EXHIBIT 99.3

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX

		Page No.
Report of Independent Registered Public Accounting Firm			2
Consolidated Balance Sheets as of December 31, 2009 and 2008			3
Consolidated Statements of Income (Loss) for the Years Ended December 31, 2009, 2008 and 2007			4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007			5
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2009, 2008 and 2007			6 — 8
Notes to Consolidated Financial Statements			9

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Nabors Industries Ltd.:

     In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income (loss), changes in equity and cash flows present fairly, in all material respects, the financial position of Nabors Industries Ltd. and its subsidiaries at December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

     As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible debt instruments and participating securities included in the computation of earnings per share as of January 1, 2009. Additionally, as discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which its oil and gas reserves are estimated, and its unconsolidated oil and gas joint ventures changed the manner in which their oil and gas reserves are estimated as well as the manner in which prices are determined to calculate the ceiling limit on capitalized oil and gas costs as of December 31, 2009.

     A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Houston, Texas
February 26, 2010, except for Note 20, as to which the date is December 13, 2010

NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

		December 31,
(In thousands, except per share amounts)		2009				2008
ASSETS
Current assets:
Cash and cash equivalents		$	927,815			$	442,087
Short-term investments			163,036				142,158
Accounts receivable, net			724,040				1,160,768
Inventory			100,819				150,118
Deferred income taxes			125,163				28,083
Other current assets			135,791				243,379
Total current assets			2,176,664				2,166,593
Long-term investments and other receivables			100,882				239,952
Property, plant and equipment, net			7,646,050				7,331,959
Goodwill			164,265				175,749
Investment in unconsolidated affiliates			306,608				411,727
Other long-term assets			250,221				191,919
Total assets		$	10,644,690			$	10,517,899
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt		$	163			$	225,030
Trade accounts payable			226,423				424,908
Accrued liabilities			346,337				367,393
Income taxes payable			35,699				111,528
Total current liabilities			608,622				1,128,859
Long-term debt			3,940,605				3,600,533
Other long-term liabilities			240,057				247,560
Deferred income taxes			673,427				622,523
Total liabilities			5,462,711				5,599,475
Commitments and contingencies (Note 16)
Equity:
Shareholders’ equity:
Common shares, par value $.001 per share:
Authorized common shares 800,000; issued 313,915 and 312,343, respectively			314				312
Capital in excess of par value			2,239,323				2,129,415
Accumulated other comprehensive income			292,706				53,520
Retained earnings			3,613,186				3,698,732
Less: treasury shares, at cost, 29,414 common shares			(977,873	)			(977,873	)
Total shareholders’ equity			5,167,656				4,904,106
Noncontrolling interest			14,323				14,318
Total equity			5,181,979				4,918,424
Total liabilities and equity		$	10,644,690			$	10,517,899

The accompanying notes are an integral part of these consolidated financial statements.

NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)

		Year Ended December 31,
(In thousands, except per share amounts)		2009				2008				2007
Revenues and other income:
Operating revenues		$	3,683,419			$	5,507,542			$	4,938,748
Earnings (losses) from unconsolidated affiliates			(155,433	)			(192,548	)			20,980
Investment income (loss)			25,599				21,412				(16,290	)
Total revenues and other income			3,553,585				5,336,406				4,943,438
Costs and other deductions:
Direct costs			2,001,404				3,100,613				2,763,462
General and administrative expenses			428,161				479,194				436,274
Depreciation and amortization			667,100				614,367				469,669
Depletion			9,417				22,308				30,904
Interest expense			266,039				196,718				154,919
Losses (gains) on sales and retirements of long-lived assets and other expense (income), net			12, 559				15,829				11,777
Impairments and other charges			330,976				176,123				41,017
Total costs and other deductions			3,715,656				4,605,152				3,908,022
Income (loss) from continuing operations before income taxes			(162,071	)			731,254				1,035,416
Income tax expense (benefit):
Current			69,532				188,832				227,951
Deferred			(203,335	)			20,828				(26,055	)
Total income tax expense (benefit)			(133,803	)			209,660				201,896
Income (loss) from continuing operations, net of tax			(28,268	)			521,594				833,520
Income from discontinued operations, net of tax			(57,620	)			(41,930	)			31,762
Net income (loss)			(85,888	)			479,664				865,282
Less: Net (income) loss attributable to noncontrolling interest			342				(3,927	)			420
Net income (loss) attributable to Nabors		$	(85,546	)		$	475,737			$	865,702
Earnings (losses) per Nabors share:
Basic from continuing operations		$	(.10	)		$	1.84			$	2.97
Basic from discontinued operations			(.20	)			(.15	)			.11
Total Basic		$	(.30	)		$	1.69			$	3.08
Diluted from continuing operations		$	(.10	)		$	1.80			$	2.89
Diluted from discontinued operations			(.20	)			(.15	)			.11
Total Diluted		$	(.30	)		$	1.65			$	3.00
Weighted-average number of common shares outstanding:
Basic			283,326				281,622				281,238
Diluted			283,326				288,236				288,226
The details of credit-related impairments to investments is presented below:
(In thousands)
Other-than-temporary impairment on debt security		$	40,300
Less: other-than-temporary impairment recognized in accumulated other comprehensive income (loss)			(4,651	)
Credit-related impairment on investment (1)		$	35,649

The accompanying notes are an integral part of these consolidated financial statements.

NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

		Year Ended December 31,
(In thousands)		2009				2008				2007
Cash flows from operating activities:
Net income (loss) attributable to Nabors		$	(85,546	)		$	475,737			$	865,702
Adjustments to net income (loss):
Depreciation and amortization			668,415				614,367				474,016
Depletion			11,078				25,442				31,165
Deferred income tax expense (benefit)			(218,760	)			17,315				(62,893	)
Deferred financing costs amortization			6,133				7,661				8,352
Pension liability amortization and adjustments			844				160				277
Discount amortization on long-term debt			86,802				123,739				127,887
Amortization of loss on hedges			580				548				551
Impairments and other charges			339,129				176,123				41,017
Losses on long-lived assets, net			12,339				9,644				4,318
Losses (gains) on investments, net			(9,954	)			18,736				61,395
Gains on debt retirement, net			(11,197	)			(12,248	)			—
Gain on disposition of Sea Mar business			—				—				(49,500	)
Losses on derivative instruments			338				4,783				1,347
Share-based compensation			106,725				45,401				30,176
Foreign currency transaction losses (gains), net			8,372				(2,718	)			(3,223	)
Equity in (earnings) losses of unconsolidated affiliates, net of dividends			229,813				236,763				(5,136	)
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable			450,530				(157,697	)			93,490
Inventory			52,995				(26,774	)			(28,668	)
Other current assets			205,108				(81,764	)			(47,959	)
Other long-term assets			(22,233	)			(85,231	)			(117,237	)
Trade accounts payable and accrued liabilities			(146,470	)			38,129				4,501
Income taxes payable			(62,535	)			24,043				(80,692	)
Other long-term liabilities			(5,534	)			10,665				46,023
Net cash provided by operating activities			1,616,972				1,462,824				1,394,909
Cash flows from investing activities:
Purchases of investments			(32,674	)			(269,983	)			(378,318	)
Sales and maturities of investments			57,033				521,613				860,385
Cash paid for acquisition of businesses, net			—				(287	)			(8,391	)
Investment in unconsolidated affiliates			(125,076	)			(271,309	)			(278,100	)
Capital expenditures			(1,093,435	)			(1,506,979	)			(2,039,180	)
Proceeds from sales of assets and insurance claims			31,375				69,842				162,055
Proceeds from sale of Sea Mar business			—				—				194,332
Net cash used for investing activities			(1,162,777	)			(1,457,103	)			(1,487,217	)
Cash flows from financing activities:
Increase (decrease) in cash overdrafts			(18,157	)			23,858				(38,416	)
Proceeds from long-term debt			1,124,978				962,901				—
Debt issuance costs			(8,832	)			(7,324	)			—
Proceeds from issuance of common shares			11,249				56,630				61,620
Reduction in long-term debt			(1,081,801	)			(836,511	)			—
Repurchase of equity component of convertible debt			(6,586	)			—				—
Repurchase of common shares			—				(281,101	)			(102,451	)
Purchase of restricted stock			(1,515	)			(13,061	)			(1,811	)
Tax benefit related to share-based awards			37				5,369				2,159
Net cash provided by (used for) financing activities			19,373				(89,239	)			(78,899	)
Effect of exchange rate changes on cash and cash equivalents			12,160				(5,701	)			1,964
Net increase in cash and cash equivalents			485,728				(89,219	)			(169,243	)
Cash and cash equivalents, beginning of period			442,087				531,306				700,549
Cash and cash equivalents, end of period		$	927,815			$	442,087			$	531,306

The accompanying notes are an integral part of these consolidated financial statements.

NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

     

		Common
		Shares												Accumulated Other Comprehensive Income (Loss)
														Unrealized
														Gains
										Capital in				(Losses) on				Cumulative
						Par				Excess of Par				Marketable				Translation								Retained				Treasury				Noncontrolling				Total
(In thousands)		Shares				Value				Value				Securities				Adjustment				Other				Earnings				Shares				Interest				Equity
Balances, December 31, 2006			299,333			$	299			$	2,060,747			$	33,400			$	171,160			$	(3,299	)		$	2,402,277			$	(775,484	)		$	14,971			$	3,904,071
Comprehensive income (loss):
Net income (loss)																											865,702								(420	)			865,282
Translation adjustment																			153,487																2,243				155,730
Unrealized gains/(losses) on marketable securities, net of income taxes of $704															14,164																								14,164
Less: reclassification adjustment for (gains)/losses included in net income, net of income taxes of $2,664															(47,283	)																							(47,283	)
Pension liability amortization, net of income taxes of $101																							176																176
Pension liability adjustment, net of income taxes of $319																							679																679
Amortization of loss on cash flow hedges																							151																151
Total comprehensive income (loss)			—				—				—				(33,119	)			153,487				1,006				865,702				—				1,823				988,899
Cumulative effect of adoption for uncertain tax positions																											(44,984	)											(44,984	)
Investment in noncontrolling interest																																			33				33
Distributions from noncontrolling interest																																			(2,908	)			(2,908	)
Disposition of operations relating to Sea Mar business from noncontrolling interest																																			549				549
Issuance of common shares for stock options exercised, net of surrender of unexercised stock options			4,521				5				61,615																												61,620
Nabors Exchangeco shares exchanged			51																																				—
Repurchase of 3,782 treasury shares																															(102,451	)							(102,451	)
Tax benefit related to share-based awards											(17,147	)																											(17,147	)
Restricted stock awards, net			1,553				1				(1,812	)																											(1,811	)
Share-based compensation, net of tender offer for stock options											30,176																												30,176
Subtotal			6,125				6				72,832				—				—				—				(44,984	)			(102,451	)			(2,326	)			(76,923	)
Balances, December 31, 2007			305,458			$	305			$	2,133,579			$	281			$	324,647			$	(2,293	)		$	3,222,995			$	(877,935	)		$	14,468			$	4,816,047

The accompanying notes are an integral part of these consolidated financial statements.

NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

     

		Common
		Shares												Accumulated Other Comprehensive Income (Loss)
														Unrealized
														Gains
										Capital in				(Losses) on				Cumulative
						Par				Excess of				Marketable				Translation								Retained				Treasury				Noncontrolling
(In thousands)		Shares				Value				Par Value				Securities				Adjustment				Other				Earnings				Shares				Interest				Total Equity
Balances, December 31, 2007			305,458			$	305			$	2,133,579			$	281			$	324,647			$	(2,293	)		$	3,222,995			$	(877,935	)		$	14,468			$	4,816,047
Comprehensive income (loss):
Net income																											475,737								3,927				479,664
Translation adjustment																			(228,865	)															(2,537	)			(231,402	)
Unrealized gains/(losses) on marketable securities, net of income tax benefit of $4,374															(37,190	)																							(37,190	)
Less: reclassification adjustment for (gains)/ losses included in net income, net of income taxes of $129															(51	)																							(51	)
Pension liability amortization, net of income taxes of $56																							104																104
Pension liability adjustment, net of income tax benefit of $1,915																							(3,009	)															(3,009	)
Unrealized gain/(loss) and amortization of (gains)/losses on cash flow hedges, net of income taxes of $163																							(104	)															(104	)
Total comprehensive income (loss)			—				—				—				(37,241	)			(228,865	)			(3,009	)			475,737				—				1,390				208,012
Issuance of common shares for stock options exercised			2,480				2				56,628																												56,630
Distributions from noncontrolling interest																																			(1,540	)			(1,540	)
Nabors Exchangeco shares exchanged			16																																				—
Issuance of 5,246 treasury shares related to conversion of notes											(181,163	)																			181,163								—
Repurchase of 8,538 treasury shares																															(281,101	)							(281,101	)
Repurchase of equity component of convertible debt											(35	)																											(35	)
Tax benefit related to the redemption of convertible debt											81,789																												81,789
Tax benefit related to share-based awards											6,282																												6,282
Restricted stock awards, net			4,389				5				(13,066	)																											(13,061	)
Share-based compensation											45,401																												45,401
Subtotal			6,885				7				(4,164	)			—				—				—				—				(99,938	)			(1,540	)			(105,635	)
Balances, December 31, 2008			312,343			$	312			$	2,129,415			$	(36,960	)		$	95,782			$	(5,302	)		$	3,698,732			$	(977,873	)		$	14,318			$	4,918,424

The accompanying notes are an integral part of these consolidated financial statements.

NABORS INDUSTRIES LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

     

		Common
		Shares												Accumulated Other Comprehensive Income (Loss)
														Unrealized
														Gains
										Capital in				(Losses) on				Cumulative
						Par				Excess of				Marketable				Translation								Retained				Treasury				Noncontrolling
(In thousands)		Shares				Value				Par Value				Securities				Adjustment				Other				Earnings				Shares				Interest				Total Equity
Balances, December 31, 2008			312,343			$	312			$	2,129,415			$	(36,960	)		$	95,782			$	(5,302	)		$	3,698,732			$	(977,873	)		$	14,318			$	4,918,424
Comprehensive income (loss):
Net income (loss)																											(85,546	)							(342	)			(85,888	)
Translation adjustment																			150,290																2,024				152,314
Unrealized gains/(losses) on marketable securities, net of income tax benefit of $839															36,727																								36,727
Unrealized gains/(losses) on adjusted basis for marketable debt security, net of income taxes of $1,199															1,956																								1,956
Less: reclassification adjustment for (gains)/losses included in net income, net of income tax benefit of $4,921															49,386																								49,386
Pension liability amortization, net of income taxes of $325																							519																519
Pension liability adjustment, net of income taxes of $89																							130																130
Amortization of (gains)/ losses on cash flow hedges, net of income tax benefit of $18																							178																178
Total comprehensive income (loss)			—				—				—				88,069				150,290				827				(85,546	)			—				1,682				155,322
Issuance of common shares for stock options exercised, net of surrender of unexercised stock options			1,476				2				11,247																												11,249
Distributions from noncontrolling interest																																			(1,677	)			(1,677	)
Nabors Exchangeco shares exchanged			105																																				—
Repurchase of equity component of convertible debt											(6,586	)																											(6,586	)
Tax benefit related to stock option exercises											37																												37
Restricted stock awards, net			(9	)							(1,515	)																											(1,515	)
Share-based compensation											106,725																												106,725
Subtotal			1,572				2				109,908				—				—				—				—				—				(1,677	)			108,233
Balances, December 31, 2009			313,915			$	314			$	2,239,323			$	51,109			$	246,072			$	(4,475	)		$	3,613,186			$	(977,873	)		$	14,323			$	5,181,979

The accompanying notes are an integral part of these consolidated financial statements.

Nabors Industries Ltd. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Nature of Operations

     Nabors is the largest land drilling contractor in the world, with approximately 542 actively marketed land drilling rigs. We conduct oil, gas and geothermal land drilling operations in the U.S. Lower 48 states, Alaska, Canada, South America, Mexico, the Caribbean, the Middle East, the Far East, Russia and Africa. We are also one of the largest land well-servicing and workover contractors in the United States and Canada. We actively market approximately 558 rigs for land workover and well-servicing work in the United States, primarily in the southwestern and western United States, and approximately 172 rigs for land workover and well-servicing work in Canada. Nabors is a leading provider of offshore platform workover and drilling rigs, and actively markets 40 platform, 13 jack-up and 3 barge rigs in the United States and multiple international markets. These rigs provide well-servicing, workover and drilling services. We have a 51% ownership interest in a joint venture in Saudi Arabia, which owns and actively markets 9 rigs in addition to the rigs we lease to the joint venture. We also offer a wide range of ancillary well-site services, including engineering, transportation, construction, maintenance, well logging, directional drilling, rig instrumentation, data collection and other support services in select domestic and international markets. We provide logistics services for onshore drilling in Canada using helicopters and fixed-wing aircraft. We manufacture and lease or sell top drives for a broad range of drilling applications, directional drilling systems, rig instrumentation and data collection equipment, pipeline handling equipment and rig reporting software. We also invest in oil and gas exploration, development and production activities in the U.S., Canada and international areas through both our wholly owned subsidiaries and our separate joint venture entities. We hold a 50% ownership interest in our Canadian entity and 49.7% ownership interests in our U.S. and International entities. Each joint venture pursues development and exploration projects with our existing customers and with other operators in a variety of forms, including operated and non-operated working interests, joint ventures, farm-outs and acquisitions.

     The majority of our business is conducted through our various Contract Drilling operating segments, which include our drilling, workover and well-servicing operations, on land and offshore. Our oil and gas exploration, development and production operations are included in our Oil and Gas operating segment. Our operating segments engaged in drilling technology and top drive manufacturing, directional drilling, rig instrumentation and software, and construction and logistics operations are aggregated in our Other Operating Segments.

     During 2010, we began actively marketing our oil and gas assets in the Horn River basin in Canada and in the Llanos basin in Colombia. These assets also include our 49.7% and 50.0% ownership interests in our investments of Remora and SMVP, respectively, which we account for using the equity method of accounting. We determined that the plan of sale criteria in the ASC Topic relating to the Presentation of Financial Statements for Assets Sold or Held for Sale had been met during the third quarter of 2010. During the third quarter of 2007 we sold our Sea Mar business, previously included in Other Operating Segments, to an unrelated third party. Accordingly, the accompanying consolidated statements of income (loss), and certain accompanying notes to the consolidated financial statements, have been updated to retroactively reclassify the operating results of these assets, as discontinued operations for all periods presented. See Note 20 — Discontinued Operations for additional discussion.

     The accompanying consolidated financial statements and related footnotes are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Certain reclassifications have been made to prior periods to conform to the current period presentation, with no effect on our consolidated financial position, results of operations or cash flows.

     As used in the Report, “we,” “us,” “our,” “the Company” and “Nabors” means Nabors Industries Ltd. and, where the context requires, includes our subsidiaries and “Nabors Delaware” means Nabors Industries, Inc., a Delaware corporation, and our subsidiaries.

Note 2 Summary of Significant Accounting Policies

Principles of Consolidation

     Our consolidated financial statements include the accounts of Nabors, as well as all majority owned and non-majority owned subsidiaries required to be consolidated under GAAP. Our consolidated financial statements

exclude majority owned entities for which we do not have either (1) the ability to control the operating and financial decisions and policies of that entity or (2) a controlling financial interest in a variable interest entity. All significant intercompany accounts and transactions are eliminated in consolidation.

     Investments in operating entities where we have the ability to exert significant influence, but where we do not control operating and financial policies, are accounted for using the equity method. Our share of the net income (loss) of these entities is recorded as earnings (losses) from unconsolidated affiliates in our consolidated statements of income (loss), and our investment in these entities is included as a single amount in our consolidated balance sheets. Investments in unconsolidated affiliates accounted for using the equity method totaled $305.7 million and $410.8 million and investments in unconsolidated affiliates accounted for using the cost method totaled $.9 million as of each December 31, 2009 and 2008, respectively. Similarly, investments in certain offshore funds classified as non-marketable are accounted for using the equity method of accounting based on our ownership interest in each fund.

Cash and Cash Equivalents

     Cash and cash equivalents include demand deposits and various other short-term investments with original maturities of three months or less.

Investments

Short-term investments

     Short-term investments consist of equity securities, certificates of deposit, corporate debt securities, U.S.- government debt securities, foreign-government debt securities, mortgage-backed debt securities and asset-backed debt securities. Securities classified as available-for-sale or trading are stated at fair value. Unrealized holding gains and temporary losses for available-for-sale securities are excluded from earnings and, until realized, are reported net of taxes in a separate component of equity. Unrealized holding losses are included in earnings during the period for which the loss is determined to be other-than-temporary. Gains and losses from changes in the market value of securities classified as trading are reported in earnings currently.

     In computing realized gains and losses on the sale of equity securities, the specific-identification method is used. In accordance with this method, the cost of the equity securities sold is determined using the specific cost of the security when originally purchased.

Long-term investments and other receivables

     Our oil and gas financing receivables are classified as long-term investments. These receivables represent our financing agreements for certain production payment contracts in our Oil and Gas segment. We have also invested in overseas funds that invest primarily in a variety of public and private U.S. and non-U.S. securities (including asset-backed and mortgage-backed securities, global structured-asset securitizations, whole-loan mortgages, and participations in whole loans and whole-loan mortgages). These investments are classified as non-marketable, because they do not have published fair values. We account for these funds under the equity method of accounting based on our percentage ownership interest and recognize gains or losses, as investment income (loss), currently based on changes in the net asset value of our investment during the current period.

Inventory

     Inventory is stated at the lower of cost or market. Cost is determined using the first-in, first-out method and includes the cost of materials, labor and manufacturing overhead.

Property, Plant and Equipment

     Property, plant and equipment, including renewals and betterments, are stated at cost, while maintenance and repairs are expensed currently. Interest costs applicable to the construction of qualifying assets are capitalized as a component of the cost of such assets. We provide for the depreciation of our drilling and workover rigs using the units-of-production method. For each day a rig is operating, we depreciate it over an approximate 4,900-day period, with the exception of our jack-up rigs which are depreciated over an 8,030-day period, after provision for salvage value. For each day a rig asset is not operating, it is depreciated over an assumed depreciable life of 20 years, with the exception of our jack-up rigs, where a 30-year depreciable life is used, after provision for salvage value.

     Depreciation on our buildings, well-servicing rigs, oilfield hauling and mobile equipment, marine transportation and supply vessels, aircraft equipment, and other machinery and equipment is computed using the straight-line method over the estimated useful life of the asset after provision for salvage value (buildings — 10 to 30 years; well-servicing rigs — 3 to 15 years; marine transportation and supply vessels — 10 to 25 years; aircraft equipment — 5 to 20 years; oilfield hauling and mobile equipment and other machinery and equipment — 3 to 10 years). Amortization of capitalized leases is included in depreciation and amortization expense. Upon retirement or other disposal of fixed assets, the cost and related accumulated depreciation are removed from the respective accounts and any gains or losses are included in our results of operations.

     We review our assets for impairment when events or changes in circumstances indicate that the carrying amounts of property, plant and equipment may not be recoverable. An impairment loss is recorded in the period in which it is determined that the sum of estimated future cash flows, on an undiscounted basis, is less than the carrying amount of the long-lived asset. Impairment charges are recorded using discounted cash flows which requires the estimation of dayrates and utilization, and such estimates can change based on market conditions, technological advances in the industry or changes in regulations governing the industry. Significant and unanticipated changes to the assumptions could result in future impairments. A significantly prolonged period of lower oil and natural gas prices could continue to adversely affect the demand for and prices of our services, which could result in future impairment charges. As the determination of whether impairment charges should be recorded on our long-lived assets is subject to significant management judgment and an impairment of these assets could result in a material charge on our consolidated statements of income (loss), management believes that accounting estimates related to impairment of long-lived assets are critical.

Oil and Gas Properties

     We follow the successful-efforts method of accounting for our consolidated subsidiaries’ oil and gas activities. Under the successful-efforts method, lease acquisition costs and all development costs are capitalized. Our provision for depletion is based on these capitalized costs and is determined on a property-by-property basis using the units-of-production method. Proved property acquisition costs are amortized over total proved reserves. Costs of wells and related equipment and facilities are amortized over the life of proved developed reserves. Estimated fair value of proved and unproved properties includes the estimated present value of all reasonably expected future production, prices, and costs. Proved oil and gas properties are reviewed when circumstances suggest the need for such a review and, are written down to their estimated fair value, if required. Unproved properties are reviewed to determine if there has been impairment of the carrying value and when circumstances suggest an impairment has occurred, are written down to their estimated fair value in that period. We consider the fair value estimates a Level 3 fair value measurement. The estimated fair value of our proved reserves generally declines when there is a significant and sustained decline in oil and natural gas prices. For the years ended December 31, 2009, 2008 and 2007, our impairment tests on the oil and gas-related assets of our wholly owned Ramshorn business unit resulted in impairment charges of $197.7 million, $21.5 million and $41.0 million, respectively. As further discussed below in Recent Accounting Pronouncements, we adopted new guidance relating to the manner in which our oil and gas reserves are estimated as of December 31, 2009.

     Exploratory drilling costs are capitalized until the results are determined. If proved reserves are not discovered, the exploratory drilling costs are expensed. Interest costs related to financing major oil and gas projects in progress are capitalized until the projects are evaluated or until the projects are substantially complete and ready for their intended use if the projects are evaluated as successful. Other exploratory costs are expensed as incurred.

     Our unconsolidated oil and gas joint ventures, which we account for under the equity method of accounting, utilize the full-cost method of accounting for costs related to oil and natural gas properties. Under this method, all such costs (for both productive and nonproductive properties) are capitalized and amortized on an aggregate basis over the estimated lives of the properties using the units-of-production method. However, these capitalized costs are subject to a ceiling test which limits pooled costs to the aggregate of the present value of future net revenues attributable to proved oil and natural gas reserves, discounted at 10%, plus the lower of cost or market value of unproved properties. As further discussed below in Recent Accounting Pronouncements and in relation to the full-cost ceiling test, our unconsolidated oil and gas joint ventures changed the manner in which their oil and gas reserves are estimated and the manner in which they calculate the ceiling limit on capitalized oil and gas costs as of December 31, 2009. Under the new guidance, future revenues for purposes of the ceiling test are valued using a 12-month

average price, adjusted for the impact of derivatives accounted for as cash flow hedges as prescribed by the Securities and Exchange Commission (“SEC”) rules. For the year ended December 31, 2009, our unconsolidated oil and gas joint ventures’ application of the full-cost ceiling test resulted in impairment charges, of which $189.3 million represented our proportionate share.

     For the years ended December 31, 2008 and 2007, our unconsolidated oil and gas joint ventures evaluated the full-cost ceiling using then-current prices for oil and natural gas, adjusted for the impact of derivatives accounted for as cash flow hedges. Our unconsolidated oil and gas joint ventures’ application of the full-cost ceiling test resulted in impairment charges during 2008, of which $207.3 million represented our proportionate share. There were no ceiling test impairment charges recorded by our unconsolidated oil and gas joint ventures during 2007.

     A significantly prolonged period of lower oil and natural gas prices or a reduction to the estimation of reserve quantities could continue to result in future impairment charges to our oil and gas properties.

Goodwill

     Goodwill represents the cost in excess of fair value of the net assets of companies acquired. We review goodwill and intangible assets with indefinite lives for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of the reporting unit exceeds its fair value. A significantly prolonged period of lower oil and natural gas prices could continue to adversely affect the demand for and prices of our services, which could result in future goodwill impairment charges for other reporting units due to the potential impact on our estimate of our future operating results. See Note 3 — Impairments and Other Charges for discussion of goodwill impairments.

     The change in the carrying amount of goodwill for our various Contract Drilling segments and our Other Operating Segments for the years ended December 31, 2009 and 2008 was as follows:

						Acquisitions
						and
		Balance as of				Purchase								Cumulative				Balance as of
		December 31,				Price								Translation				December 31,
(In thousands)		2007				Adjustments				Impairments				Adjustment				2008
Contract Drilling:
U.S. Lower 48 Land Drilling		$	30,154			$	—			$	—			$	—			$	30,154
U.S. Land Well-servicing			50,839				—				—				—				50,839
U.S. Offshore			18,003				—				—				—				18,003
Alaska			19,995				—				—				—				19,995
Canada			181,267				—				(145,447	) (1)			(35,820	)			—
International			18,983				—				—				—				18,983
Subtotal Contract Drilling			319,241				—				(145,447	)			(35,820	)			137,974
Other Operating Segments			49,191				284				(4,561	) (2)			(7,139	)			37,775
Total		$	368,432			$	284			$	(150,008	)		$	(42,959	)		$	175,749

						Acquisitions
						and
		Balance as of				Purchase								Cumulative				Balance as of
		December 31,				Price								Translation				December 31,
(In thousands)		2008				Adjustments				Impairments				Adjustment				2009
Contract Drilling:
U.S. Lower 48 Land Drilling		$	30,154			$	—				—				—				30,154
U.S. Land Well-servicing			50,839				—				—				—				50,839
U.S. Offshore			18,003				—				—				—				18,003
Alaska			19,995				—				—				—				19,995
International			18,983				—				—				—				18,983
Subtotal Contract Drilling			137,974				—				—				—				137,974
Other Operating Segments			37,775				—				(14,689	) (2)			3,205				26,291
Total		$	175,749			$	—			$	(14,689	)		$	3,205			$	164,265

     Our Oil and Gas segment does not have any goodwill. Goodwill for the consolidated company, totaling approximately $6.2 million, is expected to be deductible for tax purposes.

Derivative Financial Instruments

     We record derivative financial instruments (including certain derivative instruments embedded in other contracts) in our consolidated balance sheets at fair value as either assets or liabilities. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and the resulting designation, which is established at the inception of a derivative. Accounting for derivatives qualifying as fair value hedges allows a derivative’s gains and losses to offset related results on the hedged item in the statement of income. For derivative instruments designated as cash flow hedges, changes in fair value, to the extent the hedge is effective, are recognized in other comprehensive income until the hedged item is recognized in earnings. Hedge effectiveness is measured quarterly based on the relative cumulative changes in fair value between the derivative contract and the hedged item over time. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings. Any change in fair value of derivative financial instruments that are speculative in nature and do not qualify for hedge accounting treatment is also recognized immediately in earnings. Proceeds received upon termination of derivative financial instruments qualifying as fair value hedges are deferred and amortized into income over the remaining life of the hedged item using the effective interest rate method.

Litigation and Insurance Reserves

     We estimate our reserves related to litigation and insurance based on the facts and circumstances specific to the litigation and insurance claims and our past experience with similar claims. We maintain actuarially determined accruals in our consolidated balance sheets to cover self-insurance retentions. See Note 16 — Commitments and Contingencies regarding self-insurance accruals. We estimate the range of our liability related to pending litigation when we believe the amount and range of loss can be estimated. We record our best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss with no best estimate in the range, we record the minimum estimated liability related to the lawsuits or claims. As additional information becomes available, we assess the potential liability related to our pending litigation and claims and revise our estimates.

Revenue Recognition

     We recognize revenues and costs on daywork contracts daily as the work progresses. For certain contracts, we receive lump-sum payments for the mobilization of rigs and other drilling equipment. We defer revenue related to mobilization periods and recognize the revenue over the term of the related drilling contract. Costs incurred related to a mobilization period for which a contract is secured are deferred and recognized over the term of the related drilling contract. Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred. We defer recognition of revenue on amounts received from customers for prepayment of services until those services are provided.

     We recognize revenue for top drives and instrumentation systems we manufacture when the earnings process is complete. This generally occurs when products have been shipped, title and risk of loss have been transferred, collectibility is probable, and pricing is fixed and determinable.

     We recognize, as operating revenue, proceeds from business interruption insurance claims in the period that the applicable proof of loss documentation is received. Proceeds from casualty insurance settlements in excess of the carrying value of damaged assets are recognized in losses (gains) on sales and retirements of long-lived assets and other expense (income), net in the period that the applicable proof of loss documentation is received. Proceeds from casualty insurance settlements that are expected to be less than the carrying value of damaged assets are recognized

at the time the loss is incurred and recorded in losses (gains) on sales and retirements of long-lived assets and other expense (income), net.

     We recognize reimbursements received for out-of-pocket expenses incurred as revenues and account for out-of-pocket expenses as direct costs.

     We recognize revenue on our interests in oil and gas properties as production occurs and title passes. We also recognize, as operating revenues, gains on sales of our interests in oil and gas properties when title passes and on our earnings associated with production contracts when realized.

Share-Based Compensation

     We record compensation expense for all share-based awards granted. The amount of compensation expense recognized is based on the grant-date fair value. Note 6 — Share-Based Compensation for additional discussion.

Income Taxes

     We are a Bermuda exempt company and are not subject to income taxes in Bermuda. Consequently, income taxes have been provided based on the tax laws and rates in effect in the countries in which our operations are conducted and income is earned. The income taxes in these jurisdictions vary substantially. Our effective tax rate for financial statement purposes will continue to fluctuate from year to year because our operations are conducted in different taxing jurisdictions.

     Effective January 1, 2007, we adopted the revised provisions of the Income Taxes Topic in the ASC relating to uncertain tax positions. In connection with that adoption, we recognized increases to our tax reserves for uncertain tax positions along with interest and penalties as an increase to other long-term liabilities and as a reduction to retained earnings at January 1, 2007.

     For U.S. and other jurisdictional income tax purposes, we have net operating and other loss carryforwards that we are required to assess quarterly for potential valuation allowances. We consider the sufficiency of existing temporary differences and expected future earnings levels in determining the amount, if any, of valuation allowance required against such carryforwards and against deferred tax assets.

     We do not provide for U.S. or foreign income or withholding taxes on unremitted earnings of all U.S. and certain foreign entities, as these earnings are considered permanently reinvested. Unremitted earnings, represented by tax basis accumulated earnings and profits, totaled approximately $105.0 million, $537.7 million and $477.6 million as of December 31, 2009, 2008 and 2007, respectively. It is not practicable to estimate the amount of deferred income taxes associated with these unremitted earnings.

     Nabors realizes an income tax benefit associated with certain awards issued under our stock plans. We recognize the benefits related to tax deductions up to the amount of the compensation expense recorded for the award in the consolidated statements of income (loss). Any excess tax benefit (i.e., tax deduction in excess of compensation expense) is reflected as an increase in capital in excess of par. Any shortfall is recorded as a reduction to capital in excess of par to the extent of our aggregate accumulated pool of windfall benefits, beyond which the shortfall would be recognized in the consolidated statements of income (loss).

Foreign Currency Translation

     For certain of our foreign subsidiaries, such as those in Canada and Argentina, the local currency is the functional currency, and therefore translation gains or losses associated with foreign-denominated monetary accounts are accumulated in a separate section of the consolidated statements of changes in equity. For our other international subsidiaries, the U.S. dollar is the functional currency, and therefore local currency transaction gains and losses, arising from remeasurement of payables and receivables denominated in local currency, are included in our consolidated statements of income (loss).

Cash Flows

     We treat the redemption price, including accrued original issue discount, on our convertible debt instruments as a financing activity for purposes of reporting cash flows in our consolidated statements of cash flows.

Use of Estimates

     The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the balance sheet date and the amounts of revenues and expenses recognized during the reporting period. Actual results could differ from such estimates. Areas where critical accounting estimates are made by management include:

	•		financial instruments;
	•		depreciation and amortization of property, plant and equipment;
	•		impairment of long-lived assets;
	•		impairment of goodwill and intangible assets;
	•		impairment of oil and gas properties;
	•		income taxes;
	•		litigation and self-insurance reserves;
	•		fair value of assets acquired and liabilities assumed; and
	•		share-based compensation.

Recent Accounting Pronouncements

     On July 1, 2009, the Financial Accounting Standards Board (“FASB”) released the Accounting Standards Codification (“ASC”). The ASC became the single source of authoritative nongovernmental GAAP. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The ASC is not intended to change GAAP, but changes the approach by referencing authoritative literature by topic (each, a “Topic”) rather than by type of standard. Accordingly, references in the Notes to Consolidated Financial Statements to former FASB positions, statements, interpretations, opinions, bulletins or other pronouncements are now presented as references to the corresponding Topic in the ASC.

     Effective January 1, 2009, Nabors changed its method of accounting for certain of its convertible debt instruments in accordance with the revised provisions of the Debt with Conversions and Other Options Topic of the ASC. Additionally, Nabors changed its method for calculating its basic and diluted earnings per share using the two-class method in accordance with the revised provisions of the Earnings Per Share Topic of the ASC. As required by the Accounting Changes and Error Corrections Topic of the ASC, financial information and earnings per share calculations for prior periods have been adjusted to reflect retrospective application.

     The revised provisions of the Debt with Conversions and Other Options Topic clarify that convertible debt instruments that may be settled in cash upon conversion are accounted for with a liability component based on the fair value of a similar nonconvertible debt instrument and an equity component based on the excess of the initial proceeds from the convertible debt instrument over the liability component. Such excess represents proceeds related to the conversion option and is recorded as capital in excess of par value. The liability is recorded at a discount, which is then amortized as additional non-cash interest expense over the convertible debt instrument’s expected life. The retrospective application and impact of these provisions on our consolidated financial statements is described in Note 11 — Debt.

     The revised provisions relating to use of the two-class method for calculating earnings per share within the Earnings Per Share Topic provide that securities that are granted in share-based transactions are “participating securities” prior to vesting if they have a nonforfeitable right to participate in any dividends, and such securities therefore should be included in computing basic earnings per share. Our awards of restricted stock are considered participating securities under this definition. The retrospective application and impact of these provisions on our consolidated financial statements is set forth in Note 17 — Earnings (Losses) Per Share.

     Effective January 1, 2008, we adopted and applied the provisions of the Fair Value Measurements and Disclosures Topic of the ASC to our financial assets and liabilities and on January 1, 2009 applied the same provisions to our nonfinancial assets and liabilities. Effective April 1, 2009, we adopted the provisions of this Topic relating to fair value measures in inactive markets. These provisions provide additional guidance for determining whether a market for a financial asset is not active and a transaction is not distressed for fair value measurements. The application of these provisions did not have a material impact on our consolidated financial statements. Our fair value disclosures are provided in Note 5 — Fair Value Measurements.

     Effective January 1, 2009, we adopted the revised provisions of the Business Combinations Topic of the ASC and will apply those provisions on a prospective basis to acquisitions. The revised provisions retain the fundamental requirement that the acquisition method of accounting be used for all business combinations and expands the use of the acquisition method to all transactions and other events in which one entity obtains control over one or more other businesses or assets at the acquisition date and in subsequent periods. The revised provisions require measurement at the acquisition date of the fair value of assets acquired, liabilities assumed and any noncontrolling interests. Additionally, acquisition-related costs, including restructuring costs, are recognized as expense separately from the acquisition.

     Effective January 1, 2009, new provisions relating to noncontrolling interests of a subsidiary within the Identifiable Assets and Liabilities, and Any Noncontrolling Interest Topic of the ASC were released. The provisions establish the accounting and reporting standards for a noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The provisions clarify that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Our consolidated financial statements reflect the adoption and have been adjusted to reflect retrospective application. The application of these provisions did not have a material impact on our consolidated financial statements.

     Effective January 1, 2009, we adopted the revised provisions relating to expanded disclosures of derivatives within the Derivatives and Hedging Topic of the ASC. The revised provisions are intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced qualitative and quantitative disclosures regarding such instruments, gains and losses thereon and their effects on an entity’s financial position, financial performance and cash flows. The application of these provisions did not have a material impact on our consolidated financial statements.

     In December 2008, the SEC issued a Final Rule, “Modernization of Oil and Gas Reporting.” This rule revises some of the oil and gas reporting disclosures in Regulation S-K and Regulation S-X under the Securities Act and the Securities Exchange Act of 1934 (the “Exchange Act”), as well as Industry Guide 2. Effective December 31, 2009, the FASB issued revised guidance that substantially aligned the oil and gas accounting disclosures with the SEC’s Final Rule. The amendments are designed to modernize and update oil and gas disclosure requirements to align them with current practices and changes in technology. Additionally, this new accounting standard requires that entities use 12-month average natural gas and oil prices when calculating the quantities of proved reserves and performing the full-cost ceiling test calculation. The new standard also clarified that an entity’s equity method investments must be considered in determining whether it has significant oil and gas activities. The disclosure requirements are effective for registration statements filed on or after January 1, 2010 and for annual financial statements filed on or after December 31, 2009. The FASB provided a one-year deferral of the disclosure requirements if an entity became subject to the requirements because of a change to the definition of significant oil and gas activities. When operating results from our wholly owned oil and gas activities are considered with operating results from our unconsolidated oil and gas joint ventures, which we account for under the equity method of accounting, we have significant oil and gas activities under the new definition. In line with the one-year deferral, we will provide the oil and gas disclosures in annual periods beginning after December 31, 2009.

     Effective April 1, 2009, we adopted the provisions in the Investments of Debt and Equity Securities Topic of the ASC relating to recognition and presentation of other-than-temporary impairments to debt securities. The impact of these provisions is set forth in Notes 3 — Impairments and Other Charges and 4 — Cash and Cash Equivalents and Investments.

     Effective June 30, 2009, we adopted the provisions in the Financial Instruments Topic of the ASC relating to quarterly disclosure of the fair value of financial instruments. The disclosures required by this Topic are provided in Note 5 — Fair Value Measurements.

     Effective June 30, 2009, we adopted the revised provisions in the Subsequent Events Topic of the ASC and evaluated subsequent events through the date of the release of our financial statements. The adoption of the Subsequent Events Topic of the ASC did not have any impact on our financial position, results of operations or cash flows.

Note 3 Impairments and Other Charges

The following table provides the components of impairments and other charges recorded during the years ended December 31, 2009, 2008 and 2007:

						Year Ended December 31,
(In thousands)						2009				2008				2007
Goodwill impairments						$	14,689			$	150,008			$	—
Impairment of long-lived assets to be disposed of other than by sale:
U.S. Offshore		$	28,062
Alaska			15,000
Canada			17,930
International			3,237
Total impairment of long-lived assets to be disposed of other than by sale		$	64,229				64,229				—				—
Impairment of other intangible assets							—				4,578				—
Impairment of oil and gas-related assets:
Oil and gas financing receivable		$	149,115
Oil and gas properties			48,629
Total impairment of oil and gas-related assets		$	197,744				197,744				21,537				41,017
Other-than-temporary impairment on equity security							18,665				—				—
Other-than-temporary impairment on debt security		$	40,300
Less other-than-temporary impairment recognized in accumulated other comprehensive income (loss)			(4,651	)
Credit-related impairment on investment		$	35,649				35,649				—				—
Impairments and other charges						$	330,976			$	176,123			$	41,017