Nabors 1Q 2011 EPS Equals $0.29 after $0.06 of Weather and Period Cost

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

Three Months Ended

March 31,

December 31,

(In thousands, except per share amounts)

2011

2010

2010

Revenues and other income:

  Operating revenues

$   1,381,279

$        891,346

$                              1,317,999

  Earnings (losses) from unconsolidated affiliates

16,274

7,642

4,928

  Investment income (loss)

12,287

(2,557)

8,624

     Total revenues and other income

1,409,840

896,431

1,331,551

Costs and other deductions:

  Direct costs

858,371

505,197

775,313

  General and administrative expenses

118,458

75,426

103,704

  Depreciation and amortization

226,102

171,536

219,169

  Depletion

3,573

5,027

2,297

  Interest expense

73,924

66,769

74,009

  Losses (gains) on sales and retirements of

    long-lived assets and other expense (income), net

6,029

20,367

6,262

  Impairments and other charges (1)

-

-

137,832

     Total costs and other deductions

1,286,457

844,322

1,318,586

Income (loss) from continuing operations before income taxes

123,383

52,109

12,965

Income tax expense (benefit):

  Current

16,653

12,645

(42,837)

  Deferred

21,654

(4,055)

4,869

Income tax expense (benefit)

38,307

8,590

(37,968)

Subsidiary preferred stock dividend

750

-

750

Income (loss) from continuing operations, net of tax

84,326

43,519

50,183

Income (loss) from discontinued operations, net of tax

(2,170)

(4,421)

1,591

Net income (loss)

82,156

39,098

51,774

    Less: Net (income) loss attributable to noncontrolling interest

669

1,102

(1,293)

Net income (loss) attributable to Nabors

$        82,825

$          40,200

$                                   50,481

Earnings (losses) per share: (2)

  Basic from continuing operations

$              .30

$                .16

$                                         .18

  Basic from discontinued operations

$             (.01)

$               (.02)

$                                             -

Basic

$              .29

$                .14

$                                         .18

  Diluted from continuing operations

$              .29

$                .16

$                                         .17

  Diluted from discontinued operations

$             (.01)

$               (.02)

$                                             -

Diluted

$              .28

$                .14

$                                         .17

Weighted-average number  

  of common shares outstanding: (2)

  Basic

286,114

284,672

285,443

  Diluted

292,689

290,736

290,442

Adjusted income (loss) derived from operating activities (3)

$      191,049

$        141,802

$                                 222,444

(1)

Represents impairments of oil and gas assets recorded for the three months ended December 31, 2010.  

(2)

See "Computation of Earnings (Losses) Per Share" included herein as a separate schedule.  

(3)

Adjusted income (loss) derived from operating activities is computed by: subtracting direct costs, general and administrative expenses, depreciation and amortization, and depletion expense from Operating revenues and then adding Earnings (losses) from unconsolidated affiliates.  These amounts should not be used as a substitute to those amounts reported under accounting principles generally accepted in the United States of America (“GAAP”).  However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted income (loss) derived from operating activities, because it believes that these financial measures are an accurate reflection of our ongoing profitability.  A reconciliation of this non-GAAP measure to income (loss) from continuing operations before income taxes, which is a GAAP measure, is provided within the table set forth immediately following the heading "Segment Reporting".

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

March 31,

December 31,

(In thousands, except ratios)

2011

2010

ASSETS

Current assets:

Cash and short-term investments

$      730,307

$        801,190

Accounts receivable, net

1,242,954

1,116,510

Assets held for sale

357,516

352,048

Other current assets

380,353

343,182

    Total current assets

2,711,130

2,612,930

Long-term investments and other receivables

43,744

40,300

Property, plant and equipment, net

7,975,957

7,815,419

Goodwill

494,005

494,372

Investment in unconsolidated affiliates

300,425

267,723

Other long-term assets

365,147

415,825

    Total assets

$ 11,890,408

$   11,646,569

LIABILITIES AND EQUITY

Current liabilities:

Current portion of long-term debt

$   1,391,224

$     1,379,018

Other current liabilities

839,368

775,362

    Total current liabilities

2,230,592

2,154,380

Long-term debt

3,064,035

3,064,126

Other long-term liabilities

1,052,299

1,016,012

    Total liabilities

6,346,926

6,234,518

Subsidiary preferred stock (1)

69,188

69,188

Equity:

Shareholders' equity

5,459,905

5,328,162

Noncontrolling interest

14,389

14,701

    Total equity

5,474,294

5,342,863

    Total liabilities and equity

$ 11,890,408

$   11,646,569

Cash, short-term and long-term investments (2)

$      774,051

$        841,490

Funded debt to capital ratio: (3)

   - Gross

0.42 : 1

0.42 : 1

   - Net of cash and investments

0.37 : 1

0.37 : 1

Interest coverage ratio: (4)

7.4 : 1

7.0 : 1

(1)

Represents preferred stock of Superior.  75,000 shares of such stock are outstanding and pay quarterly dividends at an annual rate of 4%.

(2)

The March 31, 2011 and December 31, 2010 amounts include $36.4 million and $32.9 million, respectively, in oil and gas financing receivables that were included in long-term investments and other receivables.  

(3)

The gross funded debt to capital ratio is calculated by dividing (x) funded debt by (y) funded debt plus deferred tax liabilities (net of deferred tax assets) plus capital. Funded debt is the sum of (1) short-term borrowings, (2) the current portion of long-term debt and (3) long-term debt.  Capital is shareholders' equity.  The net funded debt to capital ratio is calculated by dividing (x) net funded debt by (y) net funded debt plus deferred tax liabilities (net of deferred tax assets) plus capital.  Net funded debt is funded debt minus the sum of cash and cash equivalents and short-term and long-term investments and other receivables.  Both of these ratios are used to calculate a company’s leverage in relation to its capital.  Neither ratio measures operating performance or liquidity as defined by GAAP and, therefore, may not be comparable to similarly titled measures presented by other companies.  

(4)

The interest-coverage ratio is a trailing 12-month quotient of the sum of income (loss) from continuing operations, net of tax, net income (loss) attributable to noncontrolling interest, subsidiary preferred stock dividends, interest expense, depreciation and amortization, depletion expense, impairments and other charges, income tax expense (benefit) less investment income (loss) divided by cash interest expense plus subsidiary preferred stock dividends. This ratio is a method for calculating the amount of operating cash flows available to cover cash interest expense.  The interest coverage ratio is not a measure of operating performance or liquidity defined by GAAP and may not be comparable to similarly titled measures presented by other companies.    

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

SEGMENT REPORTING

(Unaudited)

The following tables set forth certain information with respect to our reportable segments and rig activity:

Three Months Ended

March 31,

December 31,

(In thousands, except rig activity)

2011

2010

2010

Reportable segments:

Operating revenues and Earnings (losses) from

 unconsolidated affiliates:

   Contract Drilling: (1)

     U.S. Lower 48 Land Drilling

$      378,568

$        271,497

$                                 369,591

     U.S. Land Well-servicing

150,256

97,991

122,687

     Pressure Pumping (2)

257,859

-

259,684

     U.S. Offshore

30,454

38,198

20,081

     Alaska

41,315

49,794

40,119

     Canada

172,443

115,556

127,186

     International

262,477

245,344

292,722

      Subtotal Contract Drilling (3)

1,293,372

818,380

1,232,070

   Oil and Gas (4)

20,128

10,602

8,929

   Other Operating Segments (5) (6)

121,383

95,513

123,239

   Other reconciling items (7)

(37,330)

(25,507)

(41,311)

     Total

$   1,397,553

$        898,988

$                              1,322,927

Adjusted income (loss) derived from

 operating activities:

   Contract Drilling: (1)

     U.S. Lower 48 Land Drilling

$        80,095

$          60,286

$                                   85,308

     U.S. Land Well-servicing

11,123

7,185

12,132

     Pressure Pumping (2)

43,715

-

54,664

     U.S. Offshore

(3,977)

7,373

(5,142)

     Alaska

11,019

13,957

11,252

     Canada

38,992

14,882

16,572

     International

35,497

53,579

71,814

      Subtotal Contract Drilling (3)

216,464

157,262

246,600

   Oil and Gas (4)

(770)

2,619

675

   Other Operating Segments (5) (6)

6,138

6,890

10,003

   Other reconciling items (8)

(30,783)

(24,969)

(34,834)

     Total

191,049

141,802

222,444

Interest expense

(73,924)

(66,769)

(74,009)

Investment income (loss)

12,287

(2,557)

8,624

(Losses) gains on sales and retirements of

  long-lived assets and other (expense) income, net

(6,029)

(20,367)

(6,262)

Impairments and other charges (9)

-

-

(137,832)

Income (loss) before income taxes from continuing operations

$      123,383

$          52,109

$                                   12,965

Rig activity:

Rig years: (10)

  U.S. Lower 48 Land Drilling

187.9

158.6

184.3

  U.S. Offshore

8.0

12.0

6.5

  Alaska

5.3

9.1

6.0

  Canada

49.7

34.8

39.3

  International (11)

99.6

88.3

102.1

     Total rig years

350.5

302.8

338.2

Rig hours: (12)

  U.S. Land Well-servicing

187,581

148,347

169,318

  Canada Well-servicing

53,154

46,032

49,740

     Total rig hours

240,735

194,379

219,058

(1)

These segments include our drilling, well-servicing, fluid logistics and workover operations, on land and offshore.

(2)

Includes operating results of the Superior acquisition for the three months ended March 31, 2011 and December 31, 2010.

(3)

Includes earnings (losses), net from unconsolidated affiliates, accounted for using the equity method, of $.2 million, $.1 million and $3.3 million for the three months ended March 31, 2011 and 2010 and December 31, 2010, respectively.

(4)

Includes earnings (losses), net from unconsolidated affiliates, accounted for using the equity method, of $15.2 million, $4.5 million and $4.1 million for the three months ended March 31, 2011 and 2010 and December 31, 2010, respectively.

(5)

Includes our drilling technology and top drive manufacturing, directional drilling, rig instrumentation and software, and construction and logistics operations.

(6)

Includes earnings (losses), net from unconsolidated affiliates, accounted for using the equity method, of $.9 million, $3.0 million and $(2.5) million, for the three months ended March 31, 2011 and 2010 and December 31, 2010, respectively.

(7)

Represents the elimination of inter-segment transactions.

(8)

Represents the elimination of inter-segment transactions and unallocated corporate expenses.

(9)

Represents impairments and other charges recorded for the three months ended December 31, 2010.  

(10)

Excludes well-servicing rigs, which are measured in rig hours.  Includes our equivalent percentage ownership of rigs owned by unconsolidated affiliates.  Rig years represent a measure of the number of equivalent rigs operating during a given period.  For example, one rig operating 182.5 days during a 365-day period represents 0.5 rig years.

(11)

International rig years included our equivalent percentage ownership of rigs owned by unconsolidated affiliates which totaled 2.0 years, 2.5 years and 2.0 years during the three months ended March 31, 2011 and 2010 and December 31, 2010, respectively.

(12)

Rig hours represents the number of hours that our well-servicing rig fleet operated during the period.

NABORS INDUSTRIES LTD. AND SUBSIDIARIES

COMPUTATION OF EARNINGS (LOSSES) PER SHARE

(Unaudited)

A reconciliation of the numerators and denominators of the basic and diluted earnings (losses) per share computations is as follows:

Three Months Ended

March 31,

December 31,

(In thousands, except per share amounts)

2011

2010

2010

Net income (loss) attributable to Nabors (numerator):

Income (loss) from continuing operations, net of tax

$        84,326

$          43,519

$                                   50,183

  Less: net (income) loss attributable to noncontrolling interest

669

1,102

(1,293)

Adjusted income (loss) from continuing operations, net of tax - basic

$        84,995

$          44,621

$                                   48,890

  Add interest expense on assumed conversion of our 0.94% senior

       exchangeable notes due 2011, net of tax (1)

-

-

-

Adjusted income (loss) from continuing operations, net of tax - diluted

$        84,995

$          44,621

$                                   48,890

Income (loss) from discontinued operations, net of tax

(2,170)

(4,421)

1,591

Adjusted net income (loss) attributable to Nabors

$        82,825

$          40,200

$                                   50,481

  Earnings (losses) per share:

    Basic from continuing operations

$              .30

$                .16

$                                         .18

    Basic from discontinued operations

(.01)

(.02)

-

Total Basic

$              .29

$                .14

$                                         .18

    Diluted from continuing operations

$              .29

$                .16

$                                         .17

    Diluted from discontinued operations

(.01)

(.02)

-

Total Diluted

$              .28

$                .14

$                                         .17

Shares (denominator):

  Weighted-average number of shares outstanding - basic

286,114

284,672

285,443

  Net effect of dilutive stock options, warrants and restricted

     stock awards based on the if-converted method

6,575

6,064

4,999

  Assumed conversion of our 0.94% senior exchangeable notes due 2011 (1)

-

-

-

  Weighted-average number of shares outstanding - diluted

292,689

290,736

290,442

(1)

Diluted earnings (losses) per share for the three months ended March 31, 2011 and 2010 and December 31, 2010 excluded any incremental shares issuable upon exchange of the 0.94% senior exchangeable notes due 2011.  As of March 31, 2011, we have purchased approximately $1.3 billion par value of these notes in the open market, leaving approximately $1.4 billion par value outstanding.  The number of shares that we would be required to issue upon exchange consists of only the incremental shares that would be issued above the principal amount of the notes, as we are required to pay cash up to the principal amount of the notes exchanged. We would issue an incremental number of shares only upon exchange of these notes.  These shares are included in the calculation of the weighted-average number of shares outstanding in our diluted earnings per share calculation only when our stock price exceeds $45.83 as of the last trading day of the quarter and the average price of our shares for the ten consecutive trading days beginning on the third business day after the last trading day of the quarter exceeds $45.83, which did not occur during the three months ended March 31, 2011 and 2010 and December 31, 2010.  

For all periods presented, the computation of diluted earnings (losses) per share excluded outstanding stock options and warrants with exercise prices greater than the average market price of Nabors’ common shares, because their inclusion would have been anti-dilutive and because they were not considered participating securities. The average number of options and warrants that were excluded from diluted earnings (losses) per share that would have potentially diluted earnings (losses) per share in the future were 7,269,039 and 10,055,869 shares during the three months ended March 31, 2011 and 2010, respectively; and 13,693,063 shares during the three months ended December 31, 2010. In any period during which the average market price of Nabors’ common shares exceeds the exercise prices of these stock options and warrants, such stock options and warrants are included in our diluted earnings (losses) per share computation using the if-converted method of accounting.  Restricted stock will be included in our basic and diluted earnings (losses) per share computation using the two-class method of accounting in all periods because such stock is considered participating securities.