, respectively. Total maintenance and repair expenses for
the years ended December 31, 2004, 2003 and 2002 were $154,018,000, $122,105,000 and $110,788,000,
respectively. Drilling equipment and facilities are depreciated using the straight-line method
over the estimated remaining useful lives as of the in-service date or date of major refurbishment.
Estimated useful lives of our drilling equipment range from three to twenty-five years. Other
property and equipment is depreciated using the straight-line method over useful lives ranging from
two to twenty years. We evaluate the realization of property and equipment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment
loss on our property and equipment exists when estimated undiscounted cash flows expected to result
from the use of the asset and its eventual disposition are less than its carrying amount. Any
impairment loss recognized represents the excess of the assets carrying value as compared to its
estimated fair value. Prior to an impairment loss being recognized, an independent appraisal would
be performed to determine the assets estimated fair value. No material impairment losses were
recorded on our property and equipment balances during the years ended December 31, 2004, 2003 and
2002. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 46




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Goodwill and Other Assets We evaluate the realization of our goodwill on at least an annual basis, and on our remaining
long-lived assets whenever events or changes in circumstances indicate the carrying amount of an
asset may not be recoverable. An impairment loss on our goodwill exists when the carrying amount
of the goodwill exceeds its implied fair value, as determined pursuant to SFAS No. 142, Goodwill
and Other Intangible Assets. Our goodwill balance was $14,638,000 and $13,138,000 at December 31,
2004 and 2003, respectively. All of our goodwill is attributable to our engineering and consulting
services segment. The increase in goodwill during 2004 of $1,500,000 was attributable to an
earn-out payment for certain operating performance milestones achieved by the Well Director
drilling tools, which we acquired in 2002. See Note 3 to our accompanying consolidated financial
statements for additional information. No impairment losses were recorded on our goodwill balances
during the years ended December 31, 2004, 2003 and 2002. On March 31, 2002 we recognized an impairment loss of $9,758,000 on an investment in
marketable securities resulting from a decline in value considered by management to be other than
temporary. There were no other impairment losses during the years ended December 31, 2004, 2003
and 2002. Deferred debt issuance costs, which totaled $2,194,000 and $2,839,000 at December 31, 2004 and
2003, respectively, are being amortized over the life of the debt securities. Amortization related
to debt issuance costs was $645,000, $1,016,000 and $1,664,000 for the years ended December 31,
2004, 2003 and 2002, respectively. Debt issuance costs are amortized using the straight-line
method, which approximates the interest method. The amortization of debt issuance costs is
included in interest expense. Insurance We maintain insurance coverage against certain marine liabilities, including liability for
physical damage to our drilling rigs and personal injury to our drilling crews. Our marine package
policy insures us for physical damage to our drilling rigs up to the fair value of each rig.
During 2004 and 2003, we retained the first $10,000,000 per occurrence under this policy. In 2002,
we retained the first $1,000,000 per occurrence and continued to retain a portion of each loss in
excess of $1,000,000 to a maximum of $10,000,000. Our protection and indemnity policy insures us
for personal injury to our drilling crews. Since February 2004, our protection and indemnity
policy has had a standard deductible of $1,000,000 per occurrence and we retain $5,000,000 of
claims in the aggregate beyond the standard deductible. From January 2002 through January 2004, we
had a standard deductible of $100,000 per occurrence and we retained $7,250,000 of claims in the
aggregate beyond the standard deductible. We accrue for these deductibles during the year and the
insurance retention reserve is adjusted based on our actual claims losses during the year. Prepaid
insurance is amortized over the terms of our insurance policies. Revenue Recognition Revenues generated from our dayrate-basis drilling contracts, labor contracts, technologically
advanced drilling-related products, engineering services and project management engagements are
recognized as services are performed. We may receive lump-sum fees for the mobilization of equipment and personnel. Mobilization
fees received and costs incurred to mobilize an offshore rig from one market to another are
recognized over the term of the related drilling contract. Costs incurred to relocate drilling
units to more promising geographic areas in which a contract has not been secured are expensed as
incurred. Lump-sum payments received from customers relating to specific contracts are deferred
and amortized to income over the term of the drilling contract. We record reimbursements from customers for out-of-pocket expenses as revenues and the
related cost as direct operating expenses. Income Taxes Noble is a Cayman Islands company. The Cayman Islands does not impose corporate income taxes.
Consequently, income taxes have been provided based on the laws and rates in effect in the
countries in which (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 47




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS operations are conducted, or in which Noble and/or its subsidiaries are considered resident
for income tax purposes. Applicable U.S. and foreign income and withholding taxes have not been
provided on undistributed earnings of Nobles subsidiaries. We do not intend to repatriate such
undistributed earnings for the foreseeable future except for distributions upon which incremental
income and withholding taxes would not be material. In certain circumstances, we expect that, due
to changing demands of the offshore drilling markets and the ability to redeploy our offshore
drilling units, certain of such units will not reside in a location long enough to give rise to
future tax consequences. As a result, no deferred tax liability has been recognized in these
circumstances. Should our expectations change regarding the length of time an offshore drilling
unit will be used in a given location, we will adjust deferred taxes accordingly. Our recognition
of a deferred tax liability in these circumstances would not have had a material effect on our
results of operations for 2004, 2003 or 2002, and would have had no effect on our liquidity or our
cash flows. Concentration of Credit Risk The market for our services is the offshore oil and gas industry, and our customers consist
primarily of government-owned oil companies, major integrated oil companies and independent oil and
gas producers. We perform ongoing credit evaluations of our customers and generally do not require
material collateral. We maintain reserves for potential credit losses when necessary. Our results
of operations and financial condition should be considered in light of the fluctuations in demand
experienced by drilling contractors as changes in oil and gas producers expenditures and budgets
occur. These fluctuations can impact our results of operations and financial condition as supply
and demand factors directly affect utilization and dayrates, which are the primary determinants of
our net cash provided by operating activities. In 2004, one customer accounted for $150,017,000 or 14 percent of consolidated operating
revenues, of which all was included in our international contract drilling services segment.
Another customer accounted for $105,405,000 or 10 percent of consolidated operating revenues, of
which all was also included in our international contract drilling services segment. No other
customer accounted for more than 10 percent of consolidated operating revenues in 2004. In 2003,
one customer accounted for $138,254,000 or 14 percent of consolidated operating revenues, of which
all was included in our international contract drilling services segment. Another customer
accounted for $129,473,000 or 13 percent of consolidated operating revenues, of which all was
included in our international contract drilling services segment. No other customer accounted for
more than 10 percent of consolidated operating revenues in 2003. In 2002, one customer accounted
for $149,258,000 or 15 percent of consolidated operating revenues, of which $97,431,000 was
included in our domestic contract drilling services segment, $51,064,000 was included in our
international contract drilling services segment and $763,000 was included in our engineering and
consulting services segment. Another customer accounted for $123,251,000 or 12 percent of
consolidated operating revenues, of which all was included in our international contract drilling
services segment. No other customer accounted for more than 10 percent of consolidated operating
revenues in 2002. Net Income Per Share We compute and present earnings per share in accordance with SFAS No. 128, Earnings Per Share.
Net income per share has been computed on the basis of the weighted average number of ordinary
shares and, where dilutive, ordinary share equivalents outstanding during the indicated periods. The following table summarizes the basic and diluted earnings per share computations for net
income for the years ended December 31, 2004, 2003 and 2002: Net
    
    
    Basic
    
    
    Basic
    
    
    Diluted
    
    
    DilutedIncome
    
    
    Shares
    
    
    EPS
    
    
    Shares
    
    
    EPS2004
    
    $
    146,086
    
    
    
    132,897
    
    
    $
    1.10
    
    
    
    134,115
    
    
    $
    1.092003
    
    
    166,416
    
    
    
    131,948
    
    
    
    1.26
    
    
    
    133,007
    
    
    
    1.252002
    
    
    209,503
    
    
    
    132,204
    
    
    
    1.58
    
    
    
    133,452
    
    
    
    1.57
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 48




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Included in diluted shares are ordinary share equivalents relating primarily to outstanding
stock options covering 1,218,000, 1,059,000 and 1,248,000 shares for the years ended December 31,
2004, 2003 and 2002, respectively. The computation of diluted earnings per share for 2004, 2003
and 2002 did not include options to purchase 100,000, 1,804,000 and 1,913,432 ordinary shares,
respectively, because the options exercise prices were greater than the average market price of
the ordinary shares. Supplemental Cash Flow Information Year Ended December 31,2004
    
    
    2003
    
    
    2002Cash paid during the period for:Interest
    
    $
    33,911
    
    
    $
    39,162
    
    
    $
    41,364Income taxes (net of refunds)
    
    $
    27,409
    
    
    $
    10,509
    
    
    $
    8,667
 Stock-Based Compensation Plans We have several stock-based compensation plans, which are described below. As permitted by
SFAS No. 123, Accounting for Stock-Based Compensation(SFAS 123), and as amended by SFAS No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosure(SFAS 148), we have chosen to
continue using the intrinsic value method of accounting for stock-based compensation awards in
accordance with APB Opinion 25. No compensation expense was recognized in 2004, 2003 and 2002
related to stock option awards. For U.S. federal income tax purposes, we realized a reduction in
income taxes related to the exercises of employee stock options of $11,840,000, $820,000 and
$4,664,000 in the years ended December 31, 2004, 2003 and 2002, respectively. SFAS 123 was revised in December 2004 and the intrinsic method of valuing stock-based
compensation awards will no longer be allowed effective with the first interim or annual reporting
period that begins after June 15, 2005. See the Accounting Pronouncements section of this Note 1
for additional information related to the revision of SFAS 123. 1991 Stock Option and Restricted Stock Plan Our 1991 Stock Option and Restricted Stock Plan, as amended (the 1991 Plan), provides for
the granting of options to purchase our ordinary shares, with or without stock appreciation rights,
and the awarding of restricted shares to selected employees. At December 31, 2004, 3,964,803
shares were available for grant or award under the 1991 Plan. In general, all options granted
under the 1991 Plan have a term of 10 years, an exercise price equal to the fair market value of an
ordinary share on the date of grant and vest one-third annually, commencing one year after the
grant date. 1992 Nonqualified Stock Option Plan Our 1992 Nonqualified Stock Option Plan for Non-Employee Directors (the 1992 Plan) provides
for the granting of nonqualified stock options to non-employee directors of Noble. At December 31,
2004, 234,500 shares were available for grant under the 1992 Plan. We grant options at fair market
value on the grant date. The options are exercisable from time to time over a period commencing
one year from the grant date and ending on the expiration of 10 years from the grant date, unless
terminated sooner as described in the 1992 Plan. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 49




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of the status of our stock options under both the 1991 Plan and 1992 Plan as of
December 31, 2004, 2003 and 2002 and the changes during the year ended on those dates is presented
below (actual amounts): 2004
    
    
    2003
    
    
    2002Number of
    
    
    Weighted
    
    
    Number of
    
    
    Weighted
    
    
    Number of
    
    
    WeightedShares
    
    
    Average
    
    
    Shares
    
    
    Average
    
    
    Shares
    
    
    AverageUnderlying
    
    
    Exercise
    
    
    Underlying
    
    
    Exercise
    
    
    Underlying
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding at beginning of the year
    
    
    8,630,114
    
    
    $
    29.86
    
    
    
    9,187,658
    
    
    $
    29.64
    
    
    
    8,494,250
    
    
    $
    28.40Granted
    
    
    334,485
    
    
    
    37.61
    
    
    
    45,000
    
    
    
    32.11
    
    
    
    1,630,000
    
    
    
    31.53Exercised
    
    
    (3,056,216
    )
    
    
    25.87
    
    
    
    (413,079
    )
    
    
    22.83
    
    
    
    (775,118
    )
    
    
    19.99Forfeited
    
    
    (92,024
    )
    
    
    33.69
    
    
    
    (189,465
    )
    
    
    35.01
    
    
    
    (161,474
    )
    
    
    32.82Outstanding at end of year
    
    
    5,816,359
    
    
    $
    31.99
    
    
    
    8,630,114
    
    
    $
    29.86
    
    
    
    9,187,658
    
    
    $
    29.64Exercisable at end of year
    
    
    5,005,471
    
    
    $
    31.83
    
    
    
    6,995,876
    
    
    $
    29.55
    
    
    
    5,682,838
    
    
    $
    27.41
 The following table summarizes information about stock options outstanding at December
31, 2004 (actual amounts): Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    Remaining
    
    
    Average
    
    
    Number
    
    
    AverageRange of Exercise Prices
    
    Outstanding
    
    
    Life (Years)
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise Price$5.01 to $ 7.69
    
    
    20,000
    
    
    
    0.3
    
    
    $
    6.53
    
    
    
    20,000
    
    
    $
    6.537.70
to  14.00
    
    
    41,249
    
    
    
    1.1
    
    
    
    9.81
    
    
    
    41,249
    
    
    
    9.8114.01 to  28.31
    
    
    1,553,009
    
    
    
    3.5
    
    
    
    23.51
    
    
    
    1,553,009
    
    
    
    23.5128.32
to  48.81
    
    
    4,202,101
    
    
    
    6.7
    
    
    
    35.96
    
    
    
    3,391,213
    
    
    
    36.48$5.01 to $48.81
    
    
    5,816,359
    
    
    
    5.8
    
    
    $
    31.99
    
    
    
    5,005,471
    
    
    $
    31.83
 Additional disclosures required by SFAS 123 are as follows: December 31,2004
    
    
    2003
    
    
    2002Weighted average fair value per
option granted
    
    $
    15.80
    
    
    $
    13.41
    
    
    $
    11.57Valuation assumptions:Expected option term (years)
    
    
    5
    
    
    
    5
    
    
    
    5Expected volatility
    
    
    42.27
    %
    
    
    43.32
    %
    
    
    43.72
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    3.52
    %
    
    
    2.88
    %
    
    
    4.42
    %
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 50




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table reflects pro forma net income and earnings per share had we elected to
adopt the fair value approach of SFAS 123: Year Ended December 31,2004
    
    
    2003
    
    
    2002Net income  as reported
    
    $
    146,086
    
    
    $
    166,416
    
    
    $
    209,503Compensation expense, net of tax, as reported
    
    
    3,739
    
    
    
    3,008
    
    
    
    3,171Compensation expense, net of tax, pro forma
    
    
    (12,887
    )
    
    
    (20,085
    )
    
    
    (22,450
    )Net income  pro forma
    
    $
    136,938
    
    
    $
    149,339
    
    
    $
    190,224Earnings per share:Basic  as reported
    
    $
    1.10
    
    
    $
    1.26
    
    
    $
    1.58Basic  pro forma
    
    $
    1.03
    
    
    $
    1.13
    
    
    $
    1.44Diluted  as reported
    
    $
    1.09
    
    
    $
    1.25
    
    
    $
    1.57Diluted  pro forma
    
    $
    1.02
    
    
    $
    1.12
    
    
    $
    1.43
 Other Stock Based Compensation In January 1998, we awarded selected employees 22,000 restricted (i.e., nonvested) shares that
vested 20 percent per year over a five-year period commencing on the first anniversary date of the
award. In January 1999, we awarded one employee 15,000 restricted shares that vested one-third per
year over a three-year period commencing on the first anniversary date of the award. In February
1999 and October 1999, we awarded selected employees 190,000 restricted shares and 230,000
restricted shares, respectively, that vested 20 percent per year over a five-year period commencing
on the first anniversary date of the award. In September 2000, we awarded one employee 25,000
restricted shares that vest 20 percent per year over a five-year period commencing on the first
anniversary date of the award. In October 2000 and October 2001, we awarded selected employees
227,500 restricted shares and 215,500 restricted shares, respectively, that vest 20 percent per
year over a five-year period commencing on the first anniversary date of the award. No restricted
shares were awarded in 2002 or 2003. In April 2004, we awarded selected employees 95,237
restricted shares that vest one-third per year over a three-year period commencing on the first
anniversary date of the award. In April 2004, we also awarded selected employees performance
restricted shares that have a three-year performance period from the date of award. The actual
number of shares awarded and available for vesting may vary depending on the degree of achievement
of certain specified corporate performance criteria over the three-year performance period. The
number of shares awarded as so determined then vests (subject only to future employment) at the
rate of one-third thereof in April of each succeeding year. The maximum number of shares available
for award is 142,852. Nonvested shares will be forfeited. A summary of the restricted share awards and the amounts recognized as compensation expense
for the years ended December 31, 2004, 2003 and 2002 is as follows: 2004
    
    
    2003
    
    
    2002Restricted shares:Shares awarded
    
    
    95,237
    
    
    
    
    
    
    
    Share price at award date
    
    $
    37.56
    
    
    $
    
    
    
    $
    Performance restricted shares:Shares awarded (maximum available)
    
    
    142,852
    
    
    
    
    
    
    
    Share price at award date
    
    $
    37.56
    
    
    $
    
    
    
    $
    Compensation expense recognized
    
    $
    5,753
    
    
    $
    4,627
    
    
    $
    4,878
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 51




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Put Options on Ordinary Shares During 2002, we sold European-style put options covering 1,300,000 of our ordinary shares in
12 separate private transactions (11 transactions of 100,000 put options each and another
transaction of 200,000 put options) at an average price paid to us of $2.81 per option.
European-style options give the holder the right to require us to purchase our ordinary shares
from the holder at their respective exercise prices on their respective expiration dates, whereas
American-style options can be exercised any time up to, and including, the respective exercise
dates. Upon exercise of the options by the holder, we had the option to settle in cash or net
shares of Noble. The strike price under each option represented between 90 and 95 percent of the
spot price of the ordinary shares at the date of the transaction. Of the 1,300,000 options sold
during 2002, 300,000 expired unexercised and 400,000 were exercised during 2002, which resulted in
600,000 options outstanding at December 31, 2002. All of these options expired unexercised in the
first quarter of 2003. At December 31, 2004 and 2003, we had no put options outstanding to
purchase any of our ordinary shares. Certain Significant Estimates The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Accounting Pronouncements In December 2004, the FASB issued SFAS 123 (revised 2004), Share-Based Payment(SFAS 123 (revised
2004)). SFAS 123 (revised 2004) is a revision to SFAS No. 123, Accounting for Stock-Based
Compensation(SFAS 123), and supercedes APB Opinion No. 25, Accounting for Stock Issued to
Employees(APB 25).SFAS 123 (revised 2004) establishes standards for accounting for exchanges of
an entitys equity instruments for goods or services, focusing primarily on transactions in which
an entity obtains employee services in share-based payment transactions. The statement requires
that entities measure the cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award and that the cost is recognized over
the period in which the employee services are performed, which is usually the equity instruments
vesting period. SFAS 123 (revised 2004) eliminates the alternative allowed under SFAS 123 in which
equity instruments could be measured at their intrinsic value, as prescribed by APB Opinion 25,
with only pro forma disclosure in the entitys notes to its financial statements of the impact on
net income and earnings per share had the equity instruments been measured at fair value. SFAS 123
(revised 2004) is effective for public entities that do not file as small business issuers as of
the beginning of the first interim or annual reporting period that begins after June 15, 2005. The
impact that the adoption of SFAS 123 (revised 2004) will have on our consolidated results of
operations will be determined primarily by the number of stock options issued to employees in
future periods. Based on recent stock option issuances, we estimate that the adoption of this
statement will reduce annual net income by approximately $3,000,000 to $5,000,000, or $.02 to $.04
per diluted share. We do not expect the adoption of SFAS 123 (revised 2004) to have a material
impact on our consolidated cash flows or financial position. NOTE 2  CORPORATE RESTRUCTURING On April 30, 2002, Noble became the successor to Noble Drilling Corporation, a Delaware
corporation (which we sometimes refer to as Noble Drilling), as part of the internal corporate
restructuring of Noble Drilling and its subsidiaries approved by stockholders of Noble Drilling.
The restructuring was accomplished through the merger of an indirect, wholly-owned subsidiary of
Noble Drilling into Noble Drilling. Noble Drilling was the surviving entity in the merger and is
now an indirect, wholly-owned subsidiary of Noble. In addition, as a result of the merger, all of
the outstanding shares of common stock (and the related preferred stock purchase rights) of Noble
Drilling were exchanged for ordinary shares (and related preferred share purchase rights) of Noble.
We accounted for the restructuring as a reorganization of entities under common control.
Consequently, the consolidated amounts of assets, liabilities and shareholders equity did not
change as a result of the restructuring. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 52




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3  ACQUISITIONS In October 2004, we exercised our option to purchase the Noble David Tinsley(formerly Maersk
Valiant) jackup rig for an exercise price of $28,400,000. In June 2003, we paid an option fee of
$13,200,000 for the right to acquire the unit. Our aggregate purchase price for the rig was
therefore $41,600,000. In July 2004, we exercised our option to purchase the Noble Cees van Diemen(formerly Maersk
Viking) jackup rig for an exercise price of $32,900,000. In June 2003, we paid an option fee of
$15,000,000 for the right to acquire the unit. Our aggregate purchase price for the rig was
therefore $47,900,000. In June 2004, we purchased the Noble Mark Burns(formerly Okhi) jackup rig for $29,500,000 in
cash. In September 2003, we exercised our option to purchase the Noble Charlie Yester(formerly
Trident 18) jackup rig from a subsidiary of Schlumberger Limited for an exercise price of
$32,900,000 in cash. In December 2002, we had paid an option fee of $14,100,000 in cash for the
right to acquire the unit. Our aggregate purchase price for the rig was therefore $47,000,000. In
July 2003, we exercised our option to purchase the Noble Gene House(formerly Trident 19) jackup
rig from this subsidiary of Schlumberger for an exercise price of $25,200,000 in cash. In December
2002, we had paid an option fee of $10,800,000 in cash for the right to acquire the unit. Our
aggregate purchase price for this rig was therefore $36,000,000. In December 2002, we purchased
two jackup rigs, the Dhabi IIand Noble Roy Rhodes(formerly Trident III), also from this
subsidiary of Schlumberger, for an aggregate purchase price of $95,000,000 in an all cash
transaction. On May 3, 2002, as part of our strategy to expand our technology initiative, we made several
acquisitions. We acquired all of the shares of WELLDONE Engineering GmbH (WELLDONE) for
$5,750,000 in cash plus an agreement to pay an earn-out amount up to $3,500,000 provided WELLDONEs
tools achieve certain operational and financial milestones during the period through May 3, 2004,
of which $500,000 was paid in 2003. We did not pay any of the remaining $3,000,000, as these
milestones were not achieved. WELLDONEs primary asset is its ownership in the Well Director,
an automatic rotary steerable drilling system, which was designed by and is manufactured and
marketed through DMT WELLDONE Drilling Services GmbH (DMT WELLDONE). As a result of our
acquisition of WELLDONE, we acquired WELLDONEs 50 percent joint venture interest in DMT WELLDONE,
which is further described below. We paid $2,650,000 to Deutsche Montan Technologie GmbH (DMT),
the other joint venturer in DMT WELLDONE, for the remaining 50 percent interest in the joint
venture. In connection with the above described transaction, we also acquired 24 Well
DirectorTM drilling tools and related assets owned by Phoenix Technology Services, Ltd.
(Phoenix) for $6,000,000 in cash plus an agreement to pay an earn-out amount up to $3,000,000
provided certain operating performance milestones are achieved during the period through May 3,
2005, of which $1,500,000 and $500,000 was paid in 2004 and 2003, respectively. In the transaction
we also acquired from Phoenix its worldwide marketing rights to the Well DirectorTM
drilling tools. The aggregate purchase price of $14,400,000 for these related acquisitions was
allocated to goodwill ($7,863,000) and property and equipment ($6,537,000). Pursuant to a related agreement, we and DMT each committed to fund 2,100,000 Euros to a new
joint venture in which each party has a 50 percent interest. The joint venture was to use such
funds to retain DMT to conduct research and development. This joint venture was terminated in
2003. On March 27, 2002, we purchased two semisubmersible baredecks, Bingo 9000 Rig 3 and Bingo
9000 Rig 4, from subsidiaries of Ocean Rig ASA (Ocean Rig) for an aggregate purchase price of
$45,000,000 in an all cash transaction. On March 26, 2002, we purchased two semisubmersible drilling rigs, the Noble Lorris Bouzigard
(formerly Transocean 96) and Noble Therald Martin(formerly Transocean 97), from subsidiaries of
Transocean Inc. for an aggregate purchase price of $31,000,000 in an all cash transaction. During
2003, we completed upgrades to the living quarters and drilling equipment on both units. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 53




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4  MARKETABLE SECURITIES As of December 31, 2004 and 2003, we owned marketable equity securities with a fair market
value of $528,000 and $9,703,000, respectively, of which $9,458,000 of the December 31, 2003
balance was included in a Rabbi Trust for the Noble Drilling Corporation 401(k) Savings Restoration
Plan. This Rabbi Trust was liquidated and terminated in December 2004. The marketable securities
included in the Rabbi Trust were classified as trading securities and were included in Investment
in marketable securities in the Consolidated Balance Sheet at December 31, 2003 at their fair
market value. Upon liquidation of the Rabbi Trust, we recognized in earnings a net realized gain
of $895,000 related to these assets in 2004. The remaining investment in marketable equity
securities at December 31, 2004 is classified as available for sale and is included in Other
assets in the Consolidated Balance Sheet at its fair market value. On March 31, 2002, we
recognized in earnings a realized loss of $9,758,000 on this investment resulting from a decline in
value considered by management to be other than temporary. We recognized in other comprehensive
income an unrealized holding gain of $283,000 on this investment during 2004. Gross unrealized
holding losses on this investment at December 31, 2004 and 2003 were $681,000 and $964,000,
respectively, and are included in Accumulated other comprehensive income in the Consolidated
Balance Sheets. As of December 31, 2004 and 2003, we owned marketable debt securities with a fair market value
of $132,788,000 and $165,818,000, respectively. These investments are classified as available for
sale and are included in Investment in marketable securities in the Consolidated Balance Sheets
at their fair market value. Our balance of marketable debt securities at December 31, 2004
includes $33,280,000 that mature within one year, $61,008,000 that mature between one and five
years and $38,500,000 that mature beyond five years. We recognized in other comprehensive income a
net unrealized holding loss of $773,000 and in earnings a net realized loss of $129,000 related to
these investments in 2004. In 2003 and 2002, we recognized realized losses on these securities of
$382,000 and $168,000, respectively. Realized gains and losses on sales of marketable securities
are based on the specific identification method. The following table highlights additional
information applicable to our investments in marketable debt securities classified as available for
sale as of December 31, 2004 and 2003: December 31,2004
    
    
    2003Gross
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    Gross
    
    
    GrossAmortized
    
    
    Fair
    
    
    Unrealized
    
    
    Unrealized
    
    
    Amortized
    
    
    Fair
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Value
    
    
    Gains
    
    
    Losses
    
    
    Cost
    
    
    Value
    
    
    Gains
    
    
    LossesU.S. Government obligations
    
    $
    8,764
    
    
    $
    8,728
    
    
    $
    
    
    
    $
    (36
    )
    
    $
    4,137
    
    
    $
    4,126
    
    
    $
    
    
    
    $
    (11
    )Corporate debt securities
    
    
    81,866
    
    
    
    81,467
    
    
    
    11
    
    
    
    (410
    )
    
    
    136,709
    
    
    
    136,635
    
    
    
    47
    
    
    
    (121
    )Asset-backed securities
    
    
    42,989
    
    
    
    42,593
    
    
    
    5
    
    
    
    (401
    )
    
    
    25,075
    
    
    
    25,057
    
    
    
    15
    
    
    
    (33
    )Total
    
    $
    133,619
    
    
    $
    132,788
    
    
    $
    16
    
    
    $
    (847
    )
    
    $
    165,921
    
    
    $
    165,818
    
    
    $
    62
    
    
    $
    (165
    )
 The credit quality of each of our investments in marketable debt securities is rated no lower
than A or A2 by Standard & Poors and Moodys Investors Service (Moodys), respectively. NOTE 5  COMPREHENSIVE INCOME We report and display comprehensive income in accordance with SFAS No. 130, Reporting
Comprehensive Income(SFAS 130), which establishes standards for reporting and displaying
comprehensive income and its components. Components of comprehensive income are net income and all
changes in equity during the period except those resulting from transactions with owners. SFAS 130
requires enterprises to display comprehensive income and its components in the enterprises
financial statements, to classify items of comprehensive income by their nature in the financial
statements and display the accumulated balance of other comprehensive income in shareholders
equity separately from retained earnings and additional paid-in capital. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 54




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth the components of accumulated other comprehensive income
(loss): AccumulatedForeign
    
    
    Unrealized
    
    
    Minimum
    
    
    OtherCurrency
    
    
    (Losses) Gains
    
    
    Pension
    
    
    ComprehensiveItems
    
    
    on Securities
    
    
    Liability
    
    
    Income (Loss)Balance at December 31, 2001
    
    $
    25
    
    
    $
    (9,777
    )
    
    $
    (1,985
    )
    
    $
    (11,737
    )2002-period change
    
    
    1,223
    
    
    
    9,051
    
    
    
    (4,829
    )
    
    
    5,445Balance at December 31, 2002
    
    
    1,248
    
    
    
    (726
    )
    
    
    (6,814
    )
    
    
    (6,292
    )2003-period change
    
    
    192
    
    
    
    (296
    )
    
    
    6,406
    
    
    
    6,302Balance at December 31, 2003
    
    
    1,440
    
    
    
    (1,022
    )
    
    
    (408
    )
    
    
    102004-period change
    
    
    3,079
    
    
    
    (490
    )
    
    
    (61
    )
    
    
    2,528Balance at December 31, 2004
    
    $
    4,519
    
    
    $
    (1,512
    )
    
    $
    (469
    )
    
    $
    2,538
 Included in the 2002period change for unrealized (losses) gains on securities above was a
reclassification adjustment of $9,758,000 for an impairment charge on an investment included in net
income resulting from a decline in value considered by management to be other than temporary. NOTE 6  INVESTMENTS IN AND ADVANCES TO JOINT VENTURES On June 13, 2000, we formed Noble Crosco Drilling Ltd. (Noble Crosco) with our joint venture
partner. We acquired a 50 percent equity interest in Noble Crosco by investing $14,300,000 in
cash. Our joint venture partner contributed the Panon,a Levingston 111-S independent leg designed
jackup, for its 50 percent equity interest. We also agreed to lend Noble Crosco up to $7,000,000
pursuant to a credit agreement (the Noble Crosco Credit Agreement) to finance part of the upgrade
costs of the Panon. In 2001, we loaned Noble Crosco $7,000,000 under the Noble Crosco Credit
Agreement. Any funds required for the maintenance and operation of the Panonin excess of those
funds generated from operations of the joint venture and available under the Noble Crosco Credit
Agreement would be loaned by us to Noble Crosco. In 2001, we loaned Noble Crosco $4,800,000 of
such funds. At December 31, 2004, the balance due to us from Noble Crosco under the Noble Crosco
Credit Agreement and the additional loan in excess of the Noble Crosco Credit Agreement had been
repaid. We managed the upgrade of the Panonfrom a slot to a cantilever configuration, and we are
managing the operation of the unit. During 2004, we received distributions from Noble Crosco
related to the operations of the Panonof $2,700,000. We account for this investment using the
equity method. Balances related to joint ventures for 2004 and 2003 are reflected in the table below: 2004
    
    
    2003Equity in income of joint ventures (1)
    
    $
    3,931
    
    
    $
    2,307Investment in joint ventures (2)
    
    
    18,804
    
    
    
    17,585Advances to joint ventures (2)
    
    
    
    
    
    
    2,283
   (1)
    
    Balance included in Other, net in the Consolidated Statements of Income. Amounts exclude
management fees and interest income related to joint ventures of $1,253,000 and $1,838,000 in
2004 and 2003, respectively.(2)
    
    Balance included in Investments in and advances to joint ventures in the Consolidated
Balance Sheets. NOTE 7  DEBT In 2002, we borrowed $125,000,000 from our $300,000,000 bank credit facility, of which
$25,000,000 was repaid during 2004 . In November 2004, we amended our bank credit facility to increase the total commitment to
$300,000,000 from $200,000,000 and extend the maturity date to November 30, 2009 from May 30, 2006.
Deferred costs related to this amendment were $475,000, which are being amortized over the
remaining term of the bank (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 55




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS credit facility. The interest rate on this borrowing from our bank credit facility, which adjusts
periodically with LIBOR, was 3.46 percent at December 31, 2004. (See Note 8 for additional
information.) On March 16, 1999, we issued $150,000,000 principal amount of our 6.95% Senior Notes due 2009
and $250,000,000 principal amount of our 7.50% Senior Notes due 2019 (together, the Notes).
Interest on the Notes is payable on March 15 and September 15 of each year. The Notes are
redeemable, as a whole or from time to time in part, at our option on any date prior to maturity at
prices equal to 100 percent of the outstanding principal amount of the notes redeemed plus accrued
interest to the redemption date plus a make-whole premium, if any is required to be paid. The
Notes are senior unsecured obligations and the indenture governing the Notes contains covenants
that, among other things, limit our ability to create certain liens, engage in certain sale and
lease-back transactions and merge, consolidate and sell assets, except under certain conditions. In 2002, we purchased and retired $5,000,000 principal amount of our 7.50% Senior Notes due
2019 for $5,350,000, which resulted in a loss of $400,000. This loss represents the difference
between the acquisition price and the net carrying value of the notes purchased, including
unamortized debt issuance costs, and was included in Other, net in the Consolidated Statement of
Income in 2002. Prior to 2002, we purchased and retired $43,305,000 principal amount of our 7.50%
Senior Notes. In connection with the acquisition of a majority interest in Arktik Drilling Limited, Inc.
(Arktik) in 1999, we recorded Arktiks indebtedness to a minority equity owner in Arktik in the
amount of $7,900,000 (the Minority Owner Debt). Arktiks principal asset is the Noble Muravlenko
drillship. We repaid the Minority Owner Debt in full in March 2004. In December 1998, Noble Drilling (Jim Thompson) Inc., an indirect, wholly-owned subsidiary of
Noble and owner of the Noble Jim Thompson, issued $115,000,000 principal amount of its fixed rate
senior secured notes (the Thompson Notes) in four series. The Thompson Notes bear interest at
rates of 5.93 percent to 7.25 percent per annum. The Thompson Notes are secured by a first naval
mortgage on the Noble Jim Thompson,are guaranteed by Noble, and can be prepaid, in whole or in
part, at a premium at any time. In July 1998, Noble Drilling (Paul Wolff) Ltd., an indirect, wholly-owned subsidiary of Noble
and owner of the Noble Paul Wolff, issued $145,000,000 principal amount of its fixed rate senior
secured notes (the Wolff Notes) in three series. We repaid the Wolff Notes in full in December
2004. The following table summarizes our long-term debt: December 31,2004
    
    
    20036.95% Senior Notes due 2009, net of unamortized discount of
$46 in 2004 and $55 in 2003
    
    $
    149,954
    
    
    $
    149,9457.50% Senior Notes due 2019
    
    
    201,695
    
    
    
    201,695Bank Credit Facility
    
    
    100,000
    
    
    
    125,000Project Financings:Wolff Notes
    
    
    
    
    
    
    28,228Thompson Notes
    
    
    60,000
    
    
    
    76,805Minority Owner Debt
    
    
    
    
    
    
    7,900511,649
    
    
    
    589,573Current Maturities
    
    
    (8,361
    )
    
    
    (47,666
    )Long-term Debt
    
    $
    503,288
    
    
    $
    541,907
 The fair value of our Senior Notes at December 31, 2004 was $402,891,000, based on the quoted
market prices for similar issues or on the current rates offered to us for debt of similar
remaining maturities. The fair value of the indebtedness outstanding under our floating interest
rate Bank Credit Facility and Project Financings approximates their carrying values. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 56




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Aggregate principal repayments of long-term debt for the next five years and thereafter are as
follows: 2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    Total6.95% Senior Notes due 2009,
net of unamortized
discount of $46 in 2004
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    149,954
    
    
    $
    
    
    
    $
    149,9547.50% Senior Notes due 2019
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201,695
    
    
    
    201,695Bank Credit Facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    100,000Thompson Notes
    
    
    8,361
    
    
    
    8,975
    
    
    
    9,630
    
    
    
    10,334
    
    
    
    22,700
    
    
    
    
    
    
    
    60,000Total
    
    $
    8,361
    
    
    $
    8,975
    
    
    $
    9,630
    
    
    $
    10,334
    
    
    $
    272,654
    
    
    $
    201,695
    
    
    $
    511,649
 NOTE 8  CREDIT FACILITIES We have an unsecured revolving bank credit facility totaling $300,000,000 (the Credit
Agreement), including a letter of credit facility totaling $50,000,000, through November 30, 2009.
In November 2004, we amended the Credit Agreement to increase the total commitment to $300,000,000
from $200,000,000 and extend the maturity date to November 30, 2009 from May 30, 2006. In
connection with our restructuring, Noble and one of its wholly-owned subsidiaries, Noble Holding
(U.S.) Corporation (Noble Holding), have unconditionally guaranteed the performance of Noble
Drilling under the Credit Agreement. We are required to maintain various affirmative and negative
covenants, including two financial covenants relating to interest coverage and debt to capital
ratios. The Credit Agreement contains restrictive covenants, including restrictions on incurring
additional indebtedness, and restrictions on permitting additional liens, payment of dividends,
transactions with affiliates, and mergers or consolidations. As of December 31, 2004, we had
outstanding borrowings and outstanding letters of credit of $100,000,000 and $15,721,000,
respectively, under the Credit Agreement, with $184,279,000 remaining available thereunder.
Additionally, as of December 31, 2004, we had other letters of credit and third-party guarantees of
$35,916,000 and performance and customs bonds totaling $46,949,000 supported by surety bonds. NOTE 9  INTERESTS IN DEEPWATER OIL AND GAS PROPERTIES In 2000, we received interests in several deepwater oil and gas properties from Mariner Energy
Inc. and Samedan Oil Corporation pursuant to the settlements of a lawsuit with Mariner Energy and
Samedan over employment of the Noble Homer Ferringtonsemisubmersible and upon entering into a
long-term contract with each of these companies for use of the unit in the U.S. Gulf of Mexico.
Certain of these properties are currently in production. We reported income before income taxes
from such properties of $743,000, $3,246,000 and $2,638,000 in 2004, 2003 and 2002, respectively. In December 2003, we sold our interest in Mariner Energys Green Canyon property to ENI
Petroleum for $5,200,000 in cash. We realized a gain of $3,472,000 upon this sale. In March 2002, we sold our interest in Mariner Energys Falcon property to Pioneer Natural
Resources USA, Inc. for $6,200,000 in cash and the assumption of liabilities related to our share
of drilling and development costs subsequent to June 30, 2001. We realized a gain of $5,908,000
upon this sale. NOTE 10  SHAREHOLDERS EQUITY In June 1995, we adopted a stockholder rights plan designed to assure that our stockholders
receive fair and equal treatment in the event of any proposed takeover of Noble Drilling and to
guard against partial tender offers and other abusive takeover tactics to gain control of Noble
Drilling without paying all stockholders a fair price. The rights plan was not adopted in response
to any specific takeover proposal. Prior to our corporate restructuring, we amended our rights
plan to provide for the earlier expiration of the rights in the event that Noble Drilling merges
with a subsidiary company in connection with changing the parent corporation of the Noble corporate
group to a non-U.S. company. Immediately prior to such a merger as part of our corporate
restructuring, the Noble Drilling stockholder rights plan expired. Upon such merger, a new
shareholder rights plan became effective for the new (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 57




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS parent company, Noble Corporation, that is substantially similar to the previous Noble
Drilling stockholder rights plan. Under the rights plan, one right (Right) is attached to each
of our ordinary shares. Each Right will entitle the holder to purchase one one-hundredth of a
share of new Series A Junior Participating Preferred Shares, par value $1.00 per share, at an
exercise price of $120.00. The Rights are not currently exercisable and will become exercisable
only in the event a person or group acquires beneficial ownership of 25 percent or more of our
ordinary shares. The Rights expire on July 10, 2005. In connection with our corporate restructuring (see Note 2), treasury shares of Noble Drilling
were either cancelled and retired or contributed to trusts for the purpose of Company employee
benefit plans. Any ordinary shares of Noble repurchased by it are automatically cancelled and
retired pursuant to Cayman Islands law. These employee benefit plan trusts were liquidated and
terminated in December 2004. Ordinary shares of Noble held by the trusts were cancelled and
retired upon dissolution of the trusts. These trusts held 1,700,000 ordinary shares of Noble at
December 31, 2003. Share repurchases and sales of put options were effected pursuant to the share repurchase
program which our board of directors authorized and adopted and which we announced on January 31,
2002. The program authorization covers an aggregate of 15,000,000 ordinary shares. As of March 3,
2005, 9,162,000 shares remained available under this authorization. NOTE 11  INCOME TAXES Noble is a Cayman Islands company. The Cayman Islands does not impose corporate income taxes.
Consequently, income taxes have been provided based on the laws and rates in effect in the
countries in which operations are conducted, or in which Noble and/or its subsidiaries are
considered resident for income tax purposes. Our U.S. subsidiaries are subject to a U.S. corporate
tax rate of 35 percent. In certain circumstances, management expects that, due to changing demands of the offshore
drilling markets and the ability to redeploy our offshore drilling units, certain of such units
will not reside in a location long enough to give rise to future tax consequences. As a result, no
deferred tax liability has been recognized in these circumstances. Should managements
expectations change regarding the length of time an offshore drilling unit will be used in a given
location, we will adjust deferred taxes accordingly. The components of and changes in the net deferred taxes were as follows: December 31,
    
    
    December 31,2004
    
    
    2003Deferred tax assets:United States:Net operating loss carryforwards
    
    $
    28,295
    
    
    $
    11,576Tax credit carryforwards
    
    
    24,570
    
    
    
    23,403International:Net operating loss carryforwards
    
    
    
    
    
    
    Deferred tax assets
    
    
    52,865
    
    
    
    34,979Less: Valuation allowance
    
    
    (12,118
    )
    
    
    (8,343
    )Net deferred tax assets
    
    $
    40,747
    
    
    $
    26,636Deferred tax liabilities:United States:Excess of net book basis over remaining tax basis
    
    $
    (246,892
    )
    
    $
    (232,642
    )International:Excess of net book basis over remaining tax basis
    
    
    (361
    )
    
    
    (7,351
    )Deferred tax liabilities
    
    $
    (247,253
    )
    
    $
    (239,993
    )Net deferred tax liabilities
    
    $
    (206,506
    )
    
    $
    (213,357
    )
 (Unless otherwise indicated, dollar amounts in tables are in
thousands, except per share amounts.) 58




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income before income taxes consisted of the following: Year Ended December 31,2004
    
    
    2003
    
    
    2002United States
    
    $
    (12,310
    )
    
    $
    (3,996
    )
    
    $
    34,966International
    
    
    174,127
    
    
    
    190,980
    
    
    
    208,359Total
    
    $
    161,817
    
    
    $
    186,984
    
    
    $
    243,325
 The income tax provision consisted of the following: Year Ended December 31,2004
    
    
    2003
    
    
    2002Current - United States
    
    $
    (8,403
    )
    
    $
    (2,561
    )
    
    $
    160Current - International
    
    
    19,112
    
    
    
    18,753
    
    
    
    16,792Deferred - United States
    
    
    11,546
    
    
    
    14,878
    
    
    
    13,020Deferred - International
    
    
    (6,524
    )
    
    
    (10,502
    )
    
    
    3,850Total
    
    $
    15,731
    
    
    $
    20,568
    
    
    $
    33,822
 A reconciliation of statutory and effective income tax rates is shown below: Year Ended December 31,2004
    
    
    2003
    
    
    2002Statutory rate
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Effect of:U.S. tax rate which is different than the Cayman Islands rate
    
    
    9.8
    
    
    
    3.6
    
    
    
    4.5International tax rates which are different
than the Cayman Islands rate
    
    
    10.9
    
    
    
    7.3
    
    
    
    8.3Resolution of tax authority audits
    
    
    (6.7
    )
    
    
    
    
    
    
    Change in tax status of international subsidiaries
    
    
    (2.7
    )
    
    
    
    
    
    
    U.S. and international return to provision adjustments
    
    
    (1.8
    )
    
    
    
    
    
    
    Other
    
    
    0.2
    
    
    
    0.1
    
    
    
    1.1Total
    
    
    9.7
    %
    
    
    11.0
    %
    
    
    13.9
    %
 During 2004, we generated net operating losses (NOLs) of $21,767,000 and $53,950,000 for
U.S. Regular and Alternative Minimum Tax (AMT) purposes, respectively. Our total U.S. NOLs at
December 31, 2004 were $59,454,000 for U.S. Regular tax purposes and $136,728,000 for AMT purposes.
These NOLs can be carried forward 20 years and begin to expire in 2022. Based on current market
conditions, the reversal of temporary differences and forecasts of future U.S. income, we expect to
fully utilize these NOLs. Therefore, there is no valuation allowance offsetting the deferred tax
asset for these NOLs. During 2003, we generated NOLs of $23,943,000 and $61,826,000 for U.S. Regular and AMT
purposes, respectively. During 2002, we generated NOLs of $13,744,000 and $47,024,000 for U.S.
Regular and AMT purposes, respectively. Due to our corporate restructuring in 2002, $13,744,000 of
the Regular NOL and $20,952,000 of the AMT NOL were subject to the Separate Return Limitation Year
limits and could not be carried back to prior tax years. The remaining AMT NOL of $26,072,000 was
carried back to 2001 and generated cash refunds of $5,019,000. Certain components of the Net
deferred tax liabilities in the table above were based on our
estimates of NOLs and tax credit carryforwards at December 31, 2003. The Net deferred tax
liabilities at December 31, 2004 reflect the actual NOLs and tax credit carryforwards from 2003. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 59




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We had AMT credit carryforwards of $17,444,000 at December 31, 2004 and 2003. We expect to
fully utilize these credits, which can be carried forward indefinitely. Therefore, there is no
valuation allowance offsetting this asset. We had foreign tax credit carryforwards of $7,126,000
at December 31, 2004. These credits can be carried forward ten years, and begin to expire in 2010.
Because the majority of our international operations are conducted by non-U.S. subsidiaries, we
have offset the asset for these credits with a valuation allowance of $4,632,000. Our estimated
foreign tax credits and offsetting valuation allowance at December 31, 2003 were $5,959,000 and
$3,873,000, respectively. Certain of our subsidiaries file stand alone tax returns in the U.S. During 2004, these
subsidiaries generated NOLs of $4,074,000 for U.S. Regular and AMT purposes. Our total U.S. NOLs
at December 31, 2004 for Regular and AMT purposes for these subsidiaries were $21,389,000 and
$21,294,000, respectively. Due to insufficient earnings history with these subsidiaries, we have
fully offset the deferred tax asset attributable to the U.S. Regular NOLs with a valuation
allowance of $7,486,000 and $4,470,000 at December 31, 2004 and 2003, respectively. These NOLs can
be carried forward 20 years, and begin to expire in 2023. During 2004, we recorded a tax benefit of $10,803,000 due to the resolution of certain tax
authority audits. Also during 2004, two of our subsidiaries were granted approval by an
international tax authority to be taxed on a deemed profit basis in its jurisdiction. We recorded
a one-time tax benefit of $4,431,000 due to the change in tax status of these subsidiaries in such
jurisdiction. Due to our ability to redeploy units between Mexico and other jurisdictions, we do not expect
our rig-owning subsidiaries operating in Mexico to incur income tax liability in Mexico.
Therefore, no deferred tax has been recorded for these subsidiaries. Should our expectations
change regarding these subsidiaries, we will adjust deferred taxes accordingly. Our recognition of
a deferred tax liability in these circumstances would not have had a material effect on our results
of operations for 2004, 2003 or 2002, and would have had no effect on our liquidity or our cash
flows. Applicable U.S. and foreign income and withholding taxes have not been provided on
undistributed earnings of $808,000,000 for Nobles subsidiaries. Management does not intend to
repatriate such undistributed earnings for the foreseeable future except for distributions upon
which incremental income and withholding taxes would not be material. It is not practicable to
estimate the amount of deferred income taxes associated with these undistributed earnings. On October 22, 2004, The American Jobs Creation Act of 2004 (the Act) was signed into law in
the U.S. The Act creates a temporary incentive for U.S. corporations to repatriate accumulated
income earned abroad by providing an 85 percent dividends received deduction for certain dividends
from controlled foreign corporations. The deduction is subject to a number of limitations. We
have reviewed this incentive under the Act. We believe it is in our best interest to continue to
keep these undistributed earnings permanently reinvested outside the U.S. and do not intend to
repatriate any undistributed earnings for the foreseeable future except for distributions upon
which incremental income and withholding taxes would not be material. NOTE 12  EMPLOYEE BENEFIT PLANS We have a U.S. noncontributory defined benefit pension plan which covers substantially all
salaried employees and a U.S. noncontributory defined benefit pension plan which covers certain
field hourly employees, whose initial date of employment is prior to August 1, 2004 (collectively
referred to as our qualified domestic plans). These plans are governed by the Noble Drilling
Corporation Retirement Trust (the Trust). The benefits from these plans are based primarily on
years of service and, for the salaried plan, employees compensation near retirement. These plans
qualify under the Employee Retirement Income Security Act of 1974 (ERISA), and our funding policy
is consistent with funding requirements of ERISA and other applicable laws and regulations. We
make cash contributions to the qualified domestic plans when required. The benefit amount that can
be covered by the qualified domestic plans is limited under ERISA and the Internal Revenue Code
(IRC) of 1986. Therefore, we maintain an unfunded, nonqualified excess benefit plan designed to
maintain benefits for all employees at the
formula level in the qualified domestic plans. We refer to the qualified domestic plans and
the excess benefit plan collectively as the domestic plans. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 60




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Each of Noble Drilling (U.K.) Limited, Noble Enterprises Limited and Noble Drilling
(Nederland) B.V., all indirect, wholly-owned subsidiaries of Noble, maintains a pension plan which
covers all of its salaried, non-union employees (collectively referred to as our international
plans). Benefits are based on credited service and the average of the highest three years of
qualified salary within the past 10 years of participation. In 2004, we made total fundings of $1,389,000 to our domestic and international pension
plans. We made total fundings of $22,155,000 to our domestic and international pension plans in
2003, including a discretionary funding of $17,100,000. During 2002, we made fundings totaling
$5,327,000 to our plans. We expect fundings in 2005 to approximate $1,500,000. All of our plans use December 31 as the measurement date. A reconciliation of the changes in projected benefit obligations for our international and
domestic plans is as follows: As of December 31,2004
    
    
    2003International
    
    
    Domestic
    
    
    International
    
    
    DomesticBenefit obligation at beginning of year
    
    $
    41,542
    
    
    $
    68,945
    
    
    $
    36,600
    
    
    $
    54,227Service cost
    
    
    2,411
    
    
    
    4,455
    
    
    
    1,957
    
    
    
    3,504Interest cost
    
    
    2,418
    
    
    
    4,097
    
    
    
    2,015
    
    
    
    3,486Actuarial losses
    
    
    1,060
    
    
    
    1,415
    
    
    
    1,078
    
    
    
    9,586Benefits paid
    
    
    (898
    )
    
    
    (2,072
    )
    
    
    (598
    )
    
    
    (1,858
    )Plan participants contribution
    
    
    216
    
    
    
    
    
    
    
    178
    
    
    
    Foreign exchange rate changes
    
    
    3,507
    
    
    
    
    
    
    
    312
    
    
    
    Other
    
    
    
    
    
    
    367
    
    
    
    
    
    
    
    Benefit obligation at end of year
    
    $
    50,256
    
    
    $
    77,207
    
    
    $
    41,542
    
    
    $
    68,945
 A reconciliation of the changes in fair value of plan assets is as follows: As of December 31,2004
    
    
    2003International
    
    
    Domestic
    
    
    International
    
    
    DomesticFair value of plan assets at beginning of year
    
    $
    44,171
    
    
    $
    53,386
    
    
    $
    26,764
    
    
    $
    37,251Actual return on plan assets
    
    
    2,998
    
    
    
    5,173
    
    
    
    3,330
    
    
    
    7,878Employer contribution
    
    
    802
    
    
    
    587
    
    
    
    12,040
    
    
    
    10,115Plan participants contribution
    
    
    216
    
    
    
    
    
    
    
    178
    
    
    
    Benefits and expenses paid
    
    
    (963
    )
    
    
    (2,072
    )
    
    
    (618
    )
    
    
    (1,858
    )Foreign exchange rate changes
    
    
    5,337
    
    
    
    
    
    
    
    2,477
    
    
    
    Fair value of plan assets at end of year
    
    $
    52,561
    
    
    $
    57,074
    
    
    $
    44,171
    
    
    $
    53,386
 The funded status of the plans is as follows: As of December 31,2004
    
    
    2003International
    
    
    Domestic
    
    
    International
    
    
    DomesticFunded status
    
    $
    2,305
    
    
    $
    (20,133
    )
    
    $
    2,629
    
    
    $
    (15,559
    )Unrecognized net loss
    
    
    991
    
    
    
    17,501
    
    
    
    225
    
    
    
    17,887Unrecognized prior service cost
    
    
    
    
    
    
    1,695
    
    
    
    
    
    
    
    1,588Unrecognized transition obligation
    
    
    1,326
    
    
    
    
    
    
    
    1,452
    
    
    
    Net amount recognized
    
    $
    4,622
    
    
    $
    (937
    )
    
    $
    4,306
    
    
    $
    3,916
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 61




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amounts recognized in the Consolidated Balance Sheets consist of: As of December 31,2004
    
    
    2003International
    
    
    Domestic
    
    
    International
    
    
    DomesticPrepaid (accrued) pension cost
    
    $
    4,622
    
    
    $
    (3,611
    )
    
    $
    4,306
    
    
    $
    2,404Intangible asset
    
    
    
    
    
    
    1,953
    
    
    
    
    
    
    
    885Accumulated other comprehensive loss
    
    
    
    
    
    
    721
    
    
    
    
    
    
    
    627Net amount recognized
    
    $
    4,622
    
    
    $
    (937
    )
    
    $
    4,306
    
    
    $
    3,916
 Pension cost includes the following components: Year Ended December 31,2004
    
    
    2003
    
    
    2002International
    
    
    Domestic
    
    
    International
    
    
    Domestic
    
    
    International
    
    
    DomesticService cost
    
    $
    2,411
    
    
    $
    4,455
    
    
    $
    1,957
    
    
    $
    3,504
    
    
    $
    2,424
    
    
    $
    3,392Interest cost
    
    
    2,418
    
    
    
    4,097
    
    
    
    2,015
    
    
    
    3,486
    
    
    
    1,970
    
    
    
    3,552Return on plan assets
    
    
    (3,023
    )
    
    
    (4,273
    )
    
    
    (1,856
    )
    
    
    (3,376
    )
    
    
    (2,025
    )
    
    
    (3,532
    )Amortization of prior service
cost
    
    
    
    
    
    
    260
    
    
    
    
    
    
    
    217
    
    
    
    52
    
    
    
    189Amortization of transition obligation
    
    
    168
    
    
    
    
    
    
    
    530
    
    
    
    
    
    
    
    93
    
    
    
    Recognized net actuarial
(gain) loss
    
    
    (58
    )
    
    
    900
    
    
    
    (358
    )
    
    
    697
    
    
    
    (19
    )
    
    
    391Net pension expense
    
    $
    1,916
    
    
    $
    5,439
    
    
    $
    2,288
    
    
    $
    4,528
    
    
    $
    2,495
    
    
    $
    3,992
 Other information regarding our international and domestic plans is summarized below: As of December 31,2004
    
    
    2003International
    
    
    Domestic
    
    
    International
    
    
    DomesticProjected benefit obligation
    
    $
    50,256
    
    
    $
    77,207
    
    
    $
    41,542
    
    
    $
    68,945Accumulated benefit obligation
    
    
    48,716
    
    
    
    63,327
    
    
    
    39,490
    
    
    
    53,275Fair value of plan assets
    
    
    52,561
    
    
    
    57,074
    
    
    
    44,171
    
    
    
    53,386Increase in minimum liability included in
other comprehensive income
    
    
    
    
    
    
    721
    
    
    
    
    
    
    
    627
 The key assumptions for the plans are summarized below: As of December 31,2004
    
    
    2003International
    
    
    Domestic
    
    
    International
    
    
    DomesticWeighted-average assumptions used to
determine benefit obligations:Discount rate
    
    
    4.75%-5.70%
    
    
    
    5.75%
    
    
    
    5.50%
    
    
    
    6.00%Rate of compensation increase
    
    
    3.70%-3.88%
    
    
    
    5.00%
    
    
    
    3.50%-3.88%
    
    
    
    5.00%
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 62




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31,2004
    
    
    2003
    
    
    2002International
    
    
    Domestic
    
    
    International
    
    
    Domestic
    
    
    International
    
    
    DomesticWeighted-average assumptions used to
determine net periodic benefit cost:Discount rate
    
    
    5.25%-5.50
    %
    
    
    6.00
    %
    
    
    5.25%-5.50
    %
    
    
    6.50
    %
    
    
    5.50
    %
    
    
    7.00
    %Expected long-term
return on plan assets
    
    
    5.25%-6.25
    %
    
    
    8.00
    %
    
    
    5.25%-6.25
    %
    
    
    8.00
    %
    
    
    5.50%-6.25
    %
    
    
    9.00
    %Rate of compensation
increase
    
    
    3.50%-3.88
    %
    
    
    5.00
    %
    
    
    3.50%-3.88
    %
    
    
    5.00
    %
    
    
    3.50
    %
    
    
    5.00
    %
 The projected benefit obligation for the unfunded excess benefit plan was $8,547,000 and
$7,850,000 at December 31, 2004 and 2003, respectively, and is included under Domestic in the
above tables. Additional information regarding our qualified domestic plans is summarized below. The Trust invests in equity securities, fixed income debt securities, and cash equivalents and
other short-term investments. The Trust may invest in these investments directly or through pooled
vehicles, including mutual funds. The targeted and actual weighted average asset allocations by asset category for the two U.S.
defined benefit pension plans are as follows: Year Ended December 31,2004
    
    
    2003TargetAllocation
    
    
    Actual
    
    
    
    
    
    
    Actualor Range
    
    
    Allocation
    
    
    Assets
    
    
    Allocation
    
    
    AssetsAsset category:Equity securities
    
    
    65
    %
    
    
    68
    %
    
    $
    39,114
    
    
    
    68
    %
    
    $
    36,102Debt securities
    
    
    32
    %
    
    
    28
    %
    
    
    15,910
    
    
    
    29
    %
    
    
    15,517Real estate
    
    
    0
    %
    
    
    0
    %
    
    
    
    
    
    
    0
    %
    
    
    Cash
    
    
    3
    %
    
    
    4
    %
    
    
    2,050
    
    
    
    3
    %
    
    
    1,767Other
    
    
    0
    %
    
    
    0
    %
    
    
    
    
    
    
    0
    %
    
    
    Total plan assets
    
    
    100
    %
    
    
    100
    %
    
    $
    57,074
    
    
    
    100
    %
    
    $
    53,386
 Any deviation from the target range of asset allocations must be approved by the Trusts
governing committee. The performance objective of the Trust is to outperform the return of the
Total Index Composite as constructed to reflect the target allocation weightings for each asset
class. This objective should be met over a market cycle, which is defined as a period not less
than three years or more than five years. Domestic equity securities (common stock, convertible
preferred stock and convertible bonds) should achieve a total return (after fees) that exceeds the
total return of an appropriate market index over a full market cycle of three to five years.
International equity securities (common stock, convertible preferred stock and convertible bonds),
either from developed or emerging markets, should achieve a total return (after fees) that exceeds
the total return of an appropriate market index over a full market cycle of three to five years.
Fixed income debt securities should achieve a total return (after fees) that exceeds the total
return of an appropriate market index over a full market cycle of three to five years. Cash
equivalent and short-term investments should achieve relative performance better than the 90-day
Treasury bills. When mutual funds are used by the Trust, those mutual funds should achieve a total
return that equals or exceeds the total return of each funds appropriate Lipper or Morningstar
category. Lipper and Morningstar are independent mutual fund rating and information services. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 63




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For investments in equity securities, no individual options or financial futures contracts are
purchased unless approved in writing by the Trusts governing committee. In addition, no private
placements or purchases of venture capital are allowed. No direct investments in foreign
securities are made unless available in ADRs on a U.S. exchange. The maximum commitment to a
particular industry, as defined by Standard & Poors, may not exceed 20 percent. The Trusts equity
managers vote all proxies in the best interest of the Trust without regards to social issues. The
Trusts governing committee reserves the right to comment on and exercise control over the response
to any individual proxy solicitation. For fixed income debt securities, corporate bonds purchased are limited to investment grade
securities as established by Moodys or Standard & Poors. At no time shall the lowest investment
grade make up more than 20 percent of the total market value of the Trusts fixed income holdings.
The total fixed income exposure from any single non-government or government agency issuer shall
not exceed 10 percent of the Trusts fixed income holdings. The average duration of the total
portfolio shall not exceed seven years. All interest and principal receipts are swept, as
received, into an alternative cash management vehicle until reallocated in accordance with the
Trusts core allocation. For investments in cash equivalent and short-term investments, the Trust utilizes a money
market mutual fund which invests in U.S. government and agency obligations, repurchase agreements
collateralized by U.S. government or agency securities, commercial paper, bankers acceptances,
certificate of deposits, delayed delivery transactions, reverse repurchase agreements, time
deposits and Euro dollar obligations. Bankers acceptances shall be made in larger banks (ranked
by assets) rated AA or better by Moodys and in conformance with all FDIC regulations concerning
capital requirements. Equity securities include Nobles ordinary shares in the amounts of $2,736,000 (5% of total
Domestic plan assets) and $1,968,000 (4% of total Domestic plan assets) at December 31, 2004, and
2003, respectively. Noble does not expect that it will be required to make a mandatory
contribution to its domestic plans in 2005, although Noble has made discretionary contributions in
prior years and expects it will consider making a discretionary contribution to its domestic plans
in 2005. Estimated benefit payments from our domestic plans are $2,255,000 for 2005, $2,440,000
for 2006, $2,567,000 for 2007, $2,950,000 for 2008, $3,039,000 for 2009 and $17,685,000 in the
aggregate for the five years thereafter. The expected rate of return on plan assets was based on historical returns on each asset type
and weighted based on the target asset allocation. Additional information regarding our international plans is summarized below. Our international pension plans invest in equity securities, fixed income debt securities, and
cash equivalents and other short-term investments. The weighted average asset allocations by asset category for the international pension plans
are as follows: Year Ended December 31,2004
    
    
    2003Actual
    
    
    
    
    
    
    ActualAllocation
    
    
    Assets
    
    
    Allocation
    
    
    AssetsAsset category:Equity securities
    
    
    62
    %
    
    $
    32,700
    
    
    
    62
    %
    
    $
    27,225Debt securities
    
    
    31
    %
    
    
    16,339
    
    
    
    34
    %
    
    
    15,240Real estate
    
    
    0
    %
    
    
    
    
    
    
    0
    %
    
    
    Cash
    
    
    7
    %
    
    
    3,446
    
    
    
    4
    %
    
    
    1,706Other
    
    
    0
    %
    
    
    76
    
    
    
    0
    %
    
    
    Total plan assets
    
    
    100
    %
    
    $
    52,561
    
    
    
    100
    %
    
    $
    44,171
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 64




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Both the Noble Enterprises Limited and Noble Drilling (Nederland) B.V. pension plans have a
targeted asset allocation of 100 percent debt securities. The investment objective for the Noble
Enterprises Limited plan assets is to earn a favorable return against the Salomon Brothers U.S.
Government Bond Index for all maturities greater than one year. The investment objective for the
Noble Drilling (Nederland) B.V. plan assets is to earn a favorable return against the Salomon
Brothers EMU Government Bond Index for all maturities greater than one year. We evaluate the
performance of these plans on an annual basis. In establishing an expected rate of return for
these plans assets, the current level of expected returns on risk free investments (primarily
government bonds), the historical level of the risk premium associated with the other asset classes
in which the portfolio is invested and expectations for future returns of each asset class were all
considered. The expected return for each class was then weighted based on the target asset
allocation (100 percent debt securities for both of these plans at December 31, 2004) to develop
the expected long-term rate of return on assets assumption for the plans. There is no target asset allocation for the Noble Drilling (U.K.) Limited pension plan.
However, the investment objectives of the plan, as adopted by the plans trustees, is to achieve a
favorable return against the Combined Actuarial Performance Service (CAPS) pooled fund median.
The CAPS pooled fund is a benchmark that attempts to reflect the performance of all pooled pension
funds in the United Kingdom. By achieving this objective, the trustees believe the plan will be
able to avoid significant volatility in the contribution rate and provide sufficient plan assets to
cover the plans benefit obligations were the plan to be liquidated. To achieve these objectives,
the trustees have given the plans investment managers full discretion in the day to day management
of the plans assets. The plans assets are divided between two investment managers. The
performance objective communicated to one of these investment managers is to achieve upper quartile
performance over a rolling five-year period against the CAPS pooled fund benchmark. The
performance objective communicated to the other investment manager is to exceed the CAPS pooled
fund benchmark by one percent per annum over a rolling three-year period. This investment manager
is prohibited by the trustees from investing in real estate. The trustees meet the investment
managers periodically to review and discuss their investment performance. The expected rate of
return on the plans assets is based on the plans asset allocation at December 31, 2004 and
assumes that equity securities will outperform fixed interest bonds issued by the United Kingdom
government by approximately 1.75 percent per annum. Noble expects to contribute $1,500,000 to its international plans in 2005. Estimated benefit
payments from our international plans are $720,000 for 2005, $746,000 for 2006, $900,000 for 2007,
$969,000 for 2008, $1,046,000 for 2009 and $9,363,000 in the aggregate for the five years
thereafter. We presently sponsor the Noble Drilling Corporation 401(k) Savings Restoration Plan
(Restoration Plan). The Restoration Plan is a nonqualified, unfunded employee benefit plan under
which certain highly compensated employees of the Company may elect to defer compensation in excess
of amounts deferrable under the Companys 401(k) savings plan, and receive employer matching
contributions (which are made in ordinary shares). The employer matching amount is limited in the
same manner as are employer matching contributions under the Companys 401(k) savings plan. Our
liability for this plan was $15,591,000 and $11,750,000 at December 31, 2004 and 2003,
respectively, and is included in Accrued payroll and related costs in the accompanying
Consolidated Balance Sheets. Although not considered plan assets, a grantor trust was established
from which payments for obligations under the Restoration Plan were made prior to the trusts
dissolution in December 2004. The grantor trust had a balance of $9,458,000 at December 31, 2003
and is included in Investments in marketable securities in the accompanying Consolidated Balance
Sheet at that date. We also maintained a trust that held ordinary shares of Noble for purposes of
funding our obligations under the benefit plans, including the Restoration Plan. This trust was
also dissolved in December 2004. This trust held 1,700,000 ordinary shares of Noble at December
31, 2003. These shares are classified as Treasury stock in the accompanying Consolidated Balance
Sheet at December 31, 2003. We presently sponsor a 401(k) savings plan, a medical plan and other plans for the benefit of
our employees. The cost of maintaining these plans aggregated $22,193,000, $20,220,000 and
$18,167,000 in 2004, 2003 and 2002, respectively. We do not provide post-retirement benefits (other
than pensions) or any post-employment benefits to our employees. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 65




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13  COMMITMENTS AND CONTINGENCIES In August 2004, an indirect, wholly-owned subsidiary of Noble was served as a named defendant
in two lawsuits filed in the Circuit Courts of the State of Mississippi involving numerous other
companies (not affiliated with Noble) as co-defendants. In December 2004, such subsidiary was
served as a named defendant in a third lawsuit filed in Mississippi Circuit Court. The lawsuits
seek an unspecified amount of monetary damages on behalf of approximately 130 named individuals
alleging personal injury or death, including claims under the Jones Act, purportedly resulting from
exposure to asbestos on drilling rigs and associated facilities during the period 1965 through
1986. The lawsuits are in preliminary stages and we have not confirmed the number of plaintiffs,
if any, that were employed by our subsidiary or otherwise associated with our drilling operations
during the relevant period. We intend to defend vigorously against the litigation, and based on
information currently available, we do not believe the resolution of these lawsuits will have a
material adverse effect on our financial position, results of operations or cash flows. Noble Asset Company Limited (NACL), a wholly-owned, indirect subsidiary of Noble, was named
one of 21 parties served a Show Cause Notice issued by the Commissioner of Customs (Prev.), Mumbai,
India in August 2003. The Show Cause Notice concerns alleged violations of Indian Customs laws and
regulations regarding one of our jackup drilling rigs. The Commissioner alleges certain violations
to have occurred before, at the time of, and after NACL acquired the rig from the rigs previous
owner. We maintain that NACL has acted in accordance with all Indian Customs laws and regulations
and believe the Show Cause Notice is without merit as against NACL. In the purchase agreement for
the rig, NACL received contractual indemnification against liability for Indian customs duty from
the rigs previous owner. In connection with the export of the rig from India in 2001, NACL posted
a bank guarantee in the amount of $3,300,000 and a customs bond in the amount of $21,340,000, both
of which remain in place. NACL filed its initial replies to the Show Cause Notice in December
2003. NACL appeared through counsel before the Commissioner in September 2004 and made oral
arguments and written submissions. The Commissioner has not ruled to date. We do not believe the
resolution of this matter will have a material adverse effect on our financial position, results of
operations or cash flows. We are a defendant in certain claims and litigation arising out of operations in the normal
course of business. In the opinion of management, uninsured losses, if any, will not be material
to our financial position, results of operations or cash flows. In connection with several projects, we have entered into agreements with various vendors to
purchase or construct property and equipment that generally have long lead times for delivery. Any
equipment purchased for a project on which we do not proceed would be used, where applicable, as
capital spares for other units in our fleet. As of December 31, 2004, we had approximately
$32,000,000 of outstanding purchase commitments related to these projects. At December 31, 2004, we had certain noncancelable, long-term operating leases, principally
for office space and facilities, with various expiration dates. Future minimum rentals under these
leases aggregate $3,525,000 for 2005, $2,889,000 for 2006, $2,444,000 for 2007, $2,257,000 for
2008, $2,256,000 for 2009 and $6,157,000 thereafter. Rental expense for all operating leases was
$4,896,000, $4,038,000 and $3,688,000 for the years ended December 31, 2004, 2003 and 2002,
respectively. We have entered into employment agreements with each of our executive officers, as well as
certain other employees. These agreements become effective upon a change of control of Noble
(within the meaning set forth in the agreements) or a termination of employment in connection with
or in anticipation of a change of control, and remain effective for three years thereafter. These
agreements provide for compensation and certain other benefits under such circumstances. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 66




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14  UNAUDITED INTERIM FINANCIAL DATA Unaudited interim consolidated financial information for the years ended December 31, 2004 and
2003 is as follows: Quarter EndedMarch 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 312004Operating revenues
    
    $
    245,433
    
    
    $
    253,009
    
    
    $
    265,638
    
    
    $
    302,151Operating income
    
    
    38,842
    
    
    
    46,561
    
    
    
    44,015
    
    
    
    57,754Net income
    
    
    28,260
    
    
    
    34,381
    
    
    
    30,571
    
    
    
    52,874Net income per share (1):Basic
    
    $
    0.21
    
    
    $
    0.26
    
    
    $
    0.23
    
    
    $
    0.39Diluted
    
    
    0.21
    
    
    
    0.26
    
    
    
    0.23
    
    
    
    0.39
 Quarter EndedMarch 31
    
    
    June 30
    
    
    Sept. 30
    
    
    Dec. 312003Operating revenues
    
    $
    245,008
    
    
    $
    247,920
    
    
    $
    254,646
    
    
    $
    239,806Operating income
    
    
    54,718
    
    
    
    58,670
    
    
    
    67,157
    
    
    
    40,593Net income
    
    
    39,421
    
    
    
    43,738
    
    
    
    52,957
    
    
    
    30,300Net income per share (1):Basic
    
    $
    0.30
    
    
    $
    0.33
    
    
    $
    0.40
    
    
    $
    0.23Diluted
    
    
    0.30
    
    
    
    0.33
    
    
    
    0.40
    
    
    
    0.23
   (1)
    
    Earnings per share is computed independently for each of the quarters presented. Therefore,
the sum of the quarters earnings per share may not agree to the total computed for the year. NOTE 15  PARENT GUARANTEE OF REGISTERED SECURITIES ISSUED BY SUBSIDIARY Noble and Noble Holding are guarantors for certain debt securities issued by Noble Drilling.
These debt securities include Noble Drillings 6.95% Senior Notes due 2009 and its 7.50% Senior
Notes due 2019. The outstanding principal balances of the 6.95% Senior Notes and the 7.50% Senior
Notes at December 31, 2004 were $149,954,000 and $201,695,000, respectively. Noble Drilling is an
indirect, wholly-owned subsidiary of Noble and a direct, wholly-owned subsidiary of Noble Holding.
Nobles and Noble Holdings guarantee of these securities is full and unconditional. The following consolidating financial statements of Noble, Noble Holding, Noble Drilling and
all other subsidiaries are included so that separate financial statements of Noble Drilling are
not required to be filed with the United States Securities and Exchange Commission. These
consolidating financial statements present Nobles and Noble Holdings investments in both
consolidated and unconsolidated affiliates using the equity method of accounting. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.) 67




---



##### Table of Contents



NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2004
(In thousands) NobleHolding
    
    
    NobleNoble
    
    
    (Subsidiary
    
    
    Drilling
    
    
    Other
    
    
    Consolidating(Guarantor)
    
    
    (Guarantor)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCURRENT ASSETSCash and cash equivalents
    
    $
    8,130
    
    
    $
    
    
    
    $
    
    
    
    $
    50,660
    
    
    $
    
    
    
    $
    58,790Investments in marketable securities
    
    
    23,707
    
    
    
    
    
    
    
    
    
    
    
    109,081
    
    
    
    
    
    
    
    132,788Accounts receivable
    
    
    
    
    
    
    
    
    
    
    7,434
    
    
    
    197,589
    
    
    
    
    
    
    
    205,023Inventories
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,013
    
    
    
    
    
    
    
    4,013Prepaid expenses
    
    
    
    
    
    
    
    
    
    
    1,285
    
    
    
    11,169
    
    
    
    
    
    
    
    12,454Accounts receivable from affiliates
    
    
    177,091
    
    
    
    
    
    
    
    588,705
    
    
    
    
    
    
    
    (765,796
    )
    
    
    Other current assets
    
    
    19,918
    
    
    
    
    
    
    
    262
    
    
    
    11,963
    
    
    
    (19,928
    )
    
    
    12,215Total current assets
    
    
    228,846
    
    
    
    
    
    
    
    597,686
    
    
    
    384,475
    
    
    
    (785,724
    )
    
    
    425,283PROPERTY AND EQUIPMENTDrilling equipment and facilities
    
    
    
    
    
    
    
    
    
    
    99,624
    
    
    
    3,639,714
    
    
    
    
    
    
    
    3,739,338Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,550
    
    
    
    
    
    
    
    65,550
    
    
    
    
    
    
    
    99,624
    
    
    
    3,705,264
    
    
    
    
    
    
    
    3,804,888Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    (51,581
    )
    
    
    (1,009,687
    )
    
    
    
    
    
    
    (1,061,268
    )
    
    
    
    
    
    
    
    48,043
    
    
    
    2,695,577
    
    
    
    
    
    
    
    2,743,620NOTES RECEIVABLE FROM AFFILIATES
    
    
    492,139
    
    
    
    
    
    
    
    44,159
    
    
    
    
    
    
    
    (536,298
    )
    
    
    INVESTMENTS IN AFFILIATES
    
    
    1,664,904
    
    
    
    1,987,843
    
    
    
    1,773,952
    
    
    
    
    
    
    
    (5,426,699
    )
    
    
    INVESTMENT IN AND ADVANCES
TO JOINT VENTURES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,804
    
    
    
    
    
    
    
    18,804OTHER ASSETS
    
    
    
    
    
    
    
    
    
    
    5,929
    
    
    
    114,337
    
    
    
    
    
    
    
    120,266$
    2,385,889
    
    
    $
    1,987,843
    
    
    $
    2,469,769
    
    
    $
    3,213,193
    
    
    $
    (6,748,721
    )
    
    $
    3,307,973LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESCurrent maturities of long-term debt
    
    $
    
    
    
    $
    19,682
    
    
    $
    
    
    
    $
    8,361
    
    
    $
    (19,682
    )
    
    $
    8,361Accounts payable
    
    
    
    
    
    
    
    
    
    
    2,374
    
    
    
    80,638
    
    
    
    
    
    
    
    83,012Accrued payroll and related costs
    
    
    26
    
    
    
    
    
    
    
    15,222
    
    
    
    45,663
    
    
    
    
    
    
    
    60,911Taxes payable
    
    
    1,429
    
    
    
    
    
    
    
    
    
    
    
    21,454
    
    
    
    
    
    
    
    22,883Interest payable
    
    
    
    
    
    
    
    
    
    
    7,912
    
    
    
    1,315
    
    
    
    (246
    )
    
    
    8,981Accounts payable to affiliates
    
    
    
    
    
    
    114,330
    
    
    
    
    
    
    
    651,466
    
    
    
    (765,796
    )
    
    
    Other current liabilities
    
    
    
    
    
    
    
    
    
    
    809
    
    
    
    29,209
    
    
    
    
    
    
    
    30,018Total current liabilities
    
    
    1,455
    
    
    
    134,012
    
    
    
    26,317
    
    
    
    838,106
    
    
    
    (785,724
    )
    
    
    214,166LONG-TERM DEBT
    
    
    
    
    
    
    
    
    
    
    451,650
    
    
    
    51,638
    
    
    
    
    
    
    
    503,288NOTES PAYABLE TO AFFILIATES
    
    
    
    
    
    
    492,139
    
    
    
    
    
    
    
    44,159
    
    
    
    (536,298
    )
    
    
    DEFERRED INCOME TAXES
    
    
    
    
    
    
    (2,700
    )
    
    
    15,083
    
    
    
    194,123
    
    
    
    
    
    
    
    206,506OTHER LIABILITIES
    
    
    
    
    
    
    1,043
    
    
    
    4,674
    
    
    
    2,393
    
    
    
    
    
    
    
    8,110COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MINORITY INTEREST
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,531
    )
    
    
    
    
    
    
    (8,531
    )1,455
    
    
    
    624,494
    
    
    
    497,724
    
    
    
    1,121,888
    
    
    
    (1,322,022
    )
    
    
    923,539SHAREHOLDERS EQUITYOrdinary Shares-par value $0.10 per share
    
    
    13,441
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,441Capital in excess of par value
    
    
    926,652
    
    
    
    870,744
    
    
    
    870,744
    
    
    
    691,289
    
    
    
    (2,432,777
    )
    
    
    926,652Retained earnings
    
    
    1,452,974
    
    
    
    492,605
    
    
    
    1,101,301
    
    
    
    1,397,478
    
    
    
    (2,991,384
    )
    
    
    1,452,974Treasury stock, at cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock (unearned compensation)
    
    
    (11,171
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,171
    )Accumulated other comprehensive loss
    
    
    2,538
    
    
    
    
    
    
    
    
    
    
    
    2,538
    
    
    
    (2,538
    )
    
    
    2,5382,384,434
    
    
    
    1,363,349
    
    
    
    1,972,045
    
    
    
    2,091,305
    
    
    
    (5,426,699
    )
    
    
    2,384,434$
    2,385,889
    
    
    $
    1,987,843
    
    
    $
    2,469,769
    
    
    $
    3,213,193
    
    
    $
    (6,748,721
    )
    
    $
    3,307,973
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 68




---



##### Table of Contents



NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2003
(In thousands) NobleHolding
    
    
    NobleNoble
    
    
    (Subsidiary
    
    
    Drilling
    
    
    Other
    
    
    Consolidating(Guarantor)
    
    
    (Guarantor)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    33,991
    
    
    $
    
    
    
    $
    
    
    
    $
    28,576
    
    
    $
    
    
    
    $
    62,567Investments in marketable securities
    
    
    24,798
    
    
    
    
    
    
    
    
    
    
    
    150,478
    
    
    
    
    
    
    
    175,276Accounts receivable
    
    
    
    
    
    
    
    
    
    
    3,144
    
    
    
    146,091
    
    
    
    
    
    
    
    149,235Inventories
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,086
    
    
    
    
    
    
    
    4,086Prepaid expenses
    
    
    
    
    
    
    
    
    
    
    3,376
    
    
    
    8,433
    
    
    
    
    
    
    
    11,809Accounts receivable from affiliates
    
    
    17,239
    
    
    
    
    
    
    
    487,693
    
    
    
    
    
    
    
    (504,932
    )
    
    
    Other current assets
    
    
    26,098
    
    
    
    
    
    
    
    3,977
    
    
    
    14,926
    
    
    
    (26,015
    )
    
    
    18,986Total current assets
    
    
    102,126
    
    
    
    
    
    
    
    498,190
    
    
    
    352,590
    
    
    
    (530,947
    )
    
    
    421,959PROPERTY AND EQUIPMENTDrilling equipment and facilities
    
    
    
    
    
    
    
    
    
    
    100,647
    
    
    
    3,353,516
    
    
    
    
    
    
    
    3,454,163Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,591
    
    
    
    
    
    
    
    64,591
    
    
    
    
    
    
    
    100,647
    
    
    
    3,418,107
    
    
    
    
    
    
    
    3,518,754Accumulated depreciation
    
    
    
    
    
    
    
    
    
    
    (47,380
    )
    
    
    (845,508
    )
    
    
    
    
    
    
    (892,888
    )
    
    
    
    
    
    
    
    53,267
    
    
    
    2,572,599
    
    
    
    
    
    
    
    2,625,866NOTES RECEIVABLE FROM AFFILIATES
    
    
    511,821
    
    
    
    
    
    
    
    169,159
    
    
    
    4,629
    
    
    
    (685,609
    )
    
    
    INVESTMENTS IN AFFILIATES
    
    
    1,563,494
    
    
    
    1,864,823
    
    
    
    1,643,124
    
    
    
    
    
    
    
    (5,071,441
    )
    
    
    INVESTMENT IN AND ADVANCES
TO JOINT VENTURES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,868
    
    
    
    
    
    
    
    19,868OTHER ASSETS
    
    
    
    
    
    
    
    
    
    
    7,333
    
    
    
    114,607
    
    
    
    
    
    
    
    121,940$
    2,177,441
    
    
    $
    1,864,823
    
    
    $
    2,371,073
    
    
    $
    3,064,293
    
    
    $
    (6,287,997
    )
    
    $
    3,189,633LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESCurrent maturities of long-term debt
    
    $
    
    
    
    $
    17,951
    
    
    $
    
    
    
    $
    47,666
    
    
    $
    (17,951
    )
    
    $
    47,666Accounts payable
    
    
    (6
    )
    
    
    
    
    
    
    4,180
    
    
    
    83,004
    
    
    
    
    
    
    
    87,178Accrued payroll and related costs
    
    
    
    
    
    
    
    
    
    
    11,412
    
    
    
    37,099
    
    
    
    
    
    
    
    48,511Taxes payable
    
    
    (958
    )
    
    
    
    
    
    
    
    
    
    
    32,692
    
    
    
    
    
    
    
    31,734Interest payable
    
    
    
    
    
    
    8,064
    
    
    
    7,799
    
    
    
    1,585
    
    
    
    (8,064
    )
    
    
    9,384Accounts payable to affiliates
    
    
    
    
    
    
    57,527
    
    
    
    
    
    
    
    447,405
    
    
    
    (504,932
    )
    
    
    Other current liabilities
    
    
    (20
    )
    
    
    
    
    
    
    668
    
    
    
    18,902
    
    
    
    
    
    
    
    19,550Total current liabilities
    
    
    (984
    )
    
    
    83,542
    
    
    
    24,059
    
    
    
    668,353
    
    
    
    (530,947
    )
    
    
    244,023LONG-TERM DEBT
    
    
    
    
    
    
    
    
    
    
    476,640
    
    
    
    65,267
    
    
    
    
    
    
    
    541,907NOTES PAYABLE TO AFFILIATES
    
    
    
    
    
    
    511,821
    
    
    
    
    
    
    
    173,788
    
    
    
    (685,609
    )
    
    
    DEFERRED INCOME TAXES
    
    
    
    
    
    
    
    
    
    
    16,264
    
    
    
    197,093
    
    
    
    
    
    
    
    213,357OTHER LIABILITIES
    
    
    
    
    
    
    
    
    
    
    5,085
    
    
    
    13,116
    
    
    
    
    
    
    
    18,201COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    MINORITY INTEREST
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,280
    )
    
    
    
    
    
    
    (6,280
    )(984
    )
    
    
    595,363
    
    
    
    522,048
    
    
    
    1,111,337
    
    
    
    (1,216,556
    )
    
    
    1,011,208SHAREHOLDERS EQUITYOrdinary Shares-par value $0.10 per share
    
    
    13,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,389Capital in excess of par value
    
    
    915,240
    
    
    
    870,744
    
    
    
    870,744
    
    
    
    693,687
    
    
    
    (2,435,175
    )
    
    
    915,240Retained earnings
    
    
    1,306,888
    
    
    
    398,716
    
    
    
    978,281
    
    
    
    1,259,259
    
    
    
    (2,636,256
    )
    
    
    1,306,888Treasury stock, at cost
    
    
    (49,121
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,121
    )Restricted stock (unearned compensation)
    
    
    (7,981
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,981
    )Accumulated other comprehensive income
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    (10
    )
    
    
    102,178,425
    
    
    
    1,269,460
    
    
    
    1,849,025
    
    
    
    1,952,956
    
    
    
    (5,071,441
    )
    
    
    2,178,425$
    2,177,441
    
    
    $
    1,864,823
    
    
    $
    2,371,073
    
    
    $
    3,064,293
    
    
    $
    (6,287,997
    )
    
    $
    3,189,633
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 69




---



##### Table of Contents



NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2004
(In thousands) NobleHolding
    
    
    NobleNoble
    
    
    (Subsidiary
    
    
    Drilling
    
    
    Other
    
    
    Consolidating(Guarantor)
    
    
    (Guarantor)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalOPERATING REVENUESContract drilling services
    
    $
    
    
    
    $
    
    
    
    $
    30,423
    
    
    $
    906,991
    
    
    $
    
    
    
    $
    937,414Reimbursables
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    50,206
    
    
    
    
    
    
    
    50,234Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,327
    
    
    
    
    
    
    
    51,327Engineering, consulting and other
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    27,239
    
    
    
    
    
    
    
    27,256
    
    
    
    
    
    
    
    30,468
    
    
    
    1,035,763
    
    
    
    
    
    
    
    1,066,231OPERATING COSTS AND EXPENSESContract drilling services
    
    
    (334
    )
    
    
    
    
    
    
    9,749
    
    
    
    553,093
    
    
    
    
    
    
    
    562,508Reimbursables
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    44,582
    
    
    
    
    
    
    
    44,610Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,669
    
    
    
    
    
    
    
    42,669Engineering, consulting and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,339
    
    
    
    
    
    
    
    27,339Depreciation
    
    
    
    
    
    
    
    
    
    
    4,641
    
    
    
    163,578
    
    
    
    
    
    
    
    168,219Selling, general and administrative
    
    
    578
    
    
    
    
    
    
    
    1,038
    
    
    
    32,098
    
    
    
    
    
    
    
    33,714244
    
    
    
    
    
    
    
    15,456
    
    
    
    863,359
    
    
    
    
    
    
    
    879,059OPERATING INCOME
    
    
    (244
    )
    
    
    
    
    
    
    15,012
    
    
    
    172,404
    
    
    
    
    
    
    
    187,172OTHER INCOME (EXPENSE)Equity earnings in affiliates (net of tax)
    
    
    101,280
    
    
    
    123,020
    
    
    
    130,828
    
    
    
    
    
    
    
    (355,128
    )
    
    
    Interest expense
    
    
    
    
    
    
    (47,472
    )
    
    
    (27,935
    )
    
    
    (6,454
    )
    
    
    47,472
    
    
    
    (34,389
    )Other, net
    
    
    47,928
    
    
    
    
    
    
    
    911
    
    
    
    7,667
    
    
    
    (47,472
    )
    
    
    9,034INCOME BEFORE INCOME TAXES
    
    
    148,964
    
    
    
    75,548
    
    
    
    118,816
    
    
    
    173,617
    
    
    
    (355,128
    )
    
    
    161,817INCOME TAX (PROVISION) BENEFIT
    
    
    (2,878
    )
    
    
    18,341
    
    
    
    4,204
    
    
    
    (35,398
    )
    
    
    
    
    
    
    (15,731
    )NET INCOME
    
    $
    146,086
    
    
    $
    93,889
    
    
    $
    123,020
    
    
    $
    138,219
    
    
    $
    (355,128
    )
    
    $
    146,086
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 70




---



##### Table of Contents



NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2003
(In thousands) NobleHolding
    
    
    NobleNoble
    
    
    (Subsidiary
    
    
    Drilling
    
    
    Other
    
    
    Consolidating(Guarantor)
    
    
    (Guarantor)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalOPERATING REVENUESContract drilling services
    
    $
    
    
    
    $
    
    
    
    $
    13,544
    
    
    $
    876,059
    
    
    $
    
    
    
    $
    889,603Reimbursables
    
    
    
    
    
    
    
    
    
    
    350
    
    
    
    43,864
    
    
    
    
    
    
    
    44,214Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,492
    
    
    
    
    
    
    
    28,492Engineering, consulting and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,071
    
    
    
    
    
    
    
    25,071
    
    
    
    
    
    
    
    13,894
    
    
    
    973,486
    
    
    
    
    
    
    
    987,380OPERATING COSTS AND EXPENSESContract drilling services
    
    
    (27
    )
    
    
    1
    
    
    
    10,348
    
    
    
    494,716
    
    
    
    
    
    
    
    505,038Reimbursables
    
    
    
    
    
    
    
    
    
    
    350
    
    
    
    38,674
    
    
    
    
    
    
    
    39,024Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,642
    
    
    
    
    
    
    
    22,642Engineering, consulting and other
    
    
    
    
    
    
    
    
    
    
    (150
    )
    
    
    28,399
    
    
    
    
    
    
    
    28,249Depreciation
    
    
    
    
    
    
    
    
    
    
    3,851
    
    
    
    144,276
    
    
    
    
    
    
    
    148,127Selling, general and administrative
    
    
    300
    
    
    
    
    
    
    
    1,025
    
    
    
    25,309
    
    
    
    
    
    
    
    26,634Gain on sale of property and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,472
    )
    
    
    
    
    
    
    (3,472
    )273
    
    
    
    1
    
    
    
    15,424
    
    
    
    750,544
    
    
    
    
    
    
    
    766,242OPERATING (LOSS) INCOME
    
    
    (273
    )
    
    
    (1
    )
    
    
    (1,530
    )
    
    
    222,942
    
    
    
    
    
    
    
    221,138OTHER INCOME (EXPENSE)Equity earnings in affiliates (net of tax)
    
    
    120,460
    
    
    
    164,802
    
    
    
    180,861
    
    
    
    
    
    
    
    (466,123
    )
    
    
    Interest expense
    
    
    
    
    
    
    (48,956
    )
    
    
    (27,782
    )
    
    
    (16,259
    )
    
    
    52,706
    
    
    
    (40,291
    )Other, net
    
    
    49,166
    
    
    
    
    
    
    
    4,606
    
    
    
    5,071
    
    
    
    (52,706
    )
    
    
    6,137INCOME BEFORE INCOME TAXES
    
    
    169,353
    
    
    
    115,845
    
    
    
    156,155
    
    
    
    211,754
    
    
    
    (466,123
    )
    
    
    186,984INCOME TAX (PROVISION) BENEFIT
    
    
    (2,937
    )
    
    
    17,135
    
    
    
    8,647
    
    
    
    (43,413
    )
    
    
    
    
    
    
    (20,568
    )NET INCOME
    
    $
    166,416
    
    
    $
    132,980
    
    
    $
    164,802
    
    
    $
    168,341
    
    
    $
    (466,123
    )
    
    $
    166,416
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 71




---



##### Table of Contents



NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2002
(In thousands) NobleHolding
    
    
    NobleNoble
    
    
    (Subsidiary
    
    
    Drilling
    
    
    Other
    
    
    Consolidating(Guarantor)
    
    
    (Guarantor)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalOPERATING REVENUESContract drilling services
    
    $
    
    
    
    $
    
    
    
    $
    11,336
    
    
    $
    899,083
    
    
    $
    
    
    
    $
    910,419Reimbursables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,183
    
    
    
    
    
    
    
    26,183Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,416
    
    
    
    
    
    
    
    26,416Engineering, consulting and other
    
    
    
    
    
    
    
    
    
    
    276
    
    
    
    27,230
    
    
    
    (276
    )
    
    
    27,230
    
    
    
    
    
    
    
    11,612
    
    
    
    978,912
    
    
    
    (276
    )
    
    
    990,248OPERATING COSTS AND EXPENSESContract drilling services
    
    
    217
    
    
    
    
    
    
    
    9,923
    
    
    
    478,765
    
    
    
    (276
    )
    
    
    488,629Reimbursables
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,058
    
    
    
    
    
    
    
    23,058Labor contract drilling services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,951
    
    
    
    
    
    
    
    20,951Engineering, consulting and other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,868
    
    
    
    
    
    
    
    27,868Depreciation
    
    
    
    
    
    
    
    
    
    
    5,718
    
    
    
    119,436
    
    
    
    
    
    
    
    125,154Selling, general and administrative
    
    
    3,087
    
    
    
    
    
    
    
    (4,012
    )
    
    
    27,864
    
    
    
    
    
    
    
    26,939Gain on sale of property and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,908
    )
    
    
    
    
    
    
    (5,908
    )3,304
    
    
    
    
    
    
    
    11,629
    
    
    
    692,034
    
    
    
    (276
    )
    
    
    706,691OPERATING (LOSS) INCOME
    
    
    (3,304
    )
    
    
    
    
    
    
    (17
    )
    
    
    286,878
    
    
    
    
    
    
    
    283,557OTHER INCOME (EXPENSE)Equity earnings in affiliates (net of tax)
    
    
    193,105
    
    
    
    207,291
    
    
    
    220,381
    
    
    
    
    
    
    
    (620,777
    )
    
    
    Interest expense
    
    
    
    
    
    
    (20,952
    )
    
    
    (25,988
    )
    
    
    (16,634
    )
    
    
    20,952
    
    
    
    (42,622
    )Other, net
    
    
    20,959
    
    
    
    
    
    
    
    5,867
    
    
    
    (3,484
    )
    
    
    (20,952
    )
    
    
    2,390INCOME BEFORE INCOME TAXES
    
    
    210,760
    
    
    
    186,339
    
    
    
    200,243
    
    
    
    266,760
    
    
    
    (620,777
    )
    
    
    243,325INCOME TAX (PROVISION) BENEFIT
    
    
    (1,257
    )
    
    
    7,333
    
    
    
    7,048
    
    
    
    (46,946
    )
    
    
    
    
    
    
    (33,822
    )NET INCOME
    
    $
    209,503
    
    
    $
    193,672
    
    
    $
    207,291
    
    
    $
    219,814
    
    
    $
    (620,777
    )
    
    $
    209,503
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 72




---



##### Table of Contents



NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2004
(In thousands) NobleHolding
    
    
    NobleNoble
    
    
    (Subsidiary
    
    
    Drilling
    
    
    Other
    
    
    Consolidating(Guarantor)
    
    
    (Guarantor)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCASH FLOWS FROM OPERATING
ACTIVITIESNet income
    
    $
    146,086
    
    
    $
    93,889
    
    
    $
    123,020
    
    
    $
    138,219
    
    
    $
    (355,128
    )
    
    $
    146,086Adjustments to reconcile net income to net cash
(used for) provided by operating activities:Depreciation, and amortization of deferred repairs
and maintenance
    
    
    
    
    
    
    
    
    
    
    5,939
    
    
    
    203,184
    
    
    
    
    
    
    
    209,123Deferred income tax provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,022
    
    
    
    
    
    
    
    5,022Loss on sales of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129
    
    
    
    
    
    
    
    129Equity in income of joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,931
    )
    
    
    
    
    
    
    (3,931
    )Distributions received from joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,700
    
    
    
    
    
    
    
    2,700Compensation expense from stock-based plans
    
    
    5,753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,753Equity earnings in affiliates
    
    
    (101,280
    )
    
    
    (123,020
    )
    
    
    (130,828
    )
    
    
    
    
    
    
    355,128
    
    
    
    Dissolution of rabbi trust
    
    
    11,945
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,945Other
    
    
    
    
    
    
    (1,657
    )
    
    
    (188
    )
    
    
    (2,183
    )
    
    
    
    
    
    
    (4,028
    )Changes in current assets and liabilities,
net of acquired working capital:Accounts receivable
    
    
    
    
    
    
    
    
    
    
    (4,290
    )
    
    
    (51,498
    )
    
    
    
    
    
    
    (55,788
    )Accounts receivable from affiliates
    
    
    (146,459
    )
    
    
    
    
    
    
    23,409
    
    
    
    
    
    
    
    123,050
    
    
    
    Other current assets
    
    
    6,180
    
    
    
    
    
    
    
    5,806
    
    
    
    (10,799
    )
    
    
    
    
    
    
    1,187Accounts payable
    
    
    6
    
    
    
    
    
    
    
    (1,806
    )
    
    
    (2,364
    )
    
    
    
    
    
    
    (4,164
    )Accounts payable to affiliates
    
    
    
    
    
    
    56,803
    
    
    
    
    
    
    
    66,247
    
    
    
    (123,050
    )
    
    
    Other current liabilities
    
    
    2,433
    
    
    
    (8,064
    )
    
    
    4,064
    
    
    
    19,754
    
    
    
    
    
    
    
    18,187Net cash (used for) provided by
operating activities
    
    
    (75,336
    )
    
    
    17,951
    
    
    
    25,126
    
    
    
    364,480
    
    
    
    
    
    
    
    332,221CASH FLOWS FROM INVESTING
ACTIVITIESAcquisitions and related capital upgrades
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110,548
    )
    
    
    
    
    
    
    (110,548
    )Other capital expenditures
    
    
    
    
    
    
    
    
    
    
    334
    
    
    
    (150,827
    )
    
    
    
    
    
    
    (150,493
    )Deferred repair and maintenance expenditures
    
    
    
    
    
    
    
    
    
    
    (460
    )
    
    
    (72,488
    )
    
    
    
    
    
    
    (72,948
    )Repayments from affiliates
    
    
    17,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,951
    )
    
    
    Proceeds from sales of property and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,135
    
    
    
    
    
    
    
    2,135Repayments from joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,295
    
    
    
    
    
    
    
    2,295Investment in marketable securities
    
    
    (168,300
    )
    
    
    
    
    
    
    
    
    
    
    (64,916
    )
    
    
    
    
    
    
    (233,216
    )Proceeds from sales of marketable securities
    
    
    160,466
    
    
    
    
    
    
    
    
    
    
    
    104,886
    
    
    
    
    
    
    
    265,352Net cash provided by (used for)
investing activities
    
    
    10,117
    
    
    
    
    
    
    
    (126
    )
    
    
    (289,463
    )
    
    
    (17,951
    )
    
    
    (297,423
    )CASH FLOWS FROM FINANCING
ACTIVITIESPayments of borrowing on credit facility
    
    
    
    
    
    
    
    
    
    
    (25,000
    )
    
    
    
    
    
    
    
    
    
    
    (25,000
    )Payment of other long-term debt
    
    
    
    
    
    
    (17,951
    )
    
    
    
    
    
    
    (52,933
    )
    
    
    17,951
    
    
    
    (52,933
    )Proceeds from issuance of ordinary shares
    
    
    79,072
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,072Repurchase of ordinary shares
    
    
    (39,714
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,714
    )Net cash provided by (used for)
financing activities
    
    
    39,358
    
    
    
    (17,951
    )
    
    
    (25,000
    )
    
    
    (52,933
    )
    
    
    17,951
    
    
    
    (38,575
    )(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS
    
    
    (25,861
    )
    
    
    
    
    
    
    
    
    
    
    22,084
    
    
    
    
    
    
    
    (3,777
    )CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
    
    
    33,991
    
    
    
    
    
    
    
    
    
    
    
    28,576
    
    
    
    
    
    
    
    62,567CASH AND CASH EQUIVALENTS,
END OF YEAR
    
    $
    8,130
    
    
    $
    
    
    
    $
    
    
    
    $
    50,660
    
    
    $
    
    
    
    $
    58,790
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 73




---



##### Table of Contents



NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2003
(In thousands) NobleHolding
    
    
    NobleNoble
    
    
    (Subsidiary
    
    
    Drilling
    
    
    Other
    
    
    Consolidating(Guarantor)
    
    
    (Guarantor)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCASH FLOWS FROM OPERATING
ACTIVITIESNet income
    
    $
    166,416
    
    
    $
    132,980
    
    
    $
    164,802
    
    
    $
    168,341
    
    
    $
    (466,123
    )
    
    $
    166,416Adjustments
to reconcile net income to net cash provided by operating activities:Depreciation, and amortization of deferred repair
and maintenance
    
    
    
    
    
    
    
    
    
    
    4,636
    
    
    
    177,954
    
    
    
    
    
    
    
    182,590Deferred income tax provision
    
    
    
    
    
    
    
    
    
    
    194
    
    
    
    4,182
    
    
    
    
    
    
    
    4,376Loss on sales of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    382
    
    
    
    
    
    
    
    382Equity in income of joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,307
    )
    
    
    
    
    
    
    (2,307
    )Compensation expense from stock-based plans
    
    
    4,627
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,627Gain on sale of interest in deepwater
oil and gas properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,472
    )
    
    
    
    
    
    
    (3,472
    )Discretionary pension funding
    
    
    
    
    
    
    
    
    
    
    (6,900
    )
    
    
    (10,200
    )
    
    
    
    
    
    
    (17,100
    )Equity earnings in affiliates
    
    
    (120,460
    )
    
    
    (164,802
    )
    
    
    (180,861
    )
    
    
    
    
    
    
    466,123
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    (2,430
    )
    
    
    3,948
    
    
    
    
    
    
    
    1,518Other changes in current assets and liabilities,
net of acquired working capital:Accounts receivable
    
    
    
    
    
    
    
    
    
    
    (1,771
    )
    
    
    17,149
    
    
    
    
    
    
    
    15,378Accounts receivable from affiliates
    
    
    
    
    
    
    
    
    
    
    41,865
    
    
    
    
    
    
    
    (41,865
    )
    
    
    Other current assets
    
    
    (9,681
    )
    
    
    
    
    
    
    (7,094
    )
    
    
    4,694
    
    
    
    
    
    
    
    (12,081
    )Accounts payable
    
    
    (6
    )
    
    
    
    
    
    
    3,161
    
    
    
    19,245
    
    
    
    
    
    
    
    22,400Accounts payable to affiliates
    
    
    (15,408
    )
    
    
    40,147
    
    
    
    
    
    
    
    (66,604
    )
    
    
    41,865
    
    
    
    Other current liabilities
    
    
    (1,026
    )
    
    
    8,064
    
    
    
    3,678
    
    
    
    (8,135
    )
    
    
    
    
    
    
    2,581Net cash provided by
operating activities
    
    
    24,462
    
    
    
    16,389
    
    
    
    19,280
    
    
    
    305,177
    
    
    
    
    
    
    
    365,308CASH FLOWS FROM INVESTING
ACTIVITIESAcquisitions and related capital upgrades
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (194,400
    )
    
    
    
    
    
    
    (194,400
    )Other capital expenditures
    
    
    
    
    
    
    
    
    
    
    (16,411
    )
    
    
    (96,323
    )
    
    
    
    
    
    
    (112,734
    )Deferred repair and maintenance expenditures
    
    
    
    
    
    
    
    
    
    
    (2,869
    )
    
    
    (34,115
    )
    
    
    
    
    
    
    (36,984
    )Repayments from affiliates
    
    
    16,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,389
    )
    
    
    Proceeds from sales of property and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,606
    
    
    
    
    
    
    
    1,606Proceeds from sale of interest in deepwater
oil and gas properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,200
    
    
    
    
    
    
    
    5,200Repayments from joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,977
    
    
    
    
    
    
    
    4,977Investment in marketable securities
    
    
    (97,385
    )
    
    
    
    
    
    
    
    
    
    
    (112,635
    )
    
    
    
    
    
    
    (210,020
    )Proceeds from sales of marketable securities
    
    
    71,776
    
    
    
    
    
    
    
    
    
    
    
    167,509
    
    
    
    
    
    
    
    239,285Net cash used for investing activities
    
    
    (9,220
    )
    
    
    
    
    
    
    (19,280
    )
    
    
    (258,181
    )
    
    
    (16,389
    )
    
    
    (303,070
    )CASH FLOWS FROM FINANCING
ACTIVITIESPayment of long-term debt
    
    
    
    
    
    
    (16,389
    )
    
    
    
    
    
    
    (80,580
    )
    
    
    16,389
    
    
    
    (80,580
    )Proceeds from issuance of ordinary shares
    
    
    9,432
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,432Decrease in restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,668
    
    
    
    
    
    
    
    8,668Net cash provided by (used for)
financing activities
    
    
    9,432
    
    
    
    (16,389
    )
    
    
    
    
    
    
    (71,912
    )
    
    
    16,389
    
    
    
    (62,480
    )INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
    
    
    24,674
    
    
    
    
    
    
    
    
    
    
    
    (24,916
    )
    
    
    
    
    
    
    (242
    )CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
    
    
    9,317
    
    
    
    
    
    
    
    
    
    
    
    53,492
    
    
    
    
    
    
    
    62,809CASH AND CASH EQUIVALENTS,
END OF YEAR
    
    $
    33,991
    
    
    $
    
    
    
    $
    
    
    
    $
    28,576
    
    
    $
    
    
    
    $
    62,567
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 74




---



##### Table of Contents



NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2002
(In thousands) NobleHolding
    
    
    NobleNoble
    
    
    (Subsidiary
    
    
    Drilling
    
    
    Other
    
    
    Consolidating(Guarantor)
    
    
    (Guarantor)
    
    
    (Issuer)
    
    
    Subsidiaries
    
    
    Adjustments
    
    
    TotalCASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    209,503
    
    
    $
    193,672
    
    
    $
    207,291
    
    
    $
    219,814
    
    
    $
    (620,777
    )
    
    $
    209,503Adjustments
to reconcile net income to net cash provided by (used for) operating activities:Depreciation, and amortization of deferred
repairs and maintenance
    
    
    
    
    
    
    
    
    
    
    6,449
    
    
    
    148,020
    
    
    
    
    
    
    
    154,469Deferred income tax provision
    
    
    
    
    
    
    
    
    
    
    (576
    )
    
    
    17,446
    
    
    
    
    
    
    
    16,870Loss on sales of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168
    
    
    
    
    
    
    
    168Equity in income of joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,780
    )
    
    
    
    
    
    
    (1,780
    )Compensation expense from stock-based plans
    
    
    3,208
    
    
    
    
    
    
    
    1,670
    
    
    
    
    
    
    
    
    
    
    
    4,878Non-cash loss on impairment of investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,758
    
    
    
    
    
    
    
    9,758Gain on sale of interest in deepwater
oil and gas properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,908
    )
    
    
    
    
    
    
    (5,908
    )Loss on debt repurchase
    
    
    
    
    
    
    
    
    
    
    400
    
    
    
    
    
    
    
    
    
    
    
    400Equity earnings in affiliates
    
    
    (193,105
    )
    
    
    (207,291
    )
    
    
    (220,381
    )
    
    
    
    
    
    
    620,777
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    6,471
    
    
    
    (2,948
    )
    
    
    
    
    
    
    3,523Other changes in current assets and liabilities,
net of acquired working capital:Accounts receivable
    
    
    
    
    
    
    
    
    
    
    (560
    )
    
    
    4,955
    
    
    
    
    
    
    
    4,395Accounts receivable from affiliates
    
    
    10,972
    
    
    
    
    
    
    
    (85,777
    )
    
    
    
    
    
    
    74,805
    
    
    
    Other current assets
    
    
    (29
    )
    
    
    
    
    
    
    992
    
    
    
    3,979
    
    
    
    
    
    
    
    4,942Accounts payable
    
    
    
    
    
    
    
    
    
    
    396
    
    
    
    14,113
    
    
    
    
    
    
    
    14,509Accounts payable to affiliates
    
    
    
    
    
    
    17,459
    
    
    
    
    
    
    
    57,346
    
    
    
    (74,805
    )
    
    
    Other current liabilities
    
    
    
    
    
    
    
    
    
    
    1,172
    
    
    
    28,465
    
    
    
    
    
    
    
    29,637Net cash provided by (used for) operating activities
    
    
    30,549
    
    
    
    3,840
    
    
    
    (82,453
    )
    
    
    493,428
    
    
    
    
    
    
    
    445,364CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions and related capital upgrades
    
    
    
    
    
    
    
    
    
    
    (46,423
    )
    
    
    (310,431
    )
    
    
    
    
    
    
    (356,854
    )Other capital expenditures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (121,500
    )
    
    
    
    
    
    
    (121,500
    )Deferred repair and maintenance expenditures
    
    
    
    
    
    
    
    
    
    
    (905
    )
    
    
    (41,866
    )
    
    
    
    
    
    
    (42,771
    )Repayment from affiliates
    
    
    3,840
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,840
    )
    
    
    Proceeds from sales of property and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,879
    
    
    
    
    
    
    
    1,879Proceeds
from sale of interest in deepwater oil and gas properties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,200
    
    
    
    
    
    
    
    6,200Repayments from joint venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,160
    
    
    
    
    
    
    
    4,160Investment in marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (115,082
    )
    
    
    
    
    
    
    (115,082
    )Proceeds from sales of marketable securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,219
    
    
    
    
    
    
    
    83,219Net cash provided by (used for) investing activities
    
    
    3,840
    
    
    
    
    
    
    
    (47,328
    )
    
    
    (493,421
    )
    
    
    (3,840
    )
    
    
    (540,749
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from borrowing on credit facility
    
    
    
    
    
    
    
    
    
    
    125,000
    
    
    
    
    
    
    
    
    
    
    
    125,000Payment of long-term debt
    
    
    
    
    
    
    (3,840
    )
    
    
    (5,350
    )
    
    
    (55,422
    )
    
    
    3,840
    
    
    
    (60,772
    )Proceeds from issuance of ordinary shares
    
    
    6,275
    
    
    
    
    
    
    
    9,092
    
    
    
    
    
    
    
    
    
    
    
    15,367Repurchase of ordinary shares
    
    
    (33,966
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,966
    )Proceeds from sales of put options
on ordinary shares
    
    
    2,619
    
    
    
    
    
    
    
    1,039
    
    
    
    
    
    
    
    
    
    
    
    3,658Decrease in restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    698
    
    
    
    
    
    
    
    698Net cash (used for) provided by
financing activities
    
    
    (25,072
    )
    
    
    (3,840
    )
    
    
    129,781
    
    
    
    (54,724
    )
    
    
    3,840
    
    
    
    49,985INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
    
    
    9,317
    
    
    
    
    
    
    
    
    
    
    
    (54,717
    )
    
    
    
    
    
    
    (45,400
    )CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    108,209
    
    
    
    
    
    
    
    108,209CASH AND CASH EQUIVALENTS, END OF YEAR
    
    $
    9,317
    
    
    $
    
    
    
    $
    
    
    
    $
    53,492
    
    
    $
    
    
    
    $
    62,809
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 75




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16  SEGMENT AND RELATED INFORMATION We provide diversified services for the oil and gas industry. Our reportable segments consist
of the primary services we provide, which include domestic and international offshore contract
drilling and engineering and consulting services. Although these segments are generally influenced
by the same economic factors, each represents a distinct service to the oil and gas industry. Each
of our drilling rigs is considered by us to be an operating segment within our domestic and
international offshore contract drilling services reportable segments, and these operating segments
are aggregated to comprise our domestic and international contract drilling services reportable
segments in accordance with SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information(SFAS 131). Our international contract drilling services segment conducts contract drilling services in
the Middle East, Mexico, the North Sea, Brazil, West Africa, India and the Mediterranean Sea. Our
domestic contract drilling services segment conducts contract drilling services in the U.S. Gulf
of Mexico. Our engineering and consulting services segment, as represented by our Noble
Technology Services Division, provides drilling products and drilling-related software programs,
well site management, project management, technical services, and operations support for our
downhole technology tools. The accounting policies of the reportable segments are the same as those described in the
summary of significant accounting policies (see Note 1). All intersegment sales pricing is based
on current market conditions. We evaluate the performance of our operating segments based on
operating revenues and net income. Summarized financial information of our reportable segments for
the years ended December 31, 2004, 2003 and 2002 is shown in the following table
(in thousands). The Other column includes results of labor contract drilling services,
other insignificant operations and corporate related items. (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 76




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS International
    
    
    DomesticContract
    
    
    Contract
    
    
    EngineeringDrilling
    
    
    Drilling
    
    
    & ConsultingServices
    
    
    Services
    
    
    Services
    
    
    Other
    
    
    Total2004Revenues from external customers
    
    $
    720,412
    
    
    $
    255,027
    
    
    $
    21,492
    
    
    $
    69,300
    
    
    $
    1,066,231Depreciation
    
    
    119,608
    
    
    
    44,566
    
    
    
    589
    
    
    
    3,456
    
    
    
    168,219Interest expense
    
    
    16,997
    
    
    
    16,500
    
    
    
    117
    
    
    
    775
    
    
    
    34,389Equity in
income of joint venture
    
    
    3,931
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,931Income tax provision (benefit)
    
    
    16,012
    
    
    
    11,655
    
    
    
    315
    
    
    
    (12,251
    )
    
    
    15,731Segment profit (loss)
    
    
    103,523
    
    
    
    34,966
    
    
    
    (8,363
    )
    
    
    15,960
    
    
    
    146,086Total assets
    
    
    1,834,385
    
    
    
    1,243,063
    
    
    
    38,366
    
    
    
    192,159
    
    
    
    3,307,973Capital expenditures
    
    
    244,172
    
    
    
    8,973
    
    
    
    1,620
    
    
    
    6,276
    
    
    
    261,0412003Revenues from external customers
    
    $
    663,321
    
    
    $
    262,378
    
    
    $
    23,545
    
    
    $
    38,136
    
    
    $
    987,380Depreciation
    
    
    97,584
    
    
    
    46,473
    
    
    
    610
    
    
    
    3,460
    
    
    
    148,127Interest expense
    
    
    19,548
    
    
    
    19,899
    
    
    
    147
    
    
    
    697
    
    
    
    40,291Equity in
income of joint venture
    
    
    2,307
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,307Income tax provision (benefit)
    
    
    13,252
    
    
    
    14,201
    
    
    
    286
    
    
    
    (7,171
    )
    
    
    20,568Segment profit (loss)
    
    
    131,379
    
    
    
    40,470
    
    
    
    (12,737
    )
    
    
    7,304
    
    
    
    166,416Total assets
    
    
    1,578,736
    
    
    
    1,283,662
    
    
    
    30,322
    
    
    
    296,913
    
    
    
    3,189,633Capital expenditures
    
    
    135,986
    
    
    
    79,816
    
    
    
    637
    
    
    
    90,695
    
    
    
    307,1342002Revenues from external customers
    
    $
    636,869
    
    
    $
    304,842
    
    
    $
    14,569
    
    
    $
    33,968
    
    
    $
    990,248Depreciation
    
    
    70,803
    
    
    
    50,774
    
    
    
    380
    
    
    
    3,197
    
    
    
    125,154Interest expense
    
    
    18,676
    
    
    
    23,405
    
    
    
    361
    
    
    
    180
    
    
    
    42,622Equity in
income of joint venture
    
    
    1,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,780Income tax provision (benefit)
    
    
    22,674
    
    
    
    16,509
    
    
    
    (191
    )
    
    
    (5,170
    )
    
    
    33,822Segment profit (loss)
    
    
    177,223
    
    
    
    44,636
    
    
    
    (5,754
    )
    
    
    (6,602
    )
    
    
    209,503Total assets
    
    
    1,448,572
    
    
    
    1,377,386
    
    
    
    30,631
    
    
    
    209,125
    
    
    
    3,065,714Capital expenditures
    
    
    249,924
    
    
    
    97,232
    
    
    
    15,669
    
    
    
    115,529
    
    
    
    478,354
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 77




---



##### Table of Contents



NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table is a reconciliation of reportable segment profit or loss to consolidated
totals: PROFIT OR LOSS
    
    2004
    
    
    2003
    
    
    2002Total profit for reportable segments
    
    $
    130,126
    
    
    $
    159,112
    
    
    $
    216,105Other profits (losses)
    
    
    15,960
    
    
    
    7,304
    
    
    
    (6,602
    )Total consolidated net income
    
    $
    146,086
    
    
    $
    166,416
    
    
    $
    209,503
 The following tables present revenues and identifiable assets by country based on the location
of the service provided: Revenues
    
    
    Identifiable AssetsYear Ended December 31,
    
    
    December 31,2004
    
    
    2003
    
    
    2002
    
    
    2004
    
    
    2003
    
    
    2002United States
    
    $
    265,767
    
    
    $
    283,097
    
    
    $
    317,059
    
    
    $
    1,483,844
    
    
    $
    1,528,333
    
    
    $
    1,514,619Bahrain
    
    
    5,502
    
    
    
    8,110
    
    
    
    7,180
    
    
    
    
    
    
    
    
    
    
    
    29,821Brazil
    
    
    105,405
    
    
    
    138,623
    
    
    
    123,157
    
    
    
    456,079
    
    
    
    427,375
    
    
    
    443,823Canada
    
    
    26,741
    
    
    
    24,755
    
    
    
    19,445
    
    
    
    11,479
    
    
    
    10,116
    
    
    
    16,674China
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,225
    
    
    
    78,660
    
    
    
    78,632Croatia
    
    
    12,809
    
    
    
    
    
    
    
    
    
    
    
    28,141
    
    
    
    35,307
    
    
    
    Denmark
    
    
    21,213
    
    
    
    22,359
    
    
    
    32,307
    
    
    
    41,980
    
    
    
    44,498
    
    
    
    44,909Germany
    
    
    4,377
    
    
    
    7,257
    
    
    
    771
    
    
    
    9,440
    
    
    
    1,569
    
    
    
    17,025India
    
    
    38,396
    
    
    
    14,318
    
    
    
    11,380
    
    
    
    87,443
    
    
    
    99,211
    
    
    
    28,267Mexico
    
    
    150,030
    
    
    
    129,473
    
    
    
    34,818
    
    
    
    167,766
    
    
    
    172,471
    
    
    
    111,742Nigeria
    
    
    81,357
    
    
    
    61,218
    
    
    
    132,378
    
    
    
    136,609
    
    
    
    130,891
    
    
    
    145,126Qatar
    
    
    78,556
    
    
    
    48,853
    
    
    
    62,272
    
    
    
    213,788
    
    
    
    127,203
    
    
    
    114,621The Netherlands
    
    
    99,125
    
    
    
    100,984
    
    
    
    141,571
    
    
    
    134,958
    
    
    
    148,503
    
    
    
    149,002United Arab Emirates
    
    
    83,366
    
    
    
    72,216
    
    
    
    40,946
    
    
    
    290,670
    
    
    
    219,246
    
    
    
    192,160United Kingdom
    
    
    91,783
    
    
    
    74,955
    
    
    
    66,174
    
    
    
    151,310
    
    
    
    150,434
    
    
    
    164,312Other
    
    
    1,804
    
    
    
    1,162
    
    
    
    790
    
    
    
    10,241
    
    
    
    15,816
    
    
    
    14,981Total International
    
    
    800,464
    
    
    
    704,283
    
    
    
    673,189
    
    
    
    1,824,129
    
    
    
    1,661,300
    
    
    
    1,551,095Total
    
    $
    1,066,231
    
    
    $
    987,380
    
    
    $
    990,248
    
    
    $
    3,307,973
    
    
    $
    3,189,633
    
    
    $
    3,065,714
 (Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts) 78




---



##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. None. 
 ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures Nobles Chairman, Chief Executive Officer and President, James C. Day, and Nobles Chief Operating Officer, Senior Vice President
and Chief Financial Officer, Mark A. Jackson, have overseen and participated in an evaluation of
the Companys disclosure controls and procedures as of the end of the period covered by this
report. On the basis of this evaluation, Mr. Day and Mr. Jackson have concluded that the Companys
disclosure controls and procedures are effective. The Companys disclosure controls and procedures
are designed to ensure that information required to be disclosed by the Company in the reports that
it files with or submits to the Securities and Exchange Commission is recorded, processed,
summarized and reported within the time periods specified in the Commissions rules and forms. Changes in Internal Control over Financial Reporting There was no change in the Companys internal control over financial reporting that occurred
during the quarter ended December 31, 2004 that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting. Managements Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Securities
Exchange Act of 1934, as amended. Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of
the effectiveness of our internal control over financial reporting based on the framework in
Internal Control - Integrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on managements assessment, the Company maintained effective
internal control over financial reporting as of December 31, 2004. PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the
Companys financial statements included in this annual report on Form 10-K, has audited
managements assessment of the effectiveness of the Companys internal control over financial
reporting as of December 31, 2004 as stated in their report which is provided in this annual report
on Form 10-K. 
 ITEM 9B. OTHER INFORMATION. None. 
 PART III 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The sections entitled Election of Directors, Additional Information Regarding the Board of
Directors, Section 16(a) Beneficial Ownership Reporting Compliance, and Member Proposals and
Other Matters appearing in our proxy statement for the annual general meeting of members to be
held on April 28, 2005 (the 2005 Proxy Statement), set forth certain information with respect to
the directors of Noble and with respect to reporting under Section 16(a) of the Securities Exchange
Act of 1934, and are incorporated herein by reference. Certain information with respect to the executive officers of Noble is set forth under the
caption Executive Officers of the Registrant in Part I of this report. Noble has adopted a Code of Business Conduct and Ethics that applies to directors, officers
and employees, including Nobles principal executive officer, principal financial officer and
principal accounting officer. Nobles Code of Business Conduct and Ethics is posted on the
Companys website at http://www.noblecorp.com in the 79




---



##### Table of Contents



Governance area. Changes to and waivers granted with respect to Nobles Code of Business
Conduct and Ethics related to officers identified above, and other executive officers and directors
of Noble, that we are required to disclose pursuant to applicable rules and regulations of the
Commission will also be posted on our website. 
 ITEM 11. EXECUTIVE COMPENSATION. The section entitled Executive Compensation appearing in the 2005 Proxy Statement sets forth
certain information with respect to the compensation of our management, and, except for the report
of the compensation committee of the board of directors of Noble on executive compensation and the
information in such section under Performance Graph, is incorporated herein by reference. 
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The sections entitled Executive Compensation  Equity Compensation Plan Information,
Security Ownership of Certain Beneficial Owners and Security Ownership of Management appearing
in the 2005 Proxy Statement set forth certain information with respect to securities authorized for
issuance under equity compensation plans and the ownership of voting securities and equity
securities of Noble, and is incorporated herein by reference. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The section entitled Additional Information Regarding the Board of Directors  Certain
Transactions appearing in the 2005 Proxy Statement sets forth certain information with respect to
certain relationships and related party transactions, and is incorporated herein by reference. 
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. The section entitled Auditors appearing in the 2005 Proxy Statement sets forth certain
information with respect to accounting fees and services, and is incorporated herein by reference. 
 PART IV 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.  (a)
    The following documents are filed as part of this report:  (1)
    A list of the financial statements filed as a part of this report is set forth
in Item 8 on page 36 and is incorporated herein by reference.(2)
    Financial Statement Schedules:All schedules are omitted because they are either not applicable or required information
is shown in the financial statements or notes thereto.(3)
    Exhibits:The information required by this Item 15(a)(3) is set forth in the Index to Exhibits
accompanying this Annual Report on Form 10-K and is incorporated herein by reference. 80




---



##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. NOBLE CORPORATIONDate: March 8, 2005
    
    By:
    
    /s/ James C. DayJames C. Day, Chairman, Chief Executive Officer and President
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated. Signature
    
    Capacity In Which Signed
    
    Date/s/ James C. Day
    
    Chairman, Chief Executive Officer and
    
    March 8, 2005President and DirectorJames C. Day
    
    (Principal Executive Officer)/s/ Mark A. Jackson
    
    Chief Operating Officer,
    
    March 8, 2005Senior Vice President,Mark A. Jackson
    
    Chief Financial Officer, Treasurer andController(Principal Financial and Accounting
Officer)/s/ Michael A. Cawley
    
    Director
    
    March 8, 2005Michael A. Cawley/s/ Lawrence J. Chazen
    
    Director
    
    March 8, 2005Lawrence J. Chazen/s/ Luke R. Corbett
    
    Director
    
    March 8, 2005Luke R. Corbett/s/ Marc E. Leland
    
    Director
    
    March 8, 2005Marc E. Leland/s/ Jack E. Little
    
    Director
    
    March 8, 2005Jack E. Little/s/ Mary P. Ricciardello
    
    Director
    
    March 8, 2005Mary P. Ricciardello/s/ William A. Sears
    
    Director
    
    March 8, 2005William A. Sears
 81




---



##### Table of Contents



INDEX TO EXHIBITS ExhibitNumber
    
    Exhibit2.1
    
    Agreement and Plan of Merger dated as of March 11, 2002 among Noble Corporation, Noble Cayman
Acquisition Corporation, Noble Holding (U.S.) Corporation and Noble Drilling Corporation
(included as Annex A to the proxy statement/prospectus that constitutes a part of the
Registrants Registration Statement on Form S-4 (No. 333-84278) and incorporated herein by
reference).3.1
    
    Memorandum of Association of the Registrant (filed as Exhibit 3.3 to the Registrants
Registration Statement on Form S-4 (No. 333-84278) and incorporated herein by reference).3.2
    
    Articles of Association of the Registrant (filed as Exhibit 3.4 to the Registrants Registration
Statement on Form S-4 (No. 333-84278) and incorporated herein by reference).3.3
    
    Terms of Series A Junior Participating Preferred Shares of the Registrant (filed as Exhibit 4.1
to the Registrants Registration Statement on Form S-4 (No. 333-84278) and incorporated herein
by reference).4.1
    
    Indenture dated as of March 1, 1999, between Noble Drilling Corporation and JP Morgan Chase Bank
(formerly Chase Bank of Texas, National Association), as trustee (filed as Exhibit 4.1 to the
Form 8-K of Noble Drilling Corporation (hereinafter sometimes referred to as NDC) dated March
22, 1999 (date of event: March 1, 1999) and incorporated herein by reference).4.2
    
    Supplemental Indenture dated as of March 16, 1999, between Noble Drilling Corporation and JP
Morgan Chase Bank (formerly Chase Bank of Texas, National Association), as trustee (filed as
Exhibit 4.2 to NDCs Form 8-K dated March 22, 1999 (date of event: March 1, 1999) and
incorporated herein by reference).4.3
    
    Rights Agreement between Noble Corporation and UMB Bank, N.A., as Rights Agent, which includes
the Form of Right Certificate as Exhibit B thereto (filed as Exhibit 4.1 to the Registrants
Registration Statement on Form S-4 (No. 333-84278) and incorporated herein by reference).4.4
    
    First Amendment to Rights Agreement between Noble Corporation and UMB Bank, N.A., as Rights
Agent, dated as of March 12, 2003 (filed as Exhibit 4.2 to the Registrants Form 8-K filed on
March 14, 2003 and incorporated herein by reference).4.5
    
    Note Purchase Agreement dated as of December 21, 1998, by and among Noble Drilling (Jim
Thompson) Inc., JP Morgan Chase Bank (formerly Chase Bank of Texas, National Association), as
Trustee, and each of the note purchasers thereunder. Each note purchaser has entered into a
separate Note Purchase Agreement, which agreements are substantially identical in all material
respects, except for the principal amount of notes purchased. A schedule identifying each of
the note purchasers that entered into a Note Purchase Agreement with Noble Drilling (Jim
Thompson) Inc. and the principal amount of notes purchased by each such note purchaser is
included as Annex I to the Note Purchase Agreement (filed as Exhibit 4.24 to NDCs Registration
Statement on Form S-3 (No. 333-72059) and incorporated herein by reference).4.6
    
    Indenture of First Naval Mortgage, dated as of December 21, 1998, made by Noble Drilling (Jim
Thompson) Inc. in favor of JP Morgan Chase Bank (formerly Chase Bank of Texas, National
Association), as Trustee (filed as Exhibit 4.25 to NDCs Registration Statement on Form S-3 (No.
333-72059) and incorporated herein by reference).4.7
    
    Parent Guaranty, dated as of December 21, 1998, by Noble Drilling Corporation in favor of JP
Morgan Chase Bank (formerly Chase Bank of Texas, National Association), as Trustee (filed as
 82




---



##### Table of Contents



ExhibitNumber
    
    ExhibitExhibit 4.26 to NDCs Registration Statement on Form S-3 (No. 333-72059) and incorporated herein
by reference).4.8
    
    Credit Agreement dated May 30, 2001, among Noble Drilling Corporation, Christiania Bank og
Kreditkasse ASA, New York Branch, as Administrative Agent, and the lenders named therein (filed
as Exhibit 4 to NDCs Quarterly Report on Form 10-Q for the three-month period ended June 30,
2001 and incorporated herein by reference).4.9
    
    Irrevocable Letter of Credit, dated December 20, 2001, by Nordea Bank Norge ASA, New York
Branch, and issued to JP Morgan Chase Bank, as Trustee of the Trust Indenture and Security
Agreement, dated as of November 24, 1998, between Noble Drilling (Paul Romano) Inc. and the
Trustee, for the benefit of the note holders thereunder (filed as Exhibit 4.17 to NDCs Annual
Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).4.10
    
    Amended and Restated Credit Agreement dated May 1, 2002 among Noble Corporation, Noble Holding
(U.S.) Corporation, Noble Drilling Corporation, Nordea Bank Norge ASA, New York Branch, as Administrative Agent, and the lenders named therein (filed as Exhibit 4.1 to the Registrants Quarterly Report
on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by
reference).4.11
    
    First Amendment to Note Purchase Agreement and Consent, dated March 15, 2002, between Noble
Drilling (Jim Thompson) Inc., each of the note purchasers thereunder and JPMorgan Chase Bank,
National Association, as trustee (filed as Exhibit 4.2 to the Registrants Quarterly Report on
Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).4.12
    
    Amended and Restated Parent Guaranty, dated as April 25, 2002, by Noble Corporation, Noble
Holding (U.S.) Corporation and Noble Drilling Corporation, in favor of JPMorgan Chase Bank,
National Association, as trustee, for the benefit of the note purchasers under the Note
Purchase Agreement and Consent with Noble Drilling (Jim Thompson) Inc. (filed as Exhibit 4.3 to the Registrants Quarterly Report
on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by
reference).4.13
    
    Second Supplemental Indenture, dated as of April 30, 2002, between Noble Drilling Corporation,
Noble Holding (U.S.) Corporation and Noble Corporation, and JP Morgan Chase Bank, as trustee
(filed as Exhibit 4.6 to the Registrants Quarterly Report on Form 10-Q for the three-month
period ended March 31, 2002 and incorporated herein by reference).4.14
    
    Second Amendment, dated November 24, 2004, among Noble Corporation, Noble Holding (U.S.)
Corporation, Noble Drilling Corporation, various lending institutions party to the Credit
Agreement, Wells Fargo Bank, N.A. (as successor to Wells Fargo Bank Texas, National
Association) and SunTrust Bank, as Documentation Agents, The Bank of Tokyo-Mitsubishi, Ltd. and
Westdeutsche Landesbank Girozentrale, New York Branch, as Syndication Agents, The Bank of
Tokyo-Mitsubishi, Ltd. and Nordea Bank Finland Plc, New York Branch, as Co-Lead Arrangers,
Nordea Bank Finland Plc, as Bookrunner, and Nordea Bank Finland Plc, New York Branch (as the
replacement Administrative Agent to Nordea Bank Norge ASA, New York Branch, as successor by
merger to Christiania Bank og Kreditkasse ASA, New York Branch), as Administrative Agent (filed
as Exhibit 4.1 to the Registrants Current Report on Form 8-K dated November 30, 2004 and
incorporated herein by reference).10.1*
    
    Amendment to the Noble Corporation 1991 Stock Option and Restricted Stock Plan dated as of April
24, 2003, and composite copy of the Plan through such Amendment (filed as Exhibit 10.2 to the
Registrants Quarterly Report on Form 10-Q for the three-month period ended
March 31, 2003 and incorporated herein by reference).10.2*
    
    Amendment No. 4 to the Noble Corporation 1992 Nonqualified Stock Option Plan for Non-Employee
Directors dated as of April 24, 2003, and composite copy of the Plan through such
 83




---



##### Table of Contents



ExhibitNumber
    
    ExhibitAmendment (filed as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the three-month
period ended March 31, 2003 and incorporated herein by reference).10.3*
    
    Noble Corporation Equity Compensation Plan for Non-Employee Directors (filed as Exhibit 10.1 to
NDCs Quarterly Report on Form 10-Q for the three-month period ended September 30, 1996 and
incorporated herein by reference).10.4*
    
    Amendment, effective as of May 1, 2002, to the Noble Corporation Equity Compensation Plan for
Non-Employee Directors (filed as Exhibit 10.1 to Post-Effective Amendment No. 1 to the
Registrants Registration Statement on Form S-8 (No. 333-17407) and incorporated herein by
reference).10.5*
    
    Noble Corporation Short Term Incentive Plan (revised July 2004) (filed as Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the three-month period ended
June 30, 2004 and incorporated herein by reference).10.6*
    
    Noble Drilling Corporation 401(k) Savings Restoration Plan (filed as Exhibit 10.1 to the
Registrants Registration Statement on Form S-8 dated January 18, 2001 (No. 333-53912) and
incorporated herein by reference).10.7*
    
    Amendment No. 1 to the Noble Drilling Corporation 401(k) Savings Restoration Plan (filed as
Exhibit 10.1 to Post-Effective Amendment No. 1 to the Registrants Registration Statement on
Form S-8 (No. 333-53912) and incorporated herein by reference).10.8*
    
    Noble Drilling Corporation Retirement Restoration Plan dated April 27, 1995 (filed as Exhibit
10.2 to NDCs Quarterly Report on Form 10-Q for the three-month period ended
March 31, 1995 and incorporated herein by reference).10.9*
    
    Amendment No. 1 to the Noble Drilling Corporation Retirement Restoration Plan dated January 29,
1998 (filed as Exhibit 10.18 to NDCs Annual Report on Form 10-K for the year ended December 31,
1997 and incorporated herein by reference).10.10
    
    Guarantee dated August 26, 1994 between Noble Drilling Corporation and Hibernia Management and
Development Company Ltd. (filed as Exhibit 10.45 to NDCs Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by reference).10.11*
    
    Form of Indemnity Agreement entered into between Noble Corporation and each of its directors and officers (filed as Exhibit
10.1 to the Registrants Quarterly Report on Form 10-Q for the three-month period ended March
31, 2002 and incorporated herein by reference).10.12*
    
    Amended and Restated Employment Agreement, dated as of April 30, 2002, by and between Noble Drilling Corporation and James
C. Day (filed as Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q for the
three-month period ended March 31, 2002 and incorporated herein by reference).10.13
    
    Parent Guaranty by Noble Corporation, dated as of April 30, 2002, of Amended and Restated Employment Agreement by and between Noble Drilling Corporation and James C. Day (filed as Exhibit 10.3 to the
Registrants Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and
incorporated herein by reference).10.14*
    
    Amended and Restated Employment Agreement, dated as of April 30, 2002, by and between Noble Drilling Corporation and Mark
A. Jackson (filed as Exhibit 10.6 to the Registrants Quarterly Report on Form 10-Q for the
three-month period ended March 31, 2002 and incorporated herein by reference).10.15
    
    Parent Guaranty by Noble Corporation, dated as of April 30, 2002, of Amended and Restated Employment Agreement by and between Noble Drilling Corporation and Mark A. Jackson
 84




---



##### Table of Contents



ExhibitNumber
    
    Exhibit(filed as Exhibit 10.7 to the
Registrants Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and
incorporated herein by reference).10.16*
    
    Amended and Restated Employment Agreement, dated as of April 30, 2002, by and between Noble
Drilling Corporation and Julie J. Robertson (filed as Exhibit 10.8 to the Registrants
Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated
herein by reference).10.17
    
    Parent Guaranty by Noble Corporation, dated as of April 30, 2002, of Amended and Restated Employment Agreement by and between Noble Drilling Corporation and Julie J. Robertson (filed as Exhibit 10.9 to the
Registrants Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and
incorporated herein by reference).10.18*
    
    Amended and Restated Employment Agreement, dated as of April 30, 2002, by and between Noble Drilling Corporation and Danny
W. Adkins (filed as Exhibit 10.10 to the Registrants Quarterly Report on Form 10-Q for the
three-month period ended March 31, 2002 and incorporated herein by reference).10.19
    
    Parent Guaranty by Noble Corporation, dated as of April 30, 2002, of Amended and Restated
Employment Agreement by and between Noble Drilling Corporation and Danny W. Adkins (filed as
Exhibit 10.11 to the Registrants Quarterly Report on Form 10-Q for the three-month period ended
March 31, 2002 and incorporated herein by reference).10.20*
    
    Amendment No. 2 to the Noble Corporation Equity Compensation Plan for Non-Employee Directors
dated February 4, 2005.10.21*
    
    Amended and Restated Noble Corporation 1992 Nonqualified Stock Option and Restricted Share Plan
For Non-Employee Directors dated February 4, 2005.14.1
    
    Noble Corporation Code of Business Conduct and Ethics (filed as Exhibit 14.1 to the Registrants
Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by
reference).21.1
    
    Subsidiaries of the Registrant.23.1
    
    Consent of PricewaterhouseCoopers LLP.31.1
    
    Certification of James C. Day Pursuant to SEC Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification of Mark A. Jackson Pursuant to SEC Rule 13a-14(a) or Rule 15d-14(a).32.1+
    
    Certification of James C. Day Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.32.2+
    
    Certification of Mark A. Jackson Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
   *
    
    Management contract or compensatory plan or arrangement required to be filed as an exhibit
hereto.+
    
    Furnished in accordance with Item 601(b)(32)(ii) of Regulation S-K. 85