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8-K

 
Other

Noble Corporation 10-Q 2008

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
Filed by Bowne Pure Compliance
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2008
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 001-31306
NOBLE CORPORATION
(Exact name of registrant as specified in its charter)
     
Cayman Islands
(State or other jurisdiction of incorporation or organization)
  98-0366361
(I.R.S. employer identification number)
     
13135 South Dairy Ashford, Suite 800
Sugar Land, Texas

(Address of principal executive offices)
   
77478
(Zip code)
Registrant’s telephone number, including area code: (281) 276-6100
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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No þ
Number of Ordinary Shares outstanding at July 31, 2008: 269,130,192
 
 

 

 


 

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 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
 Exhibit 32.2

 

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                 
    June 30,     December 31,  
    2008     2007  
ASSETS
               
CURRENT ASSETS
               
Cash and cash equivalents
  $ 320,964     $ 161,058  
Accounts receivable
    560,923       613,115  
Insurance receivables
          39,066  
Prepaid expenses
    51,529       20,721  
Other current assets
    36,499       26,231  
 
           
Total current assets
    969,915       860,191  
 
           
 
               
PROPERTY AND EQUIPMENT
               
Drilling equipment and facilities
    6,794,897       6,354,782  
Other
    97,515       80,169  
 
           
 
    6,892,412       6,434,951  
Accumulated depreciation
    (1,753,263 )     (1,639,035 )
 
           
 
    5,139,149       4,795,916  
 
           
 
               
OTHER ASSETS
    243,256       219,899  
 
           
 
  $ 6,352,320     $ 5,876,006  
 
           
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
CURRENT LIABILITIES
               
Current maturities of long-term debt
  $ 27,958     $ 10,334  
Accounts payable
    172,805       198,395  
Accrued payroll and related costs
    97,623       115,914  
Taxes payable
    102,814       85,641  
Interest payable
    9,465       9,951  
Other current liabilities
    53,551       72,537  
 
           
Total current liabilities
    464,216       492,772  
 
           
 
               
LONG-TERM DEBT
    701,507       774,182  
DEFERRED INCOME TAXES
    254,521       240,621  
OTHER LIABILITIES
    94,237       65,705  
 
           
 
    1,514,481       1,573,280  
 
           
 
               
COMMITMENTS AND CONTINGENCIES
               
 
               
MINORITY INTEREST
    (5,313 )     (5,596 )
 
           
 
               
SHAREHOLDERS’ EQUITY
               
Ordinary shares-par value $0.10 per share; 400,000 shares authorized; 269,157 and 268,223 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively
    26,916       26,822  
Capital in excess of par value
    686,641       683,697  
Retained earnings
    4,139,866       3,602,870  
Accumulated other comprehensive loss
    (10,271 )     (5,067 )
 
           
 
    4,843,152       4,308,322  
 
           
 
  $ 6,352,320     $ 5,876,006  
 
           
See accompanying notes to the consolidated financial statements.

 

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NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
 
                               
OPERATING REVENUES
                               
Contract drilling services
  $ 783,280     $ 657,504     $ 1,581,114     $ 1,234,419  
Reimbursables
    20,964       28,608       53,422       59,751  
Labor contract drilling services
    8,218       39,165       39,149       75,720  
Engineering, consulting and other
    479       722       681       2,533  
 
                       
 
    812,941       725,999       1,674,366       1,372,423  
 
                       
 
                               
OPERATING COSTS AND EXPENSES
                               
Contract drilling services
    256,436       212,050       492,388       408,892  
Reimbursables
    17,831       24,608       47,292       52,154  
Labor contract drilling services
    6,547       32,454       31,884       60,857  
Engineering, consulting and other
          7,255             11,296  
Depreciation and amortization
    87,836       68,323       170,735       132,388  
Selling, general and administrative
    19,667       20,302       40,940       34,528  
Gain on disposal of assets, net
    (35,521 )           (35,521 )      
 
                       
 
    352,796       364,992       747,718       700,115  
 
                       
 
                               
OPERATING INCOME
    460,145       361,007       926,648       672,308  
 
                               
OTHER INCOME (EXPENSE)
                               
Interest expense, net of amount capitalized
    (721 )     (1,231 )     (1,831 )     (2,735 )
Interest income and other, net
    1,580       512       4,709       1,670  
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    461,004       360,288       929,526       671,243  
INCOME TAX PROVISION
    (85,286 )     (70,257 )     (169,620 )     (130,892 )
 
                       
 
                               
NET INCOME
  $ 375,718     $ 290,031     $ 759,906     $ 540,351  
 
                       
 
                               
NET INCOME PER SHARE:
                               
Basic
  $ 1.41     $ 1.09     $ 2.85     $ 2.03  
Diluted
  $ 1.40     $ 1.08     $ 2.83     $ 2.01  
See accompanying notes to the consolidated financial statements.

 

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NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                 
    Six Months Ended June 30,  
    2008     2007  
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income
  $ 759,906     $ 540,351  
Adjustments to reconcile net income to net cash from operating activities:
               
Depreciation and amortization
    170,735       132,388  
Impairment loss on assets
          5,400  
Deferred income tax provision
    13,900       6,324  
Share-based compensation expense
    18,471       16,903  
Pension contributions
    (17,445 )     (16,705 )
Gain on disposal of assets, net
    (35,521 )      
Other, net
    7,761       9,426  
Other changes in current assets and liabilities:
               
Accounts receivable
    52,192       (88,627 )
Hurricane insurance receivables
    17,319        
Other current assets
    (42,632 )     14,325  
Accounts payable
    (7,994 )     (20,960 )
Other current liabilities
    (1,179 )     33,243  
 
           
Net cash from operating activities
    935,513       632,068  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
New construction
    (310,770 )     (323,338 )
Other capital expenditures
    (161,546 )     (216,452 )
Major maintenance expenditures
    (52,577 )     (39,370 )
Accrued capital expenditures
    (17,596 )     22,173  
Hurricane insurance receivables
    21,747        
Proceeds from disposal of assets
    39,134       3,284  
 
           
Net cash from investing activities
    (481,608 )     (553,703 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Borrowings on bank credit facilities
          220,000  
Payments on bank credit facilities
    (50,000 )     (85,000 )
Payments of other long-term debt
    (5,076 )     (4,730 )
Net proceeds from employee stock transactions
    10,558       13,560  
Dividends paid
    (222,910 )     (10,788 )
Repurchases of ordinary shares
    (26,571 )     (120,687 )
 
           
Net cash from financing activities
    (293,999 )     12,355  
 
           
 
               
NET INCREASE IN CASH AND CASH EQUIVALENTS
    159,906       90,720  
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    161,058       61,710  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 320,964     $ 152,430  
 
           
See accompanying notes to the consolidated financial statements.

 

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NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
(Unaudited)
                                                 
                                    Accumulated        
                    Capital in             Other     Total  
    Ordinary     Excess of     Retained     Comprehensive     Shareholders’  
    Shares     Par Value     Par Value     Earnings     Loss     Equity  
 
                                               
Balance at December 31, 2007
    268,223     $ 26,822     $ 683,697     $ 3,602,870     $ (5,067 )   $ 4,308,322  
 
                                               
Share-based compensation:
                                               
Share-based compensation
    1,084       108       18,363                   18,471  
Contribution to employee benefit plans
    9       1       579                   580  
Exercise of stock options
    813       82       17,689                   17,771  
Restricted shares surrendered for withholding taxes or forfeited
    (379 )     (38 )     (7,175 )                 (7,213 )
 
                                               
Repurchases of ordinary shares
    (593 )     (59 )     (26,512 )                 (26,571 )
Net income
                      759,906             759,906  
Dividends paid ($0.83 per share)
                      (222,910 )           (222,910 )
Other comprehensive loss, net
                            (5,204 )     (5,204 )
 
                                   
 
                                               
Balance at June 30, 2008
    269,157     $ 26,916     $ 686,641     $ 4,139,866     $ (10,271 )   $ 4,843,152  
 
                                   
See accompanying notes to the consolidated financial statements.

 

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NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
                 
    Three Months Ended June 30,  
    2008     2007  
 
               
NET INCOME
  $ 375,718     $ 290,031  
 
           
 
               
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
               
Foreign currency translation adjustments
    (3,999 )     1,790  
Foreign currency forward contract activity
    (1,250 )     (222 )
Pension plan actuarial loss
          (5,580 )
Amortization of deferred pension plan amounts
    190       397  
 
           
 
               
Other comprehensive loss
    (5,059 )     (3,615 )
 
           
 
               
COMPREHENSIVE INCOME
  $ 370,659     $ 286,416  
 
           
                 
    Six Months Ended June 30,  
    2008     2007  
 
               
NET INCOME
  $ 759,906     $ 540,351  
 
           
 
               
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
               
Foreign currency translation adjustments
    (4,064 )     2,552  
Foreign currency forward contract activity
    (1,556 )     (1,051 )
Pension plan actuarial loss
          (5,580 )
Amortization of deferred pension plan amounts
    416       784  
 
           
 
               
Other comprehensive loss
    (5,204 )     (3,295 )
 
           
 
               
COMPREHENSIVE INCOME
  $ 754,702     $ 537,056  
 
           
See accompanying notes to the consolidated financial statements.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 1 — BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Noble Corporation (“Noble” or, together with its consolidated subsidiaries, unless the context requires otherwise, the “Company”, “we”, “our” and words of similar import) have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) as they pertain to Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The unaudited financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a normal recurring nature. The Consolidated Balance Sheet at December 31, 2007 presented herein is derived from the December 31, 2007 audited consolidated financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
On July 27, 2007, Noble’s Board of Directors approved what is commonly referred to in the United States as a “two-for-one stock split” of Noble’s ordinary shares effected in the form of a 100 percent stock dividend to members (shareholders) of record on August 7, 2007. The stock dividend was distributed on August 28, 2007 when shareholders of record were issued one additional ordinary share for each ordinary share held. All share and per share data included in the unaudited condensed consolidated financial statements and accompanying notes have been adjusted to reflect the stock split for all periods presented.
Certain reclassifications have been made to amounts in prior period financial statements to conform to current period presentations. We believe these reclassifications are immaterial as they do not have a material impact on our financial position, results of operations or cash flows. In our Consolidated Balance Sheet at December 31, 2007, we had previously included inventories as a separate caption. As our inventories consist of spare parts, materials and supplies held for consumption, rather than for sale to third parties, we have included this amount in other current assets. At December 31, 2007, inventories totaled approximately $4 million. In our Consolidated Statement of Cash Flows for the six months ended June 30, 2008, we present separately impairment loss on assets and pension contributions when reconciling net income to net cash from operating activities. We reclassified these amounts in our Consolidated Statement of Cash Flows for the six months ended June 30, 2007 to be consistent with our 2008 presentation, which resulted in a $5 million and $17 million reclassification in the 2007 period for impairment loss on assets and pension contributions, respectively. Previously, these amounts had been included in depreciation, amortization and impairment and other, net, respectively, in the reconciliation of net income to net cash from operating activities.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 2 — NET INCOME PER SHARE
The following table reconciles the basic and diluted average shares outstanding for net income per share computations (amounts in thousands, except per share data):
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
 
                               
Weighted-average shares outstanding — basic
    266,464       265,927       266,458       266,521  
 
                               
Effect of potentially dilutive shares:
                               
Stock options and awards
    2,730       2,813       2,428       2,646  
 
                       
Weighted-average shares outstanding — diluted
    269,194       268,740       268,886       269,167  
 
                       
 
                               
Net income — basic and diluted
  $ 375,718     $ 290,031     $ 759,906     $ 540,351  
 
                               
Net income per share:
                               
Basic
  $ 1.41     $ 1.09     $ 2.85     $ 2.03  
Diluted
  $ 1.40     $ 1.08     $ 2.83     $ 2.01  
Only those items having a dilutive impact on our basic net income per share are included in diluted net income per share. For the three months ended June 30, 2008 and 2007, stock options and awards totaling 0.2 million and 0.4 million shares, respectively, were excluded from the diluted net income per share calculation as they were not dilutive. For the six months ended June 30, 2008 and 2007, stock options and awards totaling 0.2 million and 1.1 million shares, respectively, were excluded from the diluted net income per share calculation as they were not dilutive.
NOTE 3 — PROPERTY AND EQUIPMENT
Interest is capitalized on construction-in-progress at the weighted average cost of debt outstanding during the period of construction. Capitalized interest was $12 million and $24 million for the three and six months ended June 30, 2008, respectively, and $13 million and $25 million for the three and six months ended June 30, 2007, respectively.
Certain of our rigs operating in the U.S. Gulf of Mexico sustained damage in 2005 as a result of Hurricanes Katrina and Rita. All damaged rigs returned to work by April 2006. Our insurance receivables at December 31, 2007 relating to claims for hurricane damage were $39 million. During the first quarter of 2008, we received $39 million as final settlement of all remaining hurricane-related claims and receivables for physical damage and loss of hire.
NOTE 4 — ASSET DISPOSALS
During the second quarter of 2008, we sold our North Sea labor contract drilling services business to Seawell Holding UK Limited (“Seawell”) for $35 million plus working capital. This sale included labor contracts covering 11 platform operations in the United Kingdom sector of the North Sea. In connection with this transaction, we recognized a gain of $35 million, net of closing costs, which includes approximately $5 million in cumulative currency translation adjustments.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 5 — DEBT
Long-term debt consists of the following at June 30, 2008 and December 31, 2007:
                 
    June 30,     December 31,  
    2008     2007  
Credit Facility
  $ 50,000     $ 100,000  
6.95% Senior Notes due 2009
    149,993       149,987  
7.50% Senior Notes due 2019
    201,695       201,695  
5.875% Senior Notes due 2013
    299,819       299,800  
Project Financing — Thompson Notes
    27,958       33,034  
 
           
Total Debt
    729,465       784,516  
Current Maturities
    (27,958 )     (10,334 )
 
           
Long-term Debt
  $ 701,507     $ 774,182  
 
           
We have a $600 million unsecured credit facility (the “Credit Facility”), which was originally scheduled to mature on March 15, 2012. During the first quarter of 2008, the term of the Credit Facility was extended for an additional one-year period to March 15, 2013. During this one-year extension period, the total amount available under the Credit Facility will be $575 million, but we have the right to seek an increase of the total amount available to $600 million. We may, subject to certain conditions, request that the term of the Credit Facility be further extended for an additional one-year period. Our subsidiary, Noble Drilling Corporation (“Noble Drilling”), has guaranteed the obligations under the Credit Facility. Pursuant to the terms of the Credit Facility, we may, subject to certain conditions, elect to increase the amount available to an amount not to exceed $800 million.
Our Credit Facility provides us with the ability to issue up to $150 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding, it does reduce the amount available. At June 30, 2008, we had $50 million in borrowings and $99 million in letters of credit outstanding, leaving $451 million available under our Credit Facility.
At June 30, 2008 and December 31, 2007, the weighted average interest rate for outstanding borrowings under the Credit Facility was 2.7 percent and 5.2 percent, respectively.
NOTE 6 — INCOME TAXES
At December 31, 2007, the reserves for uncertain tax positions totaled $61 million (net of related tax benefits of $7 million). At June 30, 2008, the reserves for uncertain tax positions increased to $88 million (net of related tax benefits of $4 million). The increase in uncertain tax positions at June 30, 2008 was primarily due to tax positions taken on returns filed in one of our foreign jurisdictions. If these reserves of $88 million are not realized, the provision for income taxes would be reduced by $62 million and equity would be directly increased by $26 million.
We do not anticipate that any tax contingencies resolved in the next 12 months will have a material impact on our consolidated financial position or results of operations.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 7 — EMPLOYEE BENEFIT PLANS
Pension costs include the following components:
                                 
    Three Months Ended June 30,  
    2008     2007  
    International     Domestic     International     Domestic  
 
                               
Service cost
  $ 1,421     $ 1,573     $ 1,665     $ 1,665  
Interest cost
    1,249       1,614       1,152       1,495  
Return on plan assets
    (1,686 )     (2,227 )     (1,131 )     (1,650 )
Amortization of prior service cost
          98             99  
Amortization of transition obligation
    43             67        
Recognized net actuarial loss
    40       87       54       380  
 
                       
Net pension expense
  $ 1,067     $ 1,145     $ 1,807     $ 1,989  
 
                       
                                 
    Six Months Ended June 30,  
    2008     2007  
    International     Domestic     International     Domestic  
 
                               
Service cost
  $ 2,841     $ 3,147     $ 2,935     $ 3,330  
Interest cost
    2,500       3,229       2,172       2,990  
Return on plan assets
    (3,378 )     (4,454 )     (2,262 )     (3,300 )
Amortization of prior service cost
          196             198  
Amortization of transition obligation
    86             121        
Recognized net actuarial loss
    80       174       108       760  
 
                       
Net pension expense
  $ 2,129     $ 2,292     $ 3,074     $ 3,978  
 
                       
In August 2006, U.S. President Bush signed into law the Pension Protection Act of 2006 (“PPA”). The PPA requires that pension plans become fully funded over a seven-year period beginning in 2008 and increases the amount we are allowed to contribute to our domestic pension plans in the near term.
We have contributed an aggregate of $17 million to our pension plans in 2008, which represents the total contributions expected to be made in 2008, subject to applicable law.
We sponsor the Noble Drilling Corporation 401(k) Savings Restoration Plan (“Restoration Plan”). The Restoration Plan has no assets, and amounts “contributed” to the Restoration Plan are kept by us for general corporate purposes. The investments selected by employees and associated returns are tracked on a phantom basis. Accordingly, we have a liability to employees for amounts originally contributed plus phantom investment income or less phantom investment losses. We are at risk for phantom investment income and, conversely, benefit should phantom investment losses occur. At June 30, 2008, our liability under the Restoration Plan totaled $12 million.
NOTE 8 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
We periodically enter into derivative instruments to manage our cash flow exposure to fluctuations in interest rates and foreign currency exchange rates, and we may conduct hedging activities in future periods to mitigate such exposure. We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative or trading purposes, nor are we a party to leveraged derivatives.
Our North Sea operations have a significant amount of their cash operating expenses payable in either the Euro or British Pound, and we typically maintain forward currency contracts settling monthly in Euros and British Pounds. The Euro-denominated forward contracts settling in the remainder of 2008 represent approximately 21 percent of our forecasted Euro requirements. The British Pound-denominated forward contracts settling in the remainder of 2008 represent approximately 9 percent of our forecasted British Pound requirements. The notional amount of forward contracts outstanding at June 30, 2008 was approximately 3 million Euros and 2 million British Pounds. The aggregate notional amount of these forward contracts, expressed in U.S. Dollars, was $7 million at June 30, 2008.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
All of the above foreign currency forward contracts were accounted for as cash flow hedges under Statement of Financial Accounting Standards (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (“SFAS No. 133”). The fair market value of those derivative instruments is included in Other current assets or Other current liabilities with the cumulative unrealized gain or loss included in Accumulated other comprehensive loss in our Consolidated Balance Sheets. The fair market value of outstanding foreign currency forward contracts was approximately $1 million at June 30, 2008. Hedge effectiveness is measured quarterly based on the relative cumulative changes in fair value between derivative contracts and the hedge item over time. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings. We did not recognize a gain or loss due to hedge ineffectiveness in our Consolidated Statements of Income during the three months or six months ended June 30, 2008 and 2007 related to these derivative instruments.
The balance of the net unrealized gain related to our foreign currency forward contracts included in Accumulated other comprehensive loss and related activity is as follows:
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2008     2007     2008     2007  
 
                               
Net unrealized gain at beginning of period
  $ 1,913     $ 2,388     $ 2,219     $ 3,217  
Activity during period:
                               
Settlement of forward contracts outstanding at beginning of period
    ( 1,295 )     (903 )     (1,850 )     (1,935 )
Net unrealized gain on outstanding foreign currency forward contracts
    45       681       294       884  
 
                       
Net unrealized gain at end of period
  $ 663     $ 2,166     $ 663     $ 2,166  
 
                       
NOTE 9 — FAIR VALUE OF FINANCIAL INSTRUMENTS
In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements. Instead, its application will be made pursuant to other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. On February 6, 2008, the FASB issued FASB Staff Position FAS 157-2, Partial Deferral of the Effective Date of Statement 157, which deferred the effective date for one year for certain nonfinancial assets and liabilities, except those recognized or disclosed at fair value on a recurring basis. These nonfinancial items include reporting units measured at fair value in a goodwill impairment test and nonfinancial assets and liabilities assumed in a business combination.
We adopted SFAS No. 157 effective January 1, 2008 for financial assets and liabilities measured on a recurring basis. There was no impact for the partial adoption of SFAS No. 157 on our consolidated financial statements. We do not expect the application of SFAS No. 157 to our nonfinancial assets and liabilities to have any material effect on our consolidated financial statements.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
The following table presents the carrying amount and estimated fair value of our financial instruments recognized at fair value on a recurring basis:
                                                 
    June 30, 2008     December 31, 2007  
            Estimated Fair Value              
            Measurements              
            Quoted     Significant                    
            Prices in     Other     Significant              
            Active     Observable     Unobservable              
    Carrying     Markets     Inputs     Inputs     Carrying     Estimated  
    Amount     (Level 1)     (Level 2)     (Level 3)     Amount     Fair Value  
Derivative Instruments —
                                               
Foreign currency forward contracts
  $ 663     $     $ 663     $     $ 2,219     $ 2,219  
The derivative instruments have been valued using actively quoted prices and quotes obtained from the counterparties to the derivative instruments. Our cash and cash equivalents, accounts receivable and accounts payable are by their nature short-term. As a result, the carrying values included in the accompanying Consolidated Balance Sheets approximate fair value.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities (“SFAS No. 159”). SFAS No. 159 permits entities to measure eligible assets and liabilities at fair value. We adopted SFAS No. 159 effective January 1, 2008, and we did not elect the fair value option for our financial instruments. Accordingly, there was no impact to our consolidated financial statements as a result of this adoption.
NOTE 10 — COMMITMENTS AND CONTINGENCIES
Noble Asset Company Limited (“NACL”), a wholly-owned, indirect subsidiary of Noble, was named one of 21 parties served a Show Cause Notice (“SCN”) issued by the Commissioner of Customs (Prev.), Mumbai, India (the “Commissioner”) in August 2003. The SCN concerned alleged violations of Indian customs laws and regulations regarding one of our jackups. The Commissioner alleged certain violations to have occurred before, at the time of, and after NACL acquired the rig from the rig’s previous owner. 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 150 million Indian Rupees (or $3 million at June 30, 2008) and a customs bond in the amount of 970 million Indian Rupees (or $23 million at June 30, 2008), both of which remain in place. In March 2005, the Commissioner passed an order against NACL and the other parties cited in the SCN seeking (i) to invoke the bank guarantee posted on behalf of NACL as a fine, (ii) to demand duty of (a) $19 million plus interest related to a 1997 alleged import and (b) $22 million plus interest related to a 1999 alleged import, provided that the duty and interest demanded in (b) would not be payable if the duty and interest demanded in (a) were paid by NACL, and (iii) to assess a penalty of $500,000 against NACL. NACL appealed the order of the Commissioner to the Customs, Excise & Service Tax Appellate Tribunal (“CESTAT”). At a hearing on April 5, 2006, CESTAT upheld NACL’s appeal and overturned the Commissioner’s March 2005 order against NACL in its entirety. CESTAT thereafter issued its written judgment dated August 8, 2006 upholding NACL’s appeal on all grounds and setting aside the duty demand, interest, fine and penalty. The Commissioner filed an appeal in the Bombay High Court challenging the order passed by CESTAT. In August 2008, the Division Bench of the Bombay High Court dismissed the Commissioner’s appeal of CESTAT’s order. NACL will seek the return or cancellation of its previously posted custom bond and bank guarantees. NACL continues to pursue contractual indemnification against liability for Indian customs duty and related costs and expenses against the rig’s previous owner in arbitration proceedings in London, which proceedings the parties have temporarily stayed pending further developments in the Indian proceeding. We do not believe the ultimate resolution of this matter will have a material adverse effect on our financial position, results of operations or cash flows.
We operate in a number of countries throughout the world and our income tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We are currently contesting several tax assessments and may contest future assessments when we believe the assessments are in error. We cannot predict or provide assurance as to the ultimate outcome of the existing or future assessments. We believe the ultimate resolution of the outstanding assessments, for which we have not made any accrual, will not have a material adverse effect on our consolidated financial statements. We recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained. See Note 6 for additional information.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
Certain of our international income tax returns have been examined for the 2002 through 2004 periods and audit claims have been assessed for approximately $114 million (including interest and penalties). We believe audit claims of an additional $22 million to $26 million attributable to other business tax returns may be assessed against us. We have contested, or intend to contest, most of the audit findings, including through litigation if necessary, and we do not believe that there is greater than 50 percent likelihood that additional taxes will be incurred. Accordingly, no accrual has been made for such amounts.
We are from time to time a party to various lawsuits that are incidental to our operations in which the claimants seek an unspecified amount of monetary damages for personal injury, including claims purportedly resulting from exposure to asbestos on drilling rigs and associated facilities. At July 31, 2008, there were approximately 38 of these lawsuits in which we are one of many defendants. One lawsuit is scheduled for trial in 2008. These lawsuits have been filed in the states of Louisiana, Mississippi and Texas. Exposure related to these lawsuits is not currently determinable. We intend to defend vigorously against the litigation.
We are a defendant in certain claims and litigation arising out of operations in the ordinary course of business, the resolution of which, in the opinion of management, will not be material to our financial position, results of operations or cash flows.
During the fourth quarter of 2007, our Nigerian subsidiary received letters from the Nigerian Maritime Administration and Safety Agency (“NIMASA”) seeking to collect a two percent surcharge on contract amounts under contracts performed by “vessels”, within the meaning of Nigeria’s cabotage laws, engaged in the Nigerian coastal shipping trade. Although we do not believe that these letters apply to our ownership of drilling units, NIMASA is seeking to apply a provision of the Nigerian cabotage laws (which became effective on May 1, 2004) to our offshore drilling units by considering these units to be “vessels” within the meaning of those laws and therefore subject to the surcharge, which is imposed only upon “vessels”. Our offshore drilling units are not engaged in the Nigerian coastal shipping trade and are not in our view “vessels” within the meaning of Nigeria’s cabotage laws. On January 24, 2008, we filed an originating summons against NIMASA and the Minister of Transportation in the Federal High Court of Lagos, Nigeria seeking, among other things, a declaration that our drilling operations do not constitute “coastal trade” or “cabotage” within the meaning of Nigeria’s cabotage laws and that our offshore drilling units are not “vessels” within the meaning of those laws. NIMASA and the Minister of Transportation have filed a preliminary objection to our originating summons and the proceeding. A ruling on the preliminary objection is scheduled for October 2008. We intend to oppose the preliminary objection and take all further appropriate legal action to resist the application of Nigeria’s cabotage laws to our drilling units. The outcome of any such legal action and the extent to which we may ultimately be responsible for the surcharge is uncertain. If it is ultimately determined that offshore drilling units constitute vessels within the meaning of the Nigerian cabotage laws, we may be required to pay the surcharge and comply with other aspects of the Nigerian cabotage laws, which could adversely affect our operations in Nigerian waters and require us to incur additional costs of compliance.
We maintain certain insurance coverage against specified marine liabilities, including liability for physical damage to our drilling rigs, and loss of hire on certain of our rigs. Our March 2008 insurance program renewal included an annual aggregate coverage limit of $200 million applicable to our drilling units operating in the U.S. Gulf of Mexico for physical damage and loss of hire on certain units resulting from named windstorm perils. This aggregate coverage limit may not fully insure our losses in the event that one or more named windstorms damage our drilling units in the U.S. Gulf of Mexico. The reduced coverage does not apply to our units in the Mexican portion of the Gulf of Mexico. We presently have five semisubmersibles and three submersibles in the U.S. Gulf. We maintained a $10 million deductible on our marine hull and machinery coverage, and loss of hire coverage is subject to a 60 day waiting period deductible for named U.S. Gulf windstorms and a 45 day waiting period for all other perils. If one or more future significant weather-related events occur in the Gulf of Mexico or in any other geographic area in which we operate, we may experience further increases in insurance costs, additional coverage restrictions or unavailability of certain insurance products.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
We carry protection and indemnity insurance covering marine third party liability exposures, which also includes coverage for employer’s liability resulting from personal injury to our offshore drilling crews. Since February 2004, our protection and indemnity policy has had a standard deductible of $1 million per occurrence, and we retain $5 million of claims in the aggregate beyond the standard deductible.
In connection with our 2008 and future capital expenditure programs, we had entered into certain commitments, including shipyard and purchase commitments, of approximately $729 million at June 30, 2008.
Internal Investigation
In June 2007, we announced that we were conducting an internal investigation of our Nigerian operations, focusing on the legality under the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and local laws of our Nigerian affiliate’s reimbursement of certain expenses incurred by our customs agents in connection with obtaining and renewing permits for the temporary importation of drilling units and related equipment into Nigerian waters, including permits that are necessary for our drilling units to operate in Nigerian waters. We also announced that the audit committee of Noble’s Board of Directors had engaged a leading law firm with significant experience in investigating and advising on FCPA matters to lead the investigation as independent outside counsel. The scope of the investigation also includes our dealings with customs agents and customs authorities in certain parts of the world other than Nigeria in which we conduct our operations, as well as dealings with other types of local agents in Nigeria and such other parts of the world. There can be no assurance that evidence of additional potential FCPA violations may not be uncovered through the investigation.
The audit committee commissioned the internal investigation after our management brought to the attention of the audit committee a news release issued by another company that disclosed that the other company was conducting an internal investigation into the FCPA implications of certain actions by a customs agent in Nigeria in connection with the temporary importation of that company’s vessels into Nigeria. Our drilling units that conduct operations in Nigeria do so under temporary import permits, and management considered it prudent to review our own practices in this regard.
We voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”) to advise them that an independent investigation was under way. We have been cooperating, and intend to continue to cooperate, fully with both agencies. If the SEC or the DOJ determines that violations of the FCPA have occurred, they could seek civil and criminal sanctions, including monetary penalties, against us and/or certain of our employees, as well as additional changes to our business practices and compliance programs, any of which could have a material adverse effect on our business and financial condition. In addition, such actions, whether actual or alleged, could damage our reputation and ability to do business, to attract and retain employees, and to access capital markets. Further, detecting, investigating, and resolving such actions is expensive and consumes significant time and attention of our senior management.
The independent outside counsel appointed by the audit committee to perform the internal investigation recently made a presentation of the results of its investigation to the DOJ and the SEC. The SEC and the DOJ have begun to review these results and information gathered by the independent outside counsel in the course of the investigation. Neither the SEC nor the DOJ has indicated what action it may take, if any, against us or any individual, or whether it may request that the audit committee’s independent outside counsel conduct further investigation. Therefore, we consider the internal investigation to be ongoing and cannot predict when it will conclude. Furthermore, we cannot predict whether either the SEC or the DOJ will open its own proceeding to investigate this matter, or if a proceeding is opened, what potential remedies these agencies may seek. We could also face fines or sanctions in relevant foreign jurisdictions. Based on information obtained to date in our internal investigation, we have not determined that any potential liability that may result is probable or remote or can be reasonably estimated. As a result, we have not made any accrual in our consolidated financial statements at June 30, 2008.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
We are currently operating five jackup rigs offshore Nigeria. Four of these rigs have obtained extensions of temporary imports that permit the rigs to remain in Nigeria through November 28, 2008. The fifth rig has obtained a fresh temporary import permit that will permit the rig to remain in Nigeria through July 1, 2009. We continue to seek to avoid material disruption to our Nigerian operations; however, there can be no assurance that we will be able to obtain new permits or further extensions of permits necessary to continue the operation of our rigs in Nigeria after expiration of the current terms of the temporary import permits. If we cannot obtain a new permit or an extension necessary to continue operations of any rig, we may need to cease operations under the drilling contract for such rig and relocate such rig from Nigerian waters. We cannot predict what impact this may have on any such contract or our business in Nigeria. Furthermore, we cannot predict what changes, if any, relating to temporary import permit policies and procedures may be established or implemented in Nigeria in the future, or how any such changes may impact our business there.
Notwithstanding that the internal investigation is ongoing, we have concluded that certain changes to our FCPA compliance program would provide us greater assurance that our assets are not used, directly or indirectly, to make improper payments, including customs payments, and that we are in compliance with the FCPA’s record-keeping requirements. Although we have had a long-standing published policy requiring compliance with the FCPA and broadly prohibiting any improper payments by us to foreign or domestic officials, we have since the commencement of the internal investigation adopted, and may adopt additional, intermediate measures intended to enhance FCPA compliance procedures. Additional measures may be required once the investigation concludes.
For the three and six months ended June 30, 2008, we incurred legal fees and related costs of $4 million and $11 million, respectively, related to the internal investigation. It is anticipated that additional costs will be incurred in future periods, but the amount of these costs cannot be presently determined.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 11 — SEGMENT AND RELATED INFORMATION
Beginning in the fourth quarter of 2007, we report our international and domestic contract drilling operations as a single reportable segment: Contract Drilling Services. The consolidation into one reportable segment reflects how we manage our business, and the fact that all of our drilling fleet is dependent upon the worldwide oil industry. The mobile offshore drilling units comprising our offshore rig fleet operate in a single, global market for contract drilling services and are often redeployed globally due to changing demands of our customers, which consist largely of major international and government owned/controlled oil and gas companies throughout the world. Our contract drilling services segment conducts contract drilling operations in the Middle East, India, the U.S. Gulf of Mexico, Mexico, the North Sea, Brazil and West Africa.
We evaluate the performance of our operating segment primarily based on operating revenues and net income. Summarized financial information of our reportable segment for the three and six months ended June 30, 2008 and 2007 is shown in the following table. The “Other” column includes results of labor contract drilling services, engineering and consulting services, other insignificant operations and corporate related items. All prior period amounts have been reclassified to conform to the current presentation.
                                                 
    Three Months Ended June 30,  
    2008     2007  
    Contract                     Contract              
    Drilling                     Drilling              
    Services     Other     Total     Services     Other     Total  
 
                                               
Revenues from external customers
  $ 803,390     $ 9,551     $ 812,941     $ 677,736     $ 48,263     $ 725,999  
Depreciation and amortization
    86,636       1,200       87,836       66,108       2,215       68,323  
Segment operating income
    424,227       35,918       460,145       363,114       (2,107 )     361,007  
Interest expense, net of amount capitalized
    610       111       721       976       255       1,231  
Income tax provision (benefit)
    83,641       1,645       85,286       74,043       (3,786 )     70,257  
Segment profit
    340,731       34,987       375,718       287,829       2,202       290,031  
Total assets (at end of period)
    5,774,924       577,396       6,352,320       4,775,543       417,725       5,193,268  
Capital expenditures
    274,252       16,653       290,905       305,896       36,586       342,482  
                                                 
    Six Months Ended June 30,  
    2008     2007  
    Contract                     Contract              
    Drilling                     Drilling              
    Services     Other     Total     Services     Other     Total  
 
                                               
Revenues from external customers
  $ 1,622,577     $ 51,789     $ 1,674,366     $ 1,274,650     $ 97,773     $ 1,372,423  
Depreciation and amortization
    167,421       3,314       170,735       127,917       4,471       132,388  
Segment operating income
    888,028       38,620       926,648       670,637       1,671       672,308  
Interest expense, net of amount capitalized
    1,603       228       1,831       2,342       393       2,735  
Income tax provision (benefit)
    172,440       (2,820 )     169,620       137,430       (6,538 )     130,892  
Segment profit
    717,603       42,303       759,906       531,292       9,059       540,351  
Total assets (at end of period)
    5,774,924       577,396       6,352,320       4,775,543       417,725       5,193,268  
Capital expenditures
    502,019       22,874       524,893       501,666       77,494       579,160  

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 12 — ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 establishes new accounting and reporting standards for a noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements. The amount of net income attributable to a noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 requires that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS No. 160 also includes expanded disclosures regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We do not expect the adoption of SFAS No. 160 to have a material impact on our financial position or results of operations.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) will significantly change the accounting for business combinations. Under SFAS No. 141(R), the acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141(R) will change the accounting treatment for certain specific items, including:
   
transaction costs will generally be expensed as incurred;
 
   
contingent consideration will be recognized at fair value on the acquisition date;
 
   
acquired contingent liabilities will be recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies;
 
   
fair value of the purchase price, including the issuance of equity securities, will be determined on the acquisition date (closing) instead of announcement date;
 
   
restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and
 
   
changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense.
SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, and earlier adoption is prohibited. This standard will change our accounting treatment for business combinations on a prospective basis.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”). SFAS No. 161 requires entities with derivative instruments to disclose information to enable financial statement users to understand how and why the entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and how derivative instruments and related hedged items affect the entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the impact, if any, that SFAS No. 161 will have on our consolidated financial statements.
In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years and interim periods beginning after December 15, 2008. We are currently evaluating the impact, if any, that FSP EITF 03-6-1 will have on our consolidated financial statements.

 

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. The new standard becomes effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411. SFAS No. 162 is not expected to have a material impact on our consolidated financial position or results of operations.
NOTE 13 — SUBSEQUENT EVENT
On August 1, 2008, Noble’s Board of Directors declared a quarterly cash dividend of $0.04 per ordinary share payable to shareholders of record on August 13, 2008, with a distribution date of August 29, 2008.
NOTE 14 — GUARANTEES OF REGISTERED SECURITIES
Noble and Noble Holding (U.S.) Corporation (“NHC”), a wholly-owned subsidiary of Noble, are guarantors for certain debt securities issued by Noble Drilling. These debt securities consist of Noble Drilling’s 6.95% Senior Notes due 2009 and its 7.50% Senior Notes due 2019 (the “ND Notes”), which had outstanding principal balances at June 30, 2008 of $150 million and $202 million, respectively. Noble Drilling is an indirect, wholly-owned subsidiary of Noble and a direct, wholly-owned subsidiary of NHC. Noble’s and NHC’s guarantees of the ND Notes are full and unconditional. In December 2005, Noble Drilling Holding LLC (“NDH”), an indirect wholly-owned subsidiary of Noble, became a co-obligor on (and effectively a guarantor of) the ND Notes.
In connection with the 2006 issuance of Noble’s 5.875% Senior Notes due 2013 (the “Noble Notes”), Noble Drilling guaranteed the payment of the Noble Notes. Noble Drilling’s guarantee of the Noble Notes is full and unconditional. The outstanding principal balance of the Noble Notes at June 30, 2008 was $300 million.

 

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
June 30, 2008

(In thousands)
(Unaudited)
The following consolidating financial statements of Noble, NHC and NDH combined, Noble Drilling and all other subsidiaries present investments in both consolidated and unconsolidated affiliates using the equity method of accounting. Certain reclassifications have been made to amounts in prior period financial statements to conform to current period presentations.
                                                 
            NHC and NDH     Noble     Other     Consolidating        
    Noble     Combined     Drilling     Subsidiaries     Adjustments     Total  
ASSETS
                                               
CURRENT ASSETS
                                               
Cash and cash equivalents
  $ 128,084     $ 210     $ 29     $ 192,641     $     $ 320,964  
Accounts receivable
          23,580       7,481       529,862             560,923  
Insurance receivables
                                   
Prepaid expenses
          1,037       173       50,319             51,529  
Accounts receivable from affiliates
    156,258             580,116       706,835       (1,443,209 )      
Other current assets
    3,677       36             91,459       (58,673 )     36,499  
 
                                   
Total current assets
    288,019       24,863       587,799       1,571,116       (1,501,882 )     969,915  
 
                                   
 
                                               
PROPERTY AND EQUIPMENT
                                               
Drilling equipment and facilities
          1,980,804       112,961       4,701,132             6,794,897  
Other
          225             97,290             97,515  
 
                                   
 
          1,981,029       112,961       4,798,422             6,892,412  
Accumulated depreciation
          (97,686 )     (67,540 )     (1,588,037 )           (1,753,263 )
 
                                   
 
          1,883,343       45,421       3,210,385             5,139,149  
 
                                   
 
                                               
NOTES RECEIVABLE FROM AFFILIATES
    511,835       20,963       44,159       1,598,923       (2,175,880 )      
INVESTMENTS IN AFFILIATES
    4,668,224       4,901,214       3,298,273             (12,867,711 )      
OTHER ASSETS
    3,312       6,530       6,330       227,084             243,256  
 
                                   
 
  $ 5,471,390     $ 6,836,913     $ 3,981,982     $ 6,607,508     $ (16,545,473 )   $ 6,352,320  
 
                                   
 
                                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                               
CURRENT LIABILITIES
                                               
Current maturities of long-term debt
  $     $ 27,094     $     $ 27,958     $ (27,094 )   $ 27,958  
Accounts payable
          5,892       6,134       160,779             172,805  
Accrued payroll and related costs
          331       11,745       85,547             97,623  
Taxes payable
          8,472             94,342             102,814  
Interest payable
    6,273       15,193       19,080       498       (31,579 )     9,465  
Accounts payable to affiliates
          1,440,733             2,476       (1,443,209 )      
Other current liabilities
          340       403       52,808             53,551  
 
                                   
Total current liabilities
    6,273       1,498,055       37,362       424,408       (1,501,882 )     464,216  
 
                                               
LONG-TERM DEBT
    349,819             351,688                   701,507  
NOTES PAYABLE TO AFFILIATES
    264,300       1,214,623       120,000       576,957       (2,175,880 )      
DEFERRED INCOME TAXES
          4,795       14,298       235,428             254,521  
OTHER LIABILITIES
    7,846       30,234       3,961       52,196             94,237  
 
                                   
 
    628,238       2,747,707       527,309       1,288,989       (3,677,762 )     1,514,481  
 
                                   
 
                                               
COMMITMENTS AND CONTINGENCIES
                                               
 
                                               
MINORITY INTEREST
                      (5,313 )           (5,313 )
 
                                   
 
                                               
SHAREHOLDERS’ EQUITY
                                               
Ordinary shares-par value $0.10 per share
    26,916                               26,916  
Capital in excess of par value
    686,641       552,236       870,744       834,555       (2,257,535 )     686,641  
Retained earnings
    4,139,866       3,536,970       2,583,929       4,499,548       (10,620,447 )     4,139,866  
Accumulated other comprehensive income (loss)
    (10,271 )                 (10,271 )     10,271       (10,271 )
 
                                   
 
    4,843,152       4,089,206       3,454,673       5,323,832       (12,867,711 )     4,843,152  
 
                                   
 
  $ 5,471,390     $ 6,836,913     $ 3,981,982     $ 6,607,508     $ (16,545,473 )   $ 6,352,320  
 
                                   

 

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2007

(In thousands)
(Unaudited)
                                                 
            NHC and NDH     Noble     Other     Consolidating        
    Noble     Combined     Drilling     Subsidiaries     Adjustments     Total  
ASSETS
                                               
CURRENT ASSETS
                                               
Cash and cash equivalents
  $ 12,544     $     $ 73     $ 148,441     $     $ 161,058  
Accounts receivable
          22,900       9,699       580,516             613,115  
Insurance receivables
                      39,066             39,066  
Prepaid expenses
          858       82       19,781             20,721  
Accounts receivable from affiliates
    419,197             576,239             (995,436 )      
Other current assets
    3,474       160       135       65,154       (42,692 )     26,231  
 
                                   
Total current assets
    435,215       23,918       586,228       852,958       (1,038,128 )     860,191  
 
                                   
 
                                               
PROPERTY AND EQUIPMENT
                                               
Drilling equipment and facilities
          1,665,102       111,089       4,578,591             6,354,782  
Other
          170             79,999             80,169  
 
                                   
 
          1,665,272       111,089       4,658,590             6,434,951  
Accumulated depreciation
          (82,964 )     (64,947 )     (1,491,124 )           (1,639,035 )
 
                                   
 
          1,582,308       46,142       3,167,466             4,795,916  
 
                                   
 
                                               
NOTES RECEIVABLE FROM AFFILIATES
    511,835       20,963       44,159       1,462,786       (2,039,743 )      
INVESTMENTS IN AFFILIATES
    3,881,341       4,906,292       3,010,249             (11,797,882 )      
OTHER ASSETS
    3,666       6,847       3,953       205,433             219,899  
 
                                   
 
  $ 4,832,057     $ 6,540,328     $ 3,690,731     $ 5,688,643     $ (14,875,753 )   $ 5,876,006  
 
                                   
 
                                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                               
CURRENT LIABILITIES
                                               
Current maturities of long-term debt
  $     $ 25,886     $     $ 10,334     $ (25,886 )   $ 10,334  
Accounts payable
          5,540       4,778       188,077             198,395  
Accrued payroll and related costs
          421       13,131       102,362             115,914  
Taxes payable
          2,114             83,527             85,641  
Interest payable
    4,122       6,847       15,200       588       (16,806 )     9,951  
Accounts payable to affiliates
          1,171,782             (176,346 )     (995,436 )      
Other current liabilities
          3       487       72,047             72,537  
 
                                   
Total current liabilities
    4,122       1,212,593       33,596       280,589       (1,038,128 )     492,772  
 
                                   
 
                                               
LONG-TERM DEBT
    399,800             351,682       22,700             774,182  
NOTES PAYABLE TO AFFILIATES
    114,300       1,228,486       120,000       576,957       (2,039,743 )      
DEFERRED INCOME TAXES
          4,795       12,496       223,330             240,621  
OTHER LIABILITIES
    5,513       23,266       1,689       35,237             65,705  
 
                                   
 
    523,735       2,469,140       519,463       1,138,813       (3,077,871 )     1,573,280  
 
                                   
 
                                               
COMMITMENTS AND CONTINGENCIES
                                               
 
                                               
MINORITY INTEREST
                      (5,596 )           (5,596 )
 
                                   
SHAREHOLDERS’ EQUITY
                                               
Ordinary shares-par value $0.10 per share
    26,822                               26,822  
Capital in excess of par value
    683,697       1,279,983       870,744       792,645       (2,943,372 )     683,697  
Retained earnings
    3,602,870       2,791,205       2,301,199       3,767,848       (8,860,252 )     3,602,870  
Accumulated other comprehensive income (loss)
    (5,067 )           (675 )     (5,067 )     5,742       (5,067 )
 
                                   
 
    4,308,322       4,071,188       3,171,268       4,555,426       (11,797,882 )     4,308,322  
 
                                   
 
  $ 4,832,057     $ 6,540,328     $ 3,690,731     $ 5,688,643     $ (14,875,753 )   $ 5,876,006  
 
                                   

 

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Three Months Ended June 30, 2008

(In thousands)
(Unaudited)
                                                 
            NHC and NDH     Noble     Other     Consolidating          
    Noble     Combined     Drilling     Subsidiaries     Adjustments     Total  
 
                                               
OPERATING REVENUES
                                               
Contract drilling services
  $     $ 75,805     $ 10,702     $ 734,773     $ (38,000 )   $ 783,280  
Reimbursables
          406       39       20,519             20,964  
Labor contract drilling services
                      8,218             8,218  
Engineering, consulting and other
          2       1       476             479  
 
                                   
 
          76,213       10,742       763,986       (38,000 )     812,941  
 
                                   
 
                                               
OPERATING COSTS AND EXPENSES
                                               
Contract drilling services
    6,413       9,427       6,294       272,302       (38,000 )     256,436  
Reimbursables
          312       38       17,481             17,831  
Labor contract drilling services
                      6,547             6,547  
Engineering, consulting and other
                                   
Depreciation and amortization
          8,521       1,773       77,542             87,836  
Selling, general and administrative
    2,496       1,502       461       15,208             19,667  
Gain on disposal of assets, net
                      (35,521 )           (35,521 )
 
                                   
 
    8,909       19,762       8,566       353,559       (38,000 )     352,796  
 
                                   
 
                                               
OPERATING INCOME (LOSS)
    (8,909 )     56,451       2,176       410,427             460,145  
 
                                               
OTHER INCOME (EXPENSE)
                                               
Equity earnings in affiliates (net of tax)
    388,556       331,407       126,112             (846,075 )      
Interest expense, net of amount capitalized
    (6,043 )     (10,209 )     (6,388 )     8,949       12,970       (721 )
Interest income and other, net
    2,415                   12,135       (12,970 )     1,580  
 
                                   
 
                                               
INCOME BEFORE INCOME TAXES
    376,019       377,649       121,900       431,511       (846,075 )     461,004  
INCOME TAX (PROVISION) BENEFIT
    (301 )     531       (251 )     (85,265 )           (85,286 )
 
                                   
 
                                               
NET INCOME
  $ 375,718     $ 378,180     $ 121,649     $ 346,246     $ (846,075 )   $ 375,718  
 
                                   

 

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Three Months Ended June 30, 2007

(In thousands)
(Unaudited)
                                                 
            NHC and NDH Noble     Noble     Other     Consolidating        
    Noble     Combined     Drilling     Subsidiaries     Adjustments     Total  
 
                                               
OPERATING REVENUES
                                               
Contract drilling services
  $     $ 41,065     $ 15,393     $ 621,664     $ (20,618 )   $ 657,504  
Reimbursables
          216       229       28,163             28,608  
Labor contract drilling services
                      39,165             39,165  
Engineering, consulting and other
                      722             722  
 
                                   
 
          41,281       15,622       689,714       (20,618 )     725,999  
 
                                   
 
                                               
OPERATING COSTS AND EXPENSES
                                               
Contract drilling services
    5,407       6,504       7,418       213,339       (20,618 )     212,050  
Reimbursables
          192       226       24,190             24,608  
Labor contract drilling services
                      32,454             32,454  
Engineering, consulting and other
                      7,255             7,255  
Depreciation and amortization
          6,494       1,349       60,480             68,323  
Selling, general and administrative
    4,252       991       316       14,743             20,302  
 
                                   
 
    9,659       14,181       9,309       352,461       (20,618 )     364,992  
 
                                   
 
                                               
OPERATING INCOME (LOSS)
    (9,659 )     27,100       6,313       337,253             361,007  
 
                                               
OTHER INCOME (EXPENSE)
                                               
Equity earnings in affiliates (net of tax)
    306,848       280,447       130,767             (718,062 )      
Interest expense, net of amount capitalized
    (7,527 )     (11,829 )     (6,631 )     11,853       12,903       (1,231 )
Interest income and other, net
    77       2             13,336       (12,903 )     512  
 
                                   
 
                                               
INCOME BEFORE INCOME TAXES
    289,739       295,720       130,449       362,442       (718,062 )     360,288  
INCOME TAX (PROVISION) BENEFIT
    292       4,068       (2,053 )     (72,564 )           (70,257 )
 
                                   
 
                                               
NET INCOME
  $ 290,031     $ 299,788     $ 128,396     $ 289,878     $ (718,062 )   $ 290,031  
 
                                   

 

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Six Months Ended June 30, 2008

(In thousands)
(Unaudited)
                                                 
            NHC and NDH     Noble     Other     Consolidating        
    Noble     Combined     Drilling     Subsidiaries     Adjustments     Total  
 
                                               
OPERATING REVENUES
                                               
Contract drilling services
  $     $ 116,074     $ 24,292     $ 1,488,048     $ (47,300 )   $ 1,581,114  
Reimbursables
          900       159       52,363             53,422  
Labor contract drilling services
                      39,149             39,149  
Engineering, consulting and other
          2       1       678             681  
 
                                   
 
          116,976       24,452       1,580,238       (47,300 )     1,674,366  
 
                                   
 
                                               
OPERATING COSTS AND EXPENSES
                                               
Contract drilling services
    12,345       18,481       12,851       496,011       (47,300 )     492,388  
Reimbursables
          757       154       46,381             47,292  
Labor contract drilling services
                      31,884             31,884  
Engineering, consulting and other
                                   
Depreciation and amortization
          16,129       3,412       151,194             170,735  
Selling, general and administrative
    5,204       2,987       921       31,828             40,940  
Gain on disposal of assets, net
                      (35,521 )           (35,521 )
 
                                   
 
    17,549       38,354       17,338       721,777       (47,300 )     747,718  
 
                                   
 
                                               
OPERATING INCOME (LOSS)
    (17,549 )     78,622       7,114       858,461             926,648  
 
                                               
OTHER INCOME (EXPENSE)
                                               
Equity earnings in affiliates (net of tax)
    786,883       703,145       289,652             (1,779,680 )      
Interest expense, net of amount capitalized
    (13,383 )     (20,546 )     (12,776 )     18,141       26,733       (1,831 )
Interest income and other, net
    4,351                   27,091       (26,733 )     4,709  
 
                                   
 
                                               
INCOME BEFORE INCOME TAXES
    760,302       761,221       283,990       903,693       (1,779,680 )     929,526  
INCOME TAX (PROVISION) BENEFIT
    (396 )     4,029       (1,260 )     (171,993 )           (169,620 )
 
                                   
 
                                               
NET INCOME
  $ 759,906     $ 765,250     $ 282,730     $ 731,700     $ (1,779,680 )   $ 759,906  
 
                                   

 

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Six Months Ended June 30, 2007

(In thousands)
(Unaudited)
                                                 
            NHC and NDH     Noble       Other   Consolidating        
    Noble     Combined     Drilling     Subsidiaries     Adjustments     Total  
 
                                               
OPERATING REVENUES
                                               
Contract drilling services
  $     $ 67,626     $ 28,474     $ 1,168,908     $ (30,589 )   $ 1,234,419  
Reimbursables
          356       455       58,940             59,751  
Labor contract drilling services
                      75,720             75,720  
Engineering, consulting and other
          6             2,527             2,533  
 
                                   
 
          67,988       28,929       1,306,095       (30,589 )     1,372,423  
 
                                   
 
                                               
OPERATING COSTS AND EXPENSES
                                               
Contract drilling services
    10,710       13,007       14,654       401,110       (30,589 )     408,892  
Reimbursables
          307       451       51,396             52,154  
Labor contract drilling services
                      60,857             60,857  
Engineering, consulting and other
                      11,296             11,296  
Depreciation and amortization
          12,772       2,933       116,683             132,388  
Selling, general and administrative
    6,236       1,958       646       25,688             34,528  
 
                                   
 
    16,946       28,044       18,684       667,030       (30,589 )     700,115  
 
                                   
 
                                               
OPERATING INCOME (LOSS)
    (16,946 )     39,944       10,245       639,065             672,308  
 
                                               
OTHER INCOME (EXPENSE)
                                               
Equity earnings in affiliates (net of tax)
    569,765       526,533       245,526             (1,341,824 )      
Interest expense, net of amount capitalized
    (13,134 )     (23,672 )     (13,959 )     22,489       25,541       (2,735 )
Interest income and other, net
    86       2             27,123       (25,541 )     1,670  
 
                                   
 
                                               
INCOME BEFORE INCOME TAXES
    539,771       542,807       241,812       688,677       (1,341,824 )     671,243  
INCOME TAX (PROVISION) BENEFIT
    580       8,091       (2,327 )     (137,236 )           (130,892 )
 
                                   
 
                                               
NET INCOME
  $ 540,351     $ 550,898     $ 239,485     $ 551,441     $ (1,341,824 )   $ 540,351  
 
                                   

 

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2008

(In thousands)
(Unaudited)
                                                 
            NHC and NDH     Noble     Other     Consolidating        
    Noble     Combined     Drilling     Subsidiaries     Adjustments     Total  
 
                                               
CASH FLOWS FROM OPERATING ACTIVITIES
                                               
Net income
  $ 759,906     $ 765,250     $ 282,730     $ 731,700     $ (1,779,680 )   $ 759,906  
Adjustments to reconcile net income to net cash from operating activities:
                                               
Depreciation and amortization
          16,129       3,412       151,194             170,735  
Deferred income tax provision
                1,802       12,098             13,900  
Share-based compensation expense
    18,471                               18,471  
Equity earnings in affiliates
    (786,883 )     (703,145 )     (289,652 )           1,779,680        
Pension contribution
                      (17,445 )           (17,445 )
Gain on disposal of assets, net
                      (35,521 )           (35,521 )
Other, net
    2,687       6,962       1,168       (3,056 )           7,761  
Other changes in current assets and liabilities:
                                               
Accounts receivable
          (680 )     2,218       50,654             52,192  
Hurricane insurance receivables
                      17,319             17,319  
Other current assets
    (203 )     (59 )     44       (42,414 )           (42,632 )
Accounts payable
          352       1,356       (9,702 )           (7,994 )
Other current liabilities
    2,151       14,951       2,410       (20,691 )           (1,179 )
 
                                   
Net cash from operating activities
    (3,871 )     99,760       5,488       834,136             935,513  
 
                                   
 
                                               
CASH FLOWS FROM INVESTING ACTIVITIES
                                               
New construction
          (310,770 )                       (310,770 )
Other capital expenditures
                (1,872 )     (159,674 )           (161,546 )
Major maintenance expenditures
                (2,091 )     (50,486 )           (52,577 )
Accrued capital expenditures
                      (17,596 )           (17,596 )
Hurricane insurance receivables
                      21,747             21,747  
Notes receivable from affiliates
                      (150,000 )     150,000        
Repayments from affiliates
                      13,260       (13,260 )      
Proceeds from sales of property and equipment
                      39,134             39,134  
 
                                   
Net cash from investing activities
          (310,770 )     (3,963 )     (303,615 )     136,740       (481,608 )
 
                                   
 
                                               
CASH FLOWS FROM FINANCING ACTIVITIES
                                               
Payments on bank credit facilities
    (50,000 )                             (50,000 )
Payments of other long-term debt
                      (5,076 )           (5,076 )
Advances (to) from affiliates
    258,334       224,480       (1,569 )     (481,245 )            
Repayment of notes to affiliates
          (13,260 )                 13,260        
Notes payable to affiliates
    150,000                         (150,000 )      
Net proceeds from employee stock transactions
    10,558                               10,558  
Dividends paid
    (222,910 )                             (222,910 )
Repurchases of ordinary shares
    (26,571 )                             (26,571 )
 
                                   
Net cash from financing activities
    119,411       211,220       (1,569 )     (486,321 )     (136,740 )     (293,999 )
 
                                   
 
                                               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    115,540       210       (44 )     44,200             159,906  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    12,544             73       148,441             161,058  
 
                                   
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 128,084     $ 210     $ 29     $ 192,641     $     $ 320,964  
 
                                   

 

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2007

(In thousands)
(Unaudited)
                                                 
            NHC and NDH     Noble     Other     Consolidating        
    Noble     Combined     Drilling     Subsidiaries     Adjustments     Total  
 
                                               
CASH FLOWS FROM OPERATING ACTIVITIES
                                               
Net income
  $ 540,351     $ 550,898     $ 239,485     $ 551,441     $ (1,341,824 )   $ 540,351  
Adjustments to reconcile net income to net cash from operating activities:
                                               
Depreciation and amortization
          12,772       2,933       116,683             132,388  
Impairment loss on assets
                      5,400             5,400  
Deferred income tax provision
          3,157       618       2,549             6,324  
Share-based compensation expense
    16,903                               16,903  
Equity earnings in affiliates
    (569,765 )     (526,533 )     (245,526 )           1,341,824        
Pension contribution
                      (16,705 )           (16,705 )
Other
    (370 )     (180 )     3,249       6,727             9,426  
Other changes in current assets and liabilities:
                                               
Accounts receivable
          (8,133 )     (3,563 )     (76,931 )           (88,627 )
Other current assets
    (2 )     (356 )     (487 )     15,170             14,325  
Accounts payable
    (14,158 )     (1,367 )     912       (6,347 )           (20,960 )
Other current liabilities
          (344 )     (3,699 )     37,286             33,243  
 
                                   
Net cash from operating activities
    (27,041 )     29,914       (6,078 )     635,273             632,068  
 
                                   
 
                                               
CASH FLOWS FROM INVESTING ACTIVITIES
                                               
New construction
          (215,181 )           (108,157 )           (323,338 )
Other capital expenditures
                (6,084 )     (210,368 )           (216,452 )
Major maintenance expenditures
          (1,439 )           (37,931 )           (39,370 )
Accrued capital expenditures
          13,113             9,060             22,173  
Proceeds from sales of property and equipment
                      3,284             3,284  
Notes receivable from affiliates
                      (25,700 )     25,700        
Repayments of notes receivable from affiliates
                      11,565       (11,565 )      
 
                                   
Net cash from investing activities
          (203,507 )     (6,084 )     (358,247 )     14,135       (553,703 )
 
                                   
 
                                               
CASH FLOWS FROM FINANCING ACTIVITIES
                                               
Borrowings on bank credit facilities
    135,000             85,000                   220,000  
Payments on bank credit facilities
                (85,000 )                 (85,000 )
Payments of other long-term debt
                      (4,730 )           (4,730 )
Advances (to)/from affiliates
    28,166       185,226       12,191       (225,583 )            
Notes payable to affiliates
    25,700                         (25,700 )      
Repayment of notes payable to affiliates
          (11,565 )                 11,565        
Net proceeds from employee stock transactions
    13,560                               13,560  
Dividends paid
    (10,788 )                             (10,788 )
Repurchases of ordinary shares
    (120,687 )                             (120,687 )
 
                                   
Net cash from financing activities
    70,951       173,661       12,191       (230,313 )     (14,135 )     12,355  
 
                                   
 
                                               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    43,910       68       29       46,713             90,720  
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    2,458       36             59,216             61,710  
 
                                   
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 46,368     $ 104     $ 29     $ 105,929     $     $ 152,430  
 
                                   

 

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ITEM 2.  
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 at June 30, 2008, and our results of operations for the three and six months ended June 30, 2008 and 2007. The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes contained in this report on Form 10-Q and the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007.
Beginning in the fourth quarter of 2007, we report our international and domestic contract drilling operations as a single reportable segment: Contract Drilling Services. The consolidation into one reportable segment reflects how we manage our business, and the fact that all of our drilling fleet is dependent upon the worldwide oil industry. The mobile offshore drilling units comprising our offshore rig fleet operate in a single, global market for contract drilling services and are often redeployed globally due to changing demands of our customers, which consist largely of major international and government owned/controlled oil and gas companies throughout the world. The “Other” category in our segment-based discussions includes the results of labor contract drilling services, engineering and consulting services, other insignificant operations and corporate related items. All prior year information has been reclassified to conform to the current year presentation of segments. See Note 11 of our Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.
FORWARD-LOOKING STATEMENTS
This report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this report regarding our financial position, business strategy, backlog, plans and objectives of management for future operations, foreign currency requirements, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expressions are intended to be among the statements that identify 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 be 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 those referenced or described in “Item 1A. Risk Factors” of Part II included herein, and in our other filings with the U.S. Securities and Exchange Commission (“SEC”). We cannot control such risks and uncertainties, 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. You should consider these risks and uncertainties when you are evaluating us.
EXECUTIVE OVERVIEW
We are a leading offshore drilling contractor for the oil and gas industry. We perform contract drilling services with our fleet of 62 offshore drilling units located worldwide, including the U.S. Gulf of Mexico, the Middle East, India, Mexico, the North Sea, Brazil, and West Africa.
In the second quarter of 2008, we recognized net income of $376 million, or $1.40 per diluted share, on total revenues of $813 million. The average dayrate across our worldwide fleet increased to $167,002 from $163,772 in the first quarter of 2008. Fleetwide average utilization was 90 percent in the second quarter of 2008 as compared to 94 percent in the prior quarter. Daily contract drilling services costs increased to $54,674 for the second quarter of 2008 from $48,434 for the first quarter. As a result, our contract drilling services margin decreased to 67.3 percent from 70.4 percent in the first quarter of 2008.
Our long-standing business strategy continues to be the active expansion of our worldwide offshore drilling and deepwater capabilities through acquisitions, upgrades and modifications, and the deployment of our drilling assets in important geological areas. We have also actively expanded our offshore drilling and deepwater capabilities in recent years through the construction of new rigs. During the second quarter of 2008, we continued our active expansion strategy as indicated by the following activities:
   
we continued construction on three newbuild ultra-deepwater semisubmersibles, the Noble Dave Beard, Noble Danny Adkins and Noble Jim Day, which are scheduled for delivery in the first quarter of 2009, the second quarter of 2009 and the fourth quarter of 2009, respectively; and
   
we continued construction on two F&G JU-2000E enhanced premium independent leg cantilevered jackups, the Noble Hans Deul and Noble Scott Marks, which are scheduled for delivery in the third quarter of 2008 and the second quarter of 2009, respectively.

 

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Newbuild capital expenditures during the three and six months ended June 30, 2008 totaled $176 million and $311 million, respectively.
Additionally, we continued to refine our focus on our core business of contract drilling services. During the second quarter of 2008, we closed on the sale of our North Sea platform drilling business to Seawell Holding UK Limited. We recognized a gain of $35 million in connection with this transaction.
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 various governments regarding exploration and development of their oil and gas reserves. Demand for our services is also a function of the worldwide supply of mobile offshore drilling units. Industry sources report that 11 newbuild jackup rigs and two new deepwater semisubmersibles entered service during the first half of 2008. A total of 60 newbuild jackups and 40 deepwater newbuilds are reportedly scheduled to enter service worldwide during the remainder of 2008 and 2009. Many of these rigs are being built by market speculators, and while a majority of the deepwater rigs have secured commitments, more than half of the newbuild jackups are currently not contracted. The introduction of non-contracted rigs into the marketplace could have an adverse affect on the level of demand for our services or the dayrates we are able to achieve.
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, 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. The average Brent oil price was $72.47 per barrel during 2007, or 11 percent higher than the average Brent oil price of $65.15 per barrel during 2006, following a 20 percent increase over 2005. The average Brent oil price increased further in the first half of 2008, averaging $109.17 per barrel.
U.S. natural gas prices reached a 20-year high in 2005, averaging $8.81 per thousand cubic feet (average Henry Hub monthly spot price). Natural gas prices moderated during 2007 and 2006, averaging $6.98 and $6.74 per thousand cubic feet, respectively. At June 30, 2008, the Henry Hub monthly spot price was $12.69 per thousand cubic feet, which represents an increase of 100 percent over the spot price of $6.36 per thousand cubic feet at June 30, 2007. We do not have significant exposure to the U.S. natural gas markets because we have only three mobile offshore drilling units (two contracted submersibles and one cold stacked submersible) currently deployed in the shallow waters of the U.S. Gulf of Mexico. However, the moderation of natural gas prices during 2007 and 2006 caused some competitors to move jackup rigs from the U.S. Gulf of Mexico market to various international markets, and these actions may increase competition within those markets.
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 or increases in the supply of drilling rigs into the market could have an adverse effect on our results of operations.

 

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CONTRACT DRILLING SERVICES BACKLOG
We maintain a backlog (as defined below) of commitments for contract drilling services. The following table sets forth as of June 30, 2008 the amount of our contract drilling services backlog and the percent of available operating days committed for the periods indicated:
                                                 
            Year Ending December 31,  
    Total     2008(1)     2009     2010     2011     2012-2016  
    (In thousands)  
Contract Drilling Services Backlog
                                               
Semisubmersibles/Drillships(2)
  $ 9,043,000     $ 729,000     $ 1,738,000     $ 1,833,000     $ 1,493,000     $ 3,250,000  
Jackups/Submersibles
    2,923,000       1,020,000       1,525,000       309,000       69,000        
 
                                   
Total
  $ 11,966,000     $ 1,749,000     $ 3,263,000     $ 2,142,000     $ 1,562,000     $ 3,250,000  
 
                                   
 
                                               
Percent of Available Operating Days Committed(3)
            89 %     68 %     31 %     19 %     8 %
 
     
(1)  
Represents a six-month period beginning July 1, 2008.
 
(2)  
Our drilling contracts with Petroleo Brasileiro S.A. (“Petrobras”) provide an opportunity for us to earn performance bonuses based on absence of downtime experienced for our rigs operating offshore Brazil. With respect to our semisubmersibles operating offshore Brazil, we have included in our backlog amounts an amount equal to 75 percent of potential performance bonuses for such semisubmersibles, which amount is based on and consistent with our historical earnings of performance bonuses for these rigs. With respect to our drillships operating offshore Brazil, we (a) have not included in our backlog amounts any performance bonuses for periods prior to the commencement of certain upgrade projects planned for 2010 and 2011, which projects are designed to enhance the reliability and operational performance of our drillships, and (b) have included in our backlog amounts an amount equal to 75 percent of potential performance bonuses for periods after the estimated completion of such upgrade projects. Our backlog amount for semisubmersibles/drillships includes approximately $347 million attributable to these performance bonuses.
 
(3)  
Percentages take into account additional capacity from the estimated dates of deployment of our newbuild rigs that are scheduled to commence operations during 2008 and 2009.
All of our contract drilling services backlog consists of commitments we believe to be firm. Our contract drilling services backlog reported above reflects estimated future revenues attributable to both signed drilling contracts and letters of intent. A letter of intent is generally subject to customary conditions, including the execution of a definitive drilling contract. We calculate backlog for any given unit and period by multiplying the full contractual operating dayrate for such unit by the number of days remaining in the period. The reported contract drilling services backlog does not include amounts representing revenues for mobilization, demobilization and contract preparation, which are not expected to be significant to our contract drilling services revenues, amounts constituting reimbursables from customers or amounts attributable to uncommitted option periods under drilling contracts or letters of intent.
The amount of actual revenues earned and the actual periods during which revenues are earned may be different than the backlog amounts and backlog periods set forth in the table above due to various factors, including, but not limited to, shipyard and maintenance projects, unplanned downtime, weather conditions and other factors that result in applicable dayrates lower than the full contractual operating dayrate. In addition, amounts included in the backlog may change because drilling contracts may be varied or modified by mutual consent or customers may exercise early termination rights contained in some of our drilling contracts. As a result, our backlog as of any particular date may not be indicative of our actual operating results for the succeeding periods for which the backlog is calculated.

 

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INTERNAL INVESTIGATION
In June 2007, we announced that we were conducting an internal investigation of our Nigerian operations, focusing on the legality under the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and local laws of our Nigerian affiliate’s reimbursement of certain expenses incurred by our customs agents in connection with obtaining and renewing permits for the temporary importation of drilling units and related equipment into Nigerian waters, including permits that are necessary for our drilling units to operate in Nigerian waters. We also announced that the audit committee of Noble’s Board of Directors had engaged a leading law firm with significant experience in investigating and advising on FCPA matters to lead the investigation as independent outside counsel. The scope of the investigation also includes our dealings with customs agents and customs authorities in certain parts of the world other than Nigeria in which we conduct our operations, as well as dealings with other types of local agents in Nigeria and such other parts of the world. There can be no assurance that evidence of additional potential FCPA violations may not be uncovered through the investigation.
The audit committee commissioned the internal investigation after our management brought to the attention of the audit committee a news release issued by another company that disclosed that the other company was conducting an internal investigation into the FCPA implications of certain actions by a customs agent in Nigeria in connection with the temporary importation of that company’s vessels into Nigeria. Our drilling units that conduct operations in Nigeria do so under temporary import permits, and management considered it prudent to review our own practices in this regard.
We voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”) to advise them that an independent investigation was under way. We have been cooperating, and intend to continue to cooperate, fully with both agencies. If the SEC or the DOJ determines that violations of the FCPA have occurred, they could seek civil and criminal sanctions, including monetary penalties, against us and/or certain of our employees, as well as additional changes to our business practices and compliance programs, any of which could have a material adverse effect on our business or financial condition. In addition, such actions, whether actual or alleged, could damage our reputation and ability to do business, to attract and retain employees, and to access capital markets. Further, detecting, investigating, and resolving such actions is expensive and consumes significant time and attention of our senior management.
The independent outside counsel appointed by the audit committee to perform the internal investigation recently made a presentation of the results of its investigation to the DOJ and the SEC. The SEC and the DOJ have begun to review these results and information gathered by the independent outside counsel in the course of the investigation. Neither the SEC nor the DOJ has indicated what action it may take, if any, against us or any individual, or whether it may request that the audit committee’s independent outside counsel conduct further investigation. Therefore, we consider the internal investigation to be ongoing and cannot predict when it will conclude. Furthermore, we cannot predict whether either the SEC or the DOJ will open its own proceeding to investigate this matter, or if a proceeding is opened, what potential remedies these agencies may seek. We could also face fines or sanctions in relevant foreign jurisdictions. Based on information obtained to date in our internal investigation, we have not determined that any potential liability that may result is probable or remote or can be reasonably estimated. As a result, we have not made any accrual in our consolidated financial statements at June 30, 2008.
We are currently operating five jackup rigs offshore Nigeria. Four of these rigs have obtained extensions of temporary imports that permit the rigs to remain in Nigeria through November 28, 2008. The fifth rig has obtained a fresh temporary import permit that will permit the rig to remain in Nigeria through July 1, 2009. We continue to seek to avoid material disruption to our Nigerian operations; however, there can be no assurance that we will be able to obtain new permits or further extensions of permits necessary to continue the operation of our rigs in Nigeria after expiration of the current terms of the temporary import permits. If we cannot obtain a new permit or an extension necessary to continue operations of any rig, we may need to cease operations under the drilling contract for such rig and relocate such rig from Nigerian waters. We cannot predict what impact this may have on any such contract or our business in Nigeria. Furthermore, we cannot predict what changes, if any, relating to temporary import permit policies and procedures may be established or implemented in Nigeria in the future, or how any such changes may impact our business there.
Notwithstanding that the internal investigation is ongoing, we have concluded that certain changes to our FCPA compliance program would provide us greater assurance that our assets are not used, directly or indirectly, to make improper payments, including customs payments, and that we are in compliance with the FCPA’s record- keeping requirements. Although we have had a long-standing published policy requiring compliance with the FCPA and broadly prohibiting any improper payments by us to foreign or domestic officials, we have since the commencement of the internal investigation adopted, and may adopt additional, intermediate measures intended to enhance FCPA compliance procedures. Additional measures may be required once the investigation concludes.

 

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RESULTS OF OPERATIONS
For the Three Months Ended June 30, 2008 and 2007
General
Net income for the three months ended June 30, 2008 (the “Current Quarter”) was $376 million, on operating revenues of $813 million, compared to net income for the three months ended June 30, 2007 (the “Comparable Quarter”) of $290 million, on operating revenues of $726 million.
Rig Utilization, Operating Days and Average Dayrates
Operating revenues and operating costs and expenses for our contract drilling services segment are dependent on three primary metrics — rig utilization, operating days and dayrates. The following tables set forth the average rig utilization, operating days and average dayrates for our rig fleet for the three months ended June 30, 2008 and 2007:
                                                                 
    Average Rig     Operating Days(2)     Average Dayrates  
    Utilization(1)     Three Months Ended     Three Months Ended  
    Three Months Ended     June 30,     June 30,  
    June 30,                     %                     %  
    2008     2007     2008     2007     Change     2008     2007     Change  
Jackups
    93 %     98 %     3,481       3,553       -2 %   $ 147,081     $ 112,804       30 %
Semisubmersibles >6,000’(3)
    90 %     100 %     572       555       3 %     323,830       285,758       13 %
Semisubmersibles <6,000’(4)
    100 %     87 %     273       239       14 %     192,416       169,283       14 %
Drillships
    67 %     100 %     182       273       -33 %     131,174       128,874       2 %
Submersibles (5)
    67 %     100 %     182       273       -33 %     53,039       82,137       -35 %
 
                                               
Total
    90 %     98 %     4,690       4,893       -4 %   $ 167,002     $ 134,364       24 %
 
                                               
 
     
(1)  
Information reflects our policy of reporting on the basis of the number of actively marketed rigs in our fleet excluding newbuild rigs under construction.
 
(2)  
Information reflects the number of days that our rigs were operating under contract.
 
(3)  
These units have water depth ratings of 6,000 feet or greater.
 
(4)  
These units have water depth ratings of less than 6,000 feet.
 
(5)  
Beginning in October 2007, one of our three submersibles, the Noble Fri Rodli, was cold stacked.

 

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Contract Drilling Services
The following tables set forth the operating revenues and the operating costs and expenses for our contract drilling services segment for the three months ended June 30, 2008 and 2007:
                                 
    Three Months Ended              
    June 30,     Change  
    2008     2007     $     %  
 
Operating Revenues:
                               
Contract drilling services
  $ 783,280     $ 657,504     $ 125,776       19 %
Reimbursables (1)
    19,646       19,856       (210 )     -1 %
Other
    464       376       88       23 %
 
                       
 
  $ 803,390     $ 677,736     $ 125,654       19 %
 
                       
 
Operating Costs and Expenses:
                               
Contract drilling services
  $ 256,436     $ 212,050     $ 44,386       21 %
Reimbursables (1)
    16,565       16,706       (141 )     -1 %
Other
          15       (15 )     -100 %
Depreciation and amortization
    86,636       66,108       20,528       31 %
Selling, general and administrative
    19,526       19,743       (217 )     -1 %
 
                       
 
    379,163       314,622       64,541       21 %
 
                       
Operating Income
  $ 424,227     $ 363,114     $ 61,113       17 %
 
                       
 
     
(1)  
We record reimbursements from customers for out-of-pocket expenses as revenues and the related direct costs 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. Contract drilling services revenue increases for the three months ended June 30, 2008 as compared to the same period in 2007 were primarily driven by increases in average dayrates. Average dayrates increased revenues approximately $160 million, while fewer operating days reduced revenues approximately $34 million.
Average dayrates increased 24 percent in the Current Quarter as compared to the Comparable Quarter. Higher average dayrates were received across all rig categories, except for our submersible rigs, which were impacted by weakening demand in the shallow waters of the U.S. Gulf of Mexico.
The decrease in operating days in the Current Quarter as compared to the Comparable Quarter was primarily due to downtime of certain rigs in the Current Quarter. Unpaid shipyard days increased 171 days in the Current Quarter as compared to the Comparable Quarter, as the Noble Roy Butler, Noble Max Smith and Noble George McLeod each spent time in the shipyard during the Current Quarter for rig modifications and regulatory inspections, and the Noble Roger Eason is completing repairs for fire damage suffered in November 2007. Additionally, the Noble Fri Rodli, Noble Don Walker and Noble Carl Norberg spent an aggregate of 205 days stacked during the Current Quarter. These decreases in operating days were partially offset by increased operating days for two newbuilds, the ultra-deepwater semisubmersible Noble Clyde Boudreaux and the enhanced premium jackup Noble Roger Lewis, which were added to the fleet in June and September 2007, respectively.
Operating Costs and Expenses. Contract drilling services operating costs and expenses increased 21 percent for the three months ended June 30, 2008 over the same period in 2007. Newbuild rigs, including the Noble Clyde Boudreaux and Noble Roger Lewis, added $23 million of operating costs in the Current Quarter. Excluding the effect of these rigs, our labor costs increased $14 million in the Current Quarter over the Comparable Quarter due to higher compensation, including retention programs designed to retain key rig and operations personnel. The remaining $7 million of the operating cost increase in the Current Quarter over the Comparable Quarter was primarily due to increases in costs of daily rig operations, including catering, fuel, crew rotation, maintenance and safety and training costs.
The increase in depreciation and amortization in the Current Quarter over the Comparable Quarter was primarily due to depreciation on the Noble Clyde Boudreaux and Noble Roger Lewis and additional depreciation related to other capital expenditures on our fleet since the Comparable Quarter.

 

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Selling, general and administrative expenses remained primarily unchanged for the Current Quarter as compared to the Comparable Quarter. The Current Quarter expenses include approximately $4 million of costs incurred in the internal investigation of our Nigerian operations, while the Comparable Quarter includes severance costs related to executive departures.
Other
The following table sets forth the operating revenues and the operating costs and expenses for our other services for the three months ended June 30, 2008 and 2007:
                                 
    Three Months Ended              
    June 30,     Change  
    2008     2007     $     %  
 
Operating Revenues:
                               
Labor contract drilling services
  $ 8,218     $ 39,165     $ (30,947 )     -79 %
Reimbursables (1)
    1,318       8,752       (7,434 )     -85 %
Engineering and consulting
          346       (346 )     -100 %
Other
    15             15       * *
 
                       
 
  $ 9,551     $ 48,263     $ (38,712 )     -80 %
 
                       
 
                               
Operating Costs and Expenses:
                               
Labor contract drilling services
  $ 6,547     $ 32,454     $ (25,907 )     -80 %
Reimbursables (1)
    1,266       7,902       (6,636 )     -84 %
Engineering, consulting and other
          7,240       (7,240 )     -100 %
Depreciation and amortization
    1,200       2,215       (1,015 )     -46 %
Selling, general and administrative
    141       559       (418 )     -75 %
Gain on disposal of assets, net
    (35,521 )           35,521       * *
 
                       
 
    (26,367 )     50,370       (76,737 )     * *
 
                       
Operating Income
  $ 35,918     $ (2,107 )   $ 38,025       * *
 
                       
 
     
**  
Not a meaningful percentage.
 
(1)  
We record reimbursements from customers for out-of-pocket expenses as revenues and the related direct costs 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. Our labor contract drilling services revenues decreased primarily due to the sale of our North Sea labor contract drilling services business in April 2008. Additionally, during the second quarter of 2008, we returned the jackup Noble Kolskaya, operated under a bareboat charter, to its owner. The drilling contract for the Noble Kolskaya had been terminated and the jackup had been warm stacked since February 2008. Revenues during the second quarter of 2007 related to our North Sea labor contract business and Noble Kolskaya were $32 million.
Operating Costs and Expenses. Labor contract drilling services costs and expenses decreased due to the sale of our North Sea labor contract business and the return of the Noble Kolskaya to its owner.
Engineering, consulting and other expenses decreased $7 million in the Current Quarter over the Comparable Quarter due to the sale of the rotary steerable assets and intellectual property of our Noble Downhole Technology Ltd. (“Downhole Technology”) subsidiary in November 2007. We no longer conduct engineering and consulting operations.
The decrease in depreciation and amortization was primarily due to lower depreciation expense on the Noble Kolskaya during the Current Quarter.

 

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Other Items
Interest Expense. Interest expense, net of amount capitalized decreased $0.5 million primarily due to lower debt levels in the Current Quarter than the Comparable Quarter. Capitalized interest for the Current Quarter was $12 million as compared to $13 million for the Comparable Quarter.
Interest income and other, net. Interest income increased $1 million in the Current Quarter over the Comparable Quarter primarily as a result of higher cash and cash equivalent balances during the Current Quarter.
Income Tax Provision. The income tax provision increased $15 million primarily due to higher pre-tax earnings in the Current Quarter over the Comparable Quarter. The higher pre-tax earnings increased income tax expense by $20 million, offset by a lower effective tax rate of 18.5 percent in the Current Quarter compared to 19.5 percent in the Comparable Quarter, which decreased income tax expense by approximately $5 million. The lower effective tax rate in the Current Quarter resulted primarily from higher pre-tax earnings of non-U.S. owned assets, which generally have a lower statutory tax rate.
For the Six Months Ended June 30, 2008 and 2007
General
Net income for the six months ended June 30, 2008 (the “Current Period”) was $760 million, on operating revenues of $1.7 billion, compared to net income for the six months ended June 30, 2007 (the “Comparable Period”) of $540 million, on operating revenues of $1.4 billion.
Rig Utilization, Operating Days and Average Dayrates
The following tables set forth the average rig utilization, operating days and average dayrates for our rig fleet for the six months ended June 30, 2008 and 2007:
                                                                 
    Average Rig              
    Utilization(1)     Operating Days(2)     Average Dayrates  
    Six Months Ended     Six Months Ended     Six Months Ended  
    June 30,     June 30,     June 30,  
                                    %                     %  
    2008     2007     2008     2007     Change     2008     2007     Change  
Jackups
    95 %     98 %     7,082       7,065       %   $ 146,195     $ 107,490       36 %
Semisubmersibles >6,000’(3)
    95 %     100 %     1,209       1,096       10 %     307,019       273,023       12 %
Semisubmersibles <6,000’(4)
    100 %     77 %     546       419       30 %     197,057       172,484       14 %
Drillships
    67 %     97 %     364       525       -31 %     132,420       115,355       15 %
Submersibles (5)
    66 %     97 %     361       529       -32 %     52,164       81,609       -36 %
 
                                               
Total
    92 %     97 %     9,562       9,634       -1 %   $ 165,356     $ 128,137       29 %
 
                                               
 
     
(1)  
Information reflects our policy of reporting on the basis of the number of actively marketed rigs in our fleet excluding newbuild rigs under construction.
 
(2)  
Information reflects the number of days that our rigs were operating under contract.
 
(3)  
These units have water depth ratings of 6,000 feet or greater.
 
(4)  
These units have water depth ratings of less than 6,000 feet.
 
(5)  
Beginning in October 2007, one of our three submersibles, the Noble Fri Rodli, was cold stacked.

 

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Contract Drilling Services
The following tables set forth the operating revenues and the operating costs and expenses for our contract drilling services segment for the six months ended June 30, 2008 and 2007:
                                 
    Six Months Ended              
    June 30,     Change  
    2008     2007     $     %  
 
                               
Operating Revenues:
                               
Contract drilling services
  $ 1,581,114     $ 1,234,419     $ 346,695       28 %
Reimbursables (1)
    40,812       39,625       1,187       3 %
Other
    651       606       45       7 %
 
                       
 
  $ 1,622,577     $ 1,274,650     $ 347,927       27 %
 
                       
 
                               
Operating Costs and Expenses:
                               
Contract drilling services
  $ 492,388     $ 408,892     $ 83,496       20 %
Reimbursables (1)
    35,318       33,645       1,673       5 %
Other
          156       (156 )     -100 %
Depreciation and amortization
    167,421       127,917       39,504       31 %
Selling, general and administrative
    39,422       33,403       6,019       18 %
 
                       
 
    734,549       604,013       130,536       22 %
 
                       
Operating Income
  $ 888,028     $ 670,637     $ 217,391       32 %
 
                       
 
     
(1)  
We record reimbursements from customers for out-of-pocket expenses as revenues and the related direct costs 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. Contract drilling services revenue increases for the six months ended June 30, 2008 as compared to the same period in 2007 were primarily driven by increases in average dayrates. Average dayrates increased revenues approximately $359 million for the six months ended June 30, 2008, while fewer operating days reduced revenues approximately $12 million.
Average dayrates increased 29 percent in the Current Period as compared to the Comparable Period. Higher average dayrates were received across all rig categories, except for our submersible rigs, which were impacted by weakening demand in the shallow waters of the U.S. Gulf of Mexico.
The decrease in operating days in the Current Period as compared to the Comparable Period was primarily due to downtime of certain rigs in the Current Period. Unpaid shipyard days increased 184 days in the Current Period as compared to the Comparable Period, as the Noble Roy Butler, Noble Max Smith, Noble George McLeod and Noble Roy Rhodes each spent time in the shipyard during the Current Period for rig modifications and regulatory inspections, and the Noble Roger Eason is completing repairs for fire damage suffered in November 2007. Additionally, the Noble Fri Rodli, Noble Don Walker and Noble Carl Norberg spent an aggregate total of 296 days stacked during the Current Period. These decreases in operating days were partially offset by increased operating days for two newbuilds, the ultra-deepwater semisubmersible Noble Clyde Boudreaux and the enhanced premium jackup Noble Roger Lewis, which were added to the fleet in June and September 2007, respectively.
Operating Costs and Expenses. Contract drilling services operating costs and expenses increased 20 percent for the Current Period over the Comparable Period. Newbuild rigs, including the Noble Clyde Boudreaux and Noble Roger Lewis, added $41 million of operating costs in the Current Period. Excluding the effect of these rigs, our labor costs increased $26 million in the Current Period over the Comparable Period due to higher compensation, including retention programs designed to retain key rig and operations personnel. The remaining $16 million of the operating cost increase in the Current Period over the Comparable Period was primarily due to increases in costs of daily rig operations, including catering, fuel, crew rotation, maintenance and safety and training costs.

 

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Depreciation and amortization increased in the Current Period over the Comparable Period due to depreciation on newbuilds added to the fleet, the Noble Clyde Boudreaux and Noble Roger Lewis, and additional depreciation related to other capital expenditures on our fleet since the Comparable Period.
Selling, general and administrative expenses increased $6 million in the Current Period over the Comparable Period primarily due to $11 million of costs incurred in the internal investigation of our Nigerian operations in the Current Period. This increase in costs was partially offset by decreases in severance costs related to executive departures in the Comparable Period and reductions in administrative information technology costs.
Other
The following table sets forth the operating revenues and the operating costs and expenses for our other services for the six months ended June 30, 2008 and 2007:
                                 
    Six Months Ended              
    June 30,     Change  
    2008     2007     $     %  
 
                               
Operating Revenues:
                               
Labor contract drilling services
  $ 39,149     $ 75,720     $ (36,571 )     -48 %
Reimbursables (1)
    12,610       20,126       (7,516 )     -37 %
Engineering and consulting
          1,927       (1,927 )     -100 %
Other
    30             30       * *
 
                       
 
  $ 51,789     $ 97,773     $ (45,984 )     -47 %
 
                       
 
                               
Operating Costs and Expenses:
                               
Labor contract drilling services
  $ 31,884     $ 60,857     $ (28,973 )     -48 %
Reimbursables (1)
    11,974       18,509       (6,535 )     -35 %
Engineering, consulting and other
          11,140       (11,140 )     -100 %
Depreciation and amortization
    3,314       4,471       (1,157 )     -26 %
Selling, general and administrative
    1,518       1,125       393       35 %
Gain on disposal of assets, net
    (35,521 )           35,521       * *
 
                       
 
    13,169       96,102       (82,933 )     -86 %
 
                       
Operating Income
  $ 38,620     $ 1,671     $ 36,949       * *
 
                       
     
 
     
**  
Not a meaningful percentage.
 
(1)  
We record reimbursements from customers for out-of-pocket expenses as revenues and the related direct costs 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. Our labor contract drilling services revenues decreased primarily due to the sale of our North Sea labor contract drilling services business in April 2008. Additionally, during the second quarter of 2008, we returned the jackup Noble Kolskaya, operated under a bareboat charter, to its owner. The drilling contract for the Noble Kolskaya had been terminated and the jackup had been warm stacked since February 2008. Revenues during the Comparable Period related to our North Sea labor contract business and Noble Kolskaya were $61 million as compared to $22 million for the Current Period.
Engineering, consulting and other operating revenues decreased $2 million in the Current Period over the Comparable Period due to closure of the operations of our Triton Engineering Services, Inc. (“Triton”) subsidiary in March 2007 and the sale of the rotary steerable assets and intellectual property of our Downhole Technology subsidiary in November 2007. We no longer conduct engineering and consulting operations.
Operating Costs and Expenses. Labor contract drilling services costs and expenses decreased due to the sale of our North Sea labor contract business and the return of the Noble Kolskaya to its owner.
Engineering, consulting and other expenses decreased $11 million due to the sale of the rotary steerable assets and intellectual property of Downhole Technology and the closure of the operations of Triton. The Comparable Period included $8 million of additional costs associated with the sale and closure of these non-core assets.

 

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The decrease in depreciation and amortization was primarily due to lower depreciation expense on the Noble Kolskaya during the Current Period.
Other Items
Interest Expense. Interest expense, net of amount capitalized decreased $1 million primarily due to lower debt levels in the Current Period than the Comparable Period. Capitalized interest for the Current Period was $24 million as compared to $25 million for the Comparable Period.
Interest income and other, net. Interest income increased $3 million in the Current Period over the Comparable Period primarily as a result of higher cash and cash equivalent balances during the Current Period.
Income Tax Provision. The income tax provision increased $39 million primarily due to higher pre-tax earnings in the Current Period over the Comparable Period. The higher pre-tax earnings increased income tax expense by $50 million, offset by a lower effective tax rate of 18.2 percent in the Current Period compared to 19.5 percent in the Comparable Period, which decreased income tax expense by approximately $12 million. The lower effective tax rate in the Current Period resulted primarily from higher pre-tax earnings of non-U.S. owned assets, which generally have a lower statutory tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal capital resource in the Current Period was net cash from operating activities of $936 million, which compared to $632 million in the Comparable Period. The increase in net cash from operating activities in the Current Period was primarily attributable to higher net income. At June 30, 2008, we had cash and cash equivalents of $321 million and $451 million available under our bank credit facility described under “Credit Facilities and Long-Term Debt” below. We had working capital of $506 million and $367 million at June 30, 2008 and December 31, 2007, respectively. Total debt as a percentage of total debt plus shareholders’ equity was 13 percent at June 30, 2008 and 15 percent at December 31, 2007. Additionally, at June 30, 2008, we had a total contract drilling services backlog of approximately $12 billion. Our backlog reflects a commitment of 89% of operating days for the remainder of 2008 and 68% for 2009. See additional information regarding our backlog at “Contract Drilling Services Backlog.”
On February 2, 2007, Noble’s Board of Directors increased our share repurchase program authorization by 20 million shares, resulting in 30.5 million shares authorized for repurchase. During the three months ended March 31, 2008, we repurchased 0.6 million of our ordinary shares pursuant to this program at an average price of $44.81 per share for a total cost of $27 million. No shares were repurchased during the second quarter of 2008. During 2007, we repurchased 4.2 million of our ordinary shares at an average price of $42.31 per share for a total cost of $179 million. At June 30, 2008, 25.7 million shares remained available for repurchase under such authorization. Additional repurchases, if any, may be made on the open market or in private transactions at prices determined by us.
We have contributed an aggregate of $17 million to our pension plans in 2008, which represents the total contributions expected to be made in 2008, subject to applicable law.
In April 2008, Noble’s Board of Directors declared a special cash dividend of $0.75 per ordinary share. The special dividend was paid on May 16, 2008 to holders of record on April 30, 2008 and totaled approximately $202 million. Our quarterly cash dividend declaration, paid on May 30, 2008 to holders of record on May 14, 2008, was $0.04 per ordinary share, or approximately $43 million annualized.
On August 1, 2008, Noble’s Board of Directors declared a quarterly cash dividend of $0.04 per ordinary share payable to shareholders of record on August 13, 2008, with a distribution date of August 29, 2008.

 

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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 our results of operations, financial condition, cash requirements, future business prospects, contractual restrictions and other factors deemed relevant by Noble’s Board of Directors.
Capital Expenditures
Capital expenditures totaled $525 million and $579 million for the six months ended June 30, 2008 and 2007, respectively.
We have five rigs under construction, resulting in capital expenditures for new construction in the Current Quarter and Current Period totaling $176 million and $311 million, respectively. Capital expenditures for new construction in the Current Period included $120 million for the Noble Danny Adkins, $96 million for the Noble Jim Day and $61 million for the Noble Dave Beard. Additionally, the Current Period included $34 million for our remaining newbuilds, which includes the Noble Hans Deul and Noble Scott Marks, each of which is an F&G JU-2000E enhanced premium newbuild jackup under construction. Other capital expenditures totaled $162 million in the Current Period and included approximately $59 million for major upgrade projects. Major maintenance expenditures totaled $53 million in the Current Period.
Our capital expenditures and major maintenance expenditures for 2008 are budgeted at approximately $1.45 billion. In connection with our 2008 and future capital expenditure programs, we had entered into certain commitments, including shipyard and purchase commitments, of approximately $729 million outstanding at June 30, 2008.
From time to time we consider possible projects that would require capital expenditures or other cash expenditures which are not included in our capital budget, and such unbudgeted capital or cash expenditures could be significant. In addition, we will continue to evaluate acquisitions of drilling units from time to time. Other factors that could cause actual capital expenditures to materially exceed planned capital expenditures include delays and cost overruns in shipyards (including costs attributable to labor shortages), 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.
We believe that our cash and cash equivalents, net cash from operating activities, available capacity under the bank credit facility, 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.
Credit Facilities and Long-Term Debt
We have a $600 million unsecured credit facility (the “Credit Facility”), which was originally scheduled to mature on March 15, 2012. During the first quarter of 2008, the term of the Credit Facility was extended for an additional one-year period to March 15, 2013. During this one-year extension period, the total amount available under the Credit Facility will be $575 million, but we have the right to seek an increase of the total amount available to $600 million. We may, subject to certain conditions, request that the term of the Credit Facility be further extended for an additional one-year period. Our subsidiary, Noble Drilling Corporation (“Noble Drilling”), has guaranteed the obligations under the Credit Facility. At June 30, 2008, we had $50 million in borrowings and $99 million of letters of credit outstanding under this facility, leaving $451 million remaining available thereunder.
In addition to letters of credit issued under the Credit Facility, we had letters of credit of $111 million and performance and tax assessment bonds totaling $252 million supported by surety bonds outstanding at June 30, 2008. Of the total $210 million in letters of credit outstanding at June 30, 2008, $159 million were issued to support bank bonds in connection with the temporary import extensions for our drilling units in Nigeria. Additionally, certain of our subsidiaries issue, from time to time, guarantees of the temporary import status of rigs or equipment imported into certain countries in which we operate. These guarantees are issued in lieu of payment of custom, value added or similar taxes in those countries.
Our debt decreased from $785 million (including current maturities of $10 million) at December 31, 2007 to $729 million (including current maturities of $28 million) at June 30, 2008, due to debt repayments under the Credit Facility of $50 million coupled with other debt repayments of $5 million. At June 30, 2008 and December 31, 2007, we had no off-balance sheet debt or other off-balance sheet arrangements. At June 30, 2008, we were in compliance with all our debt covenants.

 

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NEW ACCOUNTING PRONOUNCEMENTS
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”). SFAS No. 161 requires entities with derivative instruments to disclose information to enable financial statement users to understand how and why the entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and how derivative instruments and related hedged items affect the entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the impact, if any, that SFAS No. 161 will have on our consolidated financial statements.
In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years and interim periods beginning after December 15, 2008. We are currently evaluating the impact, if any, that FSP EITF 03-6-1 will have on our consolidated financial statements.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. The new standard becomes effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411. SFAS No. 162 is not expected to have a material impact on our consolidated financial position or results of operations.
ITEM 3. 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, as further described below.
Interest Rate Risk
We are subject to market risk exposure related to changes in interest rates on borrowings under the Credit Facility. Interest on borrowings under the Credit Facility is at an agreed upon percentage point spread over LIBOR. At June 30, 2008, there was $50 million outstanding under the Credit Facility. A change of one percent in the interest rate would cause a $0.5 million change in interest expense on an annual basis on this amount of borrowings.
Foreign Currency Risk
Although we conduct business globally, a substantial majority of the value of our foreign transactions are denominated in U.S. Dollars. With certain exceptions, typically involving national oil companies, we structure our drilling contracts entirely 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 one another, we do not currently have material amounts of assets, liabilities, or financial instruments that are sensitive to foreign currency exchange rates.
We periodically enter into derivative instruments to manage our cash flow exposure to fluctuations in interest rates and foreign currency exchange rates, and we may conduct hedging activities in future periods to mitigate such exposure. We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative or trading purposes, nor are we a party to leveraged derivatives.
Our North Sea operations have a significant amount of their cash operating expenses payable in either the Euro or British Pound, and we typically maintain forward currency contracts settling monthly in Euros and British Pounds. The Euro-denominated forward currency contracts settling in the remainder of 2008 represent approximately 21 percent of our forecasted Euro requirements. The British Pound-denominated forward contracts settling in the remainder of 2008 represent approximately 9 percent of our forecasted British Pound requirements.

 

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The notional amount of forward contracts outstanding at June 30, 2008 was approximately 3 million Euros and 2 million British Pounds. The aggregate notional amount of these forward contracts, expressed in U.S. Dollars, was $7 million at June 30, 2008. The fair market value of outstanding forward contracts was $0.7 million at June 30, 2008. A one percent change in exchange rates for the Euro and British Pound would change the fair value of these forward contracts by approximately $0.1 million.
Market Risk
We sponsor the Noble Drilling Corporation 401(k) Savings Restoration Plan (“Restoration Plan”). The Restoration Plan has no assets, and amounts “contributed” to the Restoration Plan are kept by us for general corporate purposes. The investments selected by employees and associated returns are tracked on a phantom basis. Accordingly, we have a liability to employees for amounts originally contributed plus phantom investment income or less phantom investment losses. We are at risk for phantom investment income and, conversely, benefit should phantom investment losses occur. At June 30, 2008, our liability under the Restoration Plan totaled $12 million. A one percent increase or decrease in the fair value of the phantom investments would increase or decrease our liability by $0.1 million.
ITEM 4. CONTROLS AND PROCEDURES
Noble’s Chairman of the Board, President and Chief Executive Officer, David W. Williams, and Noble’s Senior Vice President, Chief Financial Officer, Treasurer and Controller, Thomas L. Mitchell, have evaluated 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. Williams and Mr. Mitchell concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2008. 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 SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Subsequent to June 30, 2008, we converted certain financial applications to our new enterprise resource planning (“ERP”) system. As a result, several process level control procedures were changed in order to conform to the new ERP system. While we believe that the new ERP system will ultimately strengthen our internal control over financial reporting, there are inherent issues associated with transitioning to a new system and we could experience control and implementation issues that impact our financial reporting. In the event that such an issue occurs, we have manual procedures in place which would allow us to continue to record and report results from the new ERP system. No other changes in our internal control over financial reporting have occurred subsequent to June 30, 2008 which have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information regarding legal proceedings is set forth in the first five paragraphs in Note 10 to our condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q and is incorporated herein by reference.

 

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ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors as previously disclosed in our Form 10-K for the year ended December 31, 2007 in response to Item 1A of Part I of Form 10-K, and in our Form 10-Q for the quarter ended March 31, 2008 in response to Item 1A to Part II of Form 10-Q, except to the extent the following item is updated or otherwise modified:
Our international operations involve additional risks not associated with U.S. Gulf of Mexico operations.
We operate in various regions throughout the world that may expose us to political and other uncertainties, including risks of:
   
terrorist acts, war and civil disturbances;
   
seizure, nationalization or expropriation of property or equipment;
   
foreign and U.S. monetary policy and foreign currency fluctuations and devaluations;
   
the inability to repatriate income or capital;
   
complications associated with repairing and replacing equipment in remote locations;
   
piracy;
   
import-export quotas, wage and price controls, imposition of trade barriers and other forms of government regulation and economic conditions that are beyond our control;
   
regulatory or financial requirements to comply with foreign bureaucratic actions; and
   
changing taxation policies.
International contract drilling operations are subject to various laws and regulations in countries in which we operate, including laws and regulations relating to:
   
the importing, exporting, equipping and operation of drilling units;
   
repatriation of foreign earnings;
   
currency exchange controls;
   
oil and gas exploration and development;
   
taxation of offshore earnings and earnings of expatriate personnel; and
   
use and compensation of local employees and suppliers by foreign contractors.
Our ability to do business in a number of jurisdictions is subject to maintaining required licenses and permits and complying with applicable laws and regulations. We are operating drilling units offshore Nigeria under temporary import permits, and we may not be able to obtain temporary import permits in the future for these units necessary to continue uninterrupted operations in Nigerian waters for the duration of the units’ drilling contracts. We cannot predict what changes, if any, relating to temporary import permit policies and procedures may be established or implemented in Nigeria in the future, or how such changes may impact our business there. For additional information regarding our ongoing internal investigation of our Nigerian operations and the status of our temporary import permits in Nigeria, see “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Internal Investigation”. Changes in, compliance with, or our failure to comply with the laws and regulations of the countries where we operate, including Nigeria, may negatively impact our operations in those countries and could have a material adverse effect on our results of operations.

 

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During the fourth quarter of 2007, our Nigerian subsidiary received letters from the Nigerian Maritime Administration and Safety Agency (“NIMASA”) seeking to collect a two percent surcharge on contract amounts under contracts performed by “vessels”, within the meaning of Nigeria’s cabotage laws, engaged in the Nigerian coastal shipping trade. Although we do not believe that these letters apply to our ownership of drilling units, NIMASA is seeking to apply a provision of the Nigerian cabotage laws (which became effective on May 1, 2004) to our offshore drilling units by considering these units to be “vessels” within the meaning of those laws and therefore subject to the surcharge, which is imposed only upon “vessels”. Our offshore drilling units are not engaged in the Nigerian coastal shipping trade and are not in our view “vessels” within the meaning of Nigeria’s cabotage laws. On January 24, 2008, we filed an originating summons against NIMASA and the Minister of Transportation in the Federal High Court of Lagos, Nigeria seeking, among other things, a declaration that our drilling operations do not constitute “coastal trade” or “cabotage” within the meaning of Nigeria’s cabotage laws and that our offshore drilling units are not “vessels” within the meaning of those laws. NIMASA and the Minister of Transportation have filed a preliminary objection to our originating summons and the proceeding. A ruling on the preliminary objections is scheduled for October 2008. We intend to oppose the preliminary objection and take all further appropriate legal action to resist the application of Nigeria’s cabotage laws to our drilling units. The outcome of any such legal action and the extent to which we may ultimately be responsible for the surcharge is uncertain. If it is ultimately determined that offshore drilling units constitute vessels within the meaning of the Nigerian cabotage laws, we may be required to pay the surcharge and comply with other aspects of the Nigerian cabotage laws, which could adversely affect our operations in Nigerian waters and require us to incur additional costs of compliance.
Governmental action, including initiatives by OPEC, may continue to cause oil price volatility. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work done by major oil companies, which may continue. In addition, some foreign governments favor or effectively require the awarding of drilling contracts to local contractors, require use of a local agent or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These practices may adversely affect our ability to compete and our results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth for the periods indicated certain information with respect to purchases by us of Noble’s ordinary shares:
                                 
                    Total Number of     Maximum Number  
                    Shares Purchased     of Shares that May  
    Total Number     Average     as Part of Publicly     Yet Be Purchased  
    of Shares     Price Paid     Announced Plans     Under the Plans  
Period   Purchased     per Share     or Programs (2)     or Programs (2)  
April 2008
    6,913 (1)   $ 58.45             25,712,000  
May 2008
    483 (1)   $ 54.81             25,712,000  
June 2008
        $             25,712,000  
     
(1)  
Acquired by surrender of ordinary shares to us by employees for withholding taxes payable upon the vesting of restricted stock.
 
(2)  
No share repurchases were made in the quarter ended June 30, 2008 pursuant to the share repurchase plan, which Noble’s Board of Directors authorized and adopted and that we announced on January 31, 2002. On February 2, 2007, we announced that Noble’s Board of Directors had increased the share repurchase authorization by 20 million shares, resulting in 30.5 million shares authorized for repurchase. Our repurchase program has no date of expiration.
ITEM 6. EXHIBITS
The information required by this Item 6 is set forth in the Index to Exhibits accompanying this Quarterly Report on Form 10-Q and is incorporated herein by reference.

 

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SIGNATURES
Pursuant to the requirements 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 CORPORATION
 
 
DATE: August 8, 2008  By:   /s/ DAVID W. WILLIAMS    
    David W. Williams   
    Chairman of the Board, President and Chief Executive Officer
(Principal Executive Officer) 
 
 
    /s/ THOMAS L. MITCHELL    
    Thomas L. Mitchell   
    Senior Vice President, Chief Financial Officer, Treasurer and Controller
(Principal Financial and Accounting Officer) 
 

 

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INDEX TO EXHIBITS
         
EXHIBIT    
NUMBER   EXHIBIT
       
 
  10.1 *    
Separation agreement between Noble Corporation and Robert D. Campbell dated May 13, 2008 (filed as exhibit 10.1 to Noble Corporation’s Current Report on Form 8-K filed on May 16, 2008 and incorporated herein by reference).
       
 
  31.1       
Certification of David W. Williams Pursuant to the U.S. Securities Exchange Act of 1934, as amended, Rule 13a-14(a) or Rule 15d-14(a).
       
 
  31.2       
Certification of Thomas L. Mitchell Pursuant to the U.S. Securities Exchange Act of 1934, as amended, Rule 13a-14(a) or Rule 15d-14(a).
       
 
  32.1 +    
Certification of David W. Williams 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 Thomas L. Mitchell 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.

 

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