EX-99.1 3 h12216exv99w1.txt PRESS RELEASE EXHIBIT 99.1 -------------------------------------------------------------------------------- (NABORS INDUSTRIES LOGO) NEWS RELEASE -------------------------------------------------------------------------------- NABORS' 4 Q 2003 NET INCOME INCREASES 138% AT $0.42 VS. $0.18 PER DILUTED SHARE ST. MICHAEL, BARBADOS, JANUARY 30, 2004, NABORS INDUSTRIES LTD. (AMEX: NBR), today announced its results for the fourth quarter and full year 2003. Adjusted income derived from operating activities(1) was $65.8 million for the current quarter compared to $39.3 million in the fourth quarter of last year and $52.9 million in the third quarter of this year. Net income was $64.9 million ($0.42 per diluted share) for the current quarter compared to $27.2 million ($0.18 per diluted share) in the prior year quarter and $50.3 million ($0.33 per diluted share) in the third quarter of this year. Operating revenues and Earnings from unconsolidated affiliates were $524.6 million in the current quarter compared to $382.8 million in the prior year quarter and $476.0 million in the third quarter of this year. For the full year ended December 31, 2003, adjusted income derived from operating activities was $212.7 million compared to $170.0 million in 2002. Net income for 2003 was $192.2 million ($1.25 per diluted share) compared to $121.5 million ($0.81 per diluted share) in 2002. Operating revenues and Earnings from unconsolidated affiliates for the full year 2003 were $1.9 billion compared to $1.5 billion for 2002. Gene Isenberg, Nabors' Chairman and Chief Executive Officer, commented: "The strong improvements in our 2003 results were broad-based with our North American natural gas, International, and U.S. Land Well-servicing businesses posting the largest increases. Our Alaskan and U.S. Offshore businesses also increased significantly, with only our Manufacturing and Logistics operations posting lower results. The fourth quarter of 2003 showed a large increase over the same quarter of 2002, but more significantly it represented a substantial sequential increase over the third quarter of 2003. The largest increases during the quarter came from our North American gas drilling and U.S. Offshore operations with Alaska also posting improved results. Our U.S. Land Well-servicing business was down in the fourth quarter as expected, with seasonally lower rig hours, while our International operations' results were lower as previously forecasted. Looking forward, we expect every one of our businesses to achieve higher results in the first quarter of 2004. We also expect this robust outlook to continue throughout the year with substantial increases expected from all of our businesses except Alaska, where the outlook has recently improved modestly. In our U.S. Lower 48 Land Drilling unit, we are seeing the early stages of an improved pricing environment in selected regions and horsepower classes. I expect that by sometime in the second half of 2004 the Baker Hughes US land rig count will have increased by more than 75 rigs from its 2003 highs, with Nabors garnering a larger share as our traditional customers become more active and well complexity continues to ---------- (1) Adjusted income derived from operating activities is computed by subtracting direct costs, general and administrative expenses, and depreciation and amortization, and depletion expenses from Operating revenues and then adding Earnings from unconsolidated affiliates. Such amounts should not be used as a substitute to those amounts reported under accounting principles generally accepted in the United States of America (GAAP). A reconciliation of this non-GAAP measure to consolidated income before taxes, which is a GAAP measure, is provided herein. increase which requires more sophisticated rigs. This magnitude of market increase should absorb much of the remaining capacity of quality rigs and bring the rig supply / demand balance closer to the point where prices improve more significantly. Our initiatives in adopting selected rig technologies, where appropriate, are yielding positive results with customers as well as on our returns on these investments. Our average rig moving times have improved substantially and we have upgraded a number of our rigs with larger mud pumps and power systems to accommodate the higher hydraulic horsepower requirements of today's newer bits and drilling motors. Similarly, we are accelerating our implementation of the OptiDrill(TM) automatic driller system and have completed our implementation of internet data transmission throughout our fleet. The strength of our U.S. Gulf of Mexico offshore business is attributable to several factors with one of the most significant being the deployment of three new platform rigs for deepwater development projects commencing in the first half of 2004. Further bolstering this unit is the continuing high utilization of our 1,000 horsepower and larger self-erecting platform rigs which has been helped by last year's export of several rigs in this class to international venues for long-term contracts. In February our recently upgraded barge drilling rig should recommence operations with greatly enhanced drilling capacity and a reduced minimum draft. This is now the most versatile rig for the deep horizon prospects of the shallowest water areas of the Gulf of Mexico. Lastly, it appears that we will see a continuance of the improving market for our platform and jackup workover rigs that materialized late last year. Our Canadian unit continues to progress in excess of our expectations and validate the timeliness of our expansion in that market. Our fourth quarter results in Canada also benefited from the appreciation of the Canadian dollar relative to the US dollar. We continue to invest in this business in both innovative new rigs and technologies which are receiving strong customer acceptance. Of course, we will experience a significant seasonal drop in contribution during the second quarter of 2004 but, as compared to last year, it will have a lower relative impact on our overall results. Internationally, our 2004 results will benefit from the full-year contribution of the multiple offshore rig deployments we completed last year. We also expect to see a number of the long-running rigs that were unexpectedly idled late last year return to work during the course of this year. Furthermore, we continue to see a significant number of opportunities that are likely to materialize as the year progresses. Our U.S. Land Well-servicing business is beginning to demonstrate its leverage with an anticipated modest increase in rig hours and margins generating a more meaningful increase in profitability. We also expect sequential increases in our Manufacturing and Logistics businesses throughout 2004 as a result of the improving rig market, increased third party sales and the accelerated rollout of several new technology-driven products. All of this continues to reinforce our conviction that we can sustain robust growth in our results for the next several years. In 2004 we expect to see a continuation of the magnitude of growth in earnings per share that we saw in 2003, even in the face of a much higher tax rate. This is driven by a substantial increase in the rate of growth in adjusted income and cash flow from operations. Our confidence emanates from concrete developments in our Canadian, International and U.S. Offshore businesses as well as, certain regions of our U.S. Lower 48 Land Drilling market and elsewhere by the continuing strength in the fundamentals, particularly North American natural gas." The Nabors companies own and operate almost 600 land drilling and approximately 950 land workover and well-servicing rigs worldwide. Offshore, Nabors operates 42 platforms, 16 jack-ups, and three barge rigs in the domestic and international markets. Nabors markets 30 marine transportation and support vessels, primarily in the U.S. Gulf of Mexico. In addition, Nabors manufactures top drives and drilling instrumentation systems and provides comprehensive oilfield hauling, engineering, civil construction, logistics and facilities maintenance, and project management services. Nabors participates in most of the significant oil, gas and geothermal markets in the world. The information above includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such forward-looking statements are subject to certain risks and uncertainties, as disclosed by Nabors from time to time in its filings with the Securities and Exchange Commission. As a result of these factors, Nabors' actual results may differ materially from those indicated or implied by such forward-looking statements. -------------------------------------------------------------------------------- For further information, please contact Dennis A. Smith, Director of Corporate Development of Nabors Corporate Services, Inc. at (281) 775-8038. To request Investor Materials, call Angela Ridgell at (281) 775-8063 or our corporate headquarters in St. Michael, Barbados at (246) 421-9471 or via email at dan.mclachlin@nabors.com. Nabors will conduct a conference call to discuss the quarter's results and the near-term outlook, today at 12:00 p.m. Eastern Standard Time. The call can be accessed on our website at WWW.NABORS.COM, or through First Call at WWW.FIRSTCALLEVENTS.COM. NABORS INDUSTRIES LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED YEAR ENDED -------------------------------------------- ----------------------------- DECEMBER 31, SEPTEMBER 30, DECEMBER 31, ----------------------------- ------------- ----------------------------- 2003 2002 2003 2003 2002 ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues and other income: Operating revenues $ 524,120 $ 379,951 $ 473,494 $ 1,880,003 $ 1,466,443 Earnings from unconsolidated affiliates 436 2,834 2,485 10,183 14,775 Interest income 6,619 8,548 6,442 27,752 34,086 Other income, net 2,582 1,556 2,279 4,908 3,708 ------------- ------------- ------------- ------------- ------------- Total revenues and other income 533,757 392,889 484,700 1,922,846 1,519,012 ------------- ------------- ------------- ------------- ------------- Costs and other deductions: Direct costs 350,306 252,397 323,296 1,276,953 973,910 General and administrative expenses 42,468 39,437 41,207 165,403 141,895 Depreciation and amortization 59,674 50,390 57,394 226,528 187,665 Depletion 6,345 1,226 1,136 8,599 7,700 Interest expense 16,035 20,263 15,991 70,740 67,068 ------------- ------------- ------------- ------------- ------------- Total costs and other deductions 474,828 363,713 439,024 1,748,223 1,378,238 ------------- ------------- ------------- ------------- ------------- Income before income taxes 58,929 29,176 45,676 174,623 140,774 ------------- ------------- ------------- ------------- ------------- Income tax expense (benefit): Current 564 1,454 644 8,494 10,185 Deferred (6,506) 517 (5,249) (26,099) 9,100 ------------- ------------- ------------- ------------- ------------- Total income tax (benefit) expense (5,942) 1,971 (4,605) (17,605) 19,285 ------------- ------------- ------------- ------------- ------------- Net income $ 64,871 $ 27,205 $ 50,281 $ 192,228 $ 121,489 ============= ============= ============= ============= ============= Earnings per share (1): Basic $ .44 $ .19 $ .34 $ 1.31 $ .85 Diluted $ .42 $ .18 $ .33 $ 1.25 $ .81 Weighted average number of common shares outstanding (1): Basic 146,984 145,385 146,905 146,495 143,655 ------------- ------------- ------------- ------------- ------------- Diluted 161,851 151,717 153,378 156,897 149,997 ------------- ------------- ------------- ------------- ------------- Adjusted income derived from operating activities (2) $ 65,763 $ 39,335 $ 52,946 $ 212,703 $ 170,048 ============= ============= ============= ============= =============
(1) See "Computation of Per Share Earnings" included herein as a separate schedule. (2) Adjusted income derived from operating activities is computed by: subtracting direct costs, general and administrative expenses, and depreciation and amortization, and depletion expense from Operating revenues and then adding Earnings from unconsolidated affiliates. Such amounts should not be used as a substitute to those amounts reported under accounting principles generally accepted in the United States of America (GAAP). However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted income derived from operating activities, because it believes that this financial measure is an accurate reflection of the ongoing profitability of our company. A reconciliation of this non-GAAP measure to income before income taxes, which is a GAAP measure, is provided within the table set forth immediately following the heading "Segment Reporting". NABORS INDUSTRIES LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
DECEMBER 31, --------------------------- 2003 2002 ---------- ---------- (IN THOUSANDS, EXCEPT RATIOS) ASSETS Current assets: Cash and marketable securities $ 919,673 $ 871,651 Accounts receivable, net 409,985 320,299 Other current assets 174,536 177,958 ---------- ---------- Total current assets 1,504,194 1,369,908 Marketable securities 612,417 459,148 Property, plant and equipment, net 2,990,792 2,801,067 Goodwill, net 336,027 306,762 Other long-term assets 147,809 126,987 ---------- ---------- Total assets $5,591,239 $5,063,872 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 299,385 $ 492,985 Other current liabilities 294,006 258,469 ---------- ---------- Total current liabilities 593,391 751,454 Long-term debt 1,985,553 1,614,656 Other long-term liabilities 521,412 539,307 ---------- ---------- Total liabilities 3,100,356 2,905,417 Shareholders' equity 2,490,883 2,158,455 ---------- ---------- Total liabilities and shareholders' equity $5,591,239 $5,063,872 ========== ========== Total cash and marketable securities $1,532,090 $1,330,799 Working capital $ 910,803 $ 618,454 Funded debt to capital ratio: - Gross 0.48 : 1 0.49 : 1 - Net of cash and marketable securities 0.23 : 1 0.26 : 1 Interest coverage ratio: 6.8 : 1 6.0 : 1
NABORS INDUSTRIES LTD. AND SUBSIDIARIES SEGMENT REPORTING (UNAUDITED) The following table sets forth certain information with respect to our segments and rig activity:
THREE MONTHS ENDED YEAR ENDED ----------------------------------------------- ------------------------------ DECEMBER 31, SEPTEMBER 30, DECEMBER 31, ------------------------------ ------------- ------------------------------ 2003 2002 2003 2003 2002 ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS) Reportable segments: Operating revenues and Earnings from unconsolidated affiliates: Contract Drilling: (1) U.S. Lower 48 Land Drilling $ 139,986 $ 79,853 $ 132,065 $ 476,258 $ 374,659 U.S. Land Well-servicing 75,342 70,307 78,773 312,279 294,428 U.S. Offshore 29,244 29,841 25,928 101,566 105,717 Alaska 25,491 20,899 20,187 112,092 118,199 Canada 100,190 51,158 71,489 322,303 141,497 International 106,866 85,580 106,228 396,884 320,160 ------------- ------------- ------------- ------------- ------------- Subtotal Contract Drilling (2) 477,119 337,638 434,670 1,721,382 1,354,660 Manufacturing, Logistics and Other (3)(4) 51,264 59,487 48,635 201,660 174,775 Oil and Gas 9,467 3,550 3,366 16,919 7,223 Other (5) (13,294) (17,890) (10,692) (49,775) (55,440) ------------- ------------- ------------- ------------- ------------- Total $ 524,556 $ 382,785 $ 475,979 $ 1,890,186 $ 1,481,218 ============= ============= ============= ============= ============= Adjusted cash flow derived from operating activities: (6) Contract Drilling: U.S. Lower 48 Land Drilling $ 26,354 $ 14,475 $ 25,697 $ 85,992 $ 84,435 U.S. Land Well-servicing 16,645 13,185 18,644 69,245 58,231 U.S. Offshore 9,629 12,092 5,599 21,443 19,094 Alaska 9,580 8,157 8,659 49,815 43,389 Canada 32,936 13,917 18,054 89,696 38,127 International 33,799 28,843 36,046 131,337 113,641 ------------- ------------- ------------- ------------- ------------- Subtotal Contract Drilling 128,943 90,669 112,699 447,528 356,917 Manufacturing, Logistics and Other 4,489 7,713 4,624 24,863 42,704 Oil and Gas 7,319 3,434 3,351 14,449 6,642 Other (7) (8,969) (10,865) (9,198) (39,010) (40,850) ------------- ------------- ------------- ------------- ------------- Total 131,782 90,951 111,476 447,830 365,413 Depreciation, depletion and amortization: Contract Drilling (54,376) (45,392) (52,308) (206,329) (171,347) Manufacturing, Logistics and Other (5,620) (5,370) (5,414) (21,597) (18,044) Oil and Gas (6,345) (1,226) (1,136) (8,599) (7,700) Other (7) 322 372 328 1,398 1,726 ------------- ------------- ------------- ------------- ------------- Total depreciation, depletion and amortization (66,019) (51,616) (58,530) (235,127) (195,365) Adjusted income derived from operating activities: Contract Drilling 74,567 45,277 60,391 241,199 185,570 Manufacturing, Logistics and Other (1,131) 2,343 (790) 3,266 24,660 Oil and Gas 974 2,210 2,215 5,850 (1,056) Other (7) (8,647) (10,495) (8,870) (37,612) (39,126) ------------- ------------- ------------- ------------- ------------- Total adjusted income derived from operating activities (8) 65,763 39,335 52,946 212,703 170,048 Interest expense (16,035) (20,263) (15,991) (70,740) (67,068) Interest income 6,619 8,548 6,442 27,752 34,086 Other income, net 2,582 1,556 2,279 4,908 3,708 ------------- ------------- ------------- ------------- ------------- Income before income taxes $ 58,929 $ 29,176 $ 45,676 $ 174,623 $ 140,774 ============= ============= ============= ============= ============= Net cash provided by operating activities from our consolidated statements of cash flows (6) $ 159,193 $ 101,756 $ 94,509 $ 394,473 $ 387,445 ============= ============= ============= ============= ============= Rig activity: Rig years: (9) U.S. Lower 48 Land Drilling 168.3 95.5 157.4 143.1 103.0 U.S. Offshore 14.1 14.0 14.1 14.1 14.5 Alaska 7.3 7.7 6.3 7.9 9.3 Canada 47.1 29.6 39.1 42.1 22.9 International (10) 64.0 59.9 63.3 61.1 55.1 ------------- ------------- ------------- ------------- ------------- Total rig years 300.8 206.7 280.2 268.3 204.8 ============= ============= ============= ============= ============= Rig hours: (11) U.S. Land Well-servicing 257,578 250,364 275,610 1,088,511 1,014,657 Canada Well-servicing (12) 92,079 71,704 90,233 321,472 164,785 ------------- ------------- ------------- ------------- ------------- Total rig hours 349,657 322,068 365,843 1,409,983 1,179,442 ============= ============= ============= ============= =============
(1) This segment includes our drilling, workover and well-servicing operations, on land and offshore. (2) Includes Earnings from unconsolidated affiliates, accounted for by the equity method, of $.03 million, $.8 million and $1.0 million for the three months ended December 31, 2003 and 2002, and September 30, 2003, respectively, and $2.8 million and $3.9 million for the years ended December 31, 2003 and 2002, respectively. (3) Includes our marine transportation and supply services, drilling technology and top drive manufacturing, directional drilling, rig instrumentation and software, and construction and logistics operations. (4) Includes Earnings from unconsolidated affiliates, accounted for by the equity method, of $.4 million, $2.0 million and $1.5 million for the three months ended December 31, 2003 and 2002, and September 30, 2003, respectively, and $7.4 million and $10.9 million for the years ended December 31, 2003 and 2002, respectively. (5) Represents the elimination of inter-segment transactions. (6) Adjusted cash flow derived from operating activities is computed by: subtracting direct costs and general and administrative expenses from Operating revenues and then adding Earnings from unconsolidated affiliates. Such amounts should not be used as a substitute to those amounts reported under GAAP. However, management evaluates the performance of our business units based on several criteria, including adjusted cash flow derived from operating activities, because it believes that this financial measure is an accurate reflection of the ongoing performance of our business units. The following is a reconciliation of net cash provided by operating activities from our consolidated statements of cash flows, which is a GAAP measure, to this non-GAAP measure:
THREE MONTHS ENDED YEAR ENDED --------------------------------------------- ----------------------------- DECEMBER 31, SEPTEMBER 30, DECEMBER 31, ----------------------------- ------------- ----------------------------- 2003 2002 2003 2003 2002 ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS) Net cash provided by operating activities from our consolidated statements of cash flows $ 159,193 $ 101,756 $ 94,509 $ 394,473 $ 387,445 Interest expense 16,035 20,263 15,991 70,740 67,068 Interest income (6,619) (8,548) (6,442) (27,752) (34,086) Other income, net (2,582) (1,556) (2,279) (4,908) (3,708) Current income tax expense 564 1,454 644 8,494 10,185 Deferred financing costs amortization (1,366) (1,328) (1,378) (5,464) (5,122) Discount amortization on long-term debt (4,991) (7,859) (4,961) (25,521) (30,790) Amortization of loss on cash flow hedges (35) (50) (42) (152) (50) (Losses) gains on long-term assets, net (706) 5,696 (95) 2,476 4,570 Gains on marketable securities, net 3,454 491 65 6,146 2,877 Gains (losses) on derivative instruments 520 (1,983) 2,042 (1,139) (1,983) Sales of marketable securities and other investments, trading -- -- -- (4,484) -- Foreign currency transaction gains (losses) 443 (1,623) 36 830 486 Loss on early extinguishment of debt -- -- -- (908) (202) Equity in earnings (losses) of unconsolidated affiliates, net of dividends 311 2,834 (1,154) 919 4,900 Decrease (increase), net of effects from acquisitions, from changes in balance sheet accounts (32,439) (18,596) 14,540 34,080 (36,177) ------------- ------------- ------------- ------------- ------------- Adjusted cash flow derived from operating activities $ 131,782 $ 90,951 $ 111,476 $ 447,830 $ 365,413 ============= ============= ============= ============= =============
(7) Represents the elimination of inter-segment transactions and unallocated corporate expenses. (8) Adjusted income derived from operating activities is computed by: subtracting direct costs, general and administrative expenses, depreciation and amortization, and depletion expense from Operating revenues and then adding Earnings from unconsolidated affiliates. Such amounts should not be used as a substitute to those amounts reported under GAAP. However, management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted income derived from operating activities, because it believes that this financial measure is an accurate reflection of the ongoing profitability of our company. A reconciliation of this non-GAAP measure to consolidated income before income taxes, which is a GAAP measure, is provided within the table set forth immediately following the heading "Segment Reporting". (9) Excludes well-servicing rigs, which are measured in rig hours. Includes our percentage ownership of rigs from unconsolidated affiliates. Rig years represents a measure of the number of equivalent rigs operating during a given period. For example, one rig operating 182.5 days during a 365-day period represents 0.5 rig years. (10) International rig years include our equivalent percentage ownership of rigs owned by unconsolidated affiliates which totaled 3.5 years, 4.0 years and 3.7 years during the three months ended December 31, 2003 and 2002, and September 30, 2003, respectively, and 3.8 years and 3.7 years during the years ended December 31, 2003 and 2002, respectively. (11) Rig hours represents the aggregate number of hours that our well-servicing rig fleet operated during the year. (12) The Canada Well-servicing operation was acquired during April 2002 as part of our acquisition of Enserco Energy Service Company Inc. NABORS INDUSTRIES LTD. AND SUBSIDIARIES COMPUTATION OF PER SHARE EARNINGS (UNAUDITED) A reconciliation of the numerators and denominators of the basic and diluted earnings per share computations is as follows:
THREE MONTHS ENDED YEAR ENDED ----------------------------------------------- ------------------------------ DECEMBER 31, SEPTEMBER 30, DECEMBER 31, ------------------------------ ------------- ------------------------------ 2003 2002 2003 2003 2002 ------------- ------------- ------------- ------------- ------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net income (numerator): Net income - basic $ 64,871 $ 27,205 $ 50,281 $ 192,228 $ 121,489 Add interest expense on assumed conversion of our zero coupon convertible senior debentures, net of tax: $825 million due 2020 (1) -- -- -- 3,639 -- $1.381 billion due 2021 (2) 3,062 -- -- -- -- ------------- ------------- ------------- ------------- ------------- Adjusted net income - diluted $ 67,933 $ 27,205 $ 50,281 $ 195,867 $ 121,489 ------------- ------------- ------------- ------------- ------------- Earnings per share: Basic $ .44 $ .19 $ .34 $ 1.31 $ .85 Diluted $ .42 $ .18 $ .33 $ 1.25 $ .81 Shares (denominator): Weighted average number of shares outstanding - basic (3) 146,984 145,385 146,905 146,495 143,655 Net effect of dilutive stock options and warrants based on the treasury stock method 6,376 6,332 6,473 6,604 6,342 Assumed conversion of our zero coupon convertible/exchangeable senior debentures/notes: $825 million due 2020 (1) -- -- -- 3,798 -- $1.381 billion due 2021 (2) 8,491 -- -- -- -- $700 million due 2023 (4) -- -- -- -- -- ------------- ------------- ------------- ------------- ------------- Weighted average number of shares outstanding - diluted 161,851 151,717 153,378 156,897 149,997 ------------- ------------- ------------- ------------- -------------
(1) Diluted earnings per share for the year ended December 31, 2003 reflects the assumed conversion of our $825 million zero coupon convertible senior debentures, as the conversion in that period would have been dilutive. We redeemed for cash the remaining outstanding principal amount of our $825 million zero coupon convertible senior debentures on June 20, 2003 and therefore these debentures did not impact the calculation of diluted earnings per share for the three months ended December 31 and September 30, 2003. For the three months and year ended December 31, 2002, the weighted average number of shares outstanding-diluted excludes 8.1 million potentially dilutive shares issuable upon the conversion of our $825 million zero coupon convertible senior debentures because the inclusion of such shares would have been anti-dilutive, given the level of net income for those periods. Net income for the three months and year ended December 31, 2002 also excludes the related add-back of interest expense, net of tax, of $1.9 million and $7.6 million, respectively, for these debentures. These shares would have been dilutive and therefore included in the calculation of the weighted average number of shares outstanding-diluted had diluted earnings per share been at or above $.24 and $.93, respectively, for the three months and year ended December 31, 2002. (2) Diluted earnings per share for the three months ended December 31, 2003 reflects the assumed conversion of our $1.381 billion zero coupon convertible senior debentures, as the conversion in that period would have been dilutive. For the three months ended December 31, 2002 and September 30, 2003 and the years ended December 31, 2003 and 2002, the weighted average number of shares outstanding-diluted excludes 8.5 million potentially dilutive shares issuable upon the conversion of our $1.381 billion zero coupon convertible senior debentures because the inclusion of such shares would have been anti-dilutive, given the level of net income for those periods. Net income for the three months ended December 31, 2002 and September 30, 2003 and the years ended December 31, 2003 and 2002, excludes the related add-back of interest expense of $3.0 million, $3.0 million, $12.1 million and $11.8 million, respectively, for these debentures. These shares would have been dilutive and therefore included in the calculation of the weighted average number of shares outstanding-diluted had diluted earnings per share been at or above $.35 and $.36 for the three months ended December 31, 2002 and September 30, 2003, and at or above $1.43 and $1.39 for the years ended December 31, 2003 and 2002. (3) Includes the following weighted average number of common shares of Nabors and weighted average number of exchangeable shares of Nabors Exchangeco, respectively: 146.6 million and .4 million shares for the three months ended December 31, 2003; 144.7 million and .7 million shares for the three months ended December 31, 2002; 146.5 million and .4 million shares for the three months ended September 30, 2003; 146.0 million and .5 million shares for the year ended December 31, 2003; and 143.2 million and .4 million shares for the year ended December 31, 2002. The exchangeable shares of Nabors Exchangeco are exchangeable for Nabors common shares on a one-for-one basis, and have essentially identical rights as Nabors Industries Ltd. common shares, including but not limited to voting rights and the right to receive dividends, if any. (4) Diluted earnings per share for the three months and year ended December 31, 2003 and for the three months ended September 30, 2003 excludes approximately 10.0 million potentially dilutive shares initially issuable upon the exchange of our $700 million zero coupon exchangeable senior notes due 2023. Such shares are contingently exchangeable under certain circumstances and would only be included in the calculation of the weighted average number of shares outstanding-diluted if any of those criteria were met. Such criteria were not met during the three months and year ended December 31, 2003 and the three months ended September 30, 2003. Based on the initial exchange price per share, these shares would be exchangeable if the closing sale price per share of Nabors' common shares for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the previous calendar quarter is greater than or equal to $84.12 for all calendar quarters ending on or before June 30, 2008, and $77.11 for all calendar quarters thereafter. These notes were issued in June 2003 and therefore did not impact the calculation of diluted earnings per share for the three months and year ended December 31, 2002.