-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IGVYe4rVf79RLN9SMguIfXOhLoyn/sxp1uTzVx1B5SJdLRS34IQtng63vbgHaFMU QAWToyz+Umsf8/LmJUCxMQ== 0000950129-04-005157.txt : 20040728 0000950129-04-005157.hdr.sgml : 20040728 20040727094815 ACCESSION NUMBER: 0000950129-04-005157 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040726 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NABORS INDUSTRIES LTD CENTRAL INDEX KEY: 0001163739 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 980363970 STATE OF INCORPORATION: D0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-49887 FILM NUMBER: 04932284 BUSINESS ADDRESS: STREET 1: 2ND FLOOR INT'L TRADING CENTER STREET 2: WARRENS, P.O. BOX 905E CITY: ST. MICHAEL BARBADOS STATE: D0 ZIP: 0000 BUSINESS PHONE: 2464219471 MAIL ADDRESS: STREET 1: 2ND FLOOR INT'L TRADING CENTER STREET 2: WARRENS, P.O. BOX 905E CITY: ST. MICHAEL BARBADOS STATE: D0 ZIP: 0000 8-K 1 h16999e8vk.txt NABORS INDUSTRIES LTD - DATE OF REPORT: JULY 26, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 26, 2004 NABORS INDUSTRIES LTD. (Exact name of registrant as specified in its charter) Bermuda 000-49887 980363970 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 2nd Fl. International Trading Centre Warrens PO Box 905E St. Michael, Barbados N/A (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (246) 421-9471 N/A (Former name or former address, if changed since last report) ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits Exhibit No. Description ----------- ----------- 99.1 Press Release issued by Nabors Industries Ltd. on July 26, 2004. ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION On July 26, 2004, the Company issued a press release announcing its results of operations for the three and six month periods ending June 30, 2004. A copy of that release is furnished herewith as Exhibit 99.1 in accordance with General Instruction B.6 to Form 8-K. The press release furnished as an exhibit to this report 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 the Company from time to time in its filings with the Securities and Exchange Commission. As a result of these factors, the Company's actual results may differ materially from those indicated or implied by such forward-looking statements. The Company also presented in the press release its adjusted income (loss) derived from operating activities for all periods presented in the release, which is a "non-GAAP" financial measure under Regulation G. The components of adjusted (loss) income derived from operating activities are computed by using amounts which are determined in accordance with accounting principles generally accepted in the United States of America (GAAP). Adjusted income (loss) derived from operating activities is computed by subtracting direct costs, general and administrative expenses, depreciation and amortization, and depletion expense from Operating revenues and then adding Earnings from unconsolidated affiliates. As part of our press release information we have provided a reconciliation of adjusted income (loss) derived from operating activities to income before income taxes, which is its nearest comparable GAAP financial measure. The Company included its adjusted income (loss) derived from operating activities in the release because management evaluates the performance of our business units and the consolidated company based on several criteria, including adjusted income (loss) derived from operating activities, and because it believes this financial measure is an accurate reflection of the ongoing profitability of our Company. 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 hereunto duly authorized. NABORS INDUSTRIES LTD. Date: July 27, 2004 By: /s/ Daniel McLachlin ----------------------------------------- Daniel McLachlin Vice President-Administration & Secretary EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 99.1 Press Release issued by Nabors Industries Ltd. on July 26, 2004. EX-99.1 2 h16999exv99w1.txt PRESS RELEASE - ANNOUNCES RESULTS OF OPERATIONS EXHIBIT 99.1 - -------------------------------------------------------------------------------- (NABORS INDUSTRIES LOGO) NEWS RELEASE - -------------------------------------------------------------------------------- NABORS 2Q04 EPS $0.30 VS. $0.19 IN 2Q03 ON IMPROVED NORTH AMERICAN BUSINESS ST. MICHAEL, BARBADOS, JULY 26, 2004, NABORS INDUSTRIES LTD. (AMEX: NBR), today announced its results for the second quarter and six months ended June 30, 2004. Adjusted income derived from operating activities(1) was $46.7 million for the current quarter compared to $38.0 million in the second quarter of last year and $85.1 million in the first quarter of this year. Net income was $46.3 million ($0.30 per diluted share) for the current quarter compared to $29.0 million ($0.19 per diluted share) in the prior year quarter and $71.7 million ($0.46 per diluted share) in the first quarter of this year. Operating revenues and earnings from unconsolidated affiliates were $531.9 million in the current quarter compared to $433.9 million in the prior year quarter and $596.8 million in the first quarter of this year. For the six months ended June 30, 2004, adjusted income derived from operating activities was $131.7 million compared to $94.0 million in the first six months of 2003. Net income for the first six months of 2004 was $118.1 million ($0.76 per diluted share) compared to $77.1 million ($0.50 per diluted share) in the first six months of 2003. Revenues and earnings from unconsolidated affiliates for the first six months were $1,128.7 million compared to $889.7 million for the first six months of 2003. Gene Isenberg, Nabors' Chairman and Chief Executive Officer commented on the results, "I am quite pleased with the substantial year-over-year improvements in our results. This came primarily from higher utilization and pricing in our U.S. Lower 48 Land Drilling, Canadian, U.S. offshore and U.S. Land well-servicing operations." "Comparing to the sequential first quarter of 2004, we posted sizeable improvements in both our U.S. Lower 48 Land Drilling and well-servicing businesses while results were essentially flat in our U.S. offshore and international units. Internationally, we performed relatively well despite the multiple elements of unexpected costs incurred during the quarter as previously announced. Canada was seasonally down with the spring thaw, but was substantially improved over the same period of 2003 with higher rig utilization and pricing reflecting the continuing strength in that market. Alaska was down as we anticipated with the windup of the winter exploration activity and a generally weak market. Oil and gas and other operating income was down but in line with our revised expectations which included $2.1 million in dry hole expense." - -------- (1) 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 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." "Our outlook for the balance of the year continues to be quite positive as all of our businesses except Alaska anticipate improved results in the second half. We expect the largest improvement to come from our U.S. Lower 48 Land Drilling unit where higher rig activity and pricing combined with reduced expenses related to rig mobilizations and start-ups should generate increasingly higher results. Our international business should post the next most meaningful improvement with the unusual costs of the second quarter mostly behind us, and anticipated increases in rig activity and average per rig margins. Our U.S. offshore unit's results should also show significant improvement over the balance of the year with the contribution of two new MODS deepwater platform rigs which commenced late in the second quarter. Likewise, U.S. Land well servicing should benefit from continuing high activity levels and the contribution of recent pricing improvements. Canada is rapidly emerging from its second quarter seasonal trough with a much higher rig count and stronger rates, which should make the second half equal to or slightly better than first half. "With each quarter we continue to see constructive trends in place that support our belief that the North American gas markets will require higher levels of drilling for an extended period to meet the supply challenges. While there is some degree of uncertainty as to the precise magnitude and timing of incremental rig pricing and utilization, we are very confident of our strategy over the long-term in both our North American and international markets. Our international business continues to demonstrate high potential with increasing activity both currently and prospectively, particularly in the Middle East and North African regions." The Nabors companies own and operate almost 600 land drilling and approximately 950 land workover and well-servicing rigs worldwide. Offshore, Nabors operates 45 platform rigs, 19 jack-up units, and three barge rigs in the United States and multiple international markets. Nabors markets 31 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 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, tomorrow July 27, 2004, at 11:00 a.m. Eastern Daylight 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 SIX MONTHS ENDED ---------------------------------------- --------------------------- JUNE 30, MARCH 31, JUNE 30, ------------------------- ---------- --------------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2004 2003 2004 2004 2003 ---------- ---------- ---------- ---------- ---------- Revenues and other income: Operating revenues $ 530,715 $ 432,552 $ 592,981 $1,123,696 $ 882,389 Earnings from unconsolidated affiliates 1,153 1,359 3,822 4,975 7,262 Interest and dividend income 7,879 6,998 6,505 14,384 14,691 Other income, net 6,907 23 4,419 11,326 47 ---------- ---------- ---------- ---------- ---------- Total revenues and other income 546,654 440,932 607,727 1,154,381 904,389 ---------- ---------- ---------- ---------- ---------- Costs and other deductions: Direct costs 368,941 298,791 390,040 758,981 603,351 General and administrative expenses 45,441 40,483 45,599 91,040 81,728 Depreciation and amortization 60,843 55,882 60,488 121,331 109,460 Depletion 9,977 770 15,610 25,587 1,118 Interest expense 11,387 18,644 15,859 27,246 38,714 ---------- ---------- ---------- ---------- ---------- Total costs and other deductions 496,589 414,570 527,596 1,024,185 834,371 ---------- ---------- ---------- ---------- ---------- Income before income taxes 50,065 26,362 80,131 130,196 70,018 ---------- ---------- ---------- ---------- ---------- Income tax expense (benefit): Current 6,391 3,226 4,205 10,596 7,286 Deferred (2,674) (5,883) 4,209 1,535 (14,344) ---------- ---------- ---------- ---------- ---------- Total income tax expense (benefit) 3,717 (2,657) 8,414 12,131 (7,058) ---------- ---------- ---------- ---------- ---------- Net income $ 46,348 $ 29,019 $ 71,717 $ 118,065 $ 77,076 ========== ========== ========== ========== ========== Earnings per share (1): Basic $ .31 $ .20 $ .48 $ .80 $ .53 Diluted $ .30 $ .19 $ .46 $ .76 $ .50 Weighted-average number of common shares outstanding (1): Basic 148,866 146,382 147,984 148,425 146,045 ---------- ---------- ---------- ---------- ---------- Diluted 155,234 153,359 163,110 163,417 160,487 ---------- ---------- ---------- ---------- ---------- Adjusted income derived from operating activities (2) $ 46,666 $ 37,985 $ 85,066 $ 131,732 $ 93,994 ========== ========== ========== ========== ==========
(1) See "Computation of Earnings Per Share" included herein as a separate schedule. (2) 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 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)
JUNE 30, MARCH 31, DECEMBER 31, (IN THOUSANDS, EXCEPT RATIOS) 2004 2004 2003 ---------- ---------- ------------ ASSETS Current assets: Cash and marketable securities $ 787,615 $ 906,860 $ 919,673 Accounts receivable, net 411,034 470,763 410,487 Other current assets 180,054 206,530 185,487 ---------- ---------- ---------- Total current assets 1,378,703 1,584,153 1,515,647 Marketable securities 432,152 634,464 612,417 Property, plant and equipment, net 3,117,872 3,021,539 2,990,792 Goodwill, net 311,343 314,031 315,627 Other long-term assets 210,598 184,369 168,209 ---------- ---------- ---------- Total assets $5,450,668 $5,738,556 $5,602,692 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 4,147 $ 300,988 $ 299,385 Other current liabilities 315,500 314,171 298,988 ---------- ---------- ---------- Total current liabilities 319,647 615,159 598,373 Long-term debt 1,989,568 1,997,456 1,985,553 Other long-term liabilities 497,351 515,589 528,491 ---------- ---------- ---------- Total liabilities 2,806,566 3,128,204 3,112,417 Shareholders' equity 2,644,102 2,610,352 2,490,275 ---------- ---------- ---------- Total liabilities and shareholders' equity $5,450,668 $5,738,556 $5,602,692 ========== ========== ========== Total cash and marketable securities $1,219,767 $1,541,324 $1,532,090 Working capital $1,059,056 $ 968,994 $ 917,274 Funded debt to capital ratio: - Gross 0.43 : 1 0.47 : 1 0.48 : 1 - Net of cash and marketable securities 0.23 : 1 0.22 : 1 0.23 : 1 Interest coverage ratio: 9.5 : 1 8.0 : 1 6.8 : 1
NABORS INDUSTRIES LTD. AND SUBSIDIARIES SEGMENT REPORTING (UNAUDITED) The following tables set forth certain information with respect to our reportable segments and rig activity:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------------------------------------- ------------------------------ JUNE 30, MARCH 31, JUNE 30, ------------------------------ ----------- ------------------------------ (IN THOUSANDS, EXCEPT RIG ACTIVITY) 2004 2003 2004 2004 2003 ----------- ----------- ----------- ----------- ----------- Reportable segments: Operating revenues and Earnings from unconsolidated affiliates: Contract Drilling: (1) U.S. Lower 48 Land Drilling $ 172,049 $ 114,118 $ 153,368 $ 325,417 $ 204,207 U.S. Land Well-servicing 88,162 81,504 79,479 167,641 158,164 U.S. Offshore 31,556 24,680 31,321 62,877 46,394 Alaska 19,701 30,446 29,337 49,038 66,414 Canada 61,905 49,836 138,766 200,671 150,624 International 107,185 96,599 102,987 210,172 183,790 ----------- ----------- ----------- ----------- ----------- Subtotal Contract Drilling (2) 480,558 397,183 535,258 1,015,816 809,593 Oil and Gas (3) 14,173 2,487 21,126 35,299 4,086 Other Operating Segments (4) (5) 52,740 46,572 55,938 108,678 101,761 Other reconciling items (6) (15,603) (12,331) (15,519) (31,122) (25,789) ----------- ----------- ----------- ----------- ----------- Total $ 531,868 $ 433,911 $ 596,803 $ 1,128,671 $ 889,651 =========== =========== =========== =========== =========== Adjusted income (loss) derived from operating activities: (7) Contract Drilling: U.S. Lower 48 Land Drilling $ 12,971 $ 3,858 $ 8,568 $ 21,539 $ (79) U.S. Land Well-servicing 14,394 13,307 9,733 24,127 22,952 U.S. Offshore 4,796 530 4,817 9,613 (3,440) Alaska 3,756 10,361 7,210 10,966 25,688 Canada 2,851 (1,631) 43,272 46,123 24,389 International 18,753 19,994 18,591 37,344 36,730 ----------- ----------- ----------- ----------- ----------- Subtotal Contract Drilling 57,521 46,419 92,191 149,712 106,240 Oil and Gas 896 1,642 4,506 5,402 2,661 Other Operating Segments (2,106) (450) (431) (2,537) 5,187 Other reconciling items (8) (9,645) (9,626) (11,200) (20,845) (20,094) ----------- ----------- ----------- ----------- ----------- Total 46,666 37,985 85,066 131,732 93,994 Interest expense (11,387) (18,644) (15,859) (27,246) (38,714) Interest and dividend income 7,879 6,998 6,505 14,384 14,691 Other income, net 6,907 23 4,419 11,326 47 ----------- ----------- ----------- ----------- ----------- Income before income taxes $ 50,065 $ 26,362 $ 80,131 $ 130,196 $ 70,018 =========== =========== =========== =========== =========== Rig activity: Rig years: (9) U.S. Lower 48 Land Drilling 193.4 136.8 175.2 184.4 123.0 U.S. Offshore 15.5 15.0 13.8 14.6 14.2 Alaska 6.7 9.1 7.8 7.2 8.9 Canada 25.8 23.4 63.2 44.5 41.0 International (10) 65.6 59.8 65.0 65.3 58.4 ----------- ----------- ----------- ----------- ----------- Total rig years 307.0 244.1 325.0 316.0 245.5 =========== =========== =========== =========== =========== Rig hours: (11) U.S. Land Well-servicing 287,350 281,810 275,148 562,498 555,323 Canada Well-servicing 67,873 46,458 117,596 185,469 139,160 ----------- ----------- ----------- ----------- ----------- Total rig hours 355,223 328,268 392,744 747,967 694,483 =========== =========== =========== =========== ===========
(1) These segments include our drilling, workover and well-servicing operations, on land and offshore. (2) Includes Earnings from unconsolidated affiliates, accounted for by the equity method, of $1.0 million, $1.0 million and $1.2 million for the three months ended June 30, 2004 and 2003 and March 31, 2004, respectively, and $2.2 million and $1.9 million for the six months ended June 30, 2004 and 2003, respectively. (3) Represents our oil and gas exploration, development and production operations. (4) Includes our marine transportation and supply services, drilling technology and top drive manufacturing, directional drilling, rig instrumentation and software, and construction and logistics operations. (5) Includes Earnings from unconsolidated affiliates, accounted for by the equity method, of $.1 million, $.4 million and $2.6 million for the three months ended June 30, 2004 and 2003 and March 31, 2004, respectively, and $2.8 million and $5.4 million for the six months ended June 30, 2004 and 2003, respectively. (6) Represents the elimination of inter-segment transactions. (7) Adjusted income (loss) derived from operating activities is computed by: subtracting direct costs, general and administrative expenses, depreciation and amortization, and depletion expense from Operating revenues and then adding Earnings 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 (loss) 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". (8) Represents the elimination of inter-segment transactions and unallocated corporate expenses. (9) Excludes well-servicing rigs, which are measured in rig hours. 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 4.0 years during each of the three month periods ended June 30, 2004 and 2003, and March 31, 2004 and 8.0 years for each of the six month periods ended June 30, 2004 and 2003. (11) Rig hours represents the number of hours that our well-servicing rig fleet operated during the period. NABORS INDUSTRIES LTD. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (UNAUDITED) A reconciliation of the numerators and denominators of the basic and diluted earnings per share computations is as follows:
THREE MONTHS ENDED SIX MONTHS ENDED ---------------------------------- --------------------- JUNE 30, MARCH 31, JUNE 30, --------------------- -------- --------------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2004 2003 2004 2004 2003 -------- -------- -------- -------- -------- Net income (numerator): Net income - basic $ 46,348 $ 29,019 $ 71,717 $118,065 $ 77,076 Add interest expense on assumed conversion of our zero coupon convertible/exchangeable senior debentures/notes, net of tax: $825 million due 2020 (1) -- -- -- -- 3,639 $1.381 billion due 2021 (2) -- -- 3,081 6,180 -- $700 million due 2023 (3) -- -- -- -- -- -------- -------- -------- -------- -------- Adjusted net income - diluted $ 46,348 $ 29,019 $ 74,798 $124,245 $ 80,715 -------- -------- -------- -------- -------- Earnings per share: Basic $ .31 $ .20 $ .48 $ .80 $ .53 Diluted $ .30 $ .19 $ .46 $ .76 $ .50 Shares (denominator): Weighted average number of shares outstanding - basic (4) 148,866 146,382 147,984 148,425 146,045 Net effect of dilutive stock options and warrants based on the treasury stock method 6,368 6,977 6,635 6,501 6,783 Assumed conversion of our zero coupon convertible/exchangeable senior debentures/notes: $825 million due 2020 (1) -- -- -- -- 7,659 $1.381 billion due 2021 (2) -- -- 8,491 8,491 -- $700 million due 2023 (3) -- -- -- -- -- -------- -------- -------- -------- -------- Weighted average number of shares outstanding - diluted 155,234 153,359 163,110 163,417 160,487 -------- -------- -------- -------- --------
(1) Diluted earnings per share for the six months ended June 30, 2003 reflects the assumed conversion of our $825 million zero coupon convertible senior debentures, as the conversion in the period would have been dilutive. For the three months ended June 30, 2003, the weighted-average number of shares oustanding-diluted excludes 7.2 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 that quarter. 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 and six months ended June 30, 2004 or the three months ended March 31, 2004. (2) Diluted earnings per share for the six months ended June 30, 2004 and the three months ended March 31, 2004 reflects the assumed conversion of our $1.381 billion zero coupon convertible senior debentures, as the conversion in those periods would have been dilutive. For the three months ended June 30, 2004 and 2003 and the six months ended June 30, 2003, the weighted-average number of shares outstanding-diluted excluded 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 that period. Net income for the three months ended June 30, 2004 and 2003 and the six months ended June 30, 2003 excluded the related add-back of interest expense, net of tax, of $3.1 million, $3.0 million and $6.0 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 $.37, $.36 and $.71 for the three months ended June 30, 2004 and 2003 and six months ended June 30, 2003, respectively. (3) Diluted earnings per share for the three months ended June 30, 2004 and 2003 and March 31, 2004 and the six months ended June 30, 2004 and 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 ended June 30, 2004 and 2003 and March 31, 2004 and the six months ended June 30, 2004 and 2003. Based on the initial exchange price per share, these notes would be exchangeable for our common shares 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. (4) Includes the following weighted-average number of common shares of Nabors and weighted-average number of exchangeable shares of Nabors Exchangeco, respectively: 148.6 million and .3 million shares for the three months ended June 30, 2004; 145.9 million and .5 million shares for the three months ended June 30, 2003; 147.6 million and .4 million shares for the three months ended March 31, 2004; 148.1 million and .3 million shares for the six months ended June 30, 2004; and 145.5 million and .5 million shares for the six months ended June 30, 2003. 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. -----END PRIVACY-ENHANCED MESSAGE-----