Thank you for standing by ladies and gentlemen and welcome to the Nabors Industries Limited first quarter 2009 earnings conference call on the 22 April 2009. Throughout today’s presentation all participants will be in a listen only mode. After the presentation there will be an opportunity to ask questions. (Operator Instructions) I will now hand the conference over to Dennis Smith.

Good morning everyone and thank you for joining our call this morning. We will stick to the customary format and limit the call to an hour or less depending upon the question flow. In addition to Gene and myself here we have the usual participants Tony Petrello, our President and Chief Operating Officer; Laura Doerre, our General Counsel; Clark Woods with us today who’s our Chief Accounting Officer, and the various presidents of our business units today. We have posted some slides on the website, you can find them under www.nabors.com under Investor Relations or under investor information and under that, under events calendar, as they are in a pdf format if you want to look at those for reference. I want to remind everybody that, well obviously we are going to be talking about what happened in the quarter but more importantly how we see the future shaping up and such those are forward-looking statements and certainly subject to changes and risks and uncertainties as we disclose in our filings and encourage you to review those. And with that I will get started and turn things over to Gene.

Thanks and welcome to the conference call for the first quarter of 2009. I want to thank everybody for participating and I will be any suggestion that you might want to look at the tables and slides that we present it as we chat. The results in my view were very respectable in the first quarter and better than expected generally. However, there was a fair amount of unavoidable noise in the quarter and I would like to go through the noises, the pluses and minuses of these noises and hopefully want to finish the whole, reach the conclusion that are real operational results. We are pretty close to the $0.65 per share which we are chatting about, which excludes the non-cash pre-tax ceiling test charges associated mostly with our joint venture domestic E&P operations which amounted to $75 million. Firstly on the negative side, the quarters results were represented an approximately $25 million hit and a non-cash interest charge associated with the implementation of the accounting rules which require the convertible to be separated into a true market interest rate and an optionality. So this, instead of having a 0.94 interest charge we have roughly a 6% charge. You all knew about this for a while. We also incurred a glitch in accounting which may or may not be a little less than this but we’re, our feel now is it might be as much as $16 million. This was the payroll glitch which was collected in this quarter which represented charges that appropriately should have been in another quarter. So, these two items amounted to $38 million and prices during the quarter which we feel were not appropriately allocate able to those, in that quarter. Potentially offsetting this were two positive items, which was essentially non-recurring. First was…

(Operator Instructions) Your first question comes from Ole Slorer - Morgan Stanley.

You mentioned that you saw some signs that we might be hitting a trough fare in the domestic rig count in the second quarter. I wonder whether you could share some of the data points some of the conversations you are having that might suggest that and also maybe a little bit you know the very kind of steep acceleration and a decline in the domestic rig count as of late, and whether you see a continued acceleration right into the trough or what do you think the trough will look like. Will it be an undershoot or will it be an ease out? What do you see there?

I think we are methodically approaching it. I think we’re, you know, I don’t know you don’t know, nobody knows, but basically, the signs we see most of the customers or at least many of them have adapted sort of cut and slash approach. The cash flow is going to be this, the budget has to go down by that and go cut the rigs. If you have to pay premiums to do it, do it and do it. So all of that was done let me say front-loaded. My vision is or my understanding is that that was kind of front-loaded by many if not most of our customers and therefore what’s happening is likely to be at a much slower decline rate than before. Frankly, I think your analysis of the second derivative moving in a favorable direction is right on if you want to describe it that way. I mean, one week doesn’t make a future, but this is the first week we have ever had more rigs up and down. To elaborate on that a tiny bit the rates are lower, but there is distinct differential between the quality of the rigs, which we expect to be more pronounced in the future.

Could you elaborate on that type of differentiation that you highlighted and what are you seeing amongst your various customers and the various types of…

So far as I have said Ole I think they have been cutting everything regardless of in other words for most of these guys if you went from 25 to 20, it wouldn’t affect anything they are cutting, because they don’t want capital expenditures to go down. But I would say the ones that have picked up are decidedly lower and I won’t get into them. It is probably at least a $6,000 a day difference between quality rig and sort of a non-quality or an older rig.

Any difference between some of the majors, Shell, BP and some of the smaller ones; and talk a little bit about how you are positioned there?

Well Shell was initially they we’re going to pause during this year and accelerate pretty dramatically and this is Shell for example in Lower 48 and Canada. Then prices have got to the point where they have had to cut back this year. I still think the plans are to when things recover to grow. Exxon, we frankly do very little work for although that situation will improve, but in the Lower 48 we have operations within in Alaska and offshore. BP to my knowledge they are drilling more or less, they are not cutting back as dramatically. They have been cutting back and when they are cutting back it’s not Nabors, it’s somebody else. Anadarko cut back pretty sharply. Devon cut back, but I think those cut backs already have occurred with the big customers.

Then the well-servicing side, I mean a little surprised of the weakness there, I mean that’s more than oil related market. Can you talk a little about what caused that?

I agree with you. Roughly 70% of the work is oil related and it’s not good. The whole industry is bad though we’re contrary to where I think we are internationally and domestically. I think even in Canada I don’t think we’re doing better than the industry and we’ve got work to do to do that. I think the good we’re doing is we’re cutting cost probably at least as aggressively in that business units and any others and we are blessed compared to other people with having a pretty good California position, which is better then most of that. Our biggest single position is California. That map is bigger than the others and the one and that statement is Oxy has cut back pretty dramatically.

Gene on the balance sheet, I mean you are generating very healthy clip of free cash flow here at the trough and you are taking down debt. Is there a point now that you actually want to have some leverage into this trough and you could do something maybe on the corporate side? I mean, every single downturn you have always done something. So what’s in your personal list than we are at?

I think we are getting to the point where we will probably look at that. You can send your bankers over.

Well I am doing my best. I will talk to you soon.

Your next question comes from Marshall Adkins - Raymond James.

I think one of the things we are all trying to get our arms around are the effect of the flow through these lumps on contracts and also the rigs that are getting paid and not really working. So trying to get to that answer, can you help? What are the leading edge margins doing today and where do you see kind of say a year from today. Let’s say the rig count stabilizes and what not. Where are margins a year from today and I am just talking U.S. now.

Firstly, let me tell you I don’t know.

None of us do.

I don’t think anybody else does either but that’s okay. I think the number of really quality rigs is probably smaller than most people think. I think it’s arguably between the total rig count at the peak for example; we had 270 odd rigs working. We have added a bunch of new bills. Number one the rigs that didn’t work then for us or anybody else I don’t think they are ever going to work. I think there were a bunch of rigs that were taken out of the weeds then and I bet they’ll never work either. So, my guess is that for the industry maybe 700 or 800 of the rigs are the kind of rigs that will be quality rigs. Danny just gave me a note to help me on this. Well the kind of quality rigs that, are likely to work, around half of them, a little less than half, but AC and the rest, really high quality SCR rigs. We’ve done stuff with the SCR rigs with the K-box and stuff like that that kind of makes them look functional equivalent of an AC rig. Anyway, so the supply of rigs is going to be really smaller when things come back than most people think and I think therefore the rates on those. So the number of good rigs smaller. The number of total rigs is going to be smaller, therefore I don’t know, but I think that’s going to impact what happens. You got to tell me what the gas price is going to be. Particularly, if we have a normalized gas price which I consider to be probably $0.06 or $0.07 I think the rates will be pretty decent.

Well let me approach it, for rigs that you’re pricing, that are going out to work today and I must here’s your higher end stuff. Are the daily margins kind of in the 3,000 odd range or are they in the 6,000 odd range?

Assuming no customers are listening, probably the latter for the new ones.

The 6000 really?

Maybe we wouldn’t say that but yes.

Last question from me; you guys got a lot of benefit this quarter from lower tax rates, lower depreciation, SG&A you brought down nicely. Can you give us some guidance on those metrics going forward just so we can plug that into our models because you have some significant savings?

Yes, you got to really project what’s going to happen. The high tax regimes are the U.S. and Canada. And the low tax regime is international. And if you’ve got to figure what’s going to be what in those places to come up with an answer, and my guess is that it’s going to be lower but not by a ton than it was for the quarter. For the quarter I think it was 21%.

Well, that’s low enough. So do you think maybe that will hold to even as lower?

I think it holds and it conceivably could work lower.

So there is more benefits there…

I want to put this in this way, 100% international would be lower.

Okay and SG&A depreciation?

SG&A is coming down across the board virtually without exceptions. For the people sitting in this room, no I’m kidding. That will come down. Depreciation will come down. We’ve spent more. The capital expenditures are coming down. I think this year we started at 1.7, I think we’ll end up at around 1, maybe less than that. And next year we’ll be pretty focused to maintenance CapEx, although if somebody comes in with a project like the project we talked about after Congo that takes new capital for a good return, we’re ready and willing to be able to do it. But in terms of the ordinary CapEx, number one, the maintenance CapEx is going to be lower because we have so many stacked rigs from which demand for those rigs is less than it would have been. Also frankly, you’re going to cannibalize some of the older rigs. We’re pressuring to reduce the CapEx unless it’s absolutely necessary.

Your next question comes from Kevin Simpson - Miller Tabak.

To start off with an international question, your Saudi position look strong, but I wonder what kind of rollover risk you have, say, for next year. We believe you have decent number of contracts rolling over next year?

Next year is ‘09 or ‘10 or both?

2010.

Yes. Why don’t you finish your question, I’ll let Ziggy answer it.

And then the second question would be is, there have been talk of contracts for gas drilling there for large rigs for gas drilling, and any update there on timing and how you think Nabors stands?

The rollover for 2010 is likely a lot of the contracts was the high margins, like the jack-ups, they were just signed in ‘08, and they just started in ‘08. So we’re pretty safe in 2010, but also there will be some rigs coming up over in Europe, but I think we can remove most of those rigs.

How about the land rigs?

On land rigs and offshore, both. The offshore rigs are tied up anyway. The offshore rigs are all tied up in 2011 and 2012.

If rollover risk is really a couple of years out?

Land rigs.

And then I guess you mentioned the gas rigs; you’re talking about Saudi again?

Yes.

The gas rigs, yes, they just opened the documents. They just opened them two three days ago, and I mean as usual, I think we have a shot at it, but there is obviously competition, but it is still in the opening process.

One other international question, which is, obviously pricing pressure throughout the industry, I mean, are you seeing very significant pricing pressure. I guess, should we expect international margins to have the same kind of hit on rollovers that do occur, that may be not as bad as the US but something like, you know, down 30%, 40% range, or do you think that the competitive conditions are still relatively favorable enough that you ought to be able come close to what you have been getting.

Let me augment that question. Can you break that between jack-ups, where we are not particularly vulnerable in the next two three years and the rest of the land rigs.

Yes. I think on the land rigs obviously, there is pressure. There is more competition and the customers want better rates, but what we experienced is, if we come down on rates that we trade it off with additional work or some other benefits, but also we have been quite successful reducing all cost on the rig level and in the overhead. So I think the net, net, I think we come out pretty much the same. We are not loosing out too much.

A quick question for Joe; what kind of cost leverage do you have on reducing your personnel costs, and then I guess leverage also with your suppliers; what Gene had just talked about, to bring cost down as well.

Kevin we are obviously working with our corporate supply chain group to drive our cost down both in the field from a corporate a perspective, and also what we purchase in the field, and we’re seeing very good response from our vendors working with us to achieve this. The G&A side, we made a very significant reduction just in three months of around to 25%. So that’s already taking place, and on the go forward basis, we’re going to continue to reduce according to the rigs working. As you see we have 137 that are on our payroll, 108, 110 that are working on are actually turning that right. In terms of personnel, we are looking at the field labor cost, and that’s our two large components which are labors/R&M. Again, we have a large number of term contracts. Based on that reduction, we would pass in back to the operators. So, we are looking at how we do this. How we most effectively impact P&L, labors and making any other reductions in field, both those standpoint.

The next question is from Roger Read - Natixis.

Just following up on the US side, Gene, you said you are seeing the opportunity here for the rig count to bottom. Obviously, you’ve got the strength in the in the Haynesville. If you kind of walked around the regions of the US, is there anywhere that you don’t see the bottom in place or where more softness maybe likely just making more of a broader US rather than a specific Nabors approach?

Yes. Let me describe that. I haven’t looked a lot day or two but last time I looked the delivery points in the Rockies and Mid-Continent were like $2.5 to $2.75 and that’s delivered. So that will go as per million and that’s the delever point. So if it takes the penny or whatever it takes to get from the well head to the delivery point, you got a pretty good indication of what is weak or will be weak or should be weak in the way of rig demand. We have the B&P operations of our own. Aubrey has the biggest ones there and he has announced pretty big cut backs and he has got the sort of line in the sand prices for these various regions and I think that’s what’s going to happen, is happening or should happen and we have big position in the Rockies which is probably vulnerable like everybody else.

Okay that’s kind of what we figured. The other question I had Latin America, hearing a lot of people and obviously the tough Q1 in a couple of nations down there, but overall could you give us sort of your view on Latin America, I guess including Mexico in that as well, just what you see in terms of opportunities to put more rigs to work or at least maintain the level that you have today out there?

I would say Mexico looks strong. I think we are probably pretty strong there. I would say nothing is super sexy in the rest of Latin America. We have got maybe four rigs in Venezuela. We were ahead of the curve; at one point we had 20 odd rigs and we went down to pretty nothing and our major competitor has I think 11 rigs there. We don’t, and I don’t see any other place super sexy. Argentina is particularly week. Columbia we have a good position but it’s not super strong either. So I would say, what we’re doing internationally with sticking our necks out on a projection, includes the full knowledge that away from Mexico, Latin America is not going to be a source for a pleasant surprise with half a dozen rigs.

Okay, and then the final question I had. Just following up on the comment you made earlier about acquisitions. Should we expect you to be focused on acquisitions domestically, internationally, broadly balanced between the two?

I don’t know yet. Right now, I can assure there’s nothing on the front burner. We’re looking at stuff everywhere. I don’t think we’re looking at domestic or Canadian rigs per se or we might look at other stuff that we can buy, that we can roll out throughout our whole system and we might be looking at entry type rigs and international more than any place else.

Your next question comes from Dan Boyd - Goldman Sachs.

I wanted to talk about the international business a little bit more. It looks like you’re going to have to get a ramp up here in operating income at some point through the year to hit those guidance numbers. Can you walk me through the timing of the new rig contracts or new startups and where they are exactly?

Maybe the avoidance of hickeys. Go ahead Ziggy.

Yes. We have, we have rigs starting up this quarter. They only started this quarter so they’re going to be full in the third quarter and fourth quarter and we’re in discussion with other customers to put rigs to work third and fourth quarter, that’s where you want the upside is.

Those third and fourth quarter startups, are those included in the guidance numbers you’re giving of more than 20% or are they on top of that?

No, they are included.

Can you give me the same type of guidance on the offshore business? I was little surprised that how strong that came in this quarter. And quite frankly, your guidance for this year, can you help me figure out how much of that is currently under contract?

As Gene said, the MODS rigs and the MASE rigs are carrying up for the most part, and by and large those rigs are under contract, albeit some maybe one stack on location from time-to-time.

So basically we have new investments really offsetting the weakness and other stuff to keep picture pretty decently.

I will assume that also those are well contracted and on term?

Yes, Sir.

Okay, and then just lastly Gene, on the investment opportunities that you have, it sounds like international is more on the front burner, but you also mentioned in the press release the attractive opportunities in oil & gas. Can you expand on which ones you see as more attractive at this point? And what plays you’re interested in?

Nothing is super attractive at these prices, but on the other hand the sales price are reflecting maybe something approximating the stress or at least where a guy has to choose between a couple of three opportunities to invest and can’t do all of them. We’re currently looking at in our joint venture. We’re currently looking at, it’s got nothing humongous but I would not be surprised if we had something involved like a $50 million chunk on our cut near-term.

And would that be within your JV if you are doing a JV with a current operator in a play that needs the cash flow or would it be where the JV would be the operator?

Mostly the latter. Our joint venture stuff we essentially operate.

The next question is from Arun Jayaram - Credit Suisse.

Gene, two quick questions. One is you’ve paid down a pretty meaningful chunk of your 2011 debt maturities. Gene, what are your longer-term plans in terms of that debt? Do you plan to issue some more fixed debt to pay that down? What are your longer term thinking in terms of that debt?

What we’re planning on is being in an environment where we have to very substantially deleverage. So what we’re planning on doing is seeing what we can do to pay that out without incremental. That’s the plan and we do that by reducing CapEx, reducing costs and even buying get back at a discount if we can do that, or if we can’t do that at an appropriate price. In fact it’s easier by having the money available to do it. So we’re also looking at borrowing, that’s permitted under indentures on the debt that could supplement it if it’s attractive. We’re looking at for example borrowing in Saudi Arabia where they don’t have, what do you call it, poisoned toxic assets to worry about. Afraid they haven’t yet heard of the credit default swap. Seriously, we can probably get something between $80 million and $100 million there at a reasonable, at a normal price relative to LIBOR, may be one and half over the LIBOR if we can. If we borrow in Saudi we still have some tax advantages and we are frankly also looking at a revolver which we haven’t had for a number of years. So, there I think we are preparing for an environment where dramatic view or a substantial deleveraging will be required. We think we can get there without incremental long-term borrowing. We are preparing contingency plans on other borrowings that will enable us to cope with any hickeys. Secondly, if we see our way clear, we will take advantage as we have in previous substantial downturns to buy stuff economically.

Fair enough. Gene, second question, you’re seeing clearly a bottoming in terms of activity levels, including this week you said may be even a tick up in terms of your rig count.

I don’t know if that’s the week phenomena or trends.

Yes, I wondered as to get a sense as with the gas price is today at 3.50 or so. Prices are well below the marginal cost of produce in almost every region that we look at may be outside of the Haynesville, maybe the Marcela. Why do you think that some of the customers are in this case increasing activity over there?

I think the reasons are if they have to drill to preserve or acquire leases or if the economics are really good like Petrohawk is in the Haynesville and elsewhere. Also the point is that you have no choice, even if it’s a 3.50 price or a 2.75 price. You make money by producing it or not producing it, out of pocket lifting costs are generally lower than that. Particularly if are you committed for a term rigs and stuff like that. So, a number of people, if you are really pressed for cash flow, it’s more economical to drill and make a half adventure on a cash basis than not drill or a dollar.

Do you think hedges are keeping perhaps activity higher than without them?

They probably are but I never understood that. I don’t know why this concaves the hedges but they probably are.

Your next question comes from Dan Pickering - Tudor Pickering Holt.

I think I heard and read in the press release from the international side, essentially you identified six contracts that you expected to start, it sounds like some of them already started and some are in the second half. Are those generally the same day rate and margin mix as your present business or are they offshore and therefore higher margin, kind of what the mix looked like for the international side?

It is nothing about the same.

Okay. So, we expect about the same. And then Gene, could you talk a little bit about, I think you mentioned you had 137 rigs being paid right now in the U.S. land business. You’ve obviously got 300 and something total rigs, can you talk a little bit about your sort of capacity management stacking philosophy. How many of the idle rigs are stacked, how many are one stacked?

We don’t want that frankly. We’re stacking and we’re trying to figure out where we can put these rigs so that we don’t have losses of the rigs and damage so that we can start them up quickly and effectively, particularly the ones that are contingently available. Guys are still paying it for it on a day rate basis. So, with our plant down south, Saint Angelo is one of the places where we have a lot of storage capability. We have a lot of paid stuff, we kind of play to even putting temporary overhead shelter on that. We have a plan to really make sure that we when we stack the rigs, the ones that are ready to go to work are, and the ones that are not ready go to work don’t get subject to damage build regions and stuff like that.

When you look at your handout that you provided in addition to the quarterly commentary indicated you have got term contracts in the US of 48, 93 for the rest of this year, 2010, it is 69 rigs. Of that delta, obviously we are going to see things roll off as we move through the rest of this year. Is that pretty ratable, does it all happen towards the end of the year. Is there any lumpiness to that kind of contract structure?

Joe, do you know of that?

It’s pretty linear Dan. It’s like; it was 133 in first quarter declines.

So pretty much a straight line; and then a last question from me on the international side, like 114 rigs running in the first quarter. What would you guess the average contract duration for those rigs would be? Is it a six month? Is it a year? Is it more than that?

I mean all these rigs were signed up for mostly three years and two years. So, you know, two year, three year contract. That’s what they are working on.

Rig jack-up, 4 years.

The jack-ups are on 4 years contract.

Okay and most of them were signed in ‘07 and ‘08?

The jack-ups were all signed in ‘08, and most of the new rigs that were out there, they were all signed in late ‘07 and ‘08.

Vivian, I think we’ll make this the last question since we’re just approaching an hour time limit here.

Your final question comes from Angie Sedita - Macquarie Securities.

First, Gene, last cycle 2001-2002, we saw the older commodity rigs essentially bottom about $9,000 to $10,000 a day on the day rate, $2,000 to $3,000 on margins against these commodity rigs. Is there any reason to believe given the push into shale that it could be worse for the commodity rigs this cycle?

Yes. I think my feeling is that some of the old rigs will never go bad.

Fair enough.

If you’re talking about a shallow mechanical rig that isn’t in a specific environment where its economical, and they exist, they are not in the shale’s, but they exist where there is a lot of work and the crew is familiar with the work and the company men are familiar with the work, and there’s good relationships between those two, then the rig’s going to work. Its probably going to be adversely affected by the number of rigs like it that are going to be available without work, but in general, I think its going to be worth. There’s going to be a bigger differentiation between quality rigs and non-quality rigs, and we’re seeing it a little bit now, and the reason we haven’t seen more of it is, when a guy says, “I want to cut my budget by blank dollars and 30 rigs,” they’re not going to differentiate. They’re going to do what the boss says, and as I said earlier, when they cut those, it isn’t like they’re cutting them at 25, and you could work them at 15, they don’t want them. I think there is going to be a pretty dramatic shift, and that’s one of the reasons I personally think that, the state of the art rigs, the newer rigs performing in the areas, that’s likely to indicate what’s going to happen in the future, and I think we’re doing pretty good as I’ve said a couple or three times. I’ll be happy to say it once more if you want. I think that’s way more important than whether we made or missed this quarter by a penny, but that’s my view.

That’s fair enough. So, I mean, in the past cycles, when shale again was a factor, you saw a premium of 20% to 25% for a quality rig versus a commodity rig. So, under that assumption, you would see that premium narrow modestly or fairly significantly?

I would see the premium increase.

Then following up on the rig count, you said in the press release, you have a 137 rigs working today, 31 are receiving revenue but not working. How long should we assume these 31 are receiving the revenues? Is it 6 months or a year?

Basically, I think the total amount to date that we built or going to build on these things is like a $120 million. I think we’ve already build $93 million. For this particular quarter, there were three baskets, and I won’t make a federal case out of this, if you want you can call Dennis afterwards. But, I mean, there are three guys, cancel and pay the cancellation fee upfront, and we have the rig available to do what we want with. There is another category where guys pay the standby without crew, and they control the rig, but they pay us and we don’t work the rig. Third and smaller category is guys who we’ve got contracts with, where the stand by with our crew rate is higher than the cancellation rate. That’s the smaller number, but so they canceled, but they have the right to use the rig. So they pay us the premium, but they have the right to use the rig. So all those three things happened, and I don’t know what’s going to happen, but it’s conceivable that aggregate could get bigger. I think as we said, this quarter had 31 million of the first category I mentioned and we probably had 12 million in the P&L for the other two categories put together and if you want more than that, call Danny please.

Rather than the number of rigs because it varies all over the map, but that’s why on slide three we schedule out what the income effect of those categories are. We took the two latter categories because they are income is amortizing or being received so in forward periods and just lump them together.

Great guys. That’s all I had.

Ladies and gentlemen, that concludes our call today. Thank you for participating and if you have any further questions feel free to give us a call or email us. Thank you.